Transcript: Nightly Business Report – November 18, 2016

NBR-ThumANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Sue
Herera.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Reversing course. Why Ford
decided to keep production of one of its models in Kentucky.

Record week. The stock market is hitting new milestones, but did it come
too far too fast.

Fifth Avenue frenzy. With one week until Black Friday, there is not much
cheer along one of the most prominent corridors in the country.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Friday,
November 18th.

Good evening, everyone. Welcome. I`m Sue Herera. Tyler Mathisen is off
tonight.

It was a week of records with the Dow, NASDAQ and small cap Russell Index
reaching new all time highs.

But we begin with Ford, which is heavily criticized with President-elect
Donald Trump on the campaign trail for its decision to move some of its car
production to Mexico. Now, the automaker said it has decided to switch
gears and keep production of one of its small SUVs in Kentucky.

Phil LeBeau has more on Ford`s decision.

(BEGIN VIDEOTAPE)

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: It`s not a huge
selling model for Ford, but the Lincoln MKC has become a big deal for
President-elect Donald Trump and his promise to protect American jobs.
While running for president, Donald Trump repeatedly blasted Ford for
planning to move production of small cars to Mexico. Despite the bashing,
Ford said it would still build certain models south of the border where
costs are lower.

Then came this tweet from Trump, “Just got a call from my friend Bill Ford,
chairman of Ford, who advised me that he will be keeping the Lincoln plant
in Kentucky. No Mexico.”

So why did Bill Ford agree to keep MKC production in the U.S.? Well,
officially, Ford said it`s always reviewing production plants. But this
move helps the company in two ways. It allows Donald Trump to take a
victory lap for saving jobs while not having a big impact on the automaker.
The company built just 38,000 of the small SUVs last year, and while Ford
was planning to move the model out of Louisville by 2019, and likely would
have shipped it to a plant in Mexico, keeping in the MKC in Kentucky
doesn`t change the company`s overall production blueprint for the U.S.,
Canada and Mexico.

MARK FIELDS, FORD CEO: You have to keep in mind, the production and supply
chains are deeply integrated between the three countries, and that
integration also supports a lot of American jobs.

LEBEAU: Ford maintains, American jobs will not be cut even as it moves
forward with plans to move some production south of the border. The
question is whether that promise, along with the commitment to keep the MKC
in Kentucky, will finally convince Donald Trump to stop attacking Ford.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago.

(END VIDEOTAPE)

HERERA: The decision by Ford follows reports that Apple (NASDAQ:AAPL) is
looking into possibly moving production of its iPhone to the U.S., which we
reported on yesterday. Ford and Apple (NASDAQ:AAPL) were two corporations
criticized by the president-elect on the campaign trail.

So, are companies feeling the pressure?

Robert Salomon, professor of management at New York University`s Stern
School of Business, joins us now to discuss.

Welcome, Professor. Nice to have you here.

ROBERT SALOMON, NYU`S STERN SCHOOL OF BUSINESS: Thank you for having me.

HERERA: Do you think they`re feeling outright pressure by the president-
elect or are they just feeling uncomfortable with the rhetoric?

SALOMON: Yes, I don`t know if it`s outright pressure. But I do think
there is a certain amount of discomfort with certainly Donald Trump`s
rhetoric on the campaign trail and I think that these overtures that Apple
(NASDAQ:AAPL) and Ford have made actually don`t surprise me. They`re
trying to get out in front of whatever policy may emerge.

HERERA: How unprecedented is it for a president to put to use that kind of
rhetoric to call a company, say, and influence business decisions?

SALOMON: Well, it would certainly be unprecedented for a president to call
CEOs and say, you must do this or must not do that. But it isn`t
unprecedented for a president to speak with CEOs and industry leaders about
the kinds of policies they have on — that they are proposing. And to
speak candidly and frankly about the kinds of things they would like to
see. Now, whether or not CEOs follow those — you know, those — or
whether they influence CEOs is another thing.

HERERA: Yes. How — compare the Trump administration to the more pro
trade administrations of the last, say, quarter century.

SALOMON: Yes, it`s really interesting, because if you look at the regimes
that, over the last 25 to 30 years, they`ve certainly been pro-trade. And
on the campaign trail, Trump`s rhetoric has been protectionist and anti-
trade. So, this is a big change in regime and it will be interesting to
see how companies respond, because right now, all we have is words. All we
have is rhetoric.

It will be interesting to see how policies emerge over time. And right
now, there`s a lot of uncertainty about what those policies will be moving
forward.

HERERA: You have a couple of recommendations for CEOs or the heads of
companies that may be feeling some, you know, uncomfortable feelings about
what may lie ahead, because we don`t know what the policies are going to be
in the new administration. You say speak directly to policymakers.

SALOMON: Yes, there are several things that companies can and often do do
in these situations. The first thing is to do what Ford and Apple
(NASDAQ:AAPL) did which is to try to remind the American people they create
a lot of jobs here in the U.S. and they are good citizens here in the
United States.

Another thing that companies often do is they will speak directly to
policymakers to try and shape how they think about the kinds of problems
and decisions they have to make. And so, it doesn`t surprise me to see
Bill Ford pick up the phone and to try and speak with President-elect
Trump.

Another thing policies do is band together with other companies, industry
associations and other companies facing similar situations to influence
policy.

HERERA: OK.

SALOMON: And, finally, another avenue is through lobbying which companies
will often turn to when they want to influence policy in their favor.

HERERA: All right. On that note, Professor, thank you very much.

SALOMON: Thanks for having me.

HERERA: Professor Robert Salomon with New York Stern School of Business.

Volkswagen plans to eliminate 30,000 jobs in an effort to cut costs. The
automaker says the decision is part of a long term plan to improve its
balance sheet and ship resources. The company is still recovering from its
emissions-rigging scandal that hurt the company`s reputation and cost VW
billions of dollars.

On Wall Street, the Trump rally took a breather. Stocks pulled back today,
dragged down by the healthcare sector. The Dow Jones Industrial Average
fell 35 points to 18,867. The NASDAQ was off 12, despite hitting an
intraday high during the trading session. The S&P 500 was down five.

And the small cap Russell 2000 Index continued its hot streak, sitting a
record with 11 straight days of gains. For the week which saw the Dow hit
an all-time high, the major indexes were up continuing a trend that we have
seen since the election.

But as Bob Pisani reports, some are starting to express concerns that the
market may have come too far too fast.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: The major indexes are
right near new high and that`s great news for the polls. But it could be a
cause for concern. So, three key factors are moving the market. First,
the economy is getting strong. We saw a healthy does of jobs, housing,
retail, and CPI (NYSE:CPY) data this week, all of it pretty good. GDP is
on pace to post its strongest quarterly reading in nearly two years.
Second, there`s an assumption Trump`s victory will mean more spending, more
stimulus, reduced regulations and lower taxes.

Finally, the Fed speak has been more upbeat recently with many officials
insisting a rate hike could be coming soon. Now, normally, that would be
bad news. But the talk of more growth is convincing everyone the markets
could handle higher rates without freaking out. OK. What could go wrong?

Well, first, the market is completely ignoring the dark side of the Trump
rhetoric around trade. A trade war particularly with China would be very
damaging to both countries and to the stock market.

But the biggest risk is that Trump won`t deliver to the extent the markets
are really pricing in. That the stimulus will not be as big as people
think it will be. That the tax cuts won`t be as great as people think will
be. And the regulatory reform will take much long than expected.

Now, for the moment, the markets like the better economic numbers and the
hopes for higher growth. But if the market`s euphoria can`t be justified,
one analyst says it could be a head fake of historic proportions.

For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock Exchange.

(END VIDEOTAPE)

HERERA: Today, the dollar climbed to its biggest level in almost 14 years,
and bond yields continued to rise, extending a trend that started following
last week`s election. And today, New York Fed President Bill Dudley said
the market moves are not altering the Central Bank`s policy plan.

(BEGIN VIDEO CLIP)

BILL DUDLEY, FEDERAL RESERVE BANK OF NY VICE CHAIRMAN: Financial
conditions have changed and they`ve changed but in part because of an
expectation of a potential shift, at least my opinion, on fiscal policy.
So, the movement in markets seemed consistent with a change in expectations
about how economic policy might evolve. So, I don`t think what we`re
seeing in financial markets are, you know, to me concerning in terms of the
implications for monetary policy.

(END VIDEO CLIP)

HERERA: The Fed takes financial conditions, inflation and employment into
account when deciding when to raise interest rates.

Still ahead, a business owner`s message for the president-elect when it
comes to trade.

(MUSIC)

HERERA: The Obama administration is blocking new oil and gas drilling in
the Arctic Ocean. The decision hands a victory to environmentalists. The
plan for drilling can be rewritten by President-elect Trump, but that
process can take months or years. Alaska`s elected officials support
drilling in the Arctic.

Donald Trump has called on the Trans Pacific Partnership, the trade deal, a
job killer. But a Seattle businessman whose company has operations in five
countries disagrees and he has a message for the president-elect.

Eunice Yoon reports tonight from Yancheng, China.

(BEGIN VIDEOTAPE)

EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Far from American
politics, Seattle native Fred Crosetto has had to upend his investment
plans. A major free trade pass initiated by President Obama was expected
to boost his business making disposable gloves for U.S. consumers. But
with the surprise election of Donald Trump, that deal looks all but dead.

FRED CROSETTO, AMMEX FOUNDER: I guess all bets are off until we know what
happens with the TPP.

YOON: The TPP or Trans Pacific Partnership encompasses 12 nations as far-
flung as New Zealand and Peru.

But the agreement has come under attack by critics, including Donald Trump.

DONALD TRUMP (R), PRESIDENT-ELECT: We will also immediately stop the job-
killing Trans Pacific Partnership. That`s going to be the next disaster.

YOON: Crosetto, who has his gloves made in five countries, thinks the TPP
would be great for America, cutting prices for consumers and tariffs for
U.S. companies in Asia and back home.

CROSETTO: There are 18,000 products that are going to come out of the
United States in the TPP countries. And those are going to be more or less
duty-free and it`s an enormous golden age of opportunity for American
manufacturers and American suppliers to ship things to Asia, because Asians
has got rising incomes. They want to spend and they have a high appetite
for high quality products.

YOON: All of these products made here in China are headed for North
America. But if the TPP passes, chances are more businesses like this will
shift to countries that signed on to the TPP.

Crosetto was going to scale back his production in China, which isn`t part
of the TPP, in favor of Malaysia and Vietnam, which are. With the TPP near
death, he now fears his hiring plans back in the U.S. will also stall.

CROSETTO: We think the TPP in our particular company is going to generate
numerous, high-paying jobs. Most in the services, social media designs,
sales and marketing.

YOON: If you got a chance to sit down with Donald Trump, what would you
tell him about the TPP and Asia?

CROSETTO: I would say, look, Asia is an very important place. The United
States would really be wise to sit down and say, how can we actively engage
Asia, China? Because this is where things are going to happen in the next
50 years.

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

(END VIDEOTAPE)

HERERA: To read more about this business owner`s take on the TPP, log on
to our website, NBR.com.

Well, it`s being called the White House in midtown. President-elect Donald
Trump`s residence at Trump Tower in the middle of Manhattan is creating a
traffic and security nightmare. It`s also creating a headache for some of
the most recognizable retailers in the world.

And as Robert Frank reports, the flagship stores are concerned as the busy
holiday shopping season approaches.

(BEGIN VIDEOTAPE)

ROBERT FRANK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, with only one
week to go until Black Friday, many of the top retailers here in Midtown
Manhattan are not feeling much cheer. The reason: security and crowds here
at Trump Tower.

New York City Mayor Bill de Blasio and the New York Police Department
announcing steps today to try to alleviate the security blockades and all
those crowds around Trump Tower. Trump, of course, lives and works in the
building, located in one of the busiest intersections in the country. But
the security measures and protests around the president-elect have turned
the entire area into a green zone, choking off businesses for many of the
luxury retailers. Gucci is located in the bottom floor of Trump Tower and
it has largely been empty. Tiffany (NYSE:TIF) had its flagship store in
the corner until recently, its main entrance was closed, it is still
surrounded by blockades.

Analysts have started trimming their own estimates for Tiffany`s, with
Cowen`s analysts saying, quote, “There`s now way to sugarcoat this. The
big worry is what will happen over the nxt few months.”

Other retailers affected include Prada, Abercrombie & Fitch (NYSE:ANF),
Piaget and Bulgari. Now, many smaller retailers are also suffering.

KEVIN HILL, CROCKETT & JONES MANAGER: Well, it`s been a mix of trepidation
and exasperation and there are people that, you know, come to us, just to
come to get our shoes. And they have called us, can we come? Haven`t made
it through.

FRANK: Now, rents in midtown are some of the highest in the country, so
any loss in business could have a dramatic effect on their profitability.
The head of the business district in midtown saying, quote, “Traffic in
retail stores has dropped dramatically.”

The mayor and the New York Police Department saying today they may block
off roads, close some lanes and try to divert traffic and crowds around the
area. Now, that measure may help, but it`s going to take a miracle on 56th
Street to help retailers near Trump Tower to have a merry Christmas.

Guys, back to you.

(END VIDEOTAPE)

HERERA: Robert, I`ll take it. Thank you very much. Robert Frank in
midtown.

President-elect Donald Trump has agreed to settle lawsuits related to Trump
University, the president-elect`s now defunct for-profit college. New
York`s attorney general says the civil fraud case will be settled for $25
million. Former students claim they were falsely promised that they would
learn Trump`s real estate secrets. Some paid up to $35,000. Trump has
denied any wrongdoing.

Same-store sales fall for the third straight quarter at Abercrombie and
Fitch (NYSE:ANF), and that is where we begin tonight`s “Market Focus”.

The clothing retailer said weak performance in its tourist and flagship
stores Sluggish traffic caused the decline. The company also saw profit
and revenue fall with results sharply missing estimates. Shares fell
almost 14 percent to $14.60.

Foot Locker saw its profit rise in the latest quarter, topping analysts`
expectations. Revenue was in line with the estimates. The athletic
apparel and footwear company also said same-store sales improved but not at
the pace analysts were expecting. Shares finished up a fraction to $71.78.

Yum Brands (NYSE:YUM) is tacking on another $2 billion to its share
buyback. The new allocation is expected to be used by the end of next
year. Shares rose 2.5 percent to $62.36.

Well, you probably know this. You can pretty much order anything you want
on Amazon (NASDAQ:AMZN). But what about a car? Well, soon, that will be
possible. The e-commerce giant has signed a deal with Fiat Chrysler to
offer three models on its platform at a discount. So far, that service is
expected to be available in Italy.

Amazon (NASDAQ:AMZN) shares rose marginally to $760.16. Shares of Fiat
Chrysler fell 4 cents to $7.43.

And according to a regulatory filing, Facebook (NASDAQ:FB) has approved a
$6 billion share buyback that will begin early next year. Shares finished
the day down a fraction to $117.02.

This week`s market monitor like stocks that he says could benefit from
President-elect Donald Trump`s economic plan. The last time he was on in
April, he recommended Visa (NYSE:V), which is up 4 percent, Priceline which
gained 18 percent, and McKesson (NYSE:MCK), which is down 13 percent.

He is Kevin Norris. He`s president of Univest Wealth Management.

Welcome, Kevin. Nice to have you back.

KEVIN NORRIS, UNIVEST WEALTH MANAGEMENT PRESIDENT: Thanks for having me
back. Thank you.

HERERA: And as I understand, you still own all three, Visa (NYSE:V),
Priceline and McKesson (NYSE:MCK), correct?

NORRIS: We do. I wish I didn`t own McKesson (NYSE:MCK) any longer.

HERERA: I`m sure.

NORRIS: But that sometimes happens.

HERERA: All right. Let`s get to your new picks. There are three very
interesting ones. And as we said, some of them are based on expectations
of what the president-elect`s economic plan will be.

The first one is Masco (NYSE:MAS), which is building products.

NORRIS: Right. So, we`re — we really like Masco (NYSE:MAS) because of
the continuation of the housing market recovery. They are in the home
improvement and home construction industries. A real solid company, pays a
dividend of over 2 percent.

And we think it`s going to be a beneficiary of a continuation of the
housing market recovery, and even on the renovation side, you know, they`re
expected — this year is expected to be the biggest year or the biggest
year since the recession of renovation spending. And that was in 2007.

HERERA: Right.

NORRIS: So, we think it`s a great company and a great position.

HERERA: Does that renovation side of the story offset the rise in interest
rates?

NORRIS: It counteracts it. So, if we get higher mortgage rates, for
instance, and the new housing market slows down, the renovation market will
offset that to some degree. And that was a move Masco (NYSE:MAS) made
several years go to get into the renovation business. So, it`s a nice play
with a little bit of downside protection.

HERERA: Harris (NYSE:HRS) Corporation is next on the list. It is a tech
company. Tell us about it.

NORRIS: So, right. Harris (NYSE:HRS) Corporation is a tech company. This
is a Trump play. If we get continued, if we get increased defense
spending, as president-elect has laid out, this should be a beneficiary of
it. So, they do technology systems for defense, civil government
applications and in addition to commercial.

It`s a solid company with a solid balance sheet, high profit margins, again
here a 2 percent dividend. And just well-positioned for the Trump
presidency, provided the details back up the headlines.

HERERA: Right. It`s up better than 20 percent this year. Do you worry
that it`s gone too far?

NORRIS: Well, our estimations, it`s got another 20 percent in it next year

HERERA: I see.

NORRIS: — if they execute and they have good growth prospects.

HERERA: And Schlumberger (NYSE:SLB), an oil play, is last on the list.

NORRIS: Sure, again, this is a little bit of a Trump play in that if we
get some deregulation in the energy sector, Schlumberger (NYSE:SLB) will be
a beneficiary of it. Schlumberger (NYSE:SLB) is an oil field services
company to the international oil and gas exploration and production
industry. They really weathered the down turn very well early in the year.
They`re poised to benefit from some deregulation and if we get some kind of
OPEC agreement, oil price is moving higher, it will benefit Schlumberger
(NYSE:SLB). And so, it`s another 2 percent dividend pay, so you could pay
to hold it.

HERERA: All right. On that note, Kevin, thank you so much. Have a great
weekend.

Kevin Norris —

NORRIS: You as well. Thank you.

HERERA: — with Univest Wealth Management.

Coming up, why Warner Brothers has a lot riding on what it hopes will be a
magical weekend at the theatre this weekend.

(MUSIC)

HERERA: Here`s a look at what to watch for during next week`s holiday-
shortened week. On Monday, the antitrust trial challenging Anthem`s $53
billion acquisition of Cigna is scheduled to begin. On Tuesday, we`ll get
a fresh read on the housing market when existing home sales are released.
On Wednesday, the Federal Reserve will put the meetings of its last meeting
and that is what to watch for next week.

McDonald`s (NYSE:MCD) is entering the next phase of its turn-around, going
digital. The world`s largest fast food chain is rolling out in-store,
mobile ordering and digital payments next year in an effort to attract
millennial customers and increase foot traffic. But some critics say
McDonald`s (NYSE:MCD) is playing catch-up. But the CEO says that`s OK.

(BEGIN VIDEO CLIP)

STEVE EASTERBROOK, MCDONALD`S CEO: We have a very advanced stage of
rollout in this in Canada, in the U.K., and France and Australia. So,
therefore, they are almost like a live learning labs and we can bring a
more finely tuned, that we can get the kinks out. We can get a much more
home and business model and bring it to the U.S., which is our largest
market. So, if you want to scale it here, you want to scale it right.

So, you`re right. We`re not always going to get first movement advantage.
But we have enough phenomenal scale advantage and that`s what we think will
differentiate us from anyone else.

(END VIDEO CLIP)

HERERA: As part of its strategy, McDonald`s (NYSE:MCD) will also offer
table service to customers.

DraftKings and FanDuel are joining forces. The two largest daily fantasy
sports companies have agreed to merge, ending months of speculation. The
companies say the merger will help accelerate their profitability.
DraftKings and FanDuel have faced legal challenges around whether their
contests are games of skill or gambling. Comcast (NASDAQ:CMCSA) (NYSE:CCS)
Ventures and NBC Sports Ventures have stakes in FanDuel. Comcast
(NASDAQ:CMCSA) (NYSE:CCS) is the parent company of CNBC, which produces
this program.

It has been a rough ride for movie sequels reasonable recently, which have
disappointed at the box office. But this weekend, Warner Bros. has a lot
riding on its “Harry Potter” spinoff. But will the movie work its magic?

Julia Boorstin has our story.

(BEGIN VIDEOTAPE)

JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Warner Bros.` hopes
are high for “Fantastic Beasts and Where to Find Them” based on J.K.
Rowling`s best-selling “Harry Potter” spinoff. It`s the first in the five-
film series about a magical zoologist chasing his creatures through 1926
New York City. The film costs a reported $180 billion to make. This
projected to gross more than $200 million worldwide this weekend,
bolstering Warner Bros. with a new franchise.

ANTHONY DICLEMENTE, INSTINET MANAGING DIRECTOR: The general strategy for
Warner Bros is to invest in tent-pole franchises because the economics of
those franchises have proven to be superior to films that are not part of a
franchise. We see that with the D.C. comics films. We see that now with
“Fantastic Beasts”.

BOORSTIN: Warner Bros. hoping that it will live up to Harry Potter. Its
eight films grossed nearly $8 billion at the global box office.

JEFF BEWKES, TIME WARNER CEO: We`re very excited about “Fantastic Beasts,”
a new story based on the wizarding world of Harry Potter that we think
would be a global hit, not just in the box office, but in consumer products
across all platforms.

BOORSTIN: And Time Warner (NYSE:TWX) is not the only company banking on
“Fantastic Beasts” box office success. AT&T (NYSE:T) is in the process of
acquiring the giant for more than $85 billion as it looks to diversify with
the movies and TV shows its customers want to watch.

DICLEMENTE: We`re moving to a world of global distribution of content
using technology. And big franchises matter more in that world, because
you can sort of use that content, use those franchises to support existing
businesses, existing platforms like AT&T (NYSE:T) Wireless.

BOORSTIN: And it`s not just Time Warner (NYSE:TWX) and AT&T (NYSE:T) that
could benefit from a hit. The films could also drive even more interests
in the attractions built around Harry Potter, the Wizarding World of Harry
Potter in Universal (NYSE:UVV) Studios Orlando and Hollywood. And a range
of partners are on board to boost awareness and get some of the wizards
magic, Amazon (NASDAQ:AMZN) enabling users to unlock special content and
Android users can cast Harry Potter`s spells using Google`s voice
assistant.

And so far, the films` early showings are drawing crowds. It grossed
nearly $9 million in North America Thursday night, and it`s already grossed
$23.5 million overseas.

For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Los Angeles.

(END VIDEOTAPE)

HERERA: And finally tonight, your Thanksgiving dinner will cost you just a
little bit less this year. According to the American Farm Bureau
Federations annual survey, a meal for ten people will cost just under $50.
That`s 24 cents less than last year. And that`s because of the food
deflation trend we have been reporting on. Turkey prices, milk, pumpkin
pie mix, carrots and celery all cost less today than they did a year ago.

That is NIGHTLY BUSINESS REPORT for tonight. I`m Sue Herera. Thanks for
watching. Have a great weekend, everybody. We will see you here Monday.

END

Nightly Business Report transcripts and video are available on-line post
broadcast at http://nbr.com. The program is transcribed by CQRC
Transcriptions, 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) 2016 CNBC, Inc.

 

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