Transcript: Nightly Business Report – September 24, 2019

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


SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR:  D.C. drama.  Political turmoil  in Washington whip saws stocks and Democrats launch a formal impeachment  inquiry into the president.  


Just do it.  Nike`s quarter was better than expected, and for that, you can  thank strong sales in China, despite escalating trade tensions.  
Moon missions.  Lockheed Martin (NYSE:LMT) is awarded billions of dollars  to power the next lunar landing.  


Those stories and much more tonight on NIGHTLY BUSINESS REPORT for this  Tuesday, September 24th.  


Good evening, everyone, and welcome.  Bill has the evening off.  
Investors have largely ignored all of the impeachment talk in Washington.   That is until today.  Calls for President Trump`s impeachment gained steam  and stocks hung on every headline during the trading session.  
And then late today, House Speaker Nancy Pelosi announced a formal inquiry.  
(BEGIN VIDEO CLIP)


REP. NANCY PELOSI (D-CA (NASDAQ:CA)), SPEAKER OF THE HOUSE:  I`m directing  our six committees to proceed with their investigations under that umbrella  of impeachment inquiry.  The president must be held accountable.  No one is  above the law.  
(END VIDEO CLIP)


HERERA:  An increase in uncertainty is never good for stocks, whether it`s  political or economic.  


And today, investors also grappled with weaker than expected economic  reports and concerns over trade with China.  As a result, the Dow Jones  industrial average fell 142 points to 26,807, the Nasdaq was down 118, and  the S&P dropped 25.  
Bob Pisani walks us through today`s return of volatility.  
(BEGIN VIDEOTAPE)


BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT:  A toxic brew of  economic data.  Negative sentiment on China, trade and politics brought  volatility back to the markets today.  Stocks started positive but began  weakening just after the open on weaker consumer confidence numbers.   Remember, the U.S. consumer is hoping to prop up the world economy and  shortly after 10:00 a.m. Eastern Time, President Trump emphasized the  negatives on China trade at his U.N. speech, saying China had not adopted  promised reforms and that it consistently stole intellectual property,  citing Micron as an example.


Then, about 12:30 Eastern Time, impeachment talk got louder as Speaker  Pelosi said she would make an announcement later today regarding  impeachment.  Markets came off the lows a little after 2:00 p.m. Eastern  Time when the president tweeted he`d be released at a transcript of his  conversation with the Ukraine president tomorrow but stocks drifted again  lower into the closed.  


This is the first day by the way the S&P has moved in a more than 1 percent  range in the last three weeks.
For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock Exchange.
(END VIDEOTAPE)


HERERA:  So why does Wall Street suddenly care about politics in  Washington? 
We`re joined now by Jeff Bush, strategist at The Washington Update.
Welcome back, Jeff.  Nice to see you again.


JEFF BUSH, THE WASHINGTON UPDATE STRATEGIST:  Nice to see you, too, Sue.


HERERA:  Let me start, first of all, with the issue of trade.  First of  all, the president had some very tough words in his U.N. General Assembly  addressed today to China.  But, secondly, if in — as these proceedings,  these impeachment proceedings, continue, might it put the Chinese at an  advantage?  Do they wait out this whole process?


BUSH:  Well, I think that was the Chinese plan leading into that discussion  as well.  I think the president was using today`s speech at the U.N. to  level-set that negotiation once again, to begin that process and building  that relationship back up.  But I think the Chinese were playing a little  bit of slow ball to begin with.


HERERA:  What about fiscal policy?  Does anything get done as Washington  moves through this process?


BUSH:  Well, we`re already seeing the movement towards a continuing  resolution.  I think it`s very possible that we end up operating throughout  fiscal year on a continuing resolution, which is disappointing.  It means  that spending stays the same and we can`t begin new projects and new  programs, which is — you know, not good for our country.  We should be  able to move forward with those programs.


HERERA:  There`s a lot of headline risk when any situation like this comes  up.  How vulnerable — I mean, we saw certainly a lot of volatility and  reaction to every headline that came out today.  But as this process  continues, how vulnerable do you think the market is for headline risk?


BUSH:  Well I think the markets been pricing in a lot more volatility.   We`ve been speaking about it for about a year and a half, that we`re  building in these areas of uncertainty within the economy and within the  markets, and this is just one more to that list.


Today`s announcement of the impeachment inquiry, it really doesn`t  fundamentally change where we were before we had this understanding of this  Ukrainian situation.  Jerry Nadler was already pursuing that direction,  along with the other committee heads as well.


HERERA:  But interestingly enough, we didn`t see a lot of volatility.   Perhaps, it was simply that — you know, that the speaker putting forward  the inquiry that made the difference to the Wall Street.  But —  


BUSH:  That`s correct.
HERERA:  — the odds though of the president actually being removed from  office are extremely low.
BUSH:  Very low.


HERERA:  So, could this be a move perhaps by the Democrats to get the  Senate back which would change the dynamic in terms of legislation, fiscal  policy, et cetera?


BUSH:  I actually would probably put forward the opposite opinion.  And  what I mean by that is it`s very hard for an incumbent presidency to  motivate the base in the second term election and if the Democrats pursue  an impeachment proceeding, that`s certainly going to fire up the Republican  base.  I would actually say that would lock in the Senate for the  Republicans just may that based on that effort.


HERERA:  So how do you see this progressing what might the fallout be for  the economy and for the markets?


BUSH:  Well, not dissimilar to the impeachment inquiries and impeachment  process that we went through with Bill Clinton.  I think the market will  initially react.  We saw a little bit of that today.  We`ll probably see  more here in the near term, certainly as new headlines hit.  There`s a lot  of things that are going to unfold over the next week with the transcript  coming out tomorrow, the testifying on Thursday.  All those things  represent that headline risk.


The bottom line, I don`t think there`s fundamental difference at this point  that the market needs to react to.


HERERA:  On that note, Jeff Bush with The Washington Update, thank you  again.
BUSH:  Thank you, Sue.
HERERA:  As Bob mentioned earlier in the program, the president`s tough  talk on China during his address to the United Nations General Assembly  also contributed to the downbeat mood on Wall Street.
Eamon Javers is at the U.N. in New York.
(BEGIN VIDEOTAPE)


EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT:  President Trump took  a harsh line on China today at his speech at the U.N., laying out his trade  war as part of a broader campaign that he says is to bring an end to this  process of globalization that he says too many leaders have engaged in over  the past several decades.  The president very specific about what he says  China has been doing wrong in the global economy.


DONALD TRUMP, PRESIDENT OF THE UNITED STATES:  Not only has China declined  to adopt promised reforms, it has embraced an economic model dependent on  massive market barriers, heavy state subsidies, currency manipulation,  product dumping, forced technology transfers and the theft of intellectual  property, and also trade secrets on a grand scale.


JAVERS:  The president`s criticisms of China were expected.  Less expected  though was his criticism of social media giants which he laid into in this  speech.


TRUMP:  A small number of social media platforms are acquiring immense  power over what we can see and over what we are allowed to say.  My  administration has made clear to social media companies that we will uphold  the right of free speech.  A free society cannot allow social media giants  to silence the voices of the people.


JAVERS:  The president also specifically named Iran as being responsible  for those attacks on the Saudi oil refineries that we saw last week.  The  president not though specifying what specific action he wants to take to  punish Iran for those attacks.
For NIGHTLY BUSINESS REPORT, I`m Ayman Javers at the United Nations.
(END VIDEOTAPE)


HERERA:  There was political drama in the United Kingdom as well.  The  British Supreme Court ruled that Prime Minister Boris Johnson illegally  suspended parliament.  The ruling was a setback for Johnson and it means  that debate over how to leave the European Union can continue.
(BEGIN VIDEO CLIP)


BORIS JOHNSON, BRITISH PRIME MINISTER:  I have the highest respect of  course for judiciary and for the independence of our courts.  But I must  say I strongly disagree with this judgment and we in the U.K. will not be  deterred from getting on and delivering on the will of the people to come  out of the E.U. on October the 31st, because that is what we were mandated  to do.
(END VIDEO CLIP)


HERERA:  Johnson has pledged to see the U.K. leave the E.U. at the end of  October, even if there is no deal with the E.U. about how exactly it will  work.


And now to today`s mixed economic reports.  As mentioned, consumer  confidence fell more than expected in September.  Americans` outlook on the  economy grew more gloomy amid the trade war with China.  
A separate report on housing showed a 3.2 percent gain in home prices in  July, the prices are still cooling in some of the nation`s largest cities.   As we`ve been reporting, lower mortgage rates have drawn homebuyers back  into the market.


A solid quarter for Nike (NYSE:NKE).  The athletic shoe and apparel company  reported better than expected earnings and revenue amid a sharp increase in  sales in China and despite rising trade tensions between the U.S. and  China.  Now, that sent the stock to a new high in initial after-hours  trading.
Sara Eisen has more on Nike`s quarter.
(BEGIN VIDEOTAPE)


SARA EISEN, NIGHTLY BUSINESS REPORT CORRESPONDENT:  Nike (NYSE:NKE)  optimists continue to be rewarded with another strong set of results, and  the results were strong around the globe.  But one particular highlight  continues to be China.  Nike (NYSE:NKE) saw 22 percent revenue growth in  China.  That would have been closer to 33 percent if not for the effect of  the stronger U.S. dollar.  That comes despite fears of a slowing Chinese  consumer and trade tensions rising between the U.S. and China.  Tariffs  flying back and forth and concerns about the perception of American brands.


Despite that, China continues to be the bright spot in the portfolio.  The  other big takeaway, Nike`s going direct to consumer and that`s leading to  higher growth from its rivals in places like North America, its home market  where Nike (NYSE:NKE) saw growth of 4 percent.  It means investing behind  its sneakers app, its Website, and its own stores and relying less on  wholesalers, department stores and Footlocker`s which aren`t doing as well.   Digital is another big part of that strategy.


And finally, higher margins, higher than the street was expecting and  continuing to rise, showing that Nike (NYSE:NKE) is able to charge more  higher selling prices of its sneakers, delighting consumers with new  innovations like VaporMax and get better margins for it.


Andy Campion, the CFO, summed it up in the earnings release, saying even  amidst the increasingly volatile macro economic and geopolitical  environment, we expect our unrelenting focus on better serving the consumer  to continue to fuel strong growth across the global portfolio.  The results  from Nike (NYSE:NKE) showed that despite the stronger dollar, weakening  global economy and rising geopolitical risks, Nike (NYSE:NKE) continues to  speak to the consumer.
For NIGHTLY BUSINESS REPORT, I`m Sara Eisen.
(END VIDEOTAPE)


HERERA:  And joining us now with more on Nike`s earnings is Mariann  Montagne.  She is a portfolio manager at Gradient Investments.  


Welcome back, Mariann.  Nice to see you again.


MARIANN MONTAGNE, GRADIENT INVESTMENTS PORTFOLIO MANAGER:  Nice to see you,  too, Sue.


HERERA:  Sara gave us some of the takeaways from Nike`s report.  But what  really stood out to you?


MONTAGNE:  There were several things that stood out.  I mean, the strengths  in China was phenomenal, but also the margin expansion.  So we had a 1.5  percentage point gain in the gross margin and again, if that`s related to  pricing.  And then, we also had an expansion of the operating margin, which  means they were able to leverage all their fixed expenses and their  marketing.  That was something that pulled back on the report on the prior  quarter.  


And so, it was nice to see that turnaround and they`re very strong back-to- school season.


HERERA:  Did the strength in China surprised you and do you expect that to  continue given the fact that there`s been very little progress made on the  trade front?


MONTAGNE:  Right, what I think it shows is that they`re so strong demand  for their particular product.  So we`ve heard reports about the Chinese  trying to stay away from American brands and everything.  I guess they  don`t care when it comes to their kicks.  They just like that Nike  (NYSE:NKE) style and they`re going after it, in all of the greater China,  greater Asia area and Latin America as well.  


So, they`re taking share from others and I think that really speaks well of  the company and how they`re designing product for the particular customers.


HERERA:  Yes, the innovation certainly stood in the report.  So did their  digital initiatives.  That seems to be paying off.


MONTAGNE:  Yes.  You know, everyone likes to have their own individual  everything, and they`ve made it so easy to design your own shoes and get  exactly what you want, what you need.  So it`s awesome that they`ve been  able to produce these results.  We did not expect a 28 percent increase in  earnings per share.  We were looking for something more like 6 percent, in  line with the consensus thinking.


HERERA:  And that`s with a strong currency as well.
MONTAGNE:  Right, right.  So this has just been, you know, another  demonstration of knowing their customer, being super flexible in terms of  catering to their customers, and really taking share from others.


HERERA:  What would you say — was it — was there anything that that  worried you in the report or where you saw a weak spot?


MONTAGNE:  I guess if there was any weak spot, it would be in North America  where sales were only up 4 percent.  But I don`t think that number is going  to stay that low for long.


HERERA: Mariann Montagne with Gradient Investments — Mariann, thank you so  much.
MONTAGNE:  Thank you.
HERERA:  It is time to take a look at some of today`s “Upgrades and  Downgrades”.


Apple (NASDAQ:AAPL) was upgraded to buy at Jeffries.  The analyst says Wall  Street is underestimating how much money Apple (NASDAQ:AAPL) will make from  5G.  The price target is $260.  Despite the upgrade though, the stock fell  a fraction to $217.68.


Coverage of Disney (NYSE:DIS) was initiated with an outperform rating at  Wells Fargo (NYSE:WFC).  The analyst calls Disney (NYSE:DIS) the best name  in media.  As you know, Disney (NYSE:DIS) will soon launch its streaming  service.  The price target is $173.  The shares were down slightly to  $131.97.


Ralph Lauren was upgraded to overweight from neutral at Atlantic Equities.   The analyst cites the company solid turnaround and stock valuation.  The  price target is $138, and the stock was down just a fraction to $92.60.


Still ahead, Senator Sanders says billionaires should not exist and  proposes a new tax on the richest Americans.
(MUSIC)


HERERA:  WeWork`s co-founder and CEO was forced to step down from his  company.  Adam Neumann will become non-executive chairman of the embattled  shared office company which had been one of the most valuable startups of  the last decade.  The resignation is designed to win over investors after  WeWork`s initial public offering was delayed and its value declined.


The governor of Massachusetts has declared a public health emergency and  imposed a four month ban on the sales of all vaping products.  The state  will block sales of e-cigarettes used for tobacco and marijuana.  On  Capitol Hill, an official from the Centers for Disease Control today told  lawmakers that consumers should avoid all vaping products until the cause  of recent lung illnesses and deaths is identified.
(BEGIN VIDEO CLIP)


DR. ANNE SCHUCHAT, CDC PRINCIPAL DEPUTY DIRECTOR:  It may not even be the  THC or nicotine part.  It may be additives or substances that may be  common.  It may be material that is not labeled appropriately.  And so, we  really do think consumers need to be quite unconscious right now.
(END VIDEO CLIP)


HERERA:  The doctor also said hundreds of new vaping illnesses have been  reported in the last week.  


Facebook (NASDAQ:FB) is making an acquisition that sounds like something  out of a science fiction novel.  It`s buying a company that specializes in  allowing humans to control computers using their brains.  The size of the  deal is reported to be between $500 million and $1 billion dollars.  The  startup will work to develop augmented reality smart glasses.
And Facebook (NASDAQ:FB) is one of the companies that`s under increased  scrutiny from Washington due to privacy and competition issues.  Today, the  debate over the future of big tech took shape, with developments here and  in Europe.  
Ylan Mui is in Washington tonight.
(BEGIN VIDEOTAPE)


YLAN MUI, NIGHTLY BUSINESS REPORT CORRESPONDENT:  A big win for big tech  overseas, but it`s still under siege at home.  Across the Atlantic, the  highest court and the European Union issued a landmark ruling in favor of  Google (NASDAQ:GOOG).  The court found that Google (NASDAQ:GOOG) does not  have to apply the right to be forgotten to search results worldwide.  E.U.  users can only request that personal information be removed from searches  that occur within the E.U.


In a statement, Google (NASDAQ:GOOG) said that it`s worked hard to  implement the right to be forgotten in Europe and strike a sensible balance  between the right to access information and the right to privacy.


Here in the U.S., California will be the first state to implement a  European-style privacy law next year, a new state analysis finds that could  cost businesses as much as $16 billion to comply.


That could all shape the debate on Capitol Hill over the need for a  national privacy bill.  At the same time, lawmakers are growing more  worried about the potential for monopoly power in big tech.


At a hearing this afternoon, Republicans and Democrats took Internet  giant`s and the regulator`s that oversee them to task.


SEN .MIKE LEE (R-UT), JUDICIARY COMMITTEE CHAIRMAN:  Well, I`m encouraged  that the FTC and the DOJ are investigating whether the tech giants have  violated antitrust laws.  I`m also concerned that we might overshoot the  mark in our efforts to rein in those firms.


SEN. AMY KLOBUCHAR (D-MN), JUDICIARY COMMITTEE RANKING MEMBER:  I`m more  concerned that consumers are going to end up with a pie in their face if we  don`t start taking action soon.
MUI:  There`s no sign that either party is willing to let up.  
For NIGHTLY BUSINESS REPORT, I`m Ylan Mui in Washington.
(END VIDEOTAPE)


HERERA:  Disappointing results for BlackBerry, and that`s where we begin  tonight`s “Market Focus”.


The communication software provider posted weaker than expected revenue,  citing softness in its enterprise software unit.  BlackBerry also lowered  its guidance.  The shares fell more than 22 percent to $5.81.
Engineering and construction firm Fluor (NYSE:FLR) will be cutting its  dividend in half and sell its government and equipment rental businesses.   The company is looking to raise billion dollars from the asset sale as part  of its strategic review.  The shares dropped nearly eight and a half  percent to $18.95.


Strong used vehicle sales helped CarMax (NYSE:KMX) top analysts  expectations.  The auto retailer has now beaten Wall Street`s estimates for  six straight quarters, but the stock fell a fraction today to $86.74.


But AutoZone (NYSE:AZO) is warning customers it will be raising prices to  combat tariffs.  The company`s CEO says the increase could be as much as 25  percent.  This comes as the auto parts retailer saw same store sales rise  thank to ongoing demand after market car parts and accessories.  The shares  dropped about four and a half percent to finish at $1,096.63.
Electronic manufacturer Jabil topped estimates thanks to an increase in  demand for 5G, cloud, energy and health care services.  Separately, the  company will buy back up to $600 million of its shares.  Jabil rose about 5  percent to $32.85.


Taxing the wealthy has become a common call among some of the Democratic  presidential hopefuls.  Today, Senator Bernie Sanders released his plan  which would hit multibillionaires especially hard.  
Here`s Robert Frank.
(BEGIN VIDEOTAPE)


ROBERT FRANK, NIGHTLY BUSINESS REPORT CORRESPONDENT:  Senator Bernie  Sanders launching a new wealth tax proposal that would cut billionaire  forces in half over the next 15 years.  The plan follows Senator Elizabeth  Warren`s own wealth tax that has helped lift her in the polls.
SEN. BERNIE SANDERS (I-VT), PRESIDENTIAL CANDIDATE:  What we are saying to  the billionaire class is stop the greed, stop the greed, stop the  corruption, stop stepping on everybody in order to make more and more  billionaires.


FRANK:  Sanders` plan would affect taxpayers worth $32 million or more or  about 180,000 households in the U.S.  It`s a sliding scale starting at 1  percent but quickly rising to 8 percent for those with over $10 billion.  
Jeff Bezos would pay about $9 billion in wealth taxes just this year under  the plan, along with his income tax, property taxes and capital gains  taxes.  Bill Gates would face an eight and a half billion dollar tax bill,  while Warren Buffett would pay around six and a half billion.  Now, the top  10 billionaires in the country would pay nearly $60 billion in wealth taxes  just this year.  


The economists who advised Sanders on the plan estimated will raise four  and a half trillion dollars in revenue over ten years, about twice the  amount of Warren`s plan.  They said it would have no exemptions, be  vigorously enforced to keep tax evasion low, and, quote, entirely close the  gap in wealth growth between billionaires and the average American family.  


Polls show that more than 60 percent of voters including nearly half of  Republicans support a wealth tax on the richest Americans.
For NIGHTLY BUSINESS REPORT, I`m Robert Frank.
(END VIDEOTAPE)


HERERA:  Coming up, Lockheed Martin (NYSE:LMT) lands a mega deal to get  mankind back to the moon.
(MUSIC)


HERERA:  Executives at Volkswagen were charged by German prosecutors for  allegedly misleading shareholders in the months before the emissions- cheating scandal.  The indictment argues that the CEO and chairman along  with former CEO martin Winterkorn withheld information about the scandal in  an attempt to prop up the automakers stock price.  Back in 2015, U.S.  officials disclosed that V.W. had rigged millions of diesel-powered  vehicles to cheat emissions tests for nearly a decade.  Volkswagen is the  world`s largest automaker.


One-point-three million more workers will be able to receive overtime pay.   The Labor Department today finalized a rule expanding eligibility, which is  effective January 1st.  Under that rule, most salaried workers who earn  less than $35,000 per year will be eligible, and that`s up from the current  threshold of about $23,000.


And we finished the program tonight with a different kind of story, one  that takes us far from politics and to the space race.  There`s a big push  to go back to the moon and NASA is letting Lockheed Martin (NYSE:LMT) lead  the way, awarding it a major contract that could create a lot of jobs.  
Morgan Brennan has more.
(BEGIN VIDEOTAPE)


ANNOUNCER:  Three, two, one —  
MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT:  Another step closer  to the moon, NASA awarding Lockheed Martin (NYSE:LMT) a contract.  The deal  valued at up to $4.6 billion to put Orion into production.   The deal to  buy six spacecrafts with an option to up that to twelve.


SHEILA KAHYAOGLU, JEFFERIES AEROSPACE AND DEFENSE ANALYST:  So this was  Lockheed contract to win.  This is within Lockheed space segment which  accounts for about 20 percent of revenues and segment earnings, and this is  within their satellite sub segment.


BRENNAN:  Orion was designed for deep space exploration with astronauts.   Hardware belonging to the agency but built by Lockheed Martin (NYSE:LMT).


NASA plans to use Orion to send astronauts to the moon, a lynchpin in the  Artemis Program to put boots back on the lunar surface in five years and  then establish a permanent outpost.  


Over the years, Orion has drawn criticism due to delays and ballooning  costs.  But this contract signals a shift and commitment to its production  longer-term, cementing Orion`s place prominently in the Artemis program.


KAHYAOGLU:  I think it sends a strong message that the U.S. is open to  human exploration to the moon and potentially to Mars, and you know, that  program was previously shut down in 2011, and Constellation was cancelled.   So, this reopens that and it says that the U.S. no longer wants to use  other countries` capacity to shuttle human beings back and forth.


BRENNAN:  But it also speaks to the turf battle between states after  another piece of the Artemis plan went to Alabama`s Marshall Space Flight  Center, Texas lawmakers loudly voiced opposition. 
Orion will be managed at Texas Johnson Space Center, getting to the heart  of why space much like defense is seen as so crucial, not just because of  national security and innovation but because space programs are jobs  programs.
For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan.
(END VIDEOTAPE)


HERERA:  And before we go, here`s a final look at the day on Wall Street.   The Dow fell 142 points, the Nasdaq was down 118, and the S&P 500 dropped  25.


And that is NIGHTLY BUSINESS REPORT for tonight.  I`m Sue Herera.  Thanks  for joining us.  Have a great evening and we will see you here tomorrow.

END



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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.


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