ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Sue Herera and Bill
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
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.
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
And for that we just need to see more stability on the global markets
For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock Exchange.
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.
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
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
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
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
For NIGHTLY BUSINESS REPORT, I`m Kayla Tausche in Washington.
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.
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.
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
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 —
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
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.
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
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
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.
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
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.
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
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
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
Courtney Reagan is in Las Vegas tonight.
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
It`s leading established retailers to start to talk to startups for options
for services like faster delivery, easier returns and augmented reality
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.
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
Steve Liesman explains.
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
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.
HERERA: Coming up, a Hollywood drama. The movie industry`s biggest
director is taking on the company that`s pushing to change the
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
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.
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
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