TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: New record. The S&P 500
and Nasdaq closed at all-time high again. No wonder more investors ask is
this the greatest bull market of all time?
SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Smartphone addiction. Two big
Apple (NASDAQ:AAPL) investors want the company to do more to prevent
overuse by kids. But is it Apple`s responsibility?
MATHISEN: And the long haul. As the economy keeps on trucking so does the
Those stories and more tonight on NIGHTLY BUSINESS REPORT for Monday,
HERERA: Good evening, everyone, and welcome.
Stocks extend their 2018 gains. It wasn`t a rip-roaring rally to start the
week, but it was enough to push the S&P 500 and Nasdaq to new records.
Investors remain upbeat about the economy and confident that it will
continue to pick up steam.
So, here are the final numbers. The Dow pulled back a bit, dropping 12
points to 25,283, the Nasdaq gained 20 and the S&P 500 gained four.
With a string of record runs in 2018 getting off to a robust start, some
may start to think that this bull market is shaping up to be one of the
Mike Santoli picks it up from here.
MIKE SANTOLI, NIGHTLY BUSINESS REPORT CORRESPONDENT: The bull market set
to reach its ninth anniversary in two months is now the second best ever,
which means that investors who expect generous gains from here over the
next couple of years are effectively betting that this bull run can become
the greatest of all time.
In terms of market gains, valuation, and the public exposure to stocks,
only the final years of the 1990s surge sit at higher elevations than the
climb that began in March of 2009. This might sound scary for anyone who
recalls the speculative frenzy of the late `90s market and the wealth
destruction that followed as the tech bubble bursts, but the comforting
news for now is that while today`s bull market ranks number two, it`s still
quite a distance from the excesses of the one that closed the 20th century.
The S&P 500 has gained just over 300 percent from its lows set during the
great financial crisis in early 2009. That compares to a 580 percent
advance that ran from the 1987 crash to early 2000. And while stocks are
rather richly valued today, they are not as expensive as at the 2000 peak.
Finally, retail investors had nearly 80 percent of their financial assets
in stocks and were feasting on half baked initial public offerings 18 years
ago. Today, they hold closer to 70 percent in stocks and most popular
investments are sober index funds.
All this explains why some optimistic strategists are predicting a more
energetic phase of the bull market as public excitement grows and the new
corporate tax cut offers a fresh story line for further gains atop strong
global growth and a healthy consumer. It might all sound too good to be
true and it always makes sense to ask what could go wrong when the crowd is
fixated on the good news.
For as long as stocks keep clicking to new record highs though, the
comparisons with the greatest ever bull market will only get louder.
For NIGHTLY BUSINESS REPORT, I`m Mike Santoli.
MATHISEN: When investors who focused last year on growth stocks were
richly rewarded. Large cap growth funds were up nearly 30 percent in 2017
while large cap value funds rose just under 16 percent. So, will growth
continue to dominate this year or should investors now start to nibble more
in value stocks and mutual funds?
Joining us now to discuss that, Kevin Caron. He`s portfolio manager with
Washington Crossing Advisers.
Kevin, always good to see you.
KEVIN CARON, WASHINGTON CROSSINGS ADVISORS PORTFOLIO MANAGER: It`s good to
MATHISEN: Let`s do a little level setting here. I just love for those who
don`t know those terms of art to hear from you the difference is between a
growth stock or fund and a value stock or fund. What are the distinctions?
CARON: All right. Well, the growth stocks are companies that trade with
higher multiples, multiples of earnings or multiples of book value and
value is going to be lower.
Now, you might say, well, why not always buy the thing that`s cheaper and
the difference is, as you might guess it, guess, growth. So, in the last
year or so, as we`ve seen growth pick up in the global economy and earnings
grow really pick up for the tech sector in particular, we`ve seen the
growth investors be more willing to pay higher multiples to own the growth
sectors. And so, that`s why the growth style has, by far, outperformed the
HERERA: What do you say to those who say that valuations overall, whether
you`re talking about value or growth are still pretty richly valued, no pun
CARON: Yes. Well, they are. And it`s not — it`s really across not just
growth and value, but if you look at the overall stock market, it`s trading
with a value that is relatively high compared to the underlying economy.
Roughly $28 trillion is the value of the U.S. stock market. The economy is
So, by that measure, it`s fairly rough and it`s fairly rich. And also,
price to earnings is fairly high overall. So, they`re both fairly high.
And growth in particular is higher.
MATHISEN: So what are you doing in the portfolios that you manage that our
viewers could then maybe extrapolate and apply in their lives? Are you
paring back your growth allocations and looking at more value companies and
CARON: Yes. So, coming into 2018, we have done exactly that. We have
been overweight growth on prospects of a better growth in the economy. We
have seen that.
But we are getting a little bit concerned about the relative valuation
between growth and value. So, we have trimmed back the growth allocation
from overweight to neutral and we`ve lifted our value weighting from
underweight to neutral, citing better relative valuations for the value
HERERA: How do you feel about the economy overall because that`s basically
what`s going to continue to drive stocks?
CARON: Really solid. There is little in the data that concerns us here.
The earnings are growing nicely. The employment data seems to be fairly
good. And the overall outlook for inflation and interest rates is
So, there is nothing in the immediate data that concerns us. And we would
assume the near-term outlook for recession, for example, would relatively
low and encourage us to remain overweight equities overall compared to
MATHISEN: All right. Kevin, thanks very much. She`s the last guy there
tonight. Go home.
MATHISEN: Kevin Caron with Washington Crossings Advisers.
CARON: Thank you.
MATHISEN: Good to see you.
HERERA: In Washington, the treasury secretary has reportedly asked
Congress to lift the federal government`s debt ceiling by February 28th.
That`s according to “Bloomberg”. The treasury will exhaust all of its
borrowing options and run out of cash to pay its bills by late March or
early April if Congress doesn`t raise its borrowing authority. The
treasury secretary, Mr. Mnuchin, has said repeatedly that he would prefer
the debt limit raised well before the government faces a potential default.
MATHISEN: Dow component Pfizer (NYSE:PFE) will fault research into
Alzheimer`s and Parkinson`s treatments. The drug maker says the decision
reallocates money into other areas. Pfizer (NYSE:PFE) had made big
investments into neuro degenerative diseases. They faced some setbacks
recently. There is no known cure for either Alzheimer or Parkinson`s.
Separately, the bio tech company Axovant will no longer develop a dementia
drug because that drug failed to meet certain goals in recent studies.
Shares of both Pfizer (NYSE:PFE) and Axovant fell, with Axovant, a small
cap stock, seeing its value more than halved.
HERERA: That was just one of the very hot topics discussed at the biggest
health care event of the year.
Meg Tirrell spoke to a number of industry CEOs at the JPMorgan (NYSE:JPM)
health care conference, and that`s in San Francisco.
MEG TIRRELL, NIGHTLY BUSINESS REPORT CORRESPONDENT: A rainy day of weather
kicked off the annual J.P. Morgan health care conference in San Francisco.
It`s the year`s biggest event for health care investing, where more than
450 companies present over four days to more than 9,000 attendees.
It`s always a big conference for deal news and this year, we did get a deal
from Celgene (NASDAQ:CELG). It`s spending $1.1 billion to acquire cancer
drug maker Impact Biomedicine, gaining a drug for a rare form of bone
We talked to CEO Mark Alles about that at the conference.
MARK ALLES, CELGENE CEO: Well, first of all, it`s a hematology play. And
our DNA at Celgene (NASDAQ:CELG) is hematology. Second, it`s a highly
unmet medical need. Myelofibrosis is a rare cancer but at the same time,
until now, there`s been only one FDA approved drug ever for the disease.
TIRRELL: Following the deal, though, biotech stocks were under pressure as
some may have hoped for Celgene (NASDAQ:CELG) or others to do bigger deals
in the space. Many wondering if the U.S. tax overhaul would spur M&A.
We talked to Eli Lilly (NYSE:LLY) CEO Dave Ricks about the impacts of tax
DAVE RICKS, ELI LILLY CEO: We`re worried about the lopsided nature of
foreign competitors with better tax competitors than we did. That`s now
addressed. I think strategically that`s the most important thing that came
out of this tax reform.
It will allow us also to invest without thinking about the tax rate so
much. But rather put plants and labs where it makes sense, where the
talent is and where the markets serving are. So, overall, it was a
successful package from a pharmaceutical sector.
TIRRELL: Other topics on discussion this week have been drug pricing. It
was, of course, during this week last year that President-elect Donald
Trump made his comment that the industry is, quote, getting away with
murder when it comes to its pricing policy. And as companies were updating
on their drug pipelines and other aspects of their businesses, there was
another issue on display, that of gender diversity. According to a recent
effort from STAT News, of the more than 450 companies presenting here at
the conference, only 20 have women CEOs presenting. That compares with 22
presenters at the conference named Michael.
We talked with one of those women CEOs earlier.
KATRINE BOSLEY, EDITAS MEDICINE CEO: If you look at the senior team,
within the company, vice president and above, over half of our team members
are women. But it`s not just about gender. I think it`s a broader
question of diversity because making experimental medicines and advancing
them is tough and having diversity is a strength and part of what`s going
to make us successful.
TIRRELL: Something for the industry to work on in 2018.
For NIGHTLY BUSINESS REPORT, I`m Meg Tirrell in San Francisco.
MATHISEN: Well, there`s also been a big push by Silicon Valley to move
into the very large and very lucrative health care industry.
Deirdre Bosa has that angle tonight.
DEIRDRE BOSA, NIGHTLY BUSINESS REPORT CORRESPONDENT: This year, more than
20 million Americans are predicted to be using smart watches. Many of them
will be using them for more than just telling the time. They will be
tracking how many steps taken, how many calories burned and resting heart
But could a smart watch one day save your life?
Apple (NASDAQ:AAPL) is trying to find out. The tech giant is teaming up
with Stanford medicine for a first of its kind research study that will use
the Apple (NASDAQ:AAPL) watch to detect irregular heart rhythms that could
lead to a stroke.
And it`s not just Apple (NASDAQ:AAPL). Other big tech companies like
Alphabet, Amazon (NASDAQ:AMZN) and Facebook (NASDAQ:FB) are getting
involved in efforts to remake the health care industry.
A few reasons tech is moving into the space. One, it is $3 trillion
industry in the United States. Two, it`s ripe for innovation and
disruption. And three, these companies know consumers and they
increasingly have the scale, data and reach to deliver.
In recent years, their involvement in the health care industry has surged.
According to CB Insights participation in health care equity deals by the
10 largest U.S. tech companies has increased ten-fold in the last five
years to nearly $3 billion last year.
Some of those deals include Amazon`s participation in a financing round for
Grail, a cancer detection startup. Apple (NASDAQ:AAPL) acquired sleep
tracking company Beddit and Alphabet bought Senosis, a health monitoring
Their efforts are much bigger than just those deals. Alphabet has been
expanding verily, its unit dedicated to life sciences. Apple (NASDAQ:AAPL)
has health kit, while Amazon (NASDAQ:AMZN) is quietly moving in for the
moment and Facebook (NASDAQ:FB) is making it easier for pharma companies to
advertise. Increasingly, health care executives themselves are thinking
about disruption and innovation in terms of technology. Biogen CEO says
the biotech industry needs to take the lead in changes and be what he calls
the Tesla of the industry and set new models.
MICHAEL VOUNATSOS, BIOGEN CEO: We need to bring this industry closer to
the consumer, closer to the patients. We are meant to provide support to
the patient who is sick, not to take advantage of those.
BOSA: Meanwhile, some analysts say the road ahead for tech and health care
won`t be without bumps as they learn to understand regulatory procedures
and patient/clinician relationships.
For NIGHTLY BUSINESS REPORT, I`m Deirdre Bosa, San Francisco.
HERERA: Still ahead, screen time. Should Apple (NASDAQ:AAPL) do more to
curb growing smart phone addiction among kids?
MATHISEN: Two prominent Apple (NASDAQ:AAPL) shareholders made an unusual
request. They`re pressuring the company on a social responsibility issue
not a corporate one. The focus is on children and whether the company
should do more to fight smartphone addiction in kids.
Josh Lipton has the story.
JOSH LIPTON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Believe it or not, the
average American teenager got his first phone before he was a teen at
roughly 10 years old. And that teenager today currently spends nearly five
hours a day on it. And that doesn`t even include taking and texting.
Jana Partners and CalSTRS, two Apple (NASDAQ:AAPL) shareholders who own a
combined $2 billion of the company shares are concerned, citing that data
in a letter they sent the iPhone maker over the weekend. The shareholders
are worried that the iPhone could hurt children, saying: As one of the most
innovative companies in the history of technology, Apple (NASDAQ:AAPL) can
play a defining role in signaling to the industry that paying special
attention to the health and development of the next generation is both good
business and the right thing to do.
They point to alarming data that children are increasingly distracted by
digital devices in the classroom and that teenagers who spend too much time
on such devices are at higher risk of depression and even suicide.
One of the researchers cited in the letter says children and their parents
would benefit if they weren`t overusing the devices.
JEAN TWENGE, SAN DIEGO STATE UNIVERSITY: For Apple (NASDAQ:AAPL) in
particular, they make their profit when someone buys the device and owns
it. It doesn`t matter how often they use it. And what the research shows
is for teens, the happiest teens are those who have the phones but use them
about an hour, maybe two hours a day. It`s beyond that when issues start
to show up.
LIPTON: The shareholders want Apple (NASDAQ:AAPL) to convene a panel of
experts to study the issue, partner with experts to conduct further
research and offer parents new tools and options. Apple (NASDAQ:AAPL) does
already offers parents help. They can take an active role in restricting
the apps and features that their children use on these devices.
Some might counter that the responsibility isn`t ultimately with phone
manufacturers but with their parents. And that`s often the social media
apps like Facebook (NASDAQ:FB) and Snapchat where young people spend their
time, but Jana and CalSTRS say that Apple (NASDAQ:AAPL) can do more and
argue that addressing the issue today will boost the long-term value for
all shareholders by creating more choices and options for customers.
For NIGHTLY BUSINESS REPORT, I`m Josh Lipton, San Francisco.
HERERA: As Josh mentioned in his report, today`s typical teenager may
spend nearly five hours a day glued to that smartphone and that lack of
face to face time could be detrimental to a young person`s well-being.
So, is it the responsibility of companies to educate parents on the risk
associated with their products and services?
Here to talk about that is Dan Eaton (NYSE:ETN). He`s a business ethics
instructor at the Fowler College of Business at San Diego State University.
Welcome. Nice to have you here.
DAN EATON, SAN DIEGO STATE UNIVERSITY`S BUSINESS ETHICS INSTRUCTOR: Good
to be with you.
HERERA: So, what do you think about the basic premise that we put forward?
What is the responsibility of a company like an Apple (NASDAQ:AAPL) or
another smartphone maker to the customer and the customer`s parents?
EATON: Well, the responsibility of any company is to make sure that
consumers are sufficiently well-informed of the risks that come from using
their products. So, when you talk about whether it`s a responsibility of
the company on the one hand, or the end user or the parents on the other,
the answer is, well, yes, it`s the responsibility of both.
And it`s really good business. It`s good for the bottom line. This is not
entirely about corporate social responsibility. It`s also about protecting
shareholder value, which is why two big shareholders with $2 billion
invested in this company want pro-action now.
MATHISEN: You know, it`s interesting that these shareholders who happen to
be Apple (NASDAQ:AAPL) shareholders have gone to Apple (NASDAQ:AAPL). It
could be Samsung. It could be another manufacturer, Google (NASDAQ:GOOG)
What they seem to be calling for is, as you say, a more proactive position
on the part of Apple (NASDAQ:AAPL). Potentially to come up with wrinkles
or products that they put on the phone that make it easier for parents to
limit or monitor both the time or the ways — and there are products out
there, but they are not — Apple (NASDAQ:AAPL) already does some of it, but
they are not as easy to use as these people are calling for.
EATON: And it doesn`t seem to take anything away from Apple`s bottom line
to make them easier to use. The bottom line is that there is no defeat
device that is going to override the insistence of a teenager, period. The
bottom line is —
MATHISEN: Well, you can say that again.
HERERA: We both got kids that use them. We know what you are talking
EATON: But that said, it is sometimes the responsibility of these
companies to make it easier for parents to exercise that control.
Barbara Booth (ph), our strategic editor, has an excellent piece on
CNBC.com about the things parents ought to do. It`s with them that the
ultimate responsibility rests. But companies can do more and they should
do more, because it is good business.
This is not just about saving the world. It`s about protecting a
vulnerable population which is children and it`s about giving parents a
tool to do their ultimate job better.
HERERA: Do you think most parents are even aware of how much time their
kids spend on a phone and would they be more proactive if they realized it
or how integral the device is to their daily life?
EATON: They are probably not aware, but they`re going to be more aware now
having watched this segment. And the bottom line is that allowing this
kind of device which controls the amount of time will enable them to place
those controls regardless of how much they know about their own children`s
There was a report in the package that you just ran that children are
happiest when they only use it about an hour or two on the devices. And
this technology will enable parents to ensure their children are as happy
as they can be without getting addicted.
I mean, the piece that Barbara Booth ran talked about what`s referred to as
digital heroin. That`s scary. And it`s better to take steps now to avoid
that kind of thing that to let it get out of control with the reputational
risks that are going to ultimately to jeopardize these two investors`
financial stake in Apple (NASDAQ:AAPL).
HERERA: Dan, thank you so much. Appreciate it. We are all jealous that
you`re out in San Diego and we`re not. Thanks for joining us tonight.
EATON: And yet it`s raining here. So —
HERERA: OK. There you go.
Dan Eaton (NYSE:ETN) with San Diego State University.
MATHISEN: Well, GoPro may be open to selling itself, and that is where we
begin tonight`s “Market Focus”.
Just hours after the wearable camera maker said it was cutting jobs
lowering its fourth quarter sales forecast, “Reuters” said the company has
hired JPMorgan (NYSE:JPM) to help explore a potential sale. The company
which has been experiencing weaker demand said it was exiting the drone
business, cutting CEO Nick Woodman`s salary to a dollar.
Earlier today, Woodman said a potential merger wouldn`t be out of the
(BEGIN VIDEO CLIP)
NICK WOODMAN, GOPRO CEO: If there are opportunities for us to scale
awareness of GoPro globally by being part of a bigger company, that`s
something that we would entertain. But, of course, we need to run the
business as though we are going to be independent. And we are planning
accordingly and we`re looking forward to benefitting from the improved
sell-through we are seeing on all of our products at their new pricing.
And we`re looking forward to profitability in the second half of 2018.
(END VIDEO CLIP)
MATHISEN: GoPro shares plunged nearly 13 percent to $6.56.
The restaurant and gaming chain Dave and Buster`s slashed its full year
profit and sales outlook, after reporting a drop in same store receipts
during the holiday period. The company said weak foot traffic at the
beginning of the quarter never picked up steam, like it initially
Despite the disappointing guidance, Dave and Buster said its new stores are
performing well. Shares cratered, though, 22 percent. They finished today
On the flip side, same store sales at Kohl`s (NYSE:KSS) rose during the
holiday season as more shoppers visited Kohl`s location. The retailer
expects its offerings will continue to attract shoppers. It is hiking its
profit outlook for the year. Shares rose more than 4 percent to $56.90.
HERERA: Tenet healthcare said that it will cut more jobs than planned as
the hospital operator tries to keep a tight lid on costs. The company now
expects to eliminate 2,000 positions which it says will save Tenet about
$250 million. Shares were off 3 percent to $14.95.
Despite reporting solid holiday sales, the discount retailer Five Below saw
its shares pressured after it gave earnings and revenue guidance for the
current quarter that trailed analyst estimates. Shares were down 7 percent
And the footwear maker Crocs (NASDAQ:CROX) is increasing its fourth quarter
sales and gross margin outlook. The company also said it expects operating
costs to be relatively flat compared to last year. Shares of Crocs
(NASDAQ:CROX) finished the day up 8 percent to $13.23.
And after the bell, Urban Outfitters (NASDAQ:URBN) reported a smaller than
expected rise in same store sales during the holiday shopping season. The
shares were initially lower in after-hours trading but finished the regular
session down 1.5 percent to $33.74.
HERERA: And coming up, why one industry just keeps on trucking.
HERERA: A failed Atlantic City casino may get a new lease on life. The
former Revel Casino was purchased by a Colorado developer for about $200
million. The developer called the acquisition a dream come true. He plans
to re-open it this summer around the same time the former Trump Taj Mahal
Casino will re-open under the Hard Rock brand. The former Revel will be
called the Ocean Resort Casino.
MATHISEN: Well, last year was the most expensive on record for natural
disasters. Hurricanes Harvey, Irma, Maria, along with the wild fires that
ravaged the western part of the country, caused more than $300 billion in
According to the National Oceanic and Atmospheric Administration, the
largest cost came from the hurricanes. Apart of last year, 2005 was the
most expensive disaster year. That year, of course, hurricane Katrina
caused more than $200 billion in damage.
HERERA: Takata is expanding the largest automotive recall in U.S. history.
The Japanese air bag maker is recalling 3 million more faulty air bag
inflaters. In total, more than 19 automakers have been affected. And more
than 42 million vehicles. Thos recalls and the criminal convictions
against Takata forced that company to file for bankruptcy protection.
MATHISEN: Have you noticed more and more trucks on the road? Well, the
answer is probably yes. When the economy grows as it has been doing, more
goods need to be transported and that is resulting in a spike in demand for
Morgan Brennan hits the gas.
MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: As the economy
keeps on trucking, so too does trucking. Demand for trucks is
skyrocketing. And that means higher rates. Freight exchange service DAT
Solutions says the price for the common kind of truck jumped to $2.11 per
mile in December, up more than 25 percent from the start of 2017, and
marking the highest monthly average rate since at least 2010.
Analysts say that could go even higher.
DONALD BROUGHTON, BROUGHTON CAPITAL: It`s going to be higher rates for
shippers. The biggest question of shippers is whether or not they can get
the capacity, because if they`re not willing to pay up, they`re not going
to get the capacity. That`s just the clear pattern that`s being
established right now.
For consumers, it means higher prices at the shelf. It means higher prices
delivered, because they`d been getting a discount on shipping. And those
days are over, at least for the foreseeable future.
BRENNAN: More manufacturing activity, a robust holiday season, ongoing
rebuild efforts from hurricanes and new regulations are all playing a part.
Last month, a new rule took effect that makes drivers track driver hours
electronically. That`s helping to take trucks off the road and just as
volumes are soaring.
The biggest winners are going to be the people that are on the assets, the
XPOs, the FedExes, the Knights, the Werners, the Celadons, the Covenants.
If you own the truck and trailer, then you are in a great position right
BRENNAN: The demand is helping fuel resurgence of vehicle orders,
according to ACT Research. In December, fleets reserved the most class 8
trucks, the kind used on long haul routes, in a single month in three
years. That`s something that could benefit manufacturers like Navistar,
Daimler and Volvo AB.
But it`s not just trucking either. Volumes of goods moved by railroad,
barge and plane are all growing. It`s good news for the companies moving
them, but bad news for retailers and other shippers, since stronger demand
also means higher costs.
For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan.
HERERA: And that is NIGHTLY BUSINESS REPORT for tonight. I`m Sue Herera.
Thanks for joining us.
MATHISEN: And thanks from me as well. I`m Tyler Mathisen. Have a great
evening, everybody and we will see you back here tomorrow.
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