Nightly Business Report – March 19, 2019

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



(NYSE:FDX) cuts its full-year profit forecast for the second time this 

year, and it is blaming a worldwide economic slowdown.  

Playing to win.  Google (NASDAQ:GOOG) is making a big push into the video 

game industry and it could change the business as we know it.  

Denim debut.  Why the company that invented blue jeans is getting ready to 

return to Wall Street.  

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

March 19th.  

Good evening, everyone, and welcome.  Bill is off this evening.  

We begin with a company that has become synonymous with the global economy, 

FedEx (NYSE:FDX).  The company, which ships more packages when activity is 

strong, reported quarterly results below Wall Street estimates.  And the 

future doesn`t look much better.  FedEx (NYSE:FDX) lowered its full-year 

outlook for profit again citing a slowdown in global trade.  

The logistics company earned $3.03 a share, missing expectations.  Revenue 

was up from last year, but below consensus forecast.  And that sent the 

stock lower in initial after-hours trading.  

Kate Rogers (NYSE:ROG) has more on FedEx`s results.  



on here, continued impacts of a global slowdown on the company`s business.  

CFO Alan Graf said in a statement, slowing international macroeconomic 

conditions and weaker global trade growth trends continue as seen in our 

year-over-year declines in our FedEx (NYSE:FDX) Express (NYSE:EXPR) 

International Revenue.  The company lowered its guidance for the full-year 

EPS with a weaker Q4 range than anticipated, due to concerns over global 

trade growth.  

This comes after lowering guidance last quarter, citing weaker 

international business, particularly in Europe.  



HERERA:  So let`s turn now to Donald Broughton for more on FedEx`s results 

and what those numbers may be telling us about the health of the global 

economy. He is managing partner at the independent research firm Broughton 


Nice to have you here, Don.  Welcome.  


Thank you.  

HERERA:  All right.  What do you make of these results?  Obviously, the 

street thinks that it does not portend anything on the very good side for 

the global economy, but what about you?  You say you`re generally speaking 

an optimist.  

BROUGHTON:  Well, I really am.  And this is the company that`s going to 

deliver e-commerce in the coming years and decades.  But the bottom line 

is, they`re just following through on what they told us 90 days ago, which 

is that if you look at air freight numbers, volumes in Europe, you can 

blame it on Brexit, you can blame it on whatever, but the rates of volume 

there continue to decline.  

But more concerning is that since that last release 90 days ago, in the 

interim not only did they get proved right about Europe, but the rates have 

declined in air freight volumes in Asia have really stumbled and fallen.  

HERERA:  You know, those two issues you bring up, Asia, the U.S./China 

trade war and Brexit, both of those remain largely unresolved.  We may be 

getting a little bit of progress on trade.  So that does not really portend 

a bright future for FedEx (NYSE:FDX), does it, if it still has those two 

clouds hanging over it?  

BROUGHTON:  Well, it doesn`t portend a bright future in the short term.  

That`s granted.  But I would tell you the air freight numbers in Asia tell 

you is that, quite frankly, China needs to do a trade deal more desperately 

than we do, which raises my confidence that one will actually get done.  

And eventually one will and then the dominant player in that market, FedEx 

(NYSE:FDX), will be the biggest beneficiary.  

Brexit will eventually get settled and as it does, hopefully, we`ll get 

relief and improvement in volumes there and again FedEx (NYSE:FDX) will be 

a beneficiary.  

HERERA:  What do you do with the stock in the time that we have left?  

BROUGHTON:  We continue to be a long-term bull about the company and its 

prospects and as a result its stocks.  If you look at how well they are 

managing their operations, their technology, they move things more 

efficiently and make more money on every package than they ever have.  But 

they can`t control the macro economy.  They can`t control Brexit and they 

can`t control Trump and the trade tariffs and trade war.  

HERERA:  Indeed.  Don, thank you very much, as always.  Don Broughton with 

Broughton Capital.

BROUGHTON:  My pleasure.  

HERERA:  On Wall Street, the Dow snapped its four-day win streak after a 

report that Chinese officials are pushing back on U.S. trade demands.  As a 

result, stocks ended mixed.  The Dow fell 26 points to 25,887.  The Nasdaq 

rose 9, but the S&P 500 fell ever so slightly.  

Bob Pisani has more.  



on a couple of conflicting headlines about U.S./China trade talks.  The Dow 

Jones Industrial Average snapped a four-day win streak.  Stocks rallied 

early ahead of tomorrow`s Federal Reserve meeting per the usual pattern.  

In fact, the Fed itself has conducted studies on what is called the Fed 

drip.  It`s the tendency for stocks to drift higher in the 24 hours 

preceding a Fed announcement.  

The Fed has found this phenomenon puzzling but it does exist.  But the S&P 

500 passed below the day`s prior low late in the day and we saw heavy 

selling pressure pick up and the rally fizzled out by the close.  Still, 

stocks have held up very well recently.  Crude oil prices are hovering near 

four-month highs and there`s definitely hopes for a trade deal.  We`re 

getting very close to the final stages of negotiations.  

Recent headlines suggest the U.S. and China are in very tense negotiations.  

China wants assurances that the tariffs will be eliminated as part of the 

deal and that`s certainly a sticking point.  U.S. Treasury Secretary Steve 

Mnuchin still scheduled to go to Beijing this week.  China`s vice premier 

is slated to travel to Washington the following week, so negotiations are 

really intense right now.  

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


HERERA:  There are new developments tonight related to Boeing (NYSE:BA).  

The Department of Transportation has asked its inspector general to audit 

the FAA`s certification of the Boeing (NYSE:BA) 737 MAX following two fatal 

crashes involving the aircraft since October.  Boeing (NYSE:BA) says it 

will fully cooperate with the audit.  Separately, there are reports that 

former delta executive, Steve Dixon, will be nominated by the White House 

to head the FAA.  

And as Bob just mentioned, Federal Reserve policy makers began their two-

day meeting today.  The central bank is widely expected to hold interest 

rates steady when they announce their decision tomorrow.  

Ahead of that decision, Steve Liesman surveyed market watchers to get a 

sense of where they see the market and the economy heading.  



huddle to set interest rates at their March meeting, a new survey shows 

Wall Street preparing for slower U.S. growth this year and some thinking 

the Fed might even cut rates down the road.  The CNBC Fed survey for March 

sees growth slowing to 2.3 percent from 3.1 percent in 2018, bumping down 

again in 2020 to 2 percent.  

The 43 responders include economists, strategists and fund managers point 

to slower global growth and trade tensions as the leading threats to the 

U.S. expansion.  The two could possibly shave more than half a point 

together off of growth this year.  

ROBERT BRUSCA, FACT AND OPINION ECONOMICS:  If the global economy is still 

in difficult shape, I don`t think the economy is going to snap back that 

much.  I think the economy is in a little bit more trouble.  

LIESMAN:  On the other side are those in the survey who are more optimistic 

because they think the tax cuts this year could continue to deliver 

additional growth.  

STEPHEN STANLEY, AMHERST PIERPOINT:  It`s unrealistic to believe that all 

of the beneficial impacts of the tax cuts on investment took place in a 

six-month period.  These are multi-year projects that take a long time to 

be planned, executed, delivered, and then incorporated into business 


LIESMAN:  In bringing down growth forecasts, respondents also brought down 

their outlooks for rate hikes this year from the Fed.  At the height of the 

bull market last year, respondents thought the Fed would hike rates as many 

as three or four times in 2019.  That`s been pared back where barely a one-

quarter point hike is now expected.  

Next year, most are betting on a single hike, but 35 percent think the Fed 

could even cut interest rates.  So the Fed is seen as on hold for now, but 

investors are on the lookout for whether more than just patience is needed 

from the Central Bank.  



HERERA:  The news tonight takes us to the Midwest, which has seen 

devastating and historic flooding.  Most of Nebraska is under a state of 

emergency.  According to some early estimates, Nebraska`s agricultural 

sector could face nearly a billion dollars in damage and loss.  Agriculture 

accounts for 20 percent of that state`s economic activity.  Livestock 

accounts for nearly 60 percent of Nebraska`s agriculture revenue.  And some 

say flooding could prevent farmers from planting next year`s feed crops.  

It is time to take a look at some of today`s “Upgrades and Downgrades”.  

Domino`s Pizza (NYSE:DPZ) was upgraded to overweight from neutral at 

JPMorgan (NYSE:JPM).  The analyst cites the potential for double-digit 

sales growth.  The price target is $270.  The stock was up more than 2 

percent to $248.76.  

Union Pacific (NYSE:UNP) was downgraded to hold from buy at Luke Capital 

Markets.  The analyst cites the problems posed by the flooding in Nebraska.  

The price target is $182.  The stock fell more than 3 percent to $160.75.  

Noble (NYSE:NE) Energy was upgraded to buy from neutral at Mizuho.  The 

analyst cites the company`s free cash flow.  The price target is $29.  The 

stock was up a fraction to $24.  

Coming up, big tech is making a big push into video.  We`ll explain.  


HERERA:  The top antitrust Democrat is calling for the FTC to investigate 

Facebook (NASDAQ:FB).  The chairman of the House Judiciary Committee`s 

antitrust subcommittee wants to know whether the social media company`s 

conduct violated antitrust law.  In a “New York Times (NYSE:NYT)” op-ed, 

the congressman encouraged the FTC to take a tougher stance against the 

country`s largest tech companies.  And he cited the Cambridge Analytica 

scandal and Facebook`s handling of user data among other issues.  

Well, there is big money to be made in the video game industry, and Google 

(NASDAQ:GOOG) wants a piece of it.  The tech company made its intention 

known at the Annual Game Developers Conference in San Francisco, which is 

where we find Josh Lipton.  


SUNDAR PICHAI, GOOGLE CEO:  To build a game platform for everyone.  


Pichai took the stage today at the game developers conference in San 

Francisco, where he announced his company`s big push into the $135 billion 

video game market.  

It`s called Stadia, a new game service for devices running Google`s Chrome 

browser.  And Google (NASDAQ:GOOG) hopes it will upend the traditional 

video game market, because it means fans will soon be able to stream 

complex, high-level games over the Internet right to their phones, tablets 

and televisions.  No need for PCs or expensive game consoles.  

Google (NASDAQ:GOOG) executives say Stadia is a game-changer.  


presentation, we want games to be available for everyone.  Without the 

barriers or the limitations of the hardware that they may have in their 

homes, we`ll take care of the hardware in our data center.  All you need is 

a laptop or a PC or a TV to stream to, so you don`t have to have that 

expensive custom hardware to get the best possible game experiences.  And 

over time, we think that that will dramatically increase the game audience 

for everyone.  

LIPTON:  Google (NASDAQ:GOOG) isn`t saying exactly when Stadia will launch, 

only that it`s at some point this year.  The company isn`t yet detailing 

the business model either.  Will it be a subscription?  Or will Google 

(NASDAQ:GOOG) take a portion of all proceeds spent on stadia.  There`s 

plenty of competition when it comes to video gaming.  Microsoft 

(NASDAQ:MSFT) is exploring this technology and so is Amazon (NASDAQ:AMZN).  

Analysts say that one question is whether the big game developers now buy 

into this vision and partner with Google (NASDAQ:GOOG).  That could mean 

giving up some of their game`s proceeds.  Is that worth it to potentially 

reach that many more gamers around the world?

For NIGHTLY BUSINESS REPORT, I`m Josh Lipton, San Francisco.


HERERA:  A media milestone has been reached.  For the first time, more 

households subscribe to a digital streaming service than to traditional pay 


According to a new survey from Deloitte, 69 percent of respondents pay for 

Internet video versus 65 percent for cable or satellite television.  The 

trend was most pronounced among Generation Z where 80 percent subscribe to 

Internet video only 

Netflix (NASDAQ:NFLX) says it has no plans to make its shows and movies 

available on Apple`s upcoming video offering.  CEO Reed Hastings says he 

wants customers to watch Netflix` content on its service.  

Joining us now Brett Sappington, director of research with Park Associates.  

Brett, nice to have you here.  Welcome.  



HERERA:  This is such a fascinating space to me and it`s one where you`re 

getting new entrance to it all the time.  You say there are going to be a 

number of winners in the space but you single out Netflix (NASDAQ:NFLX).  


SAPPINGTON:  Well, Netflix (NASDAQ:NFLX) is the leader.  They`re the 

dominant leader by a significant margin.  Over half of U.S. households have 

a Netflix (NASDAQ:NFLX) subscription right now, and that`s significantly 

more than anyone else.  The next closest is Amazon (NASDAQ:AMZN).  

HERERA:  What about Apple`s entry into it.  Do they have an uphill battle 

to fight?  I mean, they`re very, very innovative company certainly and they 

want in on this space.  Netflix (NASDAQ:NFLX) doesn`t want to do business 

with them in this particular niche at this point.  What does Apple 

(NASDAQ:AAPL) have to do?  

SAPPINGTON:  Well, I think anyone entering the online video space right now 

for subscription services, everyone has kind of an uphill battle to try and 

rival Hulu, Amazon (NASDAQ:AMZN) and Netflix (NASDAQ:NFLX).  But there`s no 

company perhaps that`s out there other than maybe Facebook (NASDAQ:FB) or 

others that has a better path to success than Apple (NASDAQ:AAPL).  Apple 

(NASDAQ:AAPL) has iPhones, they have iTunes, they have smart watches.  

There`s a number of ways to be able to both get services to consumers and 

to promote their service.  

HERERA:  What about content?  Does it come down to who can create the most 

original content, or does it come down to who can aggregate the content 

from other players or maybe both?  

SAPPINGTON:  It really does come down to content.  You don`t subscribe to a 

service unless you`re interested in watching what it has.  So, for Apple 

(NASDAQ:AAPL) to be successful, it needs to have good distribution and it 

needs to have a unique reason for consumers to pick them either over other 

services or in addition to the other services that they pay for.  

HERERA:  What does Netflix (NASDAQ:NFLX) have to do to maintain its 

dominant threat?  As we mentioned, Apple (NASDAQ:AAPL) is a very innovative 

company.  A lot of these companies that are in this space, you know, their 

bread and butter is innovation.  So, what does Netflix (NASDAQ:NFLX) have 

to do to stay in its lead position?  

SAPPINGTON:  They have to continue to produce good content.  And they have 

proven very adept at doing that.  In fact, what we`ve seen from Netflix 

(NASDAQ:NFLX) is a number of — a significant portion of their library has 

gone from movies and television shows to original content and original 


They`re winning awards.  They`re gaining subscribers both here and 

internationally.  So they just need to keep up that momentum.  It`s going 

to be difficult, particularly with a number of known brands entering the 


HERERA:  On that note, Brett, thanks so much.  Brett Sappington with Park 


Well, the other shoe drops at DSW (NYSE:DSW), and that`s where we begin 

tonight`s “Market Focus”.  

The shoe retailer reported a surprise quarterly loss.  Analysts had been 

expecting a profit.  The company cited higher overall expenses and an 

increase in inventories.  DSW`s CEO also announced a rebranding effort that 

includes a name change to designer brands.  The stock fell nearly 13 

percent to $22.09.  

It was a different story, though, for Michael`s.  The arts and crafts 

retailer reported better-than-expected quarterly earnings which helped 

offset guidance that was below consensus.  The company plans to open 24 new 

stores during the new fiscal year.  The stock was up more than 8 percent to 


Goodyear Tire plans to cut 1,100 jobs in Germany.  The company says the 

decision is part of its plan to modernize manufacturing facilities.  The 

move follows Ford`s announcement just a few days ago that it plans to cut 

about 5,000 jobs in Germany.  The stock closed up a fraction to $17.92.  

Weak sales data is sapping the energy out of the shares of Monster 

Beverage.  A Wall Street analyst citing Nielsen data said sales were down 

more than 3 percent in the week that ended March 9th.  Rival energy drink 

maker Bang saw sales rise that same week.  The stock fell more than 4 

percent to $57.92.  

Well, Levi Strauss is credited with creating the first pair of blue jeans.  

The company is one of the dominant forces in the industry, and investors 

will soon be able to buy shares of the denim pioneer.  

Courtney Reagan has more on the company`s upcoming IPO.  



invest in more than just a pair of Levi 501s when the 166-year-old company 

goes public for the first time in more than three decades on Thursday.  

Levi Strauss is the top seller of jeans in the world and its Wall Street 

debut comes amid big changes in the industry.  Competition is stiff from 

the likes of wrangler and old navy.  

Rival Wrangler parent company, VF Corporation, is spinning off its jeans 

wear business into a new public company.  And Gap (NYSE:GPS) Inc. is 

spinning off Old Navy and to each own publicly traded entity.  

These newly public companies come at a time when jean sales are forecast to 

improve globally, though at a slower rate over the past five years.  

And one of denim`s biggest challenges has been athleisure.  


for the category broadly speaking.  However, with that said, I think Levi`s 

in many ways defines the category.  

REAGAN:  As consumers buy more stretchy, casual clothing, companies 

including Nike (NYSE:NKE), Adidas, Lululemon, Under Armour (NYSE:UA) and 

Gap (NYSE:GPS) Inc.`s Athleta gain apparel share in the U.S.  As Levi`s, 

True Religion, Gap (NYSE:GPS), J. Crew, Banana Republic and Ralph Lauren 

lose apparel share, according from research from Bernstein.

But NPD sees the trend turning, forecasting women are looking to replace 

yoga pants with jeans this year.  

CRAWFORD:  Denim is one of those categories that will cycle in and out of 

popularity.  And certainly, in recent times it`s been experiencing an 


REAGAN:  That`s good news for Levi`s women`s business which is less than 30 

percent of sales but growing.  It`s also good for the competition.  

American Eagle global brand president Chad Kessler says his brand is number 

one for women in the U.S. and, quote, growing rapidly.  And he expects 

significant growth to continue in both men`s and women`s jeans this year.  

So why go public now?  Levi Strauss says the offering will give it more 

financial options, but experts point to another motivation for the dual-

share class IPO that gives the descendants of the founders family 10 class 

B votes to every 1 vote of the class A investors, or nearly 81 percent of 

the voting power.  Investors hope that history of profitability and sales 

can continue for years to come.

For NIGHTLY BUSINESS REPORT, I`m Courtney Reagan.  


HERERA:  Coming up, is the item listed on that e-commerce site real or 

fake?  With the U.S. and China in the middle of a trade war, it might be 

harder to know.


HERERA:  Peloton was hit with a $150 million lawsuit.  A group of music 

publishers allege that the maker of video streaming exercise bikes used 

more than 1,000 songs from well-known artists without permission.  The 

publishers say Peloton failed to license songs from the companies, and that 

resulted in a loss of income.  Peloton says it is evaluating that 


As the U.S. and China continue their trade war and it heats up, in fact, 

Chinese nationals may have found a surprising way around the tariff, 

increasing the number of counterfeit goods according to the FBI.  China is 

behind an ever-increasing number of fake products and is now targeting 

American trademark records in a quest to gain access to e-commerce sites 

and American consumers.  

Andrea Day has the story.  



inspection station at JFK Airport, a massive warehouse where almost every 

package coming into the United States through New York City must pass 



talking about, you know, anywhere from 800,000 to a million pieces of mail 

a day.  

DAY:  That`s $92 billion worth of legitimate trade in just this past fiscal 

year.  Frank Russo is the JFK port director for Customs and Border 

Protection.  The mission: keep the real goods flowing and stop imposters in 

their tracks, a challenge, he says, like never before.  

RUSSO:  We`ve seen a big spike certainly of just volume.  

DAY:  From phony guns, jewelry and guitars.  

Just in the last 72 hours, all of these products came in here.  

RUSSO:  Absolutely.  Yes.

DAY:  So what`s behind these doors?  

RUSSO:  This is our most secure room.  

DAY:  The room loaded with potentially counterfeit drugs and more.  

RUSSO:  Everything from pharmaceuticals, tramadol, oxycodone, to ecstasy, 

MDMA, to counterfeit money, counterfeit IDs.  

DAY:  Fueling the spike, he says, e-commerce and smaller packages headed 

straight for the consumer.  

RUSSO:  An incredible uptick in e-commerce.  

DAY:  And some of these new super fakes, he says, are so real it`s almost 

impossible to tell the difference.  

Was this on its way to a consumer?  

RUSSO:  Probably.  Somebody ordered it online.  

DAY:  Fake or real?  

RUSSO:  Fake.  

DAY:  Where are we seeing most of these counterfeit products coming from?  

RUSSO:  Certainly China, one part of the world where we`re seeing an ever-

increasing number of counterfeit goods.  

DAY:  We wanted to find out what`s behind this virtual epidemic of fakes 

coming in from China and how so many are winding up on e-commerce sites for 



our clients.  

DAY:  Dyan Finguerra-Ducharme specializes in trademark law.  She says 

imposters are trying to hijack her clients` luxury brands by duping the 

U.S. Patent and Trademark Office or USPTO so they can register as the brand 

on sites like Amazon (NASDAQ:AMZN).  

FINGUERRA-DUCHARME:  They file a document with the trademark office that 

says our e-mail address has changed.  Then they go over to the Amazon 

(NASDAQ:AMZN) brand registry and say we are the owner of this mark and they 

give their e-mail.  Amazon (NASDAQ:AMZN) looks at the USPTO records and 

confirms the e-mail.  At that point, Amazon (NASDAQ:AMZN) gives them access 

to all of their tools, as the rightful brand owner.  With access to those 

tools, they can take down legitimate product and they can ensure that their 

own counterfeit product is sold on Amazon (NASDAQ:AMZN).  

DAY:  So you`re saying it could be as easy as just changing an e-mail to 

start this process?  

FINGUERRA-DUCHARME:  I`m saying it is as easy as changing an e-mail.  

DAY:  Amazon (NASDAQ:AMZN) tells us in part, we remove suspected 

counterfeit items as we become aware of them.  Amazon`s proactive 

technologies and services for protecting brands, including brand registry, 

are increasingly effective.  As a result, bad actors are attempting to find 

new ways to abuse our protection.  We are working closely with the brands, 

the USPTO and others to continue to strengthen our protections.  

FINGUERRA-DUCHARME:  It`s unbelievable how easy it has become.  

DAY:  When an e-mail address is changed, the trademark office sends out an 

alert to the old address to confirm, but Ducharme says they can easily be 

missed or even ignored by a brand.  

FINGUERRA-DUCHARME:  For my clients alone, I received about 12 or 15 of 

these e-mail alerts.  


come in and I find a new product, a new product category that 

counterfeiters are producing and faking.  

DAY:  Steven Shapiro is the unit chief for the FBI`s intellectual property 

rights unit.  

SHAPIRO:  They`ll communicate with the patent and trademark office as if 

they`re the actual brand holders in an attempt to change the contact 


DAY:  And as trade wars intensify, he says criminals are looking to e-

commerce and selling any way they can.  

SHAPIRO:  There are some that feel that as tariffs increase and other 

policy issues come along, that counterfeit is seen as an alternative route 

towards making additional profits.  It`s very difficult to monitor every 

single seller operating on these platforms because they are massive and 

they do have millions of transactions a day.  

DAY:  The USPTO tells us it takes the issue of fraudulent, unauthorized and 

improper submissions very seriously and is working right now to identify 

those filings and stop them from being processed or causing any harm.  



HERERA:  And that is NIGHTLY BUSINESS REPORT for tonight.  I`m Sue Herera, 

thanks for joining us.  We`ll see you tomorrow. END

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