ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Sue Herera and Bill Griffeth.
SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Dramatic comeback. Stocks stage a furious rally. The Dow reversing nearly 600 points and the S&P 500 had its biggest comeback of the year.
The rate debate. Today`s initial sell-off came as bond yields continued to
fall. Historically, falling rates are good for stocks, but could this time
And hiding in plain sight. You know your laptop or computer could be hack, but what about the monitor or your office phone? The everyday things in the workplace that are vulnerable to attack.
Those stories and much more tonight on NIGHTLY BUSINESS REPORT for
Wednesday, August 7th.
Good evening, everyone, and welcome. Bill has the evening off.
You can call this wild Wednesday. It started with a trio of central banks
cutting interest rates, and that led to a sharp drop in bond yields,
highlighting the concern over trade tensions between the U.S. and China.
That, in turn, led to a flight to safety.
Investors piled into things like government bonds and gold. In fact, gold
traded above $1,500 an ounce for the first time in six years. Stocks sold
off. The Dow down nearly 600 points early on. Oil also sold off, falling
more than 4 percent.
But then the buyers stepped in and stocks reversed course. The Dow
finished down only 22 points to 26,007. The Nasdaq rode 29 and the S&P
climbed 2. The indexes 2 percent reversal was its biggest comeback of
Bob Pisani has more.
BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: It was another wild day on Wall Street, the Dow plunging almost 600 points early on before rebounding to end essentially flat on the day. It was one of the great comebacks of the year. Mounting trade tensions heightened fears of a possible global recession, that has put more pressure on central banks
including our own Federal Reserve to keep cutting interest rates to get
ahead of a sharper downturn.
There were just several aggressive rate cuts announced overnight by central banks, in Thailand, in New Zealand and in India. That`s why bond yields are plunging across the globe with yields on Japanese and German bonds falling deeper into negative territory, the yield on the U.S. 10-year
Treasury note falling to a nearly three-year low early in the trading
So, no surprise that bank stocks like J.P. Morgan, Goldman Sachs (NYSE:GS),
and Comerica (NYSE:CMA) sold off today, as lower rates put pressure on bank profits.
But stocks bounced off the day`s lows right when the yield on the U.S. ten-
year came off its lows in the middle of the day. The two traded in tandem
all day long.
Despite the strong rebound in consumer staples and tech stock goes, the
trade sensitive industrials didn`t budge much. Emerson, 3M (NYSE:MMM),
Caterpillar (NYSE:CAT), all under-performed today. In fact, since the
start of August when additional tariffs were announced, industrials,
energy, semiconductors, they`ve all lagged the broader market. No surprise
What do these groups have in common? Those are the global sectors most
exposed to trade over all.
For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock Exchange.
HERERA: As Bob mentioned, those cuts by those central banks along with
falling rates puts our Federal Reserve back in the spotlight.
Steve Liesman takes a look at whether the Fed is under even more pressure
now to cut rates.
STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Normally, the central banks in Thailand, New Zealand and India would not be seen as big global movers and shakers, not like the Fed, the ECB and Bank of Japan. That wasn`t the case today when those three central banks sent a signal heard around the world as they cut interest rates, either unexpectedly in the case of Thailand, or more than expected in the cases of India and New Zealand.
That was part of what sent global bond yields careening downward,
eventually taking stocks with them for most of the day. The message to
markets, the possibility that we`re in a middle of a race to the bottom on
interest rates around the world. In fact, President Trump even encouraged
He tweeted out today: Our problem is the Federal Reserve that is too proud
to admit their mistake of acting too fast and tightening too much and I was
right. They must cut rates bigger and faster. It would be easier if the
Fed understood, which they don`t, that we are competing against other
countries, all of whom want to do well at our expense.
Whatever their motivation, Central Banks around the world from Russia to
Australia to Brazil have been cutting rates and doing so since April. Here
in the United States markets expect further rate cuts from the Federal
Reserve. Futures markets trade with a 100 percent probability of a
September rate cut, another quarter point expected in October, and even a
third one expected in December.
The Fed knows it can`t maintain rates that are so far from other countries.
The problem may be that if it cuts, other banks will simply cut more.
For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.
HERERA: Now, the upside to lower rates, mortgage applications. They
surged last week. But as Diana Olick explains, not everyone is reacting to
these new low rates.
UNIDENTIFIED FEMALE: Thank you for calling.
DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Homeowners didn`t waste any time last week calling their lenders to refinance, mortgage applications to refi jumped 12 percent for the week and were up a whopping 116 percent compared with the same week one year ago. This as the average rate on the 30-year fixed dropped channel: 26 date: 08/07/2019 time started: 18:35 time ended: 18:40 comments: precipitously to the lowest level since November 2016, all thanks to the escalating trade war with China.
The rate was nearly a full percentage point higher one year ago. That
means more than 8 million borrowers today could benefit from a refi by
lowering their rates at least a quarter of a percentage point. That
translates into a savings of about $150 a month on a $300,000 loan.
MARK ZANDI, MOODY`S CHIEF ECONOMIST: A lot of people will take the lower mortgage payments and say, oh, you know, I wanted to fix up my kitchen or the bathroom or the garage or do a little bit of landscaping. So, yes, it helps to juice up home improvement, renovation, but also all kinds of spending.
UNIDENTIFIED FEMALE: Thanks so much.
OLICK: Home buyers however were not impressed. Mortgage applications to purchase a home fell 2 percent for the week. That`s the fourth straight
week of decline, despite lower interest rates. Purchase applications were
nearly 7 percent higher than a year ago.
Mortgage rates continue to fall this week, so you can expect to see more
borrowers rushing to refi. As for buyers, it is just more complicated.
Low rates certainly help to afford a home, but the reason rates are low,
that is fear about the strength of the economy, makes buyers nervous and
less likely to want to make such a huge investment.
For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Washington.
HERERA: Over the past week or so the market has generally been lower since President Trump said the U.S. would impose new tariffs on Chinese goods beginning September 1st.
Our Eamon Javers asked the president today if he was surprised by the
(BEGIN VIDEO CLIP)
DONALD TRUMP, PRESIDENT OF THE UNITED STATES: The market reaction is to be expected. I might have expected even more. At some point, as I just said, we have to take on China. China is losing so many — they`re losing
thousands and thousands of companies are leaving China now because of the tariffs. We`re in a very good position. As to whether or not a deal will
be made, I will tell you this, China would like to make a deal very badly.
(END VIDEO CLIP)
HERERA: Now, many of the central banks are reacting to concerns about
slower global growth because of those trade tensions between the U.S. and
China. It was exacerbated Monday when China`s Yuan, its currency, hit its
lowest level against the dollar in a decade. But since then China has
worked to stabilize the currency.
And as Eunice Yoon tells us, today was no different.
EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Beijing is sending the signal that if there is a currency war, it won`t be because of China.
The authorities here today were intervening and managing the markets in
order to hold up the value of the currency. First thing this morning in
the mainland Chinese markets, the People`s Bank of China set what it calls
the midpoint at 6.996 to the U.S. dollar, just stronger than 7. The way
the system works here is that the central bank fixes the value at the start
of trade every day to influence trading.
Currency traders were also talking about reports that Chinese state banks
were stepping into the market, both here in China and offshore, to support
the Renminbi. And this is another standard way that the government tries
to manage the currency`s value. The move follows a statement by the
central bank vice governor that China believes it is response to keep the
There`s been a lot of debate about what motivated the Chinese to allow the
Yuan to weaken past 7 earlier this week, but it is becoming clear day by
day that the Chinese government wants to make sure that the currency stays under control.
For NIGHTLY BUSINESS REPORT reports, I`m Eunice Yoon in Beijing.
HERERA: And the important relationship here is, of course, with the U.S.
dollar. More precisely, the relative strengths of the dollar, and that is
incredibly important for U.S. companies and markets.
HERERA: Think Caterpillar (NYSE:CAT), ExxonMobil (NYSE:XOM), Coca-Cola (NYSE:KO) or 3M (NYSE:MMM). They are all U.S. companies that do lots of business overseas.
If you`re invested in multi-nationals, pay attention to the U.S. dollar.
The stronger the dollar gets, the more of a country`s currency it takes to
buy products that are sold in dollars. With prices up, it figures fewer
American products are likely to be sold in China and elsewhere and some
U.S. products, even oil, are facing tariffs. And that drives up the price
So one question investors have to ask, will higher prices allow a company
to offset the fact that it`s selling fewer goods? If not, profits are
And the inverse is also true. For example, China`s exports become cheaper
to buy here, which reduces the impact of any tariffs the U.S. might place
on those goods.
HERERA: So now the question is how much of an impact is a strong dollar
having on those multinationals?
Seema Mody takes a look.
SEEMA MODY, NIGHTLY BUSINESS REPORT CORRESPONDENT: President Trump may want a weaker dollar, but with a record number of central banks cutting rates around the world in 2019, that`s going to be a harder objective to achieve. Wall Street`s strategists are now betting that a stronger dollar will likely become a bigger pain for companies that make a large portion of their sales overseas, like consumers staple sector which on average makes about 45 percent of their revenue outside of the U.S.
Analysts caution that if the dollar continues to strengthen, it could make
American products less attractive to customers overseas, especially in
emerging markets where the consumer tends to be more price sensitive.
Multinationals could bring down the price of their products, but that could
then impact profitability. In the first quarter, North American companies
lost more than $23 billion due to the impact of currencies. The most in
more than three years. Analysts say that number will likely go up in the
So far, this earning season, internationally exposed names like Kimberly-
Clark (NYSE:KMB), Procter & Gamble (NYSE:PG), General Mills (NYSE:GIS),
have all cited the negative effect of currencies. But their stocks have
held up well, in fact outperforming the broader market in 2019. Investors
say much has to do with these companies appealing dividend yields.
BURNS MCKINNEY, ALLIANZ GLOBAL INVESTORS: Dividend-paying names tend to be a little less volatile than the market, and they do offer stability in this type of situation. Just, you know, look for company specific stories.
MODY: With central banks becoming more accommodative, Invesco says it`s making higher dividend-yielding multi-nationals specifically in the
consumer staples space more attractive, but that can change if a stronger
dollar continues to eat into profits.
For NIGHTLY BUSINESS REPORT, Seema Mody.
HERERA: So joining us now to put all of this into perspective is Andres
Garcia-Amaya. He is the founder and CEO of his own wealth management firm, Zoe Financial.
Andreas, nice to have you back.
ANDRES GARCIA-AMAYA, FOUNDER & CEO, ZOE FINANCIAL: Thanks for having me.
HERERA: You know, we posed the question at the beginning and the premise that when rates are falling, it`s usually positive for stocks. But you
have rates falling all over the globe and actually negative rates in many
countries around the world. So, is it different this time?
GARCIA-AMAYA: So when rates are falling and the global economy is doing
fine or global growth is accelerating, I would agree that`s usually a
positive thing. When rates are falling like the way they have the last
couple of days as a result of people basically looking at the geopolitical
situation and seeing the tensions escalate, that`s a different story,
right? That is essentially people looking for a safe haven and, therefore,
buying treasury bonds as a result of the treasury yields falling. For
that, usually it is not a positive for equities.
HERERA: Right. So what is an investor to do at this point if it looks
indeed as if we`re going to continue to see these lower rates, maybe
negative rates in more parts of the globe? Is the safe haven status of the
U.S. still the place to be?
GARCIA-AMAYA: So I think what we learned the last couple of days is that
all of our crystal balls are broken, right. We didn`t know what was going
to happen two weeks ago, now we clearly know — I think everyone knows we didn`t know this was going to happen, especially with the call it the trade wars turning into currency wars. This reminds us equity markets tend to be more volatile.
If anything, this year they`ve been more calm. The volatility is more
normal than we have seen in prior weeks. That`s one. And two is that you
should have a personal financial plan you should be pulling up to check to
see if anything has changed over the last two weeks.
If nothing has changed with that personal financial plan, then your long-
term investment objectives should not change with the geopolitical
HERERA: But does that include riding out increased volatility? Do you
need to adjust that financial plan if, indeed, you think we`re going to
have more volatility ahead?
GARCIA-AMAYA: So volatility when you are buying equity, volatility if you
are a long-term investor is actually to your benefit because you`re not
trying to retire tomorrow, right? If you are thinking five, ten years out,
short-term volatility allows you to have higher expected returns on those
equity stocks versus on the bond side.
HERERA: So what do you do now? Do you — if you have an overall
investment plan — and we just highlighted the multinationals, many of
which have fairly decent dividends. Do you take the opportunity on a day
like this when we at one point saw the Dow down 600 points and add to a
position? Is that the best safe haven at this point?
GARCIA-AMAYA: So this is something people rarely say, but days like today
do nothing, right? If — when people make decisions based on emotion,
based on what they see on the headlines, usually in the long term, that
ends up not being the right choice. So if you have — if you don`t have a
personal financial plan, I would say that`s the actionable item, is get a
personal financial plan to ensure that these kind of short-term volatility
doesn`t dissuade you from your long-term objectives.
HERERA: So if you want to be in equities longer term, what areas are you
seeing value in now and areas that perhaps might give you a little bit of
safety or at least reduce volatility?
GARCIA-AMAYA: So the best way to think about it is if you had a strategy
in which you say that you wanted 70 percent equities and 30 percent bonds
and the market falls 5 percent, 6 percent, that should trigger a
rebalancing automatically to buy more equities, without any kind of
emotional decision attached to it, right? So, use those benchmarks that
you set for yourself and use them wisely when the market gives you the
opportunity to get back to where you should have been in the first place.
HERERA: A quick comment on the gold market. We mentioned the fact it hits highs we have not seen in several years. Would you hedge your equity
position in gold or not?
GARCIA-AMAYA: I would not. Gold is one of those asset classes that I
personally do not understand what it does and when it does it. And if I
can`t explain it, it is very hard to explain to the client why we owned it
in the first place, right? It seems to be right now a good hedge against
essentially more volatility in the equity market. Sometimes it does that.
Sometimes it doesn`t, right?
So I personally don`t see it as a great hedge to volatility in the short
term or the long term.
HERERA: All right. On that note, thanks for the advice, Andres. Good to
see you again.
GARCIA-AMAYA: Thank you for having me.
HERERA: Andres Garcia-Amaya with Zoe Financial.
Coming up next, Disney (NYSE:DIS) was one of the biggest drags on the day
following earnings miss last night. Hear what the CEO says the company is
doing to succeed in the future.
HERERA: And there`s a look at the shares of Disney (NYSE:DIS), the stock
down about 5 percent following the company`s earnings which we told you about last night. That miss was attributed in part to Disney (NYSE:DIS)
building its streaming business.
Julia Boorstin sat down exclusively with Disney (NYSE:DIS) CEO Bob Iger to
talk about the company`s strategy.
JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Disney (NYSE:DIS) CEO Bob Iger saying this quarter`s lower than expected results reflects the cost of the company`s transformation as it integrates Fox and prepares to launch Disney (NYSE:DIS) Plus, the centerpiece of its streaming business. With cord cutting continuing to weigh on Disney (NYSE:DIS)`s media networks business, as well as the pay TV providers such as AT&T (NYSE:T), I asked Iger how concerned he is about projections that cord-cutting will only accelerate.
BOB IGER, DISNEY CHAIRMAN & CEO: Are we concerned about cord cutting? Yes. It has been an important business for us. But it`s the reason why we`re going into this other space, why are we pivoting strategically, to
give us an opportunity to not only contend with the transformation that`s
going on in the traditional space but to thrive and basically completely
different marketplace condition.
BOORSTIN: Iger says the company is investing to succeed in the streaming
wars, announcing Disney (NYSE:DIS) will sell a bundle of Disney (NYSE:DIS)
Plus, ESPN Plus, and Hulu with ads for $12.99, a $5 discount.
IGER: Our goal all along was to achieve scale, particularly with Disney
(NYSE:DIS) Plus, as soon as possible. To basically sign up as many
subscribers as possible and get them into the service, giving them a chance
to enjoy the great intellectual property and the product that will be part
of that service. And we thought that this bundle would be a great step in
the direction of achieving that goal.
BOORSTIN: It is not just about the subscription revenue. Disney
(NYSE:DIS) will earn from the services. Iger telling me that getting a
broader audience for Hulu will help grow its ad revenue, which he says is a
valuable revenue stream.
For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Los Angeles.
HERERA: “The New York Times (NYSE:NYT)” sees a rise in digital
subscriptions and that`s where we begin tonight`s “Market Focus”.
The company reported mixed results, beating earnings expectations but
missing on revenue. “The Times” says it is making strides in its digital
subscriptions but expects what it says is a challenging second half of the
year with its digital advertising unit. Shares fell more than 12 percent
CVS (NYSE:CVS) topped estimates thanks to an increase in same-store sales,
prescription drug sales and its recent acquisition of the insurer Aetna
(NYSE:AET). The company all raised its full-year outlook. The stock rose
more than 7 percent to $58.12.
CVS (NYSE:CVS) rival Walgreens will shut down about 200 stores or 3 percent of its U.S. locations as part of its plan to cut costs. The company says it will deliver annual savings of more than $1.5 billion by 2022. The
stock was up 2 percent to $52.48.
Drug developer Cambrex (NYSE:CBM) struck a deal to be acquired by the
private equity firm Permira Funds for more than $2 billion. Cambrex
(NYSE:CBM) says under the agreement, its shareholders will receive $60 in
cash for each share. Cambrex (NYSE:CBM) surged more than 40 percent to $60 even.
Teva Pharmaceuticals posted better than expected earnings and revenue and reaffirmed its full year profit forecast. The drugmaker also said its CFO will be leaving due to personal reasons. The stock was up more than 3
percent to $7.29.
FedEx (NYSE:FDX) is ending its ground delivery services with Amazon
(NASDAQ:AMZN). This comes as FedEx (NYSE:FDX) already ended its air
shipping contract with Amazon (NASDAQ:AMZN) in the U.S., but will still
deliver international shipments. FedEx (NYSE:FDX) shares were down a
fraction to $160.66. Amazon (NASDAQ:AMZN) was up a fraction to $1,793.40.
After the bell, Roku reported better than expected results thanks to an
increase in active user accounts. The video streaming company also raised
its full-year outlook. Shares initially rose in after-hours trading and
they closed the regular session up more than 2 percent to $197.
Also after the bell, Lyft posted a smaller than expected loss and a beat on
revenue targets thanks to more riders as well as easing price competition
with its rival Uber. The company also raised its full-year guidance.
Shares initially rose in after-hours trading. They closed the regular
session up more than 2 percent to $60.29.
Coming up, hidden threats.
(BEGIN VIDEO CLIP)
ANDREA DAY, NIGHTLY BUSINESS REPORT CORRESPONDENT: What looked like basic devices all over your devices can be hacked in ways you will never believe. That`s all coming up.
(END VIDEO CLIP)
HERERA: Here`s a look at what to watch for on Thursday. We get a snapshot of the labor market with the release of weekly jobless claims numbers. With currency issues front and center, wholesale inventories for June is something to watch for.
A higher than expected reading would be bearish for the dollar. And
another area in focus is energy, so keep an eye on the natural gas storage
numbers. That`s what to watch for tomorrow.
And finally tonight, the phone in your office, the industrial fan system in
a lab, the printer — all of these devices contain tiny computers that can
be hacked and used to gain sensitive business data or cause damage to
networks. Cybersecurity pros say more needs to be done to keep these
devices secure, and now some manufacturers are listening and making
security a competitive advantage.
Andrea Day has our investigation “Hiding in Plain Sight”.
ANG CUI, CEO, RED BALLOON SECURITY: No demo is complete until we`ve tried to physically destroy the device.
DAY: When you interview this CEO, you may wind up evacuating.
CUI: All right. Let`s get out of here.
DAY: Let`s get out of here.
Ang Cui founded the cybersecurity firm Red Balloon here in New York City.
This is where the magic happens?
CUI: This is where the magic happens.
DAY: And here the goal is to make embedded devices more secure, and that means breaking in, taking them apart, and exposing flaws.
One hundred percent of these devices can be compromised in some way.
DAY: One hundred percent?
CUI: One hundred percent.
DAY: Embedded devices are like mini computers, inside almost everything
you can power up, from smart home devices to medical gear and cars. At
every financial exchange power plant, air traffic control and almost every
company in the world.
CUI: This is probably the most important cybersecurity threat that we have
today because these computers control every single aspect of our critical
infrastructure that we depend on every single day.
DAY: And according to a report by market research firm Radiant Insights,
the global embedded system market is projected to be worth $214 billion by next year. This is a small version of an air filtration system that`s in a
lab that he is working with right now.
CUI: You don`t want the dirty air to come out ever, and this computer will
allow that to happen.
DAY: They hack devices inside the fan`s controller, not only forcing the
dirty air in the wrong direction but ultimately shutting it down and it
goes up in smoke.
CUI: That`s awesome.
DAY: But Cui says the issue goes way beyond this demo. The team recently
uncovered a major vulnerability in more than 100 devices made by Cisco
(NASDAQ:CSCO), the largest manufacturer of equipment. According to Red
Balloon, we are talking about a potential attack that could sell for
millions. They let Cisco (NASDAQ:CSCO) know what they found and the
company published this critical advisory.
Cisco (NASDAQ:CSCO) turned down a request for an on-camera interview,
instead releasing a statement saying in part: Cisco (NASDAQ:CSCO) is
committed to transparency and is not aware of any malicious use of the
vulnerability that is described in this advisory. Cisco (NASDAQ:CSCO) will
release fixes for this vulnerability.
We wanted to find out what other industry leaders are doing to protect
their embedded devices and reached out to HP and Huawei. Both companies were not part of Red Balloon`s findings.
HP is the largest manufacturer of printers which contain embedded devices. Andy Rhodes is the global head of HP`s commercial PC business. His company`s advertising claims to have the world`s most secure printers.
ANDY RHODES, HP GENERAL MANAGER: We put this special code into the printer so it is always looking for malware in devices.
DAY: Huawei did not agree to an interview or provide comment.
And back to the Cisco (NASDAQ:CSCO) findings, we asked the company if a
tool exists right now to know if a device has been hacked. Cisco
(NASDAQ:CSCO) telling us in part, an audit tool is not currently available.
We recommend customers review the security advisory to assess the best way to protect their network.
I`m Andrea Day for NIGHTLY BUSINESS REPORT.
HERERA: And before we go let`s take a look at the day`s final numbers from Wall Street. It was a wild one. The Dow finished down 22 points to 26,007 but it had been down nearly 600. The Nasdaq rose 29 and the S&P 500 climbed two.
The index`s 2 percent reversal was its biggest comeback of 2019.
And that is NIGHTLY BUSINESS REPORT for tonight. I`m Sue Herera. Thanks for joining us. Have a great evening. We`ll see you right back here
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