Transcript: Nightly Business Report – September 4, 2019

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

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR:  Snapback.  Stocks rebound from yesterday`s losses as the wild ups and downs of the market continue.  

BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR:  Bungled Brexit.  British lawmakers vote to delay leaving the E.U. again.  Why investors need to care about what`s going on across the pond.  

HERERA:  And branchless banks.  How digital startups are taking on the big
banks and grabbing valuable customers in the process.  

All of these stories and much more tonight on NIGHTLY BUSINESS REPORT for this Wednesday, September 4th.  

We do bid you a good evening.  Cat Stevens called it a wild world and
that`s what investors have been focused on these days.  Today, they look to
areas where global risks have been key, places like Hong Kong and the U.K.  
We`ll have more on those in a moment.  

But in the end, they felt it was safe to wade back into the market after
yesterday`s selloff.  And stocks rose, recovering most of the yesterday`s
losses, with the Dow up 237 points.  Nasdaq climbed by 102.  The S&P added 31.  

Seema Mody starts us off from the New York Stock Exchange.  


SEEMA MODY, NIGHTLY BUSINESS REPORT CORRESPONDENT:  U.S. stocks rallied following easing tensions in Hong Kong plus data out of the Fed Beige Book.  Markets in Asia rebounding after Hong Kong`s Carrie Lam withdrew the controversial extradition bill that has sparked months of protests.  

Separately, activity in China services sector picked up slightly in the
month of August.  While one data point doesn`t make a trend, economists say it is an encouraging sign at the moment.  Dow closing up triple digits
erasing yesterday`s losses.  Comcast (NASDAQ:CMCSA) (NYSE:CCS), Pepsi, even Coca-Cola (NYSE:KO) hitting new highs in today`s trading session.  

The rebound in today`s oil prices added to the positive tone.  WTI crude
goes up by more than 4 percent after new U.S. sanctions were imposed on
Iran.  But traders are still concerned about the longer term risk of a
larger trade war and tariffs eating into corporate profits.  Investors will
be now watching for the August ADP number out tomorrow morning which will get a first look at the monthly jobs support.  



HERERA:  In its Beige Book, the Federal Reserve found the economy growing at a modest pace.  A weak spot was manufacturing and that`s just the latest finding out of the industrial sector.  

Steve Liesman tells us what it all means.  


STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT:  The latest data show the nation`s industrial sector is shrinking and that`s raising concerns about whether consumers can hold up the U.S. economy.  

SCOTT CLEMONS, BROWN BROTHERS HARRIMAN WEALTH MGMT:  Everything we see shows the U.S. consumers are in good shape.  Where it might get tough, if, when companies begin to pass through, the tariffs and into consumer prices. We haven`t seen that wholesale yet.  That could begin to have an impact on consumer sentiment.  But that`s not a projection.

LIESMAN:  So what`s behind the factory slowdown?  Experts cite several
factors.  First, they say is the trade uncertainty out there with the trade
war between China and the U.S.  Overall, there`s global economic weakness specifically in manufacturing sectors.  

Factories have trouble finding enough workers and also the dollar is
strong, making the U.S. exports more expensive relative to their foreign

Chad Moutray, chief economist of the National Association of Manufacturers, says the manufacturing sector is contracting right now in large part because of slowing global growth and uncertainty on the trade front.  What manufacturers need most now is more clarity on trade.  

Another possible factor, the slowdown in Boeing (NYSE:BA) plane production from the issues surrounding the 737 MAX.  It`s unclear how that could be impacting the national data and it`s unlikely that it`s only just domestic issues affecting the U.S.  

Moutray from NAM says by his count, manufacturing is shrinking in 11 of 20 countries that are major export markets for the U.S.  That list includes
Canada, Mexico and Germany.  

What economists can`t know is how much of this was happening anyway and how much can and should be linked to the trade war.  



GRIFFETH:  In London, it was another day of high drama as British lawmakers voted to once again delay that country`s exit from the European Union.  The move is a blow to the nation`s new prime minister and it cuts the chances of a Brexit without an economic deal in place.  

Willem Marx is in London for us tonight.  



WILLEM MARX, NIGHTLY BUSINESS REPORT CORRESPONDENT:  It`s a now increasingly familiar but still painful tableau for the new British prime

UNIDENTIFIED MALE:  The ayes to the right, 329.  The noes to the left, 300.  

MARX:  Two days of parliamentary confrontation for Boris Johnson.  

BERCOW:  So the ayes have it.  The ayes have it.

MARX:  Five separate votes and five defeats that his government is in power but not really in control.  

Last week, Johnson pushed to suspend parliament and now, for the second day running, parliament has pushed back.  

Opposition lawmakers like Labour Party leader Jeremy Corbin have been
successful so far in their efforts to preclude the possibility next month
of a no deal Brexit.  

It`s an outcome the Bank of England, corporate leaders and the country`s
finance ministers past and present acknowledged could prove costly for the U.K. economy.  

SAJID JAVID, CHANCELLOR OF THE EXCHEQUER:  And I understand that the uncertainty around Brexit is challenging, but this is ultimately a question in trust in our democracy.  In the end, a strong economy can only be built on the foundation of a successful democracy.  

MARX:  The prime minister is long insisting that he must retain the option
to exit the E.U. without a negotiated settlement so that that economically
frightening possibility might force his European counterparts to offer
fresh concessions in a new Brexit deal.  But as his own government has so
far refused to publish details of how bad a disorderly departure will be
for the U.K., his opponents here in Westminster have denied him that
negotiating tool.  

And as of right now, since he`s lost his parliamentary majority, they can
also deny him the power to call a fresh election.  

They have loudly and repeatedly insisted they will not allow a new national election until the current legislation to block no deal has become legally binding.  

JEREMY CORBYN, BRITISH LABOUR PARTY LEADER:  Let this bill pass and gain royal assent, then we will back an election so we do not crash out with a no deal exit from the European Union.  

MARX:  Based on the existing parliamentary schedule, that means an election could be called early next week to take place midway through next month. Critics say Johnson would campaign on a promise to make Brexit still happen by Halloween, but he`d need to frighten a new parliament into supporting his high risk approach as this one no longer seems scared.  

For NIGHTLY BUSINESS REPORT, I`m Willem Marx in London.  


HERERA:  Bill Stone joins us now to talk more about this latest move to
delay Britain`s exit from the European Union and what could it mean for the U.S. and U.S. investors.  He is the chief investment officer at Avalon
Investment and Advisory.  

Bill, nice to have you with us tonight.  Welcome.  


HERERA:  Certainly, this is still unfolding and there are many more steps
that have to take place, but it seems to me that simply increases the
uncertainty for global markets.  

STONE:  Well, I think the good news is it does help in one aspect.  It
makes it less likely because of the votes that were taken today that
Britain leaves without a deal.  So, you know, probably still leaves but
seems more likely that we end up with a deal ahead, which all other things
being equal does make for actually less uncertainty.  And we`re seeing some of that reflected in the financial markets.  

GRIFFETH:  Alan Greenspan today said something he said before.  But he said it`s only a matter of time before the U.S. sees negative interest rates
like they are seeing in parts of the European Union, especially in Germany.  

Depending on how Brexit goes here, do you think that`s inevitable depending on how things go?  

STONE:  Yes, I would disagree.  I don`t think it`s necessarily inevitable.  
I view Brexit as just another, you know, geopolitical risk sitting out
there.  We don`t really know how bad it would get or what the, you know,
major implications would be if, in fact, they crashed out of the European
Union without a deal.  We just know it`s probably not a good thing.  

And even just them sitting out there and not knowing is bad enough, because you think about it, what corporation is going to make a big decision to, say, big a big new plant in the U.K. without knowing really, you know, who to build the trade with, and what it will cost and those kind of things.  
Those all weigh out.  It`s the same kind of costs that sit there with the
tariffs between the U.S. and China.  

HERERA:  So, does that make our market more attractive relative to not only the U.K., but as Italy tries to form its new government and other parts of the E.U. as Bill mentioned, Germany with negative rates.  Does that make
the U.S. market more attractive to you?

STONE:  Yes.  On some aspect, yes, because certainly, you know, when you
look at the global economy, the U.S. while slowing is still looking good
really, I have to say.  You know, it probably still grow, you know,
somewhere around 2 percent for 2019 in terms of GDP and yes we`re slowing into it.  

But the consumer still remains resilient, so corporations obviously benefit
from that, all the uncertainty in Europe and the fact that Europe is much
more exposed to some of the slowdown in China does make our companies, you know, again, if you think about the more domestically-oriented companies more attractive.  But that being said, obviously, there`s a lot of
companies, even in Europe, that do a lot of business in the U.S. and can`t
completely throw out Europe.  

HERERA:  And on that note, Bill Stone, thank you very much.  

STONE:  Thank you.  

HERERA:  Bill is with Avalon Investment and Advisory.  

GRIFFETH:  The Federal Trade Commission today issued a record fine against Google`s YouTube site to settle allegations that it collected children`s data without parents` consent.  

Ylan Mui has the story.  


YLAN MUI, NIGHTLY BUSINESS REPORT CORRESPONDENT:  Google (NASDAQ:GOOG) will pay regulators $170 million to settle accusations that YouTube repeatedly violated the law that protects children`s privacy online.  Under the agreement, Google (NASDAQ:GOOG) will pay $136 million to the FTC and $34 million to the New York attorney general`s office.  

In addition, YouTube must set up a system for content creators to designate
their videos as designed for kids.  The FTC said this is the first time any
platform has been required to do that and that it will conduct sweeps to
ensure compliance.  

JOSEPH SIMONS, FTC CHAIRMAN:  This case sends strong messages to third
parties like YouTube, channel owners and the business community as a whole.  For YouTube and other third parties like it that serve ads, they can`t
market their ability to get child viewers on the one hand and disavow
knowledge that children are using their service on the other.  

MUI:  In a statement, YouTube`s CEO said responsibility is the company`s
number one priority.  Starting in four months YouTube will assume any user watching kids` content is actually a child.  That means getting rid of
targeted personalized ads and disabling features like comments and

However, the two Democratic commissioners at the FTC voted against this
settlement.  They argue the dollar amount is too low.  It should have been
in the billions, not the millions.  It doesn`t do enough to change
YouTube`s practices and the commitment to Google (NASDAQ:GOOG) cannot be easily enforced.  

Meanwhile, consumer advocates worry that YouTube`s business model of making money by advertising to kids remains intact.  

JOSH GOLIN, CAMPAIGN FOR A COMMERCIAL-FREE CHILDHOOD:  We need to see if they move all of that children`s content off of the main YouTube site or if they`re putting it also on the YouTube kids` app, because as long as that`s still on the main YouTube site, children are going to have their data collected, they`re going to get inappropriate links.  They`re going to have inappropriate content.  

MUI:  Still, the FTC pointed out that Google`s $170 million penalty is the
largest ever collected under the privacy law.  

For NIGHTLY BUSINESS REPORT, I`m Ylan Mui in Washington.  


HERERA:  So, what are the implications of that fine by the FTC?  

Julia Boorstin takes a look.  


SIMONS:  Today, I am pleased to announce that Google (NASDAQ:GOOG) and YouTube have agreed to pay $170 million.  

JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT:  YouTube CEO Susan Wojcicki writing that the FTC settlement marks a big change.  Quote: Today`s changes will allow us to better protect kids and families on YouTube and this is just the beginning.  We`ll continue working with lawmakers.  

YouTube will stop collecting data from kids unless their parents allow it,
limiting personalized ads on kids` content.  YouTube will use technology to
identify videos targeting kids, to identify those that creators don`t flag

Dissenting commissioners say this doesn`t go far enough.  

Analysts say it will improve the platform over time.  

BRENT THILL, JEFFERIES ANALYST:  Young kids continue to flock to this
platform regardless of what happened.  We think going forward, the
compliance oversight we`ll actually make it a safer platform and actually
probably bring more people into the system, knowing that this issue is
broken, they`re under scrutiny.  So, in some ways, it can actually be a
modest tailwind.  

BOORSTIN:  Wojcicki is also making a big push to shift parents over to
YouTube kids for which they`re launching a $100 million content fund.  And the analysts say the FTC`s action both the fine and restrictions won`t have any impact on YouTube`s parent companies Google (NASDAQ:GOOG) and Alphabet which are so big that $170 million is just a rounding error.  

THILL:  YouTube is juggernaut.  This is a very minor headwind.  We think it
will pass quickly.  Advertisers did pull back a little bit earlier in the
year, and we think that they`ll resume spend on the platform.  We think
Google (NASDAQ:GOOG) has full control of the situation now and that
ultimately this will be a speed bump.  

BOORSTIN:  The question now is whether content creators shy away from
YouTube because these changes will limit how much they can earn from videos targeting kids.  We`ll see how much YouTube`s investment in original kids` content itself counters declining ad revenue.  

For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Los Angeles.


GRIFFETH:  Up next, can the consumer keep the economy afloat?  You`ll hear what some of the top retail CEOs think.  

HERERA:  Some of the themes this year have been the strength and resilience of the American consumer and how retailers would fair with those new tariffs.  Some of the biggest retail CEOs got together today in New York to discuss and Courtney Reagan was there.  


COURTNEY REAGAN, NIGHTLY BUSINESS REPORT CORRESPONDENT:  Despite fears of recession and uncertainty around tariffs, most CEOs here at the Goldman Sachs (NYSE:GS) Global Retailing Conference in New York City agreed that the U.S. consumer is strong for now.  Lowe`s CEO Marvin Ellison says the broader macro environment supports spending and not just for things homeowners have to fix when there`s an issue like a leaky roof but even in its more discretionary categories, items like patio furniture.  

MARVIN ELLISON, LOWE`S CEO:  We feel very confident that those
discretionary categories are holding up really well to levels that give us
confidence that the consumer feels good about their economic situation.  

REAGAN:  Also today, Tapestry and Coach (NYSE:COH) and Kate Spade parent company announced long time board member Jide Zeitlin is taking over as CEO.  

I spoke to him briefly by phone.  He said the U.S. consumer is still quite
strong despite the company struggling to grow sales recently.  

Tariffs, of course, are a big uncertainty for retailers, especially if the
overall effect crimps consumer spending and confidence.  

JAMIE SALTER, AUTHENTIC BRANDS GROUP CEO:  There`s two books out there, right?  Higher costs passed on to consumers, does that mean more rent coming in for the landlords and more royalties coming in for us because revenue will be higher?  Or does that mean less shopping and revenue is lower?  I think it`s too early to tell.  

REAGAN:  While it`s been a lot of hard work and taken a lot of
negotiations, a number of retailers have figured out ways to mitigate the
tariff impact.  

ED STACK, DICK`S CEO:  What we`re seeing is a relatively small percentage
are products are — you know, are facing price increases from the vendors
as they`ve been able to negotiate better deals or they`re absorbing some of

REAGAN:  William-Sonoma CEO Laura Alber said it has a number of mitigation strategies in place but where it has raised prices, it`s shown the retailer may have more pricing power than it realized.  

So, while the U.S. consumer is strong, the uncertainty that comes with the
tariff policy makes the future very hard to forecast.  

For NIGHTLY BUSINESS REPORT, I`m Courtney Reagan in New York City.  


GRIFFETH:  JetBlue comes down on its guidance and that`s where we begin
tonight`s “Market Focus” with the airline cutting its revenue forecasts due
to weaker than expected demand for its flight, light bookings to Puerto
Rico and, of course, the impact of Hurricane Dorian.  Shares slid more than
4 percent today to $16.39.  

Truck and automotive engine maker Navistar beat its estimates, thanks to an increase in demand for its North American trucks and buses and related
parts.  The company did however say it anticipates fewer truck orders next
year as the freight industry weakens.  Shares rose more than 13 percent,
though, today to $24.78.  

And women`s hand bag maker Vera Bradley (NASDAQ:VRA) missed on its
earnings, but it did post a revenue beat after what the CEO called a
challenging retail environment.  The company was also affected by higher
shipping costs and by tariffs.  Shares fell more than 19 percent today to

HERERA:  Arts and crafts retailer Michael`s painted a solid quarter,
topping analyst`s expectations.  The company saw a spike in its comparable store sales to help combat the closure of its Pat Catan stores.  Shares jumped to about 12 percent to just about $6.26.  

American Eagle Outfitter said a later start to the back to school shopping
season and unseasonable weather led to same store sales growth that missed analysts` expectations.  Shares fell more than 11 percent to $14.38.  

And after the bell, workplace chat app Slack reported its first earnings
report since going public, topping revenue estimates and seeing growth in
its paid customer use.  But Slack saw increased competition in the industry
from Microsoft (NASDAQ:MSFT) and it gave weak guidance.  That caused the shares to be volatile in after-hours trading, but they did close the
regular session up 8 percent to $31.07.  

GRIFFETH:  So-called Challenger Banks, these are the digital banking
startups.  They are all the rage for venture capitals right now.  In fact,
with VC money pouring in, these banks are the fastest growing part of the
financial technology sector.  They are attracting the millennial and Gen Z
demographic, which are highly coveted by the traditional big banks and they are doing it all without a single branch.  

Deirdre Bosa has more.  


DEIRDRE BOSA, NIGHTLY BUSINESS REPORT CORRESPONDENT:  Challenger banks are still a new concept for many.  

REPORTER:  Do you know what a challenger bank is?  


UNIDENTIFIED MALE:  I don`t know.  

UNIDENTIFIED FEMALE:  I`m not familiar with a challenger bank.  

UNIDENTIFIED FEMALE:  I don`t know.  That`s strange.  I don`t know.  

UNIDENTIFIED MALE:  Never heard of it.  

BOSA:  They`re alternative banks with fee free online checking accounts.  

Chime, one of the biggest digital only banks, is adding more customers each
month than Wells Fargo (NYSE:WFC) and Citibank, and it doesn`t have a
single physical branch.  

CHRIS BRITT, CHIME CO-FOUNDER & CEO:  Actually going into a bank branch and getting a lollipop and asking about the weather and knowing that same person that you`ve seen for decades is something that, you know, is more likely my mom to do rather than my son.  

BOSA:  Branchless banks are taking on Wall Street stalwarts by capturing a
younger demographic that have grown up with smart phones.  

UNIDENTIFIED FEMALE:  Ability to access information quickly, make
transactions quickly, especially if you`re a business owner that needs to
make, you know, quick transactions.  

UNIDENTIFIED MALE:  Yes, I use banking online, Bank of America (NYSE:BAC) to check my transactions and all of that.  

UNIDENTIFIED MALE:  I noticed that things clear faster, checks clear
faster, you`re able to access funds sooner.  

BOSA:  Big traditional players are moving into mixed success.  Goldman
Sachs (NYSE:GS) launched its online consumer bank markets in 2016 and this year teemed up with Apple (NASDAQ:AAPL) on its first credit card.  

JPMorgan (NYSE:JPM) rolled out Finn, its digital only bank in 2018, only to
close it a year later.  

BRITT:  I think if you look at the way big banks are structured, they`re
pretty well designed to serve the needs of the top say 25 percent of
America who have really large balances and they want to give credit
products, investment services and that.  

When you go below that and talk to general mainstream, everyday Americans, there`s so much fee income that`s generated by these banks.  

BOSA:  But fees lead to profits, something that most challenger banks don`t
yet have, building a profitable business is their next hurdle and it`s not
easily done with checking and savings accounts.  Online-only banks rely on
established partner banks to hold customer deposits.  That`s an added cost.  

The challenger banks move into lending and other businesses set to further
disrupt the banking landscape.  The question is, will the big banks catch

NIGHTLY BUSINESS REPORT, Deirdre Bosa, San Francisco.  


HERERA:  Coming up, Porsche goes electric.  


PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT:  How much power does Porsche`s Taycan have?  Well, it goes zero to 60 in 2.6 seconds and, believe me, you feel it.  Whew!  There we go!  



HERERA:  Here are some of the stories in the news that we`re keeping an eye on.

Hurricane Dorian is a category 2 storm off the coast of Florida and it`s
expected to move dangerously close to Georgia and the Carolinas over the
next two days.  

And in the northern Bahamas where Dorian sat for the better part of two
days, pictures are emerging of entire neighborhoods under water, including many airport runways, thus hampering the relief efforts.  

In Hong Kong, chief executive Carrie Lam announced the government will
formally withdraw the extradition bill that had sparked months of protests
but she also said the government would not accept other demands, so it is
unclear if just pulling the bill at this point will be enough to appease
the protesters.  

And in Iran, President Rouhani said starting Friday, it will begin working
on centrifuges to speed up enriching uranium as part of scaling back its
nuclear commitments.  Iran continues to ratchet up the pressure ahead of a
weekend nuclear deadline for European nations to come up with a solution
for Iran to sell its oil abroad.  

GRIFFETH:  Elsewhere, the National Transportation Safety Board said today
that driver error and Tesla`s auto pilot design were the probable cause of
a Model S crashing into a parked fire truck on a California highway back in
January of 2018.  The safety board which criticized Tesla`s auto pilot
after a fatal 2016 crash in Florida said the system`s design permitted the
California driver to disengage from the driving task before crashing
earlier this week.  

Earlier this week, the NTSB said the auto pilot system allowed the driver
to keep his hands off the wheel for the majority of the nearly 14 minutes
of that trip.  The NTSB is looking into two other fatal crashes involving
auto pilot use.  

HERERA:  And seven years after it rolled out its Model S, Tesla remains the
leader in electric vehicles in the U.S., selling nearly 2/3 of all EVs
since 2015.  But now, a new luxury car may be the first true threat to
Tesla`s dominance.  

Phil LeBeau has more from Niagara Falls.  


LEBEAU:  In front of a spectacular backdrop, Porsche is hoping its first
all electric car will make a splash.  

DETLEV VON PLATEN, PORSCHE BOARD MEMBER:  We wanted to show what we can do.  Accessibility doesn`t mean sacrifice.  

LEBEAU:  With simultaneous reveals in Germany and China, Porsche is sending a message.  

This is not just another car, going zero to 60 in 2.6 seconds.  


The Taycan is designed to handle and perform like a true luxury sports car.  
We experienced firsthand during a test ride.  

Oh, it`s got the power.  

The bigger question, will the Taycan win over EV buyers loyal to Tesla and
its first mass market car, the Model S?  

JESSICA CALDWELL, EDMUNDS.COM EXECUTIVE DIRECTOR OF INDUSTRY ANALYST:  I would say the Taycan is a big threat to the Model S.  If you look at the way it`s going to look, it`s a Porsche, it`s probably going to look great.  The performance is probably going to be fantastic and the Model S is old.  It was a great design, but it`s pretty long in tooth at this point, and
they`re a consumer base that wants to buy the latest and greatest.  

LEBEAU:  The Taycan isn`t cheap, starting at $150,000, a pricey ride
Porsche executives believe buyers will want.  

KLAUS ZELLMER, PORSCHE N.A. CEO:  Personally, I can tell you that the car
is overwhelming.  Driving it is more than what I asked for.  Now, let`s see
what consumers say about it.  

LEBEAU:  The Taycan goes on sale later this year, marking the start of the
EV era at Porsche.  

Phil LeBeau, NIGHTLY BUSINESS REPORT, Niagara Falls, Ontario.  


GRIFFETH:  And before we go, a final look at the day on Wall Street.  
Yesterday`s declines became today`s gains with the Dow up 237 points.  
Nasdaq climbed 102.  The S&P added 31.  

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

GRIFFETH:  I`m Bill Griffeth. We`ll see you tomorrow.  


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