Transcript: Nightly Business Report – January 30, 2019

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



JEROME POWELL, FEDERAL RESERVE CHAIRMAN:  The case for raising rates has 

weakened somewhat.  



some are interpreting the Federal Reserve`s pledge to be patient when it 

comes to raising interest rates.  And the Dow reclaims 25,000.  


(NYSE:BA) reports strong results and books $100 billion in annual sales for 

the first time in its 102-year history.  

HERERA:  House hunters hibernate.  A new measure of sales falls to a five-

year low, sending a shiver through the real estate market.  

Those stories and more tonight on NIGHTLY BUSINESS REPORT for this 

Wednesday, January 30th.  

GRIFFETH:  And we do bid you a good evening, everybody, and welcome.  

Yes, the Fed pledged patience, earnings were solid, and those two things 

combined were a recipe for a rally on Wall Street today.  It started with 

Apple`s results that we told you about last night.  Then came a strong 

report this morning from Boeing (NYSE:BA), which was followed then by the 

Fed, which suddenly seems to be speaking Wall Street`s language.  

And when all was said and done, the Dow was up a strong 434 points today, 

back above 25,000, the Nasdaq added 154, and the S&P was up 41.  

Bob Pisani has more on this big day on the market from the New York Stock 




today on a handful of positive news and earnings beats.  The Dow jumped 

more than 500 points at session highs to cross back over 25,000, with Apple 

(NASDAQ:AAPL) and Boeing (NYSE:BA) alone adding more than 200 points today.  

Now, the Federal Reserve wrapped up its first meeting of the year, and the 

language used in today`s Fed statement showed a change in tone, saying the 

Fed remains patient when it comes to rate hikes and that balance sheet 

policy is entirely flexible.  Those are the two things the market wanted to 

hear.  And while bond yields sunk on the heels of those comments, overall, 

traders were happy.  

Now, never mind that the Fed did not change its economic outlook.  The 

change in tone alone was good for more than 20 points in the S&P 500.  That 

happened right after their announcement was made.  

Now, this is the good news.  Here`s the bad news.  The market is looking 

very pricey right now.  The S&P 500 has punched through its recent trading 

range.  It`s now trading at its highest level since December 6th.  

It`s pricing in an awful lot of good news, not just a patient and dovish 

Fed, but optimism over trade talks and the continuation of what I call 

slowing, but still positive earnings growth.  

Here`s the bottom line.  In an environment with a lot of positives priced 

in and very limited earnings growth, the higher the market goes, the 

tougher it`s going to be to be really bullish.  

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


HERERA:  The statement by the Fed, which dropped its long-standing 

reference to future rate hikes, was embraced by investors and seemed to 

alleviate a lot of anxiety.  

Steve Liesman reports tonight from the Central Bank in Washington.  



in a sweeping policy change from its December rate hike gave the doves 

almost everything they were looking for at the conclusion of their January 

meeting.  The Fed in its policy statement kept rates unchanged, said it 

would be, quote, patient in considering further hikes and removed from its 

statement language that telegraphed further rate increases ahead.  

The Fed even said its plans to reduce its $4 trillion balance sheet 

described just last month as on auto pilot were up for consideration now if 

the economy weakens.  

POWELL:  Growth has slowed in some major foreign economies, particularly 

China and Europe.  There is elevated uncertainty around several unresolved 

government policy issues, including Brexit, ongoing trade negotiations, and 

the effects from the partial government shutdown in the United States.  

Financial conditions tightened considerably late in 2018, and remain less 

supportive of growth than they were earlier in 2018.  And while most of the 

incoming domestic economic data have been solid, some surveys of business 

and consumer sentiment have moved lower, giving reason for caution.  

LIESMAN:  Analysts took the new policy pronouncements to mean the fed was 

on hold for at least six months, pending more clarity in the economic 


Economist Joe Brusuelas at RSM called it, quote, “a strategic retreat” for 

the Fed.  Ian Shepherdson at Pantheon said it was about as dovish a 

statement as possible unless it was a rate cut, which it wasn`t.  Powell 

said the Fed could take its time in figuring out its next move because 

inflation is muted and lower oil prices should keep it that way.  

What`s unclear is if the fears of weaker growth that gripped markets prove 

transitory, will the Fed double back again to talk about rate hikes later 

this year, or is the Fed now paused for more permanent patience.  

For NIGHTLY BUSINESS REPORT, I`m Steve Liesman in Washington.  


GRIFFETH:  Now to all those earnings started with Boeing (NYSE:BA), which 

helped lead the Dow higher.  The aerospace giant posted record reported 

earnings for the fourth quarter and said it expects more of the same this 

year.  And shareholders certainly enjoyed the flight today as the stock 

rose more than 6 percent.  

Phil LeBeau has more on Boeing`s big earnings beat.  



(NYSE:BA) is soaring right now, delivering record earnings, revenue and 

cash flow in the fourth quarter.  

Boeing`s CEO says it`s proof the company is performing at a higher level.  

DENNIS MUILENBURG, BOEING CHAIRMAN & CEO:  I think what you see reflected 

here is a strong growth in the aerospace industry and the marketplace.  And 

in a way, we`re leveraging that growth as we ramp up commercial airplane 

production.  Now, we`re driving bottom line profitability and cash flow 

while we`re doing that.  

LEBEAU:  Boeing`s earnings are surging thanks in large part to the 

company`s most popular plane, the 737, where monthly production has 

steadily climbed higher, pushing airplane deliveries to a record high.  

SHEILA KAHYAOGLU, JEFFERIES:  The deliveries are in place and the free cash 

flow is there.  So, you know, we view any pullback as an opportunity on the 


LEBEAU:  Supporting Boeing`s lofty outlook, the fact more people around the 

world are flying somewhere.  In recent years, roughly 4 billion people have 

taken to the skies, so airlines around the world are ordering more planes.  

MUILENBURG:  The world needs 43,000 new airplanes over the next 20 years, 

about 7,700 of those are in China.  So China needs the airplanes.  They 

need to lift to continue to grow economically and to fuel their broader 

economic growth across multiple sectors.  

LEBEAU:  Right now, Boeing (NYSE:BA) has enough orders to cover the next 

seven years of production, 5,900 planes worth nearly a half trillion 

dollars, a backlog that should reassure investors who wonder if Boeing 

(NYSE:BA) could continue to fly high.  



HERERA:  Fellow Dow component McDonald`s (NYSE:MCD) reported strong global 

sales but it struggled to attract more U.S. diners and that is a critical 

market for the fast food chain.  McDonald`s (NYSE:MCD) raised menu prices, 

but that did not resonate with customers, especially when it comes to 

breakfast.  The company says the chain has been losing breakfast traffic at 

a greater rate than it would like.  That sent the stock slightly lower in 

trading today.  

GRIFFETH:  And the parade of big cap earnings continued late today with 

results from Microsoft (NASDAQ:MSFT) which said that sales from its cloud 

computing business rose.  That offset a slowdown in demand in other units.  

These are numbers from the world`s largest software company.  They earned 

$1.10 a share, one cent better than expectations, but revenue was a little 

short of estimates at about $32 billion.  And the stock fell in initial 

after-hours trading.  

Josh Lipton has the one key takeaway on Microsoft`s quarter.  



big number in Microsoft`s latest results, referring to the company`s 

commercial cloud revenue in the quarter, up 48 percent year over year.  

Evercore`s Kirk Materne, a Microsoft (NASDAQ:MSFT) bull, says that`s 

important because that`s really the growth driver for Microsoft 

(NASDAQ:MSFT) long term.  It`s all about the commercial business and that`s 

firing on all cylinders, he says.  Materne also says there may have been 

some disappointment in other areas, notably Windows OEM revenue declined 5 

percent.  That`s what device makers pay Microsoft (NASDAQ:MSFT) for license 

the Windows operating system.  

For NIGHTLY BUSINESS REPORT, I`m Josh Lipton, San Francisco.  


HERERA:  And Visa (NYSE:V) reported a double-digit rise in quarterly 

profit.  The payments network processed more transactions, thanks to strong 

consumer spending and a robust economy.  Both earnings and revenue came in 

better than expected.  Visa (NYSE:V) also reaffirmed its guidance for the 

full year, and the stock moved higher and then fell in initial after-hours 


GRIFFETH:  Jack Ablin joins us to talk about the market day, the earnings, 

the Fed.  He`s chief investment officer at Cresset Wealth Advisers.  

What a day, Jack, welcome.  Thanks for joining us.  


GRIFFETH:  Let`s start with the earnings.  Wall Street liked these 

corporate earnings that beat expectations.  But let`s be clear, a lot of 

those expectations had been sharply reduced ahead of time, hadn`t they?  

ABLIN:  Yes, especially Apple (NASDAQ:AAPL).  And remember Tim Cook came 

out in December with some very disappointing outlook news, talking down 

profits, talking down revenues.  So when the news finally hit, it was 

actually not as bad as investors had thought.  The company did come back 

with plans to improve their service business, expand some other revenue 

sources, and I think certainly investors took a liking to that.  

HERERA:  So what do these earnings tell you, jack, overall about the 

economy and the health of it?  

ABLIN:  Sure.  So we`re tracking roughly between 11.5 percent and 12 

percent earnings growth, which sounds great in isolation.  That`s down over 

the last several weeks, as analysts have brought their forecasts down.  

But I think we have to look later into 2019 and know that earnings growth 

is expected to rise roughly low single digits in Q2, Q3, likely Q4 because 

we`ve got, you know, massive comparisons.  Remember, Q2 of 2018, we were up 

26 percent year over year.  So those are tough numbers to beat.  

Now, keep in mind that slower growth does not necessarily mean contraction.  

And I think that`s what investors are trying to reconcile now.  

GRIFFETH:  And that brings us to the Fed, which, as we said, was very 

dovish with its comments today.  No rate increase maybe for the next six 

months, maybe for the rest of the year.  Is that a green light necessarily 

for Wall Street just to continue higher then?  

ABLIN:  Yes.  I mean, it`s really, you know, an interesting conundrum 

between what interest rates should be, given the economic environment, and 

what the market can handle.  And what it sounds like, that accommodation is 

the new neutral.  As long as we don`t see inflation, which we haven`t, then 

perhaps the natural rate of interest is lower — it is now than it has been 

in history.  

So, if I were to take a snapshot back, you know, 20 some odd years, 30 

years, and say where should the 10-year treasury be, I`m looking at a rate 

of probably 4 percent to 4.5 percent.  We`re at 2.75, and anything pushing 

it higher is really making market participants upset, so we`ll have to see.  

I think as long as we have no inflation, rates can stay where they are and 

everyone is happy.  

GRIFFETH:  All right.  Jack Ablin with Cresset Wealth Advisors, thanks 

again, Jack.  We`ll see you again.  

ABLIN:  Thank you, Bill.  

HERERA:  It is time to take a look at some of today`s “Upgrades and 


Coverage of United Continental was initiated with a buy rating at Argus 

Research.  The analyst cites improved operating efficiency and strong cost 

controls.  The price target is $101.  The stock rose 2 percent to $87.47.  

Allergan (NYSE:AGN) was downgraded to equal weight from overweight at 

Morgan Stanley (NYSE:MS).  The analyst cites emerging Botox competition and 

less confidence in the company`s pipeline.  The price target is $156.  The 

stock fell a fraction to $143.89.  

GRIFFETH:  Whirlpool (NYSE:WHR) was downgraded to underperform from sector 

perform at RBC Capital with the analyst citing industry uncertainty.  And 

that stock`s recent rally made it a little too expensive.  The price target 

is $111.  The stock fell 3 percent today to $132.15.  

Juniper was downgraded to underperform from buy at Bank of America 

(NYSE:BAC) Merrill Lynch.  The call follows the company`s disappointing 

fourth quarter results and guidance which pointed to weak demand and 

pricing trends.  Price target $25.  And that stock fell 7-1/2 percent today 

on this big rally day to $25.83.  

HERERA:  Coming up, Facebook (NASDAQ:FB) shares take off.  We`ll tell you 



GRIFFETH:  The labor market started 2019 where it left off in 2018, on a 

strong note.  Private payrolls have grown at a much faster pace than 

expected in January.  According to ADP, employers added 213,000 jobs as 

businesses continue to aggressively expand their ranks where they can.  Big 

companies added 66,000 of those jobs.  Midsize firms added 84,000.  While 

small businesses gained 63,000.  

And the government releases its own monthly employment report Friday 


HERERA:  Investors are watching closely those trade talks between the U.S. 

and China, which got under way today.  The stakes are high, since both 

sides have just over a month to reach an agreement or risk escalating the 

trade war.  

We have two reports tonight.  Eunice Yoon is in Beijing, but we begin with 

Kayla Tausche in Washington.  



in two months, teams from the U.S. and China are meeting to hash out a 

trade deal as higher tariffs loom on March 1st if sufficient progress is 

not made.  The talks have lasted all day today and throughout Thursday 

afternoon, with President Trump sitting down with the Vice Premier Liu He.  

The White House has laid out its case.  It`s open to China`s offer to buy 

more natural gas and soybeans, but China must stop stealing U.S. 

intellectual property and technology and allow U.S. companies freer access 

to its markets.  

White House economic official Larry Kudlow said the talks themselves are 



this comprehensive.  And I regard that as a big plus.  How these are worked 

out, we`ll have to wait and see.  The president has expressed some — I 

would say — guarded optimism about the talks.  

TAUSCHE:  Treasury Secretary Steven Mnuchin has been trying to manage 


STEVEN MNUCHIN, U.S. TREASURY SECRETARY:  Now, let me just remind people, 

we do have another 30 days after this, so my expectation is that we`ll make 

significant progress at these meetings.  But I would just emphasize, these 

are complicated issues.  We have a timeline of how we`ve mapped out the 90 


TAUSCHE:  Overshadowing the meetings are criminal charges of the U.S. filed 

on Monday against China`s Huawei and a push to extradite its CFO.  The 

Commerce and Justice Department said that situation is separate from trade, 

but the president has said he`s willing to intervene in the Huawei case if 

it means a better trade deal.  

For NIGHTLY BUSINESS REPORT, I`m Kayla Tausche in Washington.


GRIFFETH:  Now to Eunice Yoon in Beijing for a look at how China is 

approaching the talks.  



negotiators are hoping to reach an agreement to avoid greater tariffs by 

the March deadline.  The Chinese led by Vice Premier Liu He will reportedly 

offer a major increase in purchases of U.S. agriculture and energy 

products, a crackdown on I.T. theft and will likely play up a new draft 

foreign investment law.  The new law which is expected to be passed in 

March is meant to address U.S. concerns about unfair trade practices by, 

for example, banning forced technology transfers.  

However, the wording is vague enough that most foreign executives are 

skeptical this is more than a cosmetic move.  In fact, many expect the 

Chinese negotiators to push back hard against U.S. demands for deeper 

fundamental changes to the way the economy runs here.  

The Chinese will also be likely less than enthusiastic about the U.S.`s 

proposal for an enforcement mechanism that would allow the U.S. to ensure 

that Beijing is accountable.  The talks will also be overshadowed by the 

Justice Department`s indictments against Chinese tech titan Huawei.  U.S. 

Treasury Secretary Steven Mnuchin attempted to separate the talks from the 

indictment.  The Chinese see the targeting of Huawei as political.  

The CFO`s extradition hearing has been postponed to March 6th.  The Vice 

Premier Liu He is set to meet with President Trump on Thursday.  That`s an 

important meeting, where the vice premier will directly send a message from 

President Xi to President Trump and could potentially influence the outcome 

of any deal on trade or Huawei.  

For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon in Beijing.  


HERERA:  Customer growth slows at AT&T (NYSE:T) and that`s where we begin 

tonight`s “Market Focus”.  

The company added far fewer wireless subscribers than expected as it tries 

to keep pace with Verizon (NYSE:VZ) and T-Mobile.  It also lost more pay TV 

customers in the fourth quarter.  AT&T (NYSE:T) has pulled back on 

promotional pricing for phone and television plans, as it focuses on paying 

down debt following its $85 billion purchase of Time Warner (NYSE:TWX).  

The shares fell 4 percent to $29.37.  

Anthem is speeding up the launch of its pharmacy benefits management 

business.  The company said that move will allow Anthem to accelerate its 

whole person health strategy which it believes will reduce the total cost 

of care.  Anthem easily beat fourth quarter earnings estimates and said 

profit for 2019 will be stronger than expected.  Shares rose 9 percent to 

$297.56 and touched a 52-week high.  

Royal Caribbean reported a rise in profit in the fourth quarter and issued 

upbeat guidance.  The company cites strong consumer demand, even in China, 

as that economy slows.  


RICHARD FAIN, ROYAL CARIBBEAN CHAIRMAN & CEO:  Even though the economy may 

not be doing as well as people hoped, the middle class continues to grow.  

And one hypothesis is that it`s just growing faster than the economy 

slowdown.  And so, that, of course, helps our business.  


HERERA:  Royal Caribbean was up 8 percent today to $120.98.  

GRIFFETH:  Oshkosh reported first quarter earnings that topped expectations 

and it raised its sales guidance for the year as well.  The defense 

contractor said that its bottom line has helped by higher sales in its fire 

and emergency unit.  Oshkosh sales closed 2.5 percent higher today to 


General Dynamics (NYSE:GD) is forecasting disappointing profit for the year 

and said that it does not expect margins on its business jets to improve 

until 2020.  That overshadowed a strong performance in the information 

technology services unit and earnings that topped analysts` forecasts.  

General Dynamics (NYSE:GD) fell 3 percent today to $170.91.  

And Avon is cutting 10 percent of its global workforce.  The direct seller 

of beauty products said the layoffs are part of a strategy to streamline 

its business and reduce product line complexity.  Shares of Avon, which is 

now a small cap stock, were volatile in the after-hours session, down 2 

cents to the regular day at $1.89.  

And it was a mixed quarter for Tesla.  The electric carmaker posted 

stronger than expected sales, along with its second consecutive quarterly 

profit, but that profit did miss estimates.  As a result, shares initially 

fell afterhours, biting into a nearly 4 percent gain that we saw during the 

regular session where it closed to $308.77.  

HERERA:  Facebook (NASDAQ:FB) out with strong fourth quarter numbers.  The 

social media company posting earnings of $2.38 a share.  That was nearly 20 

cents above estimates.  Revenue came in just under $17 billion for the 

quarter, and that too was ahead of estimates.  

And investors liked what they saw, sending shares initially higher in 

after-hours trading, adding to a better than 4 percent gain during the 

regular session.  

Julia Boorstin has more on Facebook`s quarter from its headquarters in 

Menlo Park, California.



(NASDAQ:FB) is earning a lot more revenue from its users.  The company 

delivering much stronger top and bottom line results than expected.  The 

company`s earnings per share soaring 65 percent and revenue gaining 30 

percent from the year ago quarter.  This despite the fact that Facebook`s 

monthly and daily active user numbers just inched up, coming in right in 

line with expectations.  

But both with consumers and advertisers, the company seems to have shaken 

off concerns about a slew of negative headlines about data privacy and 

manipulation on the platform.  Mark Zuckerberg saying, quote, we 

fundamentally changed how we run our company to focus on the biggest social 

issues and we`re investing more to build new and inspiring ways for people 

to connect.  

Facebook (NASDAQ:FB) has increased its headcount by 42 percent in the last 

year in part to improve security.  

For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Menlo Park, California.  


GRIFFETH:  And coming up, the big chill in the housing market.


HERERA:  Here`s a look at what to watch tomorrow.  A handful of key 

companies are out with earnings, including Amazon (NASDAQ:AMZN), General 

Electric (NYSE:GE) and UPS.  As we reported, the second day of trade talks 

between the U.S. and China will be taking place, and a judge has scheduled 

a bankruptcy hearing for PG&E, California`s largest utility.  That`s what 

to watch for on Thursday.

GRIFFETH:  Meantime, Foxconn is now reconsidering its plan to make a type 

of TV display at a plant in Wisconsin.  You may recall that the company`s 

$10 billion campus was supposed to be a manufacturing center that created 

13,000 jobs, but the new plan now calls for it to be a research hub.  

Foxconn does say it remains committed to that facility and its long-term 

investment in Wisconsin.  

Foxconn, as you probably know, is a major supplier to Apple (NASDAQ:AAPL) 

and is the world`s largest contract maker of electronics.  

HERERA:  The U.S. Postal Service is making the rare decision to suspend 

mail delivery in parts of the country.  Regions within ten states are 

affected because of the extreme cold that`s bringing record low 

temperatures to the Midwest.  The Postal Service says the decision was made 

for the safety of its employees.  

GRIFFETH:  And that winter chill may be settling over the housing market.  

After a very slow fall, most analysts were expected to see a little bump in 

December sales.  

But as Diana Olick reports, that`s not what happened.  



for home buyers out shopping in December, a big drop in mortgage rates.  

But that did not help sales at all.  Signed contracts to buy existing homes 

dropped nearly 10 percent compared with a year ago, marking 12 straight 

months of annual declines, according to the National Association of 


It was also the lowest December sales reading since 2013.  This, even as 

the average rate on the 30-year fixed, fell from just over 5 percent in 

mid-November to 4.61 percent by the end of December.  

DOUG DUNCAN, FANNIE MAE CHIEF ECONOMIST:  I think consumers were impacted 

by all the discussion of shutdowns, of the volatility in markets, whether 

it was interest rates, which were actually falling at that time.  Partly, 

it`s a recognition thing that the realtors or the builders or whoever is 

talking to the consumers about buying a house, it probably takes them a 

little time to get consumers to recognize that there`s an opportunity.  

OLICK:  Realtors blamed the big drop in the stock market, hitting consumer 

confidence.  But affordability continues to be a problem.  The median price 

of a home sold in December hit the highest level ever.  Even though the 

gains in prices are slowing, it`s mostly happening on the higher end, not 

at the entry level where demand from younger buyers is strongest.  Even 

slightly lower interest rates are apparently not impressing millennials.  

DUNCAN:  Recent millennial buyers have been very conservative.  The 

percentage of them spending more than 30 percent of their disposable income 

on buying a house is very low compared to, say, ten years ago.  

OLICK:  If mortgage rates do stay this low for a while, it could help bring 

more buyers back to the market this spring.  But for now anyway, it looks 

like a long, cold winter ahead for housing.  

For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Washington.  


HERERA:  Before we go, let`s take a final look at the day on Wall Street.  

The Dow gained 434 points to close back above 25,000.  The Nasdaq added 154 

and the S&P 500 was up 41.  

That does 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.  Rest up, it`s a busy 

day tomorrow.  

HERERA:  And stay warm.  

GRIFFETH:  Yes.  See you tomorrow.


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