ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Bill Griffeth and Sue
SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Losing momentum. There are
new signs global growth is cooling and that could ripple through the U.S.
economy and your investments.
BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: Bankruptcy filing.
California`s largest power company is now expected to seek Chapter 11
protection amid mounting costs related to the state`s massive wildfires.
HERERA: Expansion plans. Two major automakers are increasing production
at a time when the industry is in transition.
Those stories and more tonight on NIGHTLY BUSINESS REPORT for Monday,
GRIFFETH: And we do bid you a good evening, everybody. And welcome.
This wasn`t exactly how nervous investors wanted to start this week. A new
report out of China showed the sharpest decline in that country`s exports
in two years, compounded by concerns about slowing global growth. And then
you add to that, a report from the organization for economic cooperation
and development that also pointed to a further slowdown in the global
economy this year.
And you had a pretty cautious Monday as a result on Wall Street. The Dow
fell by 86 points, closed at 23,909. The Nasdaq was down by 65. The S&P
slid by 13.
Eunice Yoon starts as off tonight from Beijing.
EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: China`s latest trade
data reaffirms that the economy here continues to decline. December export
as well as import figures missed expectations.
Exports dropped 4.4 percent from a year ago, analysts had expected it to
fall to a 3 percent rise. Imports shed 7.6 percent versus the forecast of
5 percent growth. China`s trade surplus jumped to $57 billion. Exports to
the U.S. in particular slid 3.5 percent and the U.S. with the U.S. for the
year was a highest on record going back to 2006.
A few important points from the data. Tariffs are hurting exporters.
Companies front-loaded orders which will taper off. Demand globally is
softening. Shipments to the U.S. were the only ones affected. Exports to
Europe and Japan also fell.
Domestic demand is struggling more than expected despite effort by the
authorities to stimulate growth. Expectations are that Beijing will have
to speed up the policy easing and other measures to boost the economy and
that President Donald Trump could use the record trade surplus to pressure
Beijing as part of the trade negotiations.
For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon in Beijing.
HERERA: Adding to those global concerns is a key vote tomorrow in the
United Kingdom. It is a vote that could help determine that country`s
economic and political future.
Willem Marx is in London tonight.
WILLEM MARX, NIGHTLY BUSINESS REPORT CORRESPONDENT: Theresa May and some
of her most senior ministers spent the last 48 hours trying to drum up
support among skeptical lawmakers in their own conservative party, ahead a
decisive vote on the prime minister`s Brexit proposals. She`s warned those
of her own MPs who say her plan could leave the U.K. tied too closely to
Europe, that (INAUDIBLE) her version of Brexit and they could end up with
no Brexit at all. That`s the second referendum is called that reverses the
Prime Minister May had last month faced the same defeat and postponed that
previous attempt to push this plan through the House of Commons. Little
really changed since then, though the consequences now are just over ten
weeks left until the U.K. is scheduled to exit the European Union with or
without a deal.
THERESA MAY, BRITISH PRIME MINISTER: I say we should deliver to the
British people and get on with building a brighter future for our country
by backing this deal tomorrow.
MARX: Government economists and the Bank of England have warned that a no
deal departure would economically disastrous for Britain. But
nevertheless, all indications are that May will still lose tomorrow night`s
vote. She then have until next Monday to come back with a new plan B.
Before then, the opposition Labour Party could push for motion of no
confidence in the government that could in turn trigger a fresh national
JEREMY CORBYN, OPPOSITION LABOUR PARTY LEADER: The government is in
disarray. It`s clear. If the prime minister`s deal is rejected tomorrow,
it`s time for general election. It`s time for a new government!
MARX: Uncertainty remains the watch word here in Westminster and that
means investors, lawmakers, and ordinary British voters still have more
questions than they have answers about the U.K.`s immediate political
For NIGHTLY BUSINESS REPORT, I`m Willem Marx in London.
HERERA: So how will all of these growth concerns around the globe impact
the market and your investments?
We`re joined now by Jeff Kleintop, global chief investments strategist over
at Charles Schwab.
Jeff, welcome back. Good to see you again.
JEFF KLEINTOP, CHARLES SCHWAB CHIEF GLOBAL INVESTMENT STRATEGIST: Thanks
for having me.
HERERA: You`ve been worried about the global outlook for some time now and
I would assume that this latest wrinkle with Brexit only adds to those
KLEINTOP: The global economy has been expected to slow, sue, whether it is
by the OECD or World Bank or the IMF, or most pundits are looking for
slower global growth this year. But the data we`ve seen come in the last
month has even slower than that. And that`s raised a number of concerns.
It seems to be tied to the macro issues.
You mentioned Brexit, there`s also the protest in France that derailed
plans there. There is concern about the Italian budget that subsided for
the time being but still have an impact on economic growth. And, of
course, there is the U.S.-China trade dispute which still lingers on. All
those factors seem to be weighing on global economic output.
GRIFFETH: And, certainly, it weighed on our stock market in the fourth
quarter as parentally Wall Street was anticipating a slowdown of some kind.
Where do you think we will see that slowdown start here in the U.S., Jeff?
KLEINTOP: Yes, that`s interesting. Already we`ve seen it affect earnings
growth. Earnings expectations have pulled back pretty sharply for 2019.
For U.S. companies, given their global exposure, where does the growth
slow? It`s hard to say. I think clearly, we`re seeing some impact on U.S.
companies. How that impacts U.S. consumers and businesses in terms of
their economic output, we`ll have to see. Certainly some slowing is
I think what is more interesting is the fact that the market seems to
already price in a recession as of the end of the fourth quarter, given the
very sharp pullback the way I look at the markets, the way I look at the
economic data. But it already gone ahead of itself in priced in that
recession which may yet be becoming.
We`re not there yet. I wouldn`t be surprised to see a little bounce in the
market here in Q1. But that doesn`t mean the coast is clear.
HERERA: All right. If that`s the case, what are you advising investors to
do, especially those with the longer term time horizon?
KLEINTOP: A longer term horizon is key right here. And remember, this is
why we own bonds in our portfolio is to buffer from some of the equity in
the volatility markets. But if indeed a Q-1 rally gives way to weakness
later in the year, you may want to consider health care, those earnings may
be less vulnerable to a pullback in global economic conditions and other
more defensive areas of the stock market. But, remember, broadening
diversification pays off here.
What we haven`t seen in some time, correlations have come down, meaning
markets are behaving a little more independently from each other than they
have in a while. And that offers some benefit to diversified investors.
HERERA: Jeff, thank you as always. Jeff Kleintop with Charles Schwab.
KLEINTOP: Thank you.
GRIFFETH: Elsewhere, investors are also nervous about earnings which we`ll
start to see a lot of this week. Citigroup (NYSE:C) got things started
this morning with a mixed report. The bank posted better than expected
profits, thanks in part to cost cuts. But its fixed income revenue fell
about 20 percent. But that doesn`t stop investors from buying the stock
today. It sent the stock nearly 4 percent higher in today`s session.
HERERA: And now to Washington and the partial government shutdown which is
now the longest in history. Negotiations between president Trump and
congressional Democrats appear frozen. It`s not just the furloughed
federal workers who are feeling the financial strain but also as we`ve been
reporting businesses as well. And that`s also true for commerce, at the
shipping ports, airports, and on the road.
Contessa Brewer is in New Haven, Connecticut.
CONTESSA BREWER, NIGHTLY BUSINESS REPORT CORRESPONDENT: On land, in the
air, and at sea, worries are growing over the federal government shutdown
and the potential for serious problems.
MARIO CORDERO, PORT OF LONG BEACH EXECUTIVE DIRECTOR: Clearly, some of the
questions that are posed to me by our customers, our shippers, retail
associations. There is a concern with regard to the impacts of a shutdown.
BREWER: At the nation`s second busiest port in Long Beach, California,
federal employees for Customs and Border Protection and the Coast Guard are
showing up, but they`re not getting paid.
And we learned some 300 ships are stuck at sea unable to come into U.S.
ports because of a technicality. You see, they`re supposed to carry what`s
called a certificate of financial responsibility, essentially proof of
insurance that they can be responsible should something dire happen. And
the Coast Guard has clearly listed on the website, it`s not processing
those applications right now.
Global supply chain giant CH Robinson says the slowdowns aren`t
significant, but points out shippers aren`t getting duty refund payments.
Companies excluded from tariffs, aren`t seeing those exclusions recognized.
So, they`re still paying and waiting for reimbursement.
Without federal safety inspections, some ships can`t refuel in harbor
costing them between 12 and 48 hours in delays.
JOE GROSS, D`AMICO SHIPPING DRY CARGO OPS MANAGER: Our industry runs very
tightly, logistically, and time is money and, you know, it may cost one
owner X amount and may cost another owner X amount, and across the
industry, it`s going to have an impact.
BREWER: Domestic freight isn`t seeing a slowdown because they Federal
Motor Carrier Safety Administration is funded by the Highway Trust Fund,
not the DOT budget. Federally chartered Amtrak remains up and running,
funded through traveler revenue.
But air passengers are seeing a slowdown at security checkpoints as TSA
reports double the number of sick calls over the week, causing some
closures in Miami and Houston. And air traffic controllers are suing
President Trump over the shutdown. FAA safety inspectors are furloughed.
MICHAEL JESSE, FORLOUGHED FAA INSPECTOR: I`m out here because I want to
raise public awareness and let the public know that there is no safety
oversight and let the public make their decision as to whether or not they
want to fly.
BREWER: Even if the government opens tomorrow, there a backlog. These
agencies will need to play catch-up so the logjam won`t disappear the
moment the government shutdown ends. And right now, there`s no end in
For NIGHTLY BUSINESS REPORT, Contessa Brewer, New Haven, Connecticut.
GRIFFETH: Time to take a look now at some of today`s “Upgrades and
We begin tonight with delta which was downgraded to neutral from buy at
Bank of America (NYSE:BAC) Merrill Lynch. The analysts there cited the
potential for slower demand, decline in CEO confident and the government
shutdown. Price target is $51. That stock fell more than 1-1/2 percent
today to $47.75.
Chevron (NYSE:CVX) was also downgraded to hold from buy at HSBC. The
analyst cited the supply of crude and that stock`s recent multi-year high.
Price target, $122. And that stock fell a fraction today to $111.72.
HERERA: Still ahead, the future of Sears (NASDAQ:SHLD) from the man who
literally wrote the book on that retailer.
GRIFFETH: Cold weather is hitting up the natural gas market. Prices
spiked again today on a cooler than expected forecast for the eastern half
of the United States towards the end of this month. And that could
potentially mean increased demand and tighter in inventories. So, prices
rose by 15 percent in today`s session.
HERERA: California`s largest utility plans to file for bankruptcy. PG&E
faces billions of dollars in liability costs stemming from that state`s
deadly wildfires. That cut the stock price in half today.
Aditi Roy takes a look at what this could mean for both consumers and
ADITI ROY, NIGHTLY BUSINESS REPORT CORRESPONDENT: A tumultuous 24 hours
for PG&E as California`s largest utility announced in a regulatory filing
this morning that it plans to file for bankruptcy.
That filing following the news late Sunday that CEO Geisha Williams is
stepping down. Williams had been in the position since 2017. Since then,
the utility has grappled with devastating wildfires including the campfire
last fall which killed at least 86 people making it the state`s deadliest
fire in history.
In today`s filing, PG&E says if it were found liable for the cost of the
northern California wildfires the last two years, the liability would
exceed $30 billion. That doesn`t include punitive damages. The utility
services 16 million customers in Northern and Central California. Experts
say a bankruptcy would likely not disrupt service but could increase rates.
Some customers say they`re unfazed by the prospect of rate hikes.
UNIDENTIFIED MALE: Not so much they file for bankruptcy before.
ROY: While the utility did file for bankruptcy back in 2001 as a result of
the energy crisis, some experts say a bankruptcy today would look very
different from the classic Chapter 11 reorganization the utility went
through more than a he decade ago. Since the wildfire risk will continue
and perhaps even increase in the future.
Insiders say stockholders of the utility would likely be wiped clean and
bond holders might have to fight for their claims in court. The utility
could also be broken up. Experts see a bankruptcy judge could decide to
separate PG&E`s gas and electric businesses.
And while all of these issues will likely take years to play out, some
customers are already worried about how it will impact their pocketbooks.
UNIDENTIFIED MALE: It does concern me because with rent in Oakland, that`s
expensive enough. And for our PG&E to go up, that can cause some problems.
I may have to get another source of income.
ROY: In addition to the civil liabilities, California`s attorney general
and Butte County`s district attorney said they are considering filing
criminal charges against the utility. PG&E says it plans to file for
bankruptcy on or around January 29th.
For NIGHTLY BUSINESS REPORT, I`m Aditi Roy, San Francisco.
GRIFFETH: Newmont Mining (NYSE:NEM) goes digging for gold. And that`s
where we begin tonight`s “Market Focus”.
With the company buying rival Goldcorp (NYSE:GG) for about $10 billion, it
would create the world`s largest gold producer. The deal follows Barrick
Gold`s agreement to buy Randgold last September. This latest consultation
wave in that industry is due in part to a dwindling supply of easy to find
gold around the world. Goldcorp (NYSE:GG) rose 7 percent to $10.38.
Newmont Mining (NYSE:NEM) dropped by 8 percent to $31.78.
Elsewhere, Gannett (NYSE:GCI) has received a hostile takeover bid. The
owner of “USA Today” got an unsolicited offer valued at $1.3 billion from
MNG Enterprises. This is a hedge fund-backed media group known for buying
up struggling local newspapers. If this deal goes through, it would turn
MNG into the largest owner of U.S. daily newspapers around the country.
Gannett (NYSE:GCI) responded this morning by simply acknowledging it
received a bid and executives said they would consider it in due course.
Shares of company surged by 21 percent today to $11.82.
HERERA: Lululemon raised its profit and revenue forecast for the fourth
quarter. The company has seen strong sales growth recently and analysts
expect that to continue both online and in China. Shares rose more than 5-
1/2 percent to $139.73.
Canadian cannabis company Canopy Growth said it received a hemp license
from New York state and it will establish U.S.-based commercial operations.
The company plans to invest between $100 million and $150 million in its
New York operations and it will source exclusively from American farmers
once it`s up and running. The shares gained 11 percent to $42.49.
GRIFFETH: Earlier today, a bankruptcy auction was held behind closed doors
in New York City trying to decide once and for all the fate of iconic
retailer Sears (NASDAQ:SHLD).
Last week, remember, Chairman Edward Lampert, who was also the company`s
largest shareholder, made that revised offer of $5 billion and today a
group of liquidators was scheduled to offer their own bids. The outcome of
the auction will determine whether Sears (NASDAQ:SHLD) and Kmart continue
to operator or go out of business.
Joining us tonight is Don Katz. He`s the founder and CEO of audible.com.
Don is also the author of “The Big Store,” written back when Sears
(NASDAQ:SHLD) came through another crisis and became the number one
retailers around the country. “The Big Store” was recently reissued as an
audio book on Audible.
I cannot say the number of people who have said that 100 years ago, Sears
(NASDAQ:SHLD) was the Amazon (NASDAQ:AMZN) of its time. Amazon
(NASDAQ:AMZN) owns Audible right now. But the business models are very
DONALD KATZ, AUDIBLE.COM FOUNDER: Well, they`re similar in a sense of
having engendered amazing consumer trust and also inventing consistently
with great vision. It`s different in the sense that we forget the 20th
century was marked very much by consumerism being the mark of success for
the rising middle class and just about everybody else. We really didn`t
come to that era of salary point in the `80s and net worth point in the
late, you know, 30 years, until fairly late.
People mark their sense of themselves by the fact that Sears (NASDAQ:SHLD)
was democratizing access to washing machines and sewing machines and dryers
and trash compactors and the like. And they earned and they created a
sense of trust by figuring out ways to logistically and inventionalized get
this to people. It was a genius company.
It found the suburbs and named in many ways. It did amazing number of
things and at the beginning of the catalog days, it figured out the how to
sell something to someone that you couldn`t see. So that alone, I mean,
only two dimensional.
HERERA: The parallel is online basically.
KATZ: It`s fascinating. But the idea of trusting farmers to pay their
bills, credit money-back guarantees, ample free parking, they invented
But they lost their way.
KATZ: I think now, my book is still read in business because it`s both a
road map to how to create a truly inventive great company, but it`s also
how not to have hubris, pride and myopia blindside you. It pretty much is
over as a company a long time ago.
HERERA: Where do you think it goes from here? Eddie Lampert still wants
in a very big way. He continues to put in a higher bid. We don`t know
which way the decision is going to go. But what is Sears` way forward?
KATZ: You know, I have stopped — I do other things with my day job now so
I don`t — I have a feeling that Sears (NASDAQ:SHLD) is over except for
basically being a real estate holder and iconic brand that much older
people spent their lives with. You know, one in 30 Americans have worked
at Sears (NASDAQ:SHLD) at the point I was writing this book.
I basically think in many ways what happened more recently after I wrote my
book is the financialization of the economy is somewhat mythic in a sense
that super — great companies are built by unleashing things with capital.
It`s hard work and creativity plus capital. And this was just a case where
it doesn`t work that way. It`s a bunch of real estate at this point.
GRIFFETH: Right. But realistically and quickly, you know, the model the
retailer has to have today if they`re not just purely online, you have to
have a brick-and-mortar store as well. There is a good combination of
KATZ: There are plenty of brick-and-mortar stores out there doing
incredibly well. I mean, just talk about the people in the hemp and
cannabis world. Look at the stores that are gearing up to be niche
retailers. There`s fantastic retailers out there, and Amazon (NASDAQ:AMZN)
actually has physical outlets that are really genius too.
KATZ: It`s just this idea of the mega corporation that at one point was
the great American corporation of the 20th century, things have been
HERERA: Yes, things are changing.
GRIFFETH: The name of the book is “The Big Store.” Don Katz, the founder
and CEO, joining us tonight.
KATZ: Bill, great to see you.
GRIFFETH: Coming up, automakers are shifting gears.
(BEGIN VIDEO CLIP)
PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: New models, new plans.
I`m Phil LeBeau at the Detroit Auto Show where automakers are laying out
the road to the future. That story coming up on NIGHTLY BUSINESS REPORT.
(END VIDEO CLIP)
GRIFFETH: Despite concerns the auto industry has too many plants and is
building too many vehicles, at least two automakers say that they will
build more assembly lines in the U.S. The announcements came today at the
North American International Auto Show.
And Phil LeBeau is in Detroit.
LEBEAU: Make no mistake, the auto industry is in an arms race with
automakers investing in new models and new plants. Volkswagen took the
ramps off its new Passat and then announced plans to hire 1,000 new workers
to build a second plant in Chattanooga, Tennessee, where it will crank out
electric model starting in 2022.
HERBERT DIESS, VOLKSWAGEN CEO: We want to grow in the United States. We
have good momentum with the new product. We have a very good team. We
have been gaining market share. We think with electric cars, we`ll have a
chance here in the U.S.
LEBEAU: Cadillac is also plugging in, showing images of an all-new
electric model that will go on sale in 2021. The move comes as the
industry tries to catch up with the success of Tesla. Last year in the
U.S., Tesla easily sold more electric cars than any other automaker. But
GMm says it is too soon to declare Tesla the winner in E.V.s.
STEVE CARLISLE, CADILLAC PRESIDENT: I think we have to wait a while to
rate the whole story. We don`t know what happens when E.V.s really start
to scale from a distribution and customer experience perspective. So for
the rest of it, and a profitability perspective.
So, I think we`ve got to wait a little while before we rate the whole
LEBEAU: But for all the focus on E.V.s, the models generating the biggest
profit and the most sales are trucks and SUVs, and no brand is hotter right
now than jeep, which is why Fiat Chrysler is adding assembly lines to keep
up with demand.
MIKE MANLEY, FCA CEO: One of the things we`re going to do in our current
plan is bringing two new products to Jeep. We`re going to bring three-row
variant, and a full size and then in the large. You know, we`re going to
bring back the Grand Wagoneer. Those two vehicles, there is no way we can
fit it into our existing manufacturing infrastructure. So, we will bring
capacity onboard for those and, you know, as you know, pent up interest
really for Grand Wagoneer is huge. So, yes, that will have to happen in
the very near future.
LEBEAU: Expansion plans for an industry in transition.
Phil LeBeau, NIGHTLY BUSINESS REPORT, Detroit.
GRIFFETH: Well, not only is the auto industry in transition but so is
retail. A finicky consumer and new technology are just some of the issues
facing that business. They were addressed at the largest trade show of the
year hosted by the National Retail Federation.
Courtney Reagan was there for us tonight in New York.
COURTNEY REAGAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Forty thousand
people from around the world, in attendance to retailers, to software
companies, to start-up and more with two goals, to discuss the latest
trends in retail which changes as fast as shopper tastes, and to showcase
the newest retail technology to serve them.
Meet Millie (ph). A Canadian fashion brand and a German grocery store are
experimenting with her to greet shoppers and answer questions.
Hey, Millie, how much are these sunglasses?
MILLIE: Normally a lot. But I like you.
REAGAN: There are smart carts that scan groceries as you go and technology
that adds up your items as you shop so you can walk without a cashier. And
analytics that identify consumer gender, age and more to microtarget for
personalize messaging, or gathering data about shopping patterns to
feedback to the retailer. Plus, robots and drones to make filling orders,
stocking shelves and gathering inventory information easier.
But as cutting edge as all the artificial intelligence and machine learning
technology is, CEOs of the country`s biggest retailers say traditional
stores remain their biggest asset.
BRIAN CORNELL, TARGET CEO: They function as service centers, fulfillment
hubs and their incredible showrooms for inspiration. In fact, this season,
our digital business outperformed the industry by over 50 percent. And
that`s largely because three out of every four digital orders was fulfilled
by a store.
HUBERT JOLY, BEST BUY CEO: The stores are wonderful asset for us. And
that`s from a customer standpoint, because, you know, a lot of the stuff we
sell, you need to touch, feel, be able to ask question, see how everything
works together. Asset for the vendors, they get to showcase the products.
As asset from a supply chain stand point, but 40 percent of the online
orders are actually picked up in the stores, and that`s growing.
REAGAN: So, while virtual stylists and A.I.-powered robots and cashier-
less technology enhance the retail experience, maximizing the utility of
stores remains retail`s top priority.
For NIGHTLY BUSINESS REPORT, I`m Courtney Reagan in New York City.
GRIFFETH: One more look at the day on Wall Street. Minor minus day, if
that is such thing. Down 86 points for the Dow. The Nasdaq was down 65.
The S&P down 13.
HERERA: And that will do it for NIGHTLY BUSINESS REPORT tonight. I`m Sue
Herera. Thanks for joining us.
GRIFFETH: I`m Bill Griffeth. Have a great evening. See you tomorrow.