ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Sue Herera and Bill Griffeth.
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DENNIS MUILENBURG, BOEING CEO: We are responsible for our airplanes. We are responsible.
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SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Boeing (NYSE:BA) CEO apologizes and admits that the company made mistakes, as he was skewered by lawmakers on the crashes involving its 737 MAX.
Raising guidance. Merck (NYSE:MRK) and Pfizer (NYSE:PFE) beat expectations and boost their outlooks even as political pressure on the industry ramps up.
Halftime report. Earnings season enters the second half. And some surprising trends are emerging.
Those stories and much more tonight on NIGHTLY BUSINESS REPORT for Tuesday, October 29th.
Good evening, everyone, and welcome. Bill has the evening off.
Boeing (NYSE:BA) CEO testified for the first time on its troubled 737 MAX. One year to the day of the Lion Air crash. The hearing was heated and emotional. Pressed by lawmakers, CEO Dennis Muilenburg admitted to making mistakes as he explained decisions behind the development of the aircraft and how the company is ultimately trying to fix the plane.
Phil LeBeau is in Washington tonight.
PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: Boeing (NYSE:BA) CEO Dennis Muilenburg told the Senate Commerce Committee safety is central to the mission of Boeing (NYSE:BA). But as senators asked about the flawed flight control system at the heart of two 737 MAX crashes, it was clear many weren`t buying Muilenburg`s position.
SENATOR RICHARD BLUMENTHAL (D), CONNECTICUT: Those pilots never had a chance. These loved ones never had a chance. They were in flying coffins.
SENATOR TAMMY DUCKWORTH (D), ILLINOIS: If you`d have told this committee and told me half truths over and over again.
SENATOR JON TESTER (D), MONTANA: I would walk before I was to get on the 737 MAX. I would walk. There is no way.
MUILENBURG: And to —
LEBEAU: Muilenburg repeatedly told senators Boeing (NYSE:BA) is putting greater emphasis on safety and oversight. But the recent release of instant messages and emails between Boeing (NYSE:BA) employees suggesting they may have misled regulators has Senator Ted Cruz questioning Muilenburg`s leadership.
SENATOR TED CRUZ (R), TEXAS: You`re the CEO. The buck stops with you. Did you read this document? And how did your team not put it in front of you run in with their hair on fire, saying we got a real problem here?
LEBEAU: Watching the hearing in person, relatives of some of those killed in MAX crashes, still raw with anger and pain.
UNIDENTIFIED MALE: And I feel that he kept beating around the bush. He had to answer questions unequivocally. He needs to tell us why MCAS was installed in the 737 MAX.
UNIDENTIFIED FEMALE: People who are trusted to put our children to be on the plane, failed us miserably. And our lives did not move on.
LEBEAU: The biggest question for senators is Boeing (NYSE:BA) too cozy with regulators who certified the MAX.
SENATOR GARY PETERS (D), MICHIGAN: Has the balance gone too far to allowing industry to police itself?
MUILENBURG: Senator, I don`t know if I can characterize it that way. My sense is that we all have the same objective here. We all want the safest industry possible. That is our objective.
LEBEAU: For Muilenburg, this is the first of two hearings on Capitol Hill. He testifies in front of the House next, defending the MAX and his plan to get the plane back in the air by the he said of the year.
Phil LeBeau, NIGHTLY BUSINESS REPORT, Washington, D.C.
HERERA: Despite the rough day for Boeing`s CEO, the stock rose more than 2 percent in today`s session. And over the last year, shares are up about 4 percent.
Merck (NYSE:MRK) and Pfizer (NYSE:PFE) were the two top performing stocks on the Dow today. Thanks to earnings that topped Wall Street estimates and outlooks that were stronger than expected. The solid results came despite increasing pressure on drug prices from Washington.
Meg Tirrell has more.
MEG TIRRELL, NIGHTLY BUSINESS REPORT CORRESPONDENT: The country`s two biggest drug companies both exceeding Wall Street expectations in the third quarter. Merck`s outperformance was driven by its juggernaut cancer drug Keytruda drew sales of more than $3 billion. Pfizer (NYSE:PFE) was helped by its breast cancer drug Ibrance and vaccine Prevnar 13. Both stocks rose on the results but year-date to performances tell a different story, said Jefferies health care strategist Jared Holz.
JARED HOLZ, JEFFERIES HEALTH CARE SECTOR STRATEGIST: Merck (NYSE:MRK), the stock good for a number of years now, essentially on Keytruda having a big lead, sizable lead in immuno-oncology.
TIRRELL: Pfizer (NYSE:PFE), meanwhile, has hasn`t recovered from its July deal to combine its generic drugs unit with Mylan (NASDAQ:MYL).
HOLZ: Pfizer (NYSE:PFE) took a big earnings hit when you strip out generics.
TIRRELL: A bigger question for the drug industry and its investors, though, is political pressure on the price of medicines. There is intense congressional focus and the industry is a favorite punching bag on the presidential campaign trail.
SEN. BERNIE SANDERS (I-VT), PRESIDENTIAL CANDIDATE: Whether it is the pharmaceutical industry whose corruption and greed is killing people today.
TIRRELL: Particularly for candidates like Bernie Sanders and Elizabeth Warren. And as Warren has risen in the polls relative to Joe Biden, health care stocks generally have underperformed, according to a Jefferies analysis.
HOLZ: There is a predominating theme in the street looks at Elizabeth Warren as anti-M&A, anti-comp — you know, competitive with respect to some of the deals that we`re seeing in the market.
TIRRELL: The focus on drug prices is also hitting home with company executives. Merck (NYSE:MRK) told analyst today it expects increased pricing pressure in 2020. And Pfizer (NYSE:PFE) CEO Alfred in a telephone interview noted the impact on the industry`s reputation. It`s earned he said in drops but lost in buckets, saying, quote, it`s a big problem that needs to be resolved.
For NIGHTLY BUSINESS REPORT, I`m Meg Tirrell.
HERERA: Fellow Dow component Johnson & Johnson (NYSE:JNJ) said it found no asbestos in the baby powder flagged by the FDA that prompted a recall. Fifteen tests were conducted of the same bottle by a third party lab. Additional tests on samples from the lot that was recalled also found no asbestos. That the sent the stock higher in initial after-hours trading.
Those results from Merck (NYSE:MRK) and Pfizer (NYSE:PFE), though, were not enough to lift the broader market. The S&P 500 did briefly touch a new record but then fell back to finish the day lower. At the close, the Dow Jones Industrial Average fell 19 points to 27,071. The Nasdaq was down 49, and the S&P 500 slipped 2.
And now that we`re halfway into earnings season, some trends are emerging. Bob Pisani has more from the New York Stock Exchange.
BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: We reached the halfway mark on earnings season it`s often the case there is good news and there`s bad news.
So, the good news, the U.S. consumer is going strong. And that`s been the key to keeping the markets up. Coupled with fading recession fears for 2020. Overall third quarter earnings down less than analyst expected at the start of the month. It`s basically flat.
The bad news is everyone was banking on a fourth quarter bounce in earnings a little bit better. But earnings estimates are coming down from the fourth quarter too, basically in half from where they were a month ago.
Just look at the cyclical groups. These are the economically sensitive groups like energy, industrials materials. Estimates for those sectors have all come down over the last few weeks. They have big global exposure. Industrials were expected to grow 4 percent. Now, they`re going to be down 2 percent for the fourth quarter. These are global manufacturing slowdown issues, particularly China.
But the bottom line is the markets continue to position not for any kind of full on-on recession but for slower growth in 2020. And that`s why the cyclical estimates keep dropping. With low global growth and no recession expected in 2020, the single biggest mover of the markets remains the U.S.- China trade wars followed by the Federal Reserve`s decision op interest rates.
For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York stock exchange.
HERERA: Federal Reserve policymakers beginning a two-day meeting with a decision on interest rates due out tomorrow. Ahead of that decision, the CNBC Fed survey of fund managers found that nearly 80 percent believe the central bank will lower rates tomorrow, making it the third cut of the year, 63 percent believe the Fed will pause for the remainder of the year. And on average, respondents believe the next cut will come in February.
Three new reports today point to modest gains in the Housing market thanks to lower mortgage rates. Pending home sales, a gauge of purchased contracts signed rose for a second straight month, up 1.5 percent. A separate report showed that home prices nationally gained 3.2 percent in the year ending in August. And the number of Americans who own a home grew. The home ownership rate increased to 64.8 percent in the third quarter.
As Bob Pisani mentioned, the U.S.-China trade war remains the single biggest mover of the market. And tonight, some signs of progress.
Eunice Yoon is in Beijing.
EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: The U.S. Trade Representative`s Office said that it might extend the tariff suspensions on $34 billion worth much Chinese goods. The suspensions are set to expire on December 28th. And companies have from November 1st to the 30th to pitch why products should be exempt again for another year. About 1,000 products, including cell phones and stainless steel have been excluded from a 25 percent tariff imposed the previous July.
The exclusion would be welcomed by Beijing. China has been demanding to get all additional tariffs lifted. And over the weekend, Beijing confirmed that some portions of the text of the phase one agreements had been completed.
Today, state TV featured a commentary saying President Trump`s remarks that the deal could be ahead of the schedule before the APEC Summit is realistic, though not guaranteed. Tensions are still there. The foreign ministry today criticized the FCC for its decision to hold a vote on November 19th to designate Chinese tech giants Huawei and ZTE as national security risks. The designation would block U.S. companies from tapping an $8.5 billion-dollar fund to buy gear from Huawei and ZTE as they look to build out telecom`s infrastructure in rural parts of America.
ZTE hasn`t commented but Huawei criticized the decision, saying banning specific vendors based on country of origin will not protect the U.S.`s telecom networks. Huawei argues the only ones will be hurt will be the U.S. companies serving the underserved.
For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon in Beijing.
HERERA: Still ahead, as fires flair, so does frustration with California`s utilities.
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JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Fire doesn`t care if you are rich or poor, and some of the wealthiest neighborhoods in Los Angeles remain evacuated but the utility companies, it may be a day of reckoning. That`s coming up next.
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HERERA: Firefighters are battling the blazes in California, and it`s getting complicated. More are losing power and strong winds are expected to fan the flames.
Jane Wells is in Brentwood tonight.
JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Here in Los Angeles, they`re expecting some of the worst winds in years later this week.
And firefighters continue to use new technology tools to better predict the fire`s path and to wake up endangered residents through apps.
JAMIE MOORE, LAFD DEPUTY CHIEF: So, we were able to evacuate 10,000 residences, well over 20,000 people in a matter of an hour. We haven`t had anybody getting injured here fortunately.
WELLS: And new construction techniques are also starting to pay off. On a street where a lot of older homes were destroyed, this house built to better withstand fires is untouched. Take a look at this.
At the back of the house, even as firefighters stopped the flames racing uphill to it, flying embers has nod impact on this place. By the way, it`s fore rent, and I checked, $8,200 a month.
But its home owners remain evacuated and worried about their properties. We are getting the first inkling on how much the utility companies are being impacted.
The area of the Getty Fire is powered by Los Angeles DWP. But around it are neighborhoods powered by Southern (NYSE:SO) California Edison.
Today, Edison International (NYSE:EIX) reported earnings of $1.50 a share adjusted. The miss of street expectations but the company says part of the reason was wildfire mitigation expenses. And the future remains unclear.
More intentional blackouts are expected especially in northern California where PG&E turned the power back on only to warn many customers it might go off again. The governor has ordered an investigation flew weather the shut offs are excessive and punishable especially if customers are charged for power they don`t have.
GOV. GAVIN NEWSOM (D), CALIFORNIA: PG&E has not been in this position before. We would like them to consider reimbursements and we`re going to be forceful in advancing that.
WELLS: Despite the outages, PG&E wire which were not turn off may be responsible for as many as three fires this week. Its stock continues to slide and analysts at Evercore have suspended a rating and target price for the company wondering if its value could go to zero. Who will buy it out of bankruptcy?
NEWSOM: I want as many people bidding for the assets of Pacific Gas and Electric as possible, I couldn`t be more clear.
WELLS: Potential buyers will get a report next week when PG&E reports earnings, but there`s a lot of wind and fire danger between now and then.
For NIGHTLY BUSINESS REPORT, Jane Wells, Brentwood, California.
HERERA: Strikes at the General Motors (NYSE:GM) alter its outlook. That`s where we begin tonight`s “Market Focus”.
G.M.`s results topped estimates, driven by increased demand for its pickup trucks and SUVs. But the automaker says the 40-day union worker strike eliminated most of the company`s cash flow for the year and shaved nearly $3 billion from its full-year bottom line. Shares, though, rose more than 4 percent to $38.21.
ConocoPhillips (NYSE:COP) posted better than expected earnings and revenue, thanks to higher shale production, which lessened the impact of lower crude prices and higher exploration costs. The oil and gas producer also announced it would be unveiling a 10-year capital plan next month. Shares rose more than 2.5 percent to $57.09.
After the bell, Amgen`s results topped estimate as the biotech said its innovative medicines delivered double digit growth. Amgen (NASDAQ:AMGN) also raised its full-year guidance. Shares initially rose following the news and closed the regular session up nearly 2 percent to $208.99.
Also after the bell, Electronic Arts (NASDAQ:ERTS) beat on revenue thanks to continued strong subscription and live services growth of its “Apex Legend” game, as well as its EA Sports titles. Shares were volatile after hours but closed the regular session down more than 2 percent to $94.41.
Democratic presidential candidate Bernie Sanders has a unique vision for the American economy. He sat down with John Harwood for a wide-ranging interview. John asked the senator who calls himself a Democratic socialist if it`s his goal not to have private corporations.
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SANDERS: No, it`s not my intention.
JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT: OK.
SANDERS: What is my intention, though is to make sure that workers have representation on those large corporations. So, we say that instead of just being a cog in a machine, what about giving that worker some power and responsibility in terms of the shaping of the corporation?
HARWOOD: On your corporate accountability plan, you — on Wall Street reform, you say you want to end the too big to jail.
We have three examples of this. In 2008, when Wall Street drove this country into the worst economic recession in modern history, as a result of that, Wall Street has paid tens and tens of billions of dollars in fines for their illegal activity. It was a wasn`t a mistake. Everybody makes a mistake.
They were selling subprime mortgages that they knew were worthless. How many of these Wall Street executives went to jail as a result of their illegal activity?
HARWOOD: I don`t think any.
SANDERS: No, right. And that is why the American people are disgusted with what goes on in Washington, D.C.
I`ll give you another example. Pharmaceutical industry — they`re not only greedy, they are corrupt. They`re engaged in collusion and in price fixing.
Right now, as you know, states attorneys general are mounting a massive lawsuit against the opioid manufacturers. And what they are saying is these guys knew exactly what they were doing.
How do we define, how do we describe the behavior of the fossil fuel industry? Let`s take a look. For a very long time, ExxonMobil (NYSE:XOM) — the executives at ExxonMobil (NYSE:XOM) and other fossil fuel industries knew that the product they were producing was causing climate change and in fact helping to destroy this planet.
So, what I`m saying here is we need as a nation to do something we have never done before. And to say to these corporate executives who have so much power that we`re tired of your greed and we are tired of your corruption.
HARWOOD: If you require that 45 percent of the board be workers, if you require more distribution of — required distribution of profits to workers, if you ban stock buybacks, do you accept that that would have a slowing effect on economic growth?
SANDERS: It`s not good enough just to look at economic growth. In the last 45 years, despite unbelievable growth, and real inflation account, the average worker is no better off than he or she was 45 years ago. Half the people today are living paycheck to paycheck.
HARWOOD: The growth is the wrong measurement.
SANDERS: Of course it`s wrong. What the question is, is our economy working for the people here? Is it working for ordinary Americans? That`s — that`s the criteria.
HARWOOD: Would it be your intention to appoint Democratic socialists to big positions in your administration?
SANDERS: You`re making — going (ph) a little bit too — a little bit crazy on the word here.
SANDERS: All right. I will appoint people who believe in the working class and the working families of this country who are prepared to stand up to the incredibly powerful corporate interests that today dominate our economic and political life.
So when I talk about democratic socialism, you want to talk about what it means. Let`s be clear what it means. Let`s not get people overly nervous about it. What it means is that health care is a human right, not a very radical idea. We are the only major country on earth that doesn`t allow that reality to take place.
I live 50 miles away from Canada. You end up in the hospital with a major procedure in Canada, you know what you pay when you leave that hospital? Zero, not a nickel. And they spend 50 percent per person of on health care as we do. That`s what I believe in.
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HERERA: John also asked Senator Sanders about his health following his recent heart attack. The senator says he is doing well.
Still ahead, a peek into the digital future of money and entertainment.
HERERA: The NCAA will allow athletes to cash in on their fame. The organization did not provide specifics but the decision follows the passage of a California law which makes it easier for college athletes in that state to profit from their name, image and likeness, beginning in 2023.
MasterCard (NYSE:MA) reported better than expected earnings and revenue as more businesses and consumers made online purchases. But MasterCard (NYSE:MA) and its rivals Visa (NYSE:V) and PayPal may soon be facing new competition when it comes to the digital payments business.
Deirdre Bosa reports on the future of money from Las Vegas.
DEIRDRE BOSA, NIGHTLY BUSINESS REPORT CORRESPONDENT: What are Uber, eBay (NASDAQ:EBAY) and Facebook (NASDAQ:FB) doing at a financial services conference.
UNIDENTIFIED MALE: Uber is a logistics company.
UNIDENTIFIED MALE: EBay is an e-commerce company.
UNIDENTIFIED FEMALE: Uber is a taxi firm.
UNIDENTIFIED MALE: Facebook (NASDAQ:FB) is a social media platform.
BOSA: They`re also increasing taking payments and financial services into their own hands. And all along with Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Pinterest and others are attending Money 2020, an annual event that brings together thousands of founders, investors and leaders and banking and financial technology to discuss the future of money.
Uber announced Uber Money, a new division pushing deep near financial services, which includes a digital wallet and upgraded debit and credit cards.
PETER HAZLEHURST, UBER HEAD OF PAYMENTS: If we could do it faster, we actually start to bring the idea of cash to the digital world.
BOSA: EBay laid out its strategy to bring its payments process in-house to better serve the platform`s merchant.
ALYSSA CUTRIGHT, EBAY GLOBAL PAYMENTS V.P.: It`s simple. We`re grounded in creating better experiences for our buyers and sellers. That means eBay (NASDAQ:EBAY) needs to step in and control the payment experience.
BOSA: And Facebook`s head of Calibra, David Marcus (NYSE:MCS), defended the company`s mission to reshape global finance with its Libra cryptocurrency.
DAVID MARCUS, CALIBRA CO-FOUNDER: I think that they will trust us because we will provide value, make strong commitments and will be very, very good at sticking to these commitments for very long periods of time.
BOSA: Taking more control of the payments process, can allow companies to cut costs and generate new revenue streams.
But pushing deeper into the space won`t be easy, and few can companies are doing it alone. Here at Money 2020, partnerships they are key, and thousands of participants from banks, investment firms and so-called fin techs, financial technology start-ups, are ready to help facilitate that shift.
Amazon (NASDAQ:AMZN) announced a partnership with fintech Paymentus to bring bill payment to Alexa, its virtual assistant. Apple (NASDAQ:AAPL) launched its first credit card earlier this year with Goldman Sachs (NYSE:GS) and MasterCard (NYSE:MA). EBay is working with Dutch fintech Adyen. And Stripe, a Silicon Valley darling, powers the payments of the structure for companies like Target (NYSE:TGT), Salesforce, and Doordash.
For now, partnerships and collaboration abound, but as technology companies get better at deploying and managing financial services, they could represent a threat to the traditional banking system.
For NIGHTLY BUSINESS REPORT, Deirdre Bosa, Las Vegas.
HERERA: And the entertainment industry`s digital future is coming into focus. Warner Media is expected to offer details of its HBO Max streaming service. Later this week, Apple (NASDAQ:AAPL) TV Plus will launch, followed a couple of weeks later by Disney (NYSE:DIS) Plus.
And as Julia Boorstin reports, each is trying to set themselves apart from the rest.
JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: HBO Max is unveiling its pricing. Apple (NASDAQ:AAPL) TV Plus is launching Friday and Disney (NYSE:DIS) Plus is launching in two weeks.
And then there`s the incumbent, Netflix (NASDAQ:NFLX). The key to understanding this company`s ammunition to winning the streaming wars is the firepower of their content, combined with how much they are charging.
You know, Disney (NYSE:DIS) Plus charging $7 a month, and Apple (NASDAQ:AAPL) $5 a month for its streaming service. Both less expensive than expected. The price tag of AT&T`s new HBO Max Service is in the spotlight.
BERNIE MCTERNAN, ROSENBLATT SECURITIES: The big challenge for AT&T`s pricing power with HBO Max is that HBO is already at a premium to other streaming services. You have Disney (NYSE:DIS) Plus launching at $6.99. Apple (NASDAQ:AAPL) TV Plus at $5.99, and Netflix (NASDAQ:NFLX) is at slight premium to Netflix (NASDAQ:NFLX). If HBO is premium to HBO now that makes it more difficult to add subscribers.
BOORSTIN: To jump-start its service, AT&T (NYSE:T) says it will give HBO Max to 10 million AT&T (NYSE:T) subscribers, and we can expect the company to offer some sort of a free trial to try to get consumers hooked.
Now, all of streaming services are looking for allies, distribution partners, to give them a head start building a subscriber base.
Disney (NYSE:DIS) is partnering with Verizon (NYSE:VZ). It will give 50 million subscribers access to Disney (NYSE:DIS) Plus for a year, with Disney (NYSE:DIS) hoping that many of those subscribers will sign on themselves when that year is up.
MCTERNAN: Since content is king, that`s the way for these services like Verizon (NYSE:VZ), like T-Mobile, like AT&T (NYSE:T) to try to differentiate, because the wireless networks are pretty much all created equal. So, content is a place to differentiate.
TIM COOK, APPLE CEO: Apple (NASDAQ:AAPL) TV Plus.
BOORSTIN: Meanwhile, Apple (NASDAQ:AAPL), which is offering a week free for TV Plus, isn`t partnering with a mobile carrier. But rather leveraging the popularity of its devices to get consumers hooked. It`s giving away a year free to anyone who buys a device. And one analyst estimates over 200 million iPhones alone will sell in the next year.
For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Los Angeles.
HERERA: Before we go, let`s take a final look at the day`s numbers on Wall Street. The Dow fell 19 points to 27,071. The Nasdaq was down 49. And the S&P 500 slipped 2 after touching a new high during the trading session.
And that is NIGHTLY BUSINESS REPORT for tonight. I`m Sue Herera. Thanks for joining us. Have a great evening. We`ll see you again tomorrow.
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