ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Bill Griffeth and Sue
BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: Sentiment shift. Stocks
rise to start the week and many point to Wall Street`s better mood.
SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Fighting cancer. Eli Lilly is
the latest drug company to make a big bet on oncology, as the science
evolves and ground-breaking new medicines are discovered.
GRIFFETH: Pricing power. It`s going to cost you more to go to Disneyland,
but will consumers pay up?
Those stories and much more tonight on NIGHTLY BUSINESS REPORT. It is
Monday, January 7th.
HERERA: Good evening, everyone, and welcome.
The big rally Friday extended into today. Investors started the week in a
buying mood, snapping up shares of technology stocks, as U.S. and Chinese
officials talked trade and the price of oil rose. The Dow Jones
Industrials rose 98 points to 23,531. The Nasdaq added 84, the S&P 500 was
As usual, there was volatility. But there was also a sense of relief,
which stands in contrast to what investors were feeling not too long ago.
Bob Pisani explains.
BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: It`s remarkable how
much market sentiment has changed just over the past few days. Investors
had had a long list of concerns but they`re finally starting to see some
progress made on several fronts. There were worries about the Fed raising
rates too quickly, trade talks going nowhere, the Chinese economy slowing
down and a possible recession as soon as this year.
Now, the Fed chairman has softened his language on interest rates. Fed
Chair Jay Powell reassured investors he is listening carefully to the
market`s concerns and that the Fed remains patient and flexible when it
comes to rate hikes. Trade talks, the second issue, are picking up. High-
level officials from both the U.S. and China are meeting today and tomorrow
to try to hash out the terms of a deal.
Third, there`s hope for the Chinese economy. Yes, it`s slower, but China
has announced stimulus programs to loosen liquidity and boost its
infrastructure spending. Yes, expectations for earnings growth in the
United States are coming down this year, but it could be a lot worse. Most
of them are in the mid-single-digit range. Gas prices have fallen 20
percent since October. That is a huge tax cut for the American consumer.
All right. How about this fear of a recession thing? Stronger job growth
and comments from the Fed are fending off those concerns at least for now.
The one wild card is political risk both here in the United States and
overseas in Europe. The fate of the U.K. and Brexit, that`s murky.
And now, here in the U.S., now that former U.S. Defense Secretary Jim
Mattis and another key moderates are gone, some are worried that maybe it`s
President Trump and not the Fed who might make some policy mistake.
Here`s the bottom line. We are not out of the woods, but the trend is
For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock Exchange.
GRIFFETH: Well, let`s talk more about this possible shift in sentiment in
the stock market.
Kristina Hooper is back with us tonight. She`s chief global market
strategist at Invesco.
Kristina, good to see you again. Welcome back.
KRISTINA HOOPER, INVESCO CHIEF GLOBAL MARKET STRATEGIST: Good to see you.
GRIFFETH: So, of the two primary issues that Bob brought up, the Fed and
the trade tiff with China, are you feeling better about those as well?
HOOPER: I`m not feeling a lot better about either one.
HOOPER: While I hold out hope that the U.S. and China resolve the trade
issue, I`m very realistic that it`s unlikely that we`ll see a resolution
any time soon. Bob reported on how China is increasing domestic stimulus.
To me, that`s a sign that it is hunkering down for what could be a
protracted fight with the U.S. regarding trade.
HERERA: And what about the Fed, Kristina? I mean, there was some
confusion early on and then just last week, it seems as though the market
was kind of soothed by what the Fed chief said.
HOOPER: Well, certainly the market was temporarily soothed, but we need to
see more than just words. What`s going to be critical is the FOMC meeting,
the statement coming out of it, to see if the language has become more
dovish, if there`s more reiteration that the Fed is truly data dependent.
What could really boost markets is if the Fed came out and said it`s also
examining balance sheet normalization and considering whether or not to
actually keep it on auto pilot. Those are all things that could truly
soothe markets for more than a day or two.
GRIFFETH: So what are you doing about that as far as investing in this
market? Do you go defensive? More to cash? What are you doing here?
HOOPER: Well, we always maintain a very long-term perspective, but for
those who are thinking about the shorter term, you certainly need to be
prepared for more volatility. Now, some view that as a real opportunity.
They have cash on the sidelines. That can present attractive purchase
opportunities for investors.
But for those who are worried about volatility, that have trouble
stomaching it, it is important to be very well-diversified. And that
includes not just equities and fixed income but having exposure to
alternative asset classes, things like real estate, gold, tend to move in a
less correlated way with stocks, for example. So that makes a lot of sense
in this kind of environment.
GRIFFETH: Diversification is the word, I think. Yes.
Christina Hooper with Invesco, thanks again for joining us tonight.
HOOPER: Thank you.
HERERA: More now on those trade talks. The U.S. delegation arrived in
China for those discussions aimed at ending the tensions that have imposed
billions of dollars in tariffs over the past year.
Ylan Mui reports tonight from Washington.
YLAN MUI, NIGHTLY BUSINESS REPORT CORRESPONDENT: This is the first face-
to-face meeting between the U.S. and China since President Trump and
President Xi sat down for dinner at the G20. Trump discussed the prospects
of a deal during a retreat at Camp David over the weekend and he told
reporters that he is hopeful.
DONALD TRUMP, PRESIDENT OF THE UNITED STATES: My relationship with
President Xi is as good as any relationship that a president here has had
with a president or leader in China. And I think good things are going to
MUI: As for the Chinese, the finance ministry says it has, quote, good
faith in these two days of talks, which are really more of a technical
meeting of senior officials. Deputy U.S. trade Representative Jeffrey
Gerrish will be leading the delegation. There are folks from treasury,
agriculture, energy and state.
One good sign, the Chinese Vice Premier Liu He apparently joined the talks
for at least a little bit. The expectation is that he could come to
Washington to meet with Treasury Secretary Stephen Mnuchin and Ambassador
Robert Lighthizer if all goes well.
Today, Commerce Secretary Wilbur Ross defended the administration`s hard
line stance. He said China has realized how dependent it is on the U.S.
WILBUR ROSS, COMMERCE SECRETARY: What will come out of it is a resolution,
are we going to go the negotiated route or are we going to go in the
original direction of higher tariffs. It`s really a binary set of
MUI: There was also a report that President Trump could meet with China`s
vice president at the World Economic Forum in Davos later this month, but
the White House is not confirming Trump`s schedule of meetings just yet.
We do know that Trump will be there. The Chinese will be there. We`ll see
if the two sides will sit down and talk.
For NIGHTLY BUSINESS REPORT, I`m Ylan Mui in Washington.
GRIFFETH: Elsewhere, oil prices are creeping back towards $50 a barrel.
“The Wall Street Journal” reports that Saudi Arabia plans to make shoe cuts
to its crude exports beyond that`s already planned, in an effort to push
prices even higher. Prices have also gotten a lift amid the easing of
trade and economic concerns. So, domestic crude settled up today about 1
HERERA: Eli Lilly is pushing further into the cancer drug industry. The
pharmaceutical company is buying Loxo Oncology for about $8 billion in
cash, making this the second major health care deal of the New Year. Both
focused on cancer. Lilly`s CEO says that acquisition will help the company
treat the disease globally.
(BEGIN VIDEO CLIP)
DAVID RICKS, ELI LILLY CHAIRMAN & CEO: We`d like to grow our presence in
oncology. We have a good set of medicines there, but we`d like to expand
that because there`s so much exciting science for patients emerging in
oncology, so many things to invest in. Loxo was particularly attractive to
us because it`s so rational that you can detect the kind of problem that`s
driving the tumor growth and then block it directly.
(END VIDEO CLIP)
HERERA: Loxo soared on the news, up 66 percent and Eli Lilly`s shares also
GRIFFETH: Our next guest is hoping that this year may be the year that
world of medicine finally outsmarts cancer.
Kevin Conroy is the CEO of a company called Exact Sciences. He joins us
now from the JPMorgan health care conference going on in San Francisco
right now to talk about this.
Kevin, good to see you. Thanks for joining us tonight.
KEVIN CONROY, EXACT SCIENCES CEO: Thank you, Bill.
GRIFFETH: I have to say, I mentioned this on Twitter earlier today and a
viewer tweeted back and said I`ve been hearing for years that medicine is
hoping that they finally have turned the corner on cancer. What makes you
think that this year may be the year that you have outsmarted cancer?
CONROY: Well, what we`re seeing is the research that we have done with the
Mayo Clinic to be able to detect the tiny changes in DNA that cancer sheds
into the blood, so with a simple blood draw, we`ve shown the ability to
detect 95 percent of liver cancers from that simple blood draw. And we are
expanding this research across 15 cancers with the Mayo Clinic. We`re
really excited about the prospects for changing the way cancer is detected
and, therefore, treated.
GRIFFETH: And you basically gave us three things that you hope will be
achieved this year that will change the dynamics in treating cancer. They
are new discoveries through industry investment, and you mentioned the fact
that companies need to continue investing, cracking the cancer code through
the liquid biopsy which is company is doing, and putting the patient first.
It`s a very dynamic set. Putting the patient first is something that I
noticed because a lot of patients are not compliant with those tests.
CONROY: Well, that`s right. That`s the problem that we wanted to solve
with our Cologuard test which is a noninvasive way of accurately screening
for colon cancer right in the privacy of your own home, and using that same
technology which empowers the patient to take care of their own health. We
think that we can really change the dynamic, and a lot of other people are
working on this too, which gives us great hope.
We know that cancer is a disease of the DNA. If you can detect that cancer
DNA in blood, you can really change the way cancer is treated, because
early detection really matters.
GRIFFETH: You know, it`s not lost on us, Kevin, that two companies have
already been taken out this year involved in either cancer treatment or
cancer detection. Celgene last Thursday, Loxo today. This is something
your company is involved in. You have market capitalization of about $9
billion and I can already see from the expression on your face you can see
where I`m going here.
If somebody called you and said, we are interested in buying your company,
what would you say to them?
CONROY: Well, I can tell you we`ve been working on this for the last ten
years, and I have never in the last ten years been more excited about the
future than now. And so, what I would say is we can`t wait to keep doing
the work that we`re doing, especially with our partner at the Mayo Clinic.
I`d much rather do that from a position of being able to make those
decisions and innovate in a way that can help people. That is our goal and
it`s going to continue to be our goal.
GRIFFETH: Kevin Conroy, the CEO of Exact Sciences, thanks again for
joining us tonight. Appreciate it.
CONROY: Thank you.
HERERA: It is time to take a look at some of today`s upgrades and
downgrades. Google`s parent, Alphabet, was upgraded from buy to hold at
Pivotal Research. The analyst cites Google`s dominant digital ad business
and says the company is better managed that Facebook. The price target is
$1,240. The stock fell a fraction to $1,075.92.
General Motors was upgraded to outperform to market perform at BMO Capital.
The analyst expects improved profitability and higher free cash flow. The
price target is $41. The stock gained 3 percent to $34.36.
GRIFFETH: Micron Technology was upgraded to outperform from market
perform, also at BMO Capital. The stock there says the stock has likely
bottomed after a 35 percent decline over the past six months. Price target
now is $50. Shares rose about 4 percent today to $34 even.
Altria was downgraded to market perform from outperform at Cowen. The
analyst sees tumultuous times in tobacco and is forecasting further
declines in an already deteriorating U.S. cigarette market. Price target
has been lower to $53. That stock fell 3 percent today to $48.78.
HERERA: Still ahead, why an ugly stock market could be bad news for the
finances of the nation`s largest economy, California.
GRIFFETH: The economic tensions between the U.S. and China have not
exactly stopped Tesla from breaking ground on a new factory in Shanghai.
The electric car maker is forging ahead with plans to ramp up production in
that critical Chinese car market.
Eunice Yoon has more for us tonight from Shanghai
EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Elon Musk described
the new Gigafactory as just another example of Tesla`s commitment to the
China market. The Tesla founder was here in Shanghai to attend a ground-
breaking ceremony for their plant which is about a two-hour drive from
here. In tweets before the event, musk said the company aimed to finish
construction this summer and start Model 3 production by the end of the
year and reach high volume production next year.
He added that the Shanghai Giga production would focus on the Model 3 and
the Y, serving the greatest China region. This factory will produce
affordable versions of the models, he says, for greater China, while the
rest and higher cost versions would be produced in the U.S. for the
worldwide market. The company plans to eventually produce approximately
3,000 Model 3 vehicles per week here and ramp up to 500,000 vehicles per
The announcement comes at an uncertain time in U.S./China relations, when
trade tensions are high. But Musk says that the move is going to be good
for the company because it`s going to help reduce some of the risk, reduce
some of the expenses associated with transportation costs, as well as
For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon in Shanghai.
HERERA: Meantime, Toyota is promising to expand the number of electric
vehicles it plans to sell. But is it moving fast enough to keep pace with
Tesla, which has become the leader in plug-in cars and SUVs?
Phil LeBeau has more on the battle to win over buyers looking to go green.
PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: It is a race between
Toyota, the third largest automaker, and Tesla, the world`s top builder of
electric cars. Last year in the U.S., Tesla easily sold more electric
vehicles than Toyota, which has just one model that plugs in, the Prius
Prime. It`s part of the Prius lineup, hybrid cars that run partially on
AD NARRATOR: More powerful, next generation gas/electric Prius, with
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LEBEAU: Prius` popularity exploded ten years ago, making Toyota the leader
in eco-friendly models.
BOB CARTER, TOYOTA NORTH AMERICA: So our strategy is to continue to
utilize and enhance our hybrids, our plug-in hybrids, and then eventually
bring in battery electric vehicles as the market grows.
LEBEAU: But gas/electric hybrid sales are slowing down because of cheaper
gas limits how much money hybrid save compared to conventional models.
Meanwhile, demand for electric cars is growing, especially in China, where
Elon Musk has broken ground on a new plant to build Teslas for Chinese
KARL BRAUER, KELLEY BLUE BOOK: I don`t think there`s any question Tesla is
seen as the real leader in pure E.V. vehicles now. Whether it`s just sales
numbers, whether it`s image and awareness and appeal, I think Tesla owns
that now. It`s going to be hard to wrestle that free from them.
LEBEAU: Toyota is undaunted. It`s developing pure electric cars while
planning to expand sales of hybrids.
CARTER: We believe right now that the hybrid technology in the short term
for `19 and `20 is the best application for consumers today.
LEBEAU: It is still early in the race to get more car buyers to plug in.
While Tesla clearly has the lead, Toyota believes it will eventually have
the models needed to charge up electric car sales.
Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago.
GRIFFETH: An activist investor wants Dollar Tree to raise its prices.
That`s where we begin tonight`s “Market Focus”.
Starboard Value is pushing them to start selling some items that cost more
than $1 in order to raise revenues. Dollar Tree has famously kept prices
at $1 since it was founded 30 years ago. Starboard also wants the company
to consider selling family dollar. That`s the struggling chain of stores
that Dollar Tree purchased back in 2015. Dollar Tree rose more than 5
percent to $97.96.
Sage Therapeutics oral treatment for postpartum depression has successfully
met the main goal of a late-stage study. The company said that patients in
that trial showed a rapid and sustained reduction in depressive symptoms.
And shares surged 42 percent on that news today to $139.13.
HERERA: Roku recorded a big increase in user growth, surpassing 27 million
active accounts in the fourth quarter. Roku says that users streamed more
than 7 billion hours in the quarter, a 68 percent gain year over year.
That growth sent shares up 25 percent to $42.18.
The New York Stock Exchange and the Nasdaq could see new competition.
Morgan Stanley, Fidelity and Citadel are among the companies planning a new
exchange, which they say will provide a low cost alternative to the major
exchanges. That sent shares of Intercontinental Exchange which owns the
NYSE down 3 percent and the Nasdaq fell more than 2.5 percent.
California`s largest utility is reportedly considering bankruptcy
protection. PG&E faces what could be crippling liability damages from a
number of wildfires. The cause of the fire has not been determined, but an
electrical outage occurred around the time and place of California`s camp
fire and where it started. Shares of PG&E dropped 22 percent to $18.95.
GRIFFETH: Well, with the new Congress being sworn in, there are new ideas
floating around Washington these days, especially when it comes to taxes.
During an interview with Anderson Cooper on “60 Minutes” over the weekend,
freshman New York Congresswoman Alexandria Ocasio-Cortez talked about the
super rich paying their fair share, invoking an idea from the 1960s.
(BEGIN VIDEO CLIP)
REP. ALEXANDRIA OCASIO-CORTEZ (D), NEW YORK: Once you get to like the
tippy tops, on your 10 millionth dollar, sometimes you see tax rates as
high as 60 percent or 70 percent. That doesn`t mean all $10 million are
taxed at an extremely high rate, but it means that as you climb up this
ladder, you should be contributing more.
(END VIDEO CLIP)
HERERA: The super rich in California have an outsized impact on that
state`s budget. And when the stock market is volatile, so is the revenue
into one of the world`s biggest economies.
Aditi Roy is in San Francisco.
ADITI ROY, NIGHTLY BUSINESS REPORT CORRESPONDENT: California`s wealthiest
residents, which include Mark Zuckerberg, Larry Ellison, Larry Page and
Sergey Bryn, pay the most in personal taxes. That`s because of the state`s
progressive tax system in which the top 1 percent of taxpayers generate
nearly half of California`s personal income tax revenue.
That also means big drops in the stock market can create volatility in the
state`s revenues, especially since California`s wealthiest residents make a
big chunk of their money from capital gains and tech company stock options.
GOV. GAVIN NEWSOM (D), CALIFORNIA: Today our economy is larger than all
but four nations in the world. We created — we`ve created nearly 3
million jobs and put away billions of dollars for a rainy day.
ROY: It`s a challenge Governor Gavin Newsom who took office today will
inherit. While the state currently has a budget surplus, experts say a
turn in the markets could result in swings in the state`s budget.
Former Governor Jerry Brown spoke about that volatility during a budget
address last year.
FORMER GOVERNOR JERRY BROWN (D), CALIFORNIA: The difficulty comes when you
have property tax that`s very stable, the property tax has only gone down
once since the great recession, whereas income tax has gone down many, many
times. And that volatility is what we`re trying to fix.
ROY: One way the state is facing that volatility is a $13 billion rainy
day fund. But one tax expert tells us if the legislature approves big, new
spending programs and if there`s a market downturn, that fund would quickly
In a paper released last year, California`s legislative analyst office they
say in California, revenues fluctuate in the economy and the stock market
more than most other states. The office estimates that the dotcom bust of
the early 2000s led to $80 billion in losses and a mild recession or even
deep bear market could result in a $20 billion budget problem.
While Gavin Newsom has indicated he would like to overhaul the tax system,
there are a few particulars about how he plans to do it. Some however
worry that any changes would roll the tax burden onto lower income
For NIGHTLY BUSINESS REPORT, I`m Aditi Roy, San Francisco.
HERERA: The White House today said that the IRS will pay tax refunds
during the partial government shutdown. That has traditionally not been
The IRS has not yet announced a start date to the filing season.
GRIFFETH: Coming up, price hike. The happiest place on earth just got a
lot more expensive.
HERERA: Here`s a look at what to watch for tomorrow. President Trump will
address the nation on immigration and the southern border. CES, the
world`s biggest annual tech show, gets under way as that industry searches
for the next big thing.
And the former chairman of Nissan, Carlos Ghosn, goes to court in Japan
where he`s accused of underreporting his income. He`s expected to make his
first public comments. That`s what to watch for on Tuesday.
GRIFFETH: Finally for tonight, if you`re planning a trip to Disneyland,
you may experience a bit of sticker shock. The theme park giant is hiking
prices once again at its parks.
Julia Boorstin is in Los Angeles with a look at what`s behind that
JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Ahead of the new
Star Wars Land opening at Disneyland this summer, the theme park is raising
prices. Effective Sunday, Disney`s least expensive daily ticket has jumped
above $100 for the first time, now $104.
Meanwhile, tickets for regular demand and peak demand days have increased
in price by 10 percent. With the price of Annual passes has increased by 8
percent. Parking prices are 25 percent higher.
TIM NOLLEN, MACQUARIE SENIOR ANALYST: It`s not surprising. It sounds to
me like something that any successful company with a quality product like
Disney would be doing in a strong economy. There`s clearly been
overwhelming demand for the parks in general. Very heavy attendance,
including at peak hours. So, part of the plan here I think is to try to
spread the attendance a bit, but also remember, it`s a very strong consumer
BOORSTIN: This price hike comes just a year after Disneyland and
California Adventure increased prices by as much as 18 percent. But that
didn`t hurt the parks, with both visitor volume and spending increasing.
Now, these price hikes are part of Disney`s preparation for a surge of
visitors for Star Wars Galaxy`s Edge. The 14 acre-$1 billion expansion of
the theme park which will include two rides.
CEO Bob Iger spoke about expectations for this new Star Wars land in
Disney`s earnings call in November.
BOB IGER, DISNEY CEO: Clearly, it`s the biggest thing we`ve done since it
opened in 1955 and we think it will drive a huge increase in demand. I
think we`ll have some interesting challenges on our hands to manage that
demand but that`s a good problem to have.
BOORSTIN: And Macquarie`s Nollen is confident consumers will be willing to
NOLLEN: I will anticipate a lot of people showing up to this new
attraction at Star Wars Land and I expect people will accept the price
increase because they want to see that product. And the Star Wars Land is
just another way of propagating the usual Disney virtual circle of popular
content through various different channels.
BOORSTIN: The risk is if consumer spending slows, if the economy struggles
or if Star Wars Land fails to live up to expectations. We`ll see how much
ride on Hans Solo`s Millennium Falcon is worth to fans.
For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Los Angeles.
HERERA: Here`s a final look at the numbers on Wall Street today. The Dow
rose 98 points, the Nasdaq added 84, the S&P 500 was up 17.
And that is NIGHTLY BUSINESS REPORT for tonight. I`m Sue Herera, thanks
for joining us.
GRIFFETH: I`m Bill Griffeth. Have a great evening. We`ll see you