Transcript: Nightly Business Report – December 13, 2018

ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Sue Herera and Bill
Griffeth.

BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: Bulls and bears. Pessimism
is suddenly running rampant but is the growing negative sentiment actually
a good sign for the market?

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Calling a bottom? A longtime
GE bear says the worst is over for the stock and shares embarked on a
strong rally.

GRIFFETH: Closing the gap. Why women and minority entrepreneurs have a
hard time raising money for their businesses and what`s being done about
it?

Those stories and much more tonight on NIGHTLY BUSINESS REPORT for this
Thursday, December the 13th.

HERERA: Good evening, everyone. And welcome.

Stocks took a breather today from the recent volatility. The market
flipped between gains and losses. And the bulls and bears struggled for
control. On one side was optimism over improves trade relations between
the U.S. and China. On the other, concerns about a global economic
slowdown.

And by the close, it was kind of a mixed finish. The Dow Jones Industrial
Average rose 70 points to 24,597. The Nasdaq fell 27. And the S&P 500 was
down a fraction.

Bob Pisani takes a look at some positive and negative forces in the market
right now.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: We kicked off with a
rally of roughly 200 points but there wasn`t a lot of buying volume behind
it. By late morning the rally faded fast.

The markets have been very indecisive recently. Investors are constantly
weighing pros and cons with new headline that emerges. There`s been some
new market negatives floating around. The big issue is still global growth
slowing next year. But how much?

It`s very tough for experts to model earnings in 2019 without knowing the
extent of the global slowdown.

But then you have President Trump`s potential legal problems. We saw the
markets take a leg down on the reports that the “National Enquirer”
admitted it had helped facilitate hush payments to a former Playboy model
alleged to have an affair with President Trump in order to prevent her
story from influencing the election.

And today, the European Central Bank has made it clear it will begin to
wind down its easy money policy next year, likely after the summer. But
there`s a lot of market positives that are out there. Our own central
bank, the Federal Reserve, is signaling fewer rate hikes in the New Year.
I think that`s important.

And then we have OPEC reaching a deal on production covets. Finally,
tariff talks are ongoing and we have seen real signs of China trade relief
in the past week, including China`s move to resume U.S. soybean purchases.
So, the overall tone is a bit more positive than it`s been in a while.

Finally, the latest investor sentiment out from the American Association of
Individual Investors shows the down attitude is at the highest level in
five years. Now, that kind of extreme bearishness usually signals at least
some kind of short-term market bottom.

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

(END VIDEOTAPE)

GRIFFETH: And Brian Levitt joins us right now to talk about that sentiment
figure. He`s senior investment strategist at Oppenheimer Funds.

Good to see you again. Welcome back.

: Thank you.

GRIFFETH: I know it`s danger — I learned long ago it`s dangerous to pick
a bottom in this market. But that high a pessimistic number would seem on
a contrary basis to suggest that`s one of the traditional benchmarks of a
bottom in the market. What do you think is going on right now?

BRIAN LEVITT, OPPENHEIMER FUNDS SR. INVESTMENT STRATEGIST: Yes, I think
that`s a good sign. We have had a natural correction in the markets and
sentiment got weak. A lot of that around policy uncertainty.

We are seeing some improvements. We are not all the way there. But it is
good news that the Fed seems to be backing down. OPEC seems to have put a
bottom in oil prices.

We need to see more clarity on trade. It looks like we`re taking
incremental steps. All of that should set up for a better time in the
broad equity market.

HERERA: So, you would disagree with those who say, you know, we need
another 10 percent to 15 percent to the downside in order for this market
to equalize and prices to become at least fairly valued.

LEVITT: Yes. No, I don`t think we need another 10 percent to 15 percent
decline in the markets. Corporate earnings are good. The global economy
is reasonably good.

Inflation is generally benign around most of the world and valuations were
just not all that excessive. You bring multiples down some in this
correction. And earnings looks good given where the tax cuts left
earnings.

So, it`s not a bad back drop for equities. I don`t think we need a leg
down.

GRIFFETH: But as we know, the market tries to sense what`s going on nine
months down the road. And there are high profile investors out there, Jeff
Gundlach just to name one, the big one bond investor, who feels we are
heading to a recession by 2020. What do you think?

LEVITT: So, I don`t think we`re heading into a recession by 2020. What I
think is important is that the U.S. economy is slowing. Now, that`s not a
bad thing. 2018 was a year of very good growth in the United States, but
tough policy, higher interest rates and taxes. And 2019 in our mind is
going to be a slower growth environment but a better policy environment.
And that actually shapes up to be a better time for markets.

In order for there to be a recession by 2020, you would need to see pretty
high inflation in the United States, a Fed that`s significantly raising
interest rates, another significant leg of dollar strength. And given how
benign the inflation back drop is and given that the Fed is pointing
towards a gradual rate tightening cycle, I find it very hard to believe
that there`s going to be a recession in 2020.

GRIFFETH: Very good. Brian Levitt with Oppenheimer Funds — good to see
you again. Thanks for joining us.

LEVITT: Thank you.

HERERA: Well, the decline in both market and economic sentiment did show
up in the most recent CNBC all America survey. But as Steve Liesman
reports, that`s not stopping people from spending.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: America`s plan to spend
record amounts for the holiday this year even though their views of the
economy fell strongly from record levels. The CNBC all America economic
survey found that holiday spending plans topped $1,000 for the first time
in the 12-year history of the survey. Rising to a record $1,100 with gains
spread across income age and regional groups.

The survey of 800 Americans nationwide is a margin of error of plus or
minus 3.5 percent. Respondents reported the hirer spending plans are
results of higher incomes, showing rising wages and better employment which
is in the economic data, will mean more and maybe more expense every
presents under the tree.

Yet the survey also found that views on the economy fell the most in the
survey`s history. The assessment of the current state of the economy
dropped a record 8 points on a quarter to quarter basis with just half of
public saying the economy is excellent or good. And the percentage saying
the economy will improve in the next year fell 5 points.

Both numbers however remain at relatively high levels. It might reflect a
sense the economy has slowed or can`t improve much more from here. The
recent selloff in the stock market dampened American views on the outlook
for equities and depressed overall economic optimism.

The message from the survey is clear. Santa`s sleigh will be laden with
overflowing bags of presents this Christmas but next year, he might be
travelling just a little bit lighter.

For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.

(END VIDEOTAPE)

GRIFFETH: And those concerns over global growth came into focus in Europe.
As Bob Pisani mentioned earlier, the European Central Bank today cut the
growth target for the region amid increasing uncertainty.

(BEGIN VIDEO CLIP)

MARIO DRAGHI, ECB PRESIDENT: There is surrounding the euro area outlook
can still be assessed as broadly balanced. However, the balance of risk is
moving to the downside, owing to the persistence of uncertainties related
to geopolitical factors, the threat of protectionist, vulnerabilities in
emerging markets and financial market volatility.

(END VIDEO CLIP)

GRIFFETH: Now, along those lines, the ECB decided to end its historic
stimulus program that was put in place during the financial crisis a decade
ago. And interestingly, it also plans to keep its key interest rate
unchanged at least through the summer of next year.

HERERA: And complicating matters for the European economy is the
uncertainty created by Brexit. That topic dominated the E.U. summit in
Brussels where the British prime minister lobbied European leaders to
support her Brexit program, something that needs to be approved by her
parliament to prevent a chaotic exit from the bloc process. As we`ve
reported, the British prime minister survived a no confidence vote but
uncertainty around her Brexit plan remains.

GRIFFETH: Back here in the U.S. jobless claims dropped back to near 49-
year lows. The number of Americans filing for unemployment benefits fell
last week by 27,000 to a seasonally adjusted number of 206,000. Economists
say that the tightening labor market increases the probability that the
Federal Reserve will hike interest rates when it meets next week.

HERERA: A report on import prices today reinforces the notion that
inflation remains muted. The release showed a drop of 1.6 percent last
month, and that was more than expected. And it was the biggest decline
since mid-2015.

This report follows weak overall readings on producer and consumer
inflation that we told you about earlier this week.

GRIFFETH: Time for a look at some of today`s upgrades and downgrades.

We begin with shares of Procter and Gamble tonight, which were upgraded to
buy from neutral at Bank of America (NYSE:BAC) Merrill Lynch. The analyst
there believes the stock`s recent momentum is sustainable. Price target
now $108. The shares rose more than 2.5 percent to near a 52-week high at
$96.49.

Fellow Dow component Coke was downgraded to neutral from buy at UBS. The
analyst says the many changes that the company`s raising the risk for
Coke`s growth targets. Price target now $51 and the shares rose
nonetheless to $49.47.

HERERA: Marvell Tech was upgraded to buy from neutral at Citi, the analyst
sees the margin expansion at the company. The price target is $19. The
shares rose about 2 percent to $15.65.

General Electric (NYSE:GE) was upgraded to neutral from underweight at
JPMorgan (NYSE:JPM). The analyst removed the stock from his short idea
focus list, saying G.E.`s challenges are better understood. The price
target which is $6 which despite the upgrade is the lowest on Wall Street.
Shares gained 7 percent to $7.20.

Morgan Brennan takes a closer look now at this call and G.E.`s latest
restructuring move.

(BEGIN VIDEOTAPE)

MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Wall Street`s
biggest bear called a bottom on G.E. shares. JPMorgan (NYSE:JPM) analyst
Stephen Tusa upgrading G.E. to neutral from underweight, but keeping the $6
price target the same. The upgrade is significant since Tusa was the first
to call G.E.`s finances into question, downgrading the name in May of 2016
when it was still a $30 stock. Since then, his predictions proved largely
right much to the chagrin of longtime shareholders.

So, why the change now? Well, according to Tusa, quote, the key to the
story in our view is the outcome of the known unknowns in near term which
are better understood and around which debate is more balanced, as opposed
to being overlooked by most bulls in the past.

Still, he does believe the beleaguered manufacturer may have to sell new
shares to raise more cash. Even though new CEO Larry Culp (NYSE:CFI) says
last month that wouldn`t be necessary given plans to sell off up to $20
billion in assets.

LARRY CULP, GENERAL ELECTRIC CEO: As John Wooden, the famous basketball
coach, said, be quick but don`t hurry. I think that`s the mindset we have.
We look at health care for example, a tremendous franchise. We talked in
June about an IPO where we take 19.9 percent of the proceeds as cash. We
have flexibility. We have options there.

BRENNAN: And while JPMorgan`s upgrade moved the stock, G.E. announced some
news as well. It`s planning to create a new independent company wholly
owned by G.E. for its industrial Internet of things software. The stand
alone subsidiary will get a new CEO, a new equity structure and some board
of directors, housing the digital technologies that G.E. once spent
billions betting would become its future.

But the news after the cutbacks in the G.E. digital business adds more
clarity to the company`s long-term plans as yet another management team
continues the difficult process of turning the American behemoth around.

For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan at the New York Stock
Exchange.

(END VIDEOTAPE)

GRIFFETH: And still ahead, what`s being done to close the funding gap for
women entrepreneurs.

(MUSIC)

GRIFFETH: There are reports tonight that federal prosecutors are
investigating whether President Trump`s inaugural committee misspent money.
According to Dow Jones, the criminal probe is in its early stages and it`s
also examining whether some of the committee`s top donors gave money in
exchange for access to the incoming Trump administration. The probe arose
out of materials that were seized as part of the investigation into the
president`s former lawyer, Michael Cohen.

HERERA: The president today took aim at General Motors (NYSE:GM), this
time during a Fox television interview where he said the automaker would
not be treated well. His comments were in response to GM`s recent edition
to cut about 15,000 jobs and close plants.

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: Tell me a couple of weeks
before Christmas that she`s going to close in Ohio and Michigan, not
acceptable to me. And she is either going to open fast or somebody else is
going to go in. But General Motors (NYSE:GM) is not going to be treated
well.

(END VIDEO CLIP)

HERERA: The president made the comments midday and that`s about the same
time that the stock started drifting lower.

GRIFFETH: Renault`s board says that Carlos Ghosn is going to remain as its
chairman and CEO. Ghosn is under arrest in Japan for allegedly
understating compensation. He has since been ousted from Renault`s
partners, Nissan and Mitsubishi. Renault says its own internal probe found
no wrongdoing by Mr. Ghosn in France.

HERERA: Costco`s earnings this afternoon are being viewed by some as early
glimpse into the start of the holiday shopping season. And as Leslie
Picker tells us, the quarter was disappointing.

(BEGIN VIDEOTAPE)

LESLIE PICKER, NIGHTLY BUSINESS REPORT CORRESPONDENT: Costco (NASDAQ:COST)
shares slipping in after-market trading after missing Wall Street`s
estimates on both the top and bottom line. Earnings came in about 1 cent
below analyst expectations while revenue missed by half a billion dollars.
The miss in subsequent stock price decline reverses some strength in Costco
(NASDAQ:COST) shares, up about 20 percent over the last year. Costco
(NASDAQ:COST) had been beating expectations on comparable sales reporting,
nearly 9 percent in November, far better than forecast. But the company
has been struggling with international expansion and lower margins on
gasoline.

For NIGHTLY BUSINESS REPORT, I`m Leslie Picker.

(END VIDEOTAPE)

GRIFFETH: Delta`s revenue may lose altitude, and that`s where we begin
tonight`s “Market Focus”.

Investors are growing concern that the slowing global economies will limit
the airline`s growth. But the CEO says he expects the current strong
demand to continue into 2019.

(BEGIN VIDEO CLIP)

ED BASTIAN, DELTA CEO: This will be the fourth year in a row this year we
make $5 billion of profits, returning, you know, 14 percent return on
capital back to the investors. And it`s going to stand the test of time.
Who can do that through the cycle? Delta has got a great lead on that.

(END VIDEO CLIP)

GRIFFETH: Apparently, those comments were not enough for investors. They
sent the stock lower by nearly 5 percent to $53.55.

Sienna reported that strongest earning in sales growth in years. The
networking systems company expects 20 percent profit growth next year. The
board also authorized a new buyback program of up $500 million. And shares
rose more than 8 percent today to $34.91.

Meanwhile, Under Armour (NYSE:UA) CEO is making the case for his company`s
turnaround. Yesterday, we told you that the at leisure apparel maker had
cut its financial targets. Well, today, the CEO said that he has a plan to
regain momentum, especially in the North American market.

(BEGIN VIDEO CLIP)

KEVIN PLANK, UNDER ARMOUR CEO: We say becoming a global brand, we have to
do that in the largest market. Like North America is essential for that.
And so, we want to do that through innovation. We do that energy and
excitement. It`s things like Stephen Curry dropping and wearing the new
Curry six last night that he debuted in Toronto. It`s products like the
hover upgrade that we have.

So, innovation is going to be the name of the game. The financial metrics
are just a by-product of what we do to make sure that we deliver to the
consumer.

(END VIDEO CLIP)

GRIFFETH: Investors weren`t exactly convinced on this one either. The
stock fell 5 percent to $18.77.

HERERA: The Justice Department has ended an investigation into SeaWorld`s
response to a 2013 documentary that was critical of the company. The
Justice Department did not take any action against the company. Earlier
this year, SeaWorld agreed to a $4 million penalty to settle charges that
it misled investors. Nonetheless, the shares down a fraction to $27.56.

And after the bell, Adobe said a rise in subscriptions for its cloud
software helped total revenue rise above expectation. Those gains also
helped net income grow but not at the pace Wall Street was hoping to see.
And so, shares were volatile in after hours trading. They ended the
regular day up 1 percent to $248.08.

GRIFFETH: Certainly one of the biggest obstacles to starting a business is
money. And for women, it`s especially challenging since only a small
portion of venture capital funding goes to female founded start-ups.

But as Julia Boorstin reports now, there is a big push to change that and
to close the gender gap.

(BEGIN VIDEOTAPE)

JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: At “Fortune`s” Most
Powerful Women Next Gen Conference, the spotlight is on the value for
diversity. For every dollar invested, startups cofounded by women
generated more than double the revenue that male start-ups did, according
to a BCG study. Despite the financial argument for diversity, 17 percent
of start-ups in the U.S. had a woman founder and two percent of VC funding
went to female founders.

BETH FERREIRA, FIRST MARK CAPITAL: We have a long way to go to get to
parity. But we are seeing a shift in the conversation, and more people
talking about, one, not only funding female founders but also thinking
about who are the funders around the table? And so, we`re having more of
those conversations, more emphasis on that.

BOORSTIN: Half the investments in Ferreira`s last fund including Glossier
and Daily Harvest were female-led companies.

It wasn`t Ferreira`s mandate to invest in women, but she said she may have
seen opportunities that her male counterparts didn`t. One reason such a
small percent of the VC funding goes to women is that 9 percent of U.S. VCs
are women and about 3/4s of U.S. firms don`t have any female partners.

New organizations are tackling in issue, all race focuses on women in V.C.
as funders and founders. While #angels helps educate VCs and start-ups on
the value of bringing in women`s perspective early and investing in diverse
teams.

MAHA IBRAHIM, CANAAN PARTNERS: Our little cottage industry made up of
small firms are highlighting the importance of diversity. They are finally
getting it. And for that, I am static. We have to make sure as an
industry that those women and those, quote/unquote, diverse hires are not
looked at as diverse hires. That they are looked as incredibly productive
and high-perform and equal members of the team.

BOORSTIN: Ibrahim sees a direct correlation between a more diverse set of
funders and higher returns. Canaan Partners are 40 percent female, and two
of their last three funds are top performing. Driving optimism that the
V.C. gender gap will close as people understand that diversity is good for
business.

For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Dana Point, California.

(END VIDEOTAPE)

GRIFFETH: And a new report from Morgan Stanley (NYSE:MS) also shows that
there is a big gap in the investments women and minority entrepreneurs
receive. So here to talk more about those findings is Carla Harris
(NYSE:HRS), Morgan Stanley`s vice chairman and head of global wealth
management and multi-cultural client strategy.

Good to see you, Carla. Welcome back.

CARLA HARRIS, MORGAN STANLEY VICE CHAIRMAN: Thanks for having me, Sue.

HERERA: What do you think is behind the results of this? Is it simply
we`re not at the table, women entrepreneurs and venture capitalists are not
at the table where they should be?

HARRIS: I think that has a lot to do with it. But I think frankly the
reason why we saw the things that we did was that as you just already
articulated, there is not that much capital flowing to women or people of
color in the past. And as you know, that has been a very closed ecosystem.

So unless you know somebody who is a VC, you had a hard time getting in the
door. And if you got in the door, there was some bias because there was a
lack of experience among those around the table making the decision.

GRIFFETH: And along those lines, Carla, I mean, it`s about relationships.
Even if you gain access to the relationships that are important to gaining
the funding, I keep hearing the bar is higher for women entrepreneurs and
people of color than it would be otherwise. Is that true? Is that what
you found?

HARRIS: Our report certainly found that. And thanks for mentioning that.

It was clearly the confidence issue was one cited as something that they
needed to see, they being the asset allocators needed to see more in women
and more in people of color. And also, there was an implication that
somehow these founders needed to bring a business that had been
significantly derisked.

So our conclusion was that there was a perception in the marketplace that
there was extraordinary risk associated with businesses that were founded
by women and people of color. And that is a huge misperception which is
one of the reasons that we wanted to put the report out there to call that
out.

HERERA: But you`ve also brought some companies and some entrepreneurs and
some venture capitalists in-house —

HARRIS: Yes.

HERERA: — to try and work around that particular problem.

HARRIS: Absolutely. And I will tell that you our experience has been
terrific. And in fact, it has proven out that there is not extraordinary
risk associated with these entrepreneurs. To give you quickly a snap shot,
our first class, we were five or five. One company was brought seven weeks
after being accepted in the accelerator another one was just purchased. A
third significantly raised more money than they had intended when they came
in. And a fourth did a very successful ICO raise. And the fifth went on
to a very wonderful accelerator that focuses just on women, the Hertz Lab
and they invested more money than we did.

GRIFFETH: I guess to coin a phrase, if you can`t join them, beat them.
That`s how that works.

HERERA: Exactly right. Carla, thanks so much. Appreciate it.

HARRIS: Thank you to both of you very much.

HERERA: Carla Harris (NYSE:HRS) with Morgan Stanley (NYSE:MS).

Coming up, the new space race reaches new heights.

(MUSIC)

HERERA: The Boy Scouts of America may file for bankruptcy as it faces
growing legal costs tied to lawsuits alleging sexual abuse of boys within
the organization. The “Wall Street Journal” says executives have hired a
law firm to assist with a potential Chapter 11 filing. Now, such a move
which potentially would allow the Boy Scouts to pause lawsuits against it,
giving it an opportunity to settle with victims who have sued.

GRIFFETH: Mortgage rates have fallen to their lowest level in about three
month. The mortgage giant Freddie Mac says the average on a 30-year fixed
rate fell to 4.63 percent this week. But despite the most recent decline,
rates for the 30-year are still higher from where they were a year ago.

HERERA: Apple (NASDAQ:AAPL) is expanding its footprint. The tech company
plans to build a $1 billion campus in Austin, Texas, its third in that
city. And that will create about 5,000 jobs.

And the company isn`t stopping there. It says it`s also opening three new
offices in Seattle, San Diego and Culver City, California, and expanding
its operations in many more cities across the country.

GRIFFETH: Speaking of California, the utility regulators there have
proposed taxing text messages. The group says that the revenue would help
fund greater access to telecom services for lower income residents in the
state. But it`s unclear how far this proposal will get because the new
ruling by the FCC classifies text messaging as an information service
rather than a telecom service which means the messages may not be subject
to the utility agencies authority.

HERERA: Richard Branson`s space tourism company Virgin Galactic
successfully flew its spaceship Unity more than 50 miles above California`s
Mojave Desert today, piloted by two members. Unity reached a speed of mach
2.9, which is nearly three times the speed of sound. After the spacecraft
goes through more extensive tests, Branson says he hopes to give others the
once in a lifetime opportunity to travel to space.

(BEGIN VIDEO CLIP)

RICHARD BRANSON, VIRGIN GROUP FOUNDER: I would hope that somewhere —
sometime in the middle of next year, I`ll be going up and then quite soon
after that, the public will go up. And we`re building here in the Mojave,
two new space ships. So, in the not-too-distant future, we`ll three
spaceships operating from New Mexico, taking people up.

(END VIDEO CLIP)

HERERA: Start saving. Tickets are $250,000 apiece.

GRIFFETH: As long a as he goes first, I`m okay with that.

Take a look at the final day on Wall Street. Not as much volatile today.
The Dow was up just 70 points, Nasdaq down 27 and the S&P was down a
fraction.

HERERA: And that is NIGHTLY BUSINESS REPORT for tonight. I`m Sue Herera.
Thanks for joining us.

GRIFFETH: I`m Bill Griffeth. Have a great evening. See you tomorrow.

END

Nightly Business Report transcripts and video are available on-line post
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Business Report is not and should not be considered as investment advice.
(c) 2018 CNBC, Inc.

 

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