ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Bill Griffeth and Sue Herera.
BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: Talks break down.
President Trump declares a shutdown meeting with congressional Democrats a
total waste of time, bringing it to an abrupt end.
SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Shutdown stress. The partial
government closure is starting to cast a chill over business with warning
signs coming from a number of different industries.
GRIFFETH: That`s a wrap. U.S. and Chinese officials end three days of
trade talks. While there`s optimism, differences still remain.
Those stories and much more tonight on NIGHTLY BUSINESS REPORT. It`s
Wednesday, January 9th.
HERERA: Good evening, everyone, and welcome.
A dramatic day at the White House. A meeting between President Trump and
House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer
seemingly ended almost before it began. Negotiations to reopen parts of
the government that are closed have stalled. The shutdown is now in its
19th day, one of the longest in history.
And Fitch says if it drags on much longer, the U.S. risks losing its AAA
Ylan Mui is in our nation`s capital.
YLAN MUI, NIGHTLY BUSINESS REPORT CORRESPONDENT: It`s a shutdown
breakdown. President Trump calling a meeting with Democrats at the White
House today a total waste of time. He tweeted that he asked if he would
approve his border wall if he reopened the government. When House Speaker
Nancy Pelosi said no, Trump tweeted that he said bye-bye.
Later, outside the White House, Vice President Mike Pence said Trump won`t
MIKE PENCE, VICE PRESIDENT OF THE UNITED STATES: I think the president
made his position very clear today, that there will be no deal without a
MUI: Chuck Schumer, the top Democrat in the Senate, accused the president
of literally walking out of their closed door meeting in the Situation Room
of the White House.
SEN. CHUCK SCHUMER (D), NEW YORK: Again, we saw a temper tantrum because
he couldn`t get his way and he just walked out of the meeting.
MUI: The confrontation comes on a day when both sides sought to shore up
their base. Democrats said that President Trump is manufacturing the
crisis and said that he cares more about the border wall than federal
Meanwhile, Trump paid a visit to Capitol Hill today to sell his shutdown
strategy to GOP lawmakers. There had been some grumbling amongst moderates
who were eager to get government workers back on the job. The president is
still weighing whether to call a national emergency in order to build a
wall without congressional approval.
Today, Trump said that Republicans have his back.
DONALD TRUMP, PRESIDENT OF THE UNITED STATES: The Republican Party I can
say, and I just left an hour meeting, we had a great time. There was no
discussion about anything other than solidarity. We want national security
and border security for our country.
MUI: Tomorrow, the president will head to the southern border to continue
his public appeal, while the government shutdown enters day 20.
For NIGHTLY BUSINESS REPORT, I`m Ylan Mui in Washington.
GRIFFETH: The shutdown is also threatening the IPO market. The partial
closure of the Securities and Exchange Commission is forcing some companies
that wanted to go public to push back their plans, which means that there
could be no IPOs this month, making this just the third time since 1995
that there were no new stock issues in the month of January. 2019 has been
expected to be a strong year for initial public offerings.
HERERA: And it`s not just the IPO market, the partial shutdown is also
starting to pressure business more broadly, rippling through to industries
you might not expect, like brewers.
Frank Holland is in Hackensack, New Jersey.
FRANK HOLLAND, NIGHTLY BUSINESS REPORT CORRESPONDENT: Seeing the glass
half full after a strong 2018 —
BLAKE CRAWFORD, ALEMENTARY BREWING CO-OWNER: We`re running a good
business, and business is very good.
HOLLAND: Alementary Brewing in Hackensack New Jersey, decided to make a
million dollar investment to more than triple brewing capacity.
CRAWFORD: We never expected that this would be the hiccup.
HOLLAND: But the government shutdown is stopping Blake Crawford
(NYSE:CRD.A) and Michael Roosevelt from getting the licenses they need to
expand and meet the growing demand for their signature Hackensack lager.
MICHAEL ROOSEVELT, ALEMENTARY BREWING CO-OWNER: We`re paying almost $1,000
a day to occupy that building. Between the lease and the property taxes
and the utilities and the payments on the equipment, it is costing a lot of
money every day. And every day that the government is shut down means one
more day that I don`t know when I am going to start getting revenue to
offset those expenses.
HOLLAND: Staff in the Alcohol and Tobacco Tax Bureau of the Treasury
Department are among the 380,000 workers deemed non-essential during the
shutdown. The office known as TTB issues licenses to makers of alcohol,
including the 6,300 craft breweries in the U.S.
CRAWFORD: The term non-essential government staff is kind of interesting,
because it`s only non-essential if your business doesn`t depend entirely on
that department being open.
HOLLAND: TTB also approves new formulas and even new labels. The Brewers
Association says it`s a big deal because brewers make roughly a third of
their income during summer months. TTB`s closure also impacting wine and
The spirits trade group saying distillers are in the midst of planning
their seasonal offerings, which is completely impossible without the prompt
label and formula approvals.
CRAWFORD: There`s no reason why businesses like ours should be stopped
from brewing because of any government policy debate.
HOLLAND: Before the government shutdown, the owners of Alementary expected
to get their approvals this month. Now, instead of bottling their beer,
they`re worried about a bottleneck at the TTB.
ROOSEVELT: With this shutdown, I have no idea how long it`s going to take
even after the shutdown is over and as the TTB workers are back reviewing
applications, how long it`s going to take them to work through their
HOLLAND: For NIGHTLY BUSINESS REPORT, I`m Frank Holland in Hackensack, New
GRIFFETH: So where else are the ripple effects of the shutdown going to be
Joining us tonight, we welcome back Erik Gordon, professor at the
University of Michigan`s Ross School of Business.
Happy New Year, Erik. Welcome back.
ERIK GORDON, UNIVERSITY OF MICHIGAN`S ROSS SCHOOL OF BUSINESS: Happy new
year to you, Bill and Sue.
GRIFFETH: It seems every day we learn a new industry or business or
enterprise is affected by this shutdown where you never would expect it.
Frank Holland`s story is a good example of that. It really points to the
surprising relationship the government has with the private sector right
GORDON: Yes, it turns out that the government is involved in all sorts of
things that we don`t think they`re involved in. And when they`re shut
down, it means industry after industry is in trouble.
HERERA: Now, you gave us a list of some of the things that you see on the
horizon, one of which is home sales could be hurt, partly because if you
deal with the government for your mortgage, that`s not going to be
processed, but also and this one surprised me, the drug review by the FDA.
GORDON: Yes. You know, you can`t just sell new drugs, thank goodness.
They have to be approved by the FDA. That`s a long, expensive kind of
But here`s something that I think is interesting. A blockbuster drug, the
drugs that make or break these big drug companies these days, they sell
about $3 million worth a day. And that means if the delay is 30 days, just
30 days delay in FDA approval can cost you $300 million.
If it`s down for three months, it could be a billion dollars lost to drug
companies. Even the biggest drug companies can`t afford that.
GRIFFETH: Right. And even the workers, the government workers who are
affected by this who are not receiving a paycheck, I mean, we`re talking
hundreds of thousands of people out there. They`re not making home
payments if they are living paycheck to paycheck, and they may not buy big
ticket items like cars down the road as well, right?
GORDON: Yes. I think if you`re worried about when you`re going to get a
paycheck again, you`re going to hold off on big ticket items that are
discretionary items. If your car broke and you have to buy it, you have to
buy it. But I tell you what, if I wasn`t getting a paycheck, I wouldn`t be
buying anything big now. So, I think a lot of industries, everything from
big screen TVs to refrigerators to cars are going to be hurting.
GRIFFETH: So does a business in the private sector need to rethink its
relationship with the government, maybe change its business model or the
way it does business or, you know, some of the products that it sells to
the consumer as a result of this? Is there a learning curve in this
GORDON: Sue, you know, I think there is. I think we`ve been alerted to a
risk we haven`t thought about very much. Even though there have been other
government shutdowns, they have tended to be very short and not had a big
effect. But, you know, when you consider risk factors now, you probably
have to list, gosh, we are dependent on government approvals. If we don`t
get them, it can hurt our business.
GRIFFETH: Indeed. Erik Gordon with the University of Michigan Ross School
of Business, always good to see you. Thanks for joining us tonight.
GORDON: Thank you.
HERERA: And another example of the shutdown`s reach, the Hubble Space
Telescope is suffering some technical problems. NASA calls it a hardware
issue, and there are reports that its repair could be delayed because some
of the government employees needed to troubleshoot that problem are not
GRIFFETH: To Wall Street now where the Dow`s win streak was extended to
four days today. Trade talks with China and the release of the minutes
from the most recent Fed meeting helped give stocks a lift. But the gains
were pared when news surfaced that that shutdown meeting at the White House
did not go well. The Dow closed with a gain of about 91 points today at
23,879. The Nasdaq was up 60, the S&P 500 added 10 points.
HERERA: And those trade talks that bill just mentioned concluded today in
Beijing. And while there`s some optimism that progress is being made, any
deal is likely still a long way off.
Eunice Yoon has our report tonight.
EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: The U.S. delegation is
on its way back to Washington, but that comes after an unexpected third day
of talks. The discussions were supposed to wrap up on Tuesday but were
extended by a day and the foreign ministry today said that that shows both
sides are serious about the talks. Now, as these negotiations were
proceeding, there was another sign of flexibility on the part of the
Chinese. Beijing granted approvals for five GMO crops, and that paves the
way for companies such as DowDuPont to sell its biotech seeds into China.
However, as has often been the case with China, people who followed these
talks, say the move was welcome but long overdue. American companies have
been waiting for these approvals for years. That gets to the core of these
Are the Chinese really willing to go far enough to address American
concerns and get a deal done? There are reports that there has been
progress, but on the less contentious issues that are easier to resolve,
such as greater Chinese purchases of U.S. farm and energy products to
reduce the deficit, but it appears there`s not much common ground on the
tougher and structural problems like forced technology transfers,
intellectual property rights protection and state subsidies for Chinese
There`s an expectation now that the next step will be higher level
discussions between Trade Representative Bob Lighthizer and Vice Premier
Liu He, possibly as early as next week in Washington.
For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon in Beijing.
GRIFFETH: By the way, there have been reports that President Trump would
talk about trade with Chinese high-level officials on the sidelines of the
World Economic Forum in Davos later this month, but now that may not
happen. Late today, the White House said the president is considering
cancelling his trip to Switzerland if the partial government shutdown still
is not resolved.
HERERA: And now to the Fed which today released the minutes of its last
meeting where policy makers decided to hike interest rates.
But as Steve Liesman reports, not everyone was on board.
STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Minutes to the
December meeting where they controversially raised rates for the fourth
time in a year showed Fed officials were thinking about bringing a halt to
their hikes. In fact, minutes show some members even opposed the rate
increase at the time.
In the end, the Fed decided to hike based on strong economic and jobs data.
Despite the sell-off in the market and rising volatility, the minutes show
officials still expected growth to remain above trend this year and that
more hikes could be coming. But Fed officials tried to tweak the language
of their statement then to indicate that future hikes were much more
dependent on economic data than they have been. It didn`t work at the
time. In the wake of the meeting, the Dow Jones plunged 2,300 points or
nearly 10 percent over the ensuing weeks before clawing back most of the
And it took soothing comments from Fed Chairman Jerome Powell just this
past week suggesting the Fed is more flexible on rates than markets
thought. Several Fed speakers on Wednesday emphasized this new patience.
They said they`re likely to hike, but we`ll wait to see whether the
pessimism in the market or the optimism in the data wins out this year.
For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.
GRIFFETH: Time to take a look at some of today`s upgrades and downgrades.
There are a lot of them.
Bank of America (NYSE:BAC) was upgraded to buy from neutral at UBS. The
analyst there cited attractive valuation and healthy operating leverage.
The call comes one week before the bank reports its earnings. Target
(NYSE:TGT) price, $32. That stock rose about 1 percent today to $25.76.
Morgan Stanley (NYSE:MS) was upgraded to buy from neutral at Citi. The
analyst says that the increase in market volatility can lead to higher
trading revenue throughout the year. Price target now $48 and shares rose
a fraction to $41.74.
HERERA: Nike (NYSE:NKE) was downgraded to neutral from outperform at
Baird. The analyst cites concerns that the stock`s valuation might not be
sustainable. The price target is $82. Shares were slightly lower to
Oracle (NASDAQ:ORCL) was downgraded to equal weight from overweight at
Barclays. The analyst cites competition in Oracle`s database business and
also in its cloud offerings. The price target is $55. The stock was off
just a fraction to $47.78.
Barclays also cutting its rating on Lowe`s to equal weight from overweight.
The analyst cites macro uncertainty and industry trends. The price target
is $105. The stock was down slightly to $97.03.
GRIFFETH: Still ahead, we`ll take you to a border town where a lot of
business is getting done.
GRIFFETH: Don`t look now, but oil prices have been in the midst of a sharp
about-face. Prices rose once again today after Saudi Arabia reassured the
market that its oil production and exports will continue to decline.
Optimism about the U.S./China trade talks have also been helping to lift
that market. Oil settled above $52 today. Just since the low achieved on
December 24th, prices have risen nearly 15 percent.
HERERA: Earnings season gets under way in earnest next week. A few
reports have already trickled in, but one thing is clear, guidance for 2019
will be the big focus for investors.
Bob Pisani is at the New York Stock Exchange.
BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Earnings season
officially kicks off next week. Good news is a lot of bad news has been
priced into the market. We saw that yesterday when Samsung dropped 1.5
percent after terrible earnings guidance.
We saw it again today. Lennar (NYSE:LEN) missed earnings and revenue
estimates. The stock is up. You might expect it to be down but it was up
It`s not clear how much negative news the markets can handle before again
turning down. For the bears, a lot of the damage to the global economy has
already been done. Morgan Stanley`s Mike Wilson says he still sees an
earnings recession ahead this year. That would mean two straight quarters
of negative year over year earnings growth.
Early fourth quarter earnings are mostly beating. No surprise there. It`s
full year guidance that matters, though. Of the 20 companies that
reported, 90 percent have beaten expectations but about 70 percent had
their first quarter estimates cut by analysts after they reported.
Where are they coming from? Well, there`s negative comments from Apple
(NASDAQ:AAPL), and Samsung and Micron. They cut the profit growth forecast
for the technology sector in half. Five percent and two and half percent.
Oil prices dropped like a stone in the fourth quarter. No surprise.
Estimates for oil companies` profit growth were also slashed dramatically.
So, it`s clear earnings are slowing down, but how much? Some believe
earnings growth could be flattish in 2019. Others think earnings will grow
in the mid to single digits.
Wharton School professor Jeremy Siegel says even if there`s no earnings
growth, the market valuations still aren`t crazy. Well, that`s comforting.
For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock Exchange.
GRIFFETH: A buzzkill for Constellation Brands (NYSE:STZ), and that`s where
we begin tonight`s “Market Focus”.
The maker of Corona beer lowered its profit outlook after reporting a sharp
decline in earnings. The company also said wine and spirits sales were
soft and it expects that weakness to continue. Constellation also cited
higher expenses related to its $4 billion investment in cannabis company
Canopy Growth. Shares plunged 12 percent today to $150.94.
Skywork Solutions lowered its quarterly sales and profit targets. The chip
maker cited weakness among its biggest smartphone customers. Investors
have been focused on the outlooks that have been issued by smartphone
suppliers after Samsung estimated a sharp decline in profit and Apple
(NASDAQ:AAPL) lowered its quarterly sales forecast. Shares of Skyworks
rose 4 percent to $67.69.
Chesapeake Energy (NYSE:CHK) plans to lower its capital expenditures this
year. The shale oil driller will also reduce its rig count by 20 percent
to an average of about 14 rigs. But the company said fourth quarter output
will likely top forecasts. That sent the small cap stock higher by more
than 12.5 percent. It closed at $2.76.
HERERA: T-Mobile said it added about 1 million net new phone subscribers
in the fourth quarter, easily exceeding estimates, which were about
850,000. The company cites competitive wireless plans and trade-in offers.
This follows Verizon`s strong quarterly subscriber numbers we told you
about yesterday. The shares were down a tick to $67.72.
After the bell, Bed Bath and Beyond beat earnings expectations by a penny.
But revenue came up short. The retailer said it`s ahead of schedule when
it comes to stemming declines in its operating profit. It also expects
fiscal 2019`s earnings to be similar to 2018, and analysts were expecting
So, as you might expect, the stock initially rose in the after hours and
also ended the regular day up 4 percent to $12.26.
HERERA: Also out after the home, KB Home (NYSE:KBH) topped profit
estimates even as total revenue fell in the quarter. The home builder also
gave a rosy outlook for the year, saying it expects to build more homes
this year than initially planned. Investors liked what they heard and sent
the shares initially higher in the afterhours. Shares also finished the
regular day up 4 percent to $21.98.
GRIFFETH: Well, certainly, the southern border is the talk of Washington
and Wall Street and main street these days. At the busiest checkpoint
between the U.S. and Mexico, small business owners are keeping a close eye
on the decisions coming out of our nation`s capital.
Aditi Roy is in San Ysidro, California, for us tonight.
ADITI ROY, NIGHTLY BUSINESS REPORT CORRESPONDENT: It`s a bustling weekday
in San Ysidro, California, a stone`s throw away from the Mexican border.
Despite the government shutdown, customs and border protection officials
are still manning the San Ysidro checkpoint and people are crossing over as
usual. It`s the busiest crossing in the western hemisphere, with 90,000
cars and pedestrians coming into the U.S. every day through the checkpoint.
These shop owners rely heavily on those Mexican residents crossing over to
the U.S. to buy clothes, shoes or perfume, contributing to the nearly $700
million in sales generated in San Ysidro every year.
PAOLA AVILA, INTERNATIONAL BUSINESS AFFAIRS V.P.: We really depend on
cross-border consumers. Our retail industry, our tourism industry depends
on this cross-border consumer.
ROY: Business leaders say since President Trump started talking about
building a wall, delays at the crossing have increased and now with the
president forcefully calling on Congress to approve the nearly $6 billion
needed to help pay for the barrier, business leaders are worried it will
affect the local economy.
AVILA: Business doesn`t like uncertainty. And the border closures
recently have caused — created uncertainty. Uncertainty translates into
discouraging trade and travel. And when you discourage trade and travel,
you see a direct economic impact.
ROY: One report says a delay of 45 minutes per crossing costs San Diego
County nearly $1.3 billion in lost business income per year. Last fall,
the San Ysidro crossing was shut down for more than five hours after a
dispute between border patrol and migrants, costing a whole day`s worth of
commerce for many local merchants and consumers.
They include Lu Wong who owns her own clothing and shoe stores in Tijuana.
She buys her merchandise in the U.S. and the closure last fall was a big
Your business has gone down?
LU WANG, BUSINESS OWNER: Yes, yes, too much.
WANG: Because of the security.
ROY: Fewer than ten miles away, customs an border protection officials
have erected eight border wall prototypes. As they grapple over whether
they will turn into reality, this border town watches and waits.
The president is scheduled to visit the border tomorrow.
For NIGHTLY BUSINESS REPORT, I`m Aditi Roy, San Ysidro, California.
GRIFFETH: Coming up, splitting up. It is not often the world`s richest
man files for divorce.
GRIFFETH: Here`s what we`re watching for tomorrow.
As Aditi just mentioned, the president will be visiting the southern border
and disputes over funding for construction of a wall will be discussed.
Federal Reserve Chair Jerome Powell will participate in a question and
answer session at the Economic Club of Washington.
And overnight, we`re going to get new economic data out of China
specifically on inflation.
That`s what we`re watching for on Thursday.
HERERA: Toyota (NYSE:TM) is recalling more than 1 million vehicles in the
U.S. to replace a potentially deadly Takata airbag. The automaker said the
airbag inflater could explode with too much force and eject shrapnel. That
recall applies to multiple Toyota (NYSE:TM), Scion and Lexus models from
2010 to 2017.
GRIFFETH: A drop in mortgage rates encouraged more potential home buyers
to apply for a mortgage in the first week of the New Year. The mortgage
bankers association said total application volume rose 23.5 percent last
week compared to the week before. Although volume is now down 9 percent
compared to the same time last year. But as we`ve been reporting, the
partial government shutdown could prevent some of those mortgage
applications from actually closing.
HERERA: Well, if you`re in the market for a skyscraper, Manhattan`s
Chrysler building is reportedly up for sale. “The Wall Street Journal”
says the owners, an Abu Dhabi government fund and New York developer are
working with a commercial real estate firm to try to attract a buyer. The
Abu Dhabi group paid $800 million for its 90 percent stake back in 2008,
and that`s an amount some real estate investors say might be difficult to
GRIFFETH: Maybe not for this next guy.
GRIFFETH: Amazon (NASDAQ:AMZN) CEO and founder Jeff Bezos and his wife
Mackenzie are getting a divorce. Maybe you`ve heard about that. And when
a divorce involves the world`s richest man and the most valuable public
company, it could go down as one of the most expensive splits in history.
Here`s Robert Frank.
ROBERT FRANK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Jeff Bezos announced
on Twitter today that he and his wife of 25 years, Mackenzie, were getting
a divorce. He said they had been separated and decided to continue our
shared lives as friends.
The question is what this could mean for Amazon (NASDAQ:AMZN), the most
valuable company in the world. It would most likely file in Seattle where
they live. Washington is a community property state, which means that all
property and debt acquired during a marriage has to be divided equitably
which usually means half.
Now, Bezos founded Amazon (NASDAQ:AMZN) in 1994, a year after they were
married, so his 16 percent stake is currently valued at around $130
billion. She could legally be entitled to half of that, or around $65
Bezos suggests this was amicable and won`t result in a public court fight.
He tweeted, quote: We see wonderful futures ahead as parents, friends and
Now, Seattle divorce attorneys tell me the Bezos probably already have a
settlement that was done in private and there`s no reason for make it
For NIGHTLY BUSINESS REPORT, I`m Robert Frank.
HERERA: Before we go, here`s a look at the final numbers on Wall Street
today. The Dow rose 91 points to 23,879. The Nasdaq added 60, and the S&P
500 was up 10.
That will do it for us tonight on NIGHTLY BUSINESS REPORT. I`m Sue Herera.
Thanks for joining us.
GRIFFETH: I`m Bill Griffeth. Have a great evening, everybody. We`ll see
About NBR“Nightly Business Report produced by CNBC” (NBR) is an award-winning and highly-respected nightly business news program that airs on public television. Television’s longest-running evening business news broadcast, “NBR” features in-depth coverage and analysis of the biggest financial news stories of the day and access to some of the world’s top business leaders and policy makers.
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