Transcript: Nightly Business Report – June 24, 2019

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

BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR:  Inching closer.  The Dow  nears a new high and heads towards its best June in decades, but a critical  meeting between the U.S. and China still looms.  

Healthy prognosis?  The Trump administration wants to make hospital and  doctor fees public as part of its push to drive down costs.  

And data disclosure.  What`s your personal information worth to big tech?   A new bill would put a price tag on your privacy.  
Those stories and much more tonight on NIGHTLY BUSINESS REPORT for this  Monday, June 24th.  

And we do bid you a good evening, everybody, and welcome.  Sue is off  tonight.  

Now, don`t be fooled by today`s modest moves in the stock market.  This  month has been big for investors.  In fact, it could be one of the very  best for a long time.  Optimism has been improving over the past few weeks,  but today, there was some caution ahead of the trade talks between the U.S.  and China which are set to take place later this week at the G20 summit in  Japan.  

So, today, the Dow Jones Industrial Rose just eight points to 26,727.   Nasdaq was down 26.  The S&P was down 5.  And today, despite these small  moves, recent rallies have sent the major indexes close to new highs.  
But does this month`s move higher have staying power?  
Mike Santoli takes a look.  

MIKE SANTOLI, NIGHTLY BUSINESS REPORT CORRESPONDENT:  This trip to a fresh  record is perhaps the most confusing in terms of how it happened and what  comes next.  It`s come with treasury yields anchored near 30 month lows,  recession fears slowing and manufacturing stalling.  The rally has been  driven by defensive stock sectors such as utilities and gold has broken out  to a multi-year high.  Investor sentiment has been quite cautious, which  has a way of boosting stocks in contrarian fashion.
Purely based on the historic probability, the market at a new high ended up  more than 17 percent not quite halfway through the year are reasons to  believe more upside lies ahead.  But also are cause to keep expectations in  check.  The Dow Jones Industrials have made a record high in the month of  June and 33 previous years, second half performance in those years is  roughly at historical average for all years.  That`s a gain of more than 4  percent.  

And the S&P 500 is on pace for the strongest first half since 1997 and one  of the five best in recent decades.  All years with similar returns by this  point finished the year with further gains.  Such historical studies  provide context but no clear course of action, of course.  The big picture  is the market has been in a wide swinging but ultimately side swinging in  the year and a half.  It`s now stretching the top of the range.  Earnings  have flattened and the market fully expects the Federal Reserve to start  cutting rates next month.  

The initial market reaction tends to be quite positive but the strength  only lasts if recession is averted.  So, have stocks already priced in this  Fed effect?  And will the second half confirm the market`s implicit belief  that the economy can keep outrunning a sharper down turn?

GRIFFETH:  So what is the market expecting from the upcoming trade talks  between President Trump and China`s President Xi Jinping at the G20 Summit  later this week?

Joining us, David Lebovitz.  He`s global market strategist at J.P. Morgan  Asset Management.
David, good to see you again.  Welcome back.  


GRIFFETH:  So, here we sit near these all-time highs as Mike was pointing  out here.  Does that mean a deal with China is already priced in?  We don`t  get much more upside if there is a deal and downside if we do — or if we  don`t?  What do you think is going on?  

LEBOVITZ:  So, I think that this is a little bit of a buy the rumor and  sell the news.  I think that the market`s assumption all along is that we  will see a deal done with China.  And, frankly, at this juncture, I think  the market would be comfortable with no escalation in the current state of  affairs with China.  So, as long as we don`t put tariffs on the additional  $300 billion of imports, I think the market will be able to handle that. 

But I don`t really see a ton of upside here stemming from a positive  resolution to these talks, maybe if some of the existing tariffs are rolled  back, you would see markets melt higher.  But I don`t think that, you know,  investors are expecting that.  I think they`re just expecting no big  changes going forward.  

GRIFFETH:  Add to the mixture, the geopolitical problems in Middle East  with Iran.  Oil had a spectacular gain last week and it`s up a little bit  again today.  Gold is moving higher as well.  
What do you think is going on here?  

LEBOVITZ:  So, I mean, the oil point I think is relatively clear.  People  are worried about supply chain disruption, and that`s putting upward  pressure on the price.  The gold move has been more interesting.  And, you  know, frankly, over the past couple of days, couple of weeks we`ve seen  less traditional assets, whether that be gold, cryptocurrency begin to move  higher.  

What that says to me is there`s an expectation of central bank easing  further.  There will be a need for investors to find returns and previously  uninvestigated corners of the market.  And you`re seeing people re-embrace  these trades that have frankly struggled over the past couple of years as  people have prepared for a Federal Reserve and global monetary policy  stance which is a bit tighter than it looks where we`re headed today.  

GRIFFETH:  And along those lines, our treasury yields have been close to  three year lows.  The ten year still hovering just above 2 percent right  now.  

LEBOVITZ:  Yes, it`s interesting to see that because the stock market and  bond market are clearly seeing two very different things at the current  juncture.  I think you have the stock market per our conversation earlier  pricing, you know, in some sort of resolution on trade, obviously an easier  Federal Reserve.  Earnings growth, which is relatively solid over the next  12 to 18 months whereas you have the bond market looking at things and  saying the economic data is beginning to deteriorate.  There is no  inflation no matter where we look outside of financial asset prices.  

So, I think that this, you know, dichotomy between the bond market and  stock market will need to be resolved.  But from where I sit, I think the  stock market has got this one right.  

GRIFFETH:  David Lebovitz with J.P. Morgan Asset Management, always good to  see you, David.  Thanks again.  

LEBOVITZ:  Thanks for having me.  

GRIFFETH:  Elsewhere, President Trump today signed an executive order  prescribing what`s hard-hitting new sanctions on Iran.  They are in  response to the downing of that unmanned U.S. drone last week.  President  Trump said that his administration will increase pressure on Tehran until  the regime abandons its dangerous activities.  

DONALD TRUMP, PRESIDENT OF THE UNITED STATES:  America is a peace-loving  nation.  We do not seek conflict with Iran or any other country.  I look  forward to the day when sanctions can be finally lifted.  I look forward to  discussing whatever we have to discuss with anybody that wants to speak. 

In the meantime, who knows what`s going to happen.  I can only tell you we  cannot ever let Iran have a nuclear weapon.  

GRIFFETH:  These new sanctions deny Iran`s supreme leader and his office  access to key financial resources but Iran said today that the sanctions  show the U.S. has no respect for international law and order.  It is  something the energy markets are watching and today the price of domestic  crude did settle slightly higher after last week`s huge 9 percent rally.  

President of the Dallas Fed said it`s too soon to decide if interest rates  need to be cut.  Robert Kaplan called on his fellow policymakers to be  patient and wait and see how economic events unfold.  Those events include,  of course, the trade war between U.S. and China, as well as decelerating  global growth.  

President Trump signed a second executive order today.  This one pushes for  transparency in health care prices.  The goal is to lower prices that  patients pay.  Hospitals and insurance companies say that they will fight  this order.  Their shares fell in trading today.  
Bertha Coombs puts it all together for us now.  

BERTHA COOMBS, NIGHTLY BUSINESS REPORT CORRESPONDENT:  President Trump`s  latest executive order is aimed at providing transparency on hospital  prices, so that patients know what they`ll pay before they`re treated, not  after the fact when they get a sky high bill. 

TRUMP:  Patients face significant obstacles shopping for the best care at  the best price, driving up health care costs for everyone.  With today`s  historic action, we are fundamentally changing the nature of the health  care marketplace.  

COOMBS:  Earlier this year, the administration required hospitals to post  their list prices but insured patients don`t pay those prices.  Under the  new executive order, the government will require hospitals to make their  negotiated insured rates public and require insurers to provide members  with out-of-pocket cost estimates for procedures ahead of time.  

Analysts say the price transparency rules could help increase competition  on services like MRIs where consumers have alternatives and can find scans  with lower out-of-pocket costs.  But with high-cost procedures like  surgery, some say the move could actually backfire.  

CRAIG GARTHWAITE, KELLOGG SCHOOL OF MANAGEMENT:  If this is about a knee  replacement or any other kind of surgery, the cost is so higher on your  deductible, the deductible is not really a feature of your shopping  decision.  Then you might start thinking that price is a substitute for  quality and you just go to the high price place because you want to go to  the highest quality place.  

COOMBS:  Some analysts worry transparency could encourage collusion,  helping hospitals keep prices sky high in some markets.  

PAUL KECKLEY, THE KECKLEY REPORT:  The bigger question might be in the long  term will that drive prices down?  Doubtful.  

COOMBS:  The executive order is just the beginning.  The administration now  has to draft the rules and give the industry time to comment.  New rules on  changing Medicare drug price rebates initiated last year still have not  been finalized, but it`s clear the pressure is on the health care industry  from Washington and from consumers to do better on prices.  

GRIFFETH:  The Supreme Court has agreed to hear an Affordable Care Act- related lawsuit where insurance companies — health insurance companies say  the federal government owes them $12 billion for losses they sustained  under that law.  One facet of the Affordable Care Act was designed to  encourage insurers to cover riskier, previously uninsured people which the  government would then reimburse them for.  

But two years ago, Republicans blocked those payments, saying that they  were a bailout for the insurance industry.  Insurers allege the government  pulled a bait-and-switch and withheld the money that they are entitled to.  
Elsewhere in Washington, they continue to bear down on big tech.  The  latest push came today.  A proposal was introduced that would force well- known companies like Google (NASDAQ:GOOG), Facebook (NASDAQ:FB) and Amazon  (NASDAQ:AMZN) to tell users what kind of data they are collecting on you  and how much it`s worth.  
Ylan Mui has more.  

YLAN MUI, NIGHTLY BUSINESS REPORT CORRESPONDENT:  There`s a new bipartisan  effort to put a price tag on privacy.  Democratic Senator Mark Warner and  Republican Josh Hawley want big tech to calculate the value of all the data  they collect and disclose that number to their users.  The new rules would  apply to companies with more than 100 million active monthly users and the  FCC would be in charge of creating the formulas that determine the value of  that data.  And companies would have to file a report every year that  includes contracts with third parties that collect data and allow users to  delete their information.  

In a tweet, Senator Warner said social media companies have told the public  that their products are free, but that`s not true.  He said you`re paying  with your data instead of your wallet and you have a right to know what  that information is worth.  Tech groups are fighting back.  One think tank,  the Information Technology and Innovation Foundation argued that the  premise of the bill is all wrong.  

Unlike with money, you don`t have less data and often the more data you  share, the better your service.  They say that trade helps consumers come  out ahead.  
For NIGHTLY BUSINESS REPORT, I`m Ylan Mui, in Washington.  

GRIFFETH:  Time to take a look now at some of today`s “Upgrades and  Downgrades”.  

We begin with United Technologies (NYSE:UTX).  Shares were upgraded to  outperform from market perform at Cohen, with the analyst citing the  company`s merger with Raytheon (NYSE:RTN).  The price target is $150.  That  stock rose 1 percent to $130.18.  

Deere was upgraded to buy from hold at Jefferies.  The analyst cited the  improved sentiment in the farm economy right now.  And price target raised  to $190.  That rose to 1.5 percent to $166.80 today.  
Dunkin Brands was upgraded from outperform from neutral at Wedbush.  The  analyst cited the potential for new growth in same store sales and improved  operations.  Price target, $92.  Shares rose more than 1 percent to $80.98.  

And Hostess Brands was upgraded to buy from neutral at UBS.  The analyst  cited accelerating sales trends and the company`s new breakfast product  line.  Price target $17.  Those shares rose more than 2 percent to $14.26.  
Still ahead, a new kind of food fight.  

RAHEL SOLOMON, NIGHTLY BUSINESS REPORT CORRESPONDENT:  I`m Rahel Solomon  for NIGHTLY BUSINESS REPORT.  Coming up, what does the aerospace industry  have to do with tariffs on specialty foods?  I`m at a specialty foods  convention in New York City and I`ll have that answer.  

GRIFFETH:  Home Depot (NYSE:HD) is watching the tariff situation closely  even though 70 percent of the goods it sells are made domestically.  The  CEO of the home improvement retailer said today that there are ways it can  minimize the potential impact of tariffs on customer prices.  

CRAIG MENEAR, HOME DEPOT CEO:  The first step that we`ll do is try to  protect the customer in the project.  We`ll do everything we can to try to  take other costs out of the business working with our suppliers, whether  that`s opportunities in supply chain, other elements of the business and  then we`ll try to protect the customer on the project.  

GRIFFETH:  Stocks fell in today`s session.  
Well, there`s another potential tariff fight brewing these days, but this  one is not with China, it`s with Europe.  And it could result in higher  prices for specialty foods.  As you saw, Rahel Solomon is in New York with  that story tonight.  

SOLOMON:  For European companies at a global specialty foods convention,  there is a looming threat — tariffs proposed by the U.S. and because of  aerospace.  

PHIL KAFARAKIS, SPECIALTY FOOD ASSOCIATION PRESIDENT:  This is the  political gamesmanship that`s going on around the world.  We just — we  just came out of it with Mexico.  It has to do with immigration policy.  We  have a problem with China when we talk about soy beans and what happened  there.  So, it seems that agriculture and food products are becoming a  little bit of a weapon as it relates to policy that have nothing to do with  food.  

SOLOMON:  For nearly 14 years, the U.S. has maintained the European Union  has provided illegal subsidies to Airbus, unfairly giving them advantage  over American companies, mainly Boeing (NYSE:BA).  The E.U. claims the U.S.  indirectly subsidizes Boeing (NYSE:BA) with defense purchases and tax  breaks.  In April, U.S. Trade Representative Robert Lighthizer issued a  list of imported foods that could be subject to retaliatory tariffs if the  E.U. does not stop subsidizing airbus.  Foods like cheese, meats and jams.  

ARIANE DAGUIN, D`ARTAGNAN CEO:  Our annual revenues are $150 million and I  think out of that, if 10 percent is affected, it would be devastating for  our business.  

MARIA LOI, LOI ESTIATORIO EXEC. CHIEF:  It`s not only me, it`s the whole  team, you know, that works for that.  And yes, they are like can we make  it?  I said, yes, of course we will make it, but it will be more expensive  for the consumer and I say, yes, for the homes.  

SOLOMON:  French, Italian and Greek companies are most at risk, although  according to a U.S. major importer, the impact will be felt across the food  industry.  Possible tariffs could be 100 percent of the product`s cost,  according to the specialty food association.  

TOM GELLERT, ATALANTA PRESIDENT:  Feta cheeses, parmesan Reggiano, imported  Gouda, imported Asiago, any fine cheese that you buy, and, you know, these  are not just at Whole Foods.  You find imported cheeses from anywhere from  whole foods to Aldi, Walmart, Wegmans.  So, it turns the gamut.

SOLOMON:  The WTO was expected to weigh in again soon, perhaps this summer.   That`s what everyone is waiting for.  If a decision isn`t favorable to the  U.S., that`s when we could see those tariffs.  But businesses here tell me  this is a food fight they don`t want anything to do with.  
For NIGHTLY BUSINESS REPORT, I`m Rahel Solomon in New York City.  

GRIFFETH:  Eldorado rolls the dice on Caesars.  And that`s where we begin  tonight`s “Market Focus”, with Eldorado Resorts buying Caesars for more  than $17 billion in cash and stock, plus the assumption of debt.  The  merger will put about 60 casinos and resorts in 16 states under a single  name, Caesars, making it the largest gaming operator in the country.   Eldorado shares fell 10 percent to $45.77 while Caesars rose to $11.44.  

FedEx (NYSE:FDX) is reportedly offering big discounts in an effort to have  online merchants to its express delivery services.  “The Wall Street  Journal” says the carrier is trying to win over shippers from rival UPS by  offering guaranteed two-day air service for the same price as shipping by  ground.  The stock was down nearly 3 percent today to $160.90.  

Bristol-Myers said that its planned $74 billion merger will now close later  than originally planned.  The deal is now expected to close by the end of  the year or the start of 2020 as opposed to the third quarter of this year.   Bristol will divest Celgene`s most profitable drug Otezla which treats  psoriasis, to help ease concerns of antitrust regulators.  Bristol-Myers  fell more than 7 percent on this news today to $45.68 while Celgene  (NASDAQ:CELG) dropped 5-1/2 percent to $93.47.  

Amazon (NASDAQ:AMZN) is opening a beauty store for professionals that will  offer stylist and barber supplies typically found in salons and spas.   Amazon (NASDAQ:AMZN) shares rose a fraction to $1,913.90.  But the news  sent shares of competitors like Sally Beauty and Alta Beauty down today.   Sally fell almost 17 percent to $12.30, while Alta dropped more than 2.5  percent to $346.54.  

The fire at that Philadelphia refinery last week that we told you about on  Friday was extinguished over the weekend.  Now that the blaze is out, the  investigation into the cause is set to begin.  And right now, many  questions remained unanswered.
Brian Sullivan traveled to that facility which is the largest on the East  Coast.  

BRIAN SULLIVAN, NIGHTLY BUSINESS REPORT CORRESPONDENT:  The fireball, 4:00  a.m. Friday morning here at the Philadelphia Energy Solutions refinery in  Philadelphia, Pennsylvania, could be seen from space.  It was felt miles  away but luckily the worst was avoided from a human perspective.  

Only a couple of workers were injured.  They were treated on scene despite  the blast which was simply incredible to behold.  You can see in background  there, the burnt out hooks (ph) of one of the refining units, that what was  burning on Friday morning.  The fire was put out over the weekend.  

That cause is still being investigated.  At least three different federal  agencies as well as local officials will be involved in that investigation.  
What the current status of this refining plant, the largest on the East  Coast is unknown.  The company has been tight lipped about exactly how much  gasoline and other products are currently being refined. 

But there was a separate fire two weeks which shut down one of the  complexes.  This is actually two separate refineries in one, that refinery  is supposed to come back online last Friday, the day that this refinery  actually exploded.  The status of that refinery and both are currently not  known.  
What we do know is this, the worst of the human toll was avoided.  This is  one of the largest refineries in the United States that still uses hydrogen  chloride, a toxic and often deadly chemical used in the mixing of gasoline.
A clean energy fund lawyer explained what could have happened had hydrogen  chloride been released from the explosion.  

ALEX BOMSTEIN, CLEAN AIR COUNCIL SENIOR LITIGATION ATTTORNEY:  Philadelphia  itself is in the worst position within the country with the most number of  people living close to hydrogen fluoride-using refinery.  This refinery is  right next to residential neighborhoods throughout South Philadelphia and  Southwest Philadelphia.  If it had hit those homes, those neighborhoods,  those people would, first of all, be burned and they could die very  quickly.  It`s a horrible scenario.  

SULLIVAN:  Thankfully, that did not happen, but now, the toll turns to the  economic side.  This refinery, 27 percent of all mid-Atlantic gasoline  supplies.  From now on, other refineries will be able to make up that lack  of supply.  

However, the longer this factory is offline, the tighter factories could  get and the higher the prices could go.  Some estimates say it could take  more than a year and possibly $100 million to get this refinery, the oldest  operating refinery in America back on line and that the if they ultimately  have the money, because they will not be refining anything here on any  large scale, at least through the summer.  
For NIGHTLY BUSINESS REPORT, I`m Brian Sullivan, Philadelphia,  Pennsylvania.  

GRIFFETH:  And coming up, did Disney`s “Toy Story 4” go to infinity and  beyond at the box office?  

GRIFFETH:  Here`s what we`re watching tomorrow.  
FedEx (NYSE:FDX) reports earnings.  The company`s results are often viewed  as a barometer for the health of the global economy.  We`ll find out if  lower mortgage rates helped fuel new home sales and report of consumer  confidence will tell us if sentiment is holding up amid rising geopolitical  tensions.  So, an interesting day coming up tomorrow.  
Senator Bernie Sanders has a plan to wipe out the $1.6 trillion of student  debt owed by more than 40 million Americans.  It will also provide $48  billion in funding for free tuition at state colleges and universities.   The Democratic presidential candidate would pay for his plan by taxing Wall  Street transactions like stock and bond trades.  His campaign estimates  that the taxes would generate $2.4 trillion over a decade.  

Meanwhile, 19 billionaires have released a letter asking all 2020  presidential candidates to support a tax on America`s families with the  largest fortunes.  The bipartisan letter says the next dollar of new tax  revenue should come from the most financially fortunate, not from middle  income and lower income Americans.  The letter was signed by George Soros,  Abigail Disney (NYSE:DIS) and members of the Pritzker family among many  other billionaires.  

Toys “R” Us could make a comeback this year.  A new company called True  Kids reportedly plans to open two Toys “R” Us stores, which would be about  a third of the size of the old ones.  True kids won the rights of the Toys  “R” Us brand last year.  It also took over the rights of other assets,  including Babies “R” Us, Jeffrey the Giraffe and Imaginarium.  More than  700 Toys “R” Us locations were closed last year.

Well, we are entering a critical time of year for Hollywood.  This year,  the entertainment industry is betting on a hot summer box office with hopes  that the return of Disney`s “Toy Story” franchise would lead the way.  
Julia Boorstin has more from Los Angeles.  

JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT:  Woody and Buzz  light year return to the big screen after nine years.  Disney`s “Toy Story  4” flew into the theaters around the country this past weekend.  The film  brought in $118 million at the domestic box office, the biggest ever  opening from the franchise, with $120 million coming in from overseas.
This film gives Disney (NYSE:DIS) the four biggest opening weekends of the  year and more than 1/3 of box office market share year-to-date. 

JESSICA REIF EHRLICH, BANK OF AMERICA MERRILL LYNCH:  We figure there`s 20  percent upside in the stock driven by, of course, films.  While this film,  “Toy Story 4”, may have under performed initially expectations, it`s still  the best debut of all the four franchise, of the four films in the  franchise.  

BOORSTIN:  But the film fell far short of expectations.  The studio  projecting about $140 million opening weekend while some analysts expected  as much as $200 million at the domestic box office.  
The shortfall could be contributed to a number of different factors.   Disney`s skipped its usual Father`s Day slot which is considered better for  drawing families.

Last year`s Father`s Day weekend release of “Incredibles 2” smashed  records.  The box office is also suffering from weak momentum following  last weekend`s disappointing performance.  And kids` movies seldom have  huge debuts, more likely to have steady performance over time.  
But Disney (NYSE:DIS) is expected to profit and not just from ticket sales  but also from its inclusion in the company`s streaming service Disney  (NYSE:DIS) Plus, which is launching in November.  

ED LEE, NEW YORK TIMES:  Ultimately, this will be redound back to Disney  (NYSE:DIS), right?  It will be on Disney (NYSE:DIS) Plus streaming service.   I mean, that`s where you`ll be able to watch these things as a family.  You  missed it.  You want to catch up later on.  You want to watch all the “Toy  Stories” in one.  That`s where you`re going to have to pay for it.  So,  eventually it will come back and make up whatever shortfall.  

BOORSTIN:  And Disney (NYSE:DIS) is expected to continue to dominate with  the studio`s “Lion King” remake, hitting theaters in July.  
For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Los Angeles.  

GRIFFETH:  And before we go, a final look at the day on Wall Street.  Kind  of a wait and see day as the market anticipates the G20 Summit later this  week.  The Dow rose just eight points.  Nasdaq was down 26.  The S&P down  five.  

That is NBR for tonight, I`m Bill Griffeth.  Thanks so much for watching.   We`ll see you tomorrow.  

Nightly Business Report transcripts and video are available on-line post  broadcast at The program is transcribed by ASC Services II  Media, LLC. Updates may be posted at a later date. The views of our guests  and commentators are their own and do not necessarily represent the views  of Nightly Business Report, or CNBC, Inc. Information presented on Nightly  Business Report is not and should not be considered as investment advice.  (c) 2019 CNBC, Inc.

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