Nightly Business Report – April 17, 2019

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

BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR:  Big tech comeback.  A group  closes at a new high, a big move considering it was battered and bruised  just a few months ago. Shifting gears.  The major automakers are embracing electric vehicles and  making green more affordable for drivers.

Sweet idea?  Can a company known for its gold box of chocolates find growth  by expanding into an ultra competitive industry?  

Those stories and more tonight on NIGHTLY BUSINESS REPORT for this  Wednesday, April 17th.

And we do bid you a good evening, everybody, and welcome.  Sue is off  tonight.

Don`t look now, but big tech is making a very big comeback.  That sector  has been powering higher the past few months, and today, the Nasdaq 100  closed at a record high.  That index is a basket of 100 largest and most  actively traded companies on the Nasdaq, which is made up mostly of  technology stocks.  It`s a remarkable turnaround for a group that was  beaten down just a few months ago.   Bertha Coombs starts us off tonight.  

BERTHA COOMBS, NIGHTLY BUSINESS REPORT CORRESPONDENT:  The Nasdaq 100`s  gains today were driven by Apple (NASDAQ:AAPL) and chip technology firm  Qualcomm (NASDAQ:QCOM) after the tech giants announced that they had  settled their longstanding patent dispute.  Large cap tech names dominate  on the Nasdaq 100 and it has been their strong recovery in 2019 that has  pushed the index to a new record high after what was a brutal year end of  2018.  

The semiconductor sector is a prime example.  Semis fell 18 percent in the  fourth quarter and concerns the U.S.-China trade war would make it  difficult for manufacturers to import chips to the U.S.  The trade  headlines have improved.  Chipmakers have seen a strong recovery with new  highs today for Qualcomm (NASDAQ:QCOM), Intel (NASDAQ:INTC) and Broadcom  (NASDAQ:BRCM), and a new record for the sector.  

The biggest contributors to the Nasdaq 100`s gains year to date have been  four of the tech heavyweights that suffered big losses in December.   Facebook (NASDAQ:FB) is now up 36 percent.  Apple (NASDAQ:AAPL) up 28  percent and Amazon (NASDAQ:AMZN) up 24 percent and Microsoft (NASDAQ:MSFT)  up 20.

But the next big catalyst for this group is going to be earnings, with all  four scheduled to in the next couple of weeks.  
For NIGHTLY BUSINESS REPORT, I`m Bertha Coombs at the Nasdaq.  

GRIFFETH:  Timothy Lesko joins us now to talk more about technology and  what`s driving it.  He`s principal at Granite Investment Advisers.
Tim, always good to see you.  Thanks for joining us tonight.

GRIFFETH:  So, just a few months ago, and as Bertha was pointing out, down  so sharply and now we`re back.  But does that mean the problems that were  plaguing the group, the problems with semiconductors, the slowdown in sales  for smartphones, the trade concerns, are those gone now?  

LESKO:  I wouldn`t say that all of the concerns are gone, but a few have  been taken off the table, particularly investors see that the Chinese trade  negotiations seem to be going well or better than anybody expected and on  top of that a few of the individual stocks had stock-specific news that  went their way.  So, it was a nice combination of those stock-specific news  and market news in general.

GRIFFETH:  And what are your expectations for the earnings that she was  just mentioning for some of these giants that are reporting soon?  

LESKO:  Well, the same factors that brought the stocks down heavily in the  fourth quarter of last year led to analysts really cutting their estimates.   So, these companies don`t need to grow that much to beat the lower  expectations that Wall Street had set for them over the next few weeks so  we expect a good earnings season out of technology.  

GRIFFETH:  And what about the semiconductors?  I mean, they are a, what, a  benchmark for the whole industry right now, and they have suffered greatly.   What`s your outlook for some of those companies right now?  The Intels and  others that are out there?  

LESKO:  Right.  Well, certainly, you have Intel (NASDAQ:INTC), Qualcomm  (NASDAQ:QCOM) and Broadcom (NASDAQ:BRCM) which both had mentioned and all  three of them had very, very specific reasons why they were struggling  against a broader technology that had done well and each of them had solved  those problems that we were worried about.  
So, in Intel`s case, they are getting out of the 5G chip business which  they were really struggling in and investors saw that as a positive light.   So, we really have good expectations for all three of the major chipmakers  and all of them are trading at a reasonable valuation.  So, there`s plenty  of room for them.  

GRIFFETH:  All right.  Well, so far so good for that group as it moves  higher.  
Tim Lesko with Granite Investment Advisers — thanks again for joining us  tonight, Tim.  

LESKO:  Thank you for having me.

GRIFFETH:  And it`s not just the tech sector moving higher.  Other parts of  the U.S. and global markets have also been rallying, just not today.  The  Dow was down three points, we were at 26,449 at the close; the Nasdaq fell  by four; the S&P 500 slipped by six.  
Bob Pisani, though, has more on what has been working for investors.  

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT:  The U.S. bucked the up  trend in global markets on disappointing earnings and the continuing  weakness in healthcare.  But markets in Europe and Asia were up as China  reported better first quarter GDP numbers than expected.  GDP has been  declining for years in China and the anticipation of a bottom there is the  main mover of the global stock market in the past couple of months on the  heels of the massive stimulus over there and the hopes for a trade deal.  

The S&P 500 isn`t the only major index patterned near a new high.  Stock  exchanges in Russia, in China, in Saudi Arabia, all at 52-week highs.   India is at an historic high.  

The other main mover s have been earnings and fear of an earnings recession  and two or more consecutive quarters of a decline on the S&P 500 are  dissipating as China avoids a meltdown and Europe kind of just muddles  through.  Analysts dramatically cut earnings estimates in December on those  fears and they appear to have cut too much.  

Just look today at the companies that are beating earnings on very wide  margins, including Netflix (NASDAQ:NFLX), Morgan Stanley (NYSE:MS) and  Textron (NYSE:TXT), all beating earnings estimates by double digits, that`s  far more than the typical earnings beat of about 3 percent.  Only IBM with  weak earnings growth and negative growth was a major disappointment today.  

As a result, many sectors of the S&P are at or near new highs, technology  and consumer discretionary, consumer staples and communication services.  

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

GRIFFETH:  More now on those growth numbers out of China overnight which  seemed to signal stabilization in the world`s second largest economy, and  it comes after that country flooded its economy with stimulus money.  
Eunice Yoon reports for us tonight from Beijing.

EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT:  Investors have been  asking if China`s economy is bottoming out and it appears to be  stabilizing.  China`s GDP for the first quarter came in at 6.4 percent,  slightly beating expectations of a slowdown.  Industrial output was its  strongest in four and a half years, 8.5 percent, possibly because the U.S.  and China have been holding back on tariffs as well as seasonal factors,  manufacturers were in full force after the lunar New Year holiday in  February.  

(INAUDIBLE) said Beijing`s recent policy steps like tax cuts for consumers  and local government bond sales showed up in the March data, retail sales  jumped, fixed asset investment picked up, construction starts to jump 18.1  percent year on year from 6 percent in the previous month as the  authorities loosened real estate curves.  Analysts believe that this could  mean China`s policymakers would hold up on further stimulus for now.  
They also have to worry another factor: rising prices.  Pork production  fell by 5.2 percent year on year as China attempted to contain an outbreak  of African swine fever in its hog population.  Prices are expected to rise  by more than 70 percent in the second half of the year, putting upward  pressure on inflation.  
For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon in Beijing.  

GRIFFETH:  Let`s turn to Mark Grant right now for more on the global  markets.  He is the global market strategist at B. Riley FBR.  
Mark, good to see you again.  Thanks for joining us tonight.
MARK GRANT, B. RILEY FBR CHIEF GLOBAL MARKET STRATEGIST:  Hi, Bill.  Good  to see you.  Always a pleasure.  

GRIFFETH:  So, the biggest concern, let`s face it, in the global economy  has been China.  What did you think of these numbers overnight?  They were  pretty impressive.  

GRANT:  They were certainly much better, Bill, than most people thought.   The issue in my mind with China is the amount of stimulus that the  government has been providing and the increased amount of debt and not only  the corporate debt, but public debt in China that I think has gone a long  way to stimulate their economy, plus their central bank, the People`s Bank  of China has been adding quite a bit of money into the economy, and it`s —  I think that`s a big cause of the upward move here.  

GRIFFETH:  So you`re concerned about that part of the equation, but what  about the trade talks.  We hear that the progress continues and they hope  to have something signed by next month.  
GRANT:  You know, that`s what they say, they`ve indicated this before and I  hope they do.  I think it would certainly be good for the markets both in  China and the United States if this gets accomplished.  So, we`re all  sitting around on Wall Street with our fingers crossed.  

GRIFFETH:  Yes, indeed.  Are there other parts of the global economy that  you like better at this point?  That you feel — we had an analyst last  night saying the emerging markets are attractive right now.  What do you  think?  

GRANT:  I don`t think that`s correct and my favorite market and the global  markets right now is the United States because of the stability, because of  very low interest rates, because the Fed has changed its course.  
My biggest concern, by the way is in China, and it`s Europe.  Europe on May  23rd, it has its national elections, or elections across the whole European  Union.  


GRANT:  And it looks to me, like, Bill, that the group that`s controlled  the use since its inception which is the German-French alliance, the  populist or the nationalists is what I think the better word is, but are  going to get either a significant share of the new E.U. parliament or they  might get the majority of the new E.U. parliament, and I think the European  Union will be a very different place.  So I`m very cautious on any  investments in Europe right now.  

GRIFFETH:  And very quickly, all of the central banks around the world  except ours right now seem to be loosening their monetary policy and you  mentioned China, both elsewhere.  But does that bother you at all?

GRANT:  Well, I think it`s a positive that interest rates are lower,  without any question.  The Japanese central bank they have a balance sheet  that`s equivalent to the entire GDP of Japan.  The ECB has a balance sheet  way larger than the Fed at this point, and they`re going to be lending more  cheap money to the banks over there.


GRANT:  And the Fed has done a back flip, if you will, and has stabilized  interest rates.  I think that`s been a very positive for both the bond and  the equity markets in the United States, and I think that`s going to  continue.  

GRIFFETH:  All right.  Mark Grant with B. Riley FBR — again, thanks for  joining us tonight.  

GRANT:  Thank you, Bill.  Thank you, sir.  

GRIFFETH:  You bet.  
Speaking about the Federal Reserve, it released its monthly anecdotal look  at the U.S. economy today, and it showed moderate growth despite continued  trade tensions and the severe flooding that we saw in the Midwest.
Steve Liesman has more on the Fed`s Beige Book.  

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT:  The Federal  Reserve`s April Beige Book finding slightly moderate growth in the 12  districts of the Federal Reserve.  It`s a similar report as last time, but  some districts did see strengthening, consumer spending was mixed with  sluggish sales for general retailers and for autos.  

Now, the contexts in many districts reported, quote, trade related  uncertainties with about as much concerned mentioned about trade and  tariffs in this report as the last one.  Employment continues to increase  with the majority of districts in high-skilled jobs, and the weight  pressure, especially for those high-skilled jobs, and most districts are  saying there was modest wage growth.  

Prices overall were up modestly with input costs increasing, including  higher fuel prices, tariffs, freight costs and rising wages all driving the  pricing trend here.  

In St. Louis, retailers expected to be able to pass along their higher  prices.  Oh, by the way, in St. Louis, there was concern about flooding in  Minneapolis and Kansas City as well affecting the agriculture industry.  
But to the wages, Dallas reported elevated wage pressure.  Philly, more  than half of fall firms expected higher input costs.  And New York City,  there was a widening gap between the salary demands and salary offers that  left some positions unfilled.  
For NIGHTLY BUSINESS REPORT, I`m Steve Liesman in Washington.  

GRIFFETH:  One bit of economy news, our trade deficit with the world fell  in February to its lowest levels since June of last year.  That was well  below what economist had been expecting, and the decline was due in large  part to a 28 percent decline in the goods deficit with China, as exports to  that country rose.  In the meantime, as we mentioned trade negotiations  with China are moving along.  

According to the Dow Jones, U.S. and China are expecting to reach a deal as  soon as May with the two countries setting a tentative time line for the  next round of talks that involves Trade Representative Robert Lighthizer  going to Beijing the last week of April.  

Elsewhere, you take a look at some of today`s “Upgrades and Downgrades”,  with Bank of America (NYSE:BAC) being downgraded today to hold from buy at  Jefferies.  The analyst cited some challenges when it comes to fees,  service charges and net income.  The price target now $32.  That stock was  up a fraction today to $30.03.  

Paypal was downgraded to neutral from buy at UBS.  The analyst says the  monetization of its Venmo app is already priced into that stock.  Price  target now, $120.  Shares were up modestly to $108.81.  
And ride-hailing company Lyft was initiated with a neutral rating at  Susquehanna today.  The analysts says that Lyft investors should be  concerned with the company`s position as the number two player behind Uber  which will debut on its own on Wall Street next month.  The price target on  Lyft, $57.  The stock was up nearly 6 percent today at $59.51.
Still ahead, automakers are plugging in.  

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT:  I`m Phil LeBeau at the  New York Auto Show, where electric vehicles like this one from Rivian are  turning heads like never before.  Why are so many people now considering an  EV?  That story coming up on NIGHTLY BUSINESS REPORT.


GRIFFETH:  Zoom, one of the highly anticipated high tech companies coming  public, reportedly has priced its initial public offering at $36 a share.   That was above expectations.  As we`ve been reporting, Zoom has been  profitable, which sets it apart from some of the other tech companies that  are coming public.  Shares will begin trading tomorrow on the Nasdaq under  the ticker symbol, ZM.  

Well, one day after Qualcomm (NASDAQ:QCOM) and Apple (NASDAQ:AAPL) ended  their long-running legal battle, the CEO of Qualcomm (NASDAQ:QCOM) today  said that he is looking forward to working with the iPhone maker.  

During an interview, Steve Mollenkopf also said that now is the time for  his company to look to the future and focus on new opportunities including  5G.  

STEVEN MOLLENKOPF, QUALCOMM (NASDAQ:QCOM) CEO:  We did put the medal to the  metal on 5G.  I think it`s a right thing to do for the company.   Independent of this relationship, and I`m sure it was important to this  relationship as well.  It`s a lot — you know, the impact of 5G is just  going to be tremendous, not only in the handset space but outside of the  handset space.  

We think we`re the clear leader and I think that`s going to be a good thing  not only for our customers, but for our shareholders.  

GRIFFETH:  Qualcomm (NASDAQ:QCOM) rose another 12 percent today, adding to  that 20 percent gain we saw yesterday.  
Pepsi shares rose to a record high today after the company reported solid  quarterly results and said the investment in its snack business is paying  off.  That sent the stock up more than 3.5 percent to that all-time high.  
Sara Eisen has details.  

SARA EISEN, NIGHTLY BUSINESS REPORT CORRESPONDENT:  PepsiCo is turning up  growth a notch, posting its best sales growth in about three years.  The  key number for PepsiCo, organic revenue, growing 5.2 percent.  
What`s behind that kind of growth?  Well, snacks for one is doing much  better.  Growth in Frito-Lay in particular, the core brand fueling the  gains, but also North American beverage business has come back lately.  
Hugh Johnston, the CFO and the vice chairman of PepsiCo, says the portfolio  is just working. 

HUGH JOHNSTON, PEPSICO CFO:  I think it`s a combination of a few things.   Number one, you see continued portfolio strength, whether it`s our U.S.  businesses, our international businesses across snacks and beverages, we  just continue to see strong broad-based performance.  In addition to that,  our North American beverage business really has been strengthening over the  last couple of quarters as we`ve invested in more advertising, we`ve  invested in more execution.  

EISEN:  PepsiCo is spending a lot more these days on advertising just like  Coca-Cola (NYSE:KO) has been doing.  It`s also seeing better execution.   For instance, when it comes to the sales force on the ground, just placing  product in the store, Johnston tells me they`ve seen a lot more  efficiencies that lead to higher profits and higher sales.  He also says  it`s a pretty consumer globally.  

JOHNSTON:  Within our segment of the economic world, we see a consumer that  is capable of spending and is willing to spend on products that they really  see is differentiated and adding value, and that`s what`s driving our focus  behind putting money behind advertising, putting money behind innovation,  because when you deliver something different that the consumer likes,  they`re certainly willing to pay for it and buy lots of it.  

EISEN:  The market has also reflected Pepsi`s new growth prospect.  The  stock has outperformed Coca-Cola (NYSE:KO) and the rest of the staples so  far in 2019, and it`s certainly upped the bar for Coca-Cola (NYSE:KO)  reporting earnings next week.  It`s been hit a little bit harder by the  strength of the U.S. dollar because it has a much bigger international  business.  

GRIFFETH:  Morgan Stanley (NYSE:MS) topped Wall Street earnings and revenue  estimates and that`s where we begin tonight`s “Market Focus”, with the bank  citing growth in its wealth management unit, as well as on cost-cuts.  

James Gorman, the CEO, said that overall, results were solid despite a slow  start to the year.  On a call with analyst the outlook remains uncertain.  

JAMES GORMAN, MORGAN STANLEY CHAIRMAN & CEO:  The world remains uncertain.   I`d love to think the next three quarters is the last three quarters of  last year, but, you know, I`m a betting man and I`m not sure I make that  bet right now.  The world is uncertain, and until we see more clarity,  we`re going to be very disciplined.  It`s not a panic, we just, good  schematic funds management.

GRIFFETH:  Morgan Stanley (NYSE:MS) shares rose more than 2.5 percent today  to $48.26.  

U.S. Bancorp (NYSE:USB) reported a rise in commercial and mortgage lending,  as well as some of its payments businesses and that helped the company  report earnings that were in line with expectations although revenue was  slightly below estimates.  The CEO said the company was helped by rising  interest rates and higher yields on securities, and shares rose a fraction  today to $50.67.  

American Airlines says it cannot yet forecast the cost of the 737 MAX  groundings.  The carrier says it`s still too early and too much uncertainty  around that issue.  Earlier this week, you may remember American canceled  all 737 MAX flights at least through mid-August.  That stock was up 1  percent today to $34.38.  

And U.S. railroad operator Kansas City Southern (NYSE:SO) (NYSE:KSU) topped  first quarter earnings estimates, its revenue was up 6 percent from last  year, and it was helped by an increase in refined fuel and grain shipments  to Mexico.  The company gets one-third of its revenue from that country.   The stock rose 4 percent today to $122.81.  

Abbott Labs also reported a healthy profit and rise in sales, thanks to  growth in its heart and diabetes care devices.  The CEO said the company`s  long term growth drivers are performing well and he`s targeting another  year of strong sales.  But investors apparently are focusing on regulatory  uncertain with that talk in Washington about changes in healthcare  insurance programs, and the stock fell 4.5 percent today to $72.88.  

After the bell tonight, Las Vegas Sands (NYSE:LVS) reported higher revenue  and better than expected profit.  The gaming company cited growth in Macau,  which is now the world`s largest gambling market, and that sent the stock  higher in after-hours trading.  It finished the regular session at $67.91.  

While auto sales are gradually slowing, automakers believe that America is  finally warming to buying an electric vehicle.  And that may explain why  plug-in models have been grabbing the headlines at this year`s New York  Auto Show.  That is where we find Phil LeBeau tonight.  

LEBEAU:  From electric pickups to luxury plug-ins to crossovers like the  Jaguar I-PACE, automakers are embracing EVs like never before.  

JOE EBERHARDT, JAGUAR LAND ROVER N.A. CEO:  The performance is phenomenal.   The driving dynamic is unlike any other car.  So, customers are starting to  really see the benefit of an electric vehicle as an everyday commuting  vehicle.  It`s part of the conversation.  

LEBEAU:  The conversation was sparked by Elon Musk and his company Tesla  started rolling out luxury electric models six years ago.  Now with the  Tesla Model 3 starting at $35,000 and the base model Chevy Bolt selling for  under $40, going green has become much more affordable.  

DAVE HABIGER, JD POWER:  The entry-level cars are 30, 40 grand when they  used to be 60 and 70.  And frankly, those 30 grand, 40 grand cars are going  twice as long on battery as the cars two years ago did on 70.  

LEBEAU:  While traditional automakers like Audi are driving the EV  discussion with new plug-ins, there are also start-ups like Rivian, turning  heads with an all-electric pickup scheduled to go on sale in 2021.  

RJ SCARINGE, RIVIAN CEO:  Critical for us to get customers in is the  vehicle has to give them a very strong reason to switch from an existing  brand whether they`re in a truck or whether they`re in a Land Rover or BMW.   It has to give them a really strong reason.  

LEBEAU:  Buyers maybe more interested in plug-in models, but electric  vehicles still make up less than 3 percent of all U.S. auto sales, proof  the industry still has a ways to go before it can convert electric vehicle  interest into actual sales.  

GRIFFETH:  And to read more about the New York Auto Show this year, you can  head to our website right now at  
When we come back, can Godiva find growth outside their famous gold boxes  of chocolate?  

GRIFFETH:  Companies certainly are always looking for new areas of growth,  and today, a company best known for its chocolate is hoping to find the  next leg of growth in cafes.  
Courtney Reagan is in New York City for us tonight.  

COURTNEY REAGAN, NIGHTLY BUSINESS REPORT CORRESPONDENT:  When consumers  think about Godiva, premium chocolate gifts is likely what comes to mind.   After all, that`s the history of the nearly 100-year-old chocolate maker  that sells in 105 countries and 800 retail locations globally.  

UNIDENTIFIED FEMALE:  Have a great day.  
REAGAN:  Godiva`s CEO has a big plan to grow the business and a big part of  that is new Godiva Cafes.  

ANNIE YOUNG-SCRIVNER, GODIVA CEO:  We feel that that could be a big piece  of our growth for the future.  In fact, around 40 percent of our revenue in  the future can come from these cafes.  We believe that we have the  opportunity to fivefold our business over the next six years.  

REAGAN:  This new Godiva cafe opened officially in New York City on  Thursday.  It`s just one of 2,000 planned around the world.  Four hundred  ultimately will be in the United States.  They sell chocolate, of course,  but also different coffee drinks and craffles, which is a cross between a  croissant and a waffle.

Young-Scrivner brings food and the beverage experience to Godiva.  Before  running the chocolate maker, she ran Starbucks (NASDAQ:SBUX) digital and  loyalty businesses.  And before that, she ran Starbucks (NASDAQ:SBUX) tea  brand Teavana.  

The food and beverage sector is a crowded space and not without risk.   Starbucks (NASDAQ:SBUX) had nearly 400 Teavana stores under Young- Scrivner`s leadership, but ultimately, closed all of them two years ago.  

There`s the expense of securing real estate in high-traffic locations,  hiring and training employees and convincing consumers throughout treats  into their diets.  

PARMESH BHASKARAN, ALIXPARTNERS DIR., RESTAURANTS, HOSPITALITY & LEISURE:   Before there were only a chocolate, if I may say a store, now, they wanted  to go into fresh foods.  The supply chain is going to be very different.   How well have they thought about the supply chain is also going to be  critical in the space.  

REAGAN:  Godiva hopes the cafes provide a halo effect spurring other  purchasing.  

YOUNG-SCRIVNER:  They have an opportunity to really open up digital where  you can order online, pick up in store and that makes it really easy for  our customers, as well.  

REAGAN:  Kind of like the Starbucks (NASDAQ:SBUX)?


REAGAN:  Young-Scrivner is confident in her plans, and so is the taste and  experience the Godiva cafe`s offer will be the deciding factor for  consumers.  

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

GRIFFETH:  And that is NIGHTLY BUSINESS REPORT.  I`m Bill Griffeth.  Thanks  so much for watching.  We`ll see you tomorrow.


Nightly Business Report transcripts and video are available on-line post  broadcast at The program is transcribed by ASC Services II  Media, LLC. Updates may be posted at a later date. The views of our guests  and commentators are their own and do not necessarily represent the views  of Nightly Business Report, or CNBC, Inc. Information presented on Nightly  Business Report is not and should not be considered as investment advice.  (c) 2019 CNBC, Inc.

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