ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Sue Herera and Bill Griffeth.
BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: All-time high. The Dow closes at a record, and for that, you can thank shares of Boeing (NYSE:BA) which expects to resume deliveries of its 737 MAX next month.
SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: What a rebound. The industrial sector had lousy earnings and demand remains weak. So, why is it rallying?
GRIFFETH: Big bust? Why cracks may be forming in the high end art market, just as the gavel drops on auction season.
Those stories and much more tonight on NIGHTLY BUSINESS REPORT for Monday, November 11th.
HERERA: Good evening, everyone, and welcome.
The blue chip Dow index closed at a record, erasing a 160-point drop during today`s session. The gains weren`t big but they were enough. The Dow Jones Industrial Average closed up 10 points to 27,691, its ninth record close of the year. The Nasdaq fell 11 and the S&P 500 was down 6.
The reason, Boeing (NYSE:BA). The stock rose 4.5 percent after the company said the 737 MAX could be back in service by the end of January. The aerospace company also said it will resume deliveries of the jet next month.
Phil LeBeau takes a look at what`s behind that optimism.
PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: With well over 300 newly built 737 MAXes parked and waiting to go into commercial service, Boeing (NYSE:BA) is anxious to get the 737 MAX back in the air again. In fact, it believes that could happen as soon as January.
Boeing`s timeline calls for a certification flight by early next month. If there are no issues, FAA certification is expected by mid-December, so MAX deliveries would resume. Pilot training rules for the plane could be set by mid-January, meaning airlines could restart commercial flights on planes that have been parked for almost a year.
But don`t expect Southwest and American to begin flying the MAX any time soon. Both have pulled the plane from their schedules until early March while United is also expected to push back its MAX plans. If Boeing`s timeline holds, it may not be long until we find out whether travelers are ready to get back on the MAX.
After two crashes and a year of negative stories questioning the safety of the MAX, will airlines be able to fill these planes with passengers?
JIM CORRIDORE, CFRA RESEARCH: I think ultimately passengers will fly these planes. Number one, they have limited number of choices if they want to get to their destination. Number two, these planes will be found to be overwhelmingly safe.
LEBEAU: These concerns about the MAX expect a major push by Boeing (NYSE:BA) and airlines to convince the traveling public that this plane has not only been fixed but it is safe to fly again.
Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago.
GRIFFETH: Now, Boeing (NYSE:BA) is just one of the companies with a lot at stake in the trade war with China. In fact, the entire industrial sector has been bounced around for years by tariffs and endless rounds of negotiations, but in the past month or so, that group has suddenly started rallying.
Seema Mody tries to make sense of the move higher.
SEEMA MODY, NIGHTLY BUSINESS REPORT CORRESPONDENT: Despite lackluster earnings, industrial stocks have staged a rebound over the past one month on hopes that a trade deal between the United States and China is coming together. Industrials are up 6 percent over the past month, making them the second best performing sector in the S&P 500 after financials.
Just look at names like Caterpillar (NYSE:CAT) which had disappointing results and even cut fourth quarter guidance. That stock has already rebounded more than 20 percent from its October lows. Now, the rebound comes even as demand for construction and agriculture-related equipment remains tepid.
However, investors see the recent improvement in trade talks as a reason to warm up to industrials. Reports say the phase one agreement of the trade deal could include the rolling back of some tariffs which have served as a headwind for U.S. and Chinese manufacturers, denting demand for big machinery and heavy equipment, but a key earnings report from farm equipment maker Deere later this month will provide investors a much needed update on the health of U.S. agriculture industry and whether farmers continue to hold off for making big ticket purchases.
Deere has been cutting production this year but analysts at UBS say progress on trade could materially change that story. The recent rebound in industrials also plays into the overall rotation into cyclical sectors but whether that rotation has legs will depend on earnings and the trade narrative continuing to improve.
If it doesn`t, analysts warn this rebound could be a short lived one.
For NIGHTLY BUSINESS REPORT, I`m Seema Mody at the New York Stock Exchange.
HERERA: Brad McMillan joins us now to talk about the rally and the economically important industrial sector. He is chief investment officer at Commonwealth Financial Network.
Good to see you again, Brad. Welcome back.
BRAD MCMILLAN, COMMONWEALTH FINANCIAL NETWORK CIO: Thanks for having me.
HERERA: Do you think — are you one who thinks that this rebound is for real and sustainable?
MCMILLAN: I do think it`s sustainable for a couple of reasons. First of all, most of the damage has already been done and companies have responded to that so they would be improving anyway. Second of all, both sides have an incentive to cut a deal, so I think — I think there are a lot of tailwinds here.
GRIFFETH: Who are we talking about here? I mean, who do you like in that sector that you`re starting to see some signs of life in?
MCMILLAN: Well, when you look at whether stocks are cheap or expensive, the real — the real cheapest area is in construction equipment, heavy equipment, heavy trucks. You know, you`ve seen an example with that with cat, for example. That`s been beaten down quite a bit. It`s very cheap relative to the market as a whole and even to the sector. They have the most head room to grow.
HERERA: But how much of this is basically relying on a trade deal getting done? What if the negotiations drag on or ultimately are not successful?
MCMILLAN: I think the argument that this isn`t just about the trade deal. I think a trade deal would certainly help, but the fact of the matter is we`ve seen back-and-forth on the trade deal this whole time and it hasn`t moved industrial stocks. Now, we`re starting to see them come back which suggests to me that the market knows it`s not just about the trade deal. They`re coming back for fundamental reasons. If we get a trade deal, that will certainly help.
GRIFFETH: I realize the stock market`s at all-time highs for the most part, but you still have the whispers for the possibility of a slowdown in the economy next year. That can`t be good for this sector.
MCMILLAN: Well, but, again, remember, it`s not about whether we`re going to have a slowdown. Yes, we probably will. It`s about expectations.
And when you look at the companies, the expectations for a slower economy abroad, a slower growth overall and the trade hit, that all adds up. They can still do relatively well compared to what people were expecting a couple of months ago. It`s not going to be good, but still they can beat expectations.
HERERA: We will see. Thanks, Brad.
MCMILLAN: Thank you.
HERERA: Brad McMillan with Commonwealth Financial Network.
GRIFFETH: Here in the U.S., of course, we celebrated Veterans Day today. In Asia, they had their own holiday, Singles Day, which has morphed into a day of shopping that is bigger than Black Friday and Cyber Monday combined. And despite recent concerns about the health of the Chinese consumers, this year`s Singles Day set some impressive sales records.
Rahel Solomon reports.
RAHEL SOLOMON, NIGHTLY BUSINESS REPORT CORRESPONDENT: It was a star studded event complete with lights and displays, an entire experience created and designed for one purpose, to get the Chinese consumer to shop.
And shop they did, to the tune of a record-breaking $38.4 billion. Compare that to last year`s $30.5 billion. In 2009, the first year of the event, sales were just under $8 million. Alibaba`s double 11 global shopping festival, also known as Singles Day, has become the world`s largest online 24-hour shopping event, larger than Black Friday and Cyber Monday combined.
And as the day has evolved, so has the use of technology with live streaming becoming more and more important. Last year, $15 billion in sales on Singles Day came from live stream viewers.
KIM KARDASHIAN, CELEBRITY: Reading the comments one each one.
SOLOMON: Kim Kardashian West hosted a live stream with the Chinese influencer in the days before this year`s event and sold out her merchandise in minutes.
JAN KNIFFEN, J. ROGERS KNIFFEN WWE CEO: It tells us the consumers are pretty healthy. The other thing it told us is U.S. products are selling very, very well.
SOLOMON: This year`s sales were closely watched as invertors look for signs on the health of the Chinese consumer and any potential backlash toward American companies because of the ongoing trade war. While sales were strong, some say we shouldn`t draw any larger conclusions about the state of the Chinese consumer.
ZACHARY SCHWARTZMAN, RBC: I don`t know if it`s a statement of the Chinese consumer as much as really the strength of Alibaba and the specific technology investments that they`ve made, the fact that their platform is still growing robustly in China. I think it`s more of a testament to how good Baba has really done.
SOLOMON: Another group that did well, U.S. brands. Notably Apple (NASDAQ:AAPL) with its iPhone 11, the Pro, Pro Max, Nike (NYSE:NKE), Estee Lauder, Gap (NYSE:GPS), and Nestle.
For NIGHTLY BUSINESS REPORT, I`m Rahel Solomon.
HERERA: It is time to take a look at some of today`s “Upgrades and Downgrades”.
Cisco (NASDAQ:CSCO) was upgraded to neutral from overweight at Piper Jaffray. The analyst points to a slowing macro environment as well as the lack of any near-term catalysts for the stock. The price target is $51. The stock fell about 1.5 percent to $48.10.
Qualcomm (NASDAQ:QCOM) was downgraded to equal weight from overweight at Morgan Stanley (NYSE:MS). The analyst cites the valuation gap between the chip maker and its peers which he says has closed following recent gains. The price target is $90. The stock fell more than 2 percent to $91.84.
GRIFFETH: Some sad news tonight out of the health care industry. The CEO of Kaiser-Permanente died suddenly over the weekend. And as Bertha Coombs reports, he raised the bar for the entire sector.
BERTHA COOMBS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Kaiser Permanente CEO Bernard Tyson was one of the nation`s foremost advocates for improving patient care and access. He spent 30 years at Kaiser, rising through the ranks to become CEO in 2013.
Under his leadership, health care advocates say the nation`s largest nonprofit integrated health system grew to be a leading example of the highest standards of care.
CECI CONNOLLY, ALLIANCE OF COMMUNITY HEALTH PLANS CEO: At Kaiser Permanente, you have a very particular model, which is to put the dollars around a health plan and clinical teams working in partnership. When you do that, you get better health.
Bernard not only understood and appreciated the power of that collaboration but he had the insight and the energy and the passion to take it out into the community.
COOMBS: Tyson died unexpectedly in his sleep early Sunday. He`s being remembered as a leader who in the words of one colleague walked the talk. He helped Kaiser invest in data analytic tools for patients at risk of health problems and he recently described his company`s push into digital communication allowing patients to securely text their doctors for easier access.
BERNARD TYSON, KAISER PERMANENTE CEO: Just think about it. You`re working at McDonald`s (NYSE:MCD) and you have a 15-minute break and you need to check out something with your physician — well, that`s what that is about. That`s about a rapid response, and texting is designed for that.
COOMBS: Over the last year, Tyson increasingly talked about the need to help patients beyond the hospital, launching a $200 million initiative to address economic and social issues that impact Kaiser`s patients in their communities, starting with an affordable housing plan in Kaiser`s hometown of Oakland, California.
TYSON: Our incentives are all aligned to community benefits and the well- being of the entire community.
COOMBS: Tyson was on the board of the American Heart Association and salesforce.com. On Sunday, Salesforce CEO Marc Benioff tweeted that, quote: A light in the world has gone out. He always did so much for others and the world, calling Tyson an inspirational leader.
Bernard Tyson was 60 years old.
GRIFFETH: WeWork is reportedly in talks with T-Mobile CEO John Legere about leading that troubled office sharing startup. According to the reports, Legere is among the candidates being considered. And so far, no final decision has been made.
But Legere has ties to WeWork`s newly appointed executive chairman, Marcelo Claure. The former Sprint CEO Claure who helped drive the recently approved merger with Legere`s T-Mobile. Shares of T-Mobile closed down 1.5 percent in today`s trade.
HERERA: A former FDA commissioner is calling for all of Juul`s vaping products to be removed from the market. Scott Gottleib cited two studies on teen use and says it is clear that Juul cannot keep their products out of the hands of kids. This comes on the same day that President Trump said he plans to meet with the vaping industry, but as Meg Tirrell reports, the situation is complicated.
MEG TIRRELL, NIGHTLY BUSINESS REPORT CORRESPONDENT: Two months to the day after the Trump administration said it planned to ban all flavors of e- cigarettes other than tobacco, no guidance has arrived. But the president in a tweet said today he`ll meet with the vaping industry, medical professionals and state representatives to come up with a, quote, acceptable solution to the vaping and e-cigarette dilemma. Children`s health and safety, he wrote, quote, together with jobs will be a focus.
Pro-vaping advocates see the president`s focus on jobs as a sign that he may be potentially softening on a total flavor ban, potentially allowing menthol to remain on the market and exempting vape shops like this one.
Despite the ban, the owner of this vape shop and two others in New York City say the national focus has already had a major impact on her business.
SPIKE BABAIAN, VAPENY SHOP OWNER: Almost every shop in New York at this point has lost between 60 and 80 percent of sales. We have been struggling to stay open. Most of us have laid off employees, cut down our expenses absolutely as much as possible. A lot of shops have not paid their rent and we are putting off our landlords to try to make sure we can stay in business until this is over.
TIRRELL: She and others who rallied on the issue at the White House on Saturday say the administration`s stance on a flavor ban could have major political implications too.
PAUL BLAIR, AMERICANS FOR TAX REFORM: They want politicians to know not only do they feel passionately about the products, but that they are voters, they are vapor voters. Similar to gun owners who feel deeply passionate about the use of firearms in the protection of themselves and their families, these people will vote on that issue.
TIRRELL: The group Americans for Tax Reform has warned that a Trump flavor ban may mean vapors may just not show up to the polls in 2020, potentially costing the president important votes in swing states imperative to his 2016 win.
Meanwhile, reports last week showed one-in-four high school students had recently used an e-cigarette, up from one-in-five last year. For that reason, groups concerned about e-cigarette use among youth have their own warning for the president.
Matthew Meyers, president of the Campaign for Tobacco-Free Kids, said a weakened proposal on e-cigarette flavors is not only bad public policy but bad politics for Trump, saying, quote: This is an issue in which parents including suburban moms across the country, across the political spectrum, feel is very important.
For NIGHTLY BUSINESS REPORT, I`m Meg Tirrell in New York.
GRIFFETH: Walgreens may have gotten its offer, and that`s where we begin tonight`s “Market Focus”, with Bloomberg reporting that private equity firm KKR (NYSE:KKR) has formally approached the drugstore chain about a deal to take it private.
As we told you last week, if Walgreens is taken private, it would likely be the largest leveraged buyout in history. Shares rose another 5 percent in today`s trade, close to $62.25.
SunPower (NASDAQ:SPWRA) is splitting itself into two publicly traded companies separating its solar panel manufacturing unit from its energy storage and services division. Company says that the split will help lower costs and improve efficiencies. SunPower (NASDAQ:SPWRA) shares were up more than 1 percent today to $8.47.
HERERA: Nektar Therapeutics (NASDAQ:NKTR) announced positive test results from combining its experimental skin care drug with Bristol-Myers Squibb (NYSE:BMY) Opdivo in patients with untreated melanoma. Shares rose on the news, up nearly 5 percent to $20.98.
Tupperware (NYSE:TUP) said it will be suspending its quarterly dividend and will focus on improving financial flexibility and driving profits in the short term. The shares fell more than 1 percent to 9.23.
GRIFFETH: A recent report in “The New York Times (NYSE:NYT)” says that child abusers are running rampant online and big tech companies are looking the other way as the criminals take advantage of loopholes in search engines and social media and the cloud by re-circulating old pornographic images of child abuse victims.
Michael Keller co-wrote the story for “The Times”. He joins us now to talk more about it.
Michael, thanks for joining us tonight.
MICHAEL KELLER, REPORTER, THE NEW YORK TIMES: Hi, thanks for having me.
GRIFFETH: Who are these big companies we`re talking about and why do you think they aren`t doing more to police this troubling trend?
KELLER: Yes, our investigation looked at many of the major tech companies including Google (NASDAQ:GOOG), Dropbox, Amazon (NASDAQ:AMZN), Facebook (NASDAQ:FB), and found a number of them had both policy gaps that allowed files to be uploaded, for example, and not be detected for this material, but also the number of companies including Microsoft (NASDAQ:MSFT) were not using their own tools built to detect and remove this material.
In our own tests, we were able to write a computer program that searched Microsoft`s Bing search engine for illegal material and found a number of matches raising serious questions about some of the companies that even have invested a lot into it really why they`re not taking full advantage of the tools that are out there.
HERERA: And I know you reached out to some of those companies. What was their response, if any?
KELLER: Some of them said that this was for privacy reasons, that — that scanning users` files raises specters that privacy advocates could take issue with. Some of them such as Amazon (NASDAQ:AMZN) Web Services or Microsoft (NASDAQ:MSFT) Azure, their enterprise systems, said that their terms of service already barred illegal material, and that they felt that their customers` privacy was a higher priority.
GRIFFETH: What are law enforcement officials doing about this, if anything?
KELLER: So, we reported that last year, there were over 45 million images and videos reported to the National Center of Missing and Exploited Children, the federally designated nonprofit that receives these reports, and they were largely overwhelmed, law enforcement is. Some of them have had to prioritize by age, overwhelmed by even the number of images that involve infants and toddlers, which was particularly shocking.
HERERA: So where do you think this is headed? Because your story certainly got a lot of buzz. A lot of people are talking about it.
Is it going to be social pressure that maybe makes these companies put in place or use some of the tools that they already have or are they just not adept enough at handling the volume, unfortunately, that is out there?
KELLER: Yes, that`s a good question.
I think there`s a couple parts to it. One, I think that most of these discussions are happening in private. Some companies have policies but they`re not really discussed publicly even though they raise serious concerns, one about this crime type being particularly egregious in terms of child safety, but also in terms of what are the privacy-related issues that it brings up.
So I think, one, more public discussion would help. Two, in terms of the new technologies that are still needing to be addressed, for example, live stream video, is a particularly challenging area where currently there are not the same developed tools to be able to detect this.
GRIFFETH: A troubling but an important story. Michael Keller with “The New York Times (NYSE:NYT)” — again, thanks for joining us tonight.
KELLER: Thank you.
HERERA: Coming up, making tough money decisions in order to plan for the future.
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CONTESSA BREWER, NIGHTLY BUSINESS REPORT CORRESPONDENT: From Wall Street to Main Street, how does America really feel about the future of the economy? I`m Contessa Brewer. Coming up on NIGHTLY BUSINESS REPORT, we`ll share the results of a new survey.
(END VIDEO CLIP)
HERERA: The art auction season is here, and after a big year last year, with some pieces selling for tens of millions of dollars, this year could end up being a bust.
Robert Frank explains.
ROBERT FRANK, NIGHTLY BUSINESS REPORT CORRESPONDENT: More than 2,000 works and more than a billion dollars worth of art coming up for auction in New York this week. The total is expected to be down 20 percent from last year. That is the biggest drop since the financial crisis.
The real trouble is at the very top of the market, paintings that usually sell for eight or nine figures. Now, two years ago, we had the Leonardo da Vinci that sold for $450 million. Then last fall, two pieces sold for over $90 million.
This year, the star lot is estimated at less than half that, $30 million to $40 million for Ed Ruscha`s “Hurting the Word Radio #2” up for auction at Christie`s.
Christie`s also a rediscovered David Hockney called Sur La Terrasse, which could fetch $45 million, still a big drop from the Hockney they sold last year for $90 million. And Sotheby`s has a de Kooning “Untitled 22” estimated at $25 million to $35 million.
Art experts blame the weakness on sellers who don`t want to let go of major works at these prices. You also have slowing growth overseas, trouble in Hong Kong, Brexit, political noise here in the U.S. and removal of a tax loophole that allowed art collectors to sell paintings and trade up without ever paying capital gains taxes.
EVAN BEARD, BANK OF AMERICA PRIVATE BANK: Across the board, the ultra, ultra high net worth are starting to pull back on these sentiment driven purchases and I think some people are saying, is this the canary in the coal mine? This is the smart money saying, let`s wait and see what happens coming into an election year.
FRANK: Now, over the long term art is performing well. Sotheby`s has a Mark Ross painting called “Blue over Red” that hammered for $5.6 million in 2005, estimated to sell this week for over $25 million.
The sales start today at Christie`s and run through Friday.
For NIGHTLY BUSINESS REPORT, I`m Robert Frank.
GRIFFETH: Despite a solid economy, 2/3 of adult fear a recession could come next year. A new survey from CNBC and Survey Monkey shows that half of respondents are taking active steps to strengthen their finances. For many, that means making some tough money decisions, something that came naturally to a former Air Force veteran who spoke to our Contessa Brewer in Dayton, Ohio.
BREWER: In Dayton, Ohio, Charlynda Scales is hard at work.
CHARLYNDA SCALES, MUTT`S SAUCE CEO: I`m a proud Air Force veteran who while serving on active duty received the only copy of my grandfather`s secret sauce recipe that I learned how to bottle and now I sell in retail stores.
BREWER: The founder of Mutt`s Sauce learned early on to make tough financial decisions.
SCALES: When I joined the military I had a dream that many other young airmen have, I wanted a new car. I had exactly enough in savings for my BMW that I could start Mutt`s Sauce LLC. So, instead of choosing my car, I chose the company.
BREWER: Today, like millions of other Americans, Charlynda is trying to figure out what the next year will bring for the U.S. economy. A new CNBC and Acorns` Invest in You survey conducted by Survey Monkey finds 65 percent of respondents believe a recession is likely in the next year. The same percentage says they`ve noticed costs going up in the last three months — restaurants, housing, insurance, and groceries.
The American consumer has been fueling the U.S. economy and the upcoming holiday shopping season is crucial for retailers, but in our survey, 36 percent say they plan to spend less this holiday shopping season compared to last year, and of those who think recession is coming, 45 percent say they plan to prepare by trimming household spending.
UNIDENTIFIED FEMALE: I can`t believe what just a gallon of milk is these days.
UNIDENTIFIED MALE: I think the economy`s strong and we`re going to be fine.
BREWER: Charlynda Scales is optimistic about the future of her company, but cutting costs where she can just in case.
SCALES: A steady paycheck of the military, disability of even a full-time job is a stark contrast to being a small business owner. You`re counting every penny.
BREWER: With conservative spending and careful planning, she`s hoping to taste sweet success.
For NIGHTLY BUSINESS REPORT, I`m Contessa Brewer.
GRIFFETH: We should point out Comcast (NASDAQ:CMCSA) (NYSE:CCS) and NBCUniversal have a stake in Acorns and NBCUniversal produces this program.
HERERA: And finally, tonight on this Veterans Day, Wall Street honored our service men and women. The New York Stock Exchange unveiled plaques on the trading floor and members of the United States Marine Corps, Coast Guard, Air Force, Navy and Army rang today`s opening bell.
And President Trump was in New York to kick off the 100th annual New York City Veterans Day parade.
And on that note, 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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