Transcript: Nightly Business Report – May 24, 2019

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

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR:  Rough week.  The Dow suffers five straight weeks of losses as investors fear the trade war with China will hurt economic growth.  

Long haul.  Truckers are getting squeezed by tariffs creating a bumpy road 
ahead for that industry.  

What`s old is new again.  Hollywood is betting that the summer sequel will 
be the secret to box office success.  

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Friday, May 24th.  

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

Stocks rebounded after yesterday`s steep sell-off, but it was not enough to 
save the major averages from weekly declines.  This week investors were 
rattled by escalating trade tensions between the world`s two most powerful economies.  And while some say the damage will be limited, the market seems to be growing more concerned that tariffs could hurt global growth which, in turn, could pinch corporate profits.  

For today, those worries were put on the backburner.  The Dow Jones 
industrial Average added 95 points to 25, 585, the Nasdaq was up eight, and 
S&P 500 rose three.  

But the damage was done.  For the week, all of the major indexes fell.  The 
Dow now down for five straight weeks as long as losing streak since 2011.

And oil prices recorded their worst week of the year, declining about 6 

Mike Santoli has more on the market`s recent decline and what might come next.  


MIKE SANTOLI, NIGHTLY BUSINESS REPORT CORRESPONDENT:  The stock market`s May malaise can so far be viewed as a normal pull back after a very strong four-month rally.  A routine reset in an ongoing bull market.

But the high stakes trade war and ongoing fragility of the global economic 
cycle carried the rift that the downturn might deepen into a more serious 

The S&P 500 index was down 5 percent from a record high at its worst this 
month.  The retreat coming right as the trade frictions with China grew 
more intense.  The market on average has two to three pullbacks a year of 
at least 5 percent.  So, in itself, this data weakness is pretty typical.  

Even after this drop, the market this year remains up more than 12 percent 
and that`s a more than respectable gain after a 6 percent decline in 2018.  
Yet, the tariff hikes and trade disruptions are striking the economy at a 
delicate point, both was already set slow after the tax (AUDIO GAP) 3 
percent U.S. growth rate last year and Chinese and European indicators have remained sluggish.  This complicates the consensus projection of a (AUDIO GAP) in the second half of 2019.  The second half of this year begins in just over a month after all.  The Treasury bond market reflects this (AUDIO GAP) but the 10-year yield sinking to an 18-month low this week as 
investors brace for slower growth and price in a higher chance that the 
Federal Reserve won`t be moved to cut interest rates by the end of this 

The Fed has so far declined to indicate that this is its intention and 
other source of tension.  Many parts of the market have already been under a lot of pressure, semiconductor, transportation and small cap stocks are 
all more than 13 percent below their highs as investors have punished the 
companies most reliant on either China trade or a brisk, U.S. economy.  

Does this mean most of the adjustment to the ongoing trade standoff and 
economic slowdown has been made?  The answer will determine whether the market is undergoing a benign pullback with the start of something worse.  

For NIGHTLY BUSINESS REPORT, I`m Mike Santoli at the New York Stock 


HERERA:  Now, the ultimate cost of the tariff is the big unknown hanging 
over the economy and tonight, Steve Liesman brings us some new estimates.  


STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT:  In the wake of new tariffs from president on China, economists have now dramatically changed their outlook.  They have been forecasting a trade deal with China and now, they`re forecasting a prolonged trade war.  They plugged the new tariffs put in place this week into their estimates and another round they now believe is on the way.  

As a result, they see higher prices in the U.S. lower growth and reduced 
confidence.  Goldman Sachs (NYSE:GS) in a report says there`s a new round of tariffs would shave another half point off growth so if the economy was 
going to grow 2 percent, it would now grow 2.5 percent.  Morgan Stanley 
(NYSE:MS) believes overall prices would be a quarter-point cut higher and 
it would cost each American household $831.  

GREGORY DACO, OXFORD ECONOMICS:  If you impose tariffs on consumer goods, the upward effect on inflation would be actually greater and faster, but you have to remember that these tariffs are negative for growth.  

The Nomura report said: We expect most of the impact on GDP growth to come from lower business investment.  That`s as a result of lower CEO 
confidence.  Producers may be able to source their goods from outside of 
China and that would keep costs down and economists say if it was cheaper 
elsewhere, they`d already be producing there.  So, even if production 
relocates to avoid tariffs, prices would still be higher, and growth still 



HERERA:  We`ve talked a lot about the impact of the cold economic war on 
various sectors, but one we haven`t touched on yet is the trucking industry 
which plays a critical role in getting imported and exported goods where 
they need to go.  

So, we sent Frank Holland to Aston, Pennsylvania.  


FRANK HOLLAND, NIGHTLY BUSINESS REPORT CORRESPONDENT:  “Keep on trucking” is a popular saying, but this year, the only thing truckers are saying is that revenues are declining.  

MARK ZIMMERMAN, ZIMMERMAN TRUCK LINES COO:  2019 has been a challenge.  

HOLLAND:  Mark Zimmerman is a third-generation trucker.  The portion of his business under contract has remained fairly steady, but the daily rates for trucking known as the spot market have seen declines since the tariffs went into effect last year.  Retailers and manufacturers front loaded shipments into the U.S. at the end of 2018 to get ahead of those tariffs.  Now, and their warehouses and stockrooms are full and those companies are in the driver`s seat.  

ERIC STARKS, FTR CHAIRMAN & CEO:  They say, I don`t have to move it right now.  I`m going to negotiate a rate that`s a little bit lower than what I 
thought I was going to pay initially and the trucker then is saying, OK, if 
I want to move that load I have to be willing to negotiate and come up with 
a lower rate.  

ZIMMERMAN:  With the shippers having the pricing power at this time, it 
definitely has an effect on — of lower revenue, and it`s also dropping to 
our bottom line where we don`t have the ability to increase as our cost 
increase for 2019.  

HOLLAND:  The rates for standard trucks had fallen 19 percent since last 
April.  For refrigerated trucks that carried food, nearly 14 percent, flat 
bed rates for industrial goods are down about the same amount.  

The impact felt by Zimmerman and big names J.B. Hunt, Schneider National and Knight-Swift all reporting lower revenues this year, while seeing their 
stock price drop double digits over the past year.  

Lower U.S. exports are also hurting trucking margins.  When drivers at this 
Pennsylvania company dropped off a trailer like this one and picked up 
another at the same time and at the same place, it`s called a dual 
transaction.  It`s more profitable.  But trucking companies say it`s 
happening less and less at major ports.  

transactions fall over the last five years from — anywhere from an 80 or 
85 percent normal to you under 20 percent across the board.  

HOLLAND:  There`s hope that a trade deal can reverse this trend as an 
industry seeks new roads to revenues.  

For NIGHTLY BUSINESS REPORT, I`m Frank Holland in Aston, Pennsylvania.  


HERERA:  Believe it or not, the trade war with China may be helping 
homebuyers as well as the nation`s big public builders.  

Diana Olick explains the ripple effect.  


DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT:  Tensions over the China trade war had investors rushing into the bond market this week, causing the 10-year treasury yield to drop.  Mortgage rates loosely 
followed that and took a deep dive.  

The average rate on the 30-year fixed fell sharply and is now at 4.1 
percent, compared with 4.29 percent at the start of the month.  While that 
may not seem like a lot, today`s homebuyers are incredibly rate sensitive 
because home prices are so high, they`re already stretched.  And that`s why stocks at the homebuilders are so tied to rates.  In yesterday`s sell-off, 
they were the winners.  

Prices for newly built homes are soaring as builders deal with higher 
construction costs, especially labor.  The median price of a new home sold 
in April hit a new record for the month.  

Now, despite the market recovery today, rates are likely to stay in this 
new low range or even go lower.  That could give an unexpected boost to the summer housing market after a pretty mediocre spring.  

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


HERERA:  Durable goods orders fell in April.  According to the Commerce 
Department, orders for goods designed to last at least three years fell 2.9 
percent and within the report, a closely watched proxy of business 
investment cooled off, and orders for civilian aircraft dropped sharply, 
likely reflecting the grounding of Boeing (NYSE:BA) 737 MAX jet.  

Following that durable goods report, J.P. Morgan lowered its overall 
economic growth forecast for the second quarter to just 1 percent.  

Boeing (NYSE:BA) is reportedly facing an SEC probe into disclosures about 
problems with its 737 MAX jet.  According to Bloomberg, the regulator wants to know whether the company was, quote, adequately forthcoming to shareholders about issues with its troubled fleet.  And late today, “The 
Wall Street Journal” reports that the MAX`s return has been delayed by the 
FAA`s re-evaluation of safety procedures of older 737 models.  Boeing 
(NYSE:BA) says the safety of the models is not in question.  Despite those 
reports the stock rose more than 1 percent in today`s trading session.  

And United Airlines is extending its cancellations of Boeing (NYSE:BA) 737 
MAX flights through early August.  The carrier said that would result in 40 
or 45 daily canceled flights.  Southwest and American have already 
suspended those flights into august.  

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

Dow was upgraded to neutral from underweight at J.P. Morgan.  The analyst cites conservative estimates for the second half of the year, and 
unresolved trade issues between the U.S. and China.  The price target is 
$49.  The stock closed just above that level at $49.20.  

Bloomin` Brands was upgraded to buy from neutral at Guggenheim Securities. The analyst believes the company is in the beginning stages of a 
turnaround.  The price target is $25.  The shares rose a fraction to 

And Constellation Brands (NYSE:STZ) was downgraded to equal weight from overweight at Morgan Stanley (NYSE:MS).  The analyst cites the potential slowdown in demand for beer this summer as well as the stock`s valuation. The price target is $220, the shares fell 3.5 percent to $198.68.  

Still ahead, tech stocks have been caught up in the trade war, but that`s 
not stopping our market monitor from finding some buys in that sector.  


HERERA:  As we head into Memorial Day, one story caught our attention.  It 
deals with the unintended consequences of the new tax law and it is 
affecting Gold Star families.

Ylan Mui has our story.  


YASIN WADE, GOLD STAR WIDOW:  This is us on — actually, the Bella (ph) 
Gulf in this one.  So, that was our last homecoming.  So — and the other 
we did not have because he passed away.


WADE:  Memories, yes.

MUI:  It`s been four years since Yasin Wade lost her husband Daniel, a Navy lieutenant.  He suffered a massive heart attack while deployed on the ship 
in the Mediterranean Sea, leaving her to raise her three young sons on her 

WADE:  I saw her get taller.  Even if you get taller, I`m still the boss, 
you realize that, right?  

MUI:  They lived comfortably in the northern Virginia suburbs but they 
don`t have a big financial buffer.  So, Wade was shocked when she filed the household taxes this year and got hit with a bill from Uncle Sam.  

WADE:  If I could have my husband back and live homeless, I would totally 
have him back and I`d be poor.  But I feel upset because our husbands have given so much and this is how we`re being treated.  

MUI:  It`s an unintended consequence of the new federal tax law and it`s 
devastating Gold Star families like Wade`s.  

When a member of the military dies while deployed, their spouses receive 
special benefits, often a portion of the payment is transferred to their 
children and that money has typically been taxed at the lowest rate and 
generally 12 percent to 15 percent.  But now, many families are finding 
that rate has tripled to 37 percent.

For Wade, it`s a difference worth hundreds of dollars.  

WADE:  Good morning.  My name is Yasin Wade.

MUI:  Wade is pleading with Washington to fix this problem, and lawmakers appeared to be listening.  There`s bipartisan legislation in the House and the Senate to restore the old tax rates on benefits paid to children, and both sides of the aisle say these families have sacrificed enough.  

SEN. DOUG JONES (D-AL):  We are here all prepared to honor these men and women coming Monday for Memorial Day, but we need to let our actions here in Congress speak louder than our words.  

MUI:  The Congress left for their Memorial Day recess without reaching a 

WADE:  I don`t think that that`s how he thought he was going to leave us.  
I don`t think that he thought we were going to be taken care of.  I don`t 
think it`s fair that we should have to take another financial hit and 
another burden after dealing with all of the things we have to deal with 
which is our grief or children`s grief, and the financial burdens that come 
with all of that.  

MUI:  All Wade can do is hope and wait.  

For NIGHTLY BUSINESS REPORT, I`m Ylan Mui in Washington.  


HERERA:  Across the Atlantic, British Prime Minister Theresa May has 
resigned.  This decision comes after six months of failed attempts to cut a 
deal with parliament which would ensure a smooth exit from the European 


THERESA MAY, BRITISH PRIME MINISTER:  I negotiated the terms of our exit and a new relationship with our closest neighbors, that protects jobs, our security and our union.  I have done everything I can to convince MPs to back that deal.  Sadly, I have not been able to do so.  I tried three 
times.  I believe it was right to persevere even when the odds against 
success seemed high.  


HERERA:  Britain is scheduled to leave the E.U. at the end of October.  The 
so-called Brexit is being cited as the potential risk to the global 

Foot Locker is losing its firm footing.  The athletic footwear and apparel 
retailer missed estimates due to increased pressure as companies like Nike 
(NYSE:NKE) or selling products directly to customers and bypassing 
retailers all together.  The company also trimmed its full-year profit 
guidance.  Foot Locker plummeted today nearly 16 percent to $44.40.  

Hibbett Sports (NASDAQ:HIBB) posted better-than-expected results, thanks in part to growth in sneakers sales and a rise in same-store sales.  The 
company also raised its guidance for next year and announced a new 
independent chairman.  The retailer`s shares jumped more than 20 percent to $23.96.  

Activist investor Third Point has reportedly bought a stake in health 
insurer Centene (NYSE:CNC) and wants it to consider selling itself rather 
than go through with its $15 billion merger with WellCare.  Earlier this 
month, it was reported another pair of hedge funds were considering a 
challenge to that merger, believing Centene (NYSE:CNC) could do better when it was sold.  Centene (NYSE:CNC) is the nation`s largest provider of 
Medicaid health plans.  Shares of both Centene (NYSE:CNC) and WellCare were higher today.  

A long-awaited $5 billion settlement between Facebook (NASDAQ:FB) and 
federal regulators over privacy issues is reportedly now being delayed due 
to a partisan split at the Federal Trade Commission.  “The Wall Street 
Journal” says the GOP chairman of the FTC is struggling to win support from at least one of the two Democrats on the panel who are concerned the 
settlement won`t be tough enough.  Facebook (NASDAQ:FB) shares were up a fraction today to $181.06.  

And the FDA approved the world`s most expensive drug.  Novartis` new gene therapy will cost more than $2 million, and it`s used as a one-time 
treatment for spinal muscular atrophy, a leading genetic cause of infant 
mortality.  The company says it is, quote, working closely with insurers to 
create five-year agreements based on the success of the treatment.  
Novartis rose more than 3 percent to $87.52.  

Time now for our weekly market monitor who likes tech stocks, but he 
recommends being selective in the sector.  Joining us is Steve Dudash, 
president of IHT Wealth Management.  

Steve, welcome.  Nice to have you here.  


HERERA:  Tech has been extremely volatile as we work through all of these 
trade headlines.  So you did give us three picks that you think may be able 
to weather that storm a little bit better than others.  

Amazon (NASDAQ:AMZN) is your first pick and there are a lot of bullish 
calls on the street about Amazon (NASDAQ:AMZN), but tell me why you like 

DUDASH:  Listen, our economy right now is in a very, very good place.  The 
only thing that`s holding it back is the threat of this trade war and this 
trade war is just show.  This is theatrics.  This is just people — two 
sides acting strong and trying to negotiate the best terms they can, which 
is normal, like you had Mike earlier in the segment talking about how the 
markets have pulled back 10 percent, but that`s a normal year.

That`s where we`re at right now, so we`re looking at defensive technology 
companies and that means companies that have lots of cash and lots of 
earnings and frankly something me and you`re going to use more and more of no matter what`s going on.  But with Amazon (NASDAQ:AMZN) in particular, you can make the argument that if the economy pulls back, and if this trade war drags on, it actually helps a company like Amazon (NASDAQ:AMZN) because, frankly, the barrier to entry to get into their business is so massively high that if the market pulls back and the economy pulls back, it`s going to squash anyone else who gets in there and therefore make the market tighter for that type of company.  

HERERA:  All right.  Next on the list is VMware.  

DUDASH:  Yes.  VMware, this is a little bit different.  But again, this is 
a defensive term I`m thinking about for people`s portfolios.  We`re talking 
about a company that takes data and crams it down and puts it in smaller 
spaces and makes it more economical to store, more economical to transfer.  

If things get tighter, if the trade war goes on for longer, companies are 
going to need to make more profitable ways of holding data.  Me and you 
both use data more today than we did five years ago, and five years from 
now, we`re going to use it twice as much, if not more than that.  Companies 
like this will be profitable now, and they are profitable now.  But in the 
future, as the economy keeps growing as we keep using technology, the 
Internet of things more and more, you`re only going to see more growth in 
these type of firms.

HERERA:  Google`s parental Alphabet is also on the list.  There are some 
regulatory concerns that have been weighing on the stock a little bit.  But 
why do you like Alphabet?  

DUDASH:  Those regulatory concerns and the market pulling back is why 
something like this right now is a buy, and the whole segment is a buy 
right now in the sense that Google (NASDAQ:GOOG) is going to be used more and more in the future.  You — if this economy pulls back, we are not 
going to use Google (NASDAQ:GOOG) less.  If unemployment goes up a couple of points, we`re not going to use Google (NASDAQ:GOOG) less.

You`re right.  There are some regulatory things both here and overseas.  
That`s never going to go away when you`re talking about massive companies. You`re always going to have that aspect.  But it`s — you`re buying it at a cheap price right now.  That`s what we`re talking about with any of these opportunities, you`re getting in at nice price point, because people are afraid of things that they shouldn`t be afraid of right now, and therefore makes things more valuable for us.  

HERERA:  OK.  Steve, thank you very much.  

DUDASH:  Thank you.

HERERA:  Steve Dudash with IHT Wealth Management.  

Coming up, where`s the beef?  


JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT:  I`m Jane Wells in Los Angeles.  Are you going to a friend`s house for a barbecue this Memorial Day weekend?  Be careful, they may sneak some fake meat on to the grill. Can you tell which one?  

Coming up, the potential for the alternative meat market and the obstacles.  



HERERA:  One quarter of working Americans have no retirement savings.  A new survey from the Federal Reserve shows that many households still 
struggle to cover their day to day expenses, despite a strong job market.  
Nonetheless, three out of four say they are living comfortably.  

Well, Memorial Day weekend marks the unofficial start to summer and with that comes trips to the movie theater and lots of barbecues.  So, we end our program tonight with stories on both.  

Jane Wells is up first with a look at what`s cooking on America`s grills.  


WELLS:  Is it real?  No.  Perhaps it`s appropriate that here in the capital 
of fake, la la land, Beyond Meat is leading the fake meat charge.  

How do you do that?  

The company had the best performing IPO in years.  Meat alternatives are 
showing up in more fast food chains and grocery store, but Beyond Meat is 
spending so much on improving the product and scaling, it`s not clear when it will be profitable.  

ETHAN BROWN, BEYOND MEAT CEO:  Our current household awareness is 2 percent.  We`ve got a lot of customers to go out there and talk to.  

WELLS:  Would you ever try the meat substitutes?  

UNIDENTIFIED FEMALE:  No.  Never tried it.  

UNIDENTIFIED MALE:  Never have, but I`d like to tray one some time.  

WELLS:  Even so, as the summer grilling season starts, demand for meat 
alternatives is heating up.  Impossible Foods has warned of potential 
shortages.  Beyond Meat went through their own supply hiccups a couple of years ago, and Ethan Brown says he`s not going to let that happen again.

BROWN:  What a charged a team was to be available to have capacity and 
stock and ingredients sufficient enough to go twice the levels of demand 
that we expect.  

WELLS:  OK.  This is fake meat.  This is real.  Fake meat often has a few 
more calories than real meat and higher sodium, but, of course, it has zero 
cholesterol and lower fat.  The real difference right now is the price.  
Fake meat products cost at least 50 percent more than real meat.  Ethan 
Brown is a matter of building up his supply chain and convincing farmers to cut out the middle man, the cow, which he says is a less efficient producer of protein from plant food than his economy is.

BROWN:  I`ve set a goal within the company, and this is an internal goal, 
but it`s a five-year program to at least one category with one product to 
be able to under price animal protein in a significant way.  

WELLS:  Barclays estimates alternative meat could take up 10 percent of the global meat counter in 10 years and be worth $140 billion, but the industry 
has its work cut out for it.  

Would you ever have a fake meat burger?  


WELLS:  Why not?  

UNIDENTIFIED MALE:  The real thing is the real thing.  

WELLS:  Though it`s getting harder to tell what`s real from what`s not.  

For NIGHTLY BUSINESS REPORT, Jane Wells, Los Angeles.  


HERERA:  And now to the summer box office which will bring a new twist on old franchises.  

Julia Boorstin has more.  


JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT:  What`s old is new again for the movie business this summer.  Studios and theaters are hoping familiar brands will draw a broad audience and turnaround the box office. North American ticket sales are down 10 percent so far this year.  The fact that Marvel`s “Avengers: Endgame”, which opened last month broke so many records means people are more likely to return to theaters.  

PAUL DERGARABEDIAN, COMSCORE:  It`s all about momentum in the summer and certainly “Endgame” set up the summer movie season to be really strong because you have so many people seeing that movie being inspired to see other movies by virtue of in-theater marketing and trailers for the upcoming slate of films.  

BOORSTIN:  Aladdin is a key example of a big trend.  Studios counting on 
tried and true brands to draw families.  

Perhaps the most highly anticipated example, Disney`s “Lion King” remake.  

Pixar`s “Toy Story 4”, also a Disney (NYSE:DIS) film, and Universal`s 
“Secret Life of Pets 2” is using a similar playbook.  

Hopes are high that the likes of the “Lion King” plus big action films will 
draw moviegoers.  One reason why theater chain stocks are up this year even though box office receipts are down.  

Another draw this summer, big action movies are back such as Universal`s 
“Fast and Furious” spin-off “Hobbs and Shaw”, building on the success of 
the eight “Fast and Furious” films that have grossed over $5 billion 

And fresh on the heels of “Avengers: Endgame”, get ready for more Marvel.  

Sony`s releasing Marvel`s “Spider-Man: Far From Home”, and Disney 
(NYSE:DIS) will release FOX`s X-Men movie “Dark Phoenix.” 

DERGARABEDIAN:  There is no superhero burnout at all at this point.  It 
seems that audiences can`t get enough and “Spider-Man: Far from Home” is going to be a beneficiary of all the goodwill and the excitement 
surrounding “Endgame”.  And this becomes a must-see movie, like every 
successive Marvel movie.  And “Endgame” sets up “Spider-Man: Far From Home” perfectly to be one of the biggest movies of the summer.

Despite the year to date declines up until at this point at the box office, 
with so many of those big brands roaring back, the annual box office could 
actually end up setting a new record.

For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Los Angeles.  


HERERA:  Before we go, here`s a final look at the day`s numbers on Wall 
Street.  The Dow added 95 points.  The Nasdaq was up eight, S&P 500 rose 
three.  For the week, all of the major indexes were lower.

And that is NIGHTLY BUSINESS REPORT for tonight.  I`m Sue Herera.  Thanks for joining us.  Have a great weekend and we`ll see you Monday for a special edition of NBR.


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