ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Sue Herera and Bill Griffeth.
BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: Turnaround Tuesday. Stocks rebound and have their second best day of the year after the Fed chair says it`s ready to act to keep the economy growing.
SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Fire and ice. Why the hottest part of real estate might just have the coldest property.
GRIFFETH: Going under ground. A Chinese subway carmaker is making inroads here in the U.S. but some lawmakers are sounding the alarm. We`ll give you a look inside the company, what it means for American jobs and even national security.
All that and much more tonight on NIGHTLY BUSINESS REPORT for Tuesday, June 4th.
HERERA: Good evening, everyone, and welcome.
Stocks surged to their second best day of the year with all the major indexes rising 2 percent. The catalyst: the Fed. More on that in a minute, and a perceived ever so softening of tone in trade tensions. The Chinese Commerce Ministry said that the friction between the two sides should be dealt with through talks.
With that, investors were in a buying mood. The Dow rose 512 points to 25,332, the Nasdaq climbed 194, wiping out yesterday`s loss, and the S&P 500 added 58.
Bob Pisani gets things started for us tonight.
BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Stocks started and ended in rally mode after six straight weeks of declines and a volatility session yesterday. The Dow surged more than 500 points, having its biggest one-day gain since January 4th.
There were a combination of reasons. First, Federal Reserve Chairman Jay Powell said that the Fed is closely monitoring trade and it would act appropriately to sustain the economic expansion. All of this helping deflate some of the negative sentiment that`s built up in the last few weeks.
Also, easing trade tensions. We`ve got some positive comments from China`s Commerce Ministry that trade disputes should be resolved with talks, as well as some hopes for resolving the Mexican tariff, even Republicans were considering a vote to block President Trump`s tariffs on Mexico.
Not surprisingly, the sectors that have been the most oversold on this trade war is the transports, the semiconductors, metals and mining, retail, they all bounced the most today. In fact, retail had their best day in five months and that doesn`t mean the sector is done fueling results of tariffs.
If you really want to see the effect of a trade war on stocks, look what happened to Tiffany (NYSE:TIF). They had earnings today, the company noted same-store sales were down 4 percent which they said was due to far fewer Chinese tourists visiting the United States.
A lot of damage elsewhere has already been done. So big transportation stocks were down, double digits this quarter on these concerns about slower global growth.
For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock Exchange.
GRIFFETH: Now, in addition to Chairman Powell`s comments, there was more Fed speak today about what the president`s economic policy might mean for the Fed`s monetary policy.
Steve Liesman is in Chicago with more tonight.
STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Two top Fed officials speaking in Chicago today suggested that coming new tariffs from the Trump administration could change monetary policy.
Here`s what Fed Vice Chair Richard Clarida told CNBC in the interview.
RICHARD CLARIDA, FEDERAL RESERVE VICE CHAIR: Today, the tariffs that have been put in place in the economy have had a small effect in the aggregate and I think the others would agree with that consensus as we move ahead and we consider potentially more tariffs and potentially retaliation, that potentially has a more noticeable effect on the economy and we would have to take that into account.
LIESMAN: Clarida said tariffs are not necessarily inflationary because the prices only go up once and stay that way. So, he said he`s more inclined to address how tariffs can weaken growth.
The Fed Chairman Jerome Powell also said the Fed would act if it needs to.
JEROME POWELL, FEDERAL RESERVE CHAIRMAN: We do not know how or when these issues will be resolved. We are closely monitoring the implications of these developments for the U.S. economic outlook and as always, we will act as appropriate to sustain the expansion with the strong labor market and the inflation near the symmetric 2 percent objective.
LIESMAN: Market saw this is all potentially good news, not only did stocks rally sharply, but the chance of a Fed rate cut shot up 60 percent. Some traders took a flyer out of a possible June rate cut.
Well, that seems early but the idea that the Fed is headed for at least one rate cut as a result of tariffs looks like a good bet after these Fed officials spoke.
For NIGHTLY BUSINESS REPORT, I`m Steve Liesman in Chicago.
HERERA: President Trump was in London again today meeting with outgoing Prime Minister Theresa May. On the agenda, Brexit and you guessed it, trade.
Willem Marx has more from London.
WILLEM MARX, NIGHTLY BUSINESS REPORT CORRESPONDENT: After all of the pomp and pageantry at Buckingham Palace Monday night, it was time to talk politics on Tuesday morning as President Trump traveled to meetings in Central London apparently prepped to do business.
DONALD TRUMP, PRESIDENT OF THE UNITED STATES: Our nations have more than $1 trillion invested in each other`s economics. The United Kingdom is America`s largest foreign investor and our largest European export market. That`s a lot of importance.
As the U.K. makes preparations to exit the European Union, the United States is committed to a phenomenal trade deal between the U.S. and the U.K.
MARX: Theresa May was one of the first world leaders to meet with the newly inaugurated President Trump, and he will be the last world leader to visit her here in her office in number 10 Downing Street. She`s failed to get her Brexit deal through the British parliament three times. She looks to be trying to position the U.K. for a favorable trade deal with the U.S.
TRUMP: I think that this is something that your folks want to do, my folks want to do and we want to do and we`re going to get it done.
MARX: The transatlantic work day began at this breakfast roundtable with business leaders with the special relationship in attendance. The conversations about economic Cooperation then continued over lunch at the prime minister`s official residence.
MARX: While nearby, thousands of protesters jeered the president`s presence in the British capital.
And at a joint press conference at a soon to be ex-prime minister, the U.S. leader brushed off criticism and insisting that a longstanding intelligence deal could survive Britain`s decision to use Huawei equipment in its new 5G network.
TRUMP: We`re going have absolutely an agreement on Huawei and everything else. We have an incredible intelligence relationship and we will be able to work out any differences. I think — we did discuss it.
MARX: Trump also confirmed his intention to impose tariffs on Mexico starting next week.
TRUMP: I think it is more likely that the tariff goes on and we`ll be talking during the time that the tariffs are on and they`re going to be paid.
MARX: For May, her British counterpart, who has paid a steep political price for her failure to talk around her opponents, there were doubtless some relief that the president`s words for her have remained relatively warm.
For NIGHTLY BUSINESS REPORT, I`m Willem Marx in London.
GRIFFETH: And tariffs are top of mind in Toyota (NYSE:TM) right now. The automaker reportedly has told its U.S. dealers the new tariffs on Mexican imports that President Trump has threatened could cost that company`s major suppliers between $200 million and $1 billion. According to an email seen by “Reuters”, Toyota (NYSE:TM) pointed out that 65 percent of its Tacoma pickup trucks sold in the United States in 2019 will be imported from Mexico.
HERERA: And those higher costs on autos could also trickle down to the consumer in a way that probably has not been given much thought — your insurance coverage.
Contessa Brewer explains.
CONTESSA BREWER, NIGHTLY BUSINESS REPORT CORRESPONDENT: When a driver crashes his or her car, it goes to a repair shop and a bill sent to the insurance company. Among the most commonly replaced items, windshields, and their prices are up 10 percent because of tariffs.
STEVE KALAFER, FLEMINGTON CAR & TRUCK COUNTRY CHAIRMAN: Countries don`t pay tariffs, consumers do.
BREWER: Steve Kalafer owns nine car dealerships with service centers in New Jersey. He`s seen costs for auto parts soar.
KALAFER: The real burden is going to be on the consumer. They don`t have a choice to fix a car. The car will either work or not. So, if you have this part and you have a 25 percent tariff increase, that part had cost $200? Bingo, $50 more.
BREWER: Last year, the U.S. imported $158 billion in auto parts and tariffs are now driving insurance prices higher.
DAVE SNYDER, PCE OF AMERICA VICE PRESIDENT: With automobile insurance, we are already paying increased costs for replacing or repairing motor vehicles as a result of the China tariffs.
BREWER: An estimated $3.4 billion in additional insurance payout, now, President Trump promises 5 percent tariffs on Mexican imports starting Monday and that they`ll keep going up as long as illegal border crossings are an issue.
Mexico is the largest source of imported car parts, accounting for almost $60 billion or nearly 40 percent of imports last year. Car insurers are bracing for as much of a $5 billion impact, depending on how high the Mexican tariffs go.
And then there are the secondary costs. Whether a car is repaired or totaled depends on the cost to fix it. More expensive parts means more cars considered totaled. Replacement vehicles are also more expensive because of tariffs and mechanics lose the repair business.
Finally, the tariff may disrupt the supply chain or cause shortages apart.
SNYDER: It means consumers can`t get their cars repaired as quickly as they otherwise would, which means they have to have rental cars longer.
BREWER: And just one additional rental car day adds a half billion dollars in cost. Who picks up that tab? You might think insurance companies, but insurance is a pass-through industry. Increased costs are passed on in the form of higher premiums. Just one way tariffs create a bumpy ride for everyone.
In Flemington, New Jersey, Contessa Brewer, NIGHTLY BUSINESS REPORT.
GRIFFETH: Up next, the hot trend, investing in cold.
(BEGIN VIDEO CLIP)
DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Cold is the new hot in real estate. That`s why I`m standing in front of a giant freezer unit. I`ll explain coming up on NIGHTLY BUSINESS REPORT.
(END VIDEO CLIP)
HERERA: The growth of e-commerce has increased demand for warehouses exponentially but one small subset of that real estate sector is really heating up even though you might not describe it that way.
Diana Olick is here to explain. She`s in Jessup, Maryland, tonight.
OLICK: Cold is hot if you`re in the warehouse business, that is. Cold storage warehouses and distribution centers are suddenly in high demand.
SPENCER LEVY, CBRE SENIOR ECONOMIC ADVISOR: It is the pea pod. It is the Amazon (NASDAQ:AMZN).
OLICK: It`s the new food delivery services driving it literally from the warehouse to your home. Small now, but growing quickly.
LEVY: It`s a variation of about 2 percent or 3 percent of all goods and groceries are bought online, and we expect the space could explode as much as 13 percent over the next five years because of the penetration of the Internet.
OLICK: It is also the farm to table and organic trend. Fewer preservatives in food require more cold storage.
MICHAEL CARROLL, RBC CAPITAL MARKETS DIRECTOR: Change in consumer preferences is that they want to eat more fruits and vegetables and less processed foods. So when you have fruits and vegetables they need to be flash frozen and transported throughout the country to the end user, and that is definitely taking an uptick in demand for this space.
But while mainstream warehouse construct is growing, there is still a limited supply of cold storage real estate that makes it much more valuable.
CARROLL: If you look at the capacity in the major market, there`s really not much.
OLICK: Americold is the only publicly traded temperature-controlled warehouse owner in the U.S. today since going public last year. Its stock is, well, on fire.
LEVY: So we`re seeing a lot more investors come into the space and when I say investors there are the dedicated real estate investors that only buy the five major food groups and many of them say, gee, I will do the niche sectors like cold storage.
OLICK: Because as the grocery segment grows, the perishables are poised to profit and so are those investing in really cold properties.
For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Jessup, Maryland.
GRIFFETH: Uber and its ride-sharing rival Lyft get a lift from Wall Street today and that`s where we begin tonight`s “Market Focus”.
Nineteen firms initiated coverage today on Uber`s struggling stock with analysts saying it`s a buying opportunity for their clients. Meanwhile, Citigroup (NYSE:C) initiated Lyft as a buy. The bank likes the company`s concentrated focus here in the U.S. and in Canada. Uber shares rose more than 3 percent today to $42.75. Lyft shares were down a fraction to $59.17.
French automaker Renault is now delaying a decision on the potential merger with Fiat Chrysler after an activist hedge fund wrote to Renault`s board opposing the deal, saying that the proposed $35 billion transaction favors Fiat Chrysler too much. Fiat stock rose nearly 4 percent today to $13.33.
HERERA: Box shares fell following last night`s results which showed slightly better than expected earnings but a week of full-year revenue outlook. The cloud software company blames longer than expected duration of closing deals with new larger clients and that often comes with longer sales cycles. The shares dropped more than 4 percent to $17.18.
Bemis (NYSE:BMS) will swap places with toymaker Mattel (NASDAQ:MAT) and joining the S&P 500, while Mattel (NASDAQ:MAT) will join the S&P mid-cap 400. The move will be effective before trading opens on Friday. Bemis (NYSE:BMS) fell a fraction to $57.20. Mattel`s stock jumped on a licensing deal for the Hello Kitty brand, rising 12 percent to $10.78.
After the bell, salesforce.com beat estimates thanks to an increase of customers to its flagship sales cloud business. The company also raised its full-year guidance. The stock initially rose in after hours trading and closed the regular session up nearly 4 percent to $150.81.
GRIFFETH: The U.S. oil market managed to eke out a gain today with the apparent easing of trade tensions. Domestic crude settled at $53.49 a barrel after a month-long losing streak that threatened to push prices into bear market territory, meaning a decline of 20 percent or more off its most recent highs.
Joining us for this outlook, John Kilduff from Again Capital is back with us here.
I mean, this slide we saw during the month, this was more about the expectation of slower growth around the world. So demand, theoretically, we go down. Is that the idea?
JOHN KILDUFF, AGAIN CAPITAL FOUNDING PARTNER: That`s right. The damage from the U.S.-China trade war on the Asian economies across the board, Bill, really put a damper on the outlook for crude oil and gasoline and diesel fuel demand as we look forward. You have Korea flirting with going into recession — South Korea, that is. Japan can`t get out of its own way, all of the import, export numbers really disappointing and a month in and month out for China, for Japan and for South Korea.
KILDUFF: And Germany, too, is the other big loser because that`s their biggest market, the Asian market, the Germans. So, all those are the key energy demand centers, they are taking the biggest hits, oil is taking hit from this.
HERERA: But it comes when Iran has sanctions on it, so we`re not seeing oil from that part of the world. And in addition to that, we have Venezuela, which is in a political crisis. So, it`s kind of an interesting juxtaposition.
KILDUFF: There is a remarkable complacency in the oil market right now. Part of it is the difference-maker has been the United States` rise to become the number one oil producer in the world. Our 2 million barrels a day is almost acting like a firewall against what would have been really hideously frightening developments in the oil market like clamping down in Iran, like basically losing Venezuela`s oil output as I just mentioned.
GRIFFETH: So, where do we go? Aare we going back to those lows we saw late year, do you think?
KILDUFF: Well, Saudi Arabia is working hard to curtail production and output and trying to hold together the OPEC group and Russia to cut supplies to the market. It should have something of a stabilizing factor. Obviously, we`re still in a very dangerous neighborhood and anything can happen at any time if the Iranians do act out and they are getting squeezed mightily right now, Bill, then we would be in a different kettle of fish.
But I think for now, the low that we hit this week, around $52, will probably hold. It does mean sub $2 gasoline for a lot of folks. Fifty is the number to watch. I don`t think we`ll get much below that.
GRIFFETH: All right.
KILDUFF: Again, the problem is that all of the geopolitics can rear their ugly head.
HERERA: Oh, yes.
GRIFFETH: It happens.
Thanks, John, as always.
KILDUFF: Thank you.
GRIFFETH: John Kilduff with Again Capital.
HERERA: More collateral damage in the tread dispute between the U.S. and China.
ROBERT FRANK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Pawns in the trade war, the fate of nearly 360,000 Chinese students who study in the U.S. now under threat as China issues a warning, coming up on NIGHTLY BUSINESS REPORT.
(END VIDEO CLIP)
GRIFFETH: The trade dispute between the U.S. and China is now spilling over to tourists. The Chinese government has warned citizens traveling to the U.S. about harassment by Chinese tourists with law enforcement, for example, at points of entry, and a second warning was issued highlighting the risks of shootings, robberies, and thieves.
HERERA: And the Chinese government also issued yet another warning to its students and as Robert Frank tells us, it could cast a chill on one of the most important economic drivers for U.S. universities. He`s at NYU in Manhattan.
FRANK: The Chinese government hitting back against the U.S. yesterday with a warning to the more than 360,000 Chinese students studying in the U.S. China`s ministry of education saying students are having trouble getting visas to come to the U.S. and that they should, quote, strengthen their risk assessment.
Chinese students contribute up to $14 billion a year to universities and colleges across the country and since they paid full fare, universities have become highly dependent on those dollars which also help subsidize U.S. student tuition, but there are signs that students and their money are shifting to Australia, Canada and the U.K., which are more welcoming. With U.S. companies becoming more reluctant to hire Chinese grads, especially for sensitive tech and engineering jobs, a U.S. degree no longer means a path to a job.
ESTHER BRIMMER, NAFSA EXECUTIVE DIRECTOR AND CEO: It`s helpful for the U.S. to have people in China who understand the United States, and people in the United States who understand China. We`re going to have to deal with each other for decades to come. It is much better that we know each other well and that we don`t use students as pawns in some larger issue.
FRANK: Here at NYU which has the largest number of international students in the country, there are nearly 9,000 from China. Costs and tuition here can run up to $72,000 a year, and NYU also has a campus in Shanghai. So, like many universities, they`re hoping that the trade war ends quickly.
For NIGHTLY BUSINESS REPORT, I`m Robert Frank in New York City.
GRIFFETH: And finally tonight, the tensions between the U.S. and China has put a spotlight on the world`s biggest rail car manufacturer. It`s a Chinese company and its bidding on contracts in some of the biggest U.S. cities right now. So for some, this is an example of the balancing act between economics and national security.
Ylan Mui takes us inside the company`s factory in Springfield, Massachusetts.
YLAN MUI, NIGHTLY BUSINESS REPORT CORRESPONDENT: These are the newest rail cars for Boston`s iconic rail system, the T.
So, this train is almost ready to go.
VINCE CONTI, CRRC BUSINESS ADMINISTRATION DIRECTOR: Yes.
MUI: They run along half a mile of test track here in Springfield, Massachusetts. The first one is scheduled for delivery this summer. But Washington wants to hit the brakes because the company that makes them is from China.
REP. PETER DEFAZIO (D-OR): CRRC is state-owned. The communist government of China owns the company.
MUI: CRRC is indeed owned by the Chinese government and it is the biggest manufacturer of trains in the world and our cameras got a rare look inside its first factory in the U.S.
CONTI: This is the shell as we receive it from China. And then from there, the components over here are what we`ll be installing.
Interior lining is primarily the Chinese, the wall panels and the air ducts and things. And we have a door system, for example, from Vapor which is in Plattsburg, New York.
MUI: In addition to Boston, CRRC has also won contracts with Philadelphia, Chicago and Los Angeles, totaling more than $2 billion.
JIA BO, CRRC LIMITED PRESIDENT (through translator): CRRC understands that the United States is a growing market in this industry and also it is the third biggest industry globally. The United States is a market that provides the most fair (ph) operation and the most full competition.
MUI: The critics of the company say it isn`t playing by those rules, and they say because it`s backed by Beijing, it could offer these cars for half the price of the competition.
SCOTT PAUL, ALLIANCE FOR AMERICAN MANUFACTURING PRESIDENT: It`s bidding on them at impossibly low prices. Ultimately, this is going to be less competition for transit commuters and for transit agencies which will mean it`s going to be a worse deal at end of the day.
MUI: In Washington, lawmakers on both sides of the aisle are sounding the alarm, calling the company a threat to national security.
REP. SAM GRAVES (R-MO): China in particular possesses sophisticated capabilities and it does have a track record of creating economic espionage.
REP. ALBIO SIRES (D-NJ): I really do believe that while we sleep, this country`s plotting.
MUI: And proposing a ban on doing business in America.
REP. HALEY ROUDA (D-CA (NASDAQ:CA)): The purpose of the bill is directed to make sure that American tax dollars are not used to support businesses from China that are being subsidized by the Chinese government.
MUI: At the factory, the company says it`s creating U.S. jobs, hiring unionized workers, buying U.S. materials and even paying U.S. tariffs, and it says that passengers have nothing to fear.
CONTI: Safety, number one. Functionality, but safety is most important.
MUI: For NIGHTLY BUSINESS REPORT, I`m Ylan Mui, in Springfield, Massachusetts.
HERERA: Here`s a look at the final day`s numbers on Wall Street. The Dow rose 512 points to 25,332. The Nasdaq climbed 194, wiping out yesterday`s loss, and the S&P 500 added 58.
GRIFFETH: And that is the NIGHTLY BUSINESS REPORT for tonight. I`m Bill Griffeth. We do thank you for watching and we`d like it remind you that this is the time of year your public television station seeks your support.
HERERA: I`m Sue Herera. We thank you very much for that support. We`ll see you tomorrow.
Nightly Business Report transcripts and video are available on-line post broadcast at http://nbr.com. 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.
<Copy: Content and programming copyright 2019 CNBC, Inc. Copyright 2019 ASC Services II Media, LLC. All materials herein are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of ASC Services II Media, LLC. You may not alter or remove any trademark, copyright or other notice from copies of the content.>