ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Bill Griffeth and Sue Herera.
SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: In the spotlight. Apple (NASDAQ:AAPL) hosts one of its biggest events of the year. But it`s not the new iPhone that`s getting all of the buzz. It`s Apple`s services business.
BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: New menu. McDonald`s (NYSE:MCD) is making major changes but it has nothing to do with fast food.
HERERA: Bigger targets. State attorneys general are setting their sights on one of America`s richest families, as they take aim at the opioid epidemic.
Those stories and more tonight on NIGHTLY BUSINESS REPORT for Tuesday, September 10th.
GRIFFETH: And we do bid you a good evening, everybody. And welcome.
Things are definitely changing at Apple (NASDAQ:AAPL). That was apparent at the company`s annual showcase today. Yes, the iPhone is still its flagship product and yes, three new versions of the smartphone got a lot of attention.
But, clearly, Apple (NASDAQ:AAPL) is looking for new areas of growth now. And just as it transformed the phone and music industries, it`s now betting it do the same with streaming. Apple (NASDAQ:AAPL) today announced a start date for its Apple (NASDAQ:AAPL) Plus service. It also announced how much it`s going to cost consumers. And that news sent shares of competitors like Netflix (NASDAQ:NFLX), Disney (NYSE:DIS) and Roku lower.
Julia Boorstin takes a look at Apple`s shifting strategy for us tonight.
JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Hardware, software and services, that`s what Apple (NASDAQ:AAPL) CEO Tim Cook says the tech giant is focused on. And Cook revealed key details about the services they first announced back in March. Apple (NASDAQ:AAPL) TV Plus will cost $49.99 a month. The first shows will launch November 1st with more shows added monthly.
And the first year will be free for those who purchase an iPhone, iPad, Apple (NASDAQ:AAPL) TV or MacBook.
TIM COOK, APPLE CEO: Our mission for Apple (NASDAQ:AAPL) TV Plus is to bring you the most original stories from the most creative minds in television and film. Stories that help you find inspiration, that are grounded in emotion, truly stories to believe in, stories with purpose.
BOORSTIN: That $5 a month price tag coming in at just half of what some analysts projected Apple (NASDAQ:AAPL) TV Plus would cost. Now, the service won`t have the same kind of library as other streaming services. But from a price point, it will be less expensive, compares to $13 a month for Netflix`s most popular streaming service and $7 a month for Disney (NYSE:DIS) Plus.
WALTER PIECYK, LIGHTSHED PARTNERS: This is the new era for Apple (NASDAQ:AAPL) where they`re trying to move from being an equipment company into more recurring revenue business, whether it`s 5 bucks a month or 10 bucks a month. This is part of the new story of Apple (NASDAQ:AAPL).
BOORSTIN: Apple (NASDAQ:AAPL) also announcing details of its Apple (NASDAQ:AAPL) arcade streaming game service, $4.99 for unlimited access to 100 exclusive games, launching September 19th in over 150 countries, as Apple (NASDAQ:AAPL) looks to lure more people to services.
For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Cupertino, California.
HERERA: On Wall Street, stocks finished mixed and they`re weighed down by decline in tech shares. Bond yields were higher, oil price just a bit lower. The Dow Jones Industrial Average rose 73 points to 26,909. The Nasdaq fell 3, and the S&P 500 up a fraction.
GRIFFETH: As the trade war with China drags on and more tariffs are introduced, two new reports out of the country today show that its economy may now have a pricing problem.
Eunice Yoon is in Beijing for us tonight.
EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Beijing got two bits of bad news on prices today.
First, China has a pork problem. Pork is seen as a staple in the diet and social stability issue. The government is highly sensitive to dramatic changes in pork prices, which it got today. Prices for August jumped by 47 percent.
Beijing has announced new measures to fight African swine fever, which has devastated China`s pig population. It released emergency pork from the strategic reserve and just today, a state paper posted a headline that appears to be attempting to convince Chinese that they don`t need their beloved meat, saying, “eating less pork is good for you”, and on social media, “your wallet and body will thank you.”
However, the worst news for policymakers is on the producer price side. The PPI fell at its fastest pace in three years. Manufacturers are struggling because of the trade conflict with the U.S. and weak demand. Most economists believe that even with the surge in pork prices, that the authorities here are going to want to prioritize battling the deflationary risks and will press ahead with stimulus, possibly interest rates cuts this year.
For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon in Beijing.
HERERA: And it`s not just a trade deal with China that investors are monitoring, but also one with Canada and Mexico. And it`s now crunch time for the administration to get the renegotiated NAFTA deal, now known as USMCA done.
Kayla Tausche is in Washington.
KAYLA TAUSCHE, NIGHTLY BUSINESS REPORT CORRESPONDENT: This week, the White House revved up its push to get Congress to pass USMCA, a deal it says has bigger impact than ongoing talks with China.
PETER NAVARRO, WHITE HOUSE TRADE ADVISER: We actually export close to five times more product to Mexico and Canada than we do to China. So, USMCA really is the big deal. We`re hoping to get this thing done within the next 30 to 60 days.
TAUSCHE: The deal needs Democrats onboard. House Speaker Nancy Pelosi will determine if and when a vote comes to the floor, depending on whether top trade officials make some changes. In negotiations, Democrats have prioritized making sure Mexico is implementing new labor reforms, enforcing environmental protections they say NAFTA overlooked and assuring that any changes for pharmaceutical companies won`t raise drug prices.
Business and farming groups are descending on Capitol Hill to push for the deal`s passage. Pork producers say Canada and Mexico make up 40 percent of their export market. Automakers want certainty on their supply chain.
North Dakota rancher Shelly Ziesch would like clearer labeling on American beef but says even without that, it`s better than no deal.
SHELLY ZIESCH, NATIONAL FARMERS UNION MEMBER: It`s difficult to sell the product when there is nobody available to purchase it. You know, when there is tariffs that raise their prices so high they can`t — they can`t afford it.
TAUSCHE: More than nine months after the three countries sign the deal, Mexico is the only one to have ratified it. Elections in Canada next month have held up passage there.
In Washington, the White House and Republicans say they already have the votes. Democrats say they they`re not there yet. U.S. Trade Representative Robert Lighthizer has yet to start the official countdown lock on the deal until he is absolutely sure they have the support.
For NIGHTLY BUSINESS REPORT, I`m Kayla Tausche in Washington.
GRIFFETH: Job openings fell for a second straight month in July. According to the Labor Department this morning, openings dropped to 7.2 million. That`s down from the all-time high of 7.6 million which was hit late last year. That report also showed a rise in the so-called quit rate. That`s a sign of worker confidence in the job market.
HERERA: House Speaker Nancy Pelosi will reportedly release an ambitious plan on drug pricing. A draft summary shows that the proposal would allow the federal government to negotiate drug prices on up to 250 Medicare- covered medicines with few competitors. It would also require manufacturers to offer the agreed upon prices to private insurers. Reaction was mixed with Merck (NYSE:MRK) falling and Pfizer (NYSE:PFE) and Eli Lilly (NYSE:LLY) rising.
GRIFFETH: Well, there are still a lot of questions about what opioid maker Purdue Pharma is going to do next. There`s still a change that it could settle with state attorneys general or it could file for bankruptcy. And if it does that, the Sackler family that owns Purdue will find itself in unwelcome spotlight.
Meg Tirrell explains.
MEG TIRRELL, NIGHTLY BUSINESS REPORT CORRESPONDENT: They are among America`s richest families, the Sackler name adorns institutions from universities to art museums. The source of their wealth? Purdue Pharma and the blockbuster opioid painkiller OxyContin.
And as Purdue is now at the center of thousands of lawsuits from states, cities and others over the toll of the opioid epidemic, the Sacklers are becoming a bigger target.
KEITH ELLISON, MINNESOTA ATTORNEY GENERAL: We have evidence that Richard Sackler and other members of the family are directly involved in sales conversations, marketing, planning. They accompanied sales representatives on calls. They are part of the entire enterprise in a way that is generally not normal just for people who have owned a share of the company.
TIRRELL: Ahead of the first federal trial in the opioid lawsuit scheduled for October, Purdue and the Sackler family have been in settlement discussion with state attorneys general and others. But according to several of those state A.G.s the two sides aren`t on the same page. And the company has reportedly threatened to file imminently for bankruptcy if the settlement isn`t reached this month.
JEFF LANDRY, LOUISIANA ATTORNEY GENERAL: Going into a freefall bankruptcy is going to problematic for the litigation and for the attorney generals.
TIRRELL: The states want to see more money guaranteed from the Sackler family. But in addition, they say if Purdue files for bankruptcy, their attention will turn directly to individual Sackler family members.
JOSH STEIN, NORTH CAROLINA ATTORNEY GENERAL: If we come to terms, there is no need to sue the Sacklers individually. If we fail and the company goes into bankruptcy, but the Sacklers do not then — at that point, I will have no choice but to sue them individually.
TIRRELL: The Sacklers are already named in several state suits and it wouldn`t be the first time the family has been involved in litigation. A just unsealed deposition video obtained by STAT News and ProPublica reveals questioning of Richard Sackler, former chairman of Purdue.
UNIDENTIFIED MALE: Do you believe that any of Purdue`s conduct has led to an increase in people being addicted in the Commonwealth of Kentucky?
RICHARD SACKLER, PURDUE PHARMA FORMER CHAIRMAN: No.
TIRRELL: Purdue agreed in 2015 to settle that case with the state of Kentucky for $24 million. States now are looking for a lot more.
STEIN: They extracted billions and billions and billions and billions and billions of dollars from this company over the last decade.
TIRRELL: A spokeswoman for Purdue Pharma declined to comment, while representatives for the Sackler family didn`t immediately respond.
For NIGHTLY BUSINESS REPORT, I`m Meg Tirrell.
HERERA: It is time to take a look at some of today`s “Upgrades and Downgrades”.
Wells Fargo (NYSE:WFC) downgraded to neutral from buy at UBS. The analyst cites the potential for lower interest rates to eat into net interest income. The price target is $49. The shares fell a fraction to $48.31.
Dollar General (NYSE:DG) was downgraded to market perform from outperform at Bernstein. The analyst cites less certainty when it comes to future sales and earnings growth. The price target is $145. The stock fell 2 percent to $157.09.
Altria was downgraded to neutral from overweight at Piper Jaffray. The analyst cites increasing regulatory scrutiny of Juul as well its potential merger with Phillip Morris. The price target is $49. Despite the downgrade, the stock was up a fraction to $44.24.
GRIFFETH: Still ahead, holiday hiring. Companies need workers but where will they find them?
GRIFFETH: For years, the growth engine of the fast food industry has been its food. But now, you can add artificial intelligence and voice technology, which is what McDonald`s (NYSE:MCD) is doing. Today the burger chain made a new high-tech investment. But its shares fell about 3-1/2 percent.
Kate Rogers (NYSE:ROG) has more.
KATE ROGERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: McDonald`s (NYSE:MCD) may be a fast food giant. But it`s leaning ever more into technology. The company is acquiring Apprente, a voice technology startup that uses artificial intelligence to understand drive-thru orders. Eventually, the technology may be applied to McDonald`s mobile app and self-order kiosks.
This is McDonald`s third technology deal this year. The move comes after its acquisition of Dynamic Yield, for $300 million in March, the company`s largest acquisition in 20 years. Dynamic Yield`s technology is being used in more than 8,000 drive-thrus across the U.S. to personalize the experience with food displays based on time of day, weather traffic in the restaurant and more.
McDonald`s (NYSE:MCD) also invested in Plexure, a mobile app vendor to continue development of its global mobile app.
Its fast food competition ramps up with apps, delivery deals and menu wars, McDonald`s (NYSE:MCD) is relying on technology to help improve service speed, and the overall customer experience.
RJ HOTTOVY, MORNINGSTAR ANALYST: I think the important thing here too is that McDonald`s (NYSE:MCD) could be building something down the road. You see the potential for an experience of the future 2.0 with all the technology initiatives they`ve been making, which potentially could unlock new formats or new business models for this company down the road.
ROGERS: CEO Steve Easterbrook who`s been at the helm for about four years said his initial focus was on turning around the business with restaurant upgrades. Now, Easterbrook says the focus is on new opportunities to drive growth.
STEVE EASTERBROOK, MCDONALD`S CEO: How can we help continue to elevate the experience of the customers? So, you know, with this pace of change in the world and with different technology and, you know, different innovations around, whether it`s around food, technology design, we are seeing opportunities that we think need to make the experience more fun, more enjoyable, or smoother for commerce. And if we can find that, we`re going to go hard at it.
ROGERS: As McDonald`s ramps up its tech investment, it`s also expecting to expand its footprint in Silicon Valley. The Apprente team will be the founding member of a new part of McDonald`s global technology team called MCD Labs. McDonald`s says over time, they will add more data scientists and engineers, shaping a fast food future that`s very different from its past.
For NIGHTLY BUSINESS REPORT, I`m Kate Rogers (NYSE:ROG).
HERERA: Wendy`s says it`s making a different kind of investment. That company is investing $20 million into expanding its breakfast offerings nationwide by next year. As part of that expansion, it will also hire about 20,000 workers. That investment caused Wendy`s to revise its outlook lower and the stock slipped 10 percent in trading today.
GRIFFETH: So McDonald`s (NYSE:MCD) is betting on new technology. Wendy`s is betting on new menu items. Which will provide the fast food industry with the fastest growth in the future?
Joining us to talk about it, Gil Luria is director of research at D.A. Davidson.
Good to see you. Welcome back.
GIL LURIA, D.A. DAVIDSON DIRECTOR OF RESEARCH: Thanks for having me.
GRIFFETH: I mean, clearly, McDonald`s (NYSE:MCD) betting on technology for ordering, for payment, delivery when Wendy`s is betting on food. Who has it right at this point do you think?
LURIA: McDonald`s (NYSE:MCD) really needs this technology in order to be successful. The efficiency gains they can get by implementing technology properly are going to be immense. Every five seconds they shave of the drive thru line, they get more customers through the door and drive growth that way.
On the other hand, Wendy has tried to introduce breakfast in the past with little success and that was a negative reaction today to the share price was that people are concerned that there will again not be successful.
HERERA: Well, they`re also up against McDonald`s (NYSE:MCD), which is a juggernaut in breakfast. But there is a big difference in scale, is there not between a McDonald`s (NYSE:MCD) and a Wendy`s?
LURIA: That`s right. McDonald`s (NYSE:MCD) is considerably bigger, which is why they can afford to invest so much in technology. When they get these incremental gains in throughput, it creates immense growth in value for McDonald`s (NYSE:MCD). Where the smaller chains have a harder time investing in technology and getting those types of gains.
GRIFFETH: So, in your view, who are some of the winners and losers going forward depending on their strategies right now?
LURIA: Whoever gets technology right will be a winner. The best examples of that are Starbucks (NASDAQ:SBUX), which has leveraged its mobile app and loyalty program to direct significant growth. Even companies like dominos whose product wouldn`t stand out on its merits, because they have the best app they`ve been able to outgrow their competitors. So, technology is going to be very important going forward for all these fast food and delivery type restaurants.
HERERA: OK. Those are the winners. Who is behind in this game?
LURIA: The ones that don`t catch up. The subscale fast food restaurants, they`re going to continue to lose share to quick service and fast casual restaurants. It`s a crowded field. We mentioned Wendy`s breakfast.
There is a lot of other fast food breakfast options out there. It`s very competitive and the competition comes from other sources. A lot of the conversation this week has been about chicken sandwiches. Popeyes chicken sandwiches, Chick-fil-A chicken sandwiches, that`s where a lot of the competition is coming.
GRIFFETH: And, of course, fake meat as well.
Gil Luria with D.A. Davidson, again, thanks for joining us tonight.
LURIA: Thank you.
HERERA: Boeing (NYSE:BA) delivers fewer planes in August. And that`s where we begin tonight`s “Market Focus”.
The company delivered 18 aircraft last month, which was down from 64 during the same period last year. As the grounding of the 737 MAX enters its seventh month, Boeing (NYSE:BA) says it expects to receive certification from the FAA by next month to put the planes back in the air. Shares rose about 3 percent to $369.49.
New York City is suing Chipotle for alleged labor law violations. The lawsuit claims Chipotle failed to provide estimates of work schedules as well as not paying premiums for last-minute scheduled changes. The city is seeking at least $1 million in compensation. Shares fell more than 6 percent to $787.98.
After the bell, the home furnishings company RH easily topped expectations and raised its full year outlook. RH also said it does not expect the current China tariffs to impact its business goals. Shares were volatile in the after-hours trading and closed the regular session up about 3.5 percent to $158.88.
GRIFFETH: Moody`s downgraded Ford`s debt rating to junk status after concluding that the automaker faces a lengthy and costly restructure with weaker cash flow. Separately, Ford says it`s going to be introducing eight electric vehicles in Europe this year. The plan there is for the majority of Ford sales in Europe to eventually come from electric vehicles by the end of 2022. Shares fell more than 1 percent today to $9.42.
Uber is laying off more than 400 technical workers or about 8 percent of its product and engineering staff only weeks after laying off a similar number from its marketing division. The company has been under intense pressure since its IPO in May. It lost more than $5 billion in its most recent quarter. Uber shares rose about 4 percent today to $33.51.
And Target (NYSE:TGT) is gearing up for the holiday shopping season. They are planning to hire more than 130,000 seasonal workers. That`s about 10,000 more than last year and the retailer says it`s going to pay those holiday workers a starting wage of $13 an hour. Target (NYSE:TGT) shares rose a fraction today to $108.83.
HERERA: So, what does the increase in temporary workers for this holiday season mean for the economy?
Mark Hamrick joins us, senior economic analyst at Bankrate, and he`s going to tell us exactly that.
Welcome, Mark. Nice to have you here.
MARK HAMRICK, BANKRATE SENIOR ECONOMIC ANALYST: Good to be with you, Sue.
HERERA: This is also coming at a record tight labor market. So the retailers and the shippers may want to add all the seasonal workers. But where are they going to get them and how much are they going to pay them?
HAMRICK: Well, you referenced at the top, they may just have to pay people more money, you know? And that`s part of the equation here. It`s interesting, Sue, and, Bill, though. We got the job openings numbers as you referenced earlier today.
And the number of job openings in retail in this latest month is down some 15 percent from a year ago and is even more dramatic decline in the wholesale trade. That number is down almost 30 percent. So, I think that overall we`ll probably see you know flattish numbers in seasonal hiring while consumer spending is up more than 5 percent year over year.
We know that job cut announcements have been running hot in the retail trade. Among other things, some of these retailers are going to be able to find displaced workers. But also find people who may be drawn into the workforce as we saw in that August employment report.
GRIFFETH: Flattish compared to last year. But still, when you think about it, I mean, just in the last few days, the back of the envelope numbers tell us there are 280,000 job openings when you talk about UPS hiring, Target`s hiring, Amazon (NASDAQ:AMZN) is hiring, now Wendy`s hiring another 20,000 workers. I mean, that still sounds like a pretty strong labor market right now clearly.
HAMRICK: Well, I think, Bill, over the last previous four years, we`ve actually been seeing the number of seasonal hires decline in retail. So, we`ll see whether this year marks a strong uptick there.
Let`s remember also in the context of the broader labor market, there are still millions of workers who are working part time that would like to have full-time work. And we still do think that we can have increased labor market participation. We know that some enterprising have been changing what they`re willing to, quote/unquote, accept with respect to workers, doing things like allowing people to be employed who might have some criminal past or even unable to pass a drug test, not necessarily optimal. But, you know, they`re having to shake things up a bit.
HERERA: And as you mentioned, they may have to pay people more. If that is the case, even though it may be a seasonal or transitional period, what`s the economic impact of that?
HAMRICK: Obviously, it weighs on profit margins. And, you know, in a way, you have to feel for retailers right now because they are hit by a virtual tsunami. Obviously, they`re having to manage through the tariffs and trade disputes impact. The uncertainty that is beginning to weigh on consumers somewhat and then obviously higher costs are reflected in both labor costs as well as the goods they are importing right now.
HERERA: Mark Hamrick with bankrate.com, thanks so much.
HAMRICK: Thank you.
HERERA: Coming up, going off the grid.
(BEGIN VIDEO CLIP)
PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: When it comes to energy efficiency, solar power gets a lot of attention. But increasingly, utilities and homeowners are turning to energy storage units.
I`m Phil LeBeau. That story coming up on NIGHTLY BUSINESS REPORT.
(END VIDEO CLIP)
GRIFFETH: Here is what we are watching tomorrow. It should be a busy day.
We`re going to find out if inflation pressures are building in the economy. The producer price index will be released.
Boeing (NYSE:BA) CEO is scheduled to speak at a Morgan Stanley (NYSE:MS) conference, assuming we get an update on the 737 MAX.
And Kantor Fitzgerald will host its charity day on the 18th anniversary of 9/11 attacks.
That`s what we`re watching for on Wednesday.
HERERA: The number of uninsured American is higher for the first time in nearly a decade. According the Census Bureau, the uninsured rate rose from to 8.5 percent last year from 7.9 the year before. That translates into roughly 27.5 million people who didn`t have health insurance at any point in 2018. The Census Bureau also reports that median household income showed no growth last year at roughly $63,000, and that the poverty rate dropped further last year to nearly 12 percent.
GRIFFETH: Finally tonight, a reminder that Tesla is more than just electric cars. Elon Musk`s company has quietly been charging up the energy storage business. But will that be enough to overcome questions about its solar power operations?
Phil LeBeau takes us to beautiful Brattleboro, Vermont, tonight.
LEBEAU: The Capy house looks like any other charming home in rural Vermont. But Ellen Capy is all about being energy efficient, from plugging her Tesla model 3, to the massive solar panels providing more than enough power for her home and nearby business.
ELLEN CAPY, TESLA ENERGY STORAGE CONSUMER: We like the idea that we have, you know, that we can be prepared — prepared for whatever, and prepared for the future, and also to be a part of the future.
LEBEAU: Even generating their own power, the Capy`s are still tied in to their local utility. So they`ve been installed two Tesla power walls to store energy and keep them powered up even when there`s a blackout.
CAPY: We got the power wall on February 7th. And on February 8th, we lost power. And we didn`t even notice.
It was seamless. Absolutely seamless. You don`t see the lights even flicker in the house, the changeover is that good.
LEBEAU: Tesla`s energy storage business charged up this spring, jumping 81 percent. Meanwhile, Vermont`s largest utility is planning to expand power wall installations and offer energy storage units to all customers.
MARY POWELL, MOUNTAIN POWER CEO: It is a cost saving device for the grid. It`s cost-saving for the planet in terms of carbon. And it`s cost saving for the grid because we use it during peak times.
LEBEAU: Despite some of the glowing reviews much the Tesla power wall, critics say there are only a limited number of people in the U.S. who truly need energy storage to deal with a blackout or a drop in electrical service.
JOE OSHA, JMP SECURITIES: All other things being equal in your average rural area in the United States at this point, it`s pretty hard to make residential storage work. There has to be some special incentives and economics to make it make sense.
LEBEAU: But for the Capys, storing their energy has empowered them to feel like they can ride out the next blackout in the area.
Phil LeBeau, NIGHTLY BUSINESS REPORT, Brattleboro, Vermont.
HERERA: And that is NIGHTLY BUSINESS REPORT tonight. I`m Sue Herera. Thanks for joining us.
GRIFFETH: I`m Bill Griffeth. Have a great evening. We`ll see you tomorrow.
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