ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Sue Herera and Bill Griffeth.
BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: Reaching records. The Dow and S&P closed at all-time highs as the Fed chair signals that the pause in interest rate cuts is not set in stone.
SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Watching Washington. The impeachment hearings are under way on Capitol Hill. How concerned should Wall Street be?
GRIFFETH: Risky business. Hong Kong protesters are targeting companies, including some of America`s biggest that are widely held by investors.
Those stories and much more tonight on NIGHTLY BUSINESS REPORT for Wednesday, November 13th.
HERERA: Good evening, everyone, and welcome.
The Dow and S&P 500 closed at a record. Investors focused on testimony from the Federal Reserve Chair Jerome Powell who signaled that the central bank is still willing to step in and support economic growth. That offset some fresh doubts about a potential trade deal between the U.S. and China and reports that those talks hit a snag over agricultural purchases.
The Dow Jones Industrial Average was up 92 points to 27,783. The Nasdaq was down about four and the S&P 500 added two.
We begin tonight with Steve Liesman and the Fed chair`s outlook for interest rates and the economy.
STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Fed Chairman Jerome Powell telling Congress`s joint economic committee essentially that interest rates are on hold unless there`s a big change to the outlook.
Among the key points he made at his testimony today, monetary policy likely to remain appropriate as in we`re on hold for a while here. The economic outlook looks favorable. Risks include the global economic slowdown and the trade war and he said fiscal policy the way it is now with big deficits is unsustainable.
But Powell also emphasized that monetary policy is not on a preset course.
JEROME POWELL, FEDERAL RESERVE CHAIRMAN: We do think monetary policy is in a good place, but we`re going to be watching very carefully incoming data and if developments emerge that cause a material reassessment on the outlook, then we`ll act appropriately.
LIESMAN: The Fed funds futures market embraced the outlook for a Fed being on hold, placing less than a 1 percent chance on a December rate cut. Only in July does the chance rise above 50 percent. Among the areas most in pursuit in questions from Congress was the issue of just how low the unemployment rate can go.
POWELL: I`m very open to the idea that we don`t know where maximum employment precisely is. We have to have significant humility when we make estimates of that and we`re going to let the data speak to us. And what the data — the data are not sending any signal that the labor market is so hot or that inflation is moving up or anything like that.
LIESMAN: Powell also said that low rates, low growth and inflation are likely the new normal, perhaps now low and maybe lower unemployment.
For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.
GRIFFETH: Yes and while Chairman Powell did tell lawmakers today that inflation overall is still low and stable, a new report showed a pickup in consumer prices. According to this morning`s Commerce Department report, the consumer price index rose 0.4 percent. That`s its fastest pace of gains in seven months, mostly because of higher gasoline prices and medical care costs.
HERERA: To earnings now. Dow component Cisco (NASDAQ:CSCO) reported better than expected profit but its revenue guidance was weak. The networking company now sees a 3 percent to 5 percent decline in year over year revenue. And that sent the stock initially lower in after hours trading.
Josh Lipton as more.
JOSH LIPTON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Investors pay close attention to Cisco (NASDAQ:CSCO) because the networking equipment giant is seen as an important barometer of tech spending.
I checked in with Needham`s Alex Henderson for his take. It`s not about the quarter he says. It`s about revenue guidance which was well below expectations. Perhaps a shock to a lot of investor that might have thought this was a more stable growth business.
Henderson says the problem looks to be weakness from cloud customers as well as service providers, meaning carriers like Verizon (NYSE:VZ) and AT&T (NYSE:T).
For NIGHTLY BUSINESS REPORT, I`m Josh Lipton, San Francisco.
GRIFFETH: Now, Jerome Powell`s testimony on Capitol Hill was not the only event Wall Street was watching in Washington today. There was also, of course, the first public hearing of the impeachment inquiry into President Trump.
Ylan Mui spent the day on Capitol Hill covering that story for us.
YLAN MUI, NIGHTLY BUSINESS REPORT CORRESPONDENT: The impeachment investigation into President Trump entered a new phase today as Democrats brought their case directly to the public.
House Intelligence Committee Chairman Adam Schiff focused the hearing on three core concerns, whether Trump is exploiting the power of his office, coercing foreign leaders and obstructing Congress`s investigations.
REP. ADAM SCHIFF (D-CA (NASDAQ:CA)): If the president can simply refuse all oversight, particularly in the context of impeachment proceeding, the balance of power between our two branches of government will be irrevocably altered. That is not what the founders intended.
MUI: Lawmakers spent five and a half hours questioning two key witnesses, George Kent, a top State Department official, and Bill Taylor, the acting U.S. ambassador to Ukraine.
During the hearing, Taylor offered some new information, one of his staffers overheard a phone call between President Trump and the ambassador to the European Union, Gordon Sondland. Taylor said his staffer heard President Trump ask about the investigations and heard Sondland reply that Ukraine was ready to move forward.
SCHIFF: And I think you said that after the call when your staff asked Ambassador Sondland what President Trump thought of Ukraine, his response was that president Trump cares more about the investigations of Biden? Is that right?
BILL TAYLOR, U.S. AMBASSADOR TO UKRAINE: And Burisma, yes, sir.
SCHIFF: And I — I take it the import of that is he cares more about that than he does about Ukraine.
TAYLOR: Yes, sir.
MUI: But a White House spokesperson responded that all the evidence in this case is hearsay. And President Trump told reporters that he wasn`t paying any attention to it.
DONALD TRUMP, PRESIDENT OF THE UNITED STATES: I`m too busy to watch it. It`s a witch hunt. It`s a hoax. I`m too busy to watch it. So, I`m sure I`ll get a report. There`s nothing — I have not been briefed, no.
There is nothing there. I see they are using lawyers that are television lawyers. They took guys off television, you know. I`m not surprised because Schiff can`t do his own questions.
MUI: Republicans tried to redirect the hearing to Joe Biden`s son and his connection to a Ukrainian gas company. They also argued that there was never any quid pro quo.
The White House released security aid to Ukraine without any commitment from the country to conduct any investigations.
REP. JIM JORDAN (R), OHIO: My clear understanding was security assistance money would not come until President Zelensky committed to pursue the investigation. My clear understanding was they weren`t getting the money until President Zelensky committed to pursue the investigations. Now, with all due respect, Ambassador, your clear understanding was obviously wrong because it didn`t happen.
MUI: There is plenty more to come. Another hearing is scheduled on Friday. Eight more witnesses are expected to testify next week and after that, lawmakers will head home for Thanksgiving recess to see how all the D.C. drama is playing back at home.
For NIGHTLY BUSINESS REPORT, I`m Ylan Mui in Washington.
HERERA: And as Ylan just mentioned, there`s a lot more to come in the impeachment hearing. But is there a smoking gun that could potentially send the market either higher or lower?
We`re joined now by Rebecca Felton. She`s the senior portfolio manager at Riverfront Investment Group.
Welcome. It`s nice to have you here, Rebecca.
REBECCA FELTON, RIVERFRONT INVESTMENT SENIOR PORTFOLIO MANAGER: It`s nice to be back. Thank you all.
HERERA: How closely do you think the market is watching this? And how much of what is going on may already be in the market?
FELTON: Well, from our perspective, we don`t really think that investors are keying in too much on this impeachment drama, rather they are focused on other drivers such as trade, such as the economy, even more maybe what Jerome Powell said today as it relates to the Fed and rates.
GRIFFETH: But is there anything you can think of that could come out of these hearings that could move the market meaningfully one direction or the other?
FELTON: Not necessarily because it`s very difficult to draw a parallel between an outcome in the impeachment hearings and sales or profits in corporate America. And those tend to be the fundamental reasons why stocks move up or down.
HERERA: What about the fact, though that it could be a distraction for not only individual investors but market participants as well?
FELTON: Well, it absolutely could be. And it`s most likely to drag on into 2020. But throughout this year as the markets have risen over 20 percent, which was a surprise to us and most folks watching the markets, we know the focus has been away from the political rhetoric in Washington and it`s been on trade and on growth and on the consumer and the corporate America.
So, again, not to — not to seem like we`re not paying attention. Certainly we are, but we don`t see those as the drivers right now.
HERERA: OK, on that note, Rebecca Felton with Riverfront Investment Group — thank you so much.
FELTON: Thank you.
GRIFFETH: And sticking with politics, a new Iowa poll shows Pete Buttigieg claiming a narrow lead now over his rivals for the Democratic nomination. Iowa as you know is that state that kicks off the presidential caucus and primary nominating season.
So, we asked Kayla Tausche to look at where the mayor stands on some economic issues.
KAYLA TAUSCHE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, election headlines in the last week centered on the potential entrance by Mike Bloomberg. Another mayor, Pete Buttigieg, has been quietly on the rise, chipping away at moderate support for Vice President Biden, and in a poll this week taking the lead from Senator Elizabeth Warren in Iowa.
According to Monmouth, 22 percent of likely Democratic voters in Iowa back Buttigieg, 19 percent Biden, followed by Senators Warren and Sanders at 18 and 13 percent respectively. It`s the second poll in two weeks showing Buttigieg above Biden in Iowa after last week`s Quinnipiac poll showed Biden in fourth and Mayor Pete in second, one point behind Warren.
The shifts in the Iowa leader board are important for two reasons. First, its caucus on February 3rd is the country`s first primary snap shot, but also because in eight of the last ten presidential races, the candidate who won Iowa went on to become the Democratic Party`s nominee. Buttigieg is betting the party wants a candidate slightly left of Biden but not nearly as progressive as Warren. He proposed free state school tuition for families earning less than $100,000, and forgiveness of debt from for- profit colleges. He`d fund a $1.5 trillion Medicare expansion by rolling back the corporate tax cut, and the remaining $600 billion on its total $2.1 trillion economic plan would be funded by a tax on unrealized capital gains for the top 1 percent of earners.
As for the mayor`s campaign finances, he ended the third quarter with $23.4 million cash on hand. That`s less than the progressives but more than double Vice President Biden.
For NIGHTLY BUSINESS REPORT, I`m Kayla Tausche in Washington.
HERERA: It is time to look at some of today`s “Upgrades and Downgrades”, including new coverage of some well-known stocks.
Coverage of Apple (NASDAQ:AAPL) was initiated with an outperform rating at RBC Capital Markets. The analyst cites the iPhone and growing role it plays in our everyday life. The price target is $295. The stock rose about 1 percent to $264.47.
Coverage of Nike (NYSE:NKE) was initiated with an overweight rating at Barclays, the analyst cites its potential for margin expansion, earnings and revenue growth, as well as cost cutting. The price target is $111. The shares were up 2 percent to $91.29.
And coverage of United Airlines was initiated with a buy rating at UBS. The analyst cites the airline`s improving operating performance among other things. The price target is $110. The stock fell a fraction to $92.42.
GRIFFETH: Still ahead, if you own a lot of large cap stocks, there is a new risk at play for them far from Wall Street.
HERERA: Google (NASDAQ:GOOG) continues to expand way beyond search and into banking. According to the “Wall Street Journal,” the company is planning to offer checking accounts with its Google (NASDAQ:GOOG) Pay app. But it`s not going it alone. Google (NASDAQ:GOOG) is partnering with Citigroup (NYSE:C) and a small Stanford University credit union. The report notes that checking accounts contain huge amounts of data about consumer spending and income.
GRIFFETH: Elsewhere, Alibaba is reportedly planning a secondary listing in Hong Kong before the end of November. According to CNBC, the Chinese e- commerce giant could raise about $13 billion. And as you know, Alibaba is coming off that very successful Singles Day shopping event which setting new sales records. Experts say that the listing could boost the Hong Kong market itself which has seen business slow down amid the current protests there.
HERERA: And those protests in Hong Kong are creating a new type of risk for some big American companies, many of which are widely held by investors.
Eunice Yoon explains from Beijing.
EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Businesses in Hong Kong, both foreign and local, are in a tough spot, not only because of the downturn caused by the turmoil but now protesters are starting to label businesses as pro-government or pro-protesters based on their perception of how friendly that business is to the demonstrators.
Several groups are creating lists and maps that can be accessed in an app called WhatsApp or Instagram, Facebook (NASDAQ:FB) and Telegram. Businesses are given color ratings. Yellow is protester-friendly. Blue or black is pro-police and green is neutral.
This is supposed to be a way of safe guarding businesses as sympathetic to the protesters from the economic fallout. But in the process, some companies are tainted as pro-government. One of them is McDonald`s (NYSE:MCD).
The protesters suspected a store cooperated with police so the store got a pro-government rating. Another is a Japanese noodle chain Yoshinoya, which protesters believed fired a PR agency for creating an ad that appeared to poke fun at police. The company denies it fired anyone.
Starbucks (NASDAQ:SBUX) doesn`t have a rating, but several shops have been vandalized. The protesters say they don`t have a problem with Starbucks (NASDAQ:SBUX) itself, but they have a serious issue with one of its local suppliers. The daughter of the family that owns it has been openly critical of the protesters.
Not surprisingly, businesses are attempting to steer clear of voicing any political leanings.
For NIGHTLY BUSINESS REPORT, Eunice Yoon in Beijing.
GRIFFETH: Companies have long tried to steer clear of politics. But this new risk of political labeling is out there. So, what could it mean for you and investment decisions?
Joining us tonight, David Nelson. He`s chief strategist at Belpointe Asset Management.
Welcome back. How are you doing?
DAVID NELSON, BELPOINTE ASSET MANAGEMENT CHIEF STRATEGIST: Thanks for having me.
GRIFFETH: What do you make of this? You know, as you look at the fundamentals of a company, does this become one of those fundamentals that you look at if they`re being labeled politically overseas.
NELSON: We`re going to have to. You know, this is the world that we live in. And increasingly, companies are being actually forced to make a decision. They`re actually going to have to choose sides here.
And that`s something that companies and management tried to avoid for as long as I can remember. If you take case in point in Hong Kong just recently, Apple (NASDAQ:AAPL) was kind of brought into the fray here. They were forced to remove their HK map that protesters have been using to track police. They thought they — by removing, they avoided the political fray, and then they`re damned if they do, damned if they don`t, right?
Here in Washington, then senators and congressmen weighed in on this and wanted them to put it back. So, it`s a tough situation for all.
HERERA: So, how would you rate it in terms of the fundamentals you look at when you decide whether or not to buy the stock?
NELSON: That`s a good one, Sue. I have to consider it for sure.
You just mentioned — in the report, you just mentioned Starbucks (NASDAQ:SBUX). Obviously, when a company is attacked like that., it hits the sales cycle. It hits earnings. Obviously, it`s a very small for a company like Starbucks (NASDAQ:SBUX) this incident, but what if it had legs.
And I think it`s great that investors and consumers want to be invested in companies that share their ideals. But we forget sometimes that in the end, a stock certificate just entitles you to the earnings and/or dividend stream of the company that funds your retirement. It`s not investing in it because it has some social value.
GRIFFETH: But I know you happen to believe that the — the job one for an investor is to keep an eye on the bottom line, right?
NELSON: You have to. I mean, in the end, that`s what this is about. And I`m not discounting things like ESG, environmental, social and governance. These are important issues today. And it`s shown that it helps the bottom line.
But if that`s all it is and — and you`re only investing in a company because it shares your ideals, somewhere down the road, you`re going to be sadly disappointed. This company is going to disappoint you.
GRIFFETH: David Nelson with Belpointe Asset Management — always good to see you, David. Thanks for joining us.
NELSON: Thanks for having me, Bill.
GRIFFETH: You bet.
HERERA: Canada Goose shares head south, and that`s where we begin tonight`s “Market Focus”.
The outer wear maker says the unrest in Hong Kong hurt its sales there, and that the wholesale revenue will fall this quarter. This comes as the company`s results beat estimates but Canada Goose shares fell about 11 percent to $34.81.
Energizer topped expectations helped by recent acquisitions in its battery and auto care units. The battery maker also says it expects net sales to rise up to 10 percent for the full year and shares kept going and going. And you get the picture. Up more than 15 percent to $48.38.
GRIFFETH: Luckin Coffee, that upstart rival to Starbucks (NASDAQ:SBUX) in China today reported a six fold jump in its quarterly revenue, thanks to new stores and expanded menu beyond just coffee. The company also raised its revenue forecast. And shares climbed about 13 percent as a result to $21.46.
Peloton is reportedly exploring streaming opportunities through Amazon (NASDAQ:AMZN), Fire TV and the Apple (NASDAQ:AAPL) Watch. Bloomberg says that the fitness maker is also looking to sell a cheaper treadmill and rowing machine sometime next year. Shares rose more than 5 percent to $29.98.
And Disney (NYSE:DIS) was the best performing component in the Dow today after it said its new streaming service Disney (NYSE:DIS) Plus had a very big debut yesterday with more than 10 million subscribers signing up in just the first 24 hours. That easily topped expectations. Disney (NYSE:DIS) shares rose more than 7 percent to $148.72.
HERERA: Moving goods from here to there is the back bone of the American economy. At the center is the $800 billion trucking industry, which as we mentioned is ripe for change.
As Frank Holland reports, the future of hauling things is digital.
FRANK HOLLAND, NIGHTLY BUSINESS REPORT CORRESPONDENT: The race is on to be the Uber freight, creating a digital market place for if freight for hire where customers and truckers can bid on jobs and get matched up. Companies like Convoy and, yes, Uber itself entering this world. Convoy is the hot start-up in the field, securing another $400 million in funding just this morning.
The startup says that money will be used to scale up networks that aims to disrupt the highly fragmented industry. The company is already attracting high profile investors such as Amazon (NASDAQ:AMZN) founder Jeff Bezos. Salesforce CEO Marc Benioff and U2 members Buno and the Edge.
High profile private equity companies such as Bill Gates Cascade (NYSE:CASC) Investment have also contributed to the more than $668 million, the digital disrupters raised.
DAN LEWIS, CONVOY CEO: What Convoy does is we take all the jobs put them in the platform. We can consider tens of thousands of trucks at the same time. And we find the ideal matches, significantly reducing empty miles, reducing waste in the system so that everyone can benefit. And that`s really where we think the future of trucking is going.
HOLLAND: CEO Dan Lewis says his company is aiming to entice truckers to shift to their platform by making trips more efficient and more profitable.
LEWIS: Higher productivity is the key to profits for truckers. And so, one thing that we did is we introduced automated reloads for small trucking companies. When they use automated reloads instead of getting one job at a time, which is the traditional method for getting work, Convoy offers them two, three jobs at a time. We optimize the pickup and drop off locations, the appointment times, to make them as productive as possible.
HOLLAND: Trucking is a nearly a $800 billion industry here in the U.S. However, Convoy and other digital startups, like Uber Freight, are targeting a smaller segment, the $62 billion freight brokerage market. Right now, the nation`s 900,000 for hire truckers work with thousands of digital and traditional brokers. Those brokers include publicly traded operators like C.H. Robinson, XPO and Landstar, legacy logistics and trucking companies that launched their own digital platforms.
LEWIS: There are 15,000 truck brokerage today, and, you know, hundreds of thousands of small trucking companies. I don`t know exactly how many can exist. But I think that we`re going to see consolidation.
HOLLAND: Those 15,000-plus freight brokerage companies control about two thirds of the overall market. Digital brokerages are definitely growing. But according to Goldman Sachs (NYSE:GS) research, the industry will remain reliant on human interaction in the near term and legacy companies are catching up in the race to go high tech.
Frank Holland, NIGHTLY BUSINESS REPORT.
HERERA: Coming up, from trucks to electric vehicles. And the big bet being made on what many say is the car of the future.
HERERA: Here is a look at what to watch for tomorrow. Dow component Walmart reports earnings. Investors will be looking to see what the world`s largest retailer says about the consumer and the upcoming holiday season.
The producer price index will tell us if inflation remains steady and Fed Chair Jerome Powell returns to Capitol Hill for day two of his testimony. And that`s what to watch for on Thursday.
GRIFFETH: The CEO of TheRealReal, the largest online luxury consignment business, is admitting that the company literally cannot live up to its claim that its merchandise is 100 percent real and not counterfeit. Julie Wainwright was a guest on “Mad Money” with Jim Cramer yesterday and she defended her company`s authentication process in the wake of a CNBC investigation last week that sent the stock stumbling. The investigation we aired here on NBR showed staff hired as copywriters and not expert authenticators were evaluating whether its high end clothing and accessories were authentic.
(BEGIN VIDEO CLIP)
JIM CRAMER, CNBC HOST, “MAD MONEY”: Do you make your life hard by giving statements periodically about how everything is real? When we all know that no one is perfect. Sotheby`s is not perfect. Christie`s is not perfect. Do you set yourself up to some degree for a level of criticism that may be justified because it`s impossible to be perfect?
JULIE WAINWRIGHT, CEO, THEREALREAL: I agree it`s impossible to be perfect, but we strive to be perfect every day. And the team`s intention every single day and their actions and, by the way — and our consumers tell us that we are the safest place to shop on the Internet. And that`s what we do every day.
GRIFFETH: Ms. Wainwright went on to say that copywriters are trained to authenticate lower risk items and that in October alone, more than 4,000 products out of 490,000 were rejected because they were counterfeit. She did not, however, address the number of fakes that her company has already sold.
HERERA: Today, Volkswagen broke ground on a plant expansion in Tennessee, where the company built electric vehicles.
It`s the latest example of automakers pumping billions of dollars into electric cars.
Here`s Phil LeBeau.
PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: Volkswagen is plugging in. The German automaker pushing to sell millions of electric vehicles is spending nearly a billion dollars to expand its plant in Chattanooga.
VW will hire another 1,000 workers as it ramps up production of EVs. It`s not alone. GM is converting one of its plants in Detroit so it can build an electric truck. While Ford is planning to add EVs to several of its assembly lines over the next four years.
And remember the GM plant in Lordstown, Ohio? It`s been sold to a new company. Lordstown Motors, where it will build electric pickups.
Altogether, the auto industry is expected to invest almost a quarter trillion dollars over the next four years in electric vehicles. Why? Because many believe sales of electric vehicles will explode over the next 20 years.
BLAKE MORET, ROCKWELL AUTOMATION CEO: I would say electric vehicles within that 20-year horizon could easily be the majority of vehicles on the road. And we`re not just talking about passenger vehicles. We`re talking about trucks and buses.
LEBEAU: The majority of electric vehicles sold in the U.S. are Teslas, in part because they`re popular but also because Tesla has three EV models to choose from. Compare that to other automakers who may have just one all electric vehicle to offer. And some automakers have none.
That will change over the next four years, as more automakers roll out electric vehicles. How many of them are able to attract a large number of buyers will depend on a variety of factors, including the price of gas. But make no mistake: the surge in EVs is just around the corner.
Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago.
HERERA: And that is NIGHTLY BUSINESS REPORT for tonight. I`m Sue Herera. Thanks for joining us.
GRIFFETH: I`m Bill Griffeth. Have a great evening. We`ll see you tomorrow.
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