Nightly Business Report – February 25, 2019

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



the week on an upbeat note after the president says he does not plan to 

raise tariffs on Chinese goods at the end of the month.  

Paid too much.  Warren Buffett admits that Berkshire Hathaway (NYSE:BRK.A) 

overpaid for Kraft (NYSE:KFT), a company that`s accounting is now the 

subject of an SEC investigation.  

Riding into the future, and it`s not on gas-powered bike.  But are electric 

motorcycles enough to win over young consumers?  

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

February 25th.

Good evening, everyone, and welcome.  Bill Griffeth is off tonight.  

Investors started the week with news that they had been hoping for.  

President Trump is stepping back from his hard-line stance on a trade 

deadline with China.  Following two weeks of high-level talks with the 

world`s second largest economy, the president postponed the date for 

raising tariffs on $200 billion worth of Chinese imports.  And while 

investors are cheering the news, many are also asking, what`s next?  

Kayla Tausche is in Washington tonight.  



heads to Vietnam to defuse nuclear tensions with North Korea, he`s touting 

another area of de-escalation, trade with China, telling U.S. governors 

he`s close to a deal.  


summit.  We`re going to have a signing summit, which is even better.  So, 

hopefully, we can get that completed, but we`re getting very, very close.  

TAUSCHE:  Talks with China have intensified over the last week.  China`s 

president, Xi Jinping, touting significant progress and a delegation 

negotiating on his behalf stayed an extra two days.  

The results, according to tweets from the president, a deal in the advanced 

stages.  Progress on intellectual property protection, technology 

transfers, agriculture, services, and currency.  And a potential deal 

announced at his Florida resort, Mar-a-Lago, in late March.  

President Trump credits tariffs for getting talks this far.  

TRUMP:  Tariffs are hurting China very badly.  

TAUSCHE:  But investors and business leaders are breathing a sigh of relief 

that tariffs could be rolled back.  Here`s Warren Buffett.  

WARREN BUFFETT, BERKSHIRE HATHAWAY CEO:  I`m relieved at the idea that 

there`s still some chance that sense will prevail.  The — it is bad for 

China, it`s bad for us if we get into some kind of a trade war.  

TAUSCHE:  Sources say the U.S. and China still disagree over how to enforce 

a deal, and within the White House too, President Trump and his top trade 

official clash on what form the deal would take.  

TRUMP:  By the way, I disagree.  I think that a memorandum of understanding 

is not a contract to the extent that we want.  

UNIDENTIFIED MALE:  From now on, we`re not using the word memorandum of 

understanding anymore.  We`re going to use the term trade agreement, all 


TAUSCHE:  The substance of any trade agreement or how long it would be 

effective are still a work in progress.  China has proposed some 

concessions that would go through 2024, the end of President Trump`s 

potential second term.  

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


HERERA:  The easing of trade tensions sparked a rally overnight in China 

which saw stocks rise the most since 2015.  Here in the U.S., stocks 

followed suit, touching almost four months high midday.  They were also 

helped by some deal-making activity which we`ll get to in just a moment.  

Today, the Dow Jones Industrial Average rose 60 points to 26,091.  The 

Nasdaq was up 26 and the S&P 500 added 3.  Today`s stock gains add to the 

strong move higher this year.  

But how sustainable is the rally?  

Mike Santoli looks into that.  



2019 is off to its best in three decades, taking the S&P 500 ride up to the 

level where rallies failed three separate times last fall.  Now that the 

losses of the worst December since the 1930s have been recovered, Wall 

Street is asking whether this rally could continue higher from here.  

Well, the market itself is encouraging to the bulls.  The advance has been 

unusually broad with the vast majority of stocks up dramatically from the 

December lows, pullbacks have been shallow and brief on the way to a nearly 

12 percent climb in the S&P year to date.  

Another point for the bulls, investor sentiment is generally muted.  

Surveys show only modest optimism and investors have pulled more money from 

stock funds this year than they`ve contributed to them.  From a contrary 

opinion angle, that`s a net positive.  

And with the Federal Reserve emphasizing patience toward any further 

interest rate hikes, bond yields have stayed low and corporate debt prices 

have firmed up.  That helps to support equity valuations which are now 

right around their five-year average compared to forecast earnings.  

But those earnings estimates are a possible stumbling block.  Projected 

earnings for the S&P 500 companies have declined steadily in recent months 

with a drop in profits now expected for the first quarter and total growth 

for the year down to about 5 percent.  Investors seem to be betting that an 

expected trade deal with China might coincide with stabilizing earnings 

forecasts and a boost to corporate confidence.  If so, that could help 

validate the rebound and sustain this rally, but as stock prices go higher, 

so does the need for economic news to improve rather than just seeming less 

bad than expected.  



HERERA:  Jason Draho joins us now to talk more about the market and what 

might drive stocks from here.  He is head of America`s asset allocation at 

UBS Global Wealth Management.  

Jason, welcome.  Nice to have you here this evening.  


HERERA:  You say that you are still positive but prudent.  What do you mean 

by that?  

DRAHO:  Well, what we think is that, you know, the economic outlook is 

still attractive and the markets have rallied a lot on both the good 

developments on trade and also the Federal Reserve turning patient and 

providing tail with some markets.  But the markets moved up a lot this year 

without actual data really getting better both in the U.S. and globally, 

we`ve seen kind of weakness over the past few months.  

So, right now, the markets kind of move ahead of the actual economic data 

which we think will get better in the U.S., for example, some of the 

weakness we`ve seen is a result of the government shutdown, the December 

selloff clearly spooked both consumer and investor sentiment.  That`s going 

to have a sort of near term impact.  But looking ahead, three, six months, 

we still feel comfortable at the outlook and that`s going to provide 

further tail winds on the upside, but prudent because a lot of good news 

has already been priced in.  

HERERA:  So, does that mean that you`ve changed your exposure to stocks?  

And if so, how?  

DRAHO:  So, just last week, we did our latest update.  We were already kind 

of overweight stocks relative to our benchmark.  We dialed that back a 

little bit.  And we`re kind of 3 percent overweight compared to our 

benchmark, we`re down to 2 percent.  

We`ve also made some other changes on a regional style and sector basis to 

try and maybe make the portfolio a little less risk on, acknowledging that, 

you know, the cycle may turn a little bit, the economic data may not 

support us as much we`d like, so we thought let`s keep risk on but take 

more prudent action of how we allocate the portfolio.  

HERERA:  You say you still like the U.S. but you also like the emerging 

markets.  If so, what part of the globe?  

DRAHO:  Well, particularly Asia, because 70 percent of the market is based 

in Asia so you can generally like emerging markets.  I think the reaction 

this morning in China with Chinese equities up 6 percent on this news kind 

of speaks to the fact that — well, U.S. markets have kind of priced in 

some good news on the Fed and on trade.  There`s definitely hasn`t been the 

case as much overseas, particularly in Asia.  

So, that`s an area where we still think is attractive as you get kind of 

better news on trade.  We`re also seeing some of the data in China showing 

to the signs of kind of green shoots after a lot of stimulus.  If that 

plays out, there`s definitely more upside in emerging markets.  

HERERA:  OK.  So, you know, for so long, this market was obsessed with 

trade, and to a certain extent, still is.  But with progress apparently 

being made, according to the president and others, what else is going to 

drive this market forward now that that at least is out of the way?  

DRAHO:  Well, I think the biggest thing that the market will focus on from 

here on is the growth outlook.  And the U.S. and overseas, and what does it 

mean for corporate earnings.  We know we`re going to see some soft data in 

the first quarter, what would people want to see and where the real market 

debate will be from here on out is, is the slowdown we`ve seen over the 

past few months of a mini-cycle slowdown and we`re going reaccelerate 

through the middle of the year, or is this actually a more ominous sign 

that growth is going to continue to be weak and risk a recession if not 

this year than next year is rising.  

I think that`s what the market will need to see is get comfort that it`s 

sort of a temporary blip.  

HERERA:  On that note, Jason, thank you.  

DRAHO:  My pleasure.

HERERA:  Jason Draho with UBS Global Wealth Management.  

And now to those deals that we mentioned earlier.  Let`s start with General 

Electric (NYSE:GE) which agreed to sell its biotech business to Danaher 

(NYSE:DHR) for $21 billion.  The move is a strategy reversal for GE, which 

rejected an approach by Danaher (NYSE:DHR) for that business about a year 

ago.  The proceeds of the deal will be used to trim debt, which stood at 

$121 billion at the end of December.  

Shares of GE were up more than 6 percent.  Danaher (NYSE:DHR) shares gained 

8.5 percent.  

And now to Barrick Gold (NYSE:ABX), which made an unsolicited $18 billion 

bid for Newmont Mining (NYSE:NEM).  Barrick Gold (NYSE:ABX) says the deal 

is logical for an industry battling high costs.  Newmont had previously 

announced a $10 billion takeover of Gold Corp.  And today, Barrick, Newmont 

and Gold Corp. all finished lower.  

And, finally, Roche is buying gene therapy specialist Spark Therapeutics 

for $4.3 billion.  Spark`s portfolio includes treatments for blindness and 

Huntington disease.  This deal follows a recent push among other drug 

makers into the gene therapy space.  Shares of Sparks soared 120 percent 

while Roche fell a fraction.  

Warren Buffett released his annual letter to shareholders over the weekend.  

It`s an annual event that many investors follow.  And this year, it took on 

added significance given last week`s warning by Kraft (NYSE:KFT) Heinz, a 

stock that is one of Berkshire`s major holdings.  

Becky Quick spoke with the Oracle (NASDAQ:ORCL) of Omaha and filed this 




Berkshire Hathaway (NYSE:BRK.A) chairman and CEO, Warren Buffett, put out 

his annual letter to shareholders which has become a bit of a must-read 

among the investment community.  He talked about all kinds of issues and we 

sat down with him in a wide-ranging interview, covered everything from the 

markets to the economy to Berkshire`s businesses, but we started with the 

news of the day, and that`s Berkshire Hathaway`s 26.7 percent investment in 

Kraft (NYSE:KFT) Heinz, and the hard times that the consumer products 

company has fallen on.  

WARREN BUFFETT, BERKSHIRE HATHAWAY CEO:  I was wrong in a couple ways on 

Kraft (NYSE:KFT) Heinz.  I think we talked, the Glide luncheon time, about 

the packaged goods, brands losing some ground against the retailers.  The 

packaged goods companies are always in a struggle with retailers.  Our 

family had a grocery store for a hundred years and we were always — then, 

we didn`t have much bargaining power.  

But the really strong brands, they can go toe to toe with Walmart or Costco 

(NASDAQ:COST) or whomever it may be, but the weaker brands tend to lose 


QUICK:  There was a Federal Reserve out on Friday that suggested that GDP 

for 2018 is probably going to come in slightly below 3 percent.  What do 

you think the economy is doing right now, just based on your businesses, 

based on the receipts you`re seeing, the companies that you track that you 

have major shares in?

BUFFETT:  Right now, just based on the monthly statements I get and in some 

cases, I get other data in between, but overall, things are a little 

better.  I mean, the rate of improvement has tapered, but it certainly 

hasn`t flattened.  Now that can change next month.  

QUICK:  For NIGHTLY BUSINESS REPORT, I`m Becky Quick in Omaha, Nebraska.  


HERERA:  Now when it comes to Apple (NASDAQ:AAPL), Mr. Buffett says he`s 

not buying more of the stock at these levels, but he`s not selling them 

either.  And he told Becky that he would add to his position if the shares 

got cheaper.  Today, the stock hit a 12-week high, closing up a fraction to 


It is time to take a look at some of today`s upgrades and downgrades.  

PayPal was downgraded to neutral from buy at Buckingham Research.  The 

analyst cites short-term challenges, including concerns around its Venmo 

business, and the lost of eBay (NASDAQ:EBAY) as a partner.  The price 

target is $99.  The shares closed at $96.70, up a fraction, and touched a 

52-week high during the trading session.  

Norwegian Cruise Line was upgraded to outperform from neutral at Macquarie.  

The analyst cites strong advance ticket sales as well as the potential for 

a dividend in the second half of the year.  The price target is $65.  

Norwegian closed up 1 percent to $55.94.

Microsoft (NASDAQ:MSFT) was added to the best ideas list over at Wedbush.  

The analyst cites major cloud opportunities in the future based on recent 

field checks.  The price target is $140 and the firm has an outperform 

rating on the stock.  Shares today closed up a bit to $111.59.  

Cronos Group was initiated with an underperform rating and new coverage at 

Jefferies.  The analyst says there`s little to get excited about the stock 

other than Altria`s investment.  The firm adds that the market has gotten 

ahead of itself.  Cronos closed down today more than 7.5 percent at $20.25.  

Still ahead: the futuristic technologies that are almost realities.


HERERA:  Hotel inventories increase by the most in more than five years in 

December.  That increase suggests that goods are piling up, which could 

represent a slowdown in demand.  According to the Commerce Department, 

inventories rose 1.1 percent, which was above forecast.  This was a delayed 

release due to the partial government shutdown.  

Federal Reserve chairman Jerome Powell is scheduled to deliver the central 

bank`s semiannual monetary report to Congress tomorrow.  But he`s no 

stranger to the halls of Congress.  

Ylan Mui reports on what`s been happening behind the scenes.  





Federal Reserve is only required to appear before Congress four times a 

year, but since taking office a year ago, Powell has been on a Capitol Hill 

charm offensive. 


COMMITTEE:  He`s much more direct in answering questions, much more 

regularly engaged in the Hill conversations.  

MUI:  Ninety-eight personal phone calls or meetings with lawmakers, four 

times the amount of Janet Yellen in her first year.  He`s reached out to 

rank-and-file members and to party leaders, but not as many Democrats as 

Republicans who controlled both chambers of Congress at the time.  

The heads of the committees that oversee the Fed got special attention, 

more than 20 individual contacts with those lawmakers.  


CHAIRMAN:  I have Chairman Powell knows that his job is going to be easier 

the more that Congress understands what he is doing to fulfill his remit of 

price stability and full employment.  

MUI:  The Fed could certainly use some friends in Washington.  


raised interest rates a little bit because we are doing so well.  I`m not 

happy about that.  

MUI:  So unhappy that the president considered firing Powell.  

POWELL:  Thank you very much, Mr. President, for the faith that you have 

shown in me.  

MUI:  Even though Trump nominated him for the job.  

But getting rid of Powell might not be so simple, especially when he`s 

built up a bank of goodwill on Capitol Hill.  

UNIDENTIFIED MALE:  Thank you for a phone call the other day.  

SEN. BOB CORKER (R), TENNESSEE:  We appreciate some of the transparency 

efforts that you have put forth.  

REP. STEVE STIVERS (R), OHIO:  I know you were in my office.  You`ve been 

to a lot of our offices.

MUI:  His record is six meetings in just one day, a Democrat and five 

Republicans, including some of the very same lawmakers who will question 

him this week.  

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


HERERA:  A big quarter for Etsy.  That`s where we begin tonight`s “Market 


The online marketplace for handmade and custom goods reported better than 

expected earnings and revenue.  The CEO says the company benefitted from 

improvements to its search function and expanded marketing.  The number of 

active sellers at the end of the fourth quarter was up about 10 percent 

from the prior year and the number of active buyers increased 20 percent.  

Shares were volatile in initial afterhours trading.  They ended the regular 

session up 4 percent.  

Also after the bell, Shake Shack beat on its results but said full year 

revenue would be below expectations.  Along with earnings, the company also 

detailed its expansion plans.  The burger chain said it plans to open up to 

40 new restaurants this year in the U.S.  

And with that, shares were all over the place in after hours.  They closed 

the regular session down more than 1 percent to $52.25.  

Goodyear director Werner Geissler bought more than $600,000 worth of the 

company`s stock earlier this month.  According to Barrons, it`s the largest 

open market purchase by a Goodyear insider in 15 years.  The shares rose 

almost 4 percent to $20.08.  

California utility PG&E scrapped plans to give $130 million in proposed 

bonuses to its employees.  This comes after victims of the California 

wildfires protested, saying the workers don`t deserve to be rewarded for 

good performance.  PG&E filed for bankruptcy in January.  The shares were 

down a fraction to $18.65.  

Qualcomm (NASDAQ:QCOM), the world`s biggest supplier of mobile phone chips, 

is telling investors that it expects to benefit from the rollout of 5G 

networks.  Its chips will supply the 5G connectivity for cars, PCs, and 

home broadband.  5G as we have explained will feature higher speeds than 

the current 4G networks, and that was just one of the topics at the Mobile 

World Congress, an annual conference that attracts heavy hitters from the 

wireless industry.  

Jon Fortt is covering the event for us from Barcelona, Spain.  



foldable phones, all grabbing attention at Mobile World Congress in 

Barcelona.  Some of tech`s power players are positioning themselves for a 

surge in spending on faster, more power efficient networks, hoping for a 

once in a decade opportunity to pull ahead of rivals.  With U.S. carriers 

lighting up the first citywide mobile 5G networks this year, the business 

opportunity for tech heavy weights like VMware is finally real.  

PATRICK GELSINGER, VMWARE CEO:  I really see to 2020 as where it`s going to 

happen.  Right now, the national anthem is playing.  Next year, the game 

gets started.  

FORTT:  VMware is offering technology to help service providers transition 

to 5G.  Meanwhile, device makers like Huawei and Samsung are already 

rolling out 5G phones.  

Geopolitics looming in the background of this year`s show.  Intel`s Bob 

Swan said the sooner those clouds clear, the better.  

BOB SWAN, INTEL CEO:  Well, I think we`re all excited by the progress that 

seems to be made in the discussions between the U.S. and China, because we 

think global trade is good for the industry in particular.  

FORTT:  But for so many companies gathering here in Spain, those 

opportunities depend on the 5G networks actually getting built — tower by 

tower, as quickly as possible.  

Ericsson CEO said in the U.S., a tight labor market is making that a 


BORJE EKHOLM, ERICSSON CEO:  We`re probably one of the largest trainers of 

tower crews in North America, actually.  But what we see now is that the 

tower crews are the limiting capacity to actually modernize faster.  

FORTT:  A good economy will help consumers afford gadgets like those 

foldable phones, both more than $1,900, when 5G is ready.  But until then, 

it`s a potential head wind.  

For NIGHTLY BUSINESS REPORT, I`m Jon Fortt, in Barcelona. 


HERERA:  Coming up, the motorcycle industry enters the electric era. 


HERERA:  Here`s a look at what to watch for tomorrow.  As we reported, the 

Fed chair, Jerome Powell, will be on Capitol Hill to testify on the state 

of the economy.  Housing will be in focus with the release of housing 

starts, the S&P Case Shiller home price index and earnings from Home Depot 

(NYSE:HD).  And the Senate Finance Committee hosts a hearing on drug 

prices.  That`s what to watch for on Tuesday.  

Bank of America (NYSE:BAC) says it will no longer use the Merrill Lynch 

Brand for its investment banking group.  It also plans to gradually retire 

the U.S. trust name to become Bank of America (NYSE:BAC) private bank.  The 

move is part of CEO Brian Moynihan`s one company strategy.  Bank of America 

(NYSE:BAC) acquired Merrill Lynch a decade ago during the financial crisis.  

It purchased U.S. trust from Charles Schwab in 2006.  

The head of the European Union is urging British Prime Minister Theresa May 

to delay the U.K.`s exit from the E.U., which is scheduled for the end of 

March.  Donald Tusk said that would be a, quote, rational solution given 

the political situation and the lack of a Brexit strategy.  But May says 

the delay will not solve the impasse in parliament and that a timely exit 

is within reach.  


THERESA MAY, BRITISH PRIME MINISTER:  We have it within our grasp, as I 

just said, I`ve had a real sense from the meetings I`ve had here, 

conversations I`ve had with E.U. leaders in recent days, a real sense that 

we can achieve that deal.  It`s within our grasp to leave with a deal on 

the 29th of March and that`s where all my energies are going to be focused.  


HERERA:  Meantime, the head of Britain`s opposition labor party said he 

could back a second referendum if his party won power.  

The Treasury Department has announced new sanctions against Venezuela.  The 

sanctions target the governors of four Venezuelan states who are connected 

to embattled President Nicolas Maduro`s government.  In a statement, the 

Secretary Treasury Mnuchin said these individuals are standing in a way of 

severely n humanitarian assistance and are prolonging the suffering of the 

Venezuelan people.  

The energy markets are watching, of course, the situation in Venezuela very 

closely since it is a member of OPEC.  But today, the focus was on a tweet 

from the president who urged the cartel to lower the cost of crude, saying, 

quote, the world cannot take a price hike — fragile, end quote.  

The team comes after OPEC nations recently embarked on a fresh round of 

production cuts designed to support prices and today, the price of domestic 

crude settled 3 percent lower.  As oil prices fall, gasoline prices are on 

the rise nationwide.  According to the latest Lundberg survey, prices are 

up 10 cents over the past two weeks to $2.44 a gallon.  

But you wouldn`t need gas if you rode an electric motorcycle.  It`s a 

segment that motorcycle makers are focused on, especially as sales for gas-

powered ones decline.  And that means the competition in this relatively 

new market is heating up.  

Frank Holland is in New York tonight.



are revving up in 2019, racing towards the future of the industry, electric 

bikes.  Gas-powered motorcycle sales have been slumping the last three 

years as the age of the average rider has increased and their income 


Harley Davidson, the iconic and best-selling gas powered bike maker in the 

U.S., is offering an electric option in August.  It`s all part of an effort 

to attract millennials who just don`t want the hogs and choppers that baby 

boomers enjoy.  

SAM PASCHEL, ZERO MOTORCYCLES CEO:  This is the new bike.  

HOLLAND:  Today, Zero Motorcycles, the best-selling electric motorcycle 

maker, launching their newest model, the SRF.  

CEO Sam Paschel says the goal is to get millennials to see these bikes as 

electric vehicles.  

PASCHEL:  The concept of owning a two-wheel Tesla is really enticing to 

that group.  The millennials also tend to be the most comfortable with 

technology and innovation and change, and they`re the early adopters.  We 

have consumers that will stay with us as we continue to innovate and grow 

and adapt as a brand.  

HOLLAND:  A recent study by UBS found the top reasons people between 21 and 

34 years old would buy a motorcycle is for ease of transportation and 

environmental reasons.  Electric bikes are considered much easier to 

operate and don`t have emissions.  

PASCHEL:  We`re going to inspire a new generation of riders and we are 

really going to appeal to millennials.  

HOLLAND:  Price and performance are the two major metrics for motorcycles.  

The SRF will sell for about $19,000.  The Strike for Lightning Motorcycles 

will sell for about $13,000.  Harley`s LiveWire will sell for about 


PASCHEL:  The electric vehicle space has been on a tear.  We`re seeing 

double digit compound annual growth rates and this feeling of momentum and 

inevitability in the electric vehicle space.  

HOLLAND:  That momentum building while the interest in motorcycles is down 


And manufacturers are hoping that electric bikes like this one will be the 

spark that reverses that trend.  

For NIGHTLY BUSINESS REPORT, I`m Frank Holland in New York City.  


HERERA:  Before we go, here`s a look at the final numbers on Wall Street 

today.  The Dow Jones Industrial Average rose 60 points to 26,091.  

However, that is well off the highs of the trading session.  We were up 

almost 200 points at one point in the day.  The Nasdaq was up 26 points, 

and the S&P 500 added about three.  

And that is the NIGHTLY BUSINESS REPORT for tonight.  I`m Sue Herera.  

Thanks for joining us.  We`ll see you tomorrow.


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