Transcript: Nightly Business Report – August 24, 2017

ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Sue

Refiners are shutting down gas prices are rising as it looks like the first
hurricane since 2008 will strike Texas.

Pressing agenda. Central bankers meet as the world`s major economies
expand but there`s considerable uncertainty for the global economy.

Sticker shock. Health care costs in retirement are rising and are expected
to go even higher.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Thursday,
August 24th.

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

Hurricane Harvey is heading straight towards the center of the U.S. energy
industry. Forecasters say it could strengthen before it hits land
tomorrow. It`s track while still unpredictable could threaten one-third of
U.S. refining capacity. The price of gasoline on the commodity markets
have begun to rise, and some refiners began to shudder their operations
which lifted shares of a number of refineries.

Jackie DeAngelis has more now on Hurricane Harvey and its potential impact
on the energy market.


Harvey is gaining steam and it`s expected to be a hurricane that land in
Corpus Christi tomorrow. There`s some speculation it could become a
category two hurricane, which would mean the chances for heavy wind
flooding and damage are high.

We even seen a storm like this in that region in almost a decade but these
events do tend to spike crude gas and natural gas prices because a lot of
the facilities are down along the Gulf Coast. A bad storm could shut down
refineries and cut off imports and exports in the area from that refining
standpoint, there are six main regions and a little less than half the
nation`s refining capacity at stake here. If a category one hits a
refinery, it takes about a week to get back up category two and more like
two weeks.

The energy markets are not in panic mode right now but traders who recall
past storms say prices will move very quickly if this storm packs a bad



HERERA: Shutting down a refiner is a complicated task and impacts gas
prices getting one back online after a big storm is even more complex.

Sharon Epperson explains how it`s done.


Getting a refinery back online after a full shutdown due to a hurricane or
major storm can be a lengthy multi-phase operation. The first step
returning evacuated personnel to the refinery could take a few days,
depending on conditions in surrounding areas. Once on location the crew
evaluates the storm damage like flooding or downed power lines. If the
power is out, the refinery has to wait for local utilities to restore it.

Once power is back, the team will restart the refining units. This is done
in the sequence of the actual refining process. At a large facility, there
could be dozens of machines in the lineup and each individual machine might
require a day or two days to startup. But in order for the refinery to get
back to business, it needs crude oil to process. However, storm damage
could be trapping the oil tankers and therefore supply could be stuck

All told it can sometimes take up to two weeks to get a refinery up and
running again, and even a small facility could require as long as seven to
10 days.


HERERA: So what does all of this mean for gas prices could we see a spike?
Let`s turn now to Patrick DeHaan for some answers and he is the senior
petroleum analyst at Gas Buddy.

Patrick, welcome. Nice to have you here.


HERERA: Of what we know right now of the storm, how big an impact do you
think it might have on gas prices and the refineries?

DEHAAN: Well, first of all, this is a pretty dramatic turn of what
happened this morning for this storm to go from a category one on landfall,
now forecasts are some of them saying it could get up to a category three
maybe even a four. The more intense and powerful the storm, the longer
we`re talking about down time and the more possible impact a gas prices.
So, if this storm is a category three or four, it could mean refineries are
down for one to two weeks maybe even longer.

And the longer we go, it`s kind of an exponential rise that we can expect
in gas prices. Right now, there`s kind of a low to medium risk of prices
nationally going up to 5 to 10 cents, but that could greatly change as this
hurricane continues to gain strength.

HERERA: What are you going to be watching for in this particular storm?
I`ve heard various different predictions, one you just mentioned the
category of the particular storm. The other is how long it lingers over
land? Which might really affect the refineries more than if it just moved
through very quickly.

DEHAAN: Yes, that`s right.

I think that`s the biggest potential of this storm sits and surges and
drops rain all over the area, I think the primary concern I would look at
is flooding, storm surge, and, of course, power outages — how long the
power may be out could greatly impact things as well.

But right now, I think the key risk is water. You`re talking about
measuring rainfall not in inches but in feet. That could be a big problem
for these refineries that are tremendously complex.

HERERA: Are there certain parts of the United States that you think might
see the spike in gas prices or at the very least an increase in gas prices,
rather than other parts of the U.S.?

Almost certainly, the Gulf area, that`s the primary market that these
refineries serve. So, you`d be talking about the South, the Southeast,
maybe even the mid-Atlantic because of the massive colonial pipeline which
runs all the way up to New Jersey does pick up supply from Gulf Coast
refineries and starts to head up the East Coast. So, primarily, those two
or three areas South, Southeast and Northeast.

But keep in mind, there is a sympathy factor here that refineries in other
areas of the country, mainly the Gulf Coast and the Midwest — excuse me,
the Great Lakes and the Midwest may start actually sending gasoline down to
the Gulf. That could bring prices up in the Great Lakes as well.

HERERA: All right. On that note, we will keep our fingers crossed and
hope for the best. Patrick, thank you very much. Patrick DeHaan with

DEHAAN: My pleasure.

HERERA: On Wall Street, stocks wobbled between gains and losses ahead of a
speech by Fed Chair Janet Yellen tomorrow at an annual gathering of central
bankers. We`ll have more on that in just a moment. The Dow Jones
Industrial Average fell 28 points to 21783, the Nasdaq was off seven, and
the S&P 500 was down five.

House Speaker Paul Ryan is pushing the Republican plan to cut corporate
taxes, and simplify individual returns. Today, he discussed the need for
reform with a group of Boeing employees at its plant in Everett,
Washington, and his discussion on taxes came just hours after President
Trump blamed congressional Republican leadership for what he called the
mess awaiting them this fall as they seek to raise the debt ceiling.

Ylan Mui traveled to Washington to talk to Speaker Ryan.


taking the case for tax reform on the road. He was here in Everett,
Washington, touring a Boeing facility and talking with employees as well as
the company`s CEO Dennis Muhlenberg.

But President Trump threw a wrench in the tax reform message with a tweet
that blamed both Speaker Ryan and Senate Majority Leader Mitch McConnell
for not having raised the debt ceiling yet. I sat down with Speaker Ryan
for an exclusive interview, and here`s his response to President Trump.

REP. PAUL RYAN (R-WI), SPEAKER OF THE HOUSE: I don`t really take it as
going after me. Look, that`s an option we were looking at, but the V.A.
deadline came up and we weren`t able to do that then. I`m really not that
worried about this.

We have plenty of options ahead of us. We will pay our debts and we will
make the debt limit. We will hit the increase before this is penetrated.
Meaning, we will pass a debt limit increase before we hit the debt limit,
plenty of options in front of us. That one just wasn`t available for us.

MUI: Do those options include a clean hike of the debt ceiling?

RYAN: There`s a bunch of different options in front of us. I`m not going
to kind of negotiate to the media, but we have a lot of options in front of
us. I`m really not worried about getting this done because I know we will
get this done and we will pass the increase before we hit the debt limit.

MUI: Tax reform is Republicans` signature issue. Paul Ryan wants to
simplify the tax code and rewrite it completely. But that could mean
taking on some popular deductions like the one for mortgage interest.

RYAN: We recognize, acknowledge and believe, you need to maintain the
mortgage interest deduction. Whether it can be improved and how it works
that`s the decision in the discussion will happen an ongoing basis and
that`s what the ways and means committee has all their hearings and process
for. The point being we`re going to maintain some of those critical things
because we think they`re very important.

Homeownership charitable giving we`re saving for retirement these are
things that everybody needs to do, everybody wants to do in conjunction
with them dramatically simplified tax code.

MUI: Ryan acknowledged in our interview that tax reform is gonna involve
some hard trade-offs and that every household in business is going to have
to be willing to give up some goodies if we want to lower rates across the

For NIGHTLY BUSINESS REPORT, I`m Ylan Mui in Washington state.


HERERA: Mortgage rates are now at their lowest levels of the year.
According to Freddie Mac, the average 30-year fixed rate fell to 3.86
percent. The rate has dropped for three straight weeks.

Yields on the 10-year treasury have fallen during that time his investors
put more money into safe haven government bonds. Mortgage rates tend to
closely track the yield on the 10-year notes.

It was a disappointing week for the housing market with yet another weak
sales report out today. Existing home sales unexpectedly fell last month.
Yesterday, you might recall, we told you sales of newly constructed homes
also dropped.

Diana Olick explains why buyers are holding back.


sales of existing homes fell to the lowest level in almost a year, well
below expectations, and realtors put the blame squarely on supply.

up many of the properties and then when the market was down and airport has
very little available for home buyers, for owner occupancy at the lower
price points.

OLICK: And that is where most of the demand from younger first-time buyers
is, builders aren`t helping much either, still focusing on move up product
even though their sales slumped in July as well. The inventory of homes
for sale has now been dropping for three straight years and pushing home
prices to new highs. July`s median sale price for an existing home hit a
new record.

Part of that is just because more high-end homes are selling, at the start
of when home prices were just beginning to bounce off the bottom of the
housing crash, the share of homes sold above half a million dollars was
just percent of all sales, 40 percent of the market was homes priced below
$ 100,000. Today, that high-end share is more than 14 percent, the low end
is less than 10 percent.

(on camera): Some are even calling it an inventory crisis with no
turnaround inside, not even in the dog days of summer when demand usually
wanes and supply is able to rebuild again.

For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Washington.


HERERA: Housing is indeed a key part of the economy but overall economic
growth has been muddling along. That`s just one of the issues that will be
discussed by Fed Chair Janet Yellen and other central bankers at the annual
gala gathering of policymakers in Jackson Hole, Wyoming, and that`s where
Steve Liesman is tonight.


gathered beneath the Tetons a decade ago, they worried about recession and
a looming global financial crisis. Circumstances are different and
somewhat better this year for the annual Kansas City Fed symposium, but
issues are still pressing. For the first time in a decade, the world`s
major economies are growing. Instead of being on the verge of buying
assets and cutting interest rates to battle recession, the Fed is hiking
and near a decision to sell assets perhaps as soon as September.

ESTHER GEORGE, KANSAS CITY FED PRESIDENT: You saw the minutes of the last
meeting, markets are expecting any time now looking at September and out
that is always a function of what issues are going on when we meet to make
that decision. But I think the setup is there, describing how that would
happen and the approach that the committee would take.

LIESMAN: But there`s still considerable uncertainty, complicating the
outlook is a potential government shutdown next month that could give the
Fed pause if it really happens and President Trump hasn`t yet decided who
he`ll pick to head the central banks so this could be Janet Yellen`s last
meeting as Fed chair unless she`s reappointed.

Also unclear is whether Congress and the president will succeed at
delivering fiscal stimulus in the form of tax cuts or infrastructure
spending and the Fed is debating why it continues to miss its inflation
target and whether it should hold off raising interest rates again until it
gets close to its 2 percent inflation target.

ROBERT KAPLAN, DALLAS FED PRESIDENT: The issue as you know is about
inflation and I think I`m really trying to weigh the conflict between the
cyclical factors which should be creating more inflation although with a
lag and some of these structural factors like globalization, technology-
enabled disruption that are muting pricing power of businesses.

And I`m not saying that we won`t act by the end of the year, I just want to
be — I think we have the ability to be patient here and seem more
information and see how these forces unfold. Meanwhile, European Central
Bank President Mario Draghi is set to speak Friday as markets speculate
whether he`ll announce plans to reduce stimulus on the continent next year.

So, it`s the same majestic mountains but a new set of issues — global
growth rather than recession, exiting easy monetary policy rather than
launching it, and potentially new leadership on the way at the Federal

For NIGHTLY BUSINESS REPORT, I`m Steve Liesman in Jackson Hole.


HERERA: Still ahead, Amazon is coming out swinging and that means cheaper
items at Whole Foods starting Monday.


HERERA: Shares of retailers that sell groceries fell after Amazon said its
acquisition of Whole Foods will close Monday, and starting Monday customers
will see an immediate markdown in prices on a number of items like
avocados, organic salmon and baby lettuce. Amazon said it will continue to
lower prices at Whole Foods stores and will eventually offer special
discounts and benefits to Amazon Prime members. There are concerns among
investors that that move could start a broader price war. And as a result,
shares of Kroger, Supervalu, Costco and Walmart all fell pretty

And on a day that saw grocery stocks fall, some traditional retailers saw
their stocks trade higher after reporting upbeat earnings it`s not often
that shares of Guess, Abercrombie and Fitch and Signet and Perry Ellis see
double-digit gains, but that`s what we saw today.

And Bob Pisani tells us if there`s a glimmer of hope in the retail malaise.


dismal retail earning season but in the last few days, several retail or
small ones have reported earnings better than expected. Signet Jewelers,
Dollar Tree and Guess all beat and raised guidance. Tiffany beat and they
affirmed guidance.

So, these are some glimmers of hope. Why?

Because there`s some indication that after a long and ugly couple of years,
some kind of bottom may be happening. Now, many retailers reported a
sequential improvement from the first quarter to the second quarter of this
year, particularly in same store sales. And after two quarters were
overall earnings declined year-over-year, earnings in the second quarter
for retailers as a whole rose 0.2 percent.

But it`s all very tentative. Here`s the problem no one believes that the
disruption from Amazon or other online competitors is over yet. No one
knows if the retail industry can ever return to any real growth and no one
knows who might even survive in the next 12 months. There`s two dozen
companies that have gone bankrupt in the past two years alone, including
Limited, Wet Seal, RadioShack, Payless, Gymboree. Many that are left are
ghosts (ph), they`re trading under $10.

But hope springs eternal. Investors have been cheered by the recent spate
of reports. So, retailers as a group are up nearly 2 percent this week.
But we`ve seen this before.

Remember, investors were hoping for better news from the bigger retailers
who reported earlier. They bought up the prices going into earnings season
and when the big guys like Macy`s and JCPenney, they all failed to deliver.
They sold them all off. We`ll see if that happens again.

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


HERERA: Weak coffee sales hurt results of J.M. Smucker, and that`s where
we begin tonight`s “Market Focus”.

The maker of Folgers Coffee and Jiffy Peanut Butter said its decision
earlier this year to raise coffee prices negatively impacted demand and
contributed to that company`s lower than expected revenue. Earnings also
missed the mark. Smucker lowered its guidance for the full year. Shares
fell more than 9 percent to $107.51.

Hormel also slashed its forecast for 2017, saying higher raw materials
costs would eat into profits. In the latest quarter, the meat producer
reported disappointing earnings and revenue as lower sales of some of its
products hurt results. Hormel shares were off 5 percent to $32.09.

Roofing and building supplies distributor Beacon Roofing Supply is buying
rival CRH`s distribution business for more than $2.5 billion. Beacon said
that deal will allow it to enter more markets in the U.S. and help growth
in key product categories. Shares of Beacon Roofing Supply jumped nearly
10 percent to $43.54. CRH shares rose more than 3 percent to $35.56.

And after the bell, Ulta reported profit and revenue that grew more than
expected as shoppers spent more online and on higher priced cosmetics.
Same store sales also picked up some gains but they weren`t good enough to
beat expectations. The company also sees earnings for the current quarter
below street estimates and that initially pressured shares in after-hours
trading, but they ended the regular day of fractionally to $233.71.

Most people entering or living in retirement could see health care costs
eat away at their nest egg. That`s according to Fidelity. A 65-year-old
couple retiring this year will need about $275,000 to cover health care and
medical expenses in retirement. That`s up 6 percent from a year ago, and
it doesn`t include long-term medical costs.

Adam Stavisky is the senior vice president of Fidelity`s benefit consulting
group and he joins us now to talk about it.

And, you know, it is up 6 percent, but it`s up a lot more from when you
first started doing this survey, what, 2002, I believe, right?

Correct. It`s up a tremendous on health care trend is one of the most
unrelenting features in the in the economy.

HERERA: Why is it so expensive? Is it because our health care system is
inefficient? Is it — is it because we`re not as healthy as we should be?
Maybe, it`s a combination of all of those things.

STAVISKY: Yes, I was told we had three minutes. So, yes, it`s a
combination of many things and all of them are continued to press on these
costs. So, people all have to understand that that as wonderful as
Medicare is, they still have a tremendous amount financially that they are
obligated to.

HERERA: When you talk to Fidelity clients and others when you do this
survey, are they at all aware of or have they planned for how much this may
cost them?

STAVISKY: So, our clients are the employers and this estimate every year
is we hope a clarion call to educate themselves to the obligation that they
face. So, the understanding is intermittent at best.

HERERA: What are employers doing to help people, young and old, that are
in their employ to prepare for this type of expense?

STAVISKY: There`s a few different things. There`s programmatically what
they can do is do the benefits they offer their employees allow them to
avail themselves of all the different tax features that we have, whether
it`s the 401k plan, Roth, HSAs, a lot of different things. And then beyond
that, they need to educate people so that they understand what again their
obligations are and they need to find a way to speak to them that`s not all
this gobbledygook about the complexity of healthcare but in a way they can
relate to.

HERERA: I think most people who retire think that Medicare is going to be
there for them.


HERERA: Now, there`s this whole push towards Medicare supplementary
insurance. But I think it`s difficult for people to think that they`re
going to need that much money. They don`t want to admit that maybe they
won`t be in the best of health. They don`t want to admit that they aren`t

STAVISKY: These numbers daunting, and there`s no two ways around it. And
so, we hope that people will start to prepare as best they can and the
eventuality is that I think the onset and definition of retirement for
working America is going to change.

HERERA: All right. Adam, kind of sobering but at least you put the clarion
call out there as you said and maybe people can start saving sooner rather
than later.

STAVISKY: Thanks for having me.

HERERA: Thanks, Adam.

Well, coming up, why temperatures are rising in Miami Beach and we`re not
talking about the weather. We`re talking about the push to raise the
minimum wage.


HERERA: Obamacare plans will be sold in every part of the U.S. next year.
Today, nonprofit managed care company care source agreed to sell plans in a
small Ohio county, which had been left without coverage when Anthem pulled
out. While every county in the country will have an insurer the centers
for Medicare and Medicaid said more than 1,400 could have only one insurer
next year. State regulators have been negotiating with insurers to sell
plans in counties where many of the big insurers have exited.

Apple plans to build its next U.S. data center in Iowa, more than $200
million in incentives were approved by the Iowa Economic Development
Authority. Apple plans to spend more than $1 billion to build two state-
of-the-art data centers on 2,000 acres in Waukee. The project is expected
to create jobs which pay a minimum of about $29 per hour.

The number of Americans filing for unemployment benefits rose less than
expected last week. Initial claims for unemployment benefits increased
2,000 to a seasonally adjusted 234,000. The latest data suggests a further
tightening in the labor market conditions.

Claims have been below 300,000 for 129 consecutive weeks. That`s the
longest stretch since 1970.

And while the job market remains strong, wages have barely budged and
there`s been a big push nationally to raise the minimum wage. That`s a big
focus for small business owners in Miami, which is the top city for start-
up activity.

Kate Rogers has our story.


Panther Coffee in Miami Beach, Florida, no worker makes less than $10 an
hour. In fact with tips, most entry-level workers take home an average
hourly pay of $15. Husband-and-wife team Joel and Leticia Pollock say
generous pay is essential to their businesses and success.

without a team. And if people come to work and they don`t feel appreciated
or they don`t feel respected, I find a minimum wage disrespectful.

ROGERS: But a battle is brewing in Miami Beach over raising the local
minimum wage. City officials voted to increase it to more than $13 an hour
by 2021, nearly $5 above the state`s current minimum. But earlier this
year, a judge ruled against that wage hike and arguments are set to begin
an appeals court this fall.

The battle comes as the national push to raise wages rose. More than half
of states nationwide now have wage floors above the federal minimum of
$7.25 an hour. Advocacy groups like the Florida Retail Federation say a
wage hike would damage local business rope and negatively impact workers.

you`re talking about mama pop shops that have a really finite amount of
money to spend.

ROGERS: Adam Meltzer, owner of the Daily Creative Food Company,
understands the concern. He says any wage above $13 an hour would cause
him to make some tough choices at his small business, where he also begins
pay at $10 an hour.

some problems where we would have to actually decrease the amount of hours
minimum wage employees worked. We also might have to raise menu prices
which would affect customers, which would also affect possibly the overall
business as a whole.

ROGERS: But Miami Beach`s Mayor Philip Levine told us living on an hour
simply isn`t doable in the city.

MAYOR PHILIP LEVINE (D), MIAMI BEACH: The question is how do you live?
Will you live because the government`s going to help you? They`re funding
you with subsidized programs, welfare programs, social programs? So,
basically, the taxpayers are subsidizing the cost of businesses.

ROGERS (on camera): One thing is for sure, entrepreneurs like Meltzer and
the Pollocks will be closely watching this case as they make decisions
about hiring and expanding right here in the city.

For NIGHTLY BUSINESS REPORT, I`m Kate Rogers in Miami Beach, Florida.


HERERA: And to read more about the minimum wage debate happening in Miami,
you can always head to our Website,

And finally tonight, the winning Powerball ticket was sold to a hospital
worker in Massachusetts. She claimed the biggest, undivided jackpot in
history, more than $750 million. She chose to take a lump sum payment of
$480 million or $336 million dollars after taxes.

Today, she said it`s all still sinking in.


MAVIS WANCZYK, POWERBALL WINNER: I just want to sit back and relax and my
— I had a pipe dream and my pipe dream is finally come true and I want to
retire in 12, and it came early.


HERERA: She said that before the news conference. She called her employer
and said she would not be coming back. Can`t blame her.

That`s NIGHTLY BUSINESS REPORT tonight. I`m Sue Herera. Thanks so much
for joining us.

Have a great evening, and we`ll see you here tomorrow.



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