Nightly Business Report – February 1, 2019

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

created.  100 straight months of gains, extending what has become the
longest job creation streak in modern U.S. history.  

Chevron (NYSE:CVX) both posted some of their biggest annual profits in
years action even as oil prices swooned.  

HERERA:  From farm-to-Fido.  A fast-growing startup is bringing healthy
food to your four-legged friends.  It`s tonight`s bright idea.  

Those stories and much more tonight on NIGHTLY BUSINESS REPORT for Friday,
February 1st.

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

The American jobs engine is still clearly firing on all cylinders.  The
latest monthly report from the government this morning showed nonfarm
payrolls were up 304,000 in January, the most in nearly a year.  That blew
away expectations of 170,000.  

The unemployment rate did rise slightly to 4 percent, but that is still an
historically low number.  Average hourly earnings were higher.  They have
now risen more than 3 percent in the past year and that is something that
the fed watches very carefully.  

But what`s interesting is this report shows that most private sector
businesses shrugged off any economic uncertainty that might have been
created by the partial government shutdown.  They just kept hiring.  

Ylan Mui reports tonight from Washington.  


off the shutdown, delivering big job gains in January.  

President Trump celebrated the strong numbers at the White House today,
calling them a reflection of his winning policies.  

was a shocker to a lot of people.  It wasn`t a shocker to me.  

MUI:  Hiring was strong almost across the board.  Leisure and hospitality
led the way with 74,000 jobs, construction was up by 52,000 jobs, and
health care grew by 42,000 jobs.  

DAVID MCINTOSH, CLUB FOR GROWTH PRESIDENT:  I think what this data shows is
the private sector has remained robust action, even as government had the

MUI:  In fact, the unemployment rate did tick up from 3.9 percent in
December to 4 percent in January.  How could that happen?  It`s because of
the way the Labor Department collected information about the shutdown.  
Furloughed federal workers were counted as employed in the government`s
survey of businesses, so there was no impact on the number of jobs created
last month.  But when the Labor Department surveyed individual households,
furloughed workers were counted as on temporary layoff, 175,000 of them,
pushing the unemployment rate up.  

BRIAN TWILLMAN, EPA EMPLOYEE:  Everyone has to deal with the shutdown
again, because it`s on your mind consistently.  There was no free vacation.  

MUI:  Another 500,000 people were classified as working part-time for
economic reasons last month, perhaps even taking jobs at places like Uber
and Lyft.  That`s evidence that the shutdown did have an effect on private
contractors and other businesses that rely on the federal government.  

will figure out a way for the contractors to get their back pay as well,
because we work along with the federals just as hard as they do.  

MUI:  One word of caution.  The Labor Department says it`s really difficult
to capture the full effect of a shutdown.  And even the headline numbers
are subject to change.  December`s blockbuster job report of 312,000 jobs,
that was revised downward to 222,000 jobs, a lot closer to what investors
had expected all along.  

For NIGHTLY BUSINESS REPORT, I`m Ylan Mui in Washington.  


HERERA:  Ethan Harris (NYSE:HRS) joins us now for more analysis on the jobs
report, and he is head of global economics at Bank of America (NYSE:BAC)
Merrill Lynch.  

Welcome, Ethan.  Nice to have you here.  


HERERA:  When you look at this report, what`s not to like?  Even the
participation rate was good.  

HARRIS:  Yeah, this was a check all the boxes report.  There`s one factoid
you guys didn`t mention.  Payroll jobs have grown an average of 240,000
over the last three months.  That`s about double the normal pace of job
growth in a trend-like economy so this was a very, very robust report.  

GRIFFETH:  Wage growth 3 percent year over year.  That`s above what the Fed
had been looking for, but yet they`re willing to be patient in raising
rates down the road.  Is there a disconnect there at all?  

HARRIS:  No, I don`t think so.  I think that after two years of a hot labor
market, we`re now getting the kind of wage gains you would expect, but it
hasn`t translated into price inflation.  I think the Fed is in a pretty
patient mood there.  They want to see first evidence that this recent stock
market shock isn`t really hurting the economy, and they`re going to wait a
while just to figure that out.  They`re not focused on inflation right now
because the inflation numbers have been so weak.  

And so, we`re in a pretty good spot right now — low inflation, strong
growth.  You can`t do much better than that.  

HERERA:  Was there anything in the report that you would have liked to have
seen a little stronger or anything that you think missed the mark?  

HARRIS:  No.  I think the report was right.  There were a lot of
distortions in there due to the shutdown.  One thing that I would add on a
positive note here is last year, we had a very strong economy, but
companies had trouble filling jobs, so there were a lot of very high job
openings, record level.  One reason the job market has so much momentum is
even with slower growth, they need to hire.  

And so, this job market is going to remain pretty strong even as the
economy continues to weaken going forward.  So I guess I didn`t give you a
good negative story there.  There`s a lot of positive here.  

GRIFETH:  If there`s nothing negative about it, then that`s the story.  But
what about this slowing economy?  Isn`t it true, though, that job growth is
usually a late cycle grower?  You know, usually, employers don`t hire
anybody anticipating growth, they`re waiting to see the growth before they

So is it possible that this job growth continues even as the economy slows?  

HARRIS:  Well, again, I think that there is so much trouble finding workers
in the past year that — and all these job openings developed that
companies will keep hiring even as the general economy slows down.  I think
the labor market is going to be exaggerating the strength of the economy.  
We are in a crisis of see some slowing, particularly on the corporate side
of the economy.  We need to see a de-escalation of all these policy shocks
if we`re going to avoid a hard landing for U.S. growth.  

But right now, the story here is that the labor market is a huge positive,
great for the consumer.  Really a good offset, at least for a while, for
some of the other stuff going on right now.  

HERERA:  All right.  Ethan Harris (NYSE:HRS) with Bank of America
(NYSE:BAC) Merrill Lynch, thank you so much.  

HARRIS:  Thank you.  

GRIFFETH:  And on Wall Street, it was a mixed finish for the stock market
today on this first day of February.  Earnings for the most part were
positive and that jobs report certainly reassured investors about the
health of the labor market.  The Dow finished the session up 64 points.  
We`re still above 25,000.  The Nasdaq fell 17 in part because of Amazon`s
quarterly results that we told you about last night and the S&P added 2.  

For the week, both the Dow and the Nasdaq posted their sixth straight weeks
of gains.  

HERERA:  Dow component Merck (NYSE:MRK) reported better-than-expected
earnings and revenue driven by sales of its cancer drug Keytruda.  Sales of
Keytruda alone were up more than 60 percent compared to a year ago and the
CEO is confident that annual financial targets can be met, adding that the
company has one of the broadest and most promising pipelines in a decade,
and that sent the stock up more than 2.5 percent.  

GRIFFETH:  Exxon and Chevron (NYSE:CVX), two of the world` biggest oil
companies, they wowed Wall Street today with their strong quarterly
earnings.  Shares of both climbed more than 3 percent as a result.  

And as Brian Sullivan reports now, the gains were powered by the Permian.  


been the best performing part of the stock market this year and quarterly
reports from the countries two biggest oil and gas companies did not
disappointing.  Both ExxonMobil (NYSE:XOM) and Chevron (NYSE:CVX) released
results on Friday and investors liked what they heard.  

First up, ExxonMobil (NYSE:XOM).  Quarterly earnings up 73 percent.  Their
earnings per share, $1.41.  The Wall Street consensus, just $1.08.  And
revenues were a little light to some aggressive estimates, but the market
was still pleased.  

The big win was on the downstream side, refining and selling the finished
product.  Downstream revenues came in at $2.73 billion, far ahead of
estimates.  Also, a tax rate of 32 percent was much lower than the 40
percent average for the first three quarters of last year.  The Exxon CEO
Darren Woods was on CNBC talking about how there is still some expansion
still going on, but the key to their business remains on keeping costs

DARREN WOODS, EXXONMOBIL CEO:  As we came into 2019, we anticipated some
economic slowdown, still expansionary but some slowdown there.  Frankly, we
don`t run the business or try to build it on a projected demand or
projected oil price.  

SULLIVAN:  Chevron (NYSE:CVX) also had its numbers on a Friday.  Their EPS,
$1.95, the consensus estimate, $1.87.  Production and revenues both beating
estimates once again.  

Chevron (NYSE:CVX) posted growth in the Permian base of Texas as well, one
of the biggest players in that hot oil area.  Chevron (NYSE:CVX) also
announced the new $25 billion stock buyback program with no set term

Exxon and Chevron (NYSE:CVX) shares both rising today, and that move
helping the energy sector and the overall market.  

The biggest ETF in the energy space, the XLE, higher and it has surged
lately.  In fact, if you were smart or lucky enough to buy on the lows of
December 26th, you`ve already made 20 percent on your investment.  

Exxon and Chevron (NYSE:CVX) generally benefit from higher oil prices, so
the one thing to keep in mind going forward is where prices move in the
next couple of months.  Oil averaged $60 a barrel last quarter, as it fell
from $75 to $45.  So, even while oil had a huge gain in January, it is
still below the average price of last quarter.  

The bottom line, things are pretty good for the two biggest oil and gas
companies, but if crude falls again, things could look different this

For NIGHTLY BUSINESS REPORT, I`m Brian Sullivan.  


HERERA:  It is time to take a look at some of today`s “Upgrades and
Downgrades”.  Dow component United Technologies (NYSE:UTX) was added to the
conviction buy list at Goldman Sachs (NYSE:GS).  The analyst cites strength
in the defense sector as well as other positive factors.  The price target
is $153.  The stock rose a fraction to $118.98.  

Fellow Dow component DowDuPont was downgraded to neutral from overweight at
JPMorgan (NYSE:JPM).  The analyst cites weaker results from its material
sciences business.  The price target there is $53.  The shares fell
slightly to $53.47.  

And PayPal was downgraded to neutral from overweight at Atlantic
Securities.  The analyst cites that stock`s relative valuation.  The price
target is $99.  The stock, however, rose more than 1 percent to $90.01.  

GRIFFETH:  Still ahead, why our market monitor says it is time to buy
stocks that have exposure to the emerging markets.  


HERERA:  As we reported, employment growth in January was very strong, and
the health care industry is creating a lot of those jobs.  But it`s not
easy to fill all of those positions, especially when it comes to emergency

Kate Rogers (NYSE:ROG) is in Bangor, Maine.  


Mailman can transport a baby requiring intensive care from one hospital to
another, or help an elderly patient in cardiac arrest.  Mailman could
answer between 4 and 17 calls a day on shifts that can stretch well beyond
24 hours.  The only guarantee is his days and nights will be busy and

you`re doing well.  But those days where the demand is high, you have an
increased call volume, everyone decides to be sick all at one time, then
you`re really struggling.  

ROGERS:  Mailman works at Northern Light Health, where 170 people are
employed in emergency medical services.  But the rural Maine system is in
need of about 10 percent more EMS staffers and hiring is proving to be
increasingly challenging.  In a tight labor market where fewer people are
entering the profession.  

JOE KELLNER, NORTHERN LIGHT HEALTH:  Unemployment is low.  That`s a big
part of it.  This is a job that people used to get into.  You know, one of
the more common pathways is through volunteerism, and volunteerism is way
down from what it used to be.  

ROGERS:  The need for EMS talent stretches far beyond Maine.  In fact, some
3,700 EMT and paramedic jobs will be added through the year 2026 according
to BLS.  Demand for EMS workers comes at a time when the health care sector
is adding a myriad of jobs.  Some 42,000 were added in January as the
population continues to age and seek care, and workers age out of their
roles in the industry.  A strong job market is also having another effect.  

More people with health benefits, more people with insurance increases
demand for heal and, therefore, health jobs.  

ROGERS:  One thing is for sure.  As more people seek care, workers like
Mailman will be ready to answer the call.  

MAILMAN:  You get to step into the chaos of the worst day of somebody`s
life and bring calm, bring peace, and have the ability to step in and help
somebody on their worst day.  That to me is priceless.  

Bangor, Maine.  


HERERA:  And to read more about the need for EMTs and paramedics, you can
always head to our website,  

GRIFFETH:  Papa John`s Pizza may no longer be up for sale.  That`s where we
begin tonight`s “Market Focus”.  

According to “Reuters”, the company is now looking for an investor instead
of an outright buyer for the company.  Buyout offers apparently from
private equity firms did not come in high enough and any deal will be
complicated by that battle for control of the company with its founder,
John Schnatter, who owns about 30 percent.  Shares fell about 9 percent in
all these news today to $38.51.  

Honeywell today forecast strong full-year earnings and said it`s likely to
post its highest profit margin in more than two decades.  The outlook as a
result of the industrial manufacturer sharpened focus on its profitable
businesses.  It`s also benefiting from the strong aviation sector which is
increasing demand for aircraft parts.  Shares rose a fraction today to

And Cigna is shrugging off the government`s proposal to eliminate rebates
to pharmacy benefit managers that they receive from drug makers.  That`s a
plan we told you about last night.  Cigna`s CEO said today that such a plan
would have a minimal impact on his company`s earnings.  Cigna also reported
better-than-expected profits but did provide what analysts described as a
conservative forecast for this whole year.  The stock fell more than 2.5
percent today to $194.06.  

HERERA:  Sony (NYSE:SNE) reported its highest ever quarterly profit driven
largely by its music business.  But the company did point to shrinking
earnings at its game division.  That is leading to concerns over Sony`s
next leg of growth.  And the stock fell nearly 8 percent to $46.15.  

Illinois tool works cut its sales growth forecast after missing revenue
estimates in its most recent quarter.  The company says it is cautious
about upcoming semiconductor-related demand.  It also plans to discontinue
its quarterly sales and earnings guidance given the company`s focus on
long-term performance.  The stock fell 2 percent to $134.43.  

GRIFFETH:  Now to our market monitor who favors companies that he says will
benefit from strong market growth.  Joining us tonight is Allen Bond.  He`s
co-portfolio manager of the Jensen Quality Growth Fund.

Allen, good to see you again.  Welcome back.  


GRIFFETH:  I think you would agree that anybody who wants to invest in
emerging markets has had to be patient waiting for growth in that area of
the world.  You start tonight with United Technologies (NYSE:UTX), the
diversified industrial manufacturer.  Why that company and how would it
benefit when emerging markets do start to grow again?  

BOND:  Yes.  So, United Technologies (NYSE:UTX) is a global industrial
conglomerate with a wide range of capital intensive businesses that range
from aircraft parts to elevators and building construction materials.  And
the emerging markets story with United Technologies (NYSE:UTX) is really
helping those countries build out their infrastructure with things like
elevators and escalators and things of that nature.  

We think United Technologies (NYSE:UTX) is a good story right now.  The
stock has been a little bit weak due to uncertainty around the company`s
announcement that it`s planning on breaking up.  But the business itself is
doing very well.  We think that`s important and we think this pullback is a
good opportunity for long-term investors.  

HERERA:  Microsoft (NASDAQ:MSFT) is also your pick.  Why?  How does it

BOND:  Sure.  So, Microsoft (NASDAQ:MSFT) is obviously one of the world`s
largest enterprise software companies with a host of products that are
ubiquitous here in the U.S. and around the world.  We think that`s a real
advantage for Microsoft (NASDAQ:MSFT) and it`s obviously a mature business,
but they have kind of found the next leg to their growth story which is
their cloud software products.  We think they`re very well positioned to
help their existing corporate customers transition to the cloud and
specifically those that may not want to use Amazon (NASDAQ:AMZN), because
they view Amazon (NASDAQ:AMZN) as a competitor.  We think that cloud
revenue can propel the company`s business and share price as we look
forward here.  

GRIFFETH:  And the third one is Pepsi.  The stock essentially has been
sideways the last few years.  Why this one over, say, Coke, for example?  

BOND:  Yes.  You know, Pepsi is a very well-known business with brands that
resonate with consumers around the world.  We think that brand equity is a
very powerful competitive advantage for Pepsi.  Relative to Coke, Pepsi is
a much more diversified play in terms of their product portfolio.  

Pepsi has been a bit weak.  We think that recently that may just be due to
the broader backup in interest rates because the business itself is doing
well.  We`re seeing signs of acceleration in their top line, in their
pricing power.  And so, we think this pullback may be a good opportunity to
own shares in what we consider a very high quality business.  

HERERA:  Very quickly, of the emerging markets, which one do you favor the

BOND:  Well, that`s good.  I think it kind of depends on what company you
want to invest in.  For us, a lot of our emerging markets exposure is
through health care stocks where emerging markets are growing their health
care infrastructure as they mature.  And we`re looking for companies that
can help them do that and it`s a really good growth story for those

GRIFFETH:  So, it`s a sector story not necessarily geographic story.  

Allen Bond with Jensen Quality Growth Fund, good to see you again.  Thanks
for joining us tonight.  

BOND:  Thank you.  

GRIFFETH:  Elsewhere, it wasn`t easy to find a story about the Super Bowl
and global trade, but Jane Wells did it.  At the center of it all is the
avocado industry and a glut of guacamole.  


increasingly essential part of Super Bowl Sunday.  While most of the
avocados grown in America come from California, most of the avocados
Americans eat come from Mexico, 80 percent.  Such a big business that
avocados from Mexico made another Super Bowl ad.  

UNIDENTIFIED MALE:  Welcome where humans compete for the ultimate prize.  
Avocados from Mexico.  

WELLS:  Imports from south of the border are up 20 percent from a year ago,
and that`s creating a guac glut.  Prices are falling.  At a Los Angeles
supermarket owned by Kroger (NYSE:KR) this week, avocados were selling two
for $1.  That hurts American growers which have lower profit margins due to
costs, like labor.  

shipped about 140 million pounds of avocados, which is roughly the
equivalent of the whole California crop that they have shipped in two

WELLS:  And in the crazy world of global trade, as more avocados come north
into the United States from Mexico, U.S. farmers want the Trump
administration to open up the market for American avocados across the ocean
in China.  

do not have market access to China.  

WELLS:  Ken Melban of the California Avocado Commission says China wants
U.S. avocados if issues like pest control can be worked out, which he
thinks is doable.

MELBAN:  We`ve been working with the United States Department of
Agriculture to get access into China since 2005.  And suffice it to say
that effort has been stalled tremendously.  We`re at a point now we are
just asking for access to other markets so that we can compete with the
producers that are coming into the U.S. also.  

WELLS:  A local congresswoman has written the administration to make
avocados part of the China trade talks.  California-based Calavo Growers
(NASDAQ:CVGW) reported a surprising fourth quarter loss as avocado prices
fell.  But if the Chinese market opens up, perhaps investors will buy the

For NIGHTLY BUSINESS REPORT, Jane Wells, Somis, California.  


HERERA:  Oh, Jane.  

Coming up, fresh food delivered, to your dog.  Meet the entrepreneurs who
are doing it and creating jobs at the same time.  It`s this month`s bright


HERERA:  Just as we`re all paying more attention to the food that we eat,
pet owners are keeping a closer eye on the foods that they`re buying for
their pets.  But just because a marketer says a food is healthy doesn`t
mean it is, and that is why two entrepreneurs, both dog lovers from
Brooklyn, New York, got the right idea to start a company aiming
specifically to keep your dog healthier.


HERERA:  For two years, Jada (ph) suffered with stomach issues.  Her owner,
Brett Podolsky, tried all kinds of foods, from kibbles to cans, and freeze
dried to raw.  But he was constantly running home to check on Jada.  

was like a heart-breaking time period.  

HERERA:  In 2014, a vet suggested home cooking.  Human food.  Beef and

Jonathan Regev, that`s his dog, Buddy, roomed with Podolsky at the time.  

JONATHAN REGEV, THE FARMER`S DOG CO-FOUNDER:  He said, what are you doing?  
I said I`m cooking for Jada.  I had never seen anybody cooking for their
dog before.  

PODOLSKY:  It was like magic.  All of her symptoms disappeared.  

HERERA:  Unable to find a product on the market, using the USDA`s standards
for human food, Podolsky and Regev kept cooking and began researching.  
They found stories linking cancers in pets to food.  Companies focused on
cost efficiency and products meeting only bare minimum standards.  

PODOLSKY:  Nothing commercial was going to be fed to my dog ever again.  

HERERA:  Dogs need what`s known as a complete and balanced diet with more
vitamins and nutrients than they get from human food alone.  So, Podolsky
and Regev created a mix and tested samples at a lab until they got the
Farmer`s Dog.  

Launching in late summer 2014, it`s frozen and shipped to arrive days after
it`s cooked.  

REGEV:  This one is turkey, broccoli, parsnips, carrots and then the
vitamin and mineral mix.  

HERERA:  It`s human grade with no preservatives.  And yes, they have both
eaten it.  

PODOLSKY:  Somebody was like, when was the last time you ate it?  I was
feeding Jada, so let`s take a bite.  

REGEV:  We had a Thanksgiving dinner with the team and our head of
engineering put the turkey recipe inside these empanadas and didn`t tell

HERERA:  Dr. Carly Fox at the Animal Medical Center in New York says she
usually recommends commercially available food as long as it`s complete and
balanced.  So, is freshly made human food better?  She says maybe.  

pet to eat human grade food if it`s something that is available to you and
it`s something that you`re able to provide to your pet.  I think it`s
something that you should absolutely discuss with your veterinarian.  

HERERA:  Costs depend on the size of a dog, averaging about $29 a week.  
The Farmer`s Dog hit the market just as American spending on pet food began
trending up, almost $30 billion in 2018, up more than 30 percent in four

For two years, the Farmer`s Dog rented startup spaces, cooking alongside
startups making human food products.  Since then, Podolsky and Regev found
a commercial manufacturer using USDA human food standards.  And the pair
say they are now shipping more than a million meals a month.  

REGEV:  When people think about dog food and dog food that they want to
invest in to keep their dog healthier, that food will look like food and it
won`t be a brown ball.  

PODOLSKY:  This is not just a sick dog thing.  This is an every dog thing.  
We wanted a company whose entire focus was making dogs healthy.  


HERERA:  And their customers are buying into the idea that preservatives
aren`t great for humans and so they probably aren`t great for animals

GRIFFETH:  Works for me.  For both of us.  

Before we go, a final look at the day on Wall Street.  It`s February
already.  The Dow was up 64 points today.  We`re back above 25,000.  The
Nasdaq fell 17, thanks in part to Amazon (NASDAQ:AMZN).  And the S&P was up

For the week, everybody was higher.  The Dow and the Nasdaq posting six
straight weeks of gains now.  

HERERA:  And that will do it for NIGHTLY BUSINESS REPORT tonight.  I`m Sue
Herera.  Thanks for watching.  

GRIFETH:  I`m Bill Griffeth as well.  Have a great weekend, enjoy the Super


GRIFFETH:  See you on Monday.


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