ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Bill Griffeth and Sue Herera.
SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Big problems for big tech. The Justice Department is opening a broad antitrust review, adding a new threat for Silicon Valley`s most dominant companies.
BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: A Coke and a smile. Demand is up for its namesake drink, the outlook bright and the stock closes at a record.
HERERA: Home sweet home. Amazon (NASDAQ:AMZN) (NASDAQ:AMZN) is getting into the real estate business through a new partnership which it hopes will change the way people buy real estate.
Those stories and more tonight on NIGHTLY BUSINESS REPORT for Tuesday, July 23rd.
GRIFFETH: And we do bid you a good evening, everybody, and welcome.
So, trade, earnings and the Fed, it`s been a constant theme for Wall Street this year, and today, it was trade that lifted investor optimism. Reports say that the U.S. and China are going to meet face-to-face next week in Beijing. Talks have been stalled since May, so even just the idea that the two sides are talking again was interpreted as progress.
And the major averages rallied as a result to near record levels. The Dow Industrial Average was up 177 points to 27,349, Nasdaq was up 47, the S&P added 20.
Kayla Tausche starts us off in Washington tonight.
KAYLA TAUSCHE, NIGHTLY BUSINESS REPORT CORRESPONDENT: U.S. and Chinese officials are expected to negotiate in person for the first time since the G-20, with sources saying these talks will take place sometime between the start of congressional recess this Friday and China`s August 1st holiday. The talks are looking for compromise on two fronts. President Trump wants China to buy agricultural products in exchange for relaxing a business ban on Huawei. Longer term, the White House will dial tariffs back if China codifies any legal into law.
Recently, White House officials have signaled that even though President Trump is inclined toward a deal, that latter item making this legally binding could take several months. Those officials have tried to shift the focus on to the new NAFTA in the meantime.
For NIGHTLY BUSINESS REPORT, I`m Kayla Tausche in Washington.
HERERA: A big story for the market tomorrow will be the Justice Department`s broad antitrust review into big tech to determine whether it is stifling competition. The announcement was made late today. The review is focused on Internet search, social media and retail services, and it pressured the stocks of Facebook (NASDAQ:FB) (NASDAQ:FB), Amazon (NASDAQ:AMZN) (NASDAQ:AMZN), Google (NASDAQ:GOOG) (NASDAQ:GOOG) in initial after-hours trading.
HERERA: But it wasn`t just trade that lifted investor sentiment but stronger-than-expected earnings as well. Take Coke. The Dow component raised its revenue forecast, thanks to sale of its namesake soda. And the stock got a jolt, rising 6 percent, making it the best performing stock on the blue chip index.
Sara Eisen digs into Coke`s quarter.
SARE EISEN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Coca-cola surprised Wall Street with more growth today, from highlights from the quarter. Six percent organic revenue growth, that was the strongest it`s been in a while, and it was built on a healthy mix of higher volume and higher pricing.
Coca-cola saw strength around the world, especially in emerging markets, and in Asia. What`s driving it? Well, Coke is saying that it has been doing better marketing like the new promo with “Stranger Things” and its new Coke, and also new innovations like just released Coca-Cola (NYSE:KO) (NYSE:KO) Orange Vanilla, which led the charge.
James Quincy says it is part of a long-term story for better growth for the company.
JAMES QUINCY, COCA COLA CHAIRMAN AND CEO: I think it is a sign that the transformation of the business being more consumer-centric, more innovation and marketing led and being faster and more nimble with our bottling partners on executing.
EISEN: Coke Zero Sugar continues to grow double digits for the seventh quarter in a row.
QUINCY: It is some Diet Coke consumers coming over, some of the people are going from Coke as they want to balance things out. They maybe have a Coke, a Coke classic and a Coke zero sugar, so coming from Coke, and from other categories.
EISEN: Other new innovations, Costa Coffee Ready to Drink, a new coffee drink which Coke says is 30 percent less sugar and is doing well in the U.K. They`ve also launched a new energy drink called Coke Energy and Coke with Coffee.
Innovation is a big part of the new growth story at Coca-Cola (NYSE:KO) (NYSE:KO) and rival Pepsi. Pepsi, you have seen it play out in the snack division with Frito-Lay, but both companies do have new, energetic CEOs that are driving faster change and also increased marketing spending, which is leading to better results in the market and in the company`s performance.
For NIGHTLY BUSINESS REPORT, I`m Sara Eisen.
GRIFFETH: And Coke`s fellow Dow component, united technology blew past earnings estimates today. The company raised its four year sales and profit forecast with a second time this year. United Tech is citing strength in the aerospace market, especially when it comes to maintenance parts and services. And that sent that stock higher in today`s session.
HERERA: It was a different story though for travelers. The Dow component missed Wall Street profit estimates in part because of weather-related losses. Strong wind and hail storms led to an increase in claims which caused underwriting gains to slow. That sent the stock down more than 1 percent.
GRIFFETH: So far, one of the biggest surprises this earnings season has been the guidance.
And as Bob Pisani reports, it`s not as bad as many feared.
BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Remember a month ago when bears were warning that big global corporations would lower second half guidance due to the global slowdown and the trade wars? Well, it`s still early. Only about 20 percent of the S&P has reported but earnings Armageddon is not upon us.
For the moment, it looks like we dodged an earnings recession, two straight quarters of negative growth and was a surprising upbeat guidance from a diverse group of companies this morning, including United Technologies (NYSE:UTX) (NYSE:UTX) and Lockheed Martin (NYSE:LMT) (NYSE:LMT) in the industrial space, Kimberly-Clark (NYSE:KMB) (NYSE:KMB) and Coca-Cola (NYSE:KO) (NYSE:KO) in consumer staples, and Biogen in health care.
Coca-Cola (NYSE:KO) (NYSE:KO) CEO James Quincy summed it up very well. He told us: We saw some clouds on the horizon but the storm never arrived.
In other words, there was no global meltdown like so many have been bracing for. Still, there are a lot of concerns, many over the stronger dollar and higher overall cost. In fact, the IMF just lowered its global economic forecast again, saying the risk remained to the down side. We`re going to get a big test of this tomorrow when Caterpillar (NYSE:CAT) (NYSE:CAT) reports. The stock sold off big time in May when tariff issues heated up.
Remember, Caterpillar (NYSE:CAT) (NYSE:CAT) gets about a quarter of sales from Asia and business has been slow there recently.
For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock Exchange.
HERERA: Investors are betting on an interest rate cut when Federal Reserve policymakers meet next week. Many consider it an insurance cut to serve as a buffer against potential weakness.
And that got us thinking about the impact of such a move and so we asked Steve Liesman to take a look.
STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: With the Federal Reserve about to cut interest rates at the end of the month, many are asking the question what will a quarter point rate cut accomplish.
Fed Chairman Jerome Powell has a list of worries that cutting rates are supposed to address.
JEROME POWELL, FEDERAL RESERVE CHAIRMAN: We think that uncertainty around trade policy and also global growth, it`s not — it`s not all down to trade policy.
UNIDENTIFIED MALE: Right.
POWELL: There`s something going on with growth around the world, particularly around manufacturing and investment and trade.
LIESMAN: But some are concerned that Fed rate cuts won`t address those issues. Companies just got a huge tax cut. Interest rates, they`re already low. Skeptics argue if a CEO is worried about the effects of a trade war, a quarter point rate cut won`t prompt corporate spending or hiring.
MEGAN GREENE, MANULIFE INVESTMENT: I don`t think the cost of borrowing is a constraint on activity these days. Particularly if you are looking at the economy, the real weakness for businesses, the little guys are hardly having any problem getting access to credit. It is not the cost of borrowing.
UNIDENTIFIED FEMALE: Right.
GREENE: If you cut rates further, it is hardly going to really boost growth.
LIESMAN: And so far, low interest rates haven`t helped address the Fed`s problem of not hitting its 2 percent inflation target. Core inflation has remained below target while the Fed maintained an easy policy for a lost of the last ten years. Inflation has eased a bit since the Fed began raising rates.
Remember, the Fed was still easy, that is below its neutral interest rate for a lot of the time that it was raising rates. So what would be the upside of a rate cut? Perhaps somewhat lower rates for consumer, home and auto loans. And by cutting rates, the Fed will bring U.S. rates more in line with the low levels in Europe and Japan.
MICHAEL GAPEN, BARCLAYS: Since U.S. yields are higher, the dollar is at roughly a 30-year high on a trade-weighted basis. So, I do think you could make an argument that bank lending has slowed, housing has slowed, some of the interest rate sensitive parts of the economy have slowed. And so, whether it`s an insurance cut or recalibrating the policy stance, I think you can make a couple of different stories to justify cuts.
LIESMAN: A rate cut will show that the Fed is more serious about at least working to hit its 2 percent inflation target. Maybe most important, a rate cut will avoid a potential sell-off from a market that expects a cut, whether it believes the cut will do any good or not.
For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.
GRIFFETH: And we all woke up to the news this morning that the economic future of the United Kingdom now will be driven by Boris Johnson, who becomes the U.K.`s next prime minister tomorrow. During his victory speech today, he repeated his pledge to pull the U.K. out of the European Union by the end of October with or without a formal deal.
Willem Marx reports tonight from London.
WILLEM MARX, NIGHTLY BUSINESS REPORT CORRESPONDENT: A journalist and politician, a mayor-turned-foreign secretary. Boris Johnson had always hoped one day to find a way into the top job, never afraid to throw his weight around, a fan of drama, both ancient and modern, with decades of eye-catching appearances on the national stage.
And perhaps his most dramatic entry will be here at 10 Downing Street on Wednesday afternoon when he crosses the threshold as the United Kingdom`s new leader.
No national election required, Johnson relied instead on the support of fewer than 100,000 party members.
UNIDENTIFIED FEMALE: Boris Johnson is elected as a leader of the Conservative and Unionist Party.
MARX: As party leader and prime minister, he`ll replace Theresa May. She like David Cameron before her felt forced to resign thanks to Britain`s complex relationship with the European Union. The effort to change that dynamic through Brexit will doubtlessly define a Johnson government for months or years if he lasts that long.
He acknowledged the huge challenges he faces as a pivotal moment in modern British history, but said he was undaunted.
BORIS JOHNSON, BRITISH PRIME MINISTER DESIGNATE: We are going to energize the country. We are going to get Brexit done. We`re going to take advantage of the opportunities that it will bring in a new spirit of can do, and we are once again going to believe in ourselves and what we can achieve.
MARX: The U.K., he insists, will depart in 100 days, do or die, come what may, and that insistence concerns investors and businesses in Britain.
The government`s own independent forecasting body has predicted a no-deal Brexit will see the economy shrink 2 percent, unemployment rise 5 percent, and house prices tumble 10 percent.
And while Johnson and his supporters began to celebrate, Europe has issued a by-now familiar warning.
FRANS TIMMERMANS, EUROPEAN COMMISSION VICE PRESIDENT: A no-deal Brexit, hard Brexit would be a tragedy for all sides, not just for the United Kingdom. I`m not one of those saying, oh, god, they`re going to suffer. We are all going to suffer if that happens.
MARX: The reception in Washington slightly warmer, President Trump tweeting Johnson would be great.
But that will provide little cheer to those British voters opposed to Brexit and to Boris Johnson. It will do nothing to change the parliamentary and electoral arithmetic that will undoubtedly constrain this politician who so often felt free to play a character of his own choosing.
For NIGHTLY BUSINESS REPORT, I`m Willem Marx in London, England.
GRIFFETH: Still ahead, the Justice Department has its sights set on big tech.
HERERA: The DOJ review is happening just as the tech giants find themselves under increased scrutiny from Washington lawmakers, so it may also come as no surprise that those same companies are pouring a lot of money into lobbying those very lawmakers.
Aditi Roy has the details.
ADITI ROY, NIGHTLY BUSINESS REPORT CORRESPONDENT: Amazon (NASDAQ:AMZN) (NASDAQ:AMZN) spent more on lobbying last quarter than any other tech company, more than $4 million. At stake for the online retailer? Its cloud division, Amazon (NASDAQ:AMZN) (NASDAQ:AMZN) Web Services, is locked in a fierce battle with Microsoft (NASDAQ:MSFT) (NASDAQ:MSFT) over the Pentagon`s $10 billion Jedi contract.
The tech giant isn`t alone. New disclosure filings show Amazon (NASDAQ:AMZN) (NASDAQ:AMZN) and Facebook (NASDAQ:FB) (NASDAQ:FB) set quarterly records on lobbying spent in April through June. Alphabet, which outspent every other U.S. company on lobbying last year, came in third at around $3 million, followed by Microsoft (NASDAQ:MSFT) (NASDAQ:MSFT) and Qualcomm (NASDAQ:QCOM) (NASDAQ:QCOM).
Those numbers across big tech have been increasing over the last decade.
SARAH BRYNER, CENTER FOR RESPONSIVE POLITICS RESEARCH DIRECTOR: Ten years ago, they were spending tens of thousands of dollars. Now they`re spending tens of millions of dollars.
ROY: They`re spending so much because they`re now facing government scrutiny on multiple fronts — data security, Internet privacy and competition.
DAVID MARCUS, FACEBOOK VICE PRESIDENT: The reason we designed Libra in such a way that Facebook (NASDAQ:FB) (NASDAQ:FB) will only be one among hundreds of members among the Libra association and will have no special privilege means you will have to trust Facebook (NASDAQ:FB) (NASDAQ:FB) and understand —
SEN. SHERROD BROWN (D), OHIO: Well, Mr. Marcus (NYSE:MCS) (NYSE:MCS), excuse me, you know better than that. You know only Facebook (NASDAQ:FB) (NASDAQ:FB) has access to 2 billion people. And all — to say that you are just one of many is simply not true. After people`s data and private messages have been stolen and sold, after you let Russian bots try to throw the 2016 election with no contrition, I might add.
ROY: As tech firms dole out as much if not more than traditional spenders like Boeing (NYSE:BA) (NYSE:BA) and AT&T (NYSE:T) (NYSE:T), it is unclear if the money is helpful in influencing lawmakers.
BRYNER: The top spenders are getting what they want, and if they weren`t, they would stop spending.
BRADLEY TUSK, TUSK STRATEGIES FOUNDER & CEO: If you are just playing an inside game, you spend more and more on lobbyists and you have diminishing returns. To expect it to work I think is unrealistic.
ROY: While the amount these companies are spending on lobbying is small compared to their large cash hordes, they`re significant in the political lobbying market and experts expect the numbers to stay relatively high.
For NIGHTLY BUSINESS REPORT, I`m Aditi Roy, San Francisco.
GRIFFETH: More earnings now. Chipotle reported better than expected profits, fuelled by its investments in delivery, advertising and, most importantly, its digital operations. That helped lift its quarterly same- store sales, which is a key metric in the casual dining industry, and investors cheered, sending the stock higher in initial after hours trading this weekend.
Kate Rogers (NYSE:ROG) (NYSE:ROG) has the one key takeaway in Chipotle`s results.
KATE ROGERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Chipotle reporting a very strong quarter Q2 with beats on metrics across the board. This quarter, all eyes once again are on digital sales which grew 99.1 percent and accounted for more than 18 percent of sales for the quarter. This is the second quarter in a row where growth was this strong. Q1 saw digital sales grow 100 percent.
It`s been a major focus under CEO Brian Niccol who took over last year, expanding delivery, enabling digital order pickup shelves, testing out Chipotle lanes for digital orders and offering digital first food promotions. They also have a loyalty program, Chipotle Rewards, that`s continuing to build on the digital platform.
Since Niccol has taken the helm, that stock hit new all-time highs and has increased over 130 percent.
For NIGHTLY BUSINESS REPORT, I`m Kate Rogers (NYSE:ROG) (NYSE:ROG).
HERERA: Higher customer spending leads to strong numbers at Visa (NYSE:V) (NYSE:V). That`s where we begin tonight`s “Market Focus”.
After the bell, the world`s largest payment processor posted better than expected earnings as profits rose by a third, thanks to that customer spending and higher fees. Visa (NYSE:V) (NYSE:V) also raised its full-year revenue outlook. Shares were volatile in the after hours trading and closed the regular session up a fraction to $180.90.
Also after the bell, Texas Instruments (NYSE:TXN) (NYSE:TXN) beat estimates even with a global slowdown in demand for micro chips. The company had warned that slowdown could persist as chip manufacturers are caught in the middle of the U.S./China dispute. T.I. is often seen as a proxy for the chip sector. Shares rose initially in after-hours trading and closed the regular session up more than 1 percent to $120.07.
Hasbro (NYSE:HAS) (NYSE:HAS) topped estimates thanks to increased demand for “Avengers: Endgame” items. The toymaker also saw strong sales from its traditional brands like Monopoly and Playdoh. Separately, Hasbro (NYSE:HAS) (NYSE:HAS) plans to cut its reliance on toy production from China because of the ongoing U.S. and China trade disputes. Shares soared nearly 10 percent to $119.31.
GRIFFETH: Harley-Davidson (NYSE:HOG) (NYSE:HOG) had mixed results. It beat earnings targets but revenue fell short because of continued slow sales of its signature motorcycles. As a result, the company cut its outlook for motorcycle shipments. But shares rose more than 6 percent today to $36.48.
JetBlue reported better than expected earnings and revenue. The airline sees capacity rising for the full year. It is the fifth straight quarter that JetBlue has beaten estimates. Shares were up more than 1-1/2 percent today to $19.28.
And Sherwin-Williams (NYSE:SHW) (NYSE:SHW) turned in a mixed report. The paint maker topped profit estimates but came in shy on revenue. The company also reaffirmed its full-year guidance. Shares of Sherwin-Williams (NYSE:SHW) (NYSE:SHW) rose nearly 8 percent today to $490.23.
And Pulte Homes topped Wall Street profit estimates, but the home builder did warn that sales and gross margins will not be as strong as expected, despite the CEO expecting demand to pick up at the second half of the year partly because of lower mortgage rates. It wasn`t enough to lift the stock, though. That fell more than 8 percent today to $30.69.
HERERA: Those lower mortgage rates were not enough to get potential buyers off the sidelines. Sales of previously-owned homes fell in June, as high home prices and low inventory offset any benefit of lower rates.
Existing home sales were down 1.7 percent, much lower than expected, and this is the key season for the housing market because roughly 40 percent of the year`s sales take place in March through June.
GRIFFETH: Amazon (NASDAQ:AMZN) (NASDAQ:AMZN) is getting into the real estate business now. The company`s joining forces with real estate brokerage firm Realogy. Word of the partnership sent Realogy shares soaring today, which may offer some relief to shareholders who have seen that stock fall more than 80 percent over the past two years.
Diana Olick has more on this new venture.
DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: It was a critical move for Realogy, the nation`s largest residential real estate brokerage company, facing tough competition from new high tech brands like Redfin and Compass. Realogy went big, partnering with the biggest online retailer in the world, Amazon (NASDAQ:AMZN) (NASDAQ:AMZN).
Potential home buyers now can go through Amazon`s TurnKey portal to a Realogy page where they enter information about what they want and are then connected with a Realogy brand agent. Those include Coldwell Banker, Century 21, Sotheby`s and Corcoran.
Once the buyer closes on the house, Amazon (NASDAQ:AMZN) (NASDAQ:AMZN) home services steps back in with up to $5,000 worth of free services like painting, cleaning, hanging your TV, as well as products for the home installed by Amazon (NASDAQ:AMZN) (NASDAQ:AMZN).
UNIDENTIFIED FEMALE: Your package also comes with a curated suite of smart home products, like a ring video doorbell.
OLICK: It is a strategy designed to boost sales for both Amazon (NASDAQ:AMZN) (NASDAQ:AMZN) and Realogy.
RYAN SCHNEIDER, REALOGY CEO: We need to involve the consumer experience with the transaction. This program is not just about helping people get into the right house with a great agent, but it is about having then the power of Amazon`s home services and a fully-equipped smart home be ready for them when they`re ready to move in.
UNIDENTIFIED MALE: Alexa, turn on the TV.
OLICK: For Amazon (NASDAQ:AMZN) (NASDAQ:AMZN), the benefit for now is to boost sales of its smart home products like Alexa as well as its relatively new home services platform. A year ago, it partnered with one of the nation`s largest homebuilders, Lennar (NYSE:LEN) (NYSE:LEN), putting products in its models in a show-and-sale strategy.
Of course, this new partnership has some speculating it is Amazon`s first foray into putting actual home listings, possibly from Realogy, on its site.
SCHNEIDER: We`ve never had that conversation with Amazon (NASDAQ:AMZN) (NASDAQ:AMZN).
OLICK: The program launches in 15 major markets including L.A., San Francisco, Seattle, Dallas, Chicago, and D.C.
For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Washington.
HERERA: Coming up, closing the gap. What some companies are doing to get more women into the male-dominated cybersecurity industry.
HERERA: We`ve reported extensively on the gender gap in the workplace, especially in the tech industry, but it is even greater in the cybersecurity sector. And that gap is something defense companies are trying to close.
Kayla Tausche is back with us tonight, this time from the Pentagon.
MARIAH KENNEY, CROWDSTRIKE: Right now, we`re working together right now.
TAUSCHE: Mariah Kenney didn`t always want to be a cybersecurity expert.
KENNEY: (AUDIO GAP) guys taught a course on cybersecurity and so I took that. Super interesting. I only understood half of it.
TAUSCHE: Kenney now works at Crowdstrike, the company hired by the Democratic Party to play defense against Russia. She graduated in May with a degree in computer science and led the University of Virginia to win two cyber contests.
The competition is sponsored by Raytheon (NYSE:RTN) (NYSE:RTN) and federal agencies. The winners get face time with potential employers.
It is part of a growing effort by companies and the government to woo new workers, especially women which make up just 19 percent of an industry long viewed as a club for geeks and men.
ESSYE B. MILLER, DEPARTMENT OF DEFENSE DEPUTY CIO: When I started my career, I clearly remember an individual, one of the male seniors saying, don`t worry, you are going to get married and start a family at some point and this won`t be important to you.
TAUSCHE: Essye Miller is the deputy chief information officer at the Pentagon. Part of her job, luring the best minds away from Silicon Valley.
MILLER: If it is about money, obviously, we can`t compete. But if it is about mission, focused on what we do for the nation and also a penchant to serve, we win every time.
TAUSCHE: That pitch hit home for Florida senior Claire Seiler.
CLAIRE SEILER, RAYTHEON INTERN: The problems that we face in cybersecurity have real-world consequences, so the difference between not solving a problem cybersecurity and solving it is the difference between millions of people having their data leaked out or having their data be protected.
TAUSCHE: There are roughly half a million cybersecurity jobs currently open in the U.S., 5,000 of those here at the Defense Department where Miller says a diverse set of perspectives will help thwart a wider variety of threats.
For NIGHTLY BUSINESS REPORT, I`m Kayla Tausche at the Pentagon.
GRIFFETH: And before we go, one final look at the day on Wall Street with word that the U.S. and China would resume trade talks next week in Beijing. That sent stocks higher and earnings from the likes of Coca-Cola (NYSE:KO) (NYSE:KO) also helped. The Dow up 177 points. The Nasdaq was up 47. The S&P added 20.
HERERA: And that does it for NIGHTLY BUSINESS REPORT tonight. I`m Sue Herera. Thanks for joining us.
GRIFFETH: I`m Bill Griffeth. Have great evening. See you tomorrow.
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