Nightly Business Report – March 5, 2019

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

Herera.  

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR:  In the bull`s-eye.  Target 

(NYSE:TGT) silenced the doubters, answering questions investors had about 

the health of the consumer and the strength of the retail industry.  

BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR:  Gaining steam.  After a 

slow stretch, home prices could be on the verge of heating up again just in 

time for the spring selling season.

HERERA:  Next big thing.  That`s what some call the new generation of 

wireless technology.  But the biggest challenge may be securing it from 

hackers.  

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

March 5th.  

GRIFFETH:  And we do bid you a good evening, everybody, and welcome.  

Now, while investors do continue to watch and wait for developments on 

trade, two major retailers offered some optimism today for the markets, and 

we start with Target (NYSE:TGT) and its strong results for the critical 

holiday shopping season.  

CEO Brian Cornell said today that sales are clicking both online and in 

stores.  In fact, the big box retailer had one of its best holiday seasons 

in more than a decade.  Its results also reduced some of the concerns that 

investors have had about the state of retail and consumer spending.  So, 

Target (NYSE:TGT) stock rose about 4.5 percent today.  

Courtney Reagan takes a look now at how Target (NYSE:TGT) is hitting the 

bull`s-eye.  

(BEGIN VIDEOTAPE)

COURTNEY REAGAN, NIGHTLY BUSINESS REPORT CORRESPONDENT:  Two years ago, 

Target (NYSE:TGT) told investors it would spend $7 billion, mostly on its 

stores, remodeling hundreds of existing locations and building new smaller 

formats at a time when many competitors were closing stores.  Investors 

were skeptical, but it worked.  

Target (NYSE:TGT) reported a stronger holiday quarter and is forecasting a 

better profitability for the full year than analysts expected.  The 

retailer saw the strongest comparable fourth quarter sales in a decade, 

driven by strong in-store shopper traffic and more than 30 percent online 

sales growth.  

BRIAN CORNELL, TARGET CEO:  The investments we made in fulfillment are 

connecting with the consumer.  They`re taking advantage of ordering online 

and picking it up in store.  They`re driving into our parking lots.  There 

are ship shoppers now taking advantage of same-day delivery.  

So, all those elements are coming together.  We talked about this a few 

months ago.  Our goal is to make Target (NYSE:TGT) America`s easiest place 

to shop and I think that`s starting to happen.  

REAGAN:  Using its stores as order fulfillment hubs is getting shoppers 

their online orders faster while lowering Target`s costs.  While analysts 

are impressed about what Target (NYSE:TGT) has done, some wonder if the 

momentum will carry on.  

MICHAEL LASSER, UBS ANALYST:  The question is, can they continue that into 

this year where maybe the consumer doesn`t see as much benefit from the 

fiscal stimulus that was poured in last year.  And the comparisons get a 

lot tougher.

REAGAN:  In August, CEO Brian Cornell said the U.S. consumer was among the 

strongest he had seen in his career.  While Cornell still thinks the U.S. 

consumer is healthy, his assessment isn`t as strong as it was six months 

ago.  

CORNELL:  Consumers are shopping.  You`re seeing strong consumer confidence 

still, and our outlook for next year is that we`ll see consistent results 

across 2019.  So, certainly, we`re going to watch it carefully.  And it`s 

going to ebb and flow, but right now, I think we`re seeing a pretty 

consistent consumer environment.  That certainly showed up in our January 

results.  

REAGAN:  The retailer hit a bull`s-eye for 2018 and investors wait to see 

if its plan continues to hit the mark.  

For NIGHTLY BUSINESS REPORT, I`m Courtney Reagan in New York City.  

(END VIDEOTAPE)

HERERA:  And now to Kohl`s (NYSE:KSS) which reported better-than-expected 

earnings, revenue and same-store sales for that same holiday period.  The 

CEO attributes the results to investments in its mobile app, brand 

partnerships and remodeled stores.  It also said it expects solid results 

down the road, and that sent the stock up more than 7 percent in today`s 

session.  

GRIFFETH:  But the rally in retail was not enough to lift the broader 

market today.  Even after Secretary of State Mike Pompeo said that he 

thought Washington and Beijing were on the cusp of reaching a trade dole.  

It was a rather subdued day on Wall Street, with the Dow closing down just 

13 points to 28,806, the Nasdaq fell just 1, the S&P 500 was down 3.  

HERERA:  And believe it or not, this week will mark 10 years since the 

start of the bull market.  During those dark days a decade ago, no one 

really knew where the market would find itself in 2019, but here we are.  

In the past ten years could lay the groundwork for the next ten.  

Mike Santoli has more.  

(BEGIN VIDEOTAPE)

MIKE SANTOLI, NIGHTLY BUSINESS REPORT CORRESPONDENT:  As the 10th 

anniversary of the climactic March 2009 market bottom arrives this week, 

many observers are focusing on all the ways this period since the global 

financial crisis has been extraordinary.  The worst economic shock in 75 

years felled huge financial institutions and ushered in the most aggressive 

Central Bank stimulus efforts ever seen.  Yet perhaps more striking is how 

very typical this decade has been for stock market investors.  

Since the S&P 500 sank briefly to 2,666 on March 6th of 2009 and reached 

its closing low three days later.  It has delivered a ten-year annualized 

gain of 17.8 percent, including dividends.  That almost exactly matches the 

yearly total return in the ten years following the 1987 stock market crash 

and the generational stock market low set in the summer of 1982.  

While in general markets don`t follow a specific pattern, a buyer of stocks 

at depressed levels after a dramatic collapse tends to enjoy gains 

substantially better than the 10 percent historical average.  So, what does 

this say about the prospects for the market from here?  Well, when 10-year 

rate of return has reached similar levels in past cycles, the bull market 

was pretty far along but still had some life left in it.  

Near the end of a very strong bull markets such as in the 1950s or 1990s, 

the trailing annual gains have been near 20 percent.  Of course, there are 

no guarantees and nasty market shakeouts are a feature, even of long-term 

up trends.  The 20 percent drop late last year is still viewed by some 

strategists as an early tremor of a more damaging downturn, for example.  

And it could be.  

But over the past decade, the bull has weathered several such tests and 

hasn`t yet failed one for good.  

For NIGHTLY BUSINESS REPORT, I`m Mike Santoli.  

(END VIDEOTAPE)

GRIFFETH:  And ten years after the start of the latest bull run, one hedge 

fund manager is now forecasting a downturn in interest rates.  

Hayman Capital Management founder Kyle Bass said today that he expects 

rates to head back to zero next year because he believes the U.S. and the 

rest of the world will fall into an economic recession, forcing the Fed 

then to cut interest rates.  

HERERA:  So let`s turn now to Nela Richardson to talk about where she sees 

interest rates heading and the market.  She is an investment strategist at 

Edward Jones.  

Good to see you again.  Welcome back, Nela. 

NELA RICHARDSON, INVESTMENT STRATEGIST, EDWARD JONES:  Thank you.  Good to 

be here.  

HERERA:  You do not agree with Mr. Bass.  You do not see a recession ahead, 

correct?  

RICHARDSON:  No, we don`t see a recession that`s imminent.  For evidence of 

that, we look to the labor market, which is strong.  We`re seeing wages 

growing.  We look to manufacturing and we`re seeing an expansion.  

We look at a healthy consumer, as you prefaced with, that is still 

spending.  For these reasons we see that the economy will continue to grow, 

albeit at a slower pace than what we enjoyed last yore.  

GRIFFETH:  But you have to admit, I mean, we`ve been ten years without a 

meaningful pullback in the market.  Yes, we had some corrections like we 

had in December, but we are overdue, don`t you think, for something more of 

a pullback of some kind?  

RICHARDSON:  Thankfully for some of us, age is just a number.  

GRIFFETH:  Right.  

RICHARDSON:  Expansions don`t die of old age.  In fact, what usually kills 

an expansion is the Federal Reserve.  And the Fed has put their knives away 

at least for now.  They promised to be patient and pause rate hikes.  

So, we think that this bull market still has legs.  There will be 

volatility.  We`re returning to normal bouts of periodic volatility, but we 

think stocks will continue to climb this year.  

HERERA:  Talk me about valuations.  There are knows that say that stocks 

are somewhat overpriced.  Mr. Bass talked about that earlier today as well.  

Others think they`re fairly pride.  Where do you fall on that spectrum?  

RICHARDSON:  If you look at historical averages, they`re right in line with 

five year and ten-year trends.  We think they`re appropriately priced.  And 

so, in this market, it`s important to be diversified.  We see that there`s 

opportunities in international equities, which are trading at attractive 

valuations.  We see opportunities in smaller midcap.

But overall, it`s really about having a diversified portfolio when you`re 

talking about the long-term retail investor.  

GRIFFETH:  Very quickly, Nela.  A lot of your viewers are interested in 

investing for income.  At this rate, where the interests fall right now, 

where do you go for income?  

RICHARDSON:  Well, there`s good news on this front, because of rates are so 

low in the U.S. but still high relative to what we see abroad, we think 

that there is real opportunity in short and intermediate bonds.  That means 

that investors can hedge their portfolios.  They can be active bondholders, 

add that income without taking that extra risk from long-term bonds and 

long-term maturity to get the same yield.  

So that`s good news for income holders.  

GRIFFETH:  Right.

RICHARDSON:  So that`s where we see — that`s what we recommend our clients 

go to short-term bonds, to CDs, and to intermediate bonds.  

HERERA:  On that note, Nela Richardson with Edward Jones — thank you.  

RICHARDSON:  Thank you.  

GRIFFETH:  Meanwhile, interest rates, of course, do play a key role in the 

housing market.  And today, we got a little clearer picture of the winter 

market and some clues about what may be in store for the spring selling 

season.  

Diana Olick has the story.  

(BEGIN VIDEOTAPE)

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT:  The nation`s home 

builders ended 2018 on a low note.  Sales of newly built homes in December 

were nearly 2.5 percent lower annually.  Total sales for the year were only 

very slightly higher than 2017.  

The supply of new homes for sale also rose to nearly seven months, showing 

demand has weakened and builders are sitting on more unsold products.  They 

have lowered prices some, but most builders are still focused on the move-

up market, not the entry level, where demand is strongest.  That they say 

is because of the high costs for land, labor and materials.  

Buyers at the end of last year were facing higher mortgage rates and that 

likely played into the weakness.  But the average rate on the 30-year fixed 

has since fallen, which could give builders a boost this spring.  Home 

builder sentiment rose in February on the back of lower rates.  

But lower rates can be a double-edged sword.  They helped fuel a strong 

run-up in prices in 2017 with some markets overheating.  The gains in home 

prices have been shrinking since last April when rates began to rise.  With 

rates lower again now, we could see home prices gain steam yet again.  

Home sales are off to a slow start this year, but more supply is coming on 

the market.  Unfortunately, the bulk of that supply is on the higher end, 

meaning wealthier buyers are more likely to get a bargain than those 

already struggling to afford their first home.  

For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Washington.  

(END VIDEOTAPE)

HERERA:  The U.S. budget gap widened in the first four months of the fiscal 

year.  The Treasury Department says the government ran a $310 billion 

deficit from October through January.  A 77 percent increase from the same 

period a year ago.  Part of the reason is that tax collections fell and 

federal spending increased.  

GRIFFETH:  Now to China where that country`s premier today outlined some of 

his country`s economic goals during than address to the National People`s 

Congress.  

Eunice Yoon has the story for us from Beijing.  

(BEGIN VIDEOTAPE)

EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT:  China`s premier 

acknowledged that the trade dispute with the U.S. was one of the challenges 

for China`s economy and said this year would be a tough struggle.  These 

are the numbers in China`s version of the State of the Union Address.  

Beijing has set the GDP target lower in a range of 6 to 6.5 percent.  CPI 

(NYSE:CPY) is expected to be manageable at 3 percent.  The economy will 

create 11 million new jobs, down from the actual figure in 2018 of 13.6 

million.  The premier said job stability will guide policy so the deficit-

to-GDP ratio was raised to 2.8 percent to help stabilize the economy.  The 

budget will carve out 2 trillion Yuan, about 2 percent of GDP for bigger 

tax cuts and lower fees.  Bank lending for SMEs will be a priority and the 

government is green lighting local bonds, 59 percent more than last year, 

to fund infrastructure.  

What was also interesting was what was missing from the report.  No mention 

of the controversial made in China 2025 program that has raised suspicions 

among China`s trading partners, including the United States.  Now, the 

report says one of China`s top priorities is to promote high-quality 

manufacturing and strengthen technological innovation.  So, the language 

may be different but Beijing`s ambition to become a manufacturing and 

technological leader is the same.  

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

(END VIDEOTAPE)

HERERA:  It is time to take a look at some of today`s “Upgrades and 

Downgrades”.  

Google`s parent Alphabet was rated a buy and new coverage at Needham.  The 

analyst cites the value of YouTube and so-called “network effect” where the 

addition of a new user adds value for other users.  The price target is 

$1,350.  The stock was up more than 1 percent to $1,169.19.  

Tesla`s price target was lowered to $192 at Barclays.  The analyst cites 

recent price cuts and the closing of stores.  The rating remains an 

underweight.  The stock fell 3 percent to $276.54.  

GRIFFETH:  Still ahead, the next generation of wireless networks promise to 

be faster and do more.  But are they safe from hackers?

(MUSIC)

GRIFFETH:  FDA Chief Scott Gottlieb is resigning.  In a statement released 

this afternoon, the Secretary of Health and Human Services Alex Azar said 

that Gottlieb will be stepping down next month after nearly two years at 

that agency.  Gottlieb is credited with leading the FDA`s charge against 

underage vaping and with accelerating some generic drug approvals.  

HERERA:  Chinese hackers targeted more than two dozen universities in the 

U.S. and around the globe.  According to “The Wall Street Journal”, it was 

part of a scheme to steal research about maritime technology, something 

that is used by the military.  The majority of universities targeted have 

research hubs that focus on that area.  

GRIFFETH:  And cybersecurity experts are gathering at a major conference in 

San Francisco, and a hot topic this year is how to secure this coming wave 

of 5G networks.  

Deirdre Bosa takes a look at a strategy that many will hope will keep the 

next generation of wireless connectivity safe.

(BEGIN VIDEOTAPE)

DEIRDRE BOSA, NIGHTLY BUSINESS REPORT CORRESPONDENT:  Never trust, always 

verify.  That`s the principle behind “zero trust”, a cyber security model 

and one of the biggest themes at RSA this year.  It is the strictest 

approach to security and assumes every actor is malicious, giving access 

only on a real-time as-need basis.  

HUGH THOMPSON, SYMANTEC CTO:  This idea of “zero trust” is being able to 

create security from your device all the way to where you`re going where 

you don`t even have to care about where it goes in between.  

BOSA:  Security experts say that the concept will play a critical role in 

the new 5G landscape.  The new super fast standard for wireless networks 

that will lead to more connected devices, from cars to homes, but will also 

lead to more security dangers that could turn these devices into weapons.  

RSA participants say that a potential ban on Chinese equipment makers like 

Huawei and ZTE won`t alone keep America`s 5G landscape safe.  Instead, they 

say the zero trust approach should act as an overlay on 5G infrastructure.  

The stakes are high at RSA this year.  Not only will 5G connect more 

devices than ever, but our identities, our thumb prints, our voices, faces, 

are increasingly going to be used to keep us secure.  

But biometric screening comes with its own dangers.  

TED SCHLEIN, KLEINER PERKINS:  We need to take steps towards ensuring 

people`s security.  And that means that individuals are going to have to 

give up some piece of information to make that happen.  That could be a 

biometric, and I think in order to do that, that will make people more 

secure in the future.  

BOSA:  According to the Unisys (NYSE:UIS) Security Index, Americans aren`t 

opposed to facial recognition systems when it comes to security in banking, 

but they`re far less willing to allow it for things like sporting events or 

direct marketing.  Experts say privacy concerns can be mitigated.  

ANN JOHNSON, MICROSOFT CORPORATE VICE PRESIDENT:  We need to get biometric 

screening to get to a place where we are truly password-less, but it is the 

best thing to eliminate passwords in the security ecosystem.  Passwords are 

still responsible for about 70 percent of phishing attacks.  

BOSA:  Cybercrime is expected to cost the world $6 trillion annually by 

2021.  Experts here at RSA say that breaches are inevitable and the I.T. 

world is focused on managing the risk.  

For NIGHTLY BUSINESS REPORT, Deirdre Bosa, San Francisco. 

(END VIDEOTAPE)

HERERA:  General Electric (NYSE:GE) surprises investors, and not in a good 

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

GE`s new CEO, Larry Culp (NYSE:CFI), said the company`s cash flow this year 

will be negative, citing its struggling power business as a factor.  Culp 

(NYSE:CFI) said the power business will face headwinds for, quote, a couple 

of years.  GE began a massive turn-around plan last year in which it said 

it would cut its debt by $25 billion and has been selling assets in order 

to do so.  Today shares fell nearly 5 percent to $9.89, but they are up 

more than 40 percent since hitting a low of $6.66 in December.  

Cowen says gamer interest in Electronic Arts (NASDAQ:ERTS) hit video game 

“Apex Legends” has dropped by half since it launched last month.  But the 

investment firm notes that Apex Legends was still the second most watched 

game last week behind its rival, “Fortnite”.  Meanwhile, EA noted yesterday 

that “Apex Legends” hit 50 million players in less than a month, while 

“Fortnite” took four months to hit 40 million.  EA shares were down 1.5 

percent to $95.72.  

GRIFFETH:  New data compiled by Jeffries has revealed a steep deceleration 

in sales at Revlon (NYSE:REV).  The investment bank says that Revlon 

(NYSE:REV) sales fell 15 percent in the four weeks ending on February 23rd 

and they were down 9 percent overall in the past year.  Shares of Revlon 

(NYSE:REV) as a result fell 21 percent today to $20.19.  

And discount retailer Ross Stores (NASDAQ:ROST) is doing something that 

other retailers are not doing.  It`s actually opening stores right now.  

The company also reported better-than-expected earnings and revenue and 

announced a $2.5 billion buyback program but its guidance for the current 

quarter was not exactly as strong as hoped for and that sent the stock 

lower in initial after-hours trading.  It did finish the regular session up 

a fraction to $94.17.  

And Urban Outfitters (NASDAQ:URBN) today topped quarterly earnings 

expectations helped by double-digit growth in sales from its digital 

operations.  The CEO called the final quarter of the year a successful one 

for all of its brands.  The stock was volatile in initial after-hours 

trading this evening.  It did finish the regular session up a fraction at 

$30.35.  

HERERA:  Coming up, why European auto executives are all charged up.

(MUSIC)

GRIFFETH:  Nissan`s former chief has now been granted bail after spending 

months in a Japanese jail.  A Tokyo judge set bail at $9 million and said 

that Carlos Ghosn must remain in Japan.  The auto executive is awaiting 

trial on charges that he understated his income, charges that he denies.  

But if found guilty, he could face as many as 15 years in prison.  

HERERA:  European auto executives say the potential for punitive U.S. 

tariffs on European car imports looms large over the industry.  At the 

Geneva auto show, the CEO of Volkswagen called it a major threat and a big 

unknown.  

(BEGIN VIDEO CLIP)

HERBERT DIESS, VOLKSWAGEN CEO:  This is a critical situation for us because 

mostly our premium brands here in Germany are depending on the import 

market of the United States.  So, Audi, Porsche, they have significant 

market share there.  

(END VIDEO CLIP)

HERERA:  President Trump last year threatened to put a 25 percent tariff on 

every car import from the European Union.  Those tariffs have so far not 

been imposed.  And officials are meeting this week to discuss that issue.  

GRIFFETH:  And even as the threat of tariffs does cast a shadow over that 

industry, European automakers are making a big push into electric cars, 

ramping up their plug-in models, many of which are on display at the Geneva 

Motor Show this week.  

Phil LeBeau takes us for a ride.

(BEGIN VIDEOTAPE)

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT:  They are the models 

turning heads in Geneva.  Electric cars and SUVs of Europe`s automakers are 

preparing to roll out.  Take BMW, it is Vision iNEXT is coming in 2021 and 

its CEO says that`s just the start.  

HARALD KRUGER, BMW CHAIRMAN:  What do we see in the next years?  It will 

tick up definitely.  It`s the future drivetrain, for the future of 

mobility.  

LEBEAU:  Last year, BMW, like most other automakers, trailed Tesla when it 

comes to selling E.V.s in the U.S.  While Tesla is lowering the price of 

its Model 3 down to $35,000, most of its models go for far more, which is 

why Porsche believes its new Taycan E.V. will attract luxury car buyers.  

OLIVER BLUME, PORSCHE CHAIRMAN:  We get very good feedback now for the 

Taycan, which we present at the end of the year, and we have a lot of 

customer demand today.  So we are looking forward to present to this car.  

LEBEAU:  Low prices at the pump means many are content to continue buying 

and driving gas-powered cars.  But automakers like Audi realized that could 

change quickly.  

BRAM SCHOT, AUDI CHAIRMAN:  The world is getting greener, you know?  We 

have to support that.  So, Audi is getting green.

LEBEAU:  So, when will we see most of these electric cars rolling into 

showrooms?  Well, we`ll start to see it later this year and gradually it 

will pick up speed, with a slew of electric cars and SUVs hitting the road 

in the next two to three years.  

Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago.

(END VIDEOTAPE)

HERERA:  The most expensive car ever made has been sold.  This Bugatti 

fetched nearly $19 million, including taxes.  This particular model is the 

only one that will be made and it was designed to celebrate the 110th 

anniversary of the company.  The supercar will be delivered to the customer 

by April of 2021.  The buyer is not known, but CNBC reports that it is a 

former chairman of Volkswagen.  

GRIFFETH:  So who else can afford to buy a Bugatti?  How about the people 

who made “Forbes” annual list of the world`s billionaires just out today?  

Amazon`s Jeff Bezos has retained his top spot with a net worth of $131 

billion.  Bill Gates is number two.  And rounding out the top three: Warren 

Buffett.  

This year, there are more than 2,100 billionaires in a total with a 

combined net worth of $8.7 trillion.  The average net worth was $4 billion; 

1,450 of the billionaires are self made, 252 are women, including Kylie 

Jenner, who is now the world`s youngest self-made billionaire at the tender 

age of 21.  

She took the title from Facebook (NASDAQ:FB) founder Mark Zuckerberg who 

became a billionaire when he was 23 years old.  

HERERA:  And that will do it for NIGHTLY BUSINESS REPORT.  I`m Sue Herera.  

Thanks for watching.

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

station seeks your support.  

GRIFFETH:  I`m Bill Griffeth, and we do thank you for that support.  Have a 

great evening.  We`ll see you tomorrow.  

END

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