ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Sue Herera and Bill Griffeth.
BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: Tariff delay. Stocks rally after President Trump eases his stance on a new round of duties, sending the Dow back above 26,000.
SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Mountain of debt. A new report shows older Americans owe a lot more money now than just a decade ago. Could that make retirement a little less golden?
GRIFFETH: Must-have documents. Emergencies happen and there are four legal papers everyone needs to have to be better prepared for them.
Those stories and much more tonight on NIGHTLY BUSINESS REPORT for this Tuesday, August 13th.
HERERA: Good evening, everyone, and welcome.
The buyers came back to Wall Street. Investors were encouraged by the White House announcement that it would delay planned tariffs on some Chinese goods. The decision raised hopes that the trade talks between the two economic superpowers would be revived.
As one strategist said, the stock market reaction is more proof that the trade war has been hanging over this market, and at least for today that cloud was lifted. The Dow Jones industrial average rose 372 points to 26,279, pretty much wiping out yesterday`s losses. The Nasdaq was up 152 and the S&P 500 added 42.
Kayla Tausche has the details on today`s cooling of tensions.
KAYLA TAUSCHE, NIGHTLY BUSINESS REPORT CORRESPONDENT: After days of no news and increasing investor worry on the trade front, tensions thawed with a phone call between U.S. and Chinese negotiating principals, which China state TV came at Washington`s invitation. Both Treasury and USDR declined to comment on whether in-person negotiations were confirmed, but the two sides are expected to speak by phone again in two weeks just before a September 1st tariff deadline.
In the meantime, the Office of the U.S. Trade Representative has shelved tariffs on a wide swath of consumer goods including smartphones, toys and some shoes and apparel until mid-December. Just days after the Fed`s last meeting this year, and President Trump says he doesn`t want to be the Grinch.
DONALD TRUMP, PRESIDENT OF THE UNITED STATES: We`re doing this for Christmas season. Just in case some of the tariffs would have some impact on U.S. customs, so far, they`ve had virtually none. But just in case they might have an impact on people, what we`ve done is we`ve delayed it so that they won`t be relevant to the Christmas shopping season.
TAUSCHE: Toy company Hasbro (NYSE:HAS) among others said it appreciated the Trump administration listening to their concerns and giving the company more time to plan while buying the White House an additional three months to see if China will agree to its terms of a trade deal.
For NIGHTLY BUSINESS REPORT, I`m Kayla Tausche in New York.
GRIFFETH: Apple`s products are some of the main beneficiaries of this tariff reprieve. That sent that stock up more than 4 percent, making it the best performer inside the Dow. Shares of Apple (NASDAQ:AAPL) suppliers were also higher today. It`s so-called ecosystem includes companies like Qorvo, Lumentum, Skyworks and Corning (NYSE:GLW).
And retail chains like Best Buy (NYSE:BBY), Kohl`s (NYSE:KSS), and Dollar Tree (NASDAQ:DLTR), they also got a lift since that sector is viewed as one with a lot to lose in a U.S./China trade war.
HERERA: Peter Sorrentino joins us now to talk more about the impact that tariff delay had on the market, the tech sector and retail sector today. He is chief investment officer at Comerica (NYSE:CMA) Wealth Management.
Peter, nice to have you with us.
You say basically —
PETER SORRENTINO, COMERICA WEALTH MANAGEMENT CIO: Thank you, Sue. Appreciate the opportunity.
HERERA: This is a positive, but longer term, things haven`t changed all that much?
SORRENTINO: No. The — essentially, we`ve got slowing global growth, and so while it is a positive announcement, I think it does sort of separate from the reality that a lot of the ordering and inventory for this holiday season has already shipped. I mean, just look at the time it takes to transship the Pacific Ocean. So, a lot of the inventory is in the warehouse in the U.S., but it is a welcome development and shifting trends for investment as you rightly pointed out.
GRIFFETH: We saw the balance that these stocks received, but these stocks have been so volatile recently. I mean, it depends on the next headline and what they`re going to do. What does the individual investor do with some of these companies if they don`t already own them and if they want to think about them? What do you think?
SORRENTINO: Well, the fundamentals for this group are still positive. You know, this is really where we are seeing continued innovation. The Apple (NASDAQ:AAPL) ecosystem as you mentioned earlier does reach broadly and it is a trend that we`re going to see going forward, where you got this interface between the real world and the digital world.
And so, that continues to expand. We see greater digital content in automobiles. We`re moving toward driverless autos. You know, it is an increasing technology push out into, you know, even now the consumer services sector.
So, the general background for these companies is still very, very positive. This is a short-run positive for them in terms of just investor sentiment, but over the longer term, it is a good group. Any time, you know, we get an opportunity to buy these stocks cheaper, it`s a welcome opportunity.
HERERA: Speaking of cheaper, how do you feel about valuations? I know it will differ depending on the part of the market that we`re talking about, but in general, do you find these companies fairly valued, still overvalued?
SORRENTINO: One of the problems over the last couple of years is the market leadership has been so narrow, and it has really been confined to a large extent to technology, telecommunication services and to consumer discretionary stocks.
And these valuations have gotten stretched, and to expect additional volatility there, it is not too surprising, you know, given that they were trading on what I would call, you know, a great deal of positive expectation. So, you know, to think that they`re going to be volatile going forward and we could see additional down side, that`s possible. Again, I think the fundamentals are still very solid for the group, and I would be encouraged by, you know, any adjustment of price to bring them more in line with their future valuation.
GRIFFETH: Before we let you go, I don`t want to put words in your mouth, but you don`t sound like you are investing in these companies with the trade war in mind. In other words, that doesn`t impact your view of these companies long term. Am I reading that correctly?
SORRENTINO: Yes. Even when you look at Apple (NASDAQ:AAPL) — I mean, Apple`s sales to China have been declining over the last, really, three years now. So I think you have to take a broader view of these, really more of a global view because, in effect, the — what we are seeing in terms of the automation push out if you will into things like consumer services and retail, that`s a trend that`s going to continue, just as we saw with factory automation.
So, it`s another wave, if you will, of technology, you know, integrating itself into our daily lives. And that`s a very positive trend. It is a very productive trend for corporate profits. So, it`s something we are encouraged by.
HERERA: Peter, thank you. Peter Sorrentino with Comerica (NYSE:CMA) Wealth Management.
GRIFFETH: And even though the mood today was upbeat, there are still, of course, a number of global hot spots that investors are keeping a close eye on.
Bob Pisani has more on that from the New York Stock Exchange.
BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Beyond the U.S.-China trade war, there are a handful of other geopolitical who were still outweighing on the global markets. Hong Kong for example is grappling with a 10 straight week of violent demonstrations where thousands of anti- government protesters storming the region`s airport for a second day in a row.
The protests have taken a toll on the Hong Kong stock market, down roughly 14 percent since start of April. We`re seeing a lot of big names in that region lower today, like Macau-based resort and casino operator Sands China, as well as Hong Kong airline Cathay Pacific, which is now down about 14 percent for the year.
Investors are worried about a longer term conflict between Hong Kong and Beijing. We did see U.S. stocks come off of their highs today when President Donald Trump tweeted that China is moving troops to Hong Kong`s borders earlier this afternoon.
Italy and Argentina are coping with populist fights, with Italy`s government teetering on the brink of collapse and Argentina coping with the current President Mauricio Macri`s poor performance in the primary election. Argentinian stocks plunged almost 50 percent on Monday, one of the worst declines the world has seen in decades.
And let`s not forget about the U.K. They`re still struggling to avoid a hard, no-deal exit from the European Union, or Brexit as it is called, by the end of October.
For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock Exchange.
GRIFFETH: So what do some of the political hot spots like Hong Kong or Argentina mean for investors?
Joining us tonight, Jeff Kleintop is back with us. He`s chief global investment strategist at Charles Schwab.
Jeff, it always good to see you. Thanks for joining us tonight.
JEFF KLEINTOP, CHARLES SCHWAB CHIEF GLOBAL INVESTMENT STRATEGIST: Thanks for having me, Bill.
GRIFFETH: Let me start with Argentina. I mean, I can`t tell you the number of analysts who have been on the program who say the emerging markets are the place to look because at some point they have to come back. But Argentina is a good example of the problems facing the emerging markets right now.
Is this as bad as it gets, do you think?
KLEINTOP: Argentina is a little bit of an isolated case. I know we can look around the world as bob summed up the issues, but Argentina is kind of a unique factor. It has a long history of political mismanagement and boom and bust cycles that made it a difficult market.
In fact, Argentina was kicked out of the emerging markets index back in 2009 because of the former President de Kirschner instituting capital controls. And now, one of the developments, of course, in this latest primary surprise that caused the stock market to fall so dramatically was that very same president, now a V.P. candidate, potentially now looking in position to win that election and maybe return the country to capital controls. That was the big concern there.
Again, this has been a boom-and-bust economy for a long time, maybe not as representative of the emerging markets universe.
HERERA: It`s less clear in Hong Kong, is it not, Jeff? I mean, we know the history with Argentina. We don`t yet know how the protest in Hong Kong and Hong Kong`s relationship with mainland China is going to play out.
KLEINTOP: Sue, you`re right. This is a much bigger issue for the overall markets, and one that seems unlikely to involve troops, military engagement by China coming over the border, but certainly police action. We`ll be watching this very closely, not only because it affects Hong Kong and could scare away businesses, could lead to international sanctions and worsen the trade war and really slow China`s economy, which is already growing at the weakest pace in decades which has impacts for global growth.
But it affects Taiwan. Taiwan has a presidential election coming up on January 11th against a pro-Chinese challenger versus a pro-independence incumbent. And how China deals with the Hong Kong situation could affect Taiwan as well and result in an even bigger global market impact.
GRIFFETH: Quickly if we can on the Middle East, specifically the Strait of Hormuz, the impact of oil. On one hand, you`ve got a global economy that`s slowing down, which means lower demand which could mean lower prices, but at the same time, you have all of the problems going on the Strait of Hormuz which could mean a cut-off in supply, which could mean higher prices.
What`s your view on that and its impact on oil?
KLEINTOP: Bill, volatility, we might bet on that. I think that`s the safest assumption.
Look, I think any ship interdiction in the Strait of Hormuz is probably temporary given the military assets the U.S. has now put there, but also we`re seeing from the U.K. and others as well. Japan is considering this also, in escorting ships through there to make sure that any blockade is very short lived and isolated.
So, we`ll have to see, but clearly, volatility is the safest bet in oil prices given the upside and downside factor.
GRIFFETH: Well put.
Jeff Kleintop with Charles Schwab, always good to see you. Thanks.
KLEINTOP: You bet.
HERERA: A new report on inflation shows it accelerated in July. The consumer price index rose for a second straight month, up 0.3 percent, making this the strongest two-month gain since early 2006. The price gains were driven by energy, rent and health care.
GRIFFETH: Time to look at some of today`s “Upgrades and Downgrades”.
We begin with shares of McDonald`s (NYSE:MCD). They were initial with a buy rating at new coverage MKM Partners. The analyst cited strong domestic and international sales growth for the company. Price target now, $250. The stock rose 1 percent today to $219.73.
Dr. Horton was initiated with a buy rating in new coverage at SunTrust. The analyst cited the homebuilder`s position in the rapidly-growing entry level housing market. Price target now $56. That stock gained 2 percent to $47.96.
And Southwest Airlines (NYSE:LUV) was downgraded to hold from buy at Argus Research. That analyst cited the ongoing grounding of the 737 MAX, which is leading to rising costs and operational disruptions for that carrier. The stock fell a fraction today to $49.92.
HERERA: Still ahead, older Americans are supposed to be debt-free, but a new report shows that`s not the case.
HERERA: Boeing (NYSE:BA) released its July orders and deliveries today, and for a fifth straight month, it had zero orders for its beleaguered 737 MAX.
And as Phil LeBeau reports, that may not change until the grounded airplane is back in the skies.
PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: It sounds like a broken record. Another month the 737 MAX is grounded, another month of zero new orders for the plane. Hardly a surprise for analysts.
RON EPSTEIN, BANK OF AMERICA ANALYST: My expectation is as soon as it gets back into service, there will be order activity for the airplane. But I think the key question is, when does the airplane get back into service?
LEBEAU: Boeing`s MAX plan is to finish fixing the plane and file for recertification by the end of September, with the FAA approving it a short time later and the MAX back in service by the end of the year. That would be welcome news for airlines like Southwest, which has parked dozens of MAXes.
But the new head of the FAA is in no hurry to say the MAX is safe.
STEPHEN DICKSON, FAA ADMINISTRATOR: This plane will not fly in commercial service again until I am completely assured that it is safe to do so.
LEBEAU: With the FAA under pressure to be tougher on Boeing (NYSE:BA), regulators are scrutinizing the plane`s flight control system to make sure issues that caused two 737 MAX crashes are completely resolved.
GORDON BETHUNE, FORMER CONTINENTAL AIRLINES CEO: I know they keep adding to additional requirements and additional testing, but sooner or later, you know, the airplane is going to demonstrate its ability and there won`t be anything other than maybe political considerations, but the airplane is ready to go. I feel comfortable that it is going to be a really good airplane.
LEBEAU: But for now, airlines are not placing new orders for the 737 MAX, and those who are waiting for deliveries in the future, well, they`re sticking with the plane. In July, there were zero 737 MAX cancellations.
Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago.
GRIFFETH: And after countless on-and-off talks, CBS (NYSE:CBS) and Viacom (NYSE:VIA) are finally merging.
That`s where we begin tonight`s “Market Focus” with a new company that will be called Viacom (NYSE:VIA) CBS (NYSE:CBS). It reunites both media companies that split back in 2006. The reunified company hopes to gain better footing in an industry that is dealing with more TV cord cutting and an increase in the use of streaming services. CBS (NYSE:CBS) shares rose more than 1 percent today to 48.70 while Viacom (NYSE:VIA) was up more than 2 percent to $29.21.
And with the ongoing trade dispute between the U.S. and China, some Chinese companies have been bracing for an economic slowdown, but it does not appear to be the case for JD.com, that China-based ecommerce company that had growth in sales which helped it easily beat estimates. Shares jumped nearly 13 percent after the report today to $30.66. General Electric (NYSE:GE) CEO Larry Colt bought nearly $3 million of the company stock during the second quarter. An SEC filing shows that Colt purchased more than 330,000 shares at just over $9 each.
His total holdings are now valued at $8.5 million. G.E. stock rose more than 3 percent today to $9.35.
HERERA: Brinker International (NYSE:EAT), which is the parent company of the Chili`s and Maggiano`s restaurant chains reported mix results, topping analysts earnings estimates but missing on revenue. The company did say it plans to acquire more than 100 Chili`s restaurants in the fiscal first quarter from a franchisee. Shares fell more than 3 percent to $38.64.
Advanced Auto Parts missed expectations as same sales stores were flat. And the company trimmed the high end of its full year net sales forecast. The auto parts retailer also announced a $400 million share repurchase program. The shares were up a fraction to $142.23.
After the bell, Tilray beat revenue estimates, but it missed on earnings. The legalization for adult marijuana use in Canada and its product expansions in Europe helped sales, which the CEO expects to see more growth of in the near future.
(BEGIN VIDEO CLIP)
BRENDAN KENNEDY, TILRAY CEO: I tell my team all the time that this is day one in this industry. All of this excitement is about two countries in the world that have legalized for adult use, and 41 that have legalized for medical. And we expect both numbers to increase significantly. I expect the global medical market to more than double in terms of countries that legalize over the next three years.
(END VIDEO CLIP)
HERERA: Shares initially dropped in the after hours trading but closed the regular session up more than 8 percent to $46.02.
GRIFFETH: Household debt is rising, especially among seniors. According to a new report from the New York Federal Reserve, people in their 60s held just over $2 trillion of debt in the second quarter. That`s much more than the $1.5 trillion they held during the financial crisis, and it is even worse among those 70 years and older. Their debt level is roughly double what it was a decade ago.
What do we make of this?
Joining us tonight is Joe Brusuelas. He`s chief economist at RSM U.S.
Joe, always good to see you. Thanks for joining us tonight.
JOE BRUSUELAS, RSM US CHIEF ECONOMIST: Thank you. It is good to be here.
GRIFFETH: I`m both fascinated and horrified by those numbers there. Seniors are supposed to be debt-free. What happened? What is going on here?
BRUSUELAS: The baby boomers didn`t get it done during their prime working age years, so they`re trying to substitute debt for lack of fixed income revenue and then their own savings rate. And this is going to be a budding problem. You know, when you go to Washington, you go up on the Hill and you talk to people, there is active talk about a U.S. retirement crisis. I think what you are seeing in the internals of those debt dynamics is exactly that.
GRIFFETH: So they`re borrowing to make ends meet or borrowing to get through, but they`re doing it in a low interest rate environment, almost a record low environment. So, they`re not making anything on what they actually have saved.
BRUSUELAS: Well, that`s right. So if you are a saver in this new economy, right, where we`re going to have very low interest rates for a very long period of time and we may actually indeed have negative interest rates over the next several years, you`re not going to get good returns as savers. So, I`m not surprised that the boomers have turned to the credit markets in order to make ends meet or as a substitute for what they didn`t do during their prime years.
GRIFFETH: What will Congress do about this, if anything?
BRUSUELAS: Well, you know, it`s funny. I think that this is one of the sleeper issues of the upcoming campaign.
My sense is that the Democratic Party will get way in front of this. I won`t be surprised if Mr. Trump gets aggressive on this too, and they try to put together a package to alleviate some of the issues. Now, what`s interesting, Bill, as you guys well know, half of the population is under 38.
I wonder how they`re going to look at that given their elevated levels of student debt. This is going to be a very combustible issue I think going forward.
GRIFFETH: All right. Joe, good to see you. Thanks for the information.
BRUSUELAS: You got it. It is not going away.
GRIFFETH: Yes, Joe Brusuelas from RSM U.S., thanks again.
HERERA: Well, the pork industry is a big part of the Chinese economy but it has been ravaged by disease this year due to the spread of the African swine flu.
The situation is so severe that the government has actually stocked up on its strategic pork reserves, even importing U.S. pork despite the trade war. But now there`s a push to change the industry`s business model.
Eunice Yoon takes a look at the shift in strategy.
EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Chinese agricultural companies are preparing for a greater push towards large-scale farms, similar to what you would see in the United States. African swine fever has ravaged the industry here, wiping out an estimated quarter of China`s 400 million pigs, and that sparked a call for change.
LIU YONGHAO, NEW HOPE GROUP CHAIRMAN: China can purchase globally instead but such a purchase will be far from enough. Buying has raised global pig prices to a relatively higher level now. To solve the problem, we have to rely on our own ability inside the Chinese system.
YOON: Beijing wants to professionalize an industry made up largely of smaller backyard farms. The government is now requiring tighter controls and bigger investment in waste disposal and bio security and it`s offering financial support to get producers to scale up.
But there are still challenges like China`s lack of experience and big farming population.
For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon in Beijing.
GRIFFETH: And coming up, four documents everyone needs as part of their financial and estate planning.
GRIFFETH: Here is what we are watching. Tomorrow, Macy`s (NYSE:M) report earnings. Investors will be looking for any impact that tariffs may be having right now. Dow component Cisco (NASDAQ:CSCO) also reports its quarterly results. Questions about its exposure to the U.S./China trade war will be brought up as well. And we`ll get a fresh read on the Chinese economy itself when it releases numerous economic reports. That`s what we`re watching for on Wednesday.
HERERA: An unexpected emergency. It can happen at any time. That`s why you need to be prepared. There are four essential documents everyone needs to have.
Our senior personal finance correspondent Sharon Epperson joins us with more on that.
Good to see you, Sharon.
SHARON EPPERSON, NIGHTLY BUSINESS REPORT PERSONAL FINANCE CORRESPONDENT: Good to be here.
HERERA: So if something happens to you, what is the number one document that you think everybody has to have?
EPPERSON: Well, I think everyone needs to have for their estate planning purposes a will. You want to figure out where your assets are going to go, what inheritances you may have, who is going to get those, but most important for me as the mother of two children is that it gives the guardianship designation. I think for those who have not passed away, they are going through something where they`re unable to care for their children at the time they`re still living, having that guardian set up is very key and I learned that.
HERERA: Yes, indeed.
GRIFFETH: Something else you learned — a document that you need if you become seriously injured, as you were a few years ago.
EPPERSON: Yes. It is so important to have a financial power of attorney, a durable power of attorney to handle the financial decisions that need to be made while you`re not there, from paying your bills to making sure that the medical bills eventually get paid as well. So, whether you are having something on auto pay already, you still need a person to oversee that, making sure that everything is done. That`s where the durable power of attorney document comes in, allowing you to designate that person.
HERERA: The other aspect of it is if you were incapacitated in some way, shape or form, if you have certain health wishes, you need someone who can execute that for you but they have to be given permission to do that.
EPPERSON: Yes, I had a period of time where I was not able to make any of those kind of critical medical decisions, and I needed someone to be able to step in and take that role and it was my health care power of attorney. I had a document that allowed someone to do that. That`s my husband. I had an alternate already name, that was my sister.
And together, they made those decisions together. And they also followed what I had in my living well in terms of what wishes I wanted in terms of end of life treatment when it`s a very critical situation.
GRIFFETH: Where do you get the documents?
EPPERSON: Well, you can go — my favorite thing to do is go to an estate planning attorney. I want to talk to someone who`s going to draft the documents, kind of walk me through all of the steps and also be able to have someone to call when these documents may be needed, and also in case they`re challenged.
In my case, it was good to be able to give my family members a name, a number and someone that they could contact. You can also find the health care documents on the American Bar Association. They have forms to help you do it online, or AARP, some of those health forms can be available.
And there are also websites that will allow you to do a power of attorney or even a will online. But again, I think if you can, it`s best to find an estate planning attorney that can help walk you through this, talk to friends, talk to other sources, financial advisers can also give you some good leads on those attorneys.
HERERA: Yes, good advice and peace of mind for yourself and everybody.
EPPERSON: Yes. Exactly. That`s exactly.
HERERA: Sharon, thank you as always.
EPPERSON: My pleasure, my pleasure.
HERERA: Sharon Epperson.
GRIFFETH: Before we go, a look at the final day on Wall Street. Remember, yesterday we were down more than 300 points. Today, we were up more than 300 points, back above 26,000. Nasdaq was up 152, the S&P added 42.
HERERA: 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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