Transcript: Nightly Business Report – August 23, 2019

ANNOUNCER:  This is NIGHTLY BUSINESS REPORT with Bill Griffeth and Sue Herera.  

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR:  Stocks rocked as the
U.S./China trade war intensifies, sending shock waves through Wall Street
and rattling the global economy.  

BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR:  Ready to act.  The Federal Reserve says it will do what is necessary to support the economic
expansion, but adds that there is no rule book for a trade war.  

HERERA:  Protect your portfolio.  What you can do to keep your money safe
and your personal finances sound in a market like this.  

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Friday,
August 23rd.  

GRIFFETH:  And we do bid you a good evening, everybody, and welcome.  

Investors went into this day knowing it was going to be an important one
for the markets, and it was, but not for the reasons that they thought.  It
wasn`t the highly-anticipated speech from Fed Chairman Jerome Powell that sparked today`s intense selling.  Instead, it was a new record of tariffs
imposed by the Chinese government on goods and then, by President Trump`s response to them late today, he`s hiking rates on even more tariffs on Chinese goods.  And his Twitter feed was active all day, as well.  

All of which served to escalate the trade war between the world`s two
largest economies.  That clouds the outlook for the economy and it rattled
Wall Street once again.  

Here are the closing numbers for this Friday.  The Dow Industrials down 623 points to 25,628.  Nasdaq fell by 239, and the S&P fell 75.  Seema Mody
walks you through this day from the New York Stock Exchange.  

(BEGIN VIDEOTAPE)

SEEMA MODY, NIGHTLY BUSINESS REPORT CORRESPONDENT:  It was another dizzying day for the stock market.  Equity futures initially rose on encouraging comments from Fed officials but just before 8:00 a.m. Eastern, China announced retaliatory tariffs firing its latest salvo in the U.S.-China
trade wars.  That immediately sparked a selloff at 10:00 a.m. Eastern.  
Stocks lifted off their lows briefly when the Fed Chair Jay Powell stated
that the Fed would ready to act as needed to sustain the economy.  

But an hour later, President Trump launched a series of tweets taking aim
at Powell and China, escalating the trade wars that sent the market
spiraling and the sell-off was broad.  Trade sensitive names like Apple
(NASDAQ:AAPL), Caterpillar (NYSE:CAT) and 3M (NYSE:MMM) all fell.  
Semiconductor stocks were lower.  FedEx (NYSE:FDX) and UPS lost ground,
pressuring the entire transportation sector.  And the Dow broke below a key technical level, not the way long-term investors wanted to start the
weekend.  

For NIGHTLY BUSINESS REPORT, I`m Seema Mody at the New York Stock Exchange.  

(END VIDEOTAPE)

HERERA:  So, the trade war took an ugly turn.  As Seema mentioned, it
started with China saying it would impose retaliatory tariffs on additional
products and ended with the president firing back.  

Ylan Mui has the details from Washington.  

(BEGIN VIDEOTAPE)

YLAN MUI, NIGHTLY BUSINESS REPORT CORRESPONDENT:  President Trump doubled down on the trade war with China in response to retaliation from Beijing.  He announced on October 1st, the current 25 percent tariffs on $250 billion of Chinese goods will go up to 30 percent.  And on September 1st, the Chinese products that are supposed to be taxed at 10 percent will be hit with a 15 percent tariff.  

Earlier today, Trump tweeted that the U.S. is better off without China and
ordered American companies to immediately start looking for an alternative. But it`s unclear how the president could enforce that order.  Firms like Apple (NASDAQ:AAPL), Dell (NASDAQ:DELL) and Nike (NYSE:NKE) are already considering moving their supply chains and experts say multinational companies will continue to do business there.  

JASON FURMAN, FORMER COUNCIL OF ECONOMIC ADVISERS CHAIR:  China is a huge market.  You have to be in China to serve that market.  To tell American companies to go out of China would be, you know, hugely crippling to the U.S. economy relative to the rest of the world, which is becoming more integrated with China.  

MUI:  China is slapping tariffs on $75 billion of U.S. exports like
aircraft and oil.  The tariffs ranging from 5 to 10 percent.  Some take
effect September 1st, others December 15th.  Existing tariffs are already
weighing on the U.S. economy.  

MARK ZANDI, MOODY`S ANALYTICS:  The reason why the economy is struggling is this trade war, and the trade war is not working.  It is doing significant damage to our economy.  It risks running the economy into a ditch.  At the end of the day, I just don`t see this getting where we want to go.  

MUI:  Automakers are also getting hit by 25 percent tariffs.  They already
got slammed last year in a previous round of tariffs.  U.S. exports of
finished vehicles dropped by 50 percent, all of the whiplash is taking a
toll.  

GITA GOPINATH, IMF CHIEF ECONOMIST:  It`s not just the tariffs that are in place, but it is the tremendous uncertainty over where the policy is headed and will there be closure any time soon.  It is weighing on business
confidence and we are seeing it on investment.  

MUI:  Business groups say they want both countries to get back to the
negotiating table.  

For NIGHTLY BUSINESS REPORT, I`m Ylan Mui in Washington.  

(END VIDEOTAPE)

GRIFFETH:  Now, those retaliatory tariffs announced this morning by Beijing are set to go into effect September 1st.  That`s the same day that one set of President Trump`s tariffs on Chinese goods also go into effect.  In the
meantime, as Ylan mentioned, the president immediately ordered U.S.
companies to look for other opportunities around the world for production.  

But as Eunice Yoon reports, that`s easier said than done.  She is in
Dongguan, China, for us tonight.  

(BEGIN VIDEOTAPE)

EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT:  With new tariffs just days away, American businessman Alfred Laspina is in China looking for suppliers anyway.  

ALFRED LASPINA, ELUMIGEN VP SALES & MARKETING:  The truth is, Eunice, right now there isn`t another alternative for us.  

YOON:  Laspina helps run Elumigen, a Michigan-based start-up that
specializes in industrial lighting.  The company was hit with 25 percent
tariffs in May and expects more products to be struck on September 1st.  
That pushed Laspina to explore other countries to source his goods, but
none could match China.  

For Laspina, factories like this are the only ones that can make what he
needs at an acceptable cost.  Workers have years of experience and
oftentimes, the entire supply chain of products is here.  

Those advantages have helped this supplier shrug off the U.S. tariffs.  
Singapore-owned Aztech had been manufacturing in China for 25 years.  

DANIEL OH, AZTECH SENIOR VP SALES & BUSINESS DEVELOPMENT:  Any additional cost is bear (ph) by customers, so it doesn`t pay us a lot.  

YOON:  So you don`t split the cost?  

OH:  We don`t.  

YOON:  Have your orders from the U.S. gone down because of the tariffs?  

OH:  No.  In fact, we see our order increase.  

YOON:  But that means Laspina and his startup have to contend with the
extra cost and uncertainty of the trade war.  

LASPINA:  The tariffs are concerning not only for the impact in the cost of
pricing today but also in planning going forward.  Is there another tariff?  
Will there be more levels?  How does that impact our positioning in the
marketplace?  That is critical to us.  

YOON:  For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon in Dongguan, China.  

(END VIDEOTAPE)

HERERA:  And all of that trade talk overshadowed Fed Chair Jerome Powell`s speech on monetary policy, and trade is just one of the mounting challenges facing central bank policymakers.  

Steve Liesman is at the Fed`s annual symposium in Jackson Hole, Wyoming.  

(BEGIN VIDEOTAPE)

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT:  Federal Reserve Chairman Jay Powell with his keynote speech at the Fed`s annual summit here in Jackson Hole, guardedly suggesting that the Federal Reserve could be cutting interest rates in the months ahead.  Even though Powell said the U.S. economic outlook is favorable, he noted there`s evidence of global growth deteriorating further, that trade policy is playing a role in a
global slowdown and that business investment and manufacturing have
weakened both.  

He said there`s only so much the Federal Reserve can do to address trade
policy but he did say the Federal Reserve could address some of it, or some
of the fallout from it.  

Powell`s top deputy, Richard Clarida, in a CNBC exclusive interview, backed up the chairman`s outlook.  

RICHARD CLARIDA, FEDERAL RESERVE VICE CHAIR:  You know, the economic outlook is favorable, the economy is in a good place but there are
significant risks.  The global economy is slowing.  There are powerful
disinflationary pressures.  There are uncertainties about trade policy and
those are factoring in.  

You know, we run monetary policy for the U.S. but we have to take into
account global developments.  They impact exports.  They impact inflation,
and we`re going to factor that in as we need to.  

LIESMAN:  Other Fed members here in Jackson Hole supported the idea of
lowering the interest rates but for other reasons.  

JAMES BULLARD, ST. LOUIS FED PRESIDENT:  What the market is saying
inflation will be over the next five years, let`s say, and adjust it
because it is CPI (NYSE:CPY) adjusted for PC.  

LIESMAN:  Right.  

BULLARD:  Market is only expecting about 1 percent or 1.1 percent
inflation.  So, we`re supposed to hit our inflation target.  That`s one
reason why I`ve argued we should get lower here.  

LIESMAN:  But it became apparent here in Jackson Hole that the Fed chairman faces a divided committee.  Not every Fed official thinks it is appropriate to lower rates.  

ESTHER GEORGE, KANSAS CITY FED PRESIDENT:  My sense was we have added accommodation and it wasn`t required in my view.  

So, I`m observing the downside risk, and right now, I`m focused on what the Federal Reserve has to do to achieve its mandates.  In my view, with this
very low unemployment rate, with wages rising, with the inflation rate
staying close to the Fed`s target, I think we are in a good place relative
to the mandates that we are asked to achieve.  

LIESMAN:  The Fed meets in September with markets expecting a rate cut and, indeed, three rate cuts by end of the year.  Fed officials say they will be
keenly watching global economic developments, potential further escalation of the trade war with China and how all of that affects the U.S. economy, figuring out the right place to set interest rates.

For NIGHTLY BUSINESS REPORT, I`m Steve Liesman in Jackson Hole, Wyoming.  

(END VIDEOTAPE)

GRIFFETH:  Alicia Levine joins us now to talk more about all this, the Fed,
the escalating trade tensions with China, and the impact it`s having on our
markets.  She`s chief market strategist at BNY Mellon Investment
Management.  

Good to see you again.  Thanks for joining us tonight.  

ALICIA LEVINE, BNY MELLON INVESTMENT MANAGEMENT CHIEF STRATEGIST:  Nice to see you on this busy day.

GRIFFETH:  A lot to digest, that is for sure.  So, on the one hand, you
have two new rounds of tariffs.  On the other hand, you have a Fed chair
who hinted that he is ready to cut rates if necessary.  Net, net, good or
bad for the stock market today overall?  

LEVINE:  So, overall, the stock market really reacted more to the
escalation of the trade fight with China and the fact that not only is
China putting tariffs on, but that the U.S. is escalating.  The thing I`d
say about that is that the Chinese action is really interesting because it
is exactly mirroring what the U.S. is doing — September 1st and December
15th.  And to me that suggests a negotiating strategy.  

So the fear that was in the market today should not be unexpected, but it
shouldn`t — but investors shouldn`t be running out of the market either.  

HERERA:  So, late today, we did get a ratcheting up of those tariffs by the
administration.  How do you anticipate China reacting to that Monday
morning or late Sunday night?  

LEVINE:  So things could definitely get worse before they get better.  So
you could see restrictions on U.S. companies in China.  You could see
restrictions on joint ventures in China, because ultimately China is
running out of goods to tariff because they only import $75 billion from
the U.S.

So there are other mechanisms where they could make life for U.S.
companies.  We should expect something.  Of course, there`s the currency
issue a couple of weeks ago.  We had weakening of the Chinese currency,
which did send shudders through global markets.  

GRIFFETH:  Now, ordinarily hearing a Fed chair hint that rate cuts are
coming would have sent the stock market higher, but, as you pointed out, it
was the trade tariff tiff that got Wall Street`s attention today.  

But all things being equal, the tariff war could mean lower rates from the
fed down the road.  Does that help the stock market or not at this point?  

LEVINE:  So I think what we heard from Chair Powell today is that the fed
is ready to go 25 basis points in September, and I believe he left the door
open for an additional 25 basis points by the end of the year.  Absent the
trade war, I don`t think we would have heard that today.  So, clearly, the
deterioration in the global outlook is causing the Fed to become more
dovish and to be more open in cutting rates.  

Ultimately, that will affect stock prices to the positive side and it will
support stock prices.  

HERERA:  Where do you come down on the issue of recession here in the
United States?  Are we closer than you thought perhaps before or not?  
There are divided opinions on that.  

LEVINE:  That`s right.  This is a great question because the data are
really unclear.  On the one hand, the consumer data and the labor market
continue to be strong, and as we know, the consumer is 70 percent of the
U.S. economy.  So as long as Americans keep on shopping, we`re fine.  

On the other hand, some of the forward-looking data, the sentiment data,
the intentions for capital expenditures are weakening and they`re starting
to look like they`re rolling over.  

GRIFFETH:  Right.  

LEVINE:  That does mean that there`s a place for the Fed to cut and to help
stabilize the economy.  And then the other question is whether the
manufacturing recession worldwide comes and hits the U.S. economy.  

GRIFFETH:  Indeed.  

LEVINE:  That is an open question.  

GRIFFETH:  Alicia Levine with BNY Mellon Investment Management — again, thanks for joining us.  Have a good weekend.  

LEVINE:  Thank you.  

HERERA:  Well, needless to say, it is an interesting time for leaders of
the world`s major economic powers to meet, and they are this weekend.  

Eamon Javers reports on the long list of issues they will be tackling.  

(BEGIN VIDEOTAPE)

EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT:  President Trump departs tonight for the G7.  France will play host to world leaders in the seaside town of Biarritz.  This year`s official agenda includes promoting
gender equality, climate and strengthening globalization through trade.  
But the ramifications of the U.S./China trade war will likely dominate the
conversation, particularly on the heels of the latest tit for tat, though
China is not a member of the G7 and Xi Jinping will not be present.  

Of course, the E.U. is not immune to Trump`s focus on trade either.

DONALD TRUMP, PRESIDENT OF THE UNITED STATES:  We have all the cards in this country, because all we have to do is tax their cars and they would give us anything they wanted.  

JAVERS:  He has repeatedly suggested he would like to slap tariffs on
European cars as he did earlier this week and French wine has also been a
target.  Currency manipulation is among the administration`s list of
concerns as well as the French digital tax that would hit U.S. tech
companies.  

Trump has bilateral meetings scheduled with French President Emmanuel
Macron, Germany`s Angela Merkel, Canada`s Justin Trudeau, Japan`s Shinzo Abe, and India`s Prime Minister Narendra Modi, as well as the U.K.`s newest prime minister, Boris Johnson.  

That meeting will be closely watch as the two hopes to wrap a trade deal
which could be announced before the U.K. officially exits the E.U. in
October.

The expectation bar is set pretty low for this one.  Organizers are already
saying there may not be a traditional end-of-summit communique as has been done in the past.  Last year, they couldn`t agree on wanting to get the
president to sign it.  This year, the administration tells me they`re happy
not having any communique at all.  

For NIGHTLY BUSINESS REPORT, I`m Eamon Javers at the White House.  

(END VIDEOTAPE)

HERERA:  Still ahead, where our market monitor is finding value in this
volatile market.  

(MUSIC)

HERERA:  New home sales dropped sharply last month from June, but if you compare sales to last year at this time they`re actually higher.  And that
could be because the drop in mortgage rates is starting to have an impact.  

Diana Olick has more.  

(BEGIN VIDEOTAPE)

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT:  Homebuilders are suddenly seeing more demand this summer after a slow spring.  Sales of newly-built homes bounced 4 percent higher annually in July according to the U.S. Census, which measures signed contracts during the month so a recent read on demand.  June`s reading was also revised sharply higher. Prices for new homes were slightly lower than last year, helping affordability, but falling mortgage rates were likely a stronger driver.  

Mortgage rates began falling in May but did pop up slightly in July when
these sales contracts were signed but rates were still far lower than they
were in July of last year.  Sales of existing homes gained in July as well,
coming in higher than July of last year, the first annual increase in more
than a year.  

That read measures closings, so people out shopping in May and June when
rates were falling more sharply.  

While lower rates certainly boosted summer sales, there is concern that the
reason behind those lower rates — that is a potentially weakening economy
— could hurt consumer confidence and cause buyers to pull back once again come fall.  

For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Washington.  

(END VIDEOTAPE)

GRIFFETH:  Foot Locker slips and falls, and that`s where we begin tonight`s “Market Focus” with the athletic footwear and apparel retailer reporting earnings and sales that missed analyst estimates.  The CEO said demand was weak for the apparel and they`re trying to figure out how to soften the blow of tariffs a as well.  Shares dropped nearly 19 percent today to $34 even.  

An increase in online sales helped accessories retailer Buckle (NYSE:BKE)
surpassed analysts` estimates.  The clothing company has now topped revenue expectations for three out of the last four quarters, but that didn`t help the stock price today.  It dropped more than 3 percent to $18.02.  

Red Robin gourmet said that fewer consumers dined in their restaurants last quarter but that was offset by greater demand for its delivery services.  
The chain reported better than expected earnings and revenue as a result
and reiterated its full year outlook and shares rose nearly 6 percent today
to $34.90.  

HERERA:  It is time now for our weekly market monitor who has names with value, and he says they will help you navigate the stock market volatility. The last time he was on in July 2018, he liked Novocure, which is up 149 percent, American Tower (NYSE:AMT), which is up 60 percent, and Yelp, which is 20 percent lower.  

Joining us tonight is Richard Steinberg, chief market strategist at the
Colony Group.  

Richard, great to see you.  

RICHARD STEINBERG, THE COLONY GROUP CHIEF MARKET STRATEGIST:  Good to see you, Sue.  

HERERA:  All right.  What a day to have you on.  A lot of volatility, and
that`s probably not going away.  Your first pick is —

STEINBERG:  Yes, we should expect more.  

HERERA:  I think so.  Lowe`s is your first pick.  Why do you like it?  

STEINBERG:  This is owned in our growth portfolio.  It`s one of our largest
names.  It is the second largest home improvement company behind Home Depot (NYSE:HD), which is still the class act of the group.  But Marv Ellison
came on from Home Depot (NYSE:HD) as the new CEO.  When he first came on, there were high hopes, the stock sell off.  We have a $140 target for it,
and I think it`s a name for a long-term growth portfolio.  

GRIFFETH:  I am betting that this next company is also in your growth
portfolio.  It`s called Nice.  I was looking at a chart today.  In the last
five years, it has essentially tripled in value here.  

Do you still like it though?  

STEINBERG:  Yes, this is — yes, this is an Israeli-based technology
company.  It`s in our analyst select portfolio and in our growth portfolio.  
I actually own this one personally also.  

The company does call center software, as well as financial crime and
compliance software.  They recently made an acquisition called “In
Contact”, which is in the cloud space within the call center space.  The
CEO is a visionary.  This is a classic case of amazing Israeli technology.  

We think if you are willing to hold this for a long period of time, it`s a
great long-term name.  We have $189 target on it.  

HERERA:  All right.  And you are sticking with one of your previous picks,
and that is Novocure.  

STEINBERG:  We`re doubling down.  

HERERA:  You`re doubling down.  

STEINBERG:  We`re doubling down.  

HERERA:  Why?  

STEINBERG:  This is in our special situations value portfolio.  The company
is really cutting-edge technology, health technology company in the cancer
space.  Think of Odyssey 2000 with an electrode kind of device.  

It has had great results in both glioblastoma and mesothelioma.  I always
have trouble with those.  

They`re showing some great clinical efficacy in small — non-small cell
cancer.  I think this is a name that could continue to be owned.  

HERERA:  OK.  

STEINBERG:  We have $122 target.  If the cancer clinicals go well, it could
be higher than that.  

HERERA:  Rich Steinberg with the Colony Group — Rich, thanks so much.  

STEINBERG:  Take care.  Good to see you.  

GRIFFETH:  Tonight, by the way, the business world is mourning the loss of
David Koch.  Of course, he was best known for his political activism but he
also ran one of the nation`s largest privately-held conglomerates, Koch
Industries.  Its investments included subsidiaries in manufacturing,
chemicals, fibers and minerals.  

Mr. Koch and his brother Charles financed one of the most influential
conservative political networks in America.  David Koch was 75 years old.  

(MUSIC)

GRIFFETH:  It`s a question being asked a lot lately.  Is a recession
coming?  A lot of rumblings among economists, and market watchers,
investors and consumers.  Some financial experts say a decline in economic activity and widespread drop in spending is inevitable.  There are those who disagree.  

But what does it mean for you?  

Our senior personal finance correspondent Sharon Epperson has some
suggestions on how to recession-proof your life.  

Welcome aboard.  

SHARON EPPERSON, NIGHTLY BUSINESS REPORT SENIOR PERSONAL FINANCE CORRESPONDENT:  Thank you.  

GRIFFETH:  Here is that question again.  What do you do first?  What do you say?  

EPPERSON:  The first thing is not to panic, to breathe, and focus on what
you can control.  And the first step there is to look at what you have
coming in, what money do you have coming in, what is your income.  

And there, focus on your job and protecting your job and the stability of
your job.  To do that, step up your performance right away.  Go in Monday
morning deciding you are going to be a critical player to whatever the
bottom line is for your company.  Make sure you update your resume, your
LinkedIn (NYSE:LNKD), those always should be updated.  You should always be networking, talking to contacts and making sure that you know what`s going on in the industry, in your company and outside of your company.  

HERERA:  Just in case, because you never know.  

EPPERSON:  Just in case, you never know.

HERERA:  And shoring up your finances, right?  

EPPERSON:  Right, you never know.  And if you do unemployed you want to
have that rainy day fund.  So, the first thing you need to do as a lot of
people say, you should have three to six months worth of your living
expenses saved.  

But if you are unemployed, if we go by what happened after the great
recession in 2011, people took — it took them 29 weeks to find a new job.  
So, you may need more money than you think.  So maybe six months to twelve months in that cash reserve would be best.  Put it in a high-yield bank savings account.  

And also some say consider getting a home equity line of credit.  Not that
you are going to use it but you have it in case you need funds to tap.  

GRIFFETH:  You know, it is early.  People are going to be sitting there
saying, what are they talking about?  The economy looks good right now.  It
occurs to me a lot of what you are saying is what we should be doing
anyway.  

EPPERSON:  You should be doing it all the time, not using credit cards all
the time, maybe using debit card instead of credit card, paying down that
debt.  All of those things are very important.  

And think about where you are putting your investments, not just what you investment in.  Make sure you have tax diversification.  You know I love
Roth accounts, so make sure you have some money on that too.  

GRIFFETH:  Sharon Epperson, always good advice.  Thank you.  

EPPERSON:  My pleasure.

GRIFFETH:  Have a good weekend.

EPPERSON:  You too.

HERERA:  Well, before we go, here`s a look at the final numbers from this
wild day on Wall Street.  The Dow dropped 623 points, the Nasdaq was down 239, the S&P 500 fell 75.  The major averages were all lower for the week.

And that is NIGHTLY BUSINESS REPORT for tonight, I`m Sue Herera.  Thanks for watching.  We`d like to remind you.  This is the time of year your public television station seeks your support.  

GRIFFETH:  I`m Bill Griffeth.  We do thank you very much for that support.  
Have a great weekend.  See you Monday.  

END

Nightly Business Report transcripts and video are available on-line post
broadcast at http://nbr.com. The program is transcribed by ASC Services II
Media, LLC. Updates may be posted at a later date. The views of our guests
and commentators are their own and do not necessarily represent the views of Nightly Business Report, or CNBC, Inc. Information presented on Nightly Business Report is not and should not be considered as investment advice. (c) 2019 CNBC, Inc.

<Copy: Content and programming copyright 2019 CNBC, Inc. Copyright 2019 ASC Services II Media, LLC. All materials herein are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of ASC Services II Media, LLC. You may not alter or remove any trademark, copyright or other notice from copies of the content.>

This entry was posted in Transcripts. Bookmark the permalink.

Leave a Reply