ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Bill Griffeth and Sue Herera.
BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: Walking away. The chief executive of Wells Fargo (NYSE:WFC) is stepping down immediately from the scandal-plagued bank, and his most vocal critic cheers.
Next target. Should profits be taxed more than earned income? That`s what Democrats are asking as they eye higher rates on long-term capital gains.
New playbook. How one investor is taking a page from venture capitalists to identify and invest in the next generation of baseball stars.
Those stories and much more tonight on NIGHTLY BUSINESS REPORT for Thursday, March 28th.
And we do bid you a good evening, everybody, and welcome. Sue is off tonight.
Stocks rose today as trade talks between the U.S. and China resumed. We`ll
have more on that in a moment.
We begin with late-breaking news tonight — a surprising resignation at
Wells Fargo (NYSE:WFC). CEO Tim Sloan is stepping down effective
immediately. His departure was announced after the close tonight. He is
being replaced on an interim basis by the bank`s general counsel.
Wells Fargo (NYSE:WFC), of course, has been under intense scrutiny because
of the fake account scandal of a few years ago which has resulted in more
than $2 billion in fines. Sloan was promoted to CEO and charged with
cleaning up the mess, but he is now the second CEO to step down because of
Senator Elizabeth Warren had been a very vocal critic of Sloan`s. She
recently called on the Federal Reserve to maintain its growth cap on the
bank until Sloan was replaced.
After the news, she tweeted this out tonight. About damn time, she wrote.
Tim Sloan should have been fired a long time ago. He enabled Wells Fargo`s
massive fake account scam, got rich off of it and then helped cover it up.
Now, let`s make sure all the people hurt by Wells Fargo (NYSE:WFC) scams
get the relief they are owed.
The stock initially moved higher in after-hours trading tonight following
To Wall Street now, and the stock market where trade was once again in
focus, U.S. officials are in Beijing to resume talks between the world`s
two largest economies, and investors cheered with hope today. The Dow
Industrial Average rose to 91 points to close at 25,717, the Nasdaq added
25, the S&P was up 10.
Eunice Yoon has more for us tonight from Beijing.
EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Trade Representative
Robert Lighthizer and Treasury Secretary Steven Mnuchin are in Beijing for
their talks with China`s Vice Premier Liu He. The Commerce Ministry
confirmed that the two sides are going to hold discussions all day on
Friday and said that a lot more needs to be done.
“The Wall Street Journal” is reporting that the Chinese side is offering to
make concessions to give access to the country`s cloud computing industry.
Under the proposal, foreign tech firms would be allowed to own data centers
as part of a pilot in a free trade zone. This is the second report
indicating that China is making offers in its technology sector.
Trump administration officials told “Reuters” that the Chinese have put
forth proposals on forced tech transfers that have gone further in the past
in their size and scope. The “Reuters” report said U.S. officials want to
keep at least some of the tariffs as leverage over the Chinese, but whether
the Chinese will want to do that seems unlikely.
Sources familiar with the talks have told me that the two sides still need
to clarify how and when tariffs will be imposed, nail down undefined
language and find a way to make the deal enforceable. Separately, China`s
premier put a timetable on a new foreign investment law that`s meant to end
forced tech transfers. He said it would go into effect next January and
added we will heed the input from various parties, especially foreign
To drive home the message that Beijing is addressing the complaints of its
trading partners, including the United States, the Chinese vice premier
heads to Washington next week to continue the negotiations.
For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon in Beijing.
GRIFFETH: Well, with just one day left in the first quarter, investors
must be feeling pretty good, because it wasn`t just one part of the market
that saw gains, but pretty much all of it.
Bob Pisani is at the New York Stock Exchange.
BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: We`re about to wrap up
the first quarter and overall investors should be very pleased with their
investment portfolios. Even with all this hand wringing about lower bond
yields, it`s not just the S&P 500 which, by the way, is having the best
quarter since 2009, everything is up. And I mean everything. The stock
market, the bond market, Russell 2000, the small cap index is up 12
But bonds are doing great. High-yield bond ETFs are up 6 percent.
Corporate bond ETFs are up 5 percent. Even treasuries are up more than 2
percent and that doesn`t include the dividend.
So, what does it all mean? It means if you have a portfolio with a 60/40
stock/bond split, you have about 9 percent this quarter. That`s very
impressive gains for a balanced portfolio. And you`ve been a winner even
if you invest by sector.
All 11 sectors are up on the quarter. Technology stocks are the big
gainers but energy stocks are also strong as oil rallied. Industrial
stocks, which were dramatically oversold at the end of the fourth quarter
thanks to these global growth and trade concerns, they snap back. They`re
up 15 percent.
It`s not bad for three months` work.
For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock Exchange.
GRIFFETH: We learned today that economic growth in the U.S. slowed in the
final three months of 2018. Gross domestic product for the fourth quarter
showed a gain of just 2.2 percent. That was in line with expectations but
down from a previous estimate from the government. And that put full year
growth for all of last year at 2.9 percent. That actually was the best
year for the economy since 2015.
But Warren Buffett is noticing a slowdown in economic activity. During a
wide-ranging interview today, the chairman of Berkshire Hathaway
(NYSE:BRK.A) pointed to BNSF Railway. That is the freight rail company
owned by Berkshire that he says is signaling weaker growth.
(BEGIN VIDEO CLIP)
WARREN BUFFETT, BERKSHIRE HATHAWAY CEO: It looks like it`s slowing down.
I don`t mean that it`s reversing course or anything, but it does seem from
all of the businesses, but especially including railroad statistics,
because they come so fast and they cover such a broad spectrum, and it gets
distorted by whether people are hurrying up the Pacific Trade because
they`re worried about tariffs and all of that sort of thing. But I would
say that it does look like the pace of increase in the economy has slowed
(END VIDEO CLIP)
GRIFFETH: Well, if the U.S. economy is slowing down, it may be in part
because economies overseas are hitting the brakes. And today, the vice
chair of the Federal Reserve said the central bank must pay closer
attention to global growth risks because countries are linked more than
ever because of trade and financial transactions. During his speech today,
Richard Clarida explained how the U.S. economy could be shocked by a global
(BEGIN VIDEO CLIP)
RICHARD CLARIDA, FEDERAL RESERVE VICE CHAIRMAN: The shock will impact the
U.S. through direct trade links, lowering the demand for U.S. exports and,
thus, lowering GDP. Second, the foreign recession would lead to lower
interest rates abroad, and other things equal would tend to raise the value
of the dollar, which in turn could have an impact on exports and trade.
(END VIDEO CLIP)
GRIFFETH: And he emphasized that policy makers cannot ignore those kinds
To the housing market now. And today, we learned that home buyers signed
fewer contracts to buy existing homes in February when compared to January.
But mortgage rates have continued going lower since then, and those lower
rates have many feeling enthusiastic about the spring selling market.
Diana Olick has more.
DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: At a Sunday open house
in Bethesda, Maryland —
UNIDENTIFIED FEMALE: Check it out.
OLICK: — home buyers were taking advantage of warmer weather and lower
DANA RICE, COMPASS REALTOR: Everything is falling into place. Interest
rates are going down, the weather is nice, we have some houses to look at
and people are excited.
OLICK: Things were busy at this five bedroom colonial listed for $1.25
million. But while the supply of homes for sale is a little higher than
last spring, the market is still very competitive.
TANIA PETERS, PROSPECTIVE BUYER: It seems like there are fewer houses on
the market that are more affordable, and it also seems that they go very
quickly. So, within the first couple weeks of showing.
OLICK: Tonya and her husband, Matthew, want more space for their young
MATTHEW PETERS, PERSPECTIVE BUYER: If we look towards the upper end of our
price range, it seems like there`s more options.
OLICK: Price is still clearly an issue, while the price gains in most
markets are shrinking, the run-up over the last few years was dramatic.
And even falling mortgage rates are not making up for it. Pending home
sales in February, which measures signed contracts during the month, fell
from January and were down sizably from a year ago.
The average rate on the 30-year fixed saw a recent peak just over 5 percent
last November but then began falling slowly. Rates were around 4.5 percent
in February. In the past week, the rate took the steepest dive in a
decade, falling to right around 4 percent.
The hope in the housing market is that this latest drop will really juice
spring sales, but demand has been strong for a long time. It will really
come down to what today`s buyers can afford.
GLENN KELMAN, REDFIN CEO: People have been on a knife`s edge about whether
they can afford a house and lower mortgage rates mean more buyers. It has
had an unusual effect. There`s almost no slack in the system, because
wages haven`t kept up with home prices, people are having to borrow the
money. When it gets easier to do that, we see more buyers.
OLICK: And that Bethesda home that went on last weekend went under
contract by Tuesday.
For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Washington.
GRIFFETH: And in Washington, a proposal is being floated that has grabbed
Wall Street`s attention.
John Harwood reports the Democrats are looking at raising the tax rate on
long-term capital gains. John joins us from D.C. tonight.
I mean, it`s no surprise the Democrats want to raise taxes on the
wealthiest of Americans. So why go after capital gains?
JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT: Bill, you know,
Alexandria Ocasio Cortez, the fiery freshman House member from New York,
drew a lot of attention with her 70 percent rate. That`s a high rate. It
sounds high to a lot of people.
Democrats want to draw a contrast with Republicans on work versus wealth,
and so they`re focusing in on capital gains rates, which are lower.
They`re talking about raising them to not as high as 70 percent in any
event, and they think that that is a way to frame in the 2020 campaign a
better argument that will appeal to a wider array of voters.
GRIFFETH: So what proposals are we seeing so far on that?
HARWOOD: Well, you`ve got Bernie Sanders who wants to equalize the
ordinary income and capital gains rates, raise them both to 54 percent.
That`s not likely to fly. John Delaney, former private equity executive
who`s a long shot Democratic candidate says, we`ll just make the capital
gains rate the same as the personal rate now, that`s 37 percent.
Elizabeth Warren has got a wealth tax, which is different, but the
interesting thing about her wealth tax is what she would do is tax on a
mark to market basis the value of assets as they appreciate, not just when
they`re sold, which is what happens under existing law.
GRIFFETH: Quickly, any pushback within the party on any of this?
HARWOOD: Yes. Larry Summers, the former treasury secretary, told me if
you raise the capital gains rate over 30 percent, you will actually cost
the government money rather than gain it because selling capital gains is
voluntary — realizing capital gains is voluntary, depending on sales. If
you discourage sales, you`ll get less revenue and so, Larry Summers said
what`s the point of going that high.
GRIFFETH: John Harwood in Washington — thanks, John.
HARWOOD: You bet.
GRIFFETH: Time to take a look at some of today`s “Upgrades and
FedEx (NYSE:FDX) was downgraded today to neutral from positive at
Susquehanna. The analyst said the stock is going to remain under pressure
in the near term without a new source of cash flow. So, the price target
is now $192. That stock rose 1 percent to $177.90.
SeaWorld was upgraded to buy from neutral at B. Riley FBR. The analyst
calls that theme park operator a leader in its industry and can benefit
from improving economies of scale. Price target now is $34. That stock
was up a fraction to $24.68.
Monster Beverage was named a top pick at Credit Suisse today. The analyst
cited the company`s growth potential and pointed to slowing momentum at new
competitor Bang. The price target, $75. Shares dipped to $54.46.
Still ahead, startups promise to disrupt the financial services industry,
but that`s not exactly how it`s been
GRIFFETH: As you may know, Lyft makes its debut on Wall Street tomorrow,
and tonight it priced its IPO at $72 a share. That was at the high ending
of the expected range. That values the company as more than $20 billion.
Lyft is one of the mostly highly anticipated IPOs of the year.
Meanwhile, the government is suing Facebook (NASDAQ:FB). The Department of
Housing and Urban Development alleges that the company engaged in housing
discrimination. The lawsuit claims that Facebook (NASDAQ:FB) allowed
advertisers to restrict who was able to see ads on the platform based on
race and national origin. The department says that violating the violating
the Federal Fair Housing Act. Facebook (NASDAQ:FB) says it is surprised by
Amazon (NASDAQ:AMZN) said today it is adding 800 jobs to its tech hub in
Austin, Texas. Those positions will focus on engineering and cloud
computing. The expansion follows Apple`s announcement last year that it
will invest $1 billion into a new campus in that city. Whole Foods, which
is owned by Amazon (NASDAQ:AMZN), is headquartered in Austin, Texas.
The Federal Trade Commission has shut down four operations that it said
were responsible for billions of robocalls. According to the FTC, the
groups pitched a wide array of services from debt relief to home security
to fake charities. The agency has been calling on phone companies and
wireless carriers to help combat the scammers.
And according to “The Wall Street Journal” robocallers so far have been
fined more than $200 million since 2015. But at this point, the government
has only collected $6,700 of that amount.
It`s no secret that technology is causing rapid changes in many industries.
Tech startups are looking to reinvent just about everything these days,
including the way we bank. But that industry`s evolution is not exactly
going as some had planned.
Deirdre Bosa is in San Francisco for us tonight.
DEIRDRE BOSA, NIGHTLY BUSINESS REPORT CORRESPONDENT: If you ever paid a
bill using your phone or opened a savings account online, then you`re part
of the fast-growing fin tech industry which stands for financial
Fin tech startups were widely expected to challenge the traditional banking
industry by making it easier and faster to save, borrow and manage your
money without ever even having to walk into a local branch, but that total
disruption never happened. And as it turned out, startups and established
banks instead are working together.
There`s Chase` acquisition of payment startup We Pay. Citi`s partnership
with robo adviser Betterment. And this week, Apple (NASDAQ:AAPL) announced
a credit card with Goldman processed by MasterCard (NYSE:MA).
At the fin tech ideas festival organized by the Banks Policy Institute here
in San Francisco, large banks and startups are on stage together talking
about more collaboration.
AJAY BANGA, MASTERCARD CEO: I think sometime back when you go back to the
launch of Apple (NASDAQ:AAPL) Pay and the like, that itself was an
indicator that I think most companies understand. In today`s world to
succeed, rather than try and control everything yourself, the best way to
work is through partnerships.
DAN SCHULMAN, PAYPAL CEO: We think of ourselves today as a platform, not a
product company. And that`s a large part of our growth is based on that
definition and that extension.
BOSA: Experts also say the future of banking involves Blockchain, the
technology behind cryptocurrencies like bitcoin, but how and when
Blockchain transforms the industry is still unclear, even for those banks
that have made big investments in the technology.
CATHY BASSANT, BANK OF AMERICA CHIEF OPERATIONS & TECH OFFICER: If I have
to buy, I am bearish. I think that and I hope that it works. I want it to
make us better, but I have not yet seen a use case that tells me I`m be
dependent on it in ten years.
BOSA: Even the CEO of startup Ripple which wants to transform the way
financial institutions move money around the world acknowledge that
progress has stalled but says that Blockchain will play a central role in
banking in the digital future, it will just take time.
BRAD GARLINGHOUSE, RIPPLE CEO: Bitcoin, I think, actually, in many ways
it`s been great for the industry, because someone who not that long ago
saying Bitcoin is a fraud is now leaning in and macro good thing in the
industry and bringing credibility.
BOSA: As for what`s next, participants here expect more changes to the
normally staid financial services factor and that any transformation will
be driven by both the newcomers and old-timers alike.
NIGHTLY BUSINESS REPORT, Deirdre Bosa, San Francisco.
GRIFFETH: Movado shares are ticking higher and that`s where we begin
tonight`s “Market Focus”.
The luxury watch maker reported better-than-expected earnings thanks to a
35 percent increase in sales over the holiday quarter. The CEO said today
its lineup of newly acquired brands are helping to boost its online sales.
And shares soared by 22 percent today to $40.06.
Accenture reported stronger than expected quarterly results and it
increased its full year guidance. The global consultancy firm cited its
push into digital and its investments in cloud services. Accenture says it
plans to spend up to $1.5 billion on deals during the current fiscal year.
The stock gained 5 percent today to $175.12.
Meanwhile, Blackstone is reportedly dropping out of an auction for Nielsen
and reports say that Apollo global management is also losing interest in
that television ratings company. The auction was expected to be completed
this month. But the latest development pressured the stock. It fell 11
percent today to $23.66.
And a lawsuit against Boeing (NYSE:BA) has now been filed over the crash of
the Ethiopian Airlines jet. The suit was filed by the family of one of the
passengers on that flight. It alleges that Boeing (NYSE:BA) had
defectively designed the automatic flight control system of its 737 MAX
jets. Investors, though, shrugged the news off. The stock gained a
fraction to $374.44.
Coming up, the big money in March Madness.
(BEGIN VIDEO CLIP)
CONTESSA BREWER, NIGHTLY BUSINESS REPORT CORRESPONDENT: College
basketball`s sweet 16 kicks off tonight, and gaming companies and casinos
are hoping for some sweet returns.
I`m Contessa Brewer. Coming up on NIGHTLY BUSINESS REPORT, how these
companies are hoping for a piece of the March Madness action.
(END VIDEO CLIP)
GRIFFETH: Last night, a jury awarded a California man $80 million in
damages after he claimed that the weed killer Roundup caused his cancer.
The man had used that product on his 56-acre property for two decades.
Bayer now owns Monsanto (NYSE:MON), the maker of Roundup. It insists that
the weed killer is safe and said that it will appeal this verdict. In the
meantime, though, Bayer and Monsanto (NYSE:MON) still face hundreds other
lawsuits tied to Roundup.
Well, the sweet 16 portion of the NCAA men`s basketball tournament gets
under way today, and so far march madness has been big money for bookies
and in sports books.
With sports betting now legal in many states outside Nevada, Contessa
Brewer has a look at all of the ways that Americans can get a piece of the
action now. She reports tonight from East Rutherford, New Jersey.
BREWER: For the first time in history, the sports book here at the
meadowlands is accepting bets on March Madness, and a slew of other sports.
UNIDENTIFIED MALE: We`re all excited about this.
BREWER: The American Gaming Association predicts one in five adults will
wager a total of $8.5 billion. Much of that on those college basketball
brackets. But legal sports books are also getting a piece of the action.
Big business surpassing even the super bowl. In Nevada, traditionally
march madness brings in 65 percent of the sports betting action for the
year. Now a total of eight states have legalized sports betting and 30
others are moving forward.
Analysts predict New Jersey alone could draw 25 percent of Nevada`s handle.
Casinos and online platforms are rushing to cash in. FanDuel now grabs 50
percent of the market share in New Jersey. CEO Matt King is hoping for
MATT KING, CEO, FANDUEL: Nobody should ever kid themselves that the need
for good, stable, friendly regulation because if you don`t have that, then
you can`t compete against the illegal guys.
BREWER: And it`s these little devices, mobile gambling, that will drive
the profits of this industry. How important is it? In February, Super
Bowl, FanDuel brought in a million and a half dollars through this sports
book, but it brought in $6.5 million through online and mobile bets. Just
this week, Rhode Island passed a measure into law to allow sports gambling,
and these companies are counting on more states to follow suit.
KING: If you really want to bring the illegal market into the regulated
market, then it`s very important that they have access to mobile sports
betting. That`s what we have today.
BREWER: For investors, looking for some direct exposure to the U.S.
market, it`s not quite as easy as making a bet on your phone. David Katz,
gaming analyst at Jefferies, suggests looking to the technology or platform
providers or overseas.
DAVID KATZ, JEFFERIES GAMING ANALYST: The bricks and mortar casino
companies don`t look to make the most money from sports betting in the U.S.
It`s the technology and platform providers, IGT and scientific games, that
are best positioned. And even the U.K. companies, William Hill, Paddy
Power and GVC that are covered by our U.K. colleagues, are best positioned
for the U.S. sports betting business.
BREWER: For now, gaming companies are intent on growing market share and
lobbying more states to legalize sports wagers. FanDuel is betting March
Madness could wind up making this its best month ever. It`s expecting
sweet returns for the sweet 16.
For NIGHTLY BUSINESS REPORT, Contessa Brewer, East Rutherford, New Jersey.
GRIFFETH: And on this opening day for Major League Baseball, we have this
story of a former pitcher who is investing in minor league players and
stealing a page from venture capital playbooks.
Eric Chemi has the story in New York tonight.
ERIC CHEMI, NIGHTLY BUSINESS REPORT CORRESPONDENT: While the stock market
may be facing volatile times, there`s a creative way to get uncorrelated
returns, investing in baseball players. A company called Big League
Advance has raised more than $150 million to buy equity stakes in Minor
League Baseball players.
The idea is simple. The players get an up front payment, but it`s not a
loan. They can keep the money forever. In returning, Big League Advance
gets a percentage of any eventual Major League Baseballers.
The company has invested in over 130 players so far, including Fernando
Tatis Jr. and Jose Asuda, two highly regarded up and coming prospects.
Michael Schwimer, a former Major League pitcher himself, founded the
MICHAEL SCHWIMER, BIG LEAGUE ADVANCE FOUNDER & CEO: The player gets to
choose the equity they like to give up in return for the money that they
receive. Our kind of company motto is Big League Advance, buy players for
players. We might have a scale of a million dollars for 10 percent, but
$100,000 every one. The player can say, OK, I`ll do $300,000 for 3
percent. So our average deal is in the $300,000 to $500,000 range.
CHEMI: A typical Minor League Player might make less than $10,000 a year
so getting an upfront payment of 300 grand could be life-changing money.
Several superstar players, including Bryce Harper and Manny Machado
recently each signed contracts worth over $300 million. Earning a small
percentage of a contract like that would be a big win for Schwimer
The company`s motto is just like venture capital, losing a small amount of
money on most investments with hopes that a few superstars make up for all
SCHWIMER: If you invest in 10 tech startups and one or two become Facebook
(NASDAQ:FB) and Google (NASDAQ:GOOG), you`re going to do pretty well, even
though they`re eight or nine missed, and that`s how we do it, just for
baseball players instead of tech stocks.
CHEMI: One benefit of this type of investing is that baseball salaries are
not correlated to the whims of the stock market. The catch, though, is it
requires investors to be patient.
SCHWIMER: It`s a very long-term investment. You`re not free agent until
six years with a Major League team. You`re seeing that with Bryce Harper
now and Manny Machado and others. And so the tale is very long. So, on an
individual player investment, we`re not expecting a return for at least six
or seven years.
CHEMI: For NIGHTLY BUSINESS REPORT, I`m Eric Chemi in New York City.
GRIFFETH: And before we go, one final look at the day on Wall Street. As
we get ready for the ending of the first quarter, the Dow today rose 91
points, NBC added 25, the S&P was up 10 as traders watch for developments
out of Beijing on those trade negotiations in China.
And tomorrow we`ll see how the Lyft IPO does on Wall Street as well.
That`s NIGHTLY BUSINESS REPORT for tonight. I`m Bill Griffeth. Thanks for
watching, everybody. We`ll see you tomorrow.