ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Bill Griffeth and Sue
SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Steady as she goes. The Fed
signals it may not make any moves on interest rates this year, cutting its
forecast from two hikes to none.
BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: Antitrust fine. The
European Union goes after Google (NASDAQ:GOOG), just the latest regulator
to turn up the heat on big tech. Is this the price they pay for success?
HERERA: Done deal. Disney (NYSE:DIS) closes its blockbuster $71 billion
purchase of Fox and now, the hard work begins.
Those stories and more tonight on NIGHTLY BUSINESS REPORT for Wednesday,
GRIFFETH: And we do bid you a good evening, everybody, and welcome. So,
it was decision day for the Federal Reserve with a twist. As expected, the
Central Bank kept its benchmark interest rate unchanged.
What was not expected was a strong signal then that there will be no rate
increases this year and maybe only one next year. Investors breathed a
sigh of relief immediately after that announcement was made. The Dow
recovered from a 200-point decline but words from President Trump today
that U.S. tariffs against China may remain in place for a prolonged period,
that took a toll.
And by the close, the Dow was down 141 points. It closed at 25,745.
Nasdaq was still up five points. The S&P was down eight.
Steve Liesman has more on the Fed`s decision from Washington for us
STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: The Federal Reserve
in a series of major announcements after its March meeting kept interest
rates on hold, downgraded its economic outlook and forecast no rate hikes
in 2019. The meeting of members of the committee had previously forecast
two hikes this year. They`re gone now.
The Fed also decided to stop reducing its balance sheet, that some of the
market had said was hurting the economy and that would begin in September.
For a central bank that moves policy slowly, it was a rapid about-face for
a forecast of strong growth and a rate hike as recently as December.
Despite the changes, Fed Chairman Jerome Powell maintained a positive
JEROME POWELL, FEDERAL RESERVE CHAIRMAN: The data are not currently
sending a signal that we need to move in one direction or another.
Committee members, participants generally see a growth of around 2 percent.
They see unemployment remaining below 4 percent. They see inflation
remaining close to target and they see growth, as I said, around 2 percent.
So that`s a positive outlook. It`s a favorable outlook.
LIESMAN: Still, the Fed downgraded its outlook for growth from 2.3 percent
to 2.1 percent this year and Powell highlighted risks to the economy coming
in part from global developments.
POWELL: You see slowing global growth. You still have — there`s no
resolution of Brexit. There`s no resolution really of the trade talks.
These are ongoing risks. We`re also carefully monitoring what`s happening
with U.S. growth. We called that out in our statement, that the limited
data that we have do show a slowdown.
On the other hand, as I mentioned, we see the underlying economic
fundamentals for growth this year as still very positive.
LIESMAN: Finally, Powell noted that downward pressure on inflation is a
major challenge for Fed and central banks around the world. But overall,
no hint from Powell about what the next move is up or down. And he gave
the clear impression today he doesn`t know either.
For NIGHTLY BUSINESS REPORT, I`m Steve Liesman in Washington.
HERERA: Let`s turn now to Art Hogan for more analysis on the Fed, the
economy and the market. He is chief market strategist at National
Welcome back, Art.
ART HOGAN, CHIEF MARKET STRATEGIST, NATIONAL SECURITIES: Hi, Sue. Thanks
so much for having me.
HERERA: You say this is a bold move. I guess the question is, in your
opinion, was it the right move?
HOGAN: Well, it`s hard to say. You know, it`s interesting. The three
things I think about here, I really feel like Jay Powell didn`t need to
actually remove both of the dots for 2019. Plenty more meetings in front
of him that he could have done that, so that`s where it really gets bold.
So, that exceeded expectations.
But, you know, this is truly a Fed has made a pivot in January from being
auto pilot hawkish in December to patient in January and now they`re even
more patient. So, what does this tell us? It tells us the Fed is actually
at neutral. They`re literally at neutral.
And the next move could be a hike or a cut in interest rates. My guess is
the next move is a hike. And I think that probably comes in the first part
But right now, the Fed has reinforced the fact that they`re really patient
and that`s probably a tailwind for the market.
GRIFFETH: So what does the stock market do with that? Clearly for Wall
Street, no more hikes at least for the foreseeable future, that`s a good
thing. But they also downgrade the forecast on the economy. That`s not
such a good thing.
So where does the stock market go, do you think?
HOGAN: Right, and I think you really would rather have the Fed tightening
than cutting rates as their next move. And that would mean the economic
activity had picked back up. So, you know, we know the first quarter is
likely going to be slower than the fourth quarter of last year. We hope
that the second quarter picks up in activity. We don`t know that yet.
And I think what Jay Powell was speaking to was that, oh, by the way, the
global economy has slowed down and we have no resolution on both Brexit and
the U.S./China trade war. So, I think when we think about all of those
things, if any of those things turn positive. For example, if we get a
U.S.-China trade deal, I think the economy picks up in the second and third
quarter of this year. There`s just a question of when that timing comes
up. The Fed may have to hike again, it may happen this year, but it`s just
not in the cards.
HERERA: So, as you look at the market as an investor, a longer term
investor, how do you handicap this given the headline risk that you just
HOGAN: Well, we need a trade behind us to think we can earn $170 for the
S&P 500 this year. That`s what our base assumption is. And if we don`t do
that and if we escalate, then I certainly think that, you know, this market
Our base case is we`re going to get that trade deal done. Unfortunately,
we`re going through that back and forth process right now, which seems like
it`s the end of the process, not the beginning. But I think getting a
trade deal behind us, we think this market can move higher than we are
right now. We just need to get that in the rear-view mirror.
HERERA: All right, Art. We`ll leave it there. Thank you.
HOGAN: Thank you.
HERERA: Art Hogan with National Securities.
European Union officials say they are willing to grant a short delay for
Britain`s exit from the bloc but that delay comes with conditions. They
want parliament to approve the withdrawal plan that has already been
rejected. That increases uncertainty just days before the U.K. is
scheduled to leave the E.U. on March 29th.
GRIFFETH: And the European Union has ordered Google (NASDAQ:GOOG) to pay
$1.7 billion for antitrust violations. This is its third fines in a series
of penalties. The E.U. competition commissioner sys Google (NASDAQ:GOOG)
abused its position in the online advertising market.
(BEGIN VIDEO CLIP
MARGRETHE VESTAGER, EUROPEAN COMMISSIONER FOR COMPETITION: If you have a
travel Website or a news Website and you want to sell the advertising space
next to the search that you can do on your site, you need a broker. And
Google (NASDAQ:GOOG) is one of the absolute biggest brokers in this market,
and they misused their dominant position to make sure that no rivals were
able to compete in this market for advertising on new sites, on travel
(END VIDEO CLIP)
GRIFFETH: In response, Google`s parent, Alphabet, said today it has
already made changes to its products and that it plans to make additional
updates as well.
HERERA: The tech giant and others in the industry are also coming under
pressure here in the U.S. So what does that mean for the tech industry?
Ian Sherr is executive editor at CNET. He joins us now to talk about that.
Ian, welcome. Nice to have you here.
It seems as though Europe is taking the lead on all the talk about
regulation of big tech and also possible breakup of big tech. What do you
think is going to play out on this country`s soil?
IAN SHERR, CNET EXECUTIVE EDITOR: You know, it`s going to be really
interesting. I think there`s going to be an ongoing conversation on
Capitol Hill where they try to understand the basics of how technology
works. We`ve learned they have a lot of education to go through.
I think at some point, there`s going to be a test, whether it`s an attempt
to really see what a breakup of Google (NASDAQ:GOOG) or Facebook
(NASDAQ:FB) could look like, and then to see what happens to the rest of
the tech industry. But there`s going to be a lot of pushback, and
especially from the tech industry, who says, look, we`re getting all of
this pressure and we don`t deserve it.
GRIFFETH: Here it has happened again. It`s happened in the past.
Technology companies or companies on the cutting edge of some type of
innovation get way out ahead of regulators and lawmakers. It happened with
AT&T (NYSE:T), it happened with Microsoft (NASDAQ:MSFT), and now it`s
happening with a lot of these FANG stocks.
What`s your expectation not just for what the regulators and lawmakers are
going to do, but what the companies, how they will respond?
SHERR: Well, they need to get in front of this as much as they can, right?
There`s a lot of things that have been put out there. I think that Senator
Elizabeth Warren, who`s now a presidential candidate has caused a lot of
conversation that probably would not have happened otherwise or taken a
little longer by calling for a breakup of Amazon (NASDAQ:AMZN) and Apple
(NASDAQ:AAPL) and Google (NASDAQ:GOOG) and Facebook (NASDAQ:FB). So —
GRIFFETH: But is there — are there regulations or self regulation that
these companies can come up with that would give them some space between
the regulators and lawmakers so that they sort of tone down the rhetoric?
SHERR: They could answer a lot of these concerns. I mean, the thing is
that right now, these companies are getting a lot of pressure from all
sorts of places. And they`re kind of responding to some of it, but the
larger problems still remain.
You know, we`re still not convinced that the election interference that
happened in 2016 won`t repeat. We`re still not convinced that these
companies are not acting monopolistically, and there`s still ongoing
concerns that they are not protecting our data correctly.
And if they can`t answer those types of questions, they`re going to have a
bad day at some point.
HERERA: Yes, very quickly in the 30 seconds that we have left, if it
indeed it came to the ultimate solution, which will be perhaps a breakup,
wouldn`t that foster perhaps more innovation? We have seen that in the
past as well.
SHERR: That`s definitely an argument, and I think that`s where you`re
starting to see people like Senator Warren push toward, but that`s not a
guarantee. If we just break them up for the sake of breaking them up,
we`re causing trouble in the economy. We`re not actually being thoughtful.
That`s what`s important. We need to be thoughtful if we`re ever going to
go down that path.
HERERA: All right. Ian Sherr with CNET, thanks so much.
SHERR: My pleasure.
GRIFFETH: So, with all the talk about regulations and laws to rein in some
of these tech giants, is Wall Street`s so-called FANG era coming to an end?
And if so, where does new leadership come from?
Mike Santoli is staying late for us tonight at the New York Stock Exchange
to explore that.
And you actually don`t buy the notion that the FANG era is coming to a
MIKE SANTOLI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, I do, Bill,
think it`s a little premature to say it`s coming to a close. What we have
seen, though, is a little fracturing of FANG.
What I mean by that is if you look at Facebook (NASDAQ:FB), to a lesser
degree Google`s parent Alphabet, those stocks underperformed for a lot of
last year. Facebook (NASDAQ:FB) has had its valuation punished to some
degree because of all these concerns. But at the same time, Amazon
(NASDAQ:AMZN), Netflix (NASDAQ:NFLX), these companies that are not really
using your private data in a way to sell to advertisers but are selling a
service that you are purchasing of your own free will and you wish to, they
have actually performed better.
So there`s definitely been some rethinking about exactly how durable some
of these business models are.
HERERA: All right. So, if indeed we do see action against some of these
companies or regulations, where do you see new leadership kind of emerging?
SANTOLI: You know, Sue, it`s very difficult to conceive of new leadership
that is exactly as dominant as these companies, because I do think there`s
an argument to be made that these businesses are in some sense, they tend
toward natural monopolies. They have these network effects that gives them
power. But I think they would probably, if they did get broken up or
recede in the market`s favor, probably health care is the place to look —
whether it`s medical technology or health care services.
You`ve already seen it grow to a large portion of the overall market value
of the S&P 500. So perhaps that is the way to go. But we`ve gone long
stretches of time in the market without a single dominant cohort of
companies that was really driving returns.
GRIFFETH: But going back to the FANGs for a moment here, you have to admit
if there are to be regulations or some kind of a law, even if there`s a
breakup, that is going to put a crimp on their profitability going forward,
SANTOLI: No, I mean, I would completely agree with that. Not only overt
regulations or breakups or lawsuits, but also just the chilling effect it
has on these companies` ambitions down the road, right? Every one of these
technology companies probably figures it has to maneuver for its next act,
expand with new businesses, whether it`s self-driving cars or some other
And are they going to be permitted, for example, to make additional
acquisitions the way Facebook (NASDAQ:FB) has done so well over the years
or are they going to expand into those other areas aggressively. Or would
they be thwarted? Those things I think very long term should be on
investors` radars, just exactly how open-ended the growth prospects for a
lot of these companies?
GRIFFETH: Mike Santoli at the New York Stock Exchange — thanks, Michael.
SANTOLI: Thank you.
HERERA: It is time to take a look at some of today`s “Upgrades and
FedEx (NYSE:FDX) was downgraded to neutral from overweight at JPMorgan
(NYSE:JPM). The firm cites rising labor costs and potential pressure on
operating margins. As we reported, the company cut its full year profit
outlook late yesterday.
The price target is $202. The stock fell about 3.5 percent to $175.07.
Sony (NYSE:SNE) was downgraded to hold from buy at Jefferies. The analyst
cites concerns about a peak in game profits and Sony`s inability to exit
the smartphone business. The price target is $50.70. The stock fell
almost 5 percent to $43.28.
And Dollar Tree (NASDAQ:DLTR) was upgraded to outperform from market
perform at Telsey Advisory Group. The analyst there cites a recent meeting
with management which increased his confidence in the company`s plan. The
price target is $117. Shares rose a fraction to $101.35.
GRIFFETH: And still ahead, and idled auto plant and the home town feeling
(BEGIN VIDEO CLIP)
FRANK HOLLAND, NIGHTLY BUSINESS REPORT CORRESPONDENT: This Shrine of Hope
has been built outside this now closed GM plant that has President Trump
tweeting. I`m Frank Holland, I`ll have local reaction to those tweets and
the closure coming up on NIGHTLY BUSINESS REPORT.
(END VIDEO CLIP)
GRIFFETH: There are reports tonight that the FBI has now joined the
criminal investigation into the certification process of the Boeing
(NYSE:BA) 737 MAX. As first reported by “The Seattle Times,” the FBI`s
Seattle field office is now part of this investigation because of its close
proximity to Boeing`s 737 manufacturing plant in Renton. The investigation
is being overseen by the Justice Department and carried out by the
Transportation Department`s inspector general.
This latest report sent Boeing (NYSE:BA) stock initially lower in after-
hours trading tonight.
HERERA: Oil prices settled at a four-month high after hitting $60 for the
first time since November. Government data showed a sharp decline in oil
and refine fuel inventories. That sent the price of domestic crude higher,
though it settled just below that $60 level.
GRIFETH: Optimism among the nation`s CEOs is cooling off. According to
the latest survey from the business roundtable, chief executives are
concerned about global economic growth. CEOs now see the economies growing
at 2.5 percent. That would be this year and it`s slightly down from the
HERERA: The Disney (NYSE:DIS) and Fox merger is officially complete, and
it could mark the beginning of a new era for Hollywood. But integrating
the two companies could prove challenging.
Julia Boorstin explains.
JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Disney (NYSE:DIS)
has officially acquired Fox`s entertainment assets, including its movie and
TV studio with its Avatar (NASDAQ:AVTR) and X-Men franchises, along with
National Geographic and FX, plus Indian media giant Star, and an additional
30 percent stake in Hulu.
These assets building Disney (NYSE:DIS) into a behemoth with more content
to stream direct to consumers to enable and to better complete with digital
giants such as Netflix (NASDAQ:NFLX).
JOEL KULINA, WEDBUSH: It`s kind of roll the dice to see who`s going to
come out. It`s going to — for everything to go seamless and everyone to
be a winner, that`s probably a little unrealistic. And we`ve seen Netflix
(NASDAQ:NFLX), what they`ve done over the years is spend, spend, spend.
I mean, I think Disney (NYSE:DIS) and the likes of so many other players
going to find out to compete with Netflix (NASDAQ:NFLX), it`s going to ding
BOORSTIN: Iger writing in a note to employees today: I wish I could tell
you that the hardest part is behind us. That closing the deal was the
finish line rather than just the next milestone. What lies ahead is the
The challenge that lies ahead isn`t just about integrating the two
companies but about the launch of Disney`s direct-to-consumer streaming
service, Disney (NYSE:DIS) Plus, later this year. It`s expected to include
new, original exclusive content plus Disney`s library.
Disney (NYSE:DIS) will unveil the details of the new service which will
feature its major brands such as “Star Wars” and Fox`s National Geographic
at a preview day next month.
JOANNA COLES, FORMER HEARST CHIEF CONTENT OFFICER: It remains to be seen
if Gen Z, millennials, actually want to download something called Disney
(NYSE:DIS) Plus. Does that remind them of their childhood? Do they like
the idea of something more edgy? Which is definitely what Netflix
BOORSTIN: As Disney (NYSE:DIS) doubles down on on-demand content, the
remainder of Fox is focused on live news and sports, spinning of as an
independent company, focusing on its ability to drive ad revenue and cable
retransmission fees for its timely content, looking to benefit from the
political news cycle in sharp contrast to Disney`s more timeless content.
For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin.
GRIFFETH: The FDA approves the first postpartum depression drug. That`s
where we begin tonight`s “Market Focus”.
Sage Therapeutics is the company that made the injectable drug called
Zulresso that treats this condition. It will only be available through a
restricted program because there are concerns about risks, including
excessive sedation or sudden loss of consciousness. Two clinical studies,
though, showed improved symptoms at the end of the first infusion. And the
CEO says that is key.
(BEGIN VIDEO CLIP)
JEFF JONAS, SAGE THERAPEUTICS CEO: When you think about what we
potentially are offering — rapid response, one-time therapy, getting women
back home, you know, we don`t hear any resistance to that. In fact,
there`s a lot of enthusiasm, in order for these women not to suffer in
silence but to get better.
(END VIDEO CLIP)
GRIFFETH: Wall Street has been anticipating this. The stock has been up
60 percent so far this year, but it ended the day down more than 2.5
percent to $152.46.
General Mills (NYSE:GIS) increased prices, and it paid off. The packaged
food maker today reported higher margins, better-than-expected earnings and
it is now forecasting improved profits for this fiscal year. The company
was also helped by lower costs. Shares rose about 2 percent today to
HERERA: Nexstar will sell 19 TV stations for more than a billion dollars
to Tegna and Scripps. The divestitures follow the acquisition of Tribune
Media by Nexstar which said it is in talks to sell two more stations in
Indianapolis. All three stocks fell. Nexstar was off a fraction. Tegna
and EW Scripps were down close to 3 percent each.
Ford plans to build a new factory in Michigan for autonomous vehicles. The
new facility is expected to open in the necessary two years. The move is
part of the automaker`s plan to focus on its future line up of self-driving
and electric cars. The stock fell 2 percent to $8.51.
GRIFFETH: President Trump traveled to Ohio today just days after
pressuring General Motors (NYSE:GM) to reopen a plant in that state. The
automaker`s factory closed earlier this month and the town of Lordstown is
feeling the impact.
Here`s Frank Holland.
FRANK HOLLAND, NIGHTLY BUSINESS REPORT CORRESPONDENT: Outside of its now
closed factory where General Motors (NYSE:GM) made the Chevy Cruze, a
Shrine of Hope left by some of the thousands of workers who made their
RYAN MCCABE, LAID OFF GM EMPLOYEE: You just don`t replace these jobs.
HOLLAND: Ryan McCabe, a husband and father of six, was laid off from the
Lordstown, Ohio, plant, after 19 years.
MCCABE: Your family has worked at General Motors (NYSE:GM), your family
has retired from General Motors (NYSE:GM), and you`re the last one there.
Then, all of a sudden, it`s all gone.
HOLLAND: GM closing this factory as it focuses more on trucks and SUVs.
Sales of the Cruze sedan falling by almost half over the past five years.
McCabe took these pictures of the last Cruze leaving the assembly line.
Now, he and thousands of other workers are searching for jobs at other GM
MCCABE: When General Motors (NYSE:GM) and Mary Barra tells us there`s all
these opportunities for us to transfer, it comes across as so cold and
calculated because I know they have kids, I know they have families. How
would they react in the same situation as us?
HOLLAND: Lordstown is under reallocation and could reopen after September
when GM and the union enter contract negotiations.
But President Trump, who visited Ohio today, wants answers now. Tweeting
over the weekend: I want jobs to stay in the USA and want Lordstown and one
of the best economies in our history opened or sold to a company who will
open it up fast.
MCCABE: I`m glad he is supporting us and wants to help us. I just wish he
would come here and kind of see firsthand, instead of just making random
tweets about it.
HOLLAND: The reaction from others in town is mixed, especially after a
2017 speech where the president told local workers manufacturing jobs would
be coming back.
UNIDENTIFIED FEMALE: I think it`s a little too late. I think he should
have been on the bandwagon when they first — when they cut the other
shifts and when they announced that they were going to cut this shift.
UNIDNETIFIED FEMALE: I feel like it`s the company`s fault, not the
HOLLAND: The closure of this plant is expected to have a $3 billion
negative impact on this region this year. But at the same time,
manufacturing jobs here in Ohio have grown more than 2.5 percent since
January of 2017. Still, the fate of this factory and McCabe remains
MCCABE: We don`t know if this is a temporary layoff or permanent layoff.
The whole unallocated status just kind of makes — it makes it hard to
gauge what to do, especially for people with families.
HOLLAND: For NIGHTLY BUSINESS REPORT, Frank Holland in Lordstown, Ohio.
HERERA: Coming up, companies are looking for the next big thing in gaming.
But are consumers willing to pay up?
GRIFFETH: There was a legal setback for German life sciences giant Bayer
last night. A second jury has ruled that its Roundup weed killer caused a
man`s cancer. Bayer denies the allegation, saying it was disappointed with
the decision. Bayer did acquire Monsanto (NYSE:MON) which makes Roundup
for $63 billion last year.
HERERA: We told you yesterday about Google`s big push into the growing
video game market. Today, other companies showed off their new innovative
devices that they hope will be the next big thing in gaming.
Josh Lipton is in San Francisco tonight.
UNIDENTIFIED FEMALE: Great. If you move your body around —
JOSH LIPTON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Some fans don`t just
want to play video games, they want to feel like they`re inside the game
itself. That`s the appeal of virtual reality or VR, a totally immersive
Today, here at the Game Developers Conference in San Francisco, one of the
biggest players, Facebook (NASDAQ:FB)-owned Oculus, introduced the Oculus
NATE MITCHELL, FACEBOOK HEAD OF VR PRODUCTS: Rift S features a much higher
resolution display, which obviously makes the whole image a lot clearer and
more immersive, and also features, you know, Oculus touch controllers,
which give you a natural sense of real hand presence, being able to reach
out and interact with the virtual world around you.
LIPTON: It`s not just the big companies. Startup magically sells so-
called mixed reality goggles where the digital content is integrated into
the real world. For example, when I put on the goggles, I suddenly
appeared like an old man to my fellow gamer, as we ran around the room and
took shots at each other.
But for all the hype, this remains a relatively small market for now.
Analysts say only 6 percent of U.S. gamers own a virtual reality or
augmented reality headset.
In part they say that`s because there still isn`t enough compelling content
right now to motivate a lot of gamers to go out and buy this hardware. And
that`s partly because of the rising popularity of games that are free to
play, like “Fortnite”, made by Epic Games. It boasts more than 200 million
registered players, raking in almost $2.5 billion last year.
Electronic Arts (NASDAQ:ERTS) released rival game “Apex Legends” in early
Fifty million players signed up for that game in the title`s first month.
Analysts are watching Electronic Arts (NASDAQ:ERTS) closely. If “Apex
Legends” is a success, then other publishers, such as Activision may follow
suit and more enthusiastically embrace that same free to play battle royale
For NIGHTLY BUSINESS REPORT, I`m Josh Lipton at San Francisco.
GRIFFETH: Finally tonight, it`s time for March Madness. According to the
American Gaming Association, nearly 50 million Americans are going to wager
a collective $8.5 billion on the college basketball tournament. This is
the first March Madness, by the way, since the Supreme Court overturned
that ruling that effectively outlawed sports betting in almost every state.
HERERA: Here`s a look at the final numbers on Wall Street. The Dow fell
141 points, Nasdaq rose 5, S&P 500 down 8.
That will do it for NIGHTLY BUSINESS REPORT tonight. I`m Sue Herera.
Thanks for joining us.
GRIFFETH: I`m Bill Griffeth. Have a great evening. We`ll see you