Transcript: Nightly Business Report – October 16, 2017

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

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: A triple header. Records rebound on Wall Street. Will this big earnings week push the blue chips Dow index past 23,000?

 

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Pledging unity. In a free-wheeling press conference, the country`s two most powerful Republicans say they have a great relationship and plan to work together on taxes, and a health care fix.

MATHISEN: Rising tensions. A conflict in Iraq spilled over into a key oil
producing region and crude prices could head straight north.

Those stories, and more tonight on NIGHTLY BUSINESS REPORT for Monday,
October 16th.

HERERA: Good evening, everyone, and welcome.

Wall Street rising, the three major indexes all closed at records. That`s
not a bad way to start the week. The financials helped lead the way and
the market may have been even higher if not for health care stocks. We`ll
have more on that in just a moment.

But first, here`s a look at the record close. The Dow Jones Industrial
Average gained 85 points to 22,956, the Nasdaq added 18, S&P 500 was up
four.

With the Dow on the verge of 23,000, the next big test for stocks is
earnings.

Seema Mody is at the New York Stock Exchange.

(BEGIN VIDEOTAPE)

SEEMA MODY, NIGHTLY BUSINESS REPORT CORRESPONDENT: The stock market
remains strong, with the Dow Jones Industrial now eyeing 23,000. Investors
attribute the stock market rally to earnings. And earnings season is about
to kick into high gear with 55 S&P 500 companies reporting this week.
That`s 11 percent of the index.

Expectations are high. Wall Street is estimating an average 4 percent jump
in profits from companies in the S&P 500. Financials will likely steal the
spotlight with both Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS)
reporting on Tuesday, with interest rates on the rise, banking analysts are
anticipating a pickup in lending activity.

Other important names on the earnings calendar include IBM, which also
reports on Tuesday, America Express (NYSE:EXPR) and eBay (NASDAQ:EBAY) on
Wednesday, Verizon (NYSE:VZ) on Thursday, and General Electric (NYSE:GE) on
Friday.

Investors will also pay close attention to commentary from check executives
on the impact of the hurricanes on growth. But strategists of Bank of
America (NYSE:BAC) and Merrill Lynch say solid results may not be enough to
move the needle. Guidance now the strongest in nearly seven years needs to
remain healthy. If it`s not, the long bull run on Wall Street could come
to an end.

For NIGHTLY BUSINESS REPORT, I`m Seema Mody at the New York Stock Exchange.

(END VIDEOTAPE)

MATHISEN: President Trump held a free form news conference today, talking
about a number of issues important to business and investors. He led the
Senate Majority Leader McConnell to the White House Rose Garden where the
two said their relationship was better than ever and they declared unity on
tax reform.

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: I would like very much to
see it be done this year. So, we won`t go a step further. If we get it
done, that`s a great achievement. But don`t forget, it took years for the
Reagan administration to get taxes done. I`ve been here for nine months.

(END VIDEO CLIP)

MATHISEN: Health care also a topic. The president said they are working
on a measure to repeal and replace Obamacare and expect to maybe have it by
early next year. And while standing at the podium, he talked about his
decision to end insurance subsidy payments and went after the health
insurers.

(BEGIN VIDEO CLIP)

TRUMP: The insurance companies have made a fortune with Obamacare, an
absolute fortune. As you know what I did with the cuts at the end, which
were all going — you know, you`re talking about hundreds of millions of
dollars a month going right into the pockets of the insurance companies.
And I`m very happy with what I did. And because of that, people are
talking now, Democrats are talking to Republicans for a short term taking
care of what we will call health care.

(END VIDEO CLIP)

MATHISEN: Early in the day, in a cabinet meeting, the president also
talked about a short-term fix and a long-term fix for health care, as you
just heard. And he renewed his attack in the morning on the high price of
prescription drugs.

(BEGIN VIDEO CLIP)

TRUMP: The prescription drug prices are out of control. The drug prices
have gone through the roof. If you look at the same exact drug by the same
exact company, made in the same exact box, and sold someplace else.
Sometimes it`s a fraction of what we pay in this country.

Meaning as usual, the world is taking advantage of the United States.
They`re setting prices in other countries, and we`re not. The drug
companies, frankly, are getting away with murder.

(END VIDEO CLIP)

MATHISEN: Well, those comments pressured some stocks in the health care
sector and that sent the health care ETF lower as you see there.

John Harwood is following the whole story from Washington.

John, he really went across the whole smorgasbord of items. Let`s start
with tax reform. Can Mr. Trump and Mr. McConnell really work together and
get a tax cut package out of Congress by year end?

JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT: They can. It`s
possible. And, certainly, they both have incentives to get that done.

But Mitch McConnell was pretty careful to put some caution on that
prediction about getting it done by the end of the year. He noted that
President Obama had not succeeded on Obamacare or on Dodd/Frank until the
second year in office. So, I would expect that this is going to be on a
slower track than the president hopes for.

But there is certainly the possibility that Republicans can decide, this is
the do-or-die issue, they have to succeed and get it done.

HERERA: What about health care reform and specifically the drug pricing
that the president referenced several times today? I mean, this is
definitely front and center on his radar.

HARWOOD: Well, this is something that he`s talked about since the
campaign. He has occasionally used this as a way of trying to establish
common bond with some Democrats, saying this is something they want to do,
too. But we haven`t gotten any indication that he`s serious about pursuing
this beyond rhetorically.

Is he prepared, for example, to tell the Medicare system, and Republican
Congress to go along, that they can negotiate drug prices with drug
companies? They`re prohibited from doing so now. I would be surprised if
he does more than just talk about this issue. But he`s got the chance to
do it if he wants to.

MATHISEN: And he also came back to the repeal and replace of Obamacare.
He talked about a short-term fix of some sort. But it was unclear what he
was talking about there, that might involve some bipartisanship. What was
he driving at there?

HARWOOD: That was a fascinating part of this news conference. What he`s
talking about are bipartisan talks between Lamar Alexander and Patty
Murray, the chairman and ranking members of the Senate Health Committee, to
restore those very payments that he cut off last week. He described them
today as payoffs to insurance companies, and said the Democrats were doing
favors for campaign contributors.

And he took pride in the fact that their stocks had gone down after he cut
off those payments. But restoring those payments is at the heart of these
bipartisan talks. And people on Capitol Hill were sort of shaking their
heads and saying, wow, this is the kind of thing he`s been attacking. But
the opportunity is there for him to take credit for it, because if in fact
they pass the short-term fix, it will reduce Obamacare premiums. And
that`s something that President Trump could stand up and say, look what I
just did.

MATHISEN: Cut the premiums.

John Harwood, thanks very much. Appreciate it.

HERERA: A new report from the White House said American workers will get a
pay raise if Republicans are able to reduce corporate taxes. The chairman
of the president`s Council of Economic Advisers says cutting the corporate
tax rate from 35 percent to 20 percent would increase household income by
at least $4,000 a year.

(BEGIN VIDEO CLIP)

KEVIN HASSETT, COUNCIL OF ECONOMIC ADVISERS CHAIR: The question is, what
happens if we go down to 20 percent? You know, if we go down to 20
percent, then they`re going to bring that activity back here, increase the
demand for workers here and drive up wages as well.

(END VIDEO CLIP)

HERERA: Hassett added that corporate tax cuts will also help boost overall
economic growth.

MATHISEN: There are reports today that President Trump will interview the
current Fed Chair Janet Yellen this week about potentially staying on in
her position atop the Central Bank. According to “Politico”, the meeting
comes as the president nears a decision on filling that job. Separately,
Chair Yellen gave an upbeat outlook on the economy yesterday, suggesting
that the central bank will soon resume raising interest rates.

(BEGIN VIDEO CLIP)

JANET YELLEN, FEDERAL RESERVE CHAIR: I expect the labor market to
strengthen further as economic growth continues. The hurricanes will
likely result in some hit to GDP growth in the third quarter but a rebound
thereafter. And smoothing through those movements, I`m expecting growth
that continues to exceed potential in the second half of the year.

(END VIDEO CLIP)

MATHISEN: Most economists expect the Fed to increase interest rates at its
December meeting.

HERERA: Oil prices are strengthening, rising towards a six-month high.
Today, they settled above $51 a barrel, as tensions increased in northern
Iraq`s oil-rich Kurdish region. Iraqi forces on Sunday took control of an
oil operation in the northern area surrounding Kirkuk which is an area that
produces hundreds of thousands of barrels of oil per day.

MATHISEN: John Kilduff joins us now to tell us what this all means for
energy prices.

John, this is obviously a very contentious region. The Kurds and the
Iraqis have joined together to fight ISIS, loosely speaking.

JOHN KILDUFF, FOUNDING PARTNER, AGAIN CAPITAL: Right.

MATHISEN: But now, as ISIS threat recedes a little bit, it turns into a
fight over independence for the Kurds and oil, right?

KILDUFF: It`s as if they`re fighting over the spoils of the victory over
ISIS or Daesh. And the strange thing, historically, and for lack of a
better word, is that the Kurds really stand alone as almost friendless,
without allies in the region. Turkey, Saudi Arabia, Iran, Iraq, of course,
none of them want an independent Kyrgyzstan. This goes back to the break
up of the Ottoman Empire. And here we are again.

An interesting intrigue, though, Tyler, this is very worrisome last night,
because we thought as the Iraqi forces were moving on Kirkuk, that this
would be a tough fight. The Peshmerga have acquitted themselves quite well
in terms of being really —

MATHISEN: These are Kurdish forces.

KILDUFF: Kurdish forces, right, sorry. As brutal fighters.

In an intrigue worthy of Shakespeare, they laid down their arms apparently
because there`s infighting amongst the Kurds themselves. So, the Iraqis
just really marched in here and have given the market some — oil market,
anyway, a breath of ease here.

So, the oil price didn`t go up all that much, it jumped over $1 a barrel on
the initial reports. But things calmed today and we`re all watching it
very closely.

HERERA: Yes, it seems as though, and I hate to use this phrase, because
every time you do, something goes wrong, but it`s different this time,
right, for the oil market? Because we have seen these types of skirmishes
in the past. but this time, it seems as though the stakes are much higher
and both sides are much more committed.

KILDUFF: That`s right, and these — this is going on for centuries.

Turkey in particular holds a heavy card here, in that an oil pipeline that
takes about 600,000 barrels of oil a day out of the Kurdish region to the
Ceyhan oil port to the Mediterranean, can be shut off in an instant by
Turkey. Also, too, we know the Saudi king was just on the phone with the
Iraq premier saying they want a unified Iraq, to show you how uniform the
region is against the Kurdish independence movement.

So — but a lot of oil happening in the balance. We know this fighting can
be fierce. It`s another iteration of it. It`s the same Shia-Sunni battle,
interreligious battle that we`ve seen for years now.

MATHISEN: Could mean what? A premium in the price, very quickly, of,
what, $1, $2? What?

KILDUFF: If the fighting were to get heavy-handed, and the oil through
Turkey gets cut-off, anywhere from $3 to $10.

MATHISEN: All right. John Kilduff of Again Capital, thanks very much.
Great to see you.

HERERA: In China, meanwhile, the government is holding its most important
meeting in years. It could shape the future of the world`s second largest
economy.

Eunice Yoon is in Beijing.

(BEGIN VIDEOTAPE)

EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: The biggest political
event of the year in China opened on Wednesday. It`s a 19th Communist
Party Congress. This conference of the national leadership is only held
twice in a decade. Its purpose is to choose who will be in the main
decision-making body for the country for the next five years. The
communist party doesn`t hold discussions in public, so whatever political
deal-making there is goes on behind closed doors.

China watchers are eagerly are awaiting who will get what seats and what
post. But the only real question is how much power President Xi Jinping
will have when it ends.

President Xi is widely expected to solidify his control over the party and
the country putting key allies in important positions. Xi may even have
his name enshrined in the party Constitution which would put him on a level
held by only two people in China`s history. Chairman Mao Zedong, the
founder of the government, and Deng Xiaoping, who opened the economy here
in the 1980s.

China experts are also looking for any signs that Xi might try to extend
his rule beyond what`s become the standard ten-year period.

For investors, it`s not exactly clear what this congress will mean.
There`s hope that economic reform will move more quickly, once President Xi
is in a stronger position, at the same time, many people believe President
Xi could very well maintain the same approach to reform and economic
policy, seen in his first five years in office.

But this conference is more about politics than policy. So, the details of
any upcoming reforms probably won`t be hammered out here. One way this
year`s congress will be different from those in the past is supposed to
take on a more communist and austere feel, in line with President Xi`s
fight against corruption.

Hospitality organizers say that this time around, there will be no free
haircuts or facials, no free fruit in the hotel rooms, and no seafood
delicacies, such as sea cucumbers or prawns to mark this occasion. That`s
important for President Xi as well as the party.

For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon in Beijing.

(END VIDEOTAPE)

MATHISEN: Still ahead, one of the best performing stocks this year moved
even higher late today — in fact, a new all-time high.

(MUSIC)

MATHISEN: The Supreme Court will hear a digital age privacy dispute. The
justices will consider the administration`s appeal of a lower court ruling
in favor of Microsoft (NASDAQ:MSFT). A lower court ruled that the e-mails
sought in a drug trafficking investigation were beyond the reach of a
search warrant because they were stored on a Microsoft (NASDAQ:MSFT) server
in Ireland. The case is just one example of the clash the technology
companies have had with the government over privacy when dealing with law
enforcement issues.

HERERA: The Supreme Court will also hear the government`s antitrust
challenge to American Express (NYSE:EXPR) (NYSE:AXP). That case centers on
whether the company can prevent merchants from asking shoppers to use cards
that charge stores lower fees. Antitrust enforcers have argued AmEx rules
are an unlawful restraint on trade. But AmEx says the rules are good for
cardholders.

MATHISEN: Netflix (NASDAQ:NFLX) added a lot more subscribers than expected
in the most recent quarter and says it plans to spend a lot more on content
next year. The company earned 37 cents a share. That was 5 cents above
estimates. Revenue increased 30 percent from a year ago, to nearly $3
billion. And investors like those results sending shares of Netflix
(NASDAQ:NFLX) to an all-time high in afterhours trading adding to the
stock`s already big games so far this year.

Julia Boorstin breaks down the Netflix (NASDAQ:NFLX) results.

(BEGIN VIDEOTAPE)

JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Netflix
(NASDAQ:NFLX) continues to outperform as its investment in content pays
off. Netflix (NASDAQ:NFLX) adding a better than expected 5.3 million new
subscribers this quarter, and it projects a stronger than expected 6.3
million new subscribers next quarter. In the face of growing competition,
CEO Reed Hastings says its feature largely lies in exclusive original
content and it`s planning to spend more to keep ahead of its rivals, now
saying it will spend $17 billion on content commitments over the next seven
years and it will spend between $7 billion and $8 billion in 2018 alone.
That`s up from the $7 billion previously forecast.

Back over to you.

(END VIDEOTAPE)

HERERA: Thank you, Julia Boorstin.

Nordstrom (NYSE:JWN) suspends talks to go private. That`s where we begin
tonight`s “Market Focus”.

The retailers said members of the founding family have halted their efforts
to find a potential buyer because of difficulties securing the debt
financing. The company also said it may resume that search after the
holiday shopping season. Nordstrom (NYSE:JWN) shares finished down 5
percent to $40.40.

Biotech Exelixis (NASDAQ:EXEL) said its drug for treating kidney cancer
also proved to be effective in treating liver cancer. During a study
trial, the treatment helped patients live longer compared to those who took
a placebo. The company said it plans to file an expanded label for the
drug with the FDA. The shares popped 17 percent to $29.02.

And Allergan (NYSE:AGN) came under pressure today after a judge invalidated
patents on the drug maker`s blockbuster dry eye medicine called Restasis.
The ruling now paves the way for competitors to market a generic version of
that treatment. Allergan (NYSE:AGN) shares fell more than 3 percent to
$198.41.

MATHISEN: The food services agent Aramark said it will buy two private
companies in separate deals totaling more than $2 billion. The company
will acquire Avendra, which specializes in services for the hospitality
industry in an effort to lower its food costs. It will also acquire the
uniform supplier AmeriPride Services to improve by expanding its service
offerings. Aramark shares up fractionally to $42.53.

After the bell today, the drive-in burger chain Sonic (NASDAQ:SONC)
reported a drop in profits and revenue. The company said it`s
disappointing sales were due to an intense competitive environment and the
impact from Hurricane Harvey. Shares initially fell in the extended
session, but ended the regular day up nearly 2 percent at $24.80.

Also after the bell, fire and safety product maker Idex said increasing
demand helped growth and sales in earnings. The company also hiked its
profit outlook for the full year and reaffirmed its sales guidance. Shares
initially unchanged in after-hours trade but they finished the regular
session up 54 cents at $125.06.

HERERA: In Northern California, officials say favorable weather is helping
firefighters gain on the deadly wildfires that have engulfed the state`s
wine industry. But the losses are mounting. Revised early estimates show
the property toll from the fires has more than doubled, to about $3 billion
in losses, destroying 6,700 structures in Sonoma County.

Pacific Gas & Electric (NYSE:PCG) Company said it expects to restore more
power to the area by late today. But that is not helping PG&E`s stock
price which is down for four straight days as investigators look into the
cause of the fire.

MATHISEN: Insurance companies are no doubt watching those California
wildfires just as they are tallying up the impact from the recent
hurricanes, and those hurricanes will likely result in big losses when the
major insurers report their quarterlies. Morgan Brennan has the details.

(BEGIN VIDEOTAPE)

MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
Harvey, Irma, Maria, the three hurricanes may add up to the most costly
hurricane season on record. And that means a big hit to insurers` bottom
lines. Analysts warn the mounting losses from these hurricanes could wipe
out a year`s worth of profits for some insurance carriers.

PAUL NEWSOME, SANDLER O`NEILL MANAGING DIRECTOR: The third quarter is
going to be a tough quarter for just about every insurance company. Most
insurance companies we follow are looking to have most of their third
quarter, if not all of their third quarter earnings wiped out. Some will
have to be a loss. There are even a few that were the losses are so large,
that essentially wiping out the entire year`s worth of earnings.

BRENNAN: Factor in powerful earthquakes in Mexico and the estimated damage
to insured homes, businesses and vehicles could top $100 billion in the
third quarter. And it doesn`t even include flood losses falling to the
federal government.

(on camera): The earnings impact is expected to be so great, Wall Street
now thinks insurer losses will drag down of the entire S&P 500. The good
news? The industry is still sitting on a surplus of capital. Meaning
companies have enough to pay out clients and weather more catastrophes.

But not without making up the difference. Travelers which reports this
week already suspended its stock buybacks. And analysts now expect
companies like Allstate (NYSE:ALL), AIG, Chubb (NYSE:CB) and Progressive
(NYSE:PGR) to consider raising premiums.

NEWSOME: Oftentimes, following large events, particularly ones that are
unusual or change how people think of the risks involved with insurance,
you`ll see an increase in prices. I think you`ll see some of that, at
least if not more, following third-quarter earnings. I think you`re going
to see companies raise prices for coastal areas.

BRENNAN: Prospective hikes that could even potentially push up prices for
consumers and business throughout the U.S. That possibility has fueled a
rebound for insurance stocks ahead of results. But analysts caution after
big events, surprises are all but certain, and unfortunately more losses
from more events will still be coming, including the deadly wildfires that
continue to burn in Northern California.

For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan.

(END VIDEOTAPE)

HERERA: Coming up, the amazing race to get Amazon`s attention.

(MUSIC)

MATHISEN: Security warning tonight that could impact practically everyone
who uses Wi-Fi. A vulnerability was discovered that could let hackers
decrypt and potentially look at everything you do online, including gaining
access to credit card numbers, passwords, e-mails, even photographs.

Tech companies are responding. Microsoft (NASDAQ:MSFT) says it has already
fixed the problem for customers running supported versions of Windows.

HERERA: The Weinstein Company has agreed to a financial life line from the
private equity firm Colony Capital. The deal gives the Weinstein Company
an immediate cash infusion as it reels from the scandal surrounding its
founder, Harvey Weinstein. The amount not disclosed. The two sides will
new discuss selling some or all of the studio`s assets to Colony.

MATHISEN: Well, Amazon (NASDAQ:AMZN) has begun accepting bids for a
location for its second global headquarters. The deadline, Thursday, and
cities and states have fallen all over themselves for the biggest economic
development prizes in recent memory.

Scott Cohn reports from one of the cities that is competing, Chicago.

(BEGIN VIDEOTAPE)

SCOTT COHN, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): This
massive building on the edge of Chicago`s downtown is a throwback to the
last time the city was a hub for home delivery. Once the largest post
office in the world, built to accommodate Sears (NASDAQ:SHLD) and
Montgomery Ward, it closed 20 years ago. Now, it`s one of a handful of
sites that Illinois is pitching as the home of Amazon`s second
headquarters.

GOV. BRUCE RAUNER (R), ILLINOIS: The criteria that Amazon (NASDAQ:AMZN)
put out, we rank at the very top. I believe we`re going to win this. And
we`re all in to win.

COHN: Amazon (NASDAQ:AMZN) says it prefers a metro area with at least 1
million people, a stable business friendly environment, a place with the
potential to attract top tech talent and a place that can think creatively
when it comes to real estate locations.

(on camera): The old Chicago Post Office is certainly creative, nearly 3
million square feet in size. This is the roof. It`s four acres. Chicago
has been trying to find a use for this landmark building for decades.

(voice-over): But creativity alone won`t cut it, not with stakes that are
this massive. The company is promising 50,000 jobs, a $5 billion
investment, and economic multiplier effect like its existing headquarters
in Seattle, which the company says has been worth nearly $40 billion.

No wonder cities are fighting tooth and nail.

MAYOR GREG STANTON (D), PHOENIX: We might have to start with going to the
state to see if we can get the legislature to change the name to Phoenix
Amazona.

COHN: Tucson, Arizona, sent the company a giant cactus.

Gary, Indiana, took out an ad in “The New York Times (NYSE:NYT).”

But not everyone likes the idea. In New York, some protested the use of
taxpayer money, incentives to woo Amazon (NASDAQ:AMZN).

UNIDENTIFIED FEMALE: Amazon (NASDAQ:AMZN) is a multi billion dollar
company and we do not think that they should be getting state and local tax
incentives and financial incentives, when — at the time when our subways
are breaking down and our schools are under-resourced and underfunded.

COHN: But in Illinois, despite arguably the worst state finances in the
nation, the governor says the state can`t afford not to bid.

RAUNER: It`s going to create a massive new economic growth, new jobs,
stronger, higher family income and expand our tax base.

COHN: Amazon (NASDAQ:AMZN) plans to announce its decision next year. A
company known for offering bargains, trying to negotiate one of its own.

For NIGHTLY BUSINESS REPORT, I`m Scott Cohn in Chicago.

(END VIDEOTAPE)

MATHISEN: Well, Scott plans to report from a number of other cities vying
for Amazon`s second headquarters before the company makes its decision next
year.

HERERA: It`s going to be a great series.

MATHISEN: Yes, big.

HERERA: You can see it here on NBR.

MATHISEN: Big.

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

MATHISEN: And I`m Tyler Mathisen. Thanks from me as well. Have a great
evening, everybody. We hope to see you back here tomorrow night.

END

Nightly Business Report transcripts and video are available on-line post
broadcast at http://nbr.com. 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