ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Sue Herera and Bill Griffeth.
SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: What a week. Up, down, up, down. Stocks take investors on a wild ride, and after all of that things were barely changed. So where do we go from here?
Finding growth. At a time when the economy may be slowing and stocks are looking for direction, this week`s market monitor says you might want to consider what he calls high-quality companies.
And political soapbox. Democrats descend on the Iowa state fair with one
goal in mind, bring their trade message directly to one audience: farmers.
All of that and much more tonight on NIGHTLY BUSINESS REPORT for this
Friday, August 9th.
Good evening, everyone, and welcome. Bill has the evening off.
Well, we made it. We made it through a week that was dominated by trade
and stock goes were pretty much all over the place with steep selloffs and
strong rallies, and today wasn`t any different. Stocks started lower after
President Trump said the U.S. was not ready to strike a trade deal with
China and then added to the tension by talking about Chinese tech firm
(BEGIN VIDEO CLIP)
DONALD TRUMP, PRESIDENT OF THE UNITED STATES: We`re not going to do business with Huawei. We`re not doing business with them. I really made the decision.
It is much simpler not to do any business with Huawei, so we`re not doing
business with Huawei. That doesn`t mean we won`t agree to something if and when we make a trade deal, but we`re not going to be doing business with Huawei.
(END VIDEO CLIP)
HERERA: And stocks headed lower. The White House later clarified, saying it was only the government not buying from Huawei, and with that stocks recovered a bit. The Dow had been down about 280 points and then briefly went positive, but ended down 90 to 26,287. The Nasdaq dropped 80 and the S&P 500 was off 19.
Today`s action seemed only fitting on this wild week.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: We`re going to have a lot of red on that board.
UNIDENTIFIED MALE: The Dow Jones Industrial Average right now is down 926
Investors worrying about the U.S./China trade war escalating.
UNIDENTIFIED MALE: The Dow Jones Industrial Average closes the day down 763 points.
UNIDENTIFIED FEMALE: Worst day of the year for stocks.
UNIDENTIFIED MALE: A healthy little bounce back today, up about a percent on the S&P.
UNIDENTIFIED FEMALE: There was buying today, back over the 26,000 level and the Dow ended 313 points, right near session highs.
UNIDENTIFIED MALE: We have regain about a little less than half of the
losses of yesterday.
UNIDENTIFIED FEMALE: Another big sell-off here on Wall Street.
UNIDENTIFIED MALE: Why have things gotten so weird in August? Well, two things have happened. Number one, the Federal Reserve happened. And number two, more tariffs.
UNIDENTIFIED MALE: The market pain is a lot less than it was in the first
hour or so of trading. Right now, we are only down 212.
UNIDENTIFIED MALE: Dow Jones Industrial Average closing just fractionally negative. But this is the biggest comeback.
UNIDENTIFIED FEMALE: Stocks are staging a recovery today.
UNIDENTIFIED MALE: It`s a pretty big move higher, 1.5 percent almost to
UNIDENTIFIED MALE: With today`s gains, even with Monday`s massive drop, we are now positive for the week.
UNIDENTIFIED FEMALE: The market half an hour into trading, we pulled back.
UNIDENTIFIED FEMALE: Dow down triple digits again, down right now about 165 points. We are sitting at session lows right now. S&P 500, 2,902 is the level.
UNIDENTIFIED MALE: We had a nice rally as I`ve been standing here in the last few minutes. Had to close for a while, drooping a bit going into the
clubhouse, the Dow ending the day down 82, S&P 500 down 19 points.
(END VIDEO CLIP)
HERERA: For the week, despite all of that volatility, all three indexes
were off just a fraction.
So let`s turn now to Sandy Villere to talk more about the market and why it
is so confused. He is a partner and portfolio manager Villere and Company.
Sandy, welcome. Nice to have you here.
SANDY VILLERE, PARTNER & PORTFOLIO MANAGER, VILLERE & COMPANY: Thank you,
Sue. Appreciate it.
HERERA: I think that Bob Pisani really said it best. Why have things
gotten so, quote-unquote, weird in August, or perhaps better said, so
VILLERE: Yes, and August is a tough month for the market. I think it is
second worse for the market throughout the year. So, it just seems like
volatility is little bit escalated. But, yes, you`ve got a lot of things
going on from, you know, earnings to the trade war and certainly the Fed.
So a lot of things that we`re trying to keep our eye on that are creating a
lot of volatility, especially trade war related.
HERERA: I was going to ask you which is the most important to you of the
factors that you just mention evidence. Which are you watching most
closely or which is the greatest variable for you?
VILLERE: Yes. So, I`m a very bottoms-up oriented stock picker, so I`m
looking at earnings importantly. But earnings have passed us. We had
about 90 percent of the S&P 500 report earnings. So, looking forward, I`m
focused on the trade war.
And what`s ironic is that the trade war and the Fed really go kind of hand
in hand. The kind of the uglier the trade war gets or the more it
escalates, the higher the likelihood that the Fed could potentially cut
rates in September and maybe October.
HERERA: You know, there`s two ways to think about that from the analysts that I have been talking to. One, the trade war if it continues and
stretches out or becomes even more acrimonious would force the Fed`s hand to cut interest rates. I talked to another analyst who said that would
really bother the market because it means that the Fed is indicating that
things are worse than we think.
What do you think of that argument?
VILLERE: Yes, and they`re supposed to be totally independent. I believe
the Fed completely is, but as the trade escalates, then you are seeing
already, we`ve got three year lows in manufacturing, you`ve got inflation
that`s extremely low and you are seeing growth slowdown. Just looking at
earnings year over year, it`s going to be negative, when you look year over
year just to the second quarter reporting.
So, if the Fed is truly data dependent and they are looking at some of
those outcomes from the trade war, slowing on all sorts of fronts, then
they`re going to have to act.
HERERA: And then the bond market seems to be telling a different story,
pointing perhaps to a recession.
How are you interpreting the bond market and interest rate action this
VILLERE: Yes, and the bond market always seems to be a little smarter than the stock market. So you are seeing the ten-year down at 174 and then the — you know, the three-month is up, you know, at 2 percent. So, that is an inverted yield curve, and oftentimes an inverted yield curve can predict a recession.
So, it makes me a little bit nervous, but for investors in general when
they`re looking at where to place their money, you look at the ten-year
treasury at 1.74, the S&P 500 yields about 2 percent on the index.
VILLERE: So kind of makes stocks look attractive.
Thanks so much, Sandy. Great to have you with me.
VILLERE: Thanks for having me, Sue.
HERERA: Sandy Villere with Villere & Company.
And as we have been discussing, overall, bond yields have been falling and
so have mortgage rates. The latest drop in the rate has mortgage lenders
scrambling to keep up with demand.
Diana Olick has more.
DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Quicken Loans, the nation`s largest lender, just had its best quarter in the company`s 34-year history, originating $34 billion in mortgages and setting a monthly record in June.
Quicken said it was looking to hire about 1,300 employees to handle the new volume. It`s all thanks to a sharp drop in mortgage rates that started in April and accelerated this month.
That caused a sudden refinance boom that most lenders hadn`t expected.
SHERRY GRAZIANO, SUNTRUST SVP, MORTGAGE TRANSFORMATON: If you think back even to the fourth quarter, we were all talking about anticipating, you know, rate hikes going into 2019.
OLICK: At SunTrust Bank, phones have been ringing off the hook, stretching capacity.
GRAZIANO: We are really looking at ways to preserve our client experience, which may mean for consumers to be aware that it might take you a little longer to get through the process and that might mean also taking a little bit longer to get hold of a mortgage professional to assist you.
OLICK: Borrowers aren`t just looking to lower their monthly payments.
Some want different loan products with different terms, while others may
want to consolidate debt like student loans and credit card debt. Whatever
the reason, refis are rising.
DARYL FAIRWEATHER, REDFIN CHIEF ECONOMIST: Refinancing is a no-brainer because you can save thousands of dollars and every month, you have more money in your pocket.
OLICK: Rates have been volatile, though, so borrowers shouldn`t try to
wait and time the market. Instead, get a lender ready now and make sure
the lender is ready to jump.
For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Washington.
HERERA: And with those lower bond yields in the spotlight these days,
investors are on the hunt for return and one place they are looking is muni
Seema Mody has more.
SEEMA MODY, NIGHTLY BUSINESS REPORT CORRESPONDENT: The search for yield is driving investors into different parts of the bond market, specifically debt issued by states and municipalities to finance civic projects like airports and schools. Muni bonds have already seen record inflows this year of $52 billion, on pace to surpass the $70 billion of inflows seen in
And if the Fed continues to cut interest rates, Wall Street strategists
expect demand to stay strong. In addition to low rates, changes to the tax
code which limited the SALT deductions claimed by households in high tax
states like New York has pushed investors to look for tax-free income. The
SALT cap was a key component of the tax reform bill.
Experts point out most municipal bonds are exempt from federal income tax, and depending on the bond in many cases also exempt from taxation by the issuer`s home state. But a surge in investor demand comes as bond
issuances have come down. Total bond issuance has fallen from $448 billion in 2017 to $338 billion in 2018. That`s according to muni market
Still, four high profile projects coming to market in August, the San
Francisco transit system, Pennsylvania Turnpike, Commonspirit and a Dallas Fort-Worth airport.
So far this year, Goldman Sachs (NYSE:GS) Dynamic Muni Income Fund has
returned 5 percent to investors.
And while muni bonds can often be seen as a riskier part of the bond market to invest in, the number of defaults at the city and state levels have
declined. In fact, only 41 defaults in 2018, that`s the lowest on record,
according to Tripp Kaiser at Muni Market Analytics. And so far in 2019,
there have been 33 defaults.
Still, financial advisers caution to not only focus on the tax-free income
but to review the quality and the investment grade of each bond. Plus, if
interest rates turn around and move higher, that could make muni debt a
less attractive place to park your money.
For NIGHTLY BUSINESS REPORT, Seema Mody.
HERERA: To the economy where the wholesale cost of goods rose moderately last month, thanks to a rebound in energy. But inflation in a wholesale level was flat year over year. So, while inflation here is not a problem for now, deflation is a growing concern in China. July inflation data showed producer prices in China contracting for the first time in three
years, while consumer prices there were pushed higher by surging prices of vegetables and pork.
And investors have been keeping a watchful on another potential risk to
China`s economy, the tense situation going on in Hong Kong between the
government and protesters.
Eunice Yoon has more from Beijing.
EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Hundreds of protesters have gathered at the Hong Kong airport, handing out anti-government leaflets to raise awareness about their concerns to the city`s visitors. The sit-in, which is expected to last through Sunday, is just the latest of a series of protest that started as a march against extradition bill, but have moved on to protest Beijing`s encroachment in the city.
Today , Hong Kong`s leader Carrie Lam called for calm but showed no
willingness to make concession to the protesters. Lam warned that the
downward economic pressure was like a tsunami. The financial secretary
said the chances of a further slowdown there is high.
The problems in Hong Kong are filtering into the already-tense U.S./China
relationship. Beijing has been characterizing the process as organized by
foreign powers, in particular an American diplomat in Hong Kong. Chinese
state TV has described the political officer as a black hand creating chaos
in Hong Kong after she met with a protest leader.
A pro-Beijing Hong Kong newspaper called her a low profile expert on
subversion and published photos and personal details of her and her family.
A State Department spokesperson called China a thuggish regime for
releasing the information, and today, the foreign ministry`s Hong Kong
office responded saying the blatant slander against China exposed the
U.S.`s gangster logic and hegemonic thinking.
So, on top of the trade conflict in Huawei, the Hong Kong situation is
another risk factor for U.S./China ties.
For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon in Beijing.
HERERA: Up next, filling the gap.
(BEGIN VIDEO CLIP)
PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: These airplanes are part of the airline industry handling the 737 MAX crisis. What are they doing? I`m Phil LeBeau outside of Montreal, Canada. That story coming up on NIGHTLY BUSINESS REPORT.
(END VIDEO CLIP)
HERERA: Nearly five months after the FAA grounded the Boeing (NYSE:BA) 737 MAX, airlines around the world are scrambling to find replacement planes. Those planes are often leased from other airlines or charter aviation companies who find themselves sitting in an enviable position with extra planes and high demand, especially in Canada.
Phil LeBeau has more from Mirabel, Quebec.
LEBEAU: This is one of the hottest planes in the commercial jet market, a
737-200. With more than 500 Boeing (NYSE:BA) 737 MAX planes parked,
airlines that plan to fly them have been scrambling to find replacement
Great news for Nolinor Aviation just outside Montreal. It is leasing 737s
like this to an airline in Toronto needing replacement planes.
MARCO PRUD`HOMME, NOLINOR AVIATION VP: We have a lot of requests from many airlines that don`t have enough capacity to do their charter flights on the weekends or their regular, or providing charter flights for these airlines.
LEBEAU: Airlines looking to cover their schedule are pushing up short-term leasing rates, in particular for older Boeing (NYSE:BA) 737s. Often,
airlines will lease the plane and pay a crew to fly it. And they`re even
pay another airline to fly their routes.
Take Air Canada. It`s hired Qatar Air to fly some of its routes. Industry
veterans say passengers probably won`t notice the change.
PHIL SEYMOUR, IBA AVIATION CEO: They are getting on a fuselage, they
doesn`t see the color scheme. They are walking down a jet way. Maybe once they get into the seats they think, oh, last time I flew I was in this kind
of seat, now I am in a different seat. But really, you know, I suppose
they are just happy to go from A to B.
LEBEAU: For Nolinor Aviation, the 737 MAX crisis has lifted demand for its
fleet of planes to a new level, and executives believe that demand is
expected to continue at least through the holidays.
PRUDK`HOMME: I think it was after a few weeks after the issue with the 737 MAX started to get very publicized, we started having requests about our availability for the summer, and then it changed to will you still be
available during the fall and now we`re talking about Christmastime.
LEBEAU: An airplane leasing market lifting off as airlines adjust to life
without the MAX.
Phil LeBeau, NIGHTLY BUSINESS REPORT, Mirabel, Quebec.
HERERA: An anonymous letter by a whistleblower tanks Mattel (NASDAQ:MAT). That`s where we begin tonight`s “Market Focus”.
The toy maker will be pulling their bond sale after receiving a letter and
will now be cancelling the sale of senior notes due in 2027. The company
plans to investigate the matters in the letter but did not disclose what
they were. The stock plunged nearly 16 percent to $11.31.
Nektar Therapeutic said there were manufacturing issues in two batches of
experimental cancer drugs given to patients in a trial. Separately, the
biotech company reported a narrower than expected loss but missed revenue estimates. Nektar plummeted more than 29 percent to $20.92.
JCPenney received a notice from the New York Stock Exchange that the
company has six months to get its price above $1 or get shareholder
approval of a reverse stock split to avoid being delisted. The struggling
retailer has seen sales drop more than 70 percent in the past year. Today,
JCPenney fell more than 13 percent to 60 cents.
PG&E posted mixed results, beatings earnings estimates but coming in shy on revenue. The company says the losses were due to costs associated with
California wildfire related lawsuits, bankruptcy, and also other expenses.
The stock fell more than 2 percent to $18.12.
Dropbox beat Wall Street`s forecast for both earnings and revenue, but the
cloud storage company saw a drop in its average revenue per user, which is a key factor to the company`s growth. That sent shares down nearly 13
percent to $18.71.
And Uber shares had one of the worst days since the company went public
after the company reported a massive loss in its latest earnings after the
bell yesterday. Yet, the CEO is still positive about the rest of this
(BEGIN VIDEO CLIP)
DARA KHOSROWSHAHI, UBER CEO: The back half of the year you`re going to see, if trends stay the same, revenue growth in excess of 30 percent. And
when you look at profitability, we beat our own internal targets, we beat
our street targets as well. We came in at a loss of $656 million. It`s
still a big loss, but the losses are improving and take rates are
(END VIDEO CLIP)
HERERA: Shares dropped almost 7 percent to $40.05.
On that note, it`s time for our weekly market monitor who has names of high quality stocks he says are reasonably cheap and could grow double digits over the long term.
Joining us is David Yepez. He is the senior investment analyst at Exencial
Welcome back, David. Nice to see you again.
DAVID YEPEZ, EXENCIAL WEALTH ADVISORS SENIOR INVESTMENT ANALYST: Good to see you again. Thank you.
HERERA: So, you say you try and identify companies that have kind of open-ended growth opportunities, which is a challenge in this market
environment, but you like Delta Airlines (NYSE:DAL). Why?
YEPEZ: Yes. So, Delta Airline is the best-run airline in the world. They
are transforming the traveling experience by investing the most in
technology. So, now, and in the future, when you travel, you`re not going
to need passports or tickets. It is just every airport is going to have
biometrics, so you could just show your face to the camera and that`s it.
It is also improving, all preordering for meals before you board on your
airplane and things like that. So, it is the best-run company in the
airline industry. We think that the travel — the amount of travelers is
going to grow over 50 percent in the next decade. So, we like it right
HERERA: All right. Teradyne (NYSE:TER) is on the list. Why do you like
YEPEZ: Yes, Teradyne (NYSE:TER) is the number one player in collaborative robots. These are robots that work right next to humans for industrial applications. So, think about, you know, light duty, things like welding or, you know, transporting goods from one area to another. And, so we think we`re at the beginning stages of this industrial revolution and
Teradyne (NYSE:TER) is leading the way on that.
HERERA: And, finally, Gardner, which is basically a tech play, an I.T.
YEPEZ: Yes, yes. So if you look at the stock for the past five years they
had a big run, but in the past few weeks, it dropped over 20 percent. We
think it is a good entry point because they held CEOs around the world in
technology. They provide research consulting to make better decisions and
And so, you know, they are helping all of the company`s retailers, banks to
— for growth in the future.
HERERA: How do you feel about the economy and the market overall, David, especially given the volatility that we saw this week?
YEPEZ: Yes, you know, we think all the volatility is related to the trade
talks and how, you know, the slowdown of the global GDP. We think
eventually there`s going to be a trade agreement. It`s going to work
itself out in the next — probably next year, sometime before the election
time. But yes, that`s our best case scenario eventually if you are a long-
term investor, that will help, you know, that`s the view we have.
HERERA: Has it influenced the way you are allocating capital?
YEPEZ: Yes. So, you know, for those portfolios we think are overweighted
in equities, we try to, you know, maybe sell a little bit of equity and try
to keep a little more cash on the sidelines. But, you know, we are long-
term investors. We are looking three to five years ahead.
YEPEZ: We think the market will be higher for now.
HERERA: David, thank you so much.
YEPEZ: Thank you.
HERERA: David Yepez with Exencial Wealth Advisers.
And coming up, focusing on the farmers.
KAYLA TAUSCHE, NIGHTLY BUSINESS REPORT CORRESPONDENT: More than a million people come to the Iowa state fair every year. Now, many of them are farmers seeking relief from the trade war. Democratic contenders are here to try to wind their votes.
We`ll tell you how coming up on NIGHTLY BUSINESS REPORT.
(END VIDEO CLIP)
HERERA: The Iowa state fair will become a focal point for trade policy
over the next few days as all of the 2020 Democratic presidential hopefuls
take their policy messages directly to farmers impacted by the U.S. trade
Kayla Tausche is at the Des Moines fair grounds in Iowa for us this
TAUSCHE: Amid the corn dogs, cotton candy, and carnival rides —
JOE BIDEN (D), PRESIDENTIAL CANDIDATE: We are the most unique idea.
TAUSCHE: You will find more than 20 Democrats running for president,
testing their stump speeches at the Iowa state fair, connecting on the
ground with swing voters, many of whom are farmers caught in the crosshairs of the trade war.
Matt Paul is one of the state`s leading Democratic strategists. He says
the trade tensions mean the independent vote is up for grabs.
MATT PAUL, CORNERSTONE PUBLIC AFFAIRS: The stakes are about as high as they can get.
TAUSCHE: Politicians and farmers up here say it`s now a matter of
BIDEN: They`re causing a lot more than little financial pain. I think
it`s going to cost a lot to go bankrupt.
CRAIG HILL, IOWA FARM BUREAU PRESIDENT: Soon, our bankers are going to say you need to liquidate your assets in order to keep and continue.
GOV. STEVE BULLOCK (D), PRESIDENTIAL CANDIDATE: When a sixth generation farmer says, I hope my son doesn`t become a seventh, you know, we have an issue.
TAUSCHE: Brad Moeckly`s family has grown soybeans, corn, and hogs in
nearby Elkhart since the 1960s. He voted for President Trump in 2016, but
want certainty by next year.
BRAD MOECKLY, IOWA FARMER: We are at the point where we are starting to suck air. We need financial assistance to maintain our productivity in
what we are doing.
TAUSCHE: Many Iowans, including Republican Senator Chuck Grassley have received federal aid to help them stay afloat. Grassley says his voters
are sticking by Trump.
SEN. CHUCK GRASSLEY (R), IOWA: I have not seen any departure from the
attitude that farmers know that this president is the first one to tackle
China cheating the Americans out of a lot of things.
TAUSCHE: President Trump says he is in no rush to make a deal with China
and that the U.S. holds all of the cards, but Democrats are hoping to turn
the tide of the Hawkeye State before the caucus six months away.
For NIGHTLY BUSINESS REPORT, I`m Kayla Tausche in Des Moines, Iowa.
HERERA: Billionaire Stephen Ross threw a fundraiser today for President
Trump. Ross is the founder and the chairman of the parent company of the
gyms Equinox and SoulCycle. And word of the event has led to calls for
boycotts and membership cancellations.
And as Robert Frank tells us, these days, everything political comes with a
ROBERT FRANK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Billionaire, real estate and sports tycoon Stephen Ross defending his decision to hold a fundraiser for the president after customers threatened to boycott his companies.
Now, Ross is the chairman of the related companies which owns Equinox,
Fitness and SoulCycle, and he is a part owner of the Miami Dolphins.
Now, news that Ross would be hosting a fundraising lunch for President
Trump Friday with tickets as much as $250,000 touched off a social media
firestorm. Celebrities like Billy Eichner, Kenny Stills and Chrissy Teigen
called on customers of Equinox and SoulCycle to pull their business in
Equinox and SoulCycle tried to distance themselves from their chairman and owner saying, quote, they have nothing to do with the event and don`t
support it and added they believe in tolerance and equality and always will
stay true to the values.
Now, Ross issued his own statement saying, quote: I have always been an
active participant in the democratic process. I have known Donald Trump
for 40 years, and while we agree on some issues, we strongly disagree on
many others, and I have never been bashful about expressing my opinions.
Now, brand experts say that in today`s politically-charged world, donating
to the upcoming presidential campaign carries extra risks for donors and
companies, especially when the candidate has differing views or politics
from the customer base.
TOM FARLEY, FAR POINT CHAIRMAN & CEO: The issue here is if you hold
yourself out as a business to have certain values and you have a certain
UNIDENTIFIED FEMALE: Are they —
FARLEY: — then you need that in alignment.
FRANK: Now, Equinox and SoulCycle declined comment on how many members
For NIGHTLY BUSINESS REPORT, I`m Robert Frank.
HERERA: And before we go, here is another look at the final day`s numbers on Wall Street. The Dow had been down about 280 points, then briefly went positive but ended down 90 to 26,287. The Nasdaq dropped 80 and the S&P 500 was off 19.
And that is NIGHTLY BUSINESS REPORT for tonight. I`m Sue Herera. Thanks for joining us. Have a great weekend. We`ll see you here Monday.
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