BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: Bumpy ride. Earnings are
strong. Profit margins are a record, so why isn`t that enough to impress
SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Big year? Boeing (NYSE:BA)
powers ahead and says earnings for the rest of 2018 will be even better
than they are now.
GRIFFETH: The magic number. How much money will you need to cover health
care expenses in retirement?
Those stories and much more tonight on NIGHTLY BUSINESS REPORT for this
Wednesday, April the 25th.
HERERA: Good evening, everybody, and welcome.
The Dow snapped its five-day losing streak but not all that convincingly.
Despite strong earnings, stocks were all over the place as markets around
the globe watched the U.S. bond market with a yield on a 10-year treasury
crept even higher, lifting the dollar.
On Wall Street, the Dow Jones Industrial Average gained 59 points to
24,983, the Nasdaq fell 3 and the S&P 500 added four.
The market moves of the past few days are leading investors to wonder if
last quarter was the top for both companies and stocks.
Mike Santoli takes a look at what might lie ahead.
MIKE SANTOLI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Big companies are
reporting powerfully strong earnings growth and record profit margins,
thanks to solid economic growth and corporate tax cuts. Yet, investors
have been unusually hard to impress, selling off stocks despite the stellar
results. Blue chip companies from Goldman Sachs (NYSE:GS) to Alphabet to
Caterpillar (NYSE:CAT) surpassed forecast by a wide margin yet Wall Street
picked apart the numbers in a way that made the road ahead seemed a bit
It seems that a steady climb in interest rates and fresh signs of inflation
are raising concerns that economic momentum and corporate profit have
peaked. While there are few indications that earnings or the U.S. economy
is close to a down turn, the strong and effortless surge in stocks in the
2016 election through this past January clearly priced in a lot of the good
news on growth, profits and taxes that are now flowing through to corporate
Consensus estimates still call for double digit earnings growth through the
rest of 2018. So, perhaps some pressure coming from higher wage and
commodity costs. Investors are simply struggling with exactly how to value
those earnings as the Fed raises rates and borrowing costs climb.
The move in ten-year treasury yields about 3 percent has also focused
investors on a transition underway from a period of high growth and very
low rates to perhaps moderate growth and somewhat higher rates. All of
this helps explain why the S&P 500 has been way down near the lower end of
its three-month trading range, trading at levels first seen around
Thanksgiving before the tax cut enthusiasm drove the indexes on a steep
Most economic expansions and bull markets do last a good while beyond the
moment of maximum optimism, so stocks can certainly recover to new highs as
the economy chugs along and companies reap the benefits. The ride might
simply be bumpier along the way.
For NIGHTLY BUSINESS REPORT, I`m Mike Santoli.
GRIFFETH: Well, Peter Boockvar joins us right now to talk about the
markets and what he sees ahead. He`s chief investment officer at Bleakley
Always great to see you, Peter. Thanks for joining us.
PETER BOOCKVAR, BLEAKLEY ADVISORY GROUP CIO: Thanks, Bill. Thanks, Sue.
GRIFFETH: Your premise is pretty simple. The stock market was rising over
the last decade as the Fed lowered interest rates and kept them at record
lows. Now that the Fed is raising rates, all bets are off, is that the
BOOCKVAR: Right, and QE also. I mean, QE was meant to encourage risk
taking but that really was reflecting risk taking in the markets, certainly
not in the economy because the growth in the economy never really exceeded
So, quantitative tightening you can argue, OK, well, that will reduce the
appetite for taking risks, along with the rise in short-term interest rates
for the Fed funds rate.
HERERA: So, a lot of investors are looking at equities and wondering how
to value them in an environment that seems to be changing, with the Fed
tightening up and we also have inflation creeping in. So, how do you look
at the stock market and put valuations in what`s a more dynamic environment
than we`ve had in years.
BOOCKVAR: It`s a great question. I define the pull back we`ve seen so far
year to date as being a P/E multiple rethink in that we`ve got to these —
at the January 27th peak, the market was trading almost 20 times forward
earnings. And what the rising interest rates led to was, OK, well, maybe I
don`t want to pay 20 times or maybe it was 18 times, I only want to pay 16
So, with no change in earnings, just the change in a P/E multiple was a
300-point decline in the S&P 500 just on a multiple rethink. So, yes,
getting the right multiple right is always difficult, but the markets —
well, I don`t know what the right number should be, but it`s going to be
less than what it was.
GRIFFETH: So, going to Mike Santoli`s point, is this as good as it gets
then at this point, or are there opportunities that you see in the market
that are — become evident as the Fed raises rates?
BOOCKVAR: Well, unfortunately the opportunities usually come after things
fall because that`s what creates value. I mean, one thing that —
HERERA: It`s annoying that that`s the way it happens but that`s the way it
BOOCKVAR: One thing that QE and low interest rates did was it inflated the
assets of a lot of different things. So, the median price to earnings
ratio in the S&P 500 got above where it was in 2000 because 2000 was just
tech. Now, everything got expensive.
So, it`s a tough question to answer. I think commodities are still well
below their highs. Gold and silver are still well below their highs, but
there aren`t that many things to find. But pullbacks are good for people
that have long-term time horizons because it gives them an opportunity to
buy things cheaper than what they were.
GRIFFETH: Peter Boockvar with the Bleakley Advisory Group — again, thanks
so much for joining us.
BOOCKVAR: Thank you.
GRIFFETH: Appreciate it.
HERERA: Well, the day was book ended by earnings from companies that are
worth nearly a trillion dollars combined. Boeing (NYSE:BA) was out this
morning. Visa (NYSE:V) and Facebook (NASDAQ:FB) after the closing bell.
So, let`s start with Dow component Visa (NYSE:V) which saw its profit rise
sharply as more people made payments using its network. Visa (NYSE:V)
topped earning and revenue expectations and issued a positive outlook.
That lifted the stocks in after-hours trading and it just might set the
tone for tomorrow.
GRIFFETH: Then there`s Facebook (NASDAQ:FB) which posted higher quarterly
profit and revenue. The company reported growth in its mobile ad business
and an increase in monthly active users. And that sent the stock higher
initially in after-hours trading.
Julia Boorstin has more now on Facebook`s quarter.
JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: The bottom line
from Facebook`s earnings, all the negative attention about privacy concerns
has not hurt the company`s ad business which is growing far faster than
projected. While the social giant`s monthly and daily active users grew
right in line with expectations, both up about 13 percent, its revenue and
earnings soared past analyst expectations.
Average revenue per user, a key measure of the health of its ad business,
grew faster than expected to $5.53 per each of Facebook`s monthly active
users. That`s 18 cents more than projections.
Against the backdrop of growing scrutiny about Facebook`s data practices,
CEO Mark Zuckerberg saying, quote: We are taking a broader view of our
responsibility and investing to make sure our services are used for good.
But we also need to keep building new tools to help people connect,
strengthen our communities and bring the world closer together.
For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Los Angeles.
HERERA: Boeing (NYSE:BA) easily topped analyst earnings and revenue
expectations. Strong demand for commercial jets prompted the world`s
biggest plane-maker to issue an upbeat forecast for both profit and cash
flow. Boeing (NYSE:BA) CEO downplayed rising concerns about rising
material costs. The company was viewed as one of the big potential losers
of the president`s tariff on aluminum.
That apparently wasn`t an issue today because the shares rose 4 percent,
making Boeing (NYSE:BA) the best performing stock in the Dow index.
Joining us now to talk a little bit more about that report is Chris
Higgins, an airline analyst with Morningstar (NASDAQ:MORN).
Chris, good to see you.
So, a very solid report certainly for Boeing (NYSE:BA). Was there anything
in this report that kind of raised your eyebrows or was unexpected?
CHRIS HIGGINS, MORNINGSTAR AIRLINE ANALYST: Well, the EPS beat, they beat
by about $1 which is a huge beat. There was some timing issues in there,
lower taxes, lower than what we expected, lower research and development in
commercial airplanes. There was also some defense programs coming through,
so there was some timing, but they did raise their guidance by 50 cents, so
we do think there are some tangible, real business improvements at Boeing
(NYSE:BA) going on here.
Also, operating cash flow came in really strong, $3.1 billion versus $2
billion last year. And really focused on cash flow at Boeing (NYSE:BA).
That`s been really strong and they continue to impress with their cash
GRIFFETH: The market has largely viewed Boeing (NYSE:BA) as vulnerable if
there is a trade war with China, that there could be retaliation. First of
all, do you buy that? And then quickly, if that`s the case, do you worry
about its future in the stock market?
HIGGINS: Yes, we`re not — I don`t think we`re as concerned as
conventional wisdom out there in the market is on the trade war with China.
China rolled out some proposals in terms of tariffs and the way they
structured the tariffs on aircraft, it purposefully excluded some of the
most bestselling Boeing (NYSE:BA) airplanes into China so that 737 Max 8,
it was excluded because of the weight restrictions there that China put
So, we think at the end of the day, there`s going to be kind of a
negotiated settlement between the U.S. and China, particularly when it
comes to commercial aircraft, because really, China doesn`t have any other
sources other than Boeing (NYSE:BA). Airbus is at full capacity right now
and they`re a narrow body aircraft.
HERERA: Very good point. Chris, thank you. Chris Higgins with
GRIFFETH: So, as we mentioned, Boeing (NYSE:BA) CEO does not appear to be
fazed by the president`s tariffs on imported steel and aluminum, but those
tariffs are creating a lot of uncertainty in the aluminum market itself and
that`s leading to stockpiling of the metal.
Kayla Tausche reports tonight from outside New Orleans.
KAYLA TAUSCHE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Half a million tons
of aluminum piled up. That`s what you see above the banks of the
Mississippi River. Football fields of metal have been building slowly for
two years, surging in 2018 as importers rushed to get foreign aluminum on
shore before the White House put tariffs in effect.
DONALD TRUMP, PRESIDENT OF THE UNITED STATES: And 10 percent tariff on
foreign aluminum, when the product comes across our borders.
TAUSCHE: That`s caused uncertainty about where companies could get
aluminum and at what price, compounded by the threat of sanctions on RUSAL,
a major Russian producer. The U.S. surcharge on aluminum delivery has
soared, so companies holding the metal here are poised to profit.
Take Castleton Commodities, a trading firm based in Connecticut. It`s
filled what was a relative empty field in 2016. That same space outside
New Orleans now holds an estimated 450,000 tons.
And there`s more around the country. Warehouses that sprung up near major
ports with 200,000 tons in Baltimore and 30,000 in Charleston. But the
biggest is in the Big Easy.
AMOS CORMIER III, PLAQUEMINES PARISH PRESIDENT: It`s the river. The
river. We have, you know, the largest river in North America. We are the
petrochemical corridor for the nation.
TAUSCHE: Amos Cormier is the leader of one town housing a stockpile. He
hopes the tariffs bring better paying manufacturing jobs once the surge in
port activity dies down.
CORMIER: In my opinion, those would be better jobs to have than just, you
know, stevedores or the offloading of coils or aluminum.
TAUSCHE: We tried to get more detail on the shipments but the companies
importing and storing the metal wouldn`t comment, nor would the ports
processing the transactions.
At Castleton, a sign warned of U.S. customs violations if the bars and
beams there were moved. We were turned away after driving in and asking
for the manager.
JORGE VAZQUEZ, HARBOR ALUMINUM FOUNDER: Our intel suggests that that
stockpile, most of it was sold last week to several traders. It basically
is just exchanging hands.
TAUSCHE: Jorge Vasquez runs Harbor Aluminum, which tracks the industry.
He says despite the recent fluctuations, the market dynamic won`t change
VAZQUEZ: They will continue to stockpile simply because the U.S. pays
better than anyone else right now on the face of the Earth.
TAUSCHE: The barriers to entry put up by the Trump administration bringing
big bucks for a few savvy traders.
For NIGHTLY BUSINESS REPORT, I`m Kayla Tausche, Plaquemines Parish,
HERERA: General Electric`s outlet was revised by Moody`s (NYSE:MCO) to
negative and that means the credit agency could downgrade the stock in the
not-so-distant future. That sent shares 4 percent lower extending its
steep losses over the past year. The revised outlook comes as investors
attend the company`s annual shareholder meeting and a lot of GE retirees
are not happy.
Morgan Brennan is in Imperial, Pennsylvania.
MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: For the first time,
General Electric (NYSE:GE) CEO and chairman John Flannery faced
shareholders, many of them retirees, at the company`s annual meeting.
JOHN FLANNERY, GE CHAIRMAN AND CEO: We`re keenly aware of the pain that
our performance has caused and the dividend cut has caused with investors,
with retirees, with families. We know how much you rely on this, and these
were decisions taken really with extreme deliberation.
BRENNAN: Flannery who took the helm last summer said he`s focused on
making the struggling industrial behemoth simpler and stronger, adding that
changes are underway at every level of the company.
One example, the board which was remade today, shrinking from 18 directors
down to 12, including several new additions. For the event, several
hundred shareholders, some protesting before going in showed up, making the
trek to a GE facility on the outskirts of Pittsburgh.
Many are retirees like Susan Strauss, who worked as a machinist for the
company for three decades and came to hear more from the CEO`s plans for a
SUSAN STRAUSS, GE SHAREHOLDER: We`re all very concerned about our
security. We depend on our pensions and we depend on the dividends, and
they reduced the dividends by half, and yet they encouraged us to buy their
stock when we were employees because they matched it 50 percent.
BRENNAN: And have you sold any of your stock or are you hanging on it?
STRAUSS: I want to sell the stock. I should have sold it a long time ago
but I — to sell it now, I would take an enormous loss.
BRENNAN: GE stock has lost half of its value over the past year and so,
too, has the dividend, after a cash crunch caused the company to make a
cut. That`s been especially hard on the blue chips retail investors which
make up more than 40 percent of GE shareholder base.
RON FLOWERS, RETIREES ASSOCIATION OF GE PRESIDENT: These are the prime
shareholders that you see here. The ones that spent their whole life
working in the shop, day by day, making money for General Electric
(NYSE:GE) their whole life, 25, 30, 35, 40 years, and those are the
shareholders that really mean something and those are the shareholders that
GE is hurting.
BRENNAN: For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan in Imperial,
GRIFFETH: By the way, the New York Stock Exchange today suspended trading
in Amazon (NASDAQ:AMZN), Alphabet and a few other companies. The NYSE said
that a data glitch affected stocks with prices above $1,000 which trade
primarily at the Nasdaq. The stocks did trade normally on other exchanges.
HERERA: It is time to take a look at some of today`s upgrades and
And we begin with one of those companies affected by the NYSE data glitch,
Alphabet. Its rating was raised buy from hold at Stifel. The analyst
cites Alphabet`s more serious approach to the security and privacy of its
consumers. Price target is $1,230. Shares rose just a fraction to $1,-
Disney`s rating was raised to market perform from under perform at BMO
Capital. The analyst cites the company`s focus on direct to consumer. The
price target is $100 and that`s pretty much where the stock is trading now.
It`s at $101.15.
GRIFFETH: Still ahead, a major cost concern for those saving or already in
GRIFFETH: Comcast (NASDAQ:CMCSA) (NYSE:CCS) has confirmed its $31 billion
bid for European pay TV operator Sky. It has prompted Sky to drop its
support for a low offer from Rupert Murdoch`s 21st Century Fox. During a
conference call today, Comcast (NASDAQ:CMCSA) (NYSE:CCS) CEO Brian Roberts
said that a Comcast (NASDAQ:CMCSA) (NYSE:CCS)/Sky get-together makes sense.
(BEGIN AUDIO CLIP)
BRIAN ROBERTS, COMCAST CEO: I love our core businesses and anybody who`s
viewing this as some diversion from that is not reading us properly in my
judgment. We didn`t choose to put Sky in play or any other asset in play.
That event happened around us, and the question is, do we take a look at it
(END AUDIO CLIP)
GRIFFETH: Separately, Comcast (NASDAQ:CMCSA) (NYSE:CCS) earnings and
revenue were out this morning. They topped Wall Street estimates helped by
the Winter Olympics and the Super Bowl. Shares rose more than 2 percent,
2.5 percent actually. And we should point out, Comcast (NASDAQ:CMCSA)
(NYSE:CCS) is the parent company of CNBC which produces this program.
HERERA: Twitter reported its second profitable quarter and blew past
analyst`s estimates for earnings, revenue and monthly active users. But a
softer outlook from Twitter`s management pressured the stock, sending
shares down more than 2 percent.
GRIFFETH: AT&T (NYSE:T) shares dropped after earnings miss and that is
where we begin tonight`s “Market Focus”.
After the bell, the telecom giant delivered weaker than expected profits
and revenue even as it added more customers during that period. Shares
initially fell in after hours but did finish the regular session up a
fraction at $35.20.
Also out after the bell tonight, eBay (NASDAQ:EBAY) said that a rise in
active buyers helped sales rise but they failed to climb at the pace that
analysts were expecting. Earnings though were inline with estimates.
Shares initially fell in the extended hours session. They also ended the
regular day down a fraction at $40.97.
And a decline in costs and a smaller exposure to Affordable Care Act
markets helped Anthem top profit expectations. The company also hiked its
earnings guidance for the full year. Shares rose by 6 percent to $238.84.
HERERA: An increase in shipments helped railroad operator Norfolk
Southern`s profits and revenue to rise. The results topped analysts`
expectations. Norfolk also said it is planning to launch $1.5 billion of
share buybacks this year. The shares climbed 8 percent to $145.96.
Viacom (NYSE:VIA) topped Wall Street expectations as the media said the
strength in its international TV division and stronger performance at
Paramount Pictures helped its results. The company also reported a smaller
than expected decline in ad spending. Viacom (NYSE:VIA) showed that its
turnaround is picking up momentum and investors seemed to agree. Shares
finished up nearly 1 percent to $31.18.
And Tupperware (NYSE:TUP) said softness in several of its foreign markets
caused its sales to fall and miss estimates. Earlier this month the
storage products maker warned that its quarterly profits would be weaker,
and they were, but apparently not as bad as Wall Street had feared, so
shares finished up the day up 9 percent to $46.28.
GRIFFETH: So, how much money will you need to cover health care expenses
in retirement? Well, whatever it is, a new report finds that nearly half
of all workers do not think they will have enough and, in fact, only one in
five have actually crunched the numbers.
Our senior personal finance correspondent Sharon Epperson has done some
digging. She joins us now with that magic number.
Is there a magic number or how much are you going to need?
SHARON EPPERSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: There is a magic
number that people may be a little frightened by, and for a 65-year-old
couple retiring this year, they`ll need $280,000 to cover health care
expenses in retirement.
Now, this assumes that they`re both already eligible for Medicare and the
good news is, it`s only 2 percent higher than it was last year. So, we are
seeing Medicare premiums relatively flat, out of pocket prescription drugs
relatively flat over the last year as well.
HERERA: OK. So, that key number is 65 years old.
EPPERSON: Sixty-five years old. Right.
HERERA: What if you retire earlier? A lot of people, you know, want —
want to travel and do things while they`re younger. What if you retire
EPPERSON: You know, it`s interesting. That is what we assumed that
they`re retiring earlier because they want to travel. Many people are
retiring earlier because of a health care issue. The median retirement age
according to the Employee Benefit Research Institute is 62 years old.
And so, when you`re retiring early, if you`re able to get health care
coverage, you may still have to come up with an extra $500 a month in
premiums. You may also have to dig into your personal savings if you
haven`t saved properly.
So, these are all things that are a concern to people who are retiring
before 65, because, of course, that`s when Medicare kicks in.
GRIFFETH: Let me go back to something you said. How do you get the health
insurance if you retire early?
EPPERSON: If you retire early, the first thing you want to do is check to
see if your employer has a retirement benefit program for health care that
you can participate. The other thing is COBRA provisions. Those last for
18 months. So, strategically, if you want to retire early, retire at 63
1/2, that exact number.
EPPERSON: And then, of course, also the Affordable Care Act provides a lot
of provisions for those between 55 and 64. You`re going to want to look at
the various options that you may have with that, but talk to a financial
advisor and accountant to see if you can plan with your income to get some
of those tax credits and subsidies to lower that amount, because that
amount could also at full price be $1,000 a month.
HERERA: A lot of people feel like they have to work longer because they
haven`t saved enough. What if you retire after age 65?
EPPERSON: Well, you have to look at all the different Medicare programs
and make sure that you apply immediately for Medicare Part B. You want to
make sure that you get that medical coverage and you don`t wait because you
could be penalized if you wait to get that.
The other thing is considering a Medicare Advantage plan. That will cover
your dental and vision expenses. You may want to look into that. MediGap
also important if you want to get some type of coverage for co-pays and
deductibles and all that.
The most important thing for anyone, regardless if you`re thinking about
retiring now or you`re going to retire at 65, always look at what the
options are for you. Look at that open enrollment. No one ever wants to
look at that material, but it can change.
HERERA: But it can change. Absolutely.
EPPERSON: It can change. And you can get a better deal, you never know.
GRIFFETH: Well, you`ve got me thinking, that`s for sure. As always, thank
you, Sharon Epperson.
HERERA: Coming up, China`s car revolution.
(BEGIN VIDEO CLIP)
PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: As demand in China for
U.S.-made cars and trucks continues to grow, so does the appetite of the
United States for vehicles made here in China. I`m Phil LeBeau at the
Beijing auto show. That story coming up on NIGHTLY BUSINESS REPORT.
(END VIDEO CLIP)
HERERA: Ford reported a rise in profit that was better than expected
helped by lower tax rates and cost-cutting measures. The automaker is
facing rising commodity costs and is trying to take advantage of the recent
consumer shift towards bigger vehicles. The stock rose initially in after
GRIFFETH: And speaking of which, electric cars and SUVs are getting a lot
of attention at the Beijing auto show. This year for the first time ever,
Tesla is at this show, trying to take advantage of new opportunities in the
world`s largest automobile market.
But as Phil LeBeau reports now, there are also a number of challenges.
LEBEAU: With nearly 100 unveilings of new models, the Beijing Auto Show is
all about who can get the most attention, and by that measure, Tesla is
doing well. Its models are a common sight around China, and last year,
almost one out of every five Teslas sold in the world was in China, where
the government is encouraging citizens to buy an electric car.
Many Tesla buyers have gladly paid well over $100,000.
JESSICA ZHANG, TESLA OWNER (through translator): From the design, from the
functions, from the user experience, Tesla is really good.
LEBEAU: While Tesla has created a growing and loyal following here in
China, this is also where it faces more challenges, especially if the
Chinese auto industry becomes more competitive both here and around the
JAMES CHAO, IHS (NYSE:IHS) MARKET: In the last two or three years, there
have been 23 new Chinese electric vehicle brands that have been introduced.
Not all of them are producing cars yet, but of those, there will probably
be a handful that are true Tesla competitors.
LEBEAU: More and more Chinese automakers plan to eventually sell cars in
the U.S. Already, the Buick Envision is imported from China, as is the S-
90 Sedan from Volvo, whose CEO says Americans have embraced Chinese made
HAKAN SAMUELSSON, VOLVO CEO: It`s a Volvo and we guarantee the quality is
OK. If it comes from Sweden, Belgium, or China, it`s really of secondary
LEBEAU: In the auto world, what rolls on the roads in China is
increasingly rolling on the streets of America.
Phil LeBeau, NIGHTLY BUSINESS REPORT, Beijing.
HERERA: And before we go, here`s another look at the day on Wall Street.
The Dow gained 59 points, the Nasdaq fell three and the S&P 500 added four.
And that will do it for NIGHTLY BUSINESS REPORT tonight. I`m Sue Herera.
Thanks for joining us.
GRIFFETH: I`m Bill Griffeth. I`m still calculating insurance numbers
GRIFFETH: Have a great evening, I`ll see you tomorrow.
HERERA: Actually, we should.
GRIFFETH: Yes, we should.
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) 2018 CNBC, Inc.