ANNOUNCER: This is NIGHTLY BUSINESS REPORT
with Bill Griffeth and Sue
SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Stocks tumble. Concerns over
trade and global growth mount as the market retreats.
BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: Banking powerhouse. BT&T
and SunTrust are combining to create one of the country`s largest banks,
making this the biggest banking deal since the financial crisis.
HERERA: Truck revolution. How America`s love affair with big vehicles is
reshaping how the automakers spend and hire.
Those stories and much more tonight on NIGHTLY BUSINESS REPORT for
Thursday, February 7th.
GRIFFETH: And we do bid you a good evening, everybody, and welcome.
So, stocks did head south after investors were hit with a 1-2 punch of
trade and global growth concerns. Let`s start with trade. The latest is
that talks between the U.S. and China may not be progressing as quickly as
the market would like, especially ahead of that key tariff deadline now set
for March 1st. That sparked concerns that the trade war between the
world`s two largest economies will not be coming to a quick resolution
At the close today, the Dow was down 220 points. Not the low of the day,
though. We`re at 25,169. The Nasdaq was down 86. The S&P slid by 25.
Bob Pisani has more on today`s stock slide.
BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: A number of headlines
stirred up fears about the U.S./China trade war. Just before 11:00 a.m.
Eastern Time, reports were out saying the White House national economic
director, Larry Kudlow, said there`s a pretty sizeable distance to go for
the two world powers to reach a trade deal.
Moments later, sources told CNBC that President Donald Trump was unlikely
to meet with Chinese Xi Jinping before the March 1st trade truce deadline.
That`s adding further fuel to the fire and sparking concerns that the trade
wars might pick up right where they left off 90 days ago. So, the markets
had been patiently optimistic about a trade deal over the last few weeks
and months, but prospects are a little dimmer now. When asked directly
whether he had planned a meeting with Xi, Trump told the press not yet.
No surprise then that defensive sectors like real estate, utilities, were
the lone groups trading in the green. Big groups like materials and energy
names lagged on the session.
Industrials like Boeing (NYSE:BA), Caterpillar (NYSE:CAT) and 3M
(NYSE:MMM), they also dragged the Dow deeper into the red. On top of that,
Europe showed more signs of a global economic slowdown overnight and that
stoked more fears about a weaker macro backdrop.
One bright spot today was the regional banks, particularly SunTrust and
BB&T (NASDAQ:MSDXP) (NYSE:BBT). They announced $66 billion merger. The
bank stocks have rallied 16 percent so far this year but still are facing
tougher conditions, thanks to low rates and tepid loan growth.
For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock Exchange.
HERERA: Bob just mentioned renewed fears of a slowdown in global growth
which is something that we talked about yesterday. But today, it was once
again a big focus for investors.
Steve Liesman has more.
STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Just a few months
ago, markets fretted about global central banks ending their easy monetary
policies. Now, faster than you can say global central bank policy
reversal, those same banks are slashing their growth forecasts, dialing
back plans to tighten policy and in some cases even easing interest rates.
Today, the Bank of England citing global trade tensions and concern over
Brexit cut its growth forecast for 2019 by half a point to 1.2 percent.
Some analysts who thought the Bank of England would hike twice this year
now see no hikes.
In the U.S. last week, the Fed shifted from a policy of gradually
increasing rates to a policy of being patient, figuring what its move will
be. Fed officials still see the U.S. economy on solid footing, but global
economic weakness is clearly their biggest worry.
RANDAL QUARLES, FED VICE CHAIRMAN FOR SUPERVISION: You look at what the
risks are, and I think global risks are probably the most significant ones.
And that will be what I at least will be looking at over the course of the
next six months is how does that evolve.
LIESMAN: Forecasters now see that evolution more to the downside. The
European Union shaved 0.6 percentage opponents from its outlook, bringing
it down to 1.3 percent. Australia`s bank shifted into neutral, and India
even lowered rates. The People`s Bank of China cut its bank reserve
requirements, making it easier for banks to lend.
It`s not her base case but former Fed Chair Janet Yellen believes that the
gathering global clouds could prompt the Fed to cut rates as its next move.
Would you say it`s possible the next move is a cut at the Fed?
JANET YELLEN, FORMER FEDERAL RESERVE CHAIR: Of course, it`s possible. If
global growth really weakens and that spills over to the United States or
financial conditions tighten more and we do see a weakening in the U.S.
economy, it`s certainly possible that the next move is a cut. But both
outcomes are possible.
LIESMAN: What the U.S. Fed ultimately does will depend on how much that
weakness washes up on American shores. A U.S./China trade deal could
alleviate at least some of the worries, but it`s not clear if that will
happen fast enough or be enough on its own to eliminate gathering global
For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.
GRIFFETH: Now to something we have not talked about in years, a bank
merger. Today, two big regional powerhouses, BB&T (NASDAQ:MSDXP)
(NYSE:BBT) and SunTrust agreed to combine, creating the sixth largest
financial institution in the country. Believe it or not, it is the biggest
U.S. bank deal in a decade.
And Wall Street liked what it heard. Both stocks gained. SunTrust was up
10 percent today, BB&T (NASDAQ:MSDXP) (NYSE:BBT) was up 4 percent.
Wilfred Frost has more on this $66 billion deal.
WILFRED FROST, NIGHTLY BUSINESS REPORT CORRESPONDENT: The combination of
BB&T (NASDAQ:MSDXP) (NYSE:BBT) and SunTrust will be one of the dominant
forces in the southeast region, becoming the third biggest bank in the area
by deposit. It falls behind Bank of America (NYSE:BAC), Wells Fargo
(NYSE:WFC) whose stocks declined in light of the extra competition, as did
JPMorgan (NYSE:JPM) who has a big presence in Florida.
The deal strikes a perfect sweet spot. The combined bank will not be
subject to more stringent regulation because it`s not big enough to be
considered strategically important. And there are plenty of synergies,
most notably, the ability to close branches, 24 percent of which are within
two miles of each other.
It will also allow increased investment in technology, a key area
highlighted by BB&T (NASDAQ:MSDXP) (NYSE:BBT) CEO, Kelly King, who will
also now serve as the chairman and CEO of the combined bank.
KELLY KING, CEO, BB&T (NASDAQ:MSDXP) (NYSE:BBT): Our clients now demand
what I call real time satisfaction. They want what they want when they
want it right here right now. And so, we are all facing an increasing set
of complex economic realities where we have to invest more and more in
FROST: More consolidation could follow in the industry, more likely among
smaller banks than involving the top five U.S. banks where regulatory
hurdles would be significant.
For NIGHTLY BUSINESS REPORT, I`m Wilfred Frost.
HERERA: So, could today`s bank merger lead to more regional bank deals?
Gerard Cassidy, banking analyst of RBC Capital Markets joins us now to talk
And I guess that is the question. Will this lead to more and how — why
did the atmosphere change where we get a deal now, because it`s one of the
biggest ones since the financial crisis?
GERARD CASSIDY, RBC CAPITAL MARKETS RANKING ANALYST: Thank you for
inviting me on the show, Sue.
I would say that a couple of key factors have started to come up. First
and foremost, it was already discussed, the regulators changed the way they
were going to regulate banks between $250 billion and $700 billion in
assets. That change was proposed last fall.
And we published at the time that this was the green light we thought for
bigger bank mergers. And so, that was one of the catalysts why we`re
seeing it today.
But I`d also point out that the banking industry has been consolidating for
over 30 years. Back in the `80s, we had 14,000 banks. Today, we have
5,700. It kind of went on pause because of the financial crisis amongst
the big banks and now, we`re back on track.
GRIFFETH: And now, the Fed is on hold, so interest rates are not going to
go much higher from here. That`s not good for the banks. Loan portfolio
growth has slowed a bit, so they have to find growth somewhere.
And I guess that`s why you`re thinking we`ll see more consolidation down
the road. So, who`s ripe for this kind of consolidation? What kind of a
bank do you look for to decide if it`s going to be bought or do the buying?
CASSIDY: It`s an interesting question, because I think it spans a variety
of banks in size. It could be small banks in the billion in asset size all
the way up to another couple hundred billion dollar in assets size bank.
Up until this deal, as you pointed out, this is the biggest deal in over
ten years. Most of the deals we`ve seen are quite small. Last year, there
were 259 bank deals but they were very small.
So, as we go forward, I think big regional banks could combine together
like we just saw today with the announcement from the SunTrust and BB&T
(NASDAQ:MSDXP) (NYSE:BBT), but also we could see smaller banks continue to
sell out. Economies of scale will drive this consolidation. As we know,
banking is a commodity product. The low cost producers are going to come
out to the winners.
HERERA: On that note, Gerard Cassidy with RBC Capital Markets — thank
CASSIDY: Thank you.
GRIFFETH: And there is cautious optimism on Capitol Hill tonight where
lawmakers are trying to hammer out their differences on border security and
come up with a spending bill that averts another government shutdown.
Ylan Mui is in Washington for us tonight.
YLAN MUI, NIGHTLY BUSINESS REPORT CORRESPONDENT: The federal government
runs out of money on February 15th. That means negotiators need to come to
an agreement in the coming days in order to comply with the official rules
for passing a bill through the House and the Senate.
Today, House Speaker Nancy Pelosi said she has confidence that members can
work out a compromise.
REP. NANCY PELOSI (D-CA (NASDAQ:CA)), SPEAKER OF THE HOUSE: I have asked
the administration to be as noninterventionist as I am on that. Just let
them do their work. And hopefully, that we`ll get good news in a short
period of time and certainly in time for the deadline of February 15th.
MUI: Senator Richard Shelby, the top Republican in the talks, met with
President Trump today to brief him on the status of the discussions.
Nothing is final yet, but Republicans say they need three things to get to
yes: more agents, new technology and a border barrier.
And GOP negotiators are staying away from using the word “wall.” And that
could open the door to a deal with Democrats over a physical
One Democrat on the negotiating team says he backs a, quote, enhanced
Another sticking point is the money. Democrats started at $1.8 billion.
That`s likely to go up. But Senator Dick Durbin, the top Democrat in the
discussions, said they haven`t settled on a number just yet.
But the big X factor in all of this is whether the president will sign what
Congress sends him.
Republican Senator John Barrasso said he is urging Trump to accept the
REP. JOHN BARRASSO (R), WYOMING: That`s a decision he`s going to make. I
would say follow Ronald Reagan`s approach which if you don`t get the whole
loaf, take it a slice at a time and then go back and get more.
MUI: Trump has called these discussions a waste of time, but he`s also
said he wants to see this process play out. So we`ll see where the
president stands if and when lawmakers reach a compromise.
For NIGHTLY BUSINESS REPORT, I`m Ylan Mui in Washington.
HERERA: Lawmakers across the Atlantic are also trying to hammer out their
differences when it comes to how Britain will exit the European Union. So-
called Brexit is considered a big risk for the global economy, and right
now, things are not going the way Prime Minister Theresa May would like.
Willem Marx in Brussels tonight.
WILLEM MARX, NIGHTLY BUSINESS REPORT CORRESPONDENT: The flag of an E.U.
member state flies outside the European Commission whenever that country`s
leader visits Brussels. That means the Union Jack could become a rare
But, recently, it`s appeared as frequently as Theresa May, whose returned
in search of a conclusive but elusive Brexit handshake. For her latest
rehearsal run, first up was Jean-Claude Juncker, Europe`s executive who
greeted the British leader, alongside a host of difficult questions —
REPORTER: Have you brought specific proposals today?
MARX: And a joke about May`s Brexit demons.
That reference was to E.U. Council President Donald Tusk who yesterday
derided the British politicians he says pushed Brexit without a workable
DONALD TUSK, EUROPEAN COUNCIL PRESIDENT: I`ve been wondering what the
special place in hell looks like for those who promoted Brexit without even
a sketch of a plan how to carry it safely.
MARX: This sit-down on Thursday has yielded yet more meetings next Monday.
All the way, May`s self-imposed late March departure deadline marches ever
THERESA MAY, BRITISH PRIME MINISTER: It`s not going to be easy, but
crucially, President Juncker and I have agreed that talks will now start to
find a way through this, to find a way to get this over the line and to
deliver on the concerns parliament has so we get a majority in parliament.
MARX: The focus on Downing Street is the next big Brexit vote on
Wednesday. With many of May`s own party still concerned the current
agreement could undermine Britain`s future sovereignty.
The British prime minister has in recent months repeatedly failed to win
over members of her own parliament in Westminster. And there was no
indication today that she had any more success here in Brussels with the
E.U. legislature which has veto power over any changes to the current
ANTONIO TAJANI, EUROPEAN PARLIAMENT PRESIDENT: It is the only solution
that guarantees another U.K. exit. It is the only solution that protects
peace in Ireland and the integrity of the internal markets.
MARX: And as May continues on to Dublin tomorrow, a tension remains just
to the north, in a border region that could soon separate the U.K. and
Ireland and in turn Europe.
For NIGHTLY BUSINESS REPORT, I`m Willem Marx in Brussels.
GRIFFETH: Time to take a look at a couple of today`s “Upgrades and
Guess was upgraded from buy to hold at Jefferies. The analyst said the
company is one of the few retailers with an opportunity for both sales
growth and margin expansion. The price target is now $24. And shares rose
4 percent to $21.04.
HERERA: Brazilian mining company Vale was downgraded to equal weight from
overweight at Morgan Stanley (NYSE:MS). The analyst cites continued
uncertainly following a recent dam accident. That uncertainty also
prompted the analyst to remove his price target for the stock. The shares
were down more than 1.5 percent to $11.17 on the session.
GRIFFETH: Still ahead, Twitter is turning into a big spender, and
investors are not exactly retweeting the plan.
GRIFFETH: Amazingly, Sears (NASDAQ:SHLD) has officially been saved from
liquidation. A bankruptcy judge today approved a deal to sell the
remaining assets of Sears (NASDAQ:SHLD) to its chairman and largest
shareholder, Edward Lampert, who runs ESL Investments. It says that the
$5.2 billion deal to buy the company will save 425 stores and about 45,000
HERERA: It was a rough day for Twitter, despite reporting better-than-
expected earnings and revenue. Investors focused on the social media
company`s guidance which was light and added that expenses will increase a
lot. That sent the stock down about 10 percent.
Julia Boorstin has more.
JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Twitter is
increasing its spending, hiring more employees and investing to improve the
conversations on the platform and cut down on the abuse. But that plan
isn`t going over so well with investors.
CFO Ned Segal saying investments make sense, though, as they work on
improving the platform.
NED SEGAL, TWITTER CFO: If you look at the 500 or so people that we added
to the team last year, more than half of them were in our engineering
product, design and research organization. So we`re trying to build
technology advantage that can be scalable, that can be durable, and that
can help us solve the problems and help people find the things that they`re
looking for on Twitter faster.
BOORSTIN: Twitter`s active user numbers were right in line with
expectations, yet falling from the previous quarter. But the company
announced it`s going to switch to reporting daily users. That number
increased by 2 million to 126 million.
Segal saying this increases transparency and doesn`t change anything about
the way advertisers pay to target their messages.
SEGAL: It`s nothing new for advertisers. They come to Twitter a specific
objective in mind to launch new product and service to connect with what`s
happening. They tell us what audience they want to reach or what part of
the world or demographic they want to reach and we help them realize their
BOORSTIN: Some analysts raising concerns around the decision to stop
reporting the monthly number that`s been a constant for Twitter since its
PAUL MEEKS, WIRELESS FUND PORTFOLIO MANAGER: When you change the goal
post, no matter how articulate your argument is for doing so, there`s
usually a bad reason. And so I take this as a negative.
BOORSTIN: As for what will drive Twitter`s next leg of growth, Segal
saying most of their revenue is from big brands and they`re working to make
it easier for small and medium businesses to spend on the platform.
For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Los Angeles.
GRIFFETH: Tapestry finds itself out of fashion and that`s where we begin
tonight`s “Market Focus”.
The luxury retailer cut its full year profit forecast today after reporting
its first quarterly miss in two years. The company cited weak sales of its
Kate Spade brand and the slowing global economy we`ve been talking about.
Tapestry also owns the Coach (NYSE:COH) and Stuart Weitzman`s brands.
Shares fell about 15 percent today to $33.48, and touched a 52-week low in
Elsewhere, Yum Brands (NYSE:YUM) missed quarterly estimates as it spent
aggressively on promotions to lift sluggish sales at its Pizza Hut
locations. Strong performances at KFC and Taco Bell helped the company top
same-store sales forecasts. They also announced the deal with Taco Bell
launching nationwide delivery through Grubhub which Yum`s CEO says is part
of a long-term plan to grow sales.
(BEGIN VIDEO CLIP)
GREG CREED, YUM! BRANDS CEO: It`s about making sure the brands are
relevant. It`s about making sure they`re distinctive. I think the newest
attribute is how to you make it easier. Pizza Hut does it. Taco Bell now
doing delivery. KFC getting into the delivery business.
So, I think delivery is the next way to make it easier for customers to
access what I think are relevant and distinctive brands.
(END VIDEO CLIP)
GRIFFETH: Shares of Yum Brands (NYSE:YUM) gained 2 cents to $94.61.
HERERA: Meanwhile, earnings at Dunkin Brands topped estimates but revenues
came in lower than expected as U.S. same-store sales were flat. The
company says it`s been focused on rolling out espresso drinks as part of a
long-term strategy to attract more coffee drinkers.
(BEGIN VIDEO CLIP)
DAVID HOFFMAN, DUNKIN BRANDS CEO: We really like what we`re seeing in
terms of the consumer reaction. It skews younger, it skews toward the
afternoon. We`re getting new guests and we`re also getting that important
switcher. Those people who switch from brand to brand, we get those
switchers back as well. So, we really like how that`s performed over the
first ten weeks.
(END VIDEO CLIP)
HERERA: But investors seem focused on the lower revenue numbers and shares
fell 3 percent to $66.79.
Kellogg`s posted an earnings beat on an adjusted basis, but the non-
adjusted numbers were negative, as the company invests in new cereals and
snacks. Those investments could lead to higher sales, as Kellogg`s sees
sales up between 3 percent and 4 percent this year. But it could come at
the expense of earnings as the company expects them to fall as much as 7
percent for the year. And that was more than what Wall Street wanted to
see, so Kellogg`s shares fell more than 5.5 percent to $55.84.
Tyson Foods (NYSE:TSN) reported weaker-than-expected quarterly sales. The
largest U.S. meat producer is facing lower pork prices and a drop in demand
for chicken. The company reaffirmed its outlook saying Chinese demand for
pork may increase given the severe outbreak of African swine fever in that
country and that is forcing some producers to cull their herds. The stock
fell more than 1 percent to $60.12.
GRIFFETH: And that outbreak of the African swine flu came as a surprise to
authorities in China who are scrambling to fight the spread of that disease
through e that`s just adding pressure to a sector of the Chinese economy
that`s already in the middle of a trade war.
Eunice Yoon is in Wudi for us tonight.
EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: China`s tariffs were
meant to hit American pig farms, but not Tai Lin.
TAI LIN, PROTERRA INVESTMENT PARTNERS MANAGING DIRECTOR: I would say
tariffs are hurting people in the short term and might create unintended
YOON: To retaliate against President Trump`s tariffs, the Chinese raised
duties on American pork last year to a total of 62 percent. But even the
pig business is global. This farm in Eastern China is 100 percent
The U.S. private equity fund along with an American hog farming company
invested $100 million in the complex four years ago. Last year, the farms
sold 500,000 pigs.
The Chinese eat more pork than anyone else in the world, as much as the
rest of the world combined.
Lin`s pigs have been in even greater demand, since an African swine flu
epidemic hit the industry last summer.
LIN: We`re using automatic feeder systems.
YOON: He says U.S. technology and standards helped him avoid the disease.
LIN: The slaughterhouses will see our meat as safe and high quality, and
so they will pay a slight premium over the market price.
YOON: The epidemic also gave a boost to farmers in the U.S. At first,
pork imports from America tanked when the tariffs hit, but the swine fever
created pork shortages in certain provinces.
The outbreak of African swine fever here forced China to import American
pork anyway, despite the tariffs.
LIN: As we go deeper into 2019, prices should come back up again because
the total stock of livestock is really low. It also happens to be the year
pig, so it should be a lucky year for pigs.
YOON: And American pig farmers.
For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon in Wudi, Shandong province.
HERERA: Coming up, the road ahead. Why some auto plants are closing while
others are expanding.
HERERA: Fiat Chrysler sees a bumpy road ahead for 2019. The automaker
issued a weaker-than-expected outlook after reporting disappointing sales
in North America, which is a key market for the company. The CEO said the
company is also trying to navigate the Chinese market which weakened in the
second half of last year. That sent shares down 12 percent in today`s
GRIFFETH: Meanwhile, Ford is investing $1 billion to beef up SUV
production at its plants in Chicago. It`s just the latest example of auto
makers spending and hiring at factories to build trucks, while cutting jobs
and shutting down assembly lines that build cars.
Phil LeBeau has more.
PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: Ford`s big investment
on the south side of Chicago is proof the SUV boom is rolling on. In order
to build the new Explorer, Ford is adding 500 jobs and investing a billion
dollars in its Chicago plants.
JOE HINRICHS, FORD MOTOR COMPANY: When it`s all finished, Chicago assembly
will have an all-new state-of-the-art body shop, an all-new paint shop and
new tooling to build this new lineup.
LEBEAU: Why are automakers putting more workers and money into some
assembly plants while shutting down others?
It`s all about America`s truck revolution. Over the last five years, as
truck and SUV sales have soared, car sales have plunged. So, assembly
plants like GM`s in Lordstown, Ohio, which builds the Chevy Cruze, will
soon be idle. Ford`s Flat Rock plant outside Detroit which builds the
Mustang and Lincoln Continental will soon cut a shift.
The fact is America`s demand for trucks and SUVs is forcing automakers to
change what they build and where they build it.
Take Fiat Chrysler. It will add assembly lines to build more jeeps,
perhaps the hottest brand in show rooms.
Or Mercedes and BMW, both hired more workers at plants in the Deep South
where they build popular SUVs.
The changing landscape of auto manufacturing in the U.S. is painful for
thousands of workers losing jobs at plants that build sedans. But overall,
this is an industry that has steadily added manufacturing jobs over the
Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago.
HERERA: Here`s a look at the final numbers on Wall Street. The Dow fell
220 points, Nasdaq down 86, S&P 500 slid 25.
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 lovely evening. Hope to see you
About NBR“Nightly Business Report produced by CNBC” (NBR) is an award-winning and highly-respected nightly business news program that airs on public television. Television’s longest-running evening business news broadcast, “NBR” features in-depth coverage and analysis of the biggest financial news stories of the day and access to some of the world’s top business leaders and policy makers.
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