Nightly Business Report – February 12, 2019

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



Lawmakers reach a tentative deal on border security that would avert a 

government shutdown, and stocks take off.  


parts of the country are experiencing an economic boom.  And today, the Fed 

chair went to a town in Mississippi where even ATMs are relatively new.  

GRIFFETH:  Time is money.  And all of that time you spend sitting in 

traffic is costing the economy tens of billions of dollars.  

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Tuesday, 

February 12th.  

HERERA:  And good evening, everyone, and welcome.  

Wall Street was in rally mode, extending the strong gains the market has 

seen this year.  Investor sentiment was lifted by the two issues that we`ve 

been reporting on — optimism on trade and talks in Washington to avert a 

government shutdown.  When reports first surfaced that a tentative 

agreement had been reached, stocks took off and never looked back.  

The Dow Jones Industrial Average rose 372 points to 25,425.  The Nasdaq 

added 106 and the S&P 500 was up 34.  

Seema Mody was in the middle of all the action at the New York Stock 




from Washington fueling a big rally on Wall Street.  First, the stocks 

jumping on news that U.S. lawmakers had secured a tentative deal on border 

security funding, which could prevent another partial government shutdown 

due to begin Saturday.  

Markets keeping a close eye on trade developments out of Beijing, where a 

U.S. delegation is continuing talks with China this week in hopes of 

reaching a trade deal before the March 1st deadline.  Optimism pushing 

China-related names like Caterpillar (NYSE:CAT), Deere and Boeing (NYSE:BA) 

higher by around 2 percent.  

The question is if the rally can last.  A lot of that will depend on the 

commentary from Beijing later this week.  

For NIGHTLY BUSINESS REPORT, Seema Mody, the New York Stock Exchange.  


GRIFFETH:  Boy, just 24 hours ago, it appeared lawmakers were still far 

apart on reaching any deal that would prevent parts of the government from 

shutting down again.  But 24 hours later, there`s a tentative agreement in 

place, but questions still remain.  

Ylan Mui has details.



against the clock to finalize a deal to fund the government.  Lawmakers 

have reached an agreement in principle that includes compromises on two key 

priorities.  On border funding, the deal includes almost $1.4 billion for 

physical barriers, less than what Trump had asked for but more than what 

Democrats initially offered.  

On immigration, Democrats backed off their demand to cap the number of 

detention beds for illegal immigrants captured inside the U.S., but the 

total number of beds would be reduced.  

Today, Republican leadership called it a bipartisan, bicameral agreement 

that includes a down payment on the president`s priorities.  


he signs the bill.  And second, I think he ought to feel free to use 

whatever tools he can legally use to enhance his effort to secure the 

border.  So, no, I would not be troubled by that.  

MUI:  But it remained unclear if the president would sign this deal.  

Speaking with reporters today, Trump said he wasn`t comfortable with this 



negotiate a little bit, so you know, whatever you get.  But I would hope 

that there won`t be a shutdown.  I am extremely unhappy with what the 

Democrats have given us.  It`s sad.  It`s sad.  

They`re doing the country no favor.  They are hurting our country very 

badly.  But we certainly don`t want to see a shutdown.  

MUI:  Conservatives have come out against this.  Senator Lindsey Graham 

says that he needs to see more detail on immigration.  The House Freedom 

Caucus says this isn`t a serious effort to secure the border.  But with 

just days to go before Friday`s deadline, lawmakers from both parties are 

urging the president to get behind this agreement because there is no plan 


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


HERERA:  President Trump today also commented on the trade negotiations 

between the U.S. and China, saying there may be some flexibility the self-

imposed March 1st deadline if the two countries are close to a deal.  As of 

now, if no deal is reached, March 1st is the date that additional tariffs 

will be put on Chinese imports to the U.S. 

And while there is some optimism, there are also obstacles ahead of the 

high-stakes talks this week.  

Eunice Yoon is in Beijing.  



Lighthizer has arrived in Beijing to join the ongoing trade talks.  Both 

sides officially remain optimistic.  The Chinese foreign ministry made a 

statement yesterday that China hoped for a good result.

But I spoke to a source who`s familiar with the negotiators on the Chinese 

side, and he painted a picture of frustration among the negotiators.  

There`s a feeling that the negotiations are about the U.S. making demands 

on China but not getting anything in return.  For instance, he said the 

Americans had been unwilling to budge on restrictions of high-tech exports 

to China, which the Chinese believe can reduce the trade deficit and has 

been a longstanding complaint by Beijing.  

Generally, there`s a sense that the Americans are being very harsh and not 

giving the Chinese faith.  And it appears to them sometimes that certain 

negotiators want to push the Chinese to the point that talks fail.  

Also this afternoon, we got a rather testy response from the Chinese 

government about what they see as a continued U.S. campaign against Huawei.  

Secretary of State Mike Pompeo is in Central Europe and has cautioned U.S. 

allies against using Huawei equipment on their soil.  

The Chinese foreign ministry responded today, saying the U.S. has 

threatened and provoked relations between China and other countries and 

discredited the legitimate development and cooperation of Chinese 

companies.  The actions of the United States are neither fair nor moral.  

This highlights how difficult the negotiations are between the U.S. and 


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


GRIFFETH:  Back here in the U.S., oil prices rose along with stocks today 

after Saudi Arabia said it now plans to reduce oil production in March.  

The crude market is brushing off concerns, at least for today that world 

oil demand could decline because of slowing global growth.  Domestic crude 

sits around $53 a barrel right now.  

HERERA:  Senator Marco Rubio is the latest politician to target stock 

repurchase programs.  The plan would tax buybacks as dividends, which are 

subject to a wide range of rates.  Buybacks are currently taxed at the 

lower capital gains rate.  The senator expects the plan would likely result 

in fewer companies pursuing buybacks and instead would encourage more 

capital investment.  

Just yesterday, as we reported, hedge fund manager Paul Tudor Jones called 

buybacks a mania and said companies should focus more on what he calls 

ethical investing.  



going on in buybacks and a mania going on in terms of shareholder primacy.  

It wasn`t always this way, right?  If we just go back to when I was a 

youngster, corporate pay, CEOs made 20 times that of the average line 


So, things have been different and can be different again.  And if they`re 

not, I`m really nervous about what the ultimate social consequences are in 

this country.  

I don`t know if I want to see a legislative outcome for this.  I`d love to 

see this happen organically.  


GRIFFETH:  Well, joining us now to talk about the impact that limiting 

stock buybacks would have on the markets, Eric Marshall joins us tonight.  

He`s portfolio manager with the Hodges Funds.  

Eric, welcome back.  Good to see you.  


GRIFFETH:  Politics aside, what impact do you think limiting buybacks would 

have on the stock market?  Let me ask it a different way.  What impact do 

buybacks have on stock market performance, do you think?  

MARSHALL:  Well, we see buybacks is actually a healthy mechanism to keep 

capital markets efficient.  Oftentimes, if a company has excess capital and 

they don`t have opportunities to reinvest that capital in projects that 

earn high returns above their cost to capital, sometimes the best thing to 

do is to return that capital to the shareholders through buybacks from the 

capital markets so that capital can be reinvested maybe in smaller 

companies who need that capital to grow their businesses and take advantage 

of higher return projects.  

So, we actually think buybacks actually keep the market efficient, which 

ends up creating economic growth in jobs and benefits all of society.  

GRIFFETH:  What happens as the stock market continues to move higher, Eric, 

to the thought by companies that they want to do more buybacks, or do they 

do less buybacks in a strong market?

MARSHALL:  Well, that`s a good point.  If we have a situation where as the 

market goes up, the cost of capital becomes — of equity capital becomes 

less expensive.  Then it doesn`t make as much sense to continue to buy back 

stock.  But I think over the recent phenomenon of all these companies 

buying back stock in recent years, it`s really been a function of higher 

earnings yield on stocks relative to really low interest rates.  

GRIFFETH:  Right.  

MARSHALL:  As long as we`re in that environment, it makes sense in a lot of 

cases for companies to return extra capital to the shareholders through 

these buybacks so that they can be reinvested elsewhere.  

GRIFFETH:  By same token, though, while we are still in a relatively low 

interest rate environment, there are those who say that that capital that 

they use to buy back their shares could also be used to build factories and 

create even more jobs.  In other words, it`s a better use of the capital 

than just buying their shares back.  

What do you think?  

MARSHALL:  Well, that`s a good point.  Not all buyback programs are created 

equal.  If a company can earn a return on capital by reinvesting in their 

business, as a shareholder, you`d want them to do that because that`s going 

to create even greater value in the future.  But if they`re going to invest 

in subpar opportunities in a stagnant business, oftentimes the best thing 

to do is put that money back into the capital markets and let other 

companies that may be smaller, may be more innovative, that maybe need that 

capital reinvest it in other places in the economy that are growing faster.  

GRIFFETH:  Eric Marshall with the Hodges Funds — again, thanks for joining 

us tonight.  

MARSHALL:  Thank you.  

HERERA:  Time to take a look at some of today`s “Upgrades and Downgrades”.  

Cisco (NASDAQ:CSCO) was downgraded to equal weight from overweight at 

Morgan Stanley (NYSE:MS).  The analyst cites slowing growth in Cisco`s 

networking security business.  The price target is $49.  Cisco 

(NASDAQ:CSCO) reports its earnings tomorrow.  Their shares rose a fraction 

to $47.89.  

Take Two was downgraded to underperform from market perform at BMO Capital 

Markets.  The analyst cites a decline in buzz around one of its most 

popular video games.  The price target is $80.  The stock fell about 4.5 

percent to $89.25.  

GRIFFETH:  Gilead Sciences (NASDAQ:GILD) was downgraded to market perform 

from outperform at Wells Fargo (NYSE:WFC).  The analyst cited a lack of 

growth catalyst following a recent drug trial failure for the company.  

Price target now is $68.  That stock fell 3 percent today to $65.40.  

And surgical equipment maker Nuvasive was downgraded to hold from buy at 

Jefferies.  The analyst there says he`s skeptical of the reports that Smith 

& Nephew is ready to make an offer for Nuvasive, and even if it does, the 

analyst thinks a bid above $60 a share is not likely.  And so, the firm cut 

its price target to $60, but the stock still rose on that takeover chatter.  

It was up 3.5 percent today to $58.08.  

HERERA:  There are a record number of job openings.  The Labor Department 

today reported 7.3 million open positions, which is the most since the 

government started tracking that data in December of 2000.  Economists say 

the report shows that employers expect demand to remain strong.  The number 

of job openings is also much greater than the number of unemployed, which 

totaled 6.3 million last month.  

GRIFFETH:  And while the labor market remains strong, economic growth is 

still uneven.  That`s especially the case in the Mississippi Delta and 

other low-income parts of the country where many residents still don`t even 

have a bank account and where ATMs are relatively recent arrivals.  Fed 

Chair Jerome Powell traveled to that region today to address that very 


Steve Liesman has the story for us tonight from Moorhead, Mississippi.  



homes in the Mississippi Delta left Farrah Appleberry and her two girls in 

destitute and in bankruptcy.  


in unison because I didn`t want to lose another home.  And one of my girls 

said, mama, it`s going to be all right.  God got us, that this too shall 


LIESMAN:  And along, literally, came Hope, a credit union focused on 

economically distressed areas in the South that brings basic banking 

services to the nation`s poorest.  

BILL BYNUM, HOPE CEO:  The rate of poverty here is three times what you see 

in the nation as a whole, even greater for the region`s African-American 

residents.  If you look at level of banking services, three times the level 

of people who don`t have a banking account.  And when you add the number of 

people who use check cashers and pay their lenders, almost between 60 

percent and 70 percent of the members who joined our credit union were 

outside the banking system or on the edge of the financial system, paying 

high rates or did not have basic tools to support their families and 

stabilize their financial lives.  

LIESMAN:  You can see the assets of banking services in poor towns like 

this throughout the Mississippi Delta.  Nationally, one in four Americans 

is known to be unbanked or underbanked, meaning they don`t have access to 

basic banking services.  Some live in banking deserts where there aren`t 

banks, some people don`t trust banks and some people think they`re just too 

poor to open an account.  

But there is also more focus on the issue.  Tuesday, Fed Chairman Jerome 

Powell made a historic trip to the delta, speaking to students and 

attending a conference along with investment bankers and community 

activists to shine a national spotlight on the problem of the unbanked.  

JEROME POWELL, FEDERAL RESERVE CHAIRMAN:  Access to safe and affordable 

financial services is vital, especially among families with limited wealth, 

whether they`re looking to invest in education, start a business, or simply 

manage the ups and downs of life.  

LIESMAN:  Access to banking is such a problem down here that it was only in 

2015 that Hope opened the town`s first bank ATM.  

GEORGE HOLLAND, MOORHEAD MAYOR:  When Hope came in, that was first thing 

they did.  They knock a hole in the wall and put an ATM machine there.  

There was very little business that you could conduct here in Moorhead at 

that branch.  

LIESMAN:  For Ms. Appleberry, the financial counseling provided by Hope 

means she should be out of bankruptcy by November.  

APPLEBERY:  Once I get out of bankruptcy, I know that it may not be the 

fattest account, but I`m looking to have enough money in hope that if I 

have a dry day, me and my girls will still make it.  


APPLEBERY:  So, I have to learn to stay small to get to big.  


HERERA:  Coming up, did you know all that time you sit in traffic isn`t 

only taking a toll on you, but taking a bite out of the economy?  We`ll 

have more on that a little later.


GRIFFETH:  It has been a tough stretch for some of the video game makers 

recently, and it`s been no different for Activision Blizzard (NASDAQ:ATVI), 

which late today reported revenue that missed estimates.  The company 

issued weak guidance as well and said it plans to cut 8 percent of its 

workforce.  Activision earned $1.29, that was a penny better than 

expectations, but it was the revenue of $2.8 billion that was considered 

disappointing, and so was the outlook that it provided for the first half 

of the year, and that sent the stock initially lower in after-hours trading 


Josh Lipton has more on Activision`s results.  



one big number in Activision`s report referring to net bookings.  That`s 

the measure of both digital and physical game sales.  Oppenheimer`s Andrew 

Uerkwitz says that`s important because that metric captures all revenue the 

company`s generating, and it was down $1 billion year over year.  

On the other hand, Uerkwitz notes a potential positive.  He says the 

company is increasing head count in development to accelerate the pace of 

new content from its leading franchises.  But others at Activision will be 

losing their jobs.  The company did announce a workforce reduction of 8 

percent from its total workforce of 9,800 employees.  

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


HERERA:  Under Armour (NYSE:UA) powers past estimates.  That`s where we 

begin tonight`s “Market Focus.” 

The sports apparel retailer reported better-than-expected earnings and 

revenue, thanks to strong sales and growth overseas.  Analysts say the 

company was able to cut excess inventory and generate excitement around new 

product launches, and that helped send the stock up nearly 7 percent to 


Quarterly profits topped expectations at international brewer Molson Coors, 

but sales fell due to weak demand in the U.S. and Canada and rising 

transportation and aluminum costs.  Molson, which makes Coors and Blue Moon 

beer, is also restating two years of financial results after finding 

accounting errors.  Sales plunged more than 9 percent to $59.19.  

The private equity firm Thoma Bravo is buying mortgage software company 

Ellie Mae for more than $3.5 billion.  Ellie Mae shareholders will receive 

$99 in cash for each share that they own.  That is a 21 percent premium 

over yesterday`s closing price.  Today, Ellie Mae surged that much, up 21 

percent at $98.95.  

GRIFFETH:  And here`s another private equity play.  JAB Holdings says that 

it plans to raise its stake in cosmetics conglomerate Coty from 40 percent 

to 60 percent, a bump of nearly $2 billion in shares of Coty, whose brands 

include CoverGirl and Sally Hansen.  Coty stock today rose about 12-1/2 

percent to $10.87.  

And a group of Democratic senators who`s urging the Justice Department and 

the FCC to reject the proposed merger between Sprint and T-Mobile.  The 

senators say that the $26 billion combination would raise prices for 

consumers and stifle competition.  A House panel is set to hold a hearing 

on this deal tomorrow.  Sprint rose about 3 percent today to $6.14, while 

T-Mobile added more than 1-1/2 percent to $69.60.  

HERERA:  A new report from analytics company INRIX found that Americans 

spend a lot of time and money sitting in traffic every day.  According to 

the data, American drivers lose about 97 hours a year sitting in traffic 

and that congestion costs the economy nearly $87 billion in 2018.  

Trevor Reed, transportation analyst at that company, joins us to talk more 

about the findings.  

Nice to have you with us, Trevor.  Welcome.  


HERERA:  And you collected this data from all of these new connected cars 

that we`re all driving in, correct?  

REED:  Yes, and we collected it from a lot of traditional sources, too.  

So, GPS, cell phone data, street coils, traffic cameras.  You name it, we 

probably collect something from it.  

GRIFFETH:  Clearly, sitting in a car for hours a day is not being 

productive.  Are there things that cities can do?  I know some cities have 

staggered starting times for companies so that you`re not all rushing to 

get to town by 8:00 or 9:00 in the morning.  What else can cities do to 

help companies?  

REED:  There`s a lot of different ways.  One of them that`s been very 

popular in Seattle is promoting the use of public transit amongst employers 

into the most dense portions of the city.  And, you know, for every car 

you`re able to get off the road in the most dense part of the city, it 

really pays big benefits as far as reducing traffic.  

HERERA:  Now, you ranked some of these cities.  Boston, Washington, D.C., 

and where you are, Seattle, they did not fare well in this particular 

study, but I`m struck by the fact that Boston and Washington, D.C., are 

very old cities, so do they need to commit more to infrastructure and that 

other type of transportation that you just mentioned in order to maybe try 

and reverse this, or at least mitigate some of the issues?  

REED:  Yes.  So, I`m really glad you brought up the age of the cities, 

because what we found in our study is that age is the best predictor of 

congestion in a city.  And when you think about it, it makes a lot of 

sense, because a city like Boston, it developed around walking, horses, 

even in the oldest parts of the city.  And so, it`s really ill suited to 

using an automobile, which is 20th-century technology in a 17th-century, 

16th-century city.  

So, especially in these old cities, the discussion should be much more 

about how do we use these streets most efficiently to serve these very 

dense populations.  

HERERA:  OK.  And on that note, Trevor Reed with INRIX, thanks so much for 

joining us tonight.  

GRIFFETH:  By the way, California`s governor is abandoning that state`s $77 

billion high-speed rail plan to connect Los Angeles and San Francisco.  

According to the “Associated Press,” cost was cited as the reason.  During 

his state of the state, Governor Gavin Newsom also proposed a digital 

dividend that would allow consumers to share in the profits made by the 

tech firms in that state.  He did not have details on how the dividend 

would work, but he did say something bold has to be done.  

Coming up, the box office got off to a slow start this year, but just wait.  


HERERA:  Amazon (NASDAQ:AMZN) and General Motors (NYSE:GM) are reportedly 

in talks to invest in electric carmaker Rivian, which specializes in 

electric pickup trucks and could be a Tesla rival.  According to “Reuters”, 

the investment would give Amazon (NASDAQ:AMZN) and GM minority stakes in 

the start-up and would value Rivian at between $1 billion and $2 billion.  

“Reuters” adds that the deal isn`t final, it could fall through.  

GRIFFETH:  Meanwhile, Nissan has cut its forecast for its profit and 

vehicle sales.  It also took an $84 million charge related to deferred 

compensation it says was promised to former chairman Carlos Ghosn.  

As you know, Tokyo prosecutors have charged Mr. Ghosn with underreporting 

his pay.  The automaker said that it`s facing a decline in global vehicle 

sales, especially in the U.S. and in Europe, and it will reconsider its 

plan to deepen its alliance with France`s Renault.  

HERERA:  Everybody loves buying something on sale, of course, but according 

to a new report, all of those markdowns cost retailers $300 billion in 

revenue last year.  That equals about 12 percent of sales.  This report 

does not include grocery retailers.

GRIFFETH:  Well, we are just a few weeks in to 2019, but already it`s 

apparent that the year is not starting the way Hollywood like.  But are 

things about to change.  Julia Boorstin takes a look at the box office 

challenges and why things may be about to heat up.  



the second part has failed to turn around a struggling 2019 box office.  It 

grossed $34 million at the domestic box office, as much as $20 million less 

than some estimates for the film.  

A disappointing weekend bringing the year-to-date U.S. box office down 14.5 

percent from last year, which is bolstered by a “Star Wars” film, and this 

winter, films such as “Bird Box” on Netflix (NASDAQ:NFLX) have been making 

headlines and drawing attention.  

PAUL DERGARABEDIAN, COMSCORE:  The bar is definitely higher in terms of 

getting people to go to the movie theater because there`s so much 

compelling content at home on the small screen.  So now it comes down to 

the marketing, the strength of that marketing for movies in theater, those 

big tent pole films, the exciting Marvel movies, the horror movies.  All 

those big franchises are going to be the films that get people off their 

couch and into the movie theater.  

BOORSTIN:  One issue — once people stop going to the movies and get used 

to streaming movies on Netflix (NASDAQ:NFLX) instead, that means they stop 

seeing trailers and getting those reminders about why to come back.  A box 

office decline can start a vicious cycle.  

Analysts warning first-quarter box office revenue could fall further on 

tough comparisons to last year`s blockbuster “Black Panther,” but Disney`s 

“Captain Marvel” coming on March 8th should start to turn things around.  

DERGARABEDIAN:  The comparisons are going to be tough up until “Captain 

Marvel,” which thankfully is required viewing for “Avengers: Endgame,” 

which is going to kick off really this summer, at the end of April.  

So, the good news is help is on the way.  The bad news is it`s going to 

take a little while to get here, but it`s coming.  

BOORSTIN:  Expected to bolster the box office, a slew of sequels in the 

works, such as Marvel`s “Avengers: Endgame,” Warner Brothers` “Godzilla: 

King of the Monsters,” Disney`s “Toy Story 4” and Sony`s “Spiderman: Far 

From Home.”  Plus, Disney (NYSE:DIS) is debuting three live-action remakes 

of popular family films, “Dumbo”, “Aladdin” and “The Lion King”, brands big 

enough to cut through the clutter and likely get crowds back to theaters.  

But there`s no question with so much content streaming at home, consumers 

need more reasons to pay up for the more expensive trip to the theater.  

For “NIGHTLY BUSINESS REPORT,” I`m Julia Boorstin in Los Angeles.  


HERERA:  Here`s a look at the final numbers from Wall Street today.  The 

Dow rose 372 points.  The Nasdaq added 106.  S&P 500 was up 34.  

That does it for us tonight.  I`m Sue Herera.  Thanks for joining us.  

GRIFFETH:  I`m Bill Griffeth.  Have a great evening.  See you tomorrow.

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