Transcript: Nightly Business Report – September 18, 2017

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

records is fifth straight record close and financials lead the way, ahead
of the start of this week`s meeting of Fed policy makers.

Students from across the globe used to flock to American MBA programs. But
that appears to be changing now.

HERERA: Best drama. Not on screen but behind it, as streaming newcomers
solidify their grip on the television industry.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Monday,
September 18th.

MATHISEN: Good evening, everyone, and welcome.

Well, the rally just keeps rolling on on Wall Street. The blue-chip Dow
index made a quiet climb to its fifth consecutive record close. The S&P
500 also hit an all-time high. Wall Street cheered a big defense industry
deal — more on that in a minute.

And investors put money into financial stocks, ahead of the start of a two-
day meeting of Federal Reserve policymakers.

And many say the grind higher will continue as long as economic growth
remains solid. The Dow Jones Industrials gained to 63 to 22331, Nasdaq was
up six, the S&P 500 added three.

Bob Pisani with more now on the week ahead and the markets move higher.


highs again today. There`s several factors moving stocks. First, a strong
momentum, crossing 2,500 in the S&P 500 was an important psychological
breakthrough, and the market has shown no signs of breaking down.

Europe`s coming back strong as well after a weak summer hurt by the
stronger euro. The S&P is up more than 1 percent this month. If we end
here, the S&P 500 would be up six straight months. That hasn`t happened
since 2013. Then, there`s North Korea where tensions for the moment are

President Trump spoke at the United Nations for the first time today, gave
a moderate speech. Stocks moved up after his speech but the hard part is
ahead where he will be seeking to persuade rural leaders to put even
tougher economic sanctions against North Korea.

Finally, there`s the Fed meeting. No rate hike expected, but the Fed will
announce normalization of its balance sheet and Chair Janet Yellen has
already said it`s going to be like, quote, watching paint dry. Meaning,
it`s going to be slow and it`s going to be designed not to surprise anyone.
We`ll see. That`s what they want.

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


HERERA: So, here to discuss how all of the factors you just heard about
could shape these markets this week is Michael Farr. He is president of
the money management firm Farr, Miller and Washington.

Good to see you, Michael.


HERERA: So, it`s a Fed week. Are we risk on or are we risk off given all
the things that that Bob has really detailed for us?

FARR: We are risk on once again. I mean, you know, we had the hurricanes
coming at us. We had missiles from North Korea flying over Japan, and I`m
smiling and I really shouldn`t be. I mean these are dramatically serious,
horrible things going on around the world and potentially more horrible
things to come, at least over in North Korea.

Markets just go higher. That risk off trade was very temporary, where
bonds rallied they`ve given back all of that rally. The dollar has been
weaker, but stock prices are going higher and making new highs. Nothing is
keeping stocks down here lately.

MATHISEN: Is there anything that would cause you to change that view,
Michael? On other words, should I be now being a little prudent and taking
some profits that I may have made?

FARR: You know, Tyler, I think any time the minute the market is making
new all-time highs, as it has here, you have to remember the old rule that
you buy low and you sell high, and this certainly isn`t low. So, you have
to be buying with caution, and you have to be very careful about the
exposure that you have out in the market.

And, you know, I think one of the things that`s been going on that`s been
driving stocks is people have been buying the dips and I think people have
been shorting stocks and when they short them and they — and the stocks
continue to rally, you know, the people — the people say, you know, we`ll
cover those short positions. They`re driving them higher.

So, I think there`s a lot that`s been driving stocks higher until we reach
that one point, nobody can ever predict it and maybe it`s a North Korea
thing and maybe it`s something we can`t think about yet in terms of whether
we get tax reform or not, there`s going to be that one moment where people
say, I`m not going to buy it — buy this dip.

HERERA: Would that —

FARR: That`s — it happens every time, but it`s been looming out there and
with — we`ve been waiting for it for over a year and a half.

HERERA: Right, we have. Might that moment surround whatever the Federal
Reserve decides to do or not to do this week?

FARR: I doubt it. You know, Sue, this seems still to be the most dovish
Fed we`ve ever had in the — in the history of Feds. Now, I think too
little attention is being paid to this roll-off and taper of the — of this
$4.5 trillion portfolio. The Feds set to do it. This is a tightening
move. It will remove accommodation. So, it`s a big deal.

But they`re not going to tighten and I think people, the street will pay
more attention to the language that says we might not tighten for the rest
of the year, then they will actually this rolling off of the portfolio.

HERERA: Right. On that note, Michael Farr — Michael, thank you very

FARR: Thank you for having me.

HERERA: Michael Farr with Farr, Miller and Washington.

MATHISEN: And now to the economy. Home builders are growing a little bit
more cautious following Hurricanes Harvey and Irma, with maybe another yet
to come. According to a new report, builders are growing concerned about
the availability of labor and the cost of building materials, but once the
post-hurricane rebuilding process is underway, the industry does expect
builder confidence to return to the higher levels of last spring.

HERERA: Investors are always keeping an eye on geopolitics and today,
Defense Secretary James Mattis says the U.S. has not shot down any of North
Korea`s missiles, including the two that recently flew over Japan because
they did not pose a direct threat.

Meantime, U.S. military forces carried out several flights over the Korean
peninsula in joint bombing drills with allies amid escalating tensions
between Washington and Pyongyang.

MATHISEN: And it is those rising tensions that led to a deal in the
defense industry. Northrop Grumman (NYSE:NOC) will buy Orbital ATK for
nearly $8 billion. That sent shares of Orbital up 20 percent, Northrop
rose more than 3 percent.

And as Morgan Brennan reports, the acquisition puts Northrop Grumman
(NYSE:NOC) front and center in the military space race.


defense, the forces behind Northrop Grumman`s nearly $8 billion deal for
Orbital ATK. The surprise acquisition could close next year and Orbital,
at least a start, will operate as a standalone segment.

On a conference call with investors, CEO Wes Bush said this will enable
Northrop Grumman (NYSE:NOC) to better compete for government contracts,
especially since space is becoming a more crucial part of the U.S. security

WES BUSH, CHAIRMAN & CEO, NORTHROP GRUMMAN: Together, we will be able to
serve our customers` growing need to re-architect the approach to the broad
space mission in light of the increasing threat profile in that operational
domain. We can no longer treat space as a permissive environment.

BRENNAN: Orbital`s portfolio will expand Northrop`s reach and space
precision guided missiles and missile defense, three key areas poised for
big growth, thanks in part to North Korea.

Analysts say the deal will drive sales on top of the surge already expected
as Northrop benefits from its secretive B21 stealth bomber, as well as more
F-35 fighter jet orders, to which the company is a top supplier. It marks
a big shift in strategy from share buybacks to a vertical expansion that
sure to spur industry reaction.

PHILIP FINNEGAN, TEAL GROUP: You`ll see some of the larger companies,
competitors of Northrop Grumman (NYSE:NOC) like Lockheed Martin (NYSE:LMT),
Boeing (NYSE:BA) reassessing their portfolios, seeing ways they should make
adjustments to possibly deal with any sort of competitive threat they see
from the combination of Northrop Grumman (NYSE:NOC) and Orbital ATK.

But it also raises questions about whether the government will give the
green light since defense is highly regulated and already very
consolidated. To that, Northrop and Orbital say the tie-up will cut costs
and create more competition for certain types of contracts.

Shares of both rocketed on the news but so too the smaller defense
suppliers, names like Aerojet Rocketdyne, Harris (NYSE:HRS) Corp, Kratos
Defense and Security Solutions and AeroVironment (NASDAQ:AVAV), which
analysts say are now sure to become takeover targets.



HERERA: Still ahead, the pressure is building on insurers as the fight
against opioid addiction intensifies.


MATHISEN: European countries have signaled that they want to hike taxes on
Internet firms, but they`re divided on how to do it. Finance ministers
from 10 European Union countries over the weekend announced their support
for a new plan that would tax the revenues of companies like Google
(NASDAQ:GOOG), Facebook (NASDAQ:FB) and Apple (NASDAQ:AAPL), that have been
accused of paying too little by booking profits in low tax rate countries.


We feel that those companies should pay their fair share of tax where they
create value and profits. There was a first discussion. We already have
some proposals like a common consolidated corporate tax base. We are
working in the framework of OECD and G20, and we want to work in that
global fora.


MATHISEN: Now, the plan faces some pushback. Smaller members of the bloc
like Denmark Luxembourg and others have warned that higher taxes could
potentially push innovative companies away from Europe. The E.U. hopes to
reach an agreement by year`s end.

HERERA: The Department of Justice has reportedly opened an insider trading
investigation into Equifax (NYSE:EFX). According to “Bloomberg”,
regulators are looking specifically at executives who sold stock before the
company disclosed a data breach which exposed the personal information of
143 million Americans. Three senior executives sold almost $2 million
worth of Equifax (NYSE:EFX) shares.

A statement from Equifax (NYSE:EFX) said the executives had no knowledge of
the breach before they sold.

Shares of Equifax (NYSE:EFX) though are off more than 30 percent since that
breach was disclosed earlier this month.

MATHISEN: The opioid crisis has focused attention on whether too many
doctors prescribed too much of the highly addictive painkillers too often.
But now, a spotlight is on the role that insurers and the pharmacy benefit
managers that run their drug programs play in steering patients toward
opiates instead of more expensive but less addictive alternatives.

Meg Tirrell reports.


have a huge impact on which medicines are prescribed and taken by patients.
Now, a group of state attorneys general is examining health insurers role
in the nation`s opioid epidemic, what they called the preeminent public
health crisis of our time.

The group of 37 state attorneys general wrote a letter today to the CEO of
America`s Health Insurance Plans or AHIP, the lobbying group for health
insurers, urging it to encourage members to review their policies around
opioids. They asked AHIP`s members to, quote, encourage health care
providers to prioritize non-opioid pain management options over opioid
prescriptions for the treatment of chronic non-cancer pain, saying no
comprehensive effort to address an end the opioid epidemic can ignore the,
quote, ever increasing number of prescriptions for opioid painkillers.

The letter comes after a “New York Times (NYSE:NYT)”/”ProPublica”
investigation suggested health insurance policies could be contributing to
opioid prescribing. The analysis of Medicare prescription drug plans
covering more than 35 million people found that almost every health plan
covered common opioids with few restrictions. But that`s some non-
addictive more costly pain medications require additional steps to receive

Moreover, the investigation found that it can be easier to obtain coverage
for opioids than for treatment for opioid addiction. In addition to the
letter to AHIP today, New York Attorney General Eric Schneiderman sent
letters last week to the three largest pharmacy benefits managers or PBMs,
seeking information about their role in administering prescription drug
benefits amid the opioid crisis. Both insurers and PBM say they`re
addressing the issue. Express (NYSE:EXPR) Scripts of PBM pointed to
actions it`s taken to prevent opioid addiction, including counseling.

AHIP said in a statement that it shares the commitment of the state
attorneys general to eradicating the opioid epidemic in America, quote:
Health plans work closely with doctors and nurses on the safest, most
proven, and most effective approaches to manage pain, the insurer group
said. Many health plans have instituted new programs that are helping to
dramatically reduce how much and how often opioids are prescribed.

The focus on insurers and PBMs adds to already heightened scrutiny on drug
makers, distributors, pharmacies and doctors, all while the opioid epidemic
rages on.



HERERA: UBS turns bullish on Caterpillar (NYSE:CAT) and that`s where we
begin tonight`s “Market Focus”.

Analysts at the firm lifted their rating on Cat from buy to neutral, saying
the equipment maker is expected to benefit from a rise in private
construction activity here in the U.S. UBS also cited Caterpillars`
growing cash position and said it is seeing new evidence that the company`s
improving earnings will continue. So, shares rose 2 percent to $123.83.

Known short seller and Citron Research founder Andrew Left is taking aim at
his next target. In a report released today, Left called technology maker
Ubiquiti Networks a total fraud, saying the company`s operating margins
don`t line up with the industry average. He also said it`s only a matter
of time before the SEC launches an investigation into that company`s
finances. Ubiquiti shares fell just about 8 percent to $50.62.

Energy and water analytics company Itron (NASDAQ:ITRI) said that it will
buy Silver Springs Network for $830 million. Silver Springs provides
Internet of things technology to help cities and utilities operate more
efficiently. Itron (NASDAQ:ITRI) said the merger will not only grow its
footprint but also expand its services. Itron (NASDAQ:ITRI) rose 5 percent
to $76.50. Silver Springs spike 24 percent to $16.10.

MATHISEN: On Friday, we told you that financial firm Evercore gave a
bullish call on the chip maker Nvidia. Well, today, the company received
more praise, this time from Bank of America (NYSE:BAC). Analysts there
raised their price target on the stock to 210 bucks a share and said Nvidia
could be the dominant product supplier to the $30 billion artificial
intelligence market. Today, Nvidia rose 4 percent to $187.55.

Specialty chemicals maker Huntsman (NYSE:HUN) said it expects this
quarter`s results to improve, this even as the company said it suffered
operational issues at some of its Texas plants following Hurricane Harvey.
Huntsman (NYSE:HUN) said the expected strength in earnings will come from
solid performance of its polyurethanes business. Huntsman (NYSE:HUN) rose
nearly 3 percent to $28.64.

And ahead of its earnings report tomorrow, the shipping giant FedEx
(NYSE:FDX) said it will change shipping rates for 2018 deliveries. The
company will raise rates by an average of about 5 percent. The price hikes
take effect January 1st. Shares finished the day up 25 cents to $215.08.

HERERA: An MBA degree used to be the gold standard for American students
and also international ones. While Americans still strive for a business
degree, schools are finding that students from abroad are having second

Kayla Tausche has our story.


Mishra came to Indiana to study business after jobs and energy and finance
in India. The face value of his U.S. education, $142,000. When he
graduates in 2019, he hopes to work some of that off in the U.S. if he can
get a visa.

for — at least for the next four or five years because it will be much
easier to pay off the debt from the U.S. then probably going back to India
and paying it from there.

TAUSCHE: Other students weren`t as willing to take the same leap.
International applications that IU`s Kelley School fell 19 percent in the
last year, a trend familiar to other business programs. Seventy-five
percent of two-year MBA programs surveyed by GMAC (NYSE:GJM) saw fewer
applicants from outside the U.S.

SANGEET CHOWFLA, GMAC (NYSE:GJM) CEO: They are actually making a fairly
long-term bet.

TAUSCHE: Sangeet Chowfla is the CEO of GMAC (NYSE:GJM), which administers
the admissions exam for business school.

CHOWFLA: Not having clarity of what the outcomes will be and what will
happen when the exit business school is leading them to look at other

TAUSCHE: Options outside the U.S. have been climbing in prestige. In the
year 2000, U.S. business schools represented 32 of the top 40 rankings in
the world. By last year, that number was cut in half.

The highest ranked U.S. business schools are not seeing declines, but
others like University of Iowa are. Its Tippie College of Business in
August announced it would end its traditional two-year MBA program and
focus on more specialized degrees instead.

that for the university and for our colleges, there`s a financial impact.
Anytime out-of-state students, and that means out of country students as
well, anytime that number goes down, that`s going to make it harder for us
to make up the finances, the tuition.

TAUSCHE: GMAC (NYSE:GJM) survey shows school administrators anecdotally
citing anxiety about living in the U.S. and fears of finding employment and

in the news and they`re a little bit worried, will they be as welcome as in
previous years?

TAUSCHE: Visa (NYSE:V) programs have largely remained unchanged, but
President Trump in April called for reforms that ensure companies hire

In August, Trump backed a bill that would shrink legal immigration.
Chowfla says the uncertainty has ripple effects overseas.

CHOWFLA: As long as some of these bills in Congress around H-1B visas do
not get closure, that uncertainty will get in the way of students actually
making an application.

TAUSCHE (on camera): The upshot, more U.S. students are applying and going
to business school, but administrators say diversity at these schools is
paramount for graduates getting hired at large multinational companies and
worried there will be an impact on hiring if the melting pot gets lukewarm.

For NIGHTLY BUSINESS REPORT, I`m Kayla Tausche, Washington.


MATHISEN: Joining us now with more on this is Dennis Yim. He`s the
director of academics for the Kaplan test prep. I wish I had taken more of
my Kaplan prep before I what did my law school exams.

So, Kayla just talked about international applicants to business schools.
They are down. She said American applicants to business schools are
actually steady to up. What`s the total look like?

know, as you know, Kaplan has been in the business for many years and when
we have times like this, we`d like to remind ourselves that the business
school admission trending is cyclical. So, if you think about the
landscape, usually when the job market is poor, you see a lot of
prospective applicants very interested in applying for business school,
because they want to, you know, make them such more marketable as a — and
hope that the job market will improve as they exit the program.

But in times like this, in 2017, and as we`ve seen in the past few years,
we`ve seen the job market be very robust. And for that reason, there`s
more risk for these prospective applicants. They don`t want to leave their
jobs. They have student loans to pay, and it`s a very —

MATHISEN: Under graduate student loans to pay.

YIM: Well, that`s correct.


YIM: And it`s hard to kind of make that investment in pursuing one of the
most expensive graduate programs.

HERERA: Right. But does it pay off?

YIM: Absolutely.

HERERA: If they do pursue it?

YIM: Absolutely. That`s the current interesting kind of situation we`re
in. GMAC (NYSE:GJM) has also released information that both compensation
in the short and long term and the job market has never been better for a
business school graduate, for an MBA — for someone with an MBA degree.

MATHISEN: The cumulative difference over the first couple of decades is
really huge, something like you — they make a median of $2.5 million more
if you look at the total year by year income than a person who doesn`t have
it. Tell me about as Kayla mentioned there, where the weakness in
applications is most acute it would seem would be in the lower tier
schools. The top tier schools are doing just fine, right? The Whartons,
the Harvards, the Stanfords.

YIM: That`s correct. Top tier programs will well less likely be less good
to feel that drop in the applicant pool, whereas low tier programs will
have a harder time kind of attracting these applicants who already have
strong careers and strong outlook.

HERERA: Does it come down to price then? I mean, Harvard doesn`t
necessarily have to cut its prices but does maybe — I mean Kayla profiled
the University of Iowa. Do they have to become more competitive on some
sort of a different basis?

YIM: There`s a lot of factors that students have to consider. I want to
touch upon the — this current political climate as well. We talked about
the uncertainty of what happens after they leave business school.

So, there`s a lot of different factors that go into it. Price is one of
them. The amount of time it takes to invest into one these programs is
another. We see a lot of competing programs in Europe and Asia that are
gearing towards more one-year programs, to allow applicants to spend less
time in school and immediately re-entered the job force when did market —

MATHISEN: And they are becoming more competitive with the domestic
programs. And another thing one of the deans said there is — when you
have fewer out of state or out of country applicants who don`t pay that
discount at in-state tuition, that proves a problem for those schools,
doesn`t it?

YIM: That`s correct.

MATHISEN: The numbers don`t work as well.

YIM: That`s correct. We actually did a survey in August of over a hundred
business school admissions officers and nearly 70 percent noted that they
were worried about the number of international applicants they would
receive over the next few years.

MATHISEN: All right. Dennis, thank you very much.

YIM: Thank you.

MATHISEN: Appreciate you being with us. Again, with Kaplan Test Prep.

All right. Coming up, the power of streaming video takes center stage


HERERA: Toys R Us could file for bankruptcy as soon as this week. There
are reports that the toy retailer has hired a law firm to address its $400
million debt load coming due next year. Like its rivals, Toys R Us has
struggled to keep up with the increase in online shopping, which has forced
retailers to cut prices. And according to “The Wall Street Journal”, some
of the store`s suppliers have reportedly held back on shipments unless Toys
R Us pays for deliveries in cash. Shares of toy makers Mattel (NASDAQ:MAT)
and Hasbro (NYSE:HAS) fell in sympathy today.

MATHISEN: The longtime Cisco (NASDAQ:CSCO) executive John Chambers is
stepping down as chairman. Chambers has decided not to stand for re-
election to the company`s board of directors when his term expires in
December. Chambers has stepped down as CEO about two years ago after 20
years at the helm. He served as CEO at Cisco (NASDAQ:CSCO) from 1995 to
2015, making him one of Silicon Valley`s longest tenured chief executives
and he grew Cisco (NASDAQ:CSCO) into the world`s biggest networking
equipment company.

HERERA: It is televisions biggest night, but the big traditional networks
didn`t steal the show at last night`s Emmys. Instead, it was streaming

Julia Boorstin takes a look at the Internet giant`s push into the TV game.


night on the red carpet for digital video, making gains on broadcast and
traditional TV.

Hulu made history, the first streaming company to ever win the Emmy for
outstanding drama, the most prestigious prize of the night, for “Handmaid`s
Tale”, winning five awards total after the streaming company co-owned by
the media giants won its first Emmys just last year.

Hulu`s growing investment in originals and its bet on adapting the
controversial novel paid off.

KARA SWISHER, RECODE EXECUTIVE EDITOR: I think it`s a it`s a great move
for them to have done this and take it a risk because it`s a very risky
material if you watch it, and I think it says a lot about what consumers
are interested in which is compelling content wherever it`s created.

BOORSTIN: At Sunday`s big ceremony, Hulu`s five total wins put it in third
place, behind HBO with wins and NBC with six awards. Hulu was ahead of
Netflix (NASDAQ:NFLX) with four Emmy awards last night, while Amazon
(NASDAQ:AMZN) came home empty-handed, with no awards at last night`s show.

But Amazon (NASDAQ:AMZN) may be working on another way to get a piece of
the television business. It`s reportedly started talks to buy small TV
channels as it looks to build its video business worldwide.

(NASDAQ:AMZN) is a big data play. So, if they were to get involved from
that perspective, they would have access to viewing habits. This is a
mobile first technology. It would allow them access to the phone. It
really just enhance the knowledgebase they already have on the data front.

BOORSTIN: As traditional pay TV providers increasingly look to offer
skinny bundles with fewer cable channels, Amazon`s prime video offering
could take advantage of the niche channels looking for more distribution.

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


MATHISEN: Amazon (NASDAQ:AMZN) Prime members can also stream NFL games on
Thursday night and if you`re lucky, you`ll be able to watch one of the most
valuable football franchises as ranked by Forbes today. For the 11th
straight year, the Dallas Cowboys hold the top spot, now worth $4.8 billion
despite not having been to the Super Bowl in 22 years.

Number two, the New England Patriots, they`ve been to the Super Bowl plenty
worth just under $4 billion. Rounding out the top three, the New York
Giants, worth $3.3 billion.

Number four, Sue, my Washington Redskins.

HERERA: I noticed that.


HERERA: Packers not on the list. Oh, well.

That does it for us tonight. I`m Sue Herera. Thanks for joining us.

MATHISEN: I`m Tyler Mathisen. Thanks for me as well. We`ll see you back
here tomorrow.



Nightly Business Report transcripts and video are available on-line post
broadcast at The program is transcribed by ASC Services II
Media, LLC. Updates may be posted at a later date. The views of our guests
and commentators are their own and do not necessarily represent the views
of Nightly Business Report, or CNBC, Inc. Information presented on Nightly
Business Report is not and should not be considered as investment advice.
(c) 2017 CNBC, Inc.


This entry was posted in Transcripts. Bookmark the permalink.

Leave a Reply