Nightly Business Report – March 4, 2019

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

Griffeth.  

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR:  Monday blues.  Stocks fall to 

start the week even though there`s increased optimism over trade, an issue 

that has pushed the market higher in recent months.  

U-turn.  Ten years of rock bottom rates are a thing of the past and that`s 

making it more expensive to buy a car.  

Pay day.  Why this is the time of year many Americans feel like they`ve hit 

the jackpot.  

Those stories and much more tonight on NIGHTLY BUSINESS REPORT for this 

Monday, March 4th. 

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

Stocks fell to start the week.  There was some optimism early on that the 

market would rise on the prospect for a trade deal after reports that the 

U.S. and China were slowly getting closer to an agreement.  It is that same 

hope that has been propelling the market higher for months, but for 

whatever reason today, it simply didn`t resonate and stocks dropped.  The 

Dow Jones Industrial Average dropped 206 points to 25,819.  The Nasdaq fell 

17 and the S&P 500 was down 10.  

Bob Pisani has more on today`s decline.  

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT:  An early rally quickly 

fizzled out with the Dow falling more than 400 points.  It was the biggest 

one-day decline in several weeks.  

Why the drop?  You know, it`s tough to pin the drop on any one theme.  This 

is the kind of action that indicates buyer exhaustion.  You know, after 

all, we had a big rally, partly on trade talk hopes and now that a deal is 

looking more and more likely, stocks took a breather.  Call it sell on the 

news if you like.  

Trade-related groups like technology and industrials were in the red. But 

we also saw names not associated with trade like retail stocks, which were 

strong last week, and health care also lagged on the session today.  

Software stocks like Salesforce also faded and transportation stocks 

tumbled for a seventh straight day.  Airline stocks in particular like 

Delta were weaker.  And again, health care lagged the big pharmaceutical 

names like Pfizer (NYSE:PFE) were all down.  

So, the big issue now is how much more room does the market have to run on 

just the Federal Reserve is going to raise interest rates history this 

year, and on the hope for China trade deal.  Remember, global growth is 

still weak and a stronger dollar is also a concern out there.  

The sectors that have seen the biggest cuts to their earnings estimates so 

far this year are energy, materials and technology.  That`s no surprise.  

Materials and technology are both closely tied to trade uncertainty.  

Now the key to getting stocks back up towards historic highs is to stop 

that downward earnings revision trend that we`ve been seeing for several 

months now.  

And for that we just need to see more stability on the global markets 

front.  

For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock Exchange.  

(END VIDEOTAPE)

HERERA:  And now to trade and a few new developments that could bring the 

world`s two largest economies within striking distance of a deal after 

months of hot and cold discussions.  

Kayla Tausche has the details.  

(BEGIN VIDEOTAPE)

KAYLA TAUSCHE, NIGHTLY BUSINESS REPORT CORRESPONDENT:  A potential detente 

in the U.S.-China trade war could be just weeks away, according to three 

sources close to the situation.  The two sides continue to negotiate via 

video conference to reach an agreement on outstanding issues ahead of a 

planned summit for late march at the president`s South Florida resort.  

The deal as it looks now would see China buy more than a trillion dollars 

in U.S. goods over six years.  China will approve a new law related to 

intellectual properties for foreign companies operating there.  There would 

be broad agreement and several macro economic buckets and an agreement to 

keep talking.  It`s through that dialogue that the U.S. would try to hold 

China accountable and if President Xi doesn`t follow through then the U.S. 

could re-introduce tariffs with no retaliation.  China sees that dynamic as 

too harsh.

While Democrats here in the U.S. say President Trump is rushing a deal 

that`s not harsh enough after walking away from talks with North Korea last 

week.  

REP. DAN KILDEE (D), MICHIGAN:  I think the president`s too anxious to sign 

a deal.  His failure in Hanoi I think does create a context where he`s 

looking to put that signature on something and I`m afraid that it will fail 

to deal with the bigger structural problems that we face.  

TAUSCHE:  Many Republicans acknowledge the importance of solving these 

long-term issues but are willing to give him the benefit of the doubt for 

now.  

FORMER GOV. CHRIS CHRISTIE (R), NEW JERSEY:  The right move is for him to 

get the best deal he can get at this time.  This is not going to end it.  

If it ends what our continued, kind of contentious trade relationship with 

China.  It`s just going to bring the temperature down, I suspect.  

TAUSCHE:  And the deal would take a lot of the heat off.  The U.S. would 

remove a majority of the tariffs it`s placed on China and China would do 

the same.  

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

(END VIDEOTAPE)

HERERA:  As negotiators work on a trade deal, Chinese officials are 

gathering for their major annual parliament try meeting called the National 

People`s Congress.  The meeting comes as China battles an economic 

downturn.  Investors hope this will shed some more light on the health of 

the world`s second largest economy.  

Eunice Yoon is in Beijing.  

(BEGIN VIDEOTAPE)

EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT:  At the national 

people`s Congress on Tuesday, Beijing`s leaders are expected to acknowledge 

the slowing economy lowering the growth target to a range of 6 to 6.5 

percent.  Investors are also expecting the government to expand its budget 

deficit.  But what`s also significant for foreign investors is the new 

foreign investment law.  This will be the only major law to pass this year 

and it`s meant to even the playing field.  

It`s a way for China to address the trade war with the U.S.  The Chinese 

believe that this new foreign investment law is significant, ending three 

joint venture laws barring forced technology transfers, preventing a state 

from illegally setting market access and allowing foreign firms to help set 

product standards.  The problem is that as with many rules in China, they 

look great on paper but can they be applied evenly and fairly?  

The best thing one business association official could say about to me was 

that at least it`s not negative.  

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

(END VIDEOTAPE)

HERERA:  New Jersey governor is doubling down on raising taxes on that 

state`s millionaires.  According to reports, Phil Murphy will outline a 

proposal in his second state of the budget address tomorrow.  The measure`s 

new tax would hit those with incomes over $1 million and would bring in 

about $450 million for the state.  

Well, socialism has become a recent buzz word in politics.  In a recent 

poll, voters prefer capitalism over socialism, yet they also want the 

federal government to do more, not less.  

John Harwood joins us tonight from Washington.  

Good to see you as always, John.  

So let`s start with the term socialism.  What does the NBC/”Wall Street 

Journal” poll tell us about that?  

JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT:  What it tells us, 

Sue, is that by almost a 3 to 1 margin, Americans say they have a negative 

view of socialism.  Just 18 percent view that term positively.  Fifty 

percent view it negatively, which is, of course, the mirror image of how 

they feel about capitalism.  

HERERA:  Yes, what does it tell us about the appeal of capitalism?  

HARWOOD:  Well, the 50 percent support or favorable view of capitalism is 

down somewhat from what other polls have found in recent years, so it 

suggests that maybe as people have struggled with stagnant wages over the 

last several years, especially people in the working and middle classes, 

that the appeal of capitalism, the shine is off a little bit.  But, still, 

it`s a clear preference over socialism and all that explains why it is that 

Republicans are eager to slap that label on to what Democrats are talking 

about and Democrats, with the exception of people like Bernie Sanders and 

maybe Alexandria Ocasio-Cortez and the House of Representatives tend to 

say, no, I`m not a socialist, I`m a capitalist.  

HERERA:  All right.  So, how was this going to play out?  Who has the upper 

hand here?  

HARWOOD:  Well, on the labeling, Republicans have the upper hand.  However, 

you`ve got to temper that with the idea that if you look at this poll, 55 

percent of Americans say they want government to do more to help them.  

Well, that`s another way of describing what Republicans are calling 

socialism.  People like things like Social Security and Medicare and the 

desire for more government assistance is why Democrats go out on the stump 

and talk about —  

HERERA:  Right.

HARWOOD:  — free college and Medicare-for-All and more infrastructure.  

People want some assistance.  

HERERA:  On that note, John Harwood in Washington.  Thanks, John.  

HARWOOD:  You bet.  

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

Kraft (NYSE:KFT) Heinz was upgraded to equal weight from underweight at 

Morgan Stanley (NYSE:MS).  They analyst cites the company`s reasonable 2019 

profit goals following its recent stock plunge.  The price target is $35.  

The stock rose 2.5 percent to $33.23.  

Bed Bath & Beyond (NASDAQ:BBBY) was downgraded to underweight from equal 

weight a Barclays.  The analyst says he`s disappointed with the company`s 

broad restructuring.  The price target is $13.  That stock fell 5 percent 

to $15.80.  

Dillard`s was downgraded to underweight from neural at JPMorgan (NYSE:JPM).  

The analyst cites rising inventory levels and a 25 percent rise in the 

stock year to date.  The price target is 57.  The stock fell about 5 

percent to $71.47.  

Still ahead, are you in the market for a car?  Well, you might be in for 

some sticker shock.  And not only because of the car`s price.

(MUSIC)

HERERA:  OxyContin maker Purdue Pharma is reportedly exploring bankruptcy.  

According to multiple reports, the filing would address potentially 

significant liabilities from thousands of lawsuits alleging that company 

contributed to the opioid crisis.  Purdue has denied the allegations, 

saying the FDA approvals for its opioids carried warnings about the risk of 

misuse.  More than 1,000 lawsuits have been filed against Purdue and 

others.  

SpaceX`s capsule had a successful docking at the International Space 

Station over the weekend.  As we reported Friday, the spacecraft is built 

to carry U.S. astronauts into orbit starting later this year.  The mission 

is considered a major milestone for space exploration since it`s part of 

NASA`s push to resume astronaut launches from U.S. soil from the first time 

since 2011.  SpaceX was founded by Elon Musk, who also founded Tesla.

And speaking of Tesla, the electric car maker will unveil its Model Y SUV 

next week.  In a series of tweets, Musk said it would cost 10 percent more 

than the Model 3 and have slightly less range for the same battery.  

Separately, regulators are reportedly investigating two fatal accidents 

involving Tesla vehicles, both in Florida.  One involved a Tesla Model 3, 

the other a Model S.  According to reports, the focus of the probes are on 

the flammability of the vehicle`s batteries and Tesla`s drive assistance 

feature.  

Well, after years of paying relatively low interest rates on auto loans, 

car buyers are now doing a double take.  Interest rates have risen to their 

highest levels in a decade.  

Phil LeBeau has more on higher rates and the slowdown in showroom sales.  

(BEGIN VIDEOTAPE)

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT:  It`s getting more 

expensive to buy a new car or truck.  Not only are automakers raising 

prices on vehicles, the interest rates on auto loans have soared to a 10-

year high.  Last month, the average rate for a new car auto loan was 6.26 

percent, up more than 1 percent compared to a year ago and well above the 

average rate from five years ago.  

JESSICA CALDWELL, EDMUNDS:  Some coming back into the market after maybe 

years ago paying a 1.9, which was quite common, now they`re up to a 5 

percent, that is a big monetary difference.  So we`re talking, you know, 

quite a bit — thousands of dollars over the life of the loan.  

LEBEAU:  Why is it costing more to borrow money for an auto loan?  One 

factor is the Federal Reserve raising interest rates, which in turn is 

pushing up rates on all types of loans.  It`s also forcing automakers to 

pull back on offers for zero percent financing.  

Meanwhile, both dealers and lenders are much more selective about who 

qualifies for the lower rate loans.  Even though buyers are being forced to 

pay more, it`s not stopping them from choosing pricier models of trucks and 

SUVs.  

CALDWELL:  People right now are ponying up and essentially still continuing 

to buy these cars although we do think that there is some caution ahead in 

terms of how long this can last, because we are starting to see sales slow 

down slightly, as people are kind of getting a bit of a sticker shock.

LEBEAU:  As auto loan rates have increased, it`s forced a growing number of 

people to consider leasing instead of buying a new model.  While the 

interest rates may not be much different, generally speaking, those who 

lease pay about $100 less per month than those who buy a new vehicle with 

an auto loan.  

Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago.  

(END VIDEOTAPE)

HERERA:  Eli Lilly (NYSE:LLY) is cutting the price of a key drug by 50 

percent.  That`s where we begin tonight`s “Market Focus”.  

The drug company will release a generic version of its popular diabetes 

medicine Humalog.  And that new product will target patients who pay for 

their insulin out of pocket.  Eli Lilly (NYSE:LLY) says it will continue to 

sell its branded version at the regular price.  Shares fell 1 percent to 

$127.46.  But they did hit a one-year high early in the session.  

Biogen is saying that it will buy gene therapy company Night Star 

Therapeutics for about $800 million.  Night Star is focused on therapies 

for inherited eye diseases.  Biogen is hoping to tap into the potentially 

lucrative gene therapy market.  Biogen fell 2 percent to $327.26.  But 

Night Star soared 66 percent to $25.18.  

Health care services group says that it cannot file its 10-K for 2018 yet 

because the SEC is looking into its earnings per share calculations 

practices.  The company which provides housekeeping and dining services to 

the health care industry received a subpoena last March from the SEC in 

connection with this issue.  10-Ks are filed annually and they contain 

company`s financial information.  The shares were down 13 percent to 

$32.78.  

AT&T (NYSE:T) is restructuring its Warner Media Division which “The Wall 

Street Journal” says will involve, quote, significant layoffs.  The plan 

includes a revamp of CNN`s digital operations and a unit called Warner 

Entertainment, which among others combines HBO and Turner`s entertainment 

operations.  AT&T (NYSE:T) shares were down more than 2-1/2 percent to 

$29.98.

Well, every retailer would love to look into the future to stay just one 

step ahead of new trends.  Today, the industry got its chance to show off 

what it thinks the future will hold and the years ahead are dominated by 

technology.  

Courtney Reagan is in Las Vegas tonight.  

(BEGIN VIDEOTAPE)

COURTNEY REAGAN, NIGHTLY BUSINESS REPORT CORRESPONDENT:  Here at Shoptalk 

in Las Vegas, hundreds of retailers, brands, tech startups and investors 

are coming together to bet big on the future of an industry in a period of 

rapid transformation.  The tech presentations and exhibitions are among the 

most attended because it`s not enough to just have the best products.  

Retailers have to serve shoppers better wherever and however they want to 

shop.  

It`s leading established retailers to start to talk to startups for options 

for services like faster delivery, easier returns and augmented reality 

shopping.  

SIMEON SIEGEL, NOMURA INSTINET SR. ANALYST:  It feels like this is a giant 

demo day where all these tech companies, at various levels of funding, are 

pitching the retailers and brands how they can make them better.  

REAGAN:  Bob`s discount furniture announcing new augmented reality 

technology and partnership with Marxent, allowing consumers to tryout new 

furnishings virtually.  Macy`s (NYSE:M) is already working with a startup 

for virtual reality furniture shopping and says it`s increasing the average 

order value by up to 50 to 60 percent.  

If retailers can get consumers to shop online and in store, the total spend 

increases.  Nordstrom (NYSE:JWN) forecasts shoppers that do both will spend 

4 to 11 times more than shoppers that use just one.  It`s part of the 

reason why the department stores are experimenting with physical ecommerce 

hubs that also offer services that can`t be done online.  

Nordstrom (NYSE:JWN) local stores in Las Vegas don`t have inventory like 

its typical locations, but instead offer a point for online order pickup, 

alterations and returns.  Co-president Erik Nordstrom (NYSE:JWN) hopes 

bridging consumer`s digital and physical experiences will ultimately make 

shopper`s lives easier, increasing loyalty and spending.  

ERIK NORDSTROM, NORDSTROM CO-PRESIDENT:  We just keep learning again and 

again and I guess do what the customer wants.  If the customer wants to get 

in and out quickly, and there`s a more convenient way of doing that, it 

does pay off for us.  

REAGAN:  Meeting consumer`s desire for instant access, around the clock 

accessibility and fast turn around all now the norm has large retailers 

racing to fill that need and quick.  

NORDSTORM:  We look in hindsight, we don`t think the strategic choices or 

direction has been off.  We think we`ve been too slow.  We think we need to 

be more agile.  

REAGAN:  And if there`s one thing that tech startups offer that bigger 

retailers need, it`s speed.  

For NIGHTLY BUSINESS REPORT, I`m Courtney Reagan in Las Vegas, Nevada.  

(END VIDEOTAPE)

HERERA:  And if you`re planning on going shopping, you are not alone.  The 

average American family spends a lot more this time of year thanks to Uncle 

Sam.  

Steve Liesman explains.  

(BEGIN VIDEOTAPE)

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT:  New Jersey resident 

James Zegular counts on his annual tax refund and this year, he knows 

exactly what he`s doing with his check.  

JAMES ZEGULAR, TAX REFUND RECIPIENT:  Last year, we went to (INAUDIBLE).  

This year, we`re going Miami.  

LIESMAN:  Zegular as it turned out is like a lot of Americans.  A new study 

by the JPMorgan (NYSE:JPM) Chase Institute looks at anonymous data from the 

spending of millions of Chase credit cardholders and found the tax refund 

is the biggest pay day of the year for nearly 1/3 of households.  

DIANA FARRELL, JPMORGAN CHASE INSTITUTE:  We were most surprised to learn 

that the tax refund is the mechanism which people step up year to year.  

And, you know, most people think of it as a year end pay increase or 

otherwise.  But what we find, it`s really this tax refund where they reset 

and they rebalance their spending.  

LIESMAN:  They do more than rebalance.  The study found that spending 

spikes 74 percent in the week after the check arrives in the mail from 

Uncle Sam.  The average refund equal to six weeks` salary for the average 

recipient.  

JULIA POLLOCK, TAX REFUND RECIPIENT:  I put some in savings and then if 

there`s something that I need or my children need, I get it for them.  

FARRELL:  People spend their tax refund differently than they spend their 

general day-to-day spending and so we see much more emphasis on durables.  

They`re paying down credit card debt.  They are just taking out more cash 

instead of buying services on durables and food.  

LIESMAN:  There were fears that because of last year`s tax cuts refunds in 

2019 might run lower, but that`s proving not to be the case.  The number 

and dollar amount of refund is running a bit behind.  But about 1/3 of the 

way through the filing season, the average refund is a bit bigger and 

that`s good news for Mr. Zegular and his planned trip to Miami.  

ZEGULAR:  Me and my girls.  Check the check.  I got nervous but it worked 

out good for us.  

LIESMAN:  For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.  

(END VIDEOTAPE)

HERERA:  Coming up, a Hollywood drama.  The movie industry`s biggest 

director is taking on the company that`s pushing to change the 

entertainment business.  

(MUSIC)

HERERA:  Director Steven Spielberg wants to ban Netflix (NASDAQ:NFLX) from 

the Oscars.  The legendary director of popular movies like “E.T.” and 

“Schindler`s List” plans to support a rule change that would prevent movies 

that debut from a screening service from Oscar eligibility.  

Matt Harrington, director of equity research with Buckingham Research joins 

us now to talk about whether or not streaming is a missed opportunity for 

Hollywood.  

Nice to have you here, Matt.  Welcome.  

MATT HARRINGTON, BUCKINGHAM RESEARCH DIRECTOR, EQUITY RESEARCH:  Thank you.  

HERERA:  I mean, the obvious answer seems to be, yes, it is a missed 

opportunity.  Would you agree with that?  

HARRINGTON:  Well, I think all the studios have benefitted somewhat from 

Netflix (NASDAQ:NFLX) in terms of selling content.  I mean, they were the 

foundation for Netflix`s early success including Disney (NYSE:DIS).  The 

problem was to a certain extent they created a monster and I think that 

Netflix (NASDAQ:NFLX) has been extremely disrupted to the mid budget movie 

business, dramatic comedies, et cetera, in theaters.  It really hasn`t had 

that very much effect at all on, say, the Avengers or high end animated 

movies.  But in terms of the genre of movies that, you know, the Academy 

Awards was generally focused on, it`s been very transformative.  

HERERA:  What does this do if this rule goes through and if Steven 

Spielberg is supporting that rule, what does that do to the streaming 

business per se?  

HARRINGTON:  Well, I don`t think it makes it a whit of difference to 

Netflix (NASDAQ:NFLX).  I mean, I think that they enjoy the critical 

acclaim, but, you know, the money from the box office isn`t that important 

to Netflix (NASDAQ:NFLX) at this point.  

HERERA:  So what does Hollywood need to do to either get on the bandwagon 

and partner in a different way with Netflix (NASDAQ:NFLX) than they have?  

Obviously, as you mentioned, they kind of created the monster to a certain 

extent.  What do they have to do to change?  

HARRINGTON:  Well, a number of these studios are pulling their content.  I 

mean, most notably, you know, Disney (NYSE:DIS), as everyone knows, which 

in particular the Fox content layered on is by far the most formidable I 

don`t want to say adversary but more complements Netflix (NASDAQ:NFLX).  

And, of course, Warner Media is doing the same thing over at AT&T (NYSE:T).  

The reorganization we`ve seen over the last couple of days.  

But I think the challenge is realizing that there`s very good content on 

Netflix (NASDAQ:NFLX), and Netflix (NASDAQ:NFLX) has really upped the pay 

scale.  I think that Steven Spielberg can complain and certainly he has 

more recognition in the broad public than any other directors.  But that`s 

not what ultimately is going to drive the business.  

I think when you look at in home, people are very acclimated now to binge 

viewing TV shows.  

HERERA:  Right.

HARRINGTON:  And you got more 4K TVs.  You`re going to have 8K TVs early in 

the next decade.  

HERERA:  Who knows what that will bring.  

HARRINGTON:  The screens get bigger and bigger.  

So, there`s certainly a social aspect of the theater experience that`s 

always going to be there.  I think you have to face reality and these 

windows are going to get more and more compressed for all the biggest 

movies.  

HERERA:  Matt Harrington with Buckingham Research — thank you, Matt.  

HARRINGTON:  Thank you.  

HERERA:  And finally tonight, are you in the market for real estate?  Well, 

according to this listing on Craigslist, you can get almost an entire town 

in Georgia for about the same price of a typical home in San Francisco.  

Thirty-seven parcels of property, including a famous opera house, a 

restaurant, a Victorian hotel, along with 40 acres of land are on sale for 

$1.7 million and that price is about the same as the median cost of a 

single family home in parts of San Francisco.  Wow.  

That does it for NIGHTLY BUSINESS REPORT tonight.  I`m Sue Herera.  

We want to remind you, this is the time of year your public television 

station seeks your support.  We thank you for that, and we`ll see you 

tomorrow.

END

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