ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Sue Herera and Bill Griffeth.
BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: Stabilized. The stock market puts the brakes on yesterday`s rout after China stops its currency from falling even further.
SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Average Joe. After a week of being battered, what are retail investors doing with their money? We`ll get insight from one of the biggest online brokerages.
GRIFFETH: And Disney (NYSE:DIS) downer. The entertainment giant misses earnings and revenue estimates and the stock reacts.
All of that and much more tonight on NIGHTLY BUSINESS REPORT for Tuesday, August 6th.
HERERA: Good evening, everyone, and welcome. Stocks recovered a bit today on Wall Street, getting back not quite half the losses from yesterday. The catalyst: China stepping in and stabilizing its currency, not allowing it to fall further.
As a result, investors stepped in. The Dow rose 311 points to 26,029. The Nasdaq climbed 107 and the S&P 500 added 37.
Wall Street has been on edge over the trade war. It`s clear investors are ready to react to any headline.
Bob Pisani explains what a trade war looks like to Wall Street.
BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Stocks rebounded and also in the session managed to regain a chunk of Monday`s steep losses, and it was the worst day in 2019, remember, on Monday. The markets were a little calmer today, but yesterday, the futures moved in a nearly 5 percent trading range over a 12-hour period.
That is extraordinary and a reminder that the trade wars could get much nastier very quickly. The central lesson is that the trade war can encompass a lot more than just tariffs. They can quickly morph into currency wars, for example, which is why the markets had a big problem yesterday. The markets hit new lows after the close on Monday when the U.S. Treasury designated China a currency manipulator, which opens the door for additional retaliatory measures potentially.
There`s also the prospect of other types of economic sanctions such as China shutting down U.S. businesses in the region. It is not just a matter of how much is paid in tariffs, it is much more complicated.
Beyond the numbers, there`s also psychological effects on investor confidence, like the prospect of lower capital expenditures and lower earnings growth and that`s what Citigroup (NYSE:C) said overnight, the overhang of a sluggish economy, trade war threats, potential currency devaluation. So, that was enough to make Citigroup (NYSE:C) lower its earnings estimates for the S&P for 2019 and 2020.
Here is the bottom-line: the markets now view currency wars as another aspect of the trade war, and Monday`s action was a reminder that full-blown trade wars are multi facetted and they can get out of control very quickly.
For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock Exchange.
GRIFFETH: As expected, China responded to the U.S. after the Treasury Department designated Beijing as a currency manipulator.
Eunice Yoon is in Beijing with more.
EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Take a look at the front pages of the newspapers in China today. “The Global Times”, which is the communist party paper, says: Renminbi to remain stable despite depreciation. “The China Daily” says fluctuations of Yuan exchange rate normal. And these headlines are not only in English, but also in Chinese. The message is just as important for domestic audience, as it is for an international one.
After the big selloff yesterday, Beijing would be wary of a repeat of 2015- 2016 when a devaluation of Yuan panicked investors and triggered capital flight. So the priority seemed to be to message to everyone today that China would stick to its pledge to stabilize the Yuan.
But the authoritative “People`s Daily” had a few words for the Trump administration regarding China being labeled a currency manipulator, saying that the U.S. is destroying international order. The central bank which manages a floating exchange rate called the U.S. move unilateral protectionist behavior that violates international rules. The bank pointed out that China doesn`t meet the U.S.`s three criteria for the label.
Secretary Mnuchin says the U.S. will engage in conversations with the International Monetary Fund as part of the process to, quote, eliminate the unfair competitive advantage of China`s actions. The central bank addressed that too, saying the IMF believes the Yuan exchange rate is generally in line with fundamentals. So, from Beijing`s perspective, the evidence is in China`s favor.
The latest developments would seem to escalate tensions, but I spoke with a source who consults with the Chinese negotiating team and he said that China still want a trade deal with the U.S., so China would be strong and firm in rhetoric, but moderate in taking action against the U.S. For example, he said China announced it would suspend U.S. agricultural purchases but the word “suspend” was used carefully, because it means that there is room to reach a compromise.
For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon in Beijing.
GRIFFETH: And a little later in the program, we`re going to tell you what farm groups are saying about China`s plan to stop buying our agricultural products.
HERERA: Not to be outdone, the U.S. is not backing down. Ylan Mui reports from Washington.
YLAN MUI, NIGHTLY BUSINESS REPORT CORRESPONDENT: On day two of the new trade war with China, the White House doubled down on its decision to accuse Beijing of manipulating its currency.
LARRY KUDLOW, NATIONAL ECONOMIC COUNCIL DIRECTOR: The Renminbi is dropped about 10 percent in nominal market terms. That`s not acceptable.
Again, we have to keep our laws intact. There`s G-20 deals. There`s WTO deals. So, we did what we have to do.
MUI: The Trump administration also argued that tariffs are hurting China more than America and that manufacturing is returning to the United States. In a tweet this morning, Trump claimed that massive amounts of money from China and other parts of the world are pouring in to the United States. He said: We are in a very strong position and that companies are also coming to the U.S. in big numbers.
But economists point out that tariffs on Chinese goods are paid by American businesses, and Kudlow acknowledged today that a weaker Yuan and a stronger dollar can help mitigate these costs.
KUDLOW: Now, ironically that actually lowers prices. That takes the pressure off any consumer price increases at home, but that`s the wrong way to do it. That abrogates a lot of pledges and promises. After all, if China keeps devaluing its currency, then money is just going to flow out of there. It has already started.
MUI: But former ambassador to China, Gary Locke, warned that nobody wins in a trade war and consumers could be the biggest losers.
GARY LOCKE, FORMER U.S. AMBASSADOR TO CHINA: All of the tariffs in place already are costing American households anywhere from $800 to over $1,000 per year. So we need to have a reset. We need to pause. We need to get people back to the negotiating table.
MUI: Larry Summers, who served as NEC director and treasury secretary under President Obama, went even further. In an op-ed in “The Washington Post (NYSE:WPO)”, he wrote that the White House risks real economic damage as businesses and consumers become fearful and hold off on spending.
Trade negotiators from Beijing were scheduled to come to Washington next month for another round of talks. The White House said today that meeting is still on.
For NIGHTLY BUSINESS REPORT, I`m Ylan Mui in Washington.
GRIFFETH: And we don`t have to tell you that the recent trade war fears over the past week created some wild swings in the market.
So, what does a retail investor do about all of this with their portfolio?
Back with us today, J.J. Kinahan, the chief market strategist at TD Ameritrade (NASDAQ:AMTD).
Always good to see you, J.J.
J.J. KINAHAN, CHIEF MARKET STRATEGIST, TD AMERITRADE: Hi, Bill.
GRIFFETH: So, usually, when the market is at rough patch, the smart money says, don`t overreact, this too shall pass. But more voices on Wall Street have been saying this may not pass for a while. So, what`s an investor to do with this?
KINAHAN: Well, it is interesting, Bill. If we look at our client`s activity over the last couple of months, I would agree, first of all don`t panic. But one of the things we have seen is our clients pare back on equities and go more towards fixed income. So, they`ve been net buyers of product, but they`ve actually been next sellers of equities two months in a row. And the stock that they actually leading the way, Bill, maybe to your surprise is Apple (NASDAQ:AAPL). Then we have Facebook (NASDAQ:FB) and Amazon (NASDAQ:AMZN).
So, the FANG stocks have certainly gone from so en vogue a year ago to ones where I think people are taking some profits right now. As I say, going in the fixed income, but they`re going in the short duration fixed income, most of it under six months. Because to your point, I think a lot of people think it will last at least through the end of the year, but they want to have money ready if this is settled. They`re not taking off all of their investments, but they`re certainly paring back some risk where they see some existing.
HERERA: And are you hearing from your clients and would you recommend to our viewers who have a long-term time horizon perhaps to put up a list, make a list of the stocks you have always wanted to add to your portfolio but perhaps they`ve been too expensive?
KINAHAN: Yes, I think, Sue, that`s a great point. Yes, we have heard from our clients. But I think it is more, you know, at the top of the show Bob did a great piece explaining what this sort of means in terms of a devaluation? And most of our clients just explain to me what this actually means.
So, it hasn`t been a panic phone call, which I think is great. It is people just trying to understand. To your point, Sue, you know, if you look at our mix at TD Ameritrade (NASDAQ:AMTD), we have a lot of clients who are shorter term traders, who trade a lot of derivatives. They love this, when there`s volatility.
But to the longer term traders, many of whom are watching your show right now, what I would say is absolutely, look at stock you want to own, don`t make the mistake, though, of going all in at this time, so to speak. There maybe other opportunities. Maybe you buy a portion of a stock that you`ve really had your eye on for a while. Stocks have come off a bit. That gives you some opportunity.
But the one message I think to really take away from, you know, what we are seeing is this lasted longer than people think. And, you know, there`s no reason to believe that the end is near so to speak. This may be a prolonged cycle.
So no matter what you do looking — you know, just finishing earnings season, looking at the earnings, what are the companies that you want to buy saying about this or are they largely avoiding it because this is the largest issue we have right now in the market.
GRIFFETH: J.J. Kinahan with TD Ameritrade (NASDAQ:AMTD) — again, thanks for joining us tonight, J.J.
KINAHAN: Always a pleasure. Thanks, guys.
HERERA: And now that those trade tensions have indeed escalated, Wall Street is expecting the Federal Reserve to take action and cut interest rates again, but just how many cuts does the street want?
Steve Liesman takes a look.
STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: In the wake of the tariff threats from the president and renewed worries about a currency war between the U.S. and China, markets are now more aggressive in pricing in the idea that the Fed comes to the rescue and cuts interest rates this year.
The Fed funds future market trading with a 74 percent probability that the Fed cuts its overnight lending rate by 25 basis points in September. There`s a 73 percent chance it does another 25 in December, and it is toying with the idea of January with a third cut with a 48 percent probability.
But is all of that too aggressive? St. Louis Fed President James Bullard making the first comments from the Fed since the trade war blew up again. He`s not as sure about the direction of policy as the market is. Bullard saying the rates are, quote, in the right neighborhood.
He doesn`t see a need for half a percentage point cut. He expects another cut but says it`s a, quote, losing game for the Fed to respond to all stock market movements. He also says that Fed policy can`t react to the day-to- day give-and-take of a trade war.
All of this suggests that markets maybe a little more certain about where policy is going than the Federal Reserve is, and suggest the Fed is not going to react to every tariff move. Eventually, the Fed is going to have to see that tariffs are actually weakening the U.S. economy before it sets policy lower.
This raises the question, is this the start of a mid-cycle adjustment of maybe just a couple of rate cuts or is it the start of a longer easing cycle? The Fed may come around to the view that it is a longer one, but it doesn`t seem to be there quite yet.
For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.
GRIFFETH: One of the Fed`s mandates of course is achieving full employment so it watches each new piece of data very carefully. And this morning, the government said that the number of job openings in June was little changed from May, signaling an essentially healthy jobs market still. The number of opening was 7.35 million, nearly 1.4 million more than the number of unemployed Americans. It`s the 15th straight month above 7 million.
HERERA: And one place looking for workers is Vermont, and that state is offering incentives to help lure people to live and work there. One goal, bring in younger workers.
Kate Rogers (NYSE:ROG) is on the job for us in Burlington, Vermont.
KATE ROGERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: For Collin Palkovitz remote work means freedom.
COLLIN PALKOVITZ, REMOTE WORKER: I value working remotely, just innately. It enables me to be wherever I want to be and to have my family be with me in a setting that we choose and a location and a culture that we choose.
ROGERS: The 37-year old has worked remotely for the better part of his career with Pure Charity, a technology nonprofit.
He and his family were based outside of Los Angeles but decided they wanted to buy a home and own some land. So they packed up their two kids and dog into an RV and drove 25,000 miles across the country for six months, looking for the perfect place to plant roots. They ended up in Vermont this past January.
Palkovitz took advantage of the state`s new remote worker grant program which offers incentives of up to $10,000 to workers who do the majority of their work remotely, to keep their jobs and move to Vermont. Palkovitz says he got some $4,500 reimbursed for his move.
State officials say this is a way to attract a new and potentially younger tax base in the face of an aging population that`s slowly growing in a historically tight labor market.
In fact, Fitz Ratings recently downgraded the state in part over age demographics.
SEN. MICHAEL SIROTKIN (D), VERMONT: We have incredibly low unemployment. We hear from the business community all the time that they`re looking for workers and skilled workers, and this seems to be one small piece of the puzzle to try to get new people to come to our state.
ROGERS: So far, nearly 60 remote workers have taken advantage of the program with an average age of 38, an average grant of around $3,800. Come January, a new phase of the program will begin, new worker grants. This will offer up to $7,500 for out-of-state residents to relocate to Vermont and work for companies based in the state like this Darn Tough Vermont. The sock manufacturer is experiencing record growth but needs workers to keep up.
BROOKE KAPLAN, DARN TOUGH VERMONT: We`re going to redouble our workforce in a matter of years and we really need to work in partner with the state to get those workers.
ROGERS: For Palkovitz who now lives on 64 acres in Pawlet, on the border of New York state with his family, the grant program presented the opportunity to make a needed change.
PALKOVITZ: This is something that we`ve always dreamed of doing, is living out on a lot of land.
ROGERS: For “NIGHTLY BUSINESS REPORT”, I`m kate rogers in burlington, Vermont.
GRIFFETH: And coming up, Disney (NYSE:DIS) surprises and misses on its quarterly results. We`ll look at what happened to one of the more widely- held stocks.
HERERA: Oil prices fell again today as increasing tensions between China and the U.S. create fears of a global slowdown in demand. Both benchmark Brent and domestic crude falling more than 1 percent today. So, the question is, how low could oil go?
Brian Sullivan takes a look at the drivers.
BRIAN SULLIVAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Energy stocks have already been beaten up this year, but they really sank on Monday on renewed trade war worries. The S&P Oil and Gas Exploration ETF, the ticker XOP, hitting its lowest level since early 2016 as crude oil prices now sit 30 percent below their highs, hit back just in early October.
The big question now for oil and gas investors is simple. How low can oil go?
Well, there are three main concerns in focus.
Number one: the strength of the U.S. dollar. The greenback touching its highest level against the Chinese Yuan since at least 2010. As the value of the dollar rises, oil often will fall because it is globally priced in dollars. As the dollar gets stronger, you simply need fewer dollars to buy the same amount of oil.
Second: you have oversupply concerns. Just last month, the International Energy Agency published a report warning of another oversupplied market next year. On top of that, you got reports showing that China and other countries have been taking in more Iranian oil than previously forecast. In many cases, that oil is waiting reserve, maybe in a ship floating at sea. It has not yet hit the market. When it does, and it will, oil is likely to fall more.
And, finally, fears of a global slowdown. Investors are increasingly worried the trade war will slow global economic growth, curbing demand from some of the world`s biggest buyers of oil like the United States, China or India.
DAN YERGIN, HIS MARKIT VICE CHAIRMAN: There are a lot of blinking lights about risk in the global economy, and that translates into weaker demand. And that too is weighing on the oil price and, in particular, on the oil companies.
SULLIVAN: Oil had its worst day in three years last week when the president announced his plan for 10 percent additional tariffs on Chinese imports beginning on September 1st.
For NIGHTLY BUSINESS REPORT, I`m Brian Sullivan.
GRIFFETH: After the bell tonight, Disney (NYSE:DIS) posted earnings and revenue that was below Wall Street estimates. The entertainment company missed earnings by $0.40 and revenue came in just over $20 billion, but it was more than a billion dollars off the mark. Not surprisingly, shares were volatile after hours tonight. Julia Boorstin has the takeaway for investors.
JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: This quarter Disney`s lower than expected top and bottom line results reflect the impact of the company`s transformation as it integrates its Fox acquisition and as it invests to build its streaming business. CEO Bob Igor saying, quote: The results reflect our efforts to reflectively integrate the 21st Century Fox assets to enhance and advance our strategic transformation.
But it was the disappointment performance of one of Fox`s films, “Dark Phoenix”, which dragged on the studio`s top and bottom line results, both less than expected. And as the company ramps up investment in ESPN Plus and gets ready to launch Disney (NYSE:DIS) plus, its direct to consumer and international division reporting a larger loss than anticipated.
But now, Igor says the company has all of the pieces in place. Quote: The incredible popularity of Disney`s brands and franchises positioned as well as we launch Disney (NYSE:DIS) Plus in addition of original and library content from Fox will only further strengthen our direct-to-consumer offerings.
For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Burbank, California.
HERERA: Major drug distributors offer to settle opioid lawsuits. That`s where we begin tonight`s “Market Focus”.
Bloomberg reports McKesson (NYSE:MCK), Cardinal Health (NYSE:CAH) and AmerisourceBergen (NYSE:ABC) are looking to pay $10 billion to settle claims that these companies helped fuel the U.S. opioid epidemic. The companies are in continuing talks with a group of state attorneys general who countered with a demand of $45 billion instead to cover the cost. All three companies fell in today`s trading.
The FDA is looking to bring criminal action against Novartis, accusing the pharmaceutical company of knowingly submitting false data in its application for a more than $2 million gene their by drug. The agency believes the treatment will remain on the market as it continues its evaluation. The shares dropped about 3 percent to $88.22.
Shake Shack beat estimates thanks to an increase in restaurant sales. The company also raised its outlook. Separately, Shake Shack is teaming up with Grubhub for a nationwide delivery as the on-demand food delivery industry ramps up in the country. The stock soared more than 18 percent to $86.72.
GRIFFETH: Take Two Interactive posted an earnings and revenue beat because of the continued success of the video game makers “Grand Theft Auto” and “Red Dead Redemption” franchises. The company also raised its full year outlook. The stock jumped nearly 8 percent of the news to $124.56.
Energizer Holdings (NYSE:ENR) missed estimates. The company said it was due to weather effects on its refrigerant business and weakness in its auto care products division. The battery company lowered its global net sales outlook. And shares plummeted more than 14 percent to $33.49.
And El Dorado Resorts missed estimates due to flooding conditions in the Midwest and construction disruptions at its Blackhawk properties. Separately, the company may also sell a casino on the Las Vegas strip after it completes its nearly $9 billion acquisition of Cesar`s. Shares fell more than 3 percent today to $40.45.
HERERA: China is suspending agricultural imports from the U.S. must seem a bit of piling on for American farmers.
Aditi Roy has a look at the toll it is all taking.
ADITI ROY, NIGHTLY BUSINESS REPORT CORRESPONDENT: It has been a tough 18 months for U.S. farmers. They`re already caught in the middle of a trade war with China when torrential rains flooded much of the Midwest and Southeast during planting season this spring. And now China, which was the fourth largest market for U.S. agriculture exports, is halting all shipments of U.S. agriculture exports.
STEPHEN NICHOLSON, RABO AGRIFINANCE: We have been shipping those products to them this year, although at reduced quantities. We have also been shipping soybeans to them this year, again at reduced quantities. But you are now going to shut it down completely according to what we heard the Chinese say yesterday. So, that`s going to put a lot more downward pressure on prices going forward.
ROY: The American Farm Bureau Federation says exports to China in the first half of the year are down more than a billion dollars from last year. The organization also notes U.S. farmers stand to lose all of the nearly $9 billion market in 2018 if trade tensions continue. Soybean farmers are hardest hit.
NICHOLSON: That is the biggest export we have to China, and so, you know, farmers who plant soybeans have really been hurt on the prices.
ROY: The administration has doled out billions in aid to farmers to ease the pain of tariffs. The president today promised farmers more help if necessary, but many farmers say while the subsidies help, they don`t make them whole.
NICHOLSON: It will help. It will not make up the full — the full loss of losing a whole market, you know, to us, to the United States.
ROY: While farm groups have been trying to boost exports to other countries outside of China, so far, they haven`t had much success. The only exception has been wheat exports which have gone up 30 percent from last year.
For NIGHTLY BUSINESS REPORT, I`m Aditi Roy, San Francisco
GRIFFETH: And up next, Apple`s latest effort to keep its customers in house.
GRIFFETH: Finally tonight, Apple (NASDAQ:AAPL) is testing the waters with a new credit card. The hope is to keep Apple (NASDAQ:AAPL) customers inside the company`s fabled ecosystem.
Will it work?
Deirdre Bosa takes a look.
DEIRDRE BOSA, NIGHTLY BUSINESS REPORT CORRESPONDENT: The Apple (NASDAQ:AAPL) Card is here for a select group of users for now and later this month to everyone who qualifies.
TIM COOK, APPLE CEO: Apple (NASDAQ:AAPL) Card was created by apple and built on principles that we stand for, like simplicity and transparency and privacy.
BOSA: It is an apple-branded credit card issued through Goldman Sachs (NYSE:GS) and it`s only available to iPhone users. There is a physical card that works like any other credit card as well as a function inside the Apple (NASDAQ:AAPL) Pay app to make contactless payments. Its features include enhanced security that uses the iPhone`s fingerprint or face ID and a unique rewards program that gives 3 percent cash back on Apple (NASDAQ:AAPL) products.
Hundreds of thousands of people signed up to be notified when it became available.
UNIDENTIFIED MALE: I am an Apple (NASDAQ:AAPL) user. I have Apple (NASDAQ:AAPL) computers since they started to launch them. So, it is not completely out of the question.
BOSA: Now, a select group will get to test it as Apple (NASDAQ:AAPL) and Goldman Sachs (NYSE:GS) fine tune the product.
For Apple (NASDAQ:AAPL), the card is a way to keep existing iPhone users hooked on Apple (NASDAQ:AAPL) products at a time when iPhone sales are declining. It`s betting that customer loyalty and its reputation for privacy and security will entice users.
For Goldman Sachs (NYSE:GS), it is a high-profile push further into consumer services. The bank is hoping that the Apple (NASDAQ:AAPL) Card can translate into new customers of its consumer bank Marcus (NYSE:MCS), but will users adopt it?
UNIDENTIFIED MALE: I am a big fan of the Apple (NASDAQ:AAPL) products. I would have to look into the flexibility of it.
UNIDENTIFIED MALE: I mean, I already have everything linked to my iPhone, so my Wells debit card, credit cards, all of that stuff. And it has my information on it. I would trust them with everything else.
UNIDENTIFIED MALE: I have my American Express (NYSE:EXPR) (NYSE:AXP) added to my Apple (NASDAQ:AAPL) Pay. I don`t think I need — personally, I don`t need anymore than that.
BOSA: One thing is for certain, the collaboration between the tech titan and banking giant will be watched closely by Silicon Valley and Wall Street alike.
For NIGHTLY BUSINESS REPORT, Deirdre Bosa, San Francisco.
HERERA: And before we go, here is another look at the day`s final numbers from Wall Street. The Dow rose 311 points to 26,029. The Nasdaq climbed 107 and the S&P 500 added 37.
And that is NIGHTLY BUSINESS REPORT for tonight. I`m Sue Herera. Thanks for joining us.
GRIFFETH: I`m Bill Griffeth. Have a great evening. See you tomorrow.
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