Transcript: Nightly Business Report – January 25, 2019

ANNOUNCER:  This is NIGHTLY BUSINESS REPORT with Sue Herera and Bill


today that we have reached a deal to end the shutdown and reopen the
federal government.  


congressional leaders strike a short-term deal, ending the longest
government shutdown in history, at least for now.  

Stocks climbed.  The Dow posts five straight weeks of gains, but does the
market need to go lower before it can head higher?  

Rise of the machines.  A new report says robots could disrupt a quarter of
all U.S. jobs.  

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Friday,
January 25th.

Good evening, everyone, and welcome.  Bill Griffeth is off tonight.  

Washington dominated the day on Wall Street.  The longest government
shutdown in history is over, at least for now.  President Trump and
Congress reached a deal to reopen the government for three weeks, ending a
stand-off that threatened to slow the economy.  


TRUMP:  Over the next 21 days, I expect that both Democrats and Republicans
will operate in good faith.  This is an opportunity for all parties to work
together for the benefit of our whole beautiful wonderful nation.  If we
make a fair deal, the American people will be proud of their government for
proving that we can put country before party.  


HERERA:  Both the president and Senate minority leader Chuck Schumer
thanked the federal workers, and the senator said the shutdown accomplished


SEN. CHUCK SCHUMER (D-NY), MINORITY LEADER:  Hopefully, it means a lesson
has been learned.  Shutting down government over a policy difference is
self-defeating.  It accomplishes nothing but pain and suffering for the
country and the American people.  That`s a lesson we all must bear in mind.  


HERERA:  But it is not over.  The spending bill does not provide immediate
funding for a border wall.  Negotiations over border security will continue
and they are not expected to be easy.  

Kayla Tausche is on Capitol Hill for us tonight.  

Good evening, Kayla.  

So what about that money for a border wall?  

absent, Sue, from the deal we saw the president and Congress agree to
today.  Democrats have floated compromises.  They have suggested over the
last couple of weeks either potentially offering the president a fraction
of the $5.7 billion in border funding that he has sought or offering the
president the entirety of that but with restrictions, that it could only be
used for high-tech measures like drones or scanners.  

In return, Democrats have been seeking protections for the Dreamers or
children of undocumented immigrants that have come to the country over the
last several years.  It is expected to be a contentious process.  The House
and Senate will go head to head starting next week through the conference
or formal negotiating process on that very issue.  

HERERA:  What happens in that three-week period, Kayla?  And at the end, if
they don`t have an agreement, what happens then?  

TAUSCHE:  Well, the president today suggested that he is not ruling out
shutting down the government again, and if he does not get an agreement
that includes the money for the border wall or border barrier, whatever
word he chooses to call it at that time, that he is not ruling out
declaring a national emergency, though that could run into some legal

Senate Majority Leader Mitch McConnell for his part suggested on the Senate
floor today that some Democrats had signaled they would support funding for
border security measures going forward, and he asked those Democrats to
make good on that promise.  

HERERA:  Kayla, thank you so much.  Kayla Tausche on Capitol Hill tonight.  

Well, before the agreement was announced, the stress of the shutdown played
out at some of the nation`s major airports, resulting in serious flight
delays.  And that perhaps brought a sense of urgency to get a deal done.  

Courtney Reagan spent the day at LaGuardia Airport in New York.  


travelers found themselves at the center of the partial government
shutdown.  The FAA reported a shortage of air traffic controllers this
morning, a critical job for the nation`s airports, who are being asked to
work without pay.  

GOV. ANDREW CUOMO, (D) NEW YORK:  Due to the federal shutdown, there are
too few staff at the FAA in Washington to adequately control air traffic,
and they have to reduce flights coming from airports on the East Coast,
like LaGuardia, due to the staffing shortage.  

REAGAN:  The disruption was significant, especially for those flying up and
down the East Coast.  This morning here at New York`s LaGuardia Airport,
there was a brief ground stop due to the air traffic controller shortage.  
Once planes began to take off and land again, delays averaged 90 minutes,
an hour or more at Newark and Atlanta airports.  

The U.S. Travel Association says more than half of all flight delays and
cancellations in the country originate in the New York, New Jersey and
Pennsylvania airspace, so the ripple effect hits fliers throughout the U.S.  
At one point, Delta said it had about 200 delays at airports, though United
and American didn`t experience significant delays.  

Travelers at LaGuardia, though, exercised patience and were sympathetic to
the government employees.  

UNIDENTIFIED MALE:  They have to worry about do I pay rent or do I feed my
kids?  Do I get the lights shut off or do I go to work?  So they have to
get paid.  

UNIDENTIFIED FEMALE:  I think the fact that people even show up to work not
getting paid is — they should be commended and double paid.  

REAGAN:  Tonight, a sense of relief among workers and travelers that a
temporary end is in sight.  

For NIGHTLY BUSINESS REPORT, I`m Courtney Reagan in New York City.  


HERERA:  On Wall Street, stocks were higher from the opening bell on some
positive earnings and a report that the Fed may be close to ending its
balance sheet reduction.  The Dow Jones Industrial Average rose 183 points
to 24,737, the Nasdaq added 91 and the S&P 500 was up 22.  For the week it
was a mixed finish that saw the Dow record its fifth consecutive week of
gains.  The question now for investors is whether the positive sentiment
will continue into next week.  

Bob Pisani takes a look.  


believe that next week could bring a rounding of positive news on several

First, the end of the government shutdown, even though the deal is
announced by President Trump is only for three weeks, at least it limits
any economic damage from the shutdown.  

Second, a high-level delegation from China is set to visit Washington next
week for trade talks.  The markets believe some kind of deal can be
reached, however an agreement to reduce or eliminate tariffs isn`t the
problem.  The U.S. wants more including clear rules regarding intellectual
property theft.  That`s going to be tough to negotiate.  

The Federal Reserve is also meeting and most traders expect them to be
fairly quiet and reiterate they will be data dependent and will not raise
interest rates.  

Speaking of central banks, all of them seemed to be retreating from the
idea of raising rates as the global economy has cooled.  China is on full-
on stimulus mode.  Mario Draghi, head of the European Central Bank, he has
implied it`s unlikely they`re going to raise rates before 2020.  

Since central banks are the prime supplies of global liquidity, a retreat
from raising rates is certainly a help to markets and is likely the main
reason the markets have held up so well despite signs the global economy is

For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock Exchange.  


HERERA:  According to one school of thought, the Dow needs to go lower
before it can head higher.  Here to talk about what the Dow Theory is
telling investors is Jason Ware, chief investment officer at Albion
Financial Group.  

Jason, welcome, nice to have you here.  

JASON WARE, ALBION FINANCIAL GROUP CIO:  Hi, Sue.  Thanks for having me.  

HERERA:  What do you think the odds are that we would retest the lows in
the Dow Jones Industrial Average?  

WARE:  Yes, and that`s a question that`s obviously at the forefront of so
many people`s minds, especially given the fourth quarter we had last year,
where the market was in basically freefall.  

You know, to handicap that with any statistical odds I think is difficult.  
Could the market retest the December lows?  It certainly could.  We know
the general thought is that the market likes to retest before moving higher
so that`s something that could happen.  

But there are also many instances where that doesn`t happen.  We see strong
reversals in the market that continue higher until we get record highs
without a retest.  1978, 1982, 2009 even we saw that kind of a pattern.  
So, you know, it doesn`t always have to happen that way.  

I think that`s really going to drive the market over the near term and
whether we retest that low or not is sentiment.  It`s collective mood from
the investment community.  The market cares not so much about the absolutes
of good and bad but more importantly whether things are getting better or

HERERA:  Right.

WARE:  So, if we see news headlines on trade, the Federal Reserve,
corporate earnings for Q4, you know, things are getting worse, then we
could go back down and if things progress and get better, maybe we have
upside from here.  

HERERA:  All right.  So, what is the best strategy on an investment and
allocation basis for an investor, since we don`t know whether the market is
going to retest its lows but we have a lot of headline risks out there?  
Today was one example.  China as you mentioned was another example.  

WARE:  Right.  So in the wise words of the late Jack Bogle, stay the
course.  And that`s one of the things we preach with our clients and have
for almost 37 years now is have an appropriate asset allocation, that is
the right mix of stocks and bonds that`s appropriate for the client and for
their time horizon.  

But in service to that asset allocation and that investment policy, which
is our guiding light for how we invest, it`s having high-quality portfolio
construction.  That is a diversified portfolio of individual stocks of
great companies, of different market caps and different geographic
locations that put an investor in the position to not have to guess where
the market is going over the short term or what the winning asset class is
going to be, but rather having a high quality portfolio construction and
just ride the ups and downs in the market.  

HERERA:  On that note, Jason, thank you very much.

WARE:  Thank you.  

HERERA:  Jason Ware with Albion Financial Group.

A story in the news that didn`t have an impact on stocks today but one that
Wall Street is watching closely.  A former Trump campaign adviser and long-
time political consultant, Roger Stone, was indicted by special counsel
Robert Mueller.  Stone was charged with seven counts, including lying to
Congress about his contacts with the website WikiLeaks during the 2016
presidential campaign.  He was arrested in Florida and appeared in federal
court today where he pleaded not guilty and was released on a $250,000

It is time to take a look at some of today`s “Upgrades and Downgrades”.  
Intel (NASDAQ:INTC) was downgraded to neutral from positive.  The analyst
cites deteriorating demand at Intel`s data center business.  The call
follows the company`s disappointing earnings which we told you about last
night.  The price target is $50.  The stock fell 5 percent to finish out at

Norfolk Southern (NYSE:SO) was downgraded to hold from buy at Deutsche
Bank.  The analyst says that the railroad operator is at a slight
disadvantage compared to its rivals when is comes to making its operations
more efficient.  The price target is $177.  The stock fell just a fraction
to $165.12.  

Coming up, a new report says a quarter of American jobs face high exposure
to automation.  Are you at risk?  


HERERA:  Take a look at shares of California utility PG&E, down nearly 16
percent today, giving back a chunk of yesterday`s 75 percent gain after
regulators said the company wasn`t responsible for the second-most
destructive fire ever in that state.  Some had questioned PG&E`s plan to
file bankruptcy before yesterday`s findings.  So now what?  

Aditi Roy takes a look.  


investigators cleared PG&E of responsibility for the 2017 Tubbs Fire, which
claimed 22 lives and more than 5600 homes, many are wondering what`s next
for the utility.  While some analysts agree the development is good news
for PG&E, the utility still appears to be headed towards bankruptcy, saying
in a statement: PG&E still faces extensive litigation, significant
potential liabilities and a deteriorating financial situation, which is
further impaired by the recent credit agency downgrades to below investment

PG&E faces something of a liquidity crisis, call it six, nine months down
the road.  They just don`t have access to cost-effective capital right now
with the stock price down and bonds trading at such high yields.  

ROY:  In recent regulatory filings, PG&E estimates its liabilities from
wildfires the last two years could exceed $30 billion.  Analysts say the
Tubbs Fire ruling takes away up to $17 billion of liability.  But that the
utility still faces up to another $17 billion in costs from the 2018 Camp
Fire, which killed 86 people, setting the current record for deadliest and
most destructive wildfire in state history.  

That doesn`t include punitive damage, and some lawyers for fire victims say
they`re still moving forward with their claims against the utility.  

Industry watchers say all those factors and the junk status of the
utility`s bonds makes bankruptcy an inevitable choice.  

MILLER:  The problem is there`s no way out of this for several years.  We
look at how slowly California tends to move on just typical regulatory
issues, let alone all of the different stakeholders that are involved in
this fire.  Liability issue, the potential that you could have future fires
that are at risk for PG&E and it`s a process that`s going to play out over
many years.  And PG&E needs financing over those years to support what
regulators have said they have to invest in.  

ROY:  But not everyone shares that view.  Hedge fund Blue Mountain Capital,
a PG&E investor, says a bankruptcy filing by PG&E would be totally up
necessary and bad for all stakeholders, because the firm believes the
company is solvent and should be able to cover its liabilities.  It`s
calling for a new slate of directors, which the fund will name next month.  

With the Tubbs Fire investigation complete, many are now looking to the
Camp Fire inquiry.  A ruling on the cause of that fire is expected in the
coming months.  



HERERA:  Time now for our weekly market monitor, who believes the global
economy will continue to slow, so he says investors should look for
companies that can manage through those tougher economic times.  

He is Chris Retzler, portfolio manager, I should say, with Needham Small
Cap Growth Fund.  

Chris, good to see you again.  Welcome back.  

very much.  Good to see you too.  

HERERA:  Let`s get right to your picks.  Air Lease — and I found this
interesting.  It is a global play.  Why do you like it?  

RETZLER:  It`s a domestically based airline leasing company that`s a play
on the globalization and air traffic of the middle class that`s growing
around the world.  You know, a big area that has been hurt has been the
emerging markets.  It leases a lot into those airlines in China.  But they
were able to manage through the higher interest rate era because they`re an
investment grade quality airline leasing.  

The company dipped lower in December, it`s recovered here in January.  A
great management team and one we think can manage through difficult slowing
economy globally.  

HERERA:  Something in the large cap semi conductor area with your next pick
and that is Applied Materials (NASDAQ:AMAT).  It also has a dividend.  

RETZLER:  Yes, no, Applied Materials (NASDAQ:AMAT) is a semi cap equipment
maker which would supply companies like Intel (NASDAQ:INTC) where we heard
today some of their business is slowing.  But what Intel (NASDAQ:INTC) is
going to have to do is spend more money on CapEx.  That helps to drive the
business of a company like Applied Materials (NASDAQ:AMAT), as well as,
again, the technological innovation in semi conductors that we`re all
looking for in our handsets, we`ll continue to drive forward and that
requires more tools in the foundries.  

HERERA:  And the next pick, is it Viasat?  

RETZLER:  Yes, Viasat.  And so, for those who fly on airplanes and you see
at the entrance to plane exceed, they`re the ones providing that service to
you for connectivity when you fly on an airplane.  They also have some
exposure within the defense industry, but they`re a high-quality satellite
provider.  Also, a great management team that we think can manage through a
slowing global economy.  

HERERA:  And you like the management team and you say that it has a strong
shareholder base as well.  

RETZLER:  Yes.  I think all three companies have strong management teams.  
That`s one of our top requirements when we make investments and look at
companies is, you know, how can a management team that`s good manage
through difficult times and how do they handle themselves.  

HERERA:  All right, on that note, Chris, thanks so much for joining us.  

RETZLER:  Thank you.  

HERERA:  Chris Retzler with Needham Small Cap Growth Fund.

Well, hope springs eternal for D.R. Horton (NYSE:DHI) and that`s where we
begin tonight`s “Market Focus”.  

The home builder expects a strong spring selling season after a few tough
months.  Higher prices and rising mortgage rates kept some buyers out of
the market and resulted in weaker-than-expected quarterly earnings.  Shares
of D.R. Horton (NYSE:DHI) were down more than 2.5 percent today to $37.30.  

AbbVie`s earnings and revenue missed analysts` estimates.  The drugmaker
says its top-selling drug Humira faces competition from cheaper versions in
Europe.  The rheumatoid arthritis drug is the world`s best selling
prescription medicine.  AbbVie was off 6 percent to $80.54.  

Colgate-Palmolive (NYSE:CL) reported better-than-expected earnings but the
CEO said he expects earnings to fall this year on higher raw materials
prices and a stronger dollar.  The consumer goods company raised prices of
some of its products, which in turn crimped demand in places like Brazil
and Argentina.  The shares were down a fraction to $61.84.  

There`s a new report from the Brookings Institution that says 25 percent of
American jobs are at risk of automation and that the disruption will hit
some workers harder than others.  

Mark Muro is the author and he joins us to discuss this is findings.  

It`s really fascinating, Mark.  Welcome.  Nice to have you here.  

me, Sue.  

HERERA:  I was really surprised at the wide swath of jobs and, therefore,
people that are really vulnerable to automation.  

MURO:  Yes.  I think what`s interesting, our research shows that those who
have a bachelor`s degree are going to do OK.  The real pressure is going to
come on people in vulnerable jobs, vulnerable places, and underrepresented
groups.  Some of the people who are struggling now are going to have some
new things to worry about.  

HERERA:  Let`s talk about those people who may be vulnerable.  You say that
a degree will help you, but low wage earners, the report says, are going to
be among the first to see their jobs disappear because some of the tasks
that they do are routine based.  

MURO:  Yes, absolutely.  It`s sort of troubling that those who are already
struggling, you know, may be in for new complications, but that`s
absolutely it.  Those who are doing sort of rote, relatively low pay, low
skill work are now those who are going to be facing some of the newer
technologies, new forms of automation, new forms of artificial
intelligence, who are coming to do food service work, coming into hotels,
coming into those kind of retail situations.  

And I think —

HERERA:  Let`s take a look at some of these jobs that are vulnerable or
industries that are vulnerable.  Basically rote production, you mentioned
food service, transportation, administrative work, maintenance, an also
construction because basically the machines can do that.  

We`ve seen some of this on Wall Street already.  

MURO:  Yes, absolutely.  Those are the most exposed.  And it`s because
they`re mainly predictable jobs.  They`re kind of rote jobs and that
machine and the newer forms of automation and artificial intelligence can
do that work.  So, you`ve got to be in things that can`t be replaced.  

HERERA:  On that note, Mark, thank you very much.  

MURO:  Thank you for —

HERERA:  With the Brookings Institute.  Have a good weekend.  

MURO:  Yes, thanks so much.  Take care.  

HERERA:  Coming up, the savings crisis that is now facing millions of


HERERA:  Well, it may be Friday, but here`s a look at what you should watch
for next week.  
On Tuesday, Apple (NASDAQ:AAPL) reports its earnings and, as you know, the
company cut its revenue guidance earlier this month in part because of

On Wednesday, quarterly results from Dow components Boeing (NYSE:BA),
McDonald`s (NYSE:MCD), Microsoft (NASDAQ:MSFT) and Visa (NYSE:V) will be

And on Friday, the government issues its monthly employment report.  And
that is what to watch for next week.  

A record number of suspected cases of elder financial abuse were reported
by banks last year for a total of about 24,000.  That is double the amount
of five years earlier.  According to “The Wall Street Journal”, banks are
increasing training programs for employees on how to detect and stop the
issue without violating a customer`s privacy.  

The shutdown and those workers who went without pay got us thinking about
savings, and of all the surveys that show Americans don`t have enough money
stashed away for a rainy day.  

Senior personal finance correspondent Sharon Epperson joins us with more on
savings crisis that is facing millions of Americans.  

You know, it`s — the numbers are really staggering.  How much of a
financial bind would most Americans be in if they faced this type of
situation, or just an emergency?  

CORRESPONDENT:  When you think about the fact that the majority of
Americans are living paycheck to paycheck and surveys have shown that more
than half of Americans have less than $1,000 saved, then you realize what a
problem it will be if something unexpected happens, even if it`s just that
you can`t repair your car or you have an emergency room visit of $1,000.  

Bankrate recently surveyed folks and found out that only 40 percent would
be able to pay for an unexpected $1,000 bill with their savings.  They
don`t have the savings to cover it.  And it`s not that they`re not used to
having something happen that they never expected, because three out of ten
said they had an unexpected expense in the last year.  

HERERA:  All right.  So your back`s against the wall.  You`ve had — you`ve
been furloughed or you have that emergency that so many people apparently
have.  You need to borrow money.  Where do most people go, and where should
they go?  

EPPERSON:  With that Bankrate study, more than a third of those surveyed
said they would use their credit card or get a personal loan or they borrow
from family and friends.  That`s where many people do go to borrow money.  

Here`s the catch.  If you use a credit card, the average rate right now is
over 17.5 percent on a credit card.  If you get a cash advance, we`re
talking about an interest rate of close to 30 percent.  That`s a lot to pay
in interest when you`re likely not going to able to pay your bill in full
every month because that`s why you borrowed in the first place.  

So, personal loan seems like a better bet.  And if you have great credit,
it`s a much lower interest rate, 5 percent or so.  But if you have not so
great credit, personal loan rates can be as high as 36 percent, according
to Bankrate.  

HERERA:  Oh my goodness.

EPPERSON:  Borrowing from friends and family, probably the first place to
go but it`s a business transaction.  Make sure you put it in writing and
have the terms in that contract.  

HERERA:  OK, you`re unable to pay and have credit card debt, you have a
mortgage and you can`t pay those things.  What do you do?  

EPPERSON:  So not just for federal workers, I think the Office of Personnel
Management put out a great resource to anybody who`s dealing with this
situation, in providing sample letters that federal workers could use to
explain their situation.  Follow these steps.  Contact your lender.  First
of all, don`t hide about it.  

Contact your lender.  If you have an outstanding loan, let them know your
situation.  Determine what you can pay and promise, reiterate that you will
pay, you know you owe this money and you`re going to pay it when you`re
able to do so.  And then send a letter, confirmed by letter what you`ve
discussed, what the terms will be of your payment and work from there.  

But the most important thing is to be up front about it to explain your
situation, because there are many resources out there that want to try to

HERERA:  Indeed.  And we saw some of that —

EPPERSON:  Yes, we have.  

HERERA:  — during the shutdown.  


HERERA:  Sharon, thank you as always.  

EPPERSON:  Sure, my pleasure.  

HERERA:  We appreciate it.  

Before we go, let`s take a look at the final numbers from Wall Street
today.  The Dow Jones Industrial Average up about 183 points.  The Nasdaq
was up about 91 and the S&P 500 was up 22.  

And that does it for NIGHTLY BUSINESS REPORT tonight.  I`m Sue Herera.  
Thanks for joining us.  We`ll see you Monday.  Have a great weekend.


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