ANNOUNCER: This is NIGHTLY BUSINESS REPORT
with Bill Griffeth and Sue
SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Economic puzzle. Americans
are earning more money, but they`re not spending it. And some economists
are trying to figure out why.
Change of plans. Amazon`s big push to expand may not be as clear-cut as it
Sideways drift. If you think the rally is about to slow, our market
monitor has some stocks he says are winners, no matter what.
Those stories and more tonight on NIGHTLY BUSINESS REPORT for this Friday,
Good evening, everyone, and welcome. Bill Griffeth is off tonight.
March is coming in with a roar. It wasn`t a huge rise today, but enough to
keep the mood upbeat. The S&P 500 closed above a key psychological level
for the first time in months. Today`s action extends the best two-month
start to a year for the Dow since 1987.
The blue chip Dow index rose 110 points to 26,026. The Nasdaq added 62,
and the S&P 500 was up 19, closing above 2,800. The Dow snapped nine
straight weeks of gains while the Nasdaq rose for its tenth consecutive
Investors spent much of the day trying to make heads or tails out of the
latest economic reports, which showed something you don`t often see.
Steve Liesman explains.
STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: History shows when
Americans have more money in their pockets, they tending to spend it. A
report issued Friday which had been delayed by the government shutdown
showed that incomes in December surged a healthy 1 percent. Good news
right in the heart of the holiday shopping season. Wages were up a strong
0.5 percent, which should have sent Americans to the mall with some
spending abandon, but they didn`t go, at least not according to the latest
Consumer spending fell by half a point, the worst December decline since
the financial crisis. With earnings now shaping (ph) savings by a wide
margin, the savings rate shot up, hitting 7.6 percent of disposable income,
the most in three years.
Did Americans suddenly turn frugal? Unlikely. Economists point to a
series of one-off factors that boosted income, including farm subsidies
from a trade battle, and a one-time special multibillion dollar dividend
made by VMware. And there`s skepticism, too, that consumer spending was
really that bad.
JOHN RYDING, RDQ ECONOMICS: The government was under partial shutdown so
we don`t know if that is messed up numbers. We`re either going to see
those retail sales number revised and an even stronger fourth quarter or
they`re going to get measured in January.
LIESMAN: It`s been a good rule of thumb: when Americans have more money in
their pockets, they spend more. December was probably an exception to that
rule, not a repeal.
For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.
HERERA: Auto sales had once been hot and all of that spending was an
important part of economic activity. But it appears as if demand may be
stalling out. February sales dropped compared to the same time last year.
It wasn`t a huge decline, but enough to have automakers and dealers asking
if sales of new cars and trucks is cooling off.
Here`s Phil LeBeau.
PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: Americans appear to be
tapping the brakes when it comes to buying now cars and trucks. February
sales slowed down compared to the same time a year ago, with Nissan, Toyota
(NYSE:TM) and Fiat Chrysler all reporting lower sales. Overall demand for
new cars and trucks is still relatively solid, largely because of several
For starters, consumer confidence remains high, and the country continues
to add jobs at a healthy clip. Mix in cheap gas with a surging stock
market and you see why many Americans are still comfortable buying a new
car or truck. Will auto sales top 17 million vehicles for a fifth straight
year? Well, it`s too early to tell, since January and February are low
Spring is when auto sales traditionally kick into a higher gear, so within
the next several weeks, we should have a pretty good idea if automakers and
auto dealers are expecting another year of solid sales.
Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago.
HERERA: We also learned today that the manufacturing sector grew at a
slower pace in February. According to the Institute for Supply Management,
new orders, production and employment all slipped. And it was that weak
data that caught the attention of the energy market, creating concerns over
the potential for weakening global demand for oil. And that sent the price
of domestic crude lower by 2 percent.
GRIFFETH: Optimism over trade with China also helped give stocks a lift
today. This after a Bloomberg report stated that U.S. officials are
getting a final agreement ready for President Trump and Chinese President
Xi to sign a bit later this month.
Eunice Yoon is in Beijing tonight.
EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: The March 1st tariff
deadline is delayed and President Trump and his administration are sounding
largely bullish that a trade deal can be done. At his press conference
Thursday in Vietnam, President Trump said the U.S. and China negotiators
were on their way to doing something special.
White House economic advisor Larry Kudlow told CNBC that the two sides were
on the verge of an historic deal, and Treasury Secretary Steven Mnuchin
said the document is 150 pages and very detailed. The buzz is that the
U.S. side is hoping to have the agreement ready so that President Trump and
President Xi can sit down for a summit as early as mid-March. Between now
and any Trump/Xi summit, President Xi will be preoccupied with a major
Chinese political event called the National Peoples Congress.
Huawei`s CFO is scheduled to have her extradition hearing next week.
President Trump has hinted that he could include Huawei in the trade deal.
At the same time, President Trump said in Hanoi that he could walk away
from any deal, including one with the Chinese. No official comment from
China on his remarks.
For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon in Beijing.
HERERA: Eunice just mentioned that extradition hearing of Huawei`s CFO.
Well, today, Canada said the U.S. has presented enough evidence to proceed
with that hearing. U.S. prosecutors have accused the executive of
violating U.S. sanctions on Iran. According to “Reuters”, China says it is
utterly dissatisfied with and firmly opposes Canada`s decision to allow the
Huawei extradition case to proceed.
The next budget battle to rattle investors is fast approaching and that is
debate over the debt ceiling. The treasury will begin using extraordinary
measures to pay its debts, buying time for Congress to act.
Ylan Mui has more from Washington.
YLAN MUI, NIGHTLY BUSINESS REPORT CORRESPONDENT: The national debt stands
at $22 trillion. And starting tomorrow, the Treasury Department can`t
borrow any more to pay the nation`s bills. That`s because the debt limit
comes back into force after Congress suspended it two years ago. They`ll
have to act again or risk defaulting on our debt.
No one knows exactly when treasury will run out of cash. The CBO projects
it could happen late this fiscal year or early in the next one. In a
letter to Congress, Treasury Secretary Steven Mnuchin said honoring the
full faith and credit of the United States is a critical commitment, and he
urged Congress to raise the debt limit.
But those negotiations have yet to begin in earnest on Capitol Hill.
REP. KEVIN MCCARTHY (R), CALIFORNIA: I think on a bipartisan level we
should sit down together and find a way that we can stop the spending
behavior of this government and actually curb where we could pay off our
MUI: To make things even complicated, the deadline for the debt ceiling is
smack in the middle of two other big fiscal fights — the deadline to fund
the government and prevent another shutdown and the deadline for avoiding
automatic spending cuts that would chop $125 billion out of the federal
SEN. PATRICK LEAHY (D), VERMONT: Unless we get a budget deal,
sequestration returns in fiscal year 2020. That would mean steep cuts in
programs that invest in America and support working families.
MUI: For now, the clock is ticking.
For NIGHTLY BUSINESS REPORT, I`m Ylan Mui in Washington.
HERERA: It is time to take a look at some of today`s “Upgrades and
American Airlines and Delta were downgraded to hold from buy at Deutsche
Bank. The analyst cites global economic headwinds. The price target for
American is $40 and $55 for Delta. American fell more than 2.5 percent.
Delta was down more than 1 percent.
Hertz was upgraded to equal weight from underweight at Barclays. The
analyst cites strength in rental car prices. The price target is $18. The
stock closed just above that level to $19.35.
A number of brokerages increased their price targets on the Gap (NYSE:GPS),
including the Telsey Advisory Group which has a $40 target on that stock.
This follows the decision by the Gap (NYSE:GPS) to split the company and
separate out Old Navy, something we told you about yesterday. Telsey rates
the stock an outperform. The shares rose 16 percent to $29.51.
So, will Gap`s decision to separate from its better performing businesses
become a trend setter for the other companies to follow suit on Wall
Joining us to talk about that is Mike Bailey, director of research with FBB
Welcome, Mike. Nice to have you here.
MIKE BAILEY, DIRECTOR OF RESEARCH, FBB CAPITAL MARKETS: Great. Thanks for
having me back.
HERERA: You make the point that when you split up the businesses, the two
companies or in this case several companies can really focus on their
separate businesses, both the pluses and the minuses.
BAILEY: Absolutely. I think that`s a really good thing about spin-offs.
So, you may have one company with a bunch of different businesses thrown
together. The companies figure out that it sometimes can be kind of a mess
and they say let`s split these up, let`s focus.
I think in some ways that helps in terms of the management`s time. So, the
CEO — the new CEOs can really focus and get their projects done.
Additionally you think about money. So, if you`ve got a big umbrella and a
bunch of companies there, you`ve only got so much money to sprinkle around.
So, if you`ve got that separated, you can do that in a better way, a little
So, in general, there are a couple of things we think that helps as
companies tend to break up.
HERERA: So do you think this will become a trend on Wall Street? If so,
are there companies that you think are likely candidates?
BAILEY: So, you know, in terms of thinking about spin-offs, these things,
we see spin-offs all the time. Sometimes they`re more in the headlines,
sometimes they`ll go away for a little while. We`re hearing a little bit
more about spin-offs these days but I don`t know that I`d call it a major
We would see tons of massive, sort of the opposite of spin-offs. You see,
you know, mergers happening all the time. Bristol Myers is buying Celgene
(NASDAQ:CELG) for $80 billion.
So we`re seeing both sides of it. Spin spin-offs will likely continue.
It`s tough to say if you`re going to see a big wave of them.
One factor that could lead to more spin-offs, if you look at interest
rates, if interest rates were to move up a lot, that would make it really
expensive for companies to do big merger deals and that might slow the
mergers down and you might see more spin-offs afterwards. There`s a few
things happening but you`ll probably see more but we don`t expect a massive
HERERA: Is it — or does it pertain more to areas that are struggling?
For instance, we know that the Gap (NYSE:GPS) was struggling for a while.
It`s in the retail sector. Retail is tough right now.
Is that type of atmosphere when a company is struggling in a difficult
niche? Is that when you tending to see more spin-offs or does it not
BAILEY: They`re all over the map. So you can see sometimes a company
where basically the entire business is challenged. If you look at Gap
(NYSE:GPS), you`ve got half the business or the Gap (NYSE:GPS) and Banana
Republic definitely struggling. Old Navy is doing better so you`ve got a
I think some of the best spin-offs we`ve seen is where you`ve got an older,
mature business that`s doing fine, doing OK, and they have a really great
exciting asset that`s buried, and they want to release that, sort of let
that, you know, go off on its own.
I don`t think we`re seeing that in the case of Gap (NYSE:GPS). So, that`s
something — we currently don`t own the stock — there`s other apparel
companies we prefer as opposed to it.
BAILEY: So I think they`re going to have some challenges.
HERERA: Mike, thank you so much.
BAILEY: Thank you.
HERERA: Mike Bailey with FBB Capital Partners.
Still ahead, speaking of splitting up, that same theme extends to Amazon
(BEGIN VIDEO CLIP)
SCOTT COHN, NIGHTLY BUSINESS REPORT CORRESPONDENT: It is a drama worthy of
an Amazon (NASDAQ:AMZN) prime video. New York jilted by Amazon
(NASDAQ:AMZN) tries to win the company back as its marriage to Virginia is
on the rocks. Meantime, Amazon`s own expansion plans are a mystery.
I`m Scott Cohn. We`ll have the story coming up on NIGHTLY BUSINESS REPORT.
(END VIDEO CLIP)
HERERA: The grocery industry got a bit of a surprise today. Amazon
(NASDAQ:AMZN) is reportedly making a big push into that business with plans
to open a dozen food stores in several cities. And you can see when the
news crossed midday. Kroger (NYSE:KR) shares fell sharply.
Deirdre Bosa has more on what Amazon (NASDAQ:AMZN) may be considering.
DEIRDRE BOSA, NIGHTLY BUSINESS REPORT CORRESPONDENT: Amazon (NASDAQ:AMZN)
may be getting deeper into the grocery business, a nearly $650 billion
market in the U.S. According to “The Wall Street Journal”, the e-commerce
giant is planning to launch a new chain of grocery stores, adding to its
portfolio of Whole Foods, cashierless convenience and delivery grocery
offerings. The report says that Amazon (NASDAQ:AMZN) is planning dozens of
these new stores across the country and the first one will open in Los
Angeles as early as the end of 2019.
Amazon (NASDAQ:AMZN) has been experimenting with online groceries for over
a decade. Its 2017 purchase of Whole Foods was a major step into the
brick-and-mortar format and it has further expanded its physical footprint
with Amazon (NASDAQ:AMZN) Go, a cashierless concept that now has 10
Amazon (NASDAQ:AMZN) declined to comment on the report, but shares of food
retailers like Sprouts Farmers Market, Kroger (NYSE:KR), Target (NYSE:TGT)
and Walmart, they all moved lower on the news and the threat of Amazon
(NASDAQ:AMZN) pushing further onto their territories. Whole Foods pricing
reputation has led to the nickname whole paycheck. Amazon (NASDAQ:AMZN)
has been lowering prices and offering discounts to prime members, but some
customers say that it hasn`t been enough.
A report says that the new stores are not designed to compete directly with
Whole Foods and they offer a wider variety of products.
For NIGHTLY BUSINESS REPORT, Deirdre Bosa, San Francisco.
HERERA; And when it comes to Amazon (NASDAQ:AMZN), New York isn`t giving
up on its second headquarters project despite the company`s decision two
weeks ago that it is pulling out of a deal in Queens. Meanwhile, protests
are growing in Arlington, Virginia, home to another part of the project.
In the balance is Amazon`s critical expansion plans, which no longer appear
as clear-cut as they once seemed.
Scott Cohn reports from a key Amazon (NASDAQ:AMZN) facility in silicon .
COHN: Amazon (NASDAQ:AMZN) needs to grow and it needs people. For now
they`re spread across 17 key locations across the country, like this
research campus where they develop new devices. HQ2 was supposed to let
Amazon (NASDAQ:AMZN) expand its footprint in a big way.
GOV. ANDREW CUOMO (D), NEW YORK: This is the largest economic development
initiative that has ever been done by the city or the state.
COHN: It hasn`t worked out that way. First, Amazon (NASDAQ:AMZN) had to
split the project between New York and Virginia. No one location had
enough workers. Then, protests in New York over incentives and housing.
Amazon (NASDAQ:AMZN) pulled out, emboldening activists in Virginia.
JON LISS, NEW VIRGINIA MAJORITY: David hit Goliath and Goliath ran out of
New York. And so, down here we might be David or a lot of Little Davids
and we think we`ve got a chance.
COHN: Now, New York sees an opening to win Amazon (NASDAQ:AMZN) back.
Governor Cuomo says he`s spoken to Jeff Bezos personally and dozens of
community leaders have signed on to an open letter in “The New York Times
Sure, opinions are strong in New York, sometimes strident. We consider it
part of the New York charm.
ALICIA GLEN, NEW YORK CITY DEPUTY MAYOR: The fundamental reasons why
Amazon (NASDAQ:AMZN) wanted to be here remain the same, right? It`s a
spectacular opportunity to build world class headquarters in a fantastic
COHN: Meanwhile, Virginia is doing its own damage control with Amazon
CHRISTIAN DORSEY (D), ARLINGTON, VA COUNTY BOARD CHAIR: We`re going to
find that magic space where our interests align with their values, with
their potential path for growth.
COHN: There is no sign that any of this is changing Amazon`s mind. For
now, the company plans to put those 25,000 workers who were going to New
York in its existing facilities like this one. But that in itself marks a
major scaling back of a project that once held an entire continent
For NIGHTLY BUSINESS REPORT, Scott Cohn, Sunnyvale, California.
HERERA: Walgreens shares caught a chill and that`s where we begin
tonight`s `Market Focus”.
The Dow component said its outlook is being clouded by drug reimbursement
headwinds as well as pressure from lower prices for generic medicines. But
one analyst said he`s encouraged by management`s move to cut costs.
Nonetheless, the stock fell more than 6 percent to $66.61, making it the
worst performing stock in the Dow today.
Customers spent more on sneakers at Foot Locker, helping that company
report strong sales in its most recent quarter. The retailer easily topped
Wall Street`s earnings estimates and said it`s looking to further improve
its margins. It also plans to close 165 stores this year. The shares
sprinted ahead, up about 6 percent to $63.57.
Tribune Media`s results beat expectations, helped by strong advertising
revenue during election season and higher carriage fees. Tribune is
getting acquired by broadcasting giant Nexstar Media Group for more than $4
billion. Shares rose slightly to $46.42.
Masco (NYSE:MAS) said it will explore strategic alternatives for its
cabinetry and window businesses. The businesses include well known brands
like KraftMaid and Merillat. The home improvement company says it plans to
complete the review by the end of June. Masco (NYSE:MAS) was up 6-1/2
percent to $40 a share.
And Puma Biotech beat earnings and revenue estimates. The drug company
also issued better-than-expected full year guidance. The strong results
were helped by sales of its breast cancer drug, which were up more than 200
percent since last year. The shares rose nearly 40 percent to finish at
And it`s time now for our weekly market monitor who likes companies he says
should hold up if we get a pullback or even a sideways stock market.
Joining us is Bill Stone, chief investment officer with Avalon Advisers.
Good to see you again, Bill. Welcome back.
BILL STONE, CHIEF INVESTMENT OFFICER, AVALON ADVISERS: Thank you.
HERERA: Let`s start with your first pick, Walt Disney (NYSE:DIS)
Companies. I have to say I was there last week. The parks definitely have
pricing power and they were really, really crowded.
STONE: So you really played into it. The themes are really one is that
people really are valuing experiences over goods so that`s it, right, going
to the parks. The second one, which I don`t think people think about as
much, is really the cord-cutting idea.
So, Disney (NYSE:DIS) has the content to go direct to the consumer over the
long run. I think that`s where things go. So, obviously everyone thinks
about the Disney (NYSE:DIS) movies, et cetera, but also think about ABC,
think about ESPN. They`re also in the process of acquiring some of those
properties from 21st Century Fox. So they are going to be in a position to
really offer that direct.
HERERA: And they offer a dividend as well.
STONE: Yes. So I think it`s a really interesting — you know, there`s
some worries about that acquisition, so I think it`s a really interesting
piece going forward.
HERERA: OK. Eli Lilly (NYSE:LLY), they spun off their animal health
business but you say they have a diversified set of drugs and very strong
ones as well.
STONE: Yes. Obviously another theme, we know the graying of America,
frankly the graying of the globe, there is — you know, it`s a guarantee
we`re going to have more demand for drugs.
The other good thing to know about Eli Lilly (NYSE:LLY) is they have very
little patent expirations coming up here soon. The second part is even
some of their drugs when they come off the patent are very difficult to
take generic because the insulins are very hard to recreate.
The last piece is they have a very good pipeline, particularly they have a
couple cancer drugs. Again, you have to get through the testing and get
through the FDA, but if they do, there`s some real blockbuster upside to
HERERA: Now, the last pick is ExxonMobil (NYSE:XOM), and it`s been an
underperformer if you value it against the S&P for some time now. Why do
you like that stock?
STONE: Yes. So, I think one thing is energy as a whole has just been a
dog for years. So what has changed, right? I think what has really
changed is particularly for an ExxonMobil (NYSE:XOM), and I`ll talk about
them in particular, they have changed their business to make more money at
a lower oil price. They also focused on actually making money rather than
just producing oil. And that obviously as a shareholder means a lot.
Lastly, that also means that they can pay a very large dividend. So you`re
talking a more than 4 percent, like 4.2 percent dividend yield which I
think will grow over time.
HERERA: OK. Bill Stone, thank you so much.
STONE: Thank you.
HERERA: Bill is with Avalon Advisers. To read more about his picks, head
to our website, NBR.com.
Coming up, the space race is ready for liftoff.
(BEGIN VIDEO CLIP)
MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: From launch pad 39A
at the Kennedy Space Center, I`m Morgan Brennan. It is a key test launch
for SpaceX but also for America. We`ve got that story coming up on NIGHTLY
(END VIDEO CLIP)
HERERA: Here`s a look at what to watch for next week.
On Tuesday, China`s National Peoples Congress gets under way. Investors
will be looking for any economic policy changes.
On Wednesday, Target (NYSE:TGT) reports earnings, which will provide a
fresh look into the state of retail and the health of the consumer.
And on Friday, the government releases its monthly employment report.
And that`s what to watch for next week.
Wells Fargo (NYSE:WFC) officials have reached a record settlement with
shareholders over the bank`s fake account scandal. The deal requires
insurers for current and former executives to pay $240 million to the bank.
It resolves claims that executives breached their fiduciary duties by
failing to stop the creation of the bogus accounts which were made without
customer authorization. The officials denied any wrongdoing.
The ride-hailing company Lyft has filed to go public. The firm is looking
to raise as much as $100 million in its initial public offering, though
that amounting could be changed based on investor demand. It will list on
the Nasdaq under the ticker symbol LYFT.
In the filing, Lyft reported it lost more than $900 million last year on
more than $2 billion in revenue. Lyft`s IPO is expected to be among the
first of a wave of public offerings this year.
And finally tonight, a story that is literally out of this world. SpaceX
is readying for a launch that could usher in a new era of space
Morgan Brennan is at the Kennedy Space Center in Florida.
BRENNAN: It`s a critical test that would mark a major milestone for
commercial space flight and for America. SpaceX`s demo 1 launch for NASA.
If all goes as planned, it will be the first time a commercially built
spacecraft designed to carry humans will launch into space, and visit the
International Space Station and do so for the government.
WILLIAM GERSTENMAIER, NASA HUMAN EXPLORATION & OPERATIONS ASSOCIATE
ADMINISTRATOR: We`re doing things that are really risky that most normal
human beings don`t do. And the designs and at complexity of what we have
to do, we`re strapping human beings on top of rockets with millions of
pounds of thrust and hurling them into orbit to go attach to a space
station to do world-cutting, world researching. That isn`t trivial.
BRENNAN: The last time astronauts launched from American soil was from
this very same launch pad, 39A, in 2011. Since the space shuttle program
ended, the U.S. has not had the capability to send humans into orbit.
Instead, we have paid large sums to the Russians to do it for us.
To address that, NASA awarded two contracts, one to SpaceX to develop the
crew-driving capsule for $2.5 billion. The other to Boeing (NYSE:BA) for
just over $4 billion for its CST 100 Starliner. SpaceX and Boeing
(NYSE:BA) own and operate the capsules and NASA will lease them for
It`s a different business model than the past, and one that speaks to how
crucial the private sector has become in this new space race.
HANS KOENIGSMANN, SPACEX MISSION ASSURANCE VP: Human space flight is
basically the core mission of SpaceX. So, we`re really excited to do this.
There`s nothing more important for us than this endeavor. And we really
appreciate the opportunity from NASA to actually do this and have a chance
to fly up to the station.
BRENNAN: This mission won`t have people on board, but SpaceX is the first
to get this far in the testing process.
Boeing (NYSE:BA) is expected to do its unmanned flight next month. It all
means the spacecraft could be carrying astronauts as soon as this summer.
But first, things need to go right tonight. SpaceX will launch its capsule
with a Falcon IX rocket as it begins a week-long journey to the space
station and back.
For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan at the Kennedy Space Center
HERERA: Here`s a look at the numbers on Wall Street. At the close, the
Dow rose 110 points, the Nasdaq added 62, S&P 500 was up 19. The Dow
snapped nine straight weeks of gains while the Nasdaq rose for its tenth
And that is NIGHTLY BUSINESS REPORT for tonight. I`m Sue Herera. Thanks
for joining us. Have a great weekend. We`ll see you Monday.
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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