ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Bill Griffeth and Sue
SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Fear of missing out. The
stock market is having the best start of the year in decades, but don`t
sweat it if you missed it.
BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: Hands on health care. Your
local drugstore may soon get a makeover making it less like a retailer and
more like a wellness center.
HERERA: Deep in debt. The U.S. government owes a record amount of money
as do American households.
Those stories and more tonight on NIGHTLY BUSINESS REPORT for Wednesday,
GRIFFETH: And we do bid you a good evening, everybody, and welcome.
Yesterday`s rally in the stock market continued today as Wall Street still
monitors the progress of the spending bill in Washington designed to
prevent another government shutdown and those trade talks taking place in
Beijing. The sense is that if a deal is reached between the U.S. and China
without any more tariff increases, that would reduce about growth and
perhaps allow the rallies to continue which it did today.
The Dow gained about 117 points back to 25,543. The Nasdaq was up five and
the S&P gained eight. And we`ll have more on the U.S./China trade talks in
just a moment.
But we begin tonight with a closer look at the sharp market rally that we
have seen so far in 2019, at how far the major indexes have come in such a
short period of time. Just since the lows of December 24th, the Dow and
the S&P are up nearly 14 percent, the Nasdaq has gained roughly 17 percent.
HERERA: And that is leading some to fear that they have missed out on the
rally. But did they?
Jeremy Siegel, finance professor at the University of Pennsylvania`s
Wharton School of Business joins us now to talk about that.
Good to see you, Jeremy, as always. So, I guess —
JEREMY SIEGEL, UNIVERSITY OF PENNSYLVANIA WHARTON SCHOOL OF BUSINESS: Good
to be here, Sue.
HERERA: So, I guess that is the question. Have they missed out? What are
your expectations as we go further into this year?
SIEGEL: Well, certainly, you missed out. There was an incredible
Christmas Eve sale on December 24th. I think we all wished, my God, we
could have gotten the great bargains. I think we have seen — as you said
15, 16 percent. I mean, we have seen a big increase since then.
I think most of the increase is behind us now. I do think we`re going to
have an upward tilt to the end of the year, but it`s not going to be a
runaway. I don`t think people say oh, my god, I have to get in.
Otherwise, I`ll going to miss a big rally.
GRIFFETH: You know, I think it was John Templeton who said you`re never
going to sell the absolute top of a market. You`re never going to buy the
absolute bottom of a market. You might as well say in the market and
eliminates this fear of missing out.
What do you think about that?
SIEGEL: Oh, I mean, I have been advocating that for years. I mean, if we
let our emotions take hold of us, we`re going to sell at the bottom and
we`re going to all going to buy at the top which, of course, is exactly
opposite which one to do. Plan long term.
And, by the way, I think long term values are there. This market is —
it`s certainly not as undervalued as it was last December but it isn`t over
So, certainly don`t shy away from the market as a result of this rally but
I don`t think you have to go head over tail end and say oh, my God, it`s
going to be another 10, 15, 20 percent. I think it has struggled. They
have this year`s earnings that are certainly not anything like last year`s.
And we still have of course the trade and, you know, political
considerations coming in front of us.
HERERA: And that headline risk could create a lot of volatility. I mean,
we have already seen that happen, but we`re coming up once again against
another deadline and the trade talks are inching closer to an agreement.
But we certainly aren`t there yet.
SIEGEL: Yes, and I think — I think the market is 90 percent certain that
there`s going to be an agreement. And I think they`re right, which means
if we get one, we`ll see it pop. But it won`t an enormous pop. I expect a
five or six point rally in a few days and then it`s going to have to
contend with a lot of other worries into the market.
In other words, it would be very shocked if we — if Trump imposed 25
percent tariff and we head into the trade war I`m afraid we`ll so a bear
market. But we will see a pop on a settlement. Of course, we have to
expect that Trump had talked about maybe we`ll delay the March 1st
deadline, so we have to be prepared for that.
SIEGEL: A pop, but not a huge upward surge.
HERERA: And on that note, Jeremy Siegel, thank you so much. Jeremy is
with the Wharton School of Business.
GRIFFETH: Now to the trade talks and today, there were encouraging signals
from both sides about the negotiations. Back we go to Eunice Yoon in
EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: “The South China
Morning Post”, the Hong Kong newspaper is quoting sources as saying that
President Xi Jinping plans to meet with Treasury Secretary Steve Mnuchin
and Trade Representative Robert Lighthizer possibly Friday as a goodwill
gesture for the trade talks. Mnuchin and Lighthizer are here to meet with
the Chinese vice premier on Thursday and Friday.
And today, Mnuchin told reporters that he hoped that the conversations
would be productive.
“The Wall Street Journal” is reporting that the negotiators are focused on
drafting a framework of an agreement that can be signed by Presidents Trump
and Xi at a possible summit, though it`s still unclear how much the sides
can narrow their differences. The market cheered the rallies on news that
President Trump was open to extending the March 1st deadline. The Chinese
would likely welcome an extension since Trump administration officials have
said in the past that the March 1st deadline was a hard deadline. Without
that pressure, the Chinese would be able to keep on talking and some
American business people would argue, without taking much action.
For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon in Beijing.
HERERA: And now to Brexit, which many economists and strategists consider
a potential threat to global growth. Ford reportedly told the British
prime minister that it may have to move some production out of the U.K. if
a deal is not reached that would provide Britain with a smooth exit from
the European Union.
And with the deadline to reach a deal fast approaching, Willem Marx is in
London and he takes a look at where things stand.
WILLEM MARX, NIGHTLY BUSINESS REPORT CORRESPONDENT: For British Prime
Minister Theresa May, time and parliament repeatedly proved to be part of
the same paradoxical equation. So the less time she has, the more
challenges parliament provides, with an exponentially increasing threat
from allies and enemies alike.
JEREMY CORBYN, LABOUR PARTY LEADER: The government`s handling of Brexit
has been costly, shambolic and deliberately evasive.
MARX: They`re now remain slightly more than six weeks until Britain hits a
two-year deadline designated for its departure from Europe, and the prime
minister`s critics claim she wants to use that hard out as a pressure
tactic both at home and abroad. It was a month ago that May suffered a
crushing House of Commons defeat.
UNIDENTIFIED MALE: So, the noes have it. The noes have it.
MARX: But the factual complexities that currently coursed through this
country`s fiscal veins have continued to function as a form of life
support, at least until now.
After another two weeks of talks here in Westminster, in Brussels, in
Belfast and in Dublin, the prime minister has acknowledged she needs more
time to find a negotiating breakthrough. That apparent lack of progress is
once more prompted a barrage of criticisms and accusations from her
IAN BLACKFORD, SCOTTISH NATIONAL PARTY: This is the height of arrogance
from a government set on running the clock down. Just 44 days from a no
deal scenario, the prime minister is hamstrung by her own party and
rejected by European leaders.
MARX: But her approach with the Europeans does have some support.
GREG HANDS, BRITISH CONSERVATIVE PARTY: They said they`ve been waiting for
months for a determined view from London. Well, they got that determined
view. I think Theresa May has rightly asked for some more time to see if
she can get a deal with Brussels.
MARX: So far though, Brussels refuses to budge from the position it first
took up many, many months ago. Tomorrow will bring yet another day of
Brexit debate and voting. And in a sign of the mathematical conundrum May
faces, some of her conservatives are again threatening to rebel against
For NIGHTLY BUSINESS REPORT, I`m Willem Marx in London.
GRIFFETH: Back here. Dow component Cisco (NASDAQ:CSCO) reported better
than expected results today, thanks to its application software and
cybersecurity businesses. The company said it earned 73 cents a share.
That was one cent better than estimates. Revenue rose from a year ago to
more than $12 billion. Cisco (NASDAQ:CSCO) also increased its dividend,
and investors obviously liked sending the stock higher in initial after-
HERERA: This earnings season is in a home stretch. And so far, so good.
Dominic Chu explains.
DOMINIC CHU, NIGHTLY BUSINESS REPORT CORRESPONDENT: It`s almost over.
Nearly three quarters of all S&P 500 companies have reported their results
so far and so far, it`s been a generally good story.
According to data from Refinitiv, 71 percent of companies have beaten
average analyst estimates for earnings and 62 percent have beaten the
average revenue estimate for analysts as well. That has some experts
feeling good about the health of corporate America.
BRYCE DOTY, SIT INVESTMENT ASSOCIATES: We are predicting that growth to be
at least 2.5 percent which is I think is a little better than most. I
think people are going to be surprised.
CHU: If every company left reports earnings in line with analyst
expectations, the S&P 500 will see nearly 17 percent earnings growth and
around 6 percent revenue growth. That`s the good news. The bad news is
last quarter was so good, it will be tough to top this year.
MARK YUSKO, MORGAN CREEK CAPITAL MANAGEMENT: I think we`ll have negative
I think we`ll have negative year over year earnings growth. Part of that
is a little bit unfair because we had, you know, the steroid-induced year
last year which was crazy because of the tax reform.
CHU: We`re already seeing some signs of increasingly pessimism. In
October of last year, Wall Street analysts were predicting that the
earnings growth in the first quarter of 2019 would be solidly positive and
fast forward to today and they`re predicting a slight earnings decline. It
could make for a more volatile market when the next earnings season kicks
off in mid-April.
For NIGHTLY BUSINESS REPORT, I`m Dominic Chu.
GRIFFETH: Time to take a look at some of today`s “Upgrades and
Freeport-McMoRan was upgraded to overweight from equal weight at Morgan
Stanley (NYSE:MS), with the analyst citing an improved outlook for copper
prices. Price target is now $14 and that stock rose nearly 7 percent today
Lattice Semiconductor (NASDAQ:LSCC) was upgraded to positive from neutral
at Susquehanna. The analyst cited the company`s better than expected
quarterly guidance which it issued last night and it ran counter to the
weaker environment we have been seeing for semiconductor stocks more
generally. Price target for Lattice, $11. That stock rose 29 percent
today to $10.60.
HERERA: Still ahead, hitting the gas.
(BEGIN VIDEO CLIP)
PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: Why is BMW gearing up
for a big 2019? I`m Bill LeBeau in Thermal, California. That story is
coming up on NIGHTLY BUSINESS REPORT.
(END VIDEO CLIP)
HERERA: Johnson & Johnson (NYSE:JNJ) is buying Auris Health for about $3.5
billion. The acquisition pushes J&J further into the healthcare robotics
market. Auris` flagship product is a robot used by surgeons remotely.
Auris` focus is on lung cancer and respiratory procedures. Shares of J&J
rose in today`s session.
GRIFFETH: Well, CVS (NYSE:CVS) is starting to use its merger with Aetna
(NYSE:AET) to try and change the definition of the drugstore. The company
is turning some of its locations to what it now calls health hubs, offering
more services and health-focused products.
Bertha Coombs takes us to one in Spring, Texas, tonight.
BERTHA COOMBS, NIGHTLY BUSINESS REPORT CORRESPONDENT: More than half of
the new CVS (NYSE:CVS) health hub concept store is devoted to health care.
With more space for many clinic services and walkers, as well as a wellness
studio, where customers like Jacqueline Haynes comes in for yoga classes
and get one-on-one advice on managing their health.
JAQUELINE HAYNES, CVS (NYSE:CVS) CUSTOMER: They also have a program where
they have a dietitian. And that dietitian would meet with you for free and
so she`s teaching me about my blood pressure, because I do have hyper
COOMBS: Along with the dietitian, health hub has a respiratory therapist
and new products to treat sleep apnea, a breathing disorder that can lead
to other health issues.
DR. ALAN LOTVIN, CVS (NYSE:CVS) HEALTH EVP OF TRANSFORMATION: Sleep apnea
is one of the least or most undiagnosed opportunities. And so, we have a
respiratory therapist and the nurses collaborate we can screen and then
provide and fit masks and machines, teach people how to use them, so
closing that loop around a condition that a lot of Americans have.
COOMBS: CVS (NYSE:CVS) isn`t the only one experimenting with hands on
health care. Some of their large insurance rivals like Cigna, United
Health and Humana (NYSE:HUM) have programs where they reach out over the
phone to members who have hypertension or diabetes to try to get them to
help manage their care. Or send in help at home after a patient has been
discharged from the hospital, sometimes in conjunction with Walgreens on
But CVS (NYSE:CVS) is trying to bring all of those services here at the new
health hub, CVS (NYSE:CVS) is reaching out to the insured Aetna (NYSE:AET)
members with diabetes, hyper tension and heart disease to come into the
store for health coaching services.
KEVIN HOURICAN, CVS (NYSE:CVS) PHARMACY PRESIDENT: We`ve been pleasantly
surprised at how many of our pharmacy customers when offered the dietitian
services have said yes.
COOMBS: In the first month, more than half like Jacqueline have acted on
new health changes.
HAYNES: It`s one-stop shopping for my health.
COOMBS: The yoga classes and initial consultations are free. But
diagnostics services and medical equipment are billed through insurance or
paid out of pocket. Executives admit it`s early days and they`re trying to
figure out just how to get the mix right.
For NIGHTLY BUSINESS REPORT, I`m Bertha Coombs in Spring, Texas.
GRIFFETH: And to read more about CVS` health hubs and what others in the
industry are doing, you can head to our website. Read about it at NBR.com.
HERERA: Hilton is raising prices and that`s where we begin tonight`s
The hotel operator is charging more for rooms and that helped the company
report better than expected quarterly profits. Hilton cited healthy demand
for travel, though it did point to a possible deceleration per room this
year due to concerns over global growth. Hilton shares were up just about
7 percent to $79.37.
Dish Network missed earnings expectations but revenue came in above
forecast. The satellite TV operator also lost more than 300,000
subscribers last quarter, thanks in part to carriage disputes with HBO and
Univision. The number of subscribers fell below 10 million for the first
time in 15 years and shares plunged more than 7.5 percent to $28.86.
Teva Pharmaceuticals posted weaker than expected fourth quarter earnings.
The drugmaker also and cited competition from generic drugs for its
blockbuster multiple sclerosis drug Copaxone. Teva shares plummeted over
7.5 percent to $17.63.
GRIFFETH: T-Mobile and Sprint executives were on Capitol Hill today
answering questions from lawmakers about their proposed $26 billion merger.
The CEO of T-Mobile defended the get together saying it will not hurt
consumers or jobs.
(BEGIN VIDEO CLIP)
JOHN LEGERE, T-MOBILE CEO: The outcome of this merger will be a
significant increased in supply in the form of eight times the capacity
that our network will make available. It will bring in 87 percent decline
in the price per gig of data and jobs will go up. So, this is dramatically
(END VIDEO CLIP)
GRIFFETH: And shares of both companies fell a fraction in today`s trading.
And late today, AIG reported a quarterly loss which was below the profit
that analysts had been looking for. The company cited catastrophe losses
along with volatility in both the equity and in the credit markets. AIG
also announced a $2 billion stock buy back program. Shares were initially
lower in after-hours trading, but they finished the regular session up a
fraction at $44.18.
HERERA: BMW plans to ramp up production at its sole U.S. plant this year
to keep up with America`s growing appetite for luxury SUVs. In fact, the
automaker expects to build a near record number of vehicles including its
newest model, the X7.
Phil LeBeau reports tonight from Thermal, California.
LEBEAU: It`s bigger, more luxurious, it`s better, this is the golden age
of high end SUVs. BMW`s all new X7 hit show rooms next month as the strong
economy adds to the appeal of upscale SUVs.
BERNHARD KUHNT, BMW NORTH AMERICA CEO: If you look at the SUV market in
total, SUV market is growing and growing and growing on the premium side.
It`s now 50, nearly 60 percent now.
LEBEAU: Over the last six years, luxury SUV sales have steadily picked up
speed, thanks in part to popular models like the Mercedes GLS. Meanwhile,
newer and refreshed entries like the Lincoln Navigator will be added
competition for BMW`s biggest SUV.
JEFF SCHUSTER, LMC AUTOMOTIVE CHIEF ANALYST: When we`re looking at the
high end, the top end of the bandwidth, really that large seven-seater,
there`s really about ten vehicles that this BMW X7 competes with.
Obviously this is where a lot of profit margins are made and I think that`s
why they`re looking to enter this segment.
LEBEAU: The X7 will be built at the BMW plant in South Carolina.
Production is expected to climb this year to near record levels. For BMW
and other European automakers building popular SUVs here in the U.S. is
critical to their success, especially as the White House considers slapping
tariffs or higher costs on luxury sedans imported from plants in Europe, a
move that would hurt sales.
KUHNT: Am I concerned about it? Yes, I am, because it will have an
impact. If tariff goes up, it`s not good for the consumer. It`s not good
for our dealer network. It`s not good for the economy in total.
LEBEAU: Overall, Bernhard Kuhnt believes America`s appetite for new
vehicles remains strong. Welcome news for the X7 rolling in to showrooms
next month and entering a crowded luxury SUV market where buyers are
willing to pay more than $50,000 for a new ride.
Phil LeBeau, NIGHTLY BUSINESS REPORT, Thermal, California.
GRIFFETH: And those higher prices means that Americans are taking out
bigger car loans. And speaking of which, the word “debt” was very much in
the news today. First, the Treasury Department said that our nation`s
federal debt level has now surpassed $22 trillion for the first time. Then
the Federal Reserve Bank of New York reported that more than 7 million
Americans are behind on their car payments by at least 90 days.
Finally, a new survey from bankrate.com found that roughly a third of
Americans have more credit card debt than they do in savings.
Joining us now to talk about the implications of all of this for the
economy, Joe Brusuelas is back with us. He`s chief economist at RSM.
Joe, good to see you again. Welcome back.
JOE BRUSUELAS, RSM CHIEF ECONOMIST: Thank you.
GRIFFETH: Do any of the numbers make your palms sweat?
BRUSUELAS: Well, the fact that we have got people falling more than 90
days behind on their loans for auto loans does cause some concern. I`m not
too worried about the national debt. Right now, that`s not a problem. Nor
should it be our concern.
HERERA: But longer term, is it going to be an issue for the U.S.
especially given the interest rate environment that we find ourselves in?
BRUSUELAS: All right. So, if we continue in this low interest rate
environment it`s not going to be a real concern. We have learned a lot
about debt and deficit dynamics over the past 30 years primarily by
watching what`s happened in Japan.
Now, we don`t want to go there to around, we`re going to be 200 percent of
debt to GDP ratios. But should we see a resetting of interest rates back
to what we might consider their natural level, then it would be a problem.
GRIFFETH: What about the metric that Bank Rate talked about today that
we`re a third of Americans have higher credit card debt than they do
savings? I mean, it`s happened in the past. This is how we get ourselves
into trouble, with higher debt than we can manage. Are we there yet do you
BRUSUELAS: Well, there`s two things, one that`s classic late cycle
dynamics. Two, we`ve got two different economies here in this country.
One is along the coast, aligned with tech, digital, scientific, literary,
life sciences and the other is more traditional. That`s the traditional
economy, that`s where the problem is.
And that`s where you see the middle that stokes a lot of that stokes a lot
of social and policy tensions around the country.
HERERA: If I can turn you back to the car loan issue because it`s
essential for people to have transportation to work. So if indeed they`re
falling that far behind on their car loans, what are the implications for
the economy? And also, some of these loans are not through traditional
BRUSUELAS: All right. So, we`re not going to have any financial systemic
problems because of delinquencies. And these are made by nonbank lenders.
And, two, other 25 percent of business cycle have been subprime variety.
So, this isn`t something that`s largely going to be unexpected but when you
see people fall behind like that, that`s a sign that your economy is
slowing. We are slowing back to around 1.8 percent which is a long term
trend. That`s where we`ll be here in this year.
GRIFFETH: All right. We`re not at a crisis, but it`s something to keep an
Joe Brusuelas from RSM, always good to see you. Thanks again for joining
BRUSUELAS: Thank you.
GRIFFETH: And coming up, farmers plow ahead despite facing challenges.
(BEGIN VIDEO CLIP)
JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Oh, sure, the farm
show, it`s all fun and games. But we`re about a year into the trade and
tariff war and the question really is for farmers and equipment makers —
what`s the real impact? Do they have a tough road to hoe? We`ll have that
(END VIDEO CLIP)
GRIFFETH: Here`s what we`re watching tomorrow. Retail sales for December
will finally be released. It`s a month late because of the partial
government shutdown. The producer price index will give the investors a
look at inflation pressures in the economy right now. And Dow component
Coca-Cola (NYSE:KO) releases its quarterly results.
That`s what we`re watching for on Thursday.
HERERA: Google (NASDAQ:GOOG) plans to expand into Nevada, Ohio, Texas and
Nebraska, and it will spend $13 billion this year to do so. In a blog
post, CEO Sundar Pichai said that the new locations will be both data
centers and offices. This is the first time Google (NASDAQ:GOOG) will have
infrastructure locations in those states. The company is also doubling its
workforce in Virginia and expanding its New York campus.
GRIFFETH: Well, it`s been quite a year for the agriculture industry as we
have been reporting. Farmers across the country find themselves caught in
the middle of the U.S./China trade war. Something that both — that is
both positive and negative.
And as Jane Wells reports now it was the big topic of conversation at this
year`s World Agriculture Expo in Tulare, California.
WELLS: It is the large farm show in the West, and it`s a good place to
take farming`s financial temperature nearly a year into the trade and
BRADEN MONK, UTAH DAIRY FARMER: The processors won`t take any more milk
and the beef is not worth as much as it`s used to be. So, it`s been pretty
WELLS: Yes, large parts of the farm economy have taken a hit but it`s not
all bad. Lower soybean exports mean more soybeans at home to feed American
ALLAN HUTTEMA, IDAHO DAIRY FARMER: It`s helped us a bit on the input side.
WELLS: Here in California, exports of fresh oranges have plummeted an
estimated 80 percent because of Chinese tariffs missing out on the popular
lunar New Year celebration. But that means cheaper prices for American
ROLAND FUMASI, RABOBANK SENIOR ANALYST: Orange prices are off 30 percent,
40 percent in recent weeks versus where they were at the same time last
WELLS: So what does this mean for equipment makers? These machines cost
more due to tariffs on imported steel. Yet, U.S. tractor sales were up
over 5 percent in January.
The decision that farmers have to make is after the buying boom in 2013 and
2014, this will be the time that they would start to replacing equipment.
Will they? Well, they`re certainly here kicking the tires.
JOE DIPIETRO, AGCO (NYSE:AGCO) VP SALES/MARKETING NORTH AMERICA: And
honestly, the age of the U.S. and Canadian vehicle parts, the age of the
machinery on the farms, it`s at a point where the farmer is needing to
WELLS: Even so, Deere was downgraded to neutral by Bank of America
(NYSE:BAC) over concerns in part about trade. Yet, once again, most
farmers appear to be sticking by the president as he talks trade with
BROOKS BEHLING, UTAH ALFALFA FARMER: It does hurt. But I think in the
end, when things play out, it will be better for everybody. It had to be
done. Things couldn`t go on the way they were.
WELLS: For NIGHTLY BUSINESS REPORT, Jane Wells, Tulare, California.
HERERA: Before we go, here`s a look at the final numbers from Wall Street.
The Dow rose 117 points, Nasdaq was up five, and the S&P 500 gained eight.
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 great evening. We`ll see you