Transcript: Nightly Business Report – November 18, 2019

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

BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR:  The great rotation.  The  market rally is not being driven by any one sector but by many often  conflicting groups.  That doesn`t happen very often.  

Less is more.  A new study shows that some heart surgeries are not needed,  leading to questions about a multibillion dollar market.  
And the electric pony.  Why Ford is attaching the iconic Mustang name to an  all electric SUV.  

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Monday  November 18th.  

And we do bid you a good evening, everybody, and welcome.  Sue is off  tonight.  Well, a new week brings new records for the Dow, the S&P and for  the Nasdaq.  And once again there was a decided lack of volatility.  None  of the major averages ever strayed very far from the unchanged level.  And  at the close, they had very modest gains.  

But it was enough.  The Dow rose 31 points for now 28,036, Nasdaq added  nine, the S&P was up just one.  

But this was not just another record close powered by the same old stocks.   A closer look at the market shows strength in some unexpected places.  And  that could mean new opportunities for investors.  
Bob Pisani is following the money for us tonight.

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT:  Stocks staged another  quiet run to record high to Dow, the S&P, Nasdaq, all notching new  milestones just barely.  Although today`s rally, led by real estate and  consumer staples.  It`s been a solid November overall for the major  averages.  

Market rotation is pushing big swathes of normally conflicting sectors to  new highs, all at the same time.  This doesn`t happen very often.  So,  right now, not only is the market cap weighted S&P 500 new highs, but the  equal weighted version of that index is also at new highs.  Well, it means  it`s not just the mega cap companies like Apple (NASDAQ:AAPL) and Microsoft  (NASDAQ:MSFT) pulling their weight and carrying the broader index higher.   The gains are more broad-based.  And that`s really good news, investors  love that.  

There`s been a lot of talk about a rotation out of growth and into value.   But the fact is, well, value and growth stocks are hitting new highs at the  same time.  That`s a little unusual.  Value stocks are things like bank  stocks.  Those are things like Google (NASDAQ:GOOG), and Microsoft  (NASDAQ:MSFT).  Beyond that, defensive and cyclical names are hitting new  highs.  So, defensive groups, consumer staple, health care, new highs,  right along with cyclical, economically sensitive groups like technology  and communication services.  

You see?  It seems like every time one sector falters, another one takes  its play.  And much of that optimism has been fueled by a combination of  positive trade headlines.  And a general sense that maybe global growth is  bottoming out.  The key question now is how long can the so-called perfect  rotation continue?  We don`t know, but enjoy it.  
For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock Exchange.  

GRIFFETH:  And one area of the market where inventors are putting money to  work right now are those value stocks.  How long can that rally last?

Brian Levitt joins us to talk about that.  He`s global market strategist at  Invesco.

Brian, good to see you again.  Welcome back.  


GRIFFETH:  You`re a bit skeptical about this value led rally, why?  
LEVITT:  Yes.  I mean, typically, value needs a catalyst in order for it to  outperform over on a persistent basis, and so, this value rally in my  opinion is the result of very weak economic activity in the summer and a  market that had gotten very bearish and even inverted the yield curve.  And  so, what you`re seeing is a recovery rates up, the yield curve normalizing.   You should expect value to do well in that type of environment.  But beyond  that, you would need a catalyst, and that catalyst would usually be the  United States moving higher to a sustained level of growth.  

I`m skeptical.  I don`t think at this point in the cycle, we`re moving to a  new high or sustained level of growth.  I think we`re normalizing back  towards trend and in a more trend growth environment, I would still call  that slow growth world, investors tend to favor true growth assets.  

GRIFFETH:  So, these defensive issues that have done well recently, the  industrials and the financials and some others, you`re saying maybe be  careful with those right now?  Is that the idea?

LEVITT:  Well, it`s not that they won`t perform well.  I think they`ll  perform fine, it`s just whether growth is going to outperform value.  So, I  think the markets are likely to trend higher.  But leadership is likely to  revert back to the more growth-oriented parts of the market.  I mean,  again, value cycles to unlock value, I would think you would need better  growth, which means rates up significantly.  A much steeper yield curve.

We`re in an environment where rates backed up from very dire levels.  The  yield curve has steepened a little bit, in order to really like value, you  would have to think that that trend continues.  And in my mind, this is  still a slow growth world, and that`s going to favor true growth assets.  

GRIFFETH:  And if memory serves, value stocks tend to do well near the end  of a market cycle.  Do you think that`s what`s going on here?  

LEVITT:  No, no, I think value would do well at the depths of a recession  into the recovery.  So, this is not, you know, that you`ve had growth  stocks run for a while and the market cap breaks and the more value- oriented parts of the market do well.  This is a recovery off a pretty weak  levels in the summer, this is not the ends of the cycle.  If anything, I  think this cycle is going to go on for far longer than most people expect  because growth is reasonable, the Feds easing.  There`s no real inflation.  

So, I don`t think the cycle is ending any time soon.  This is just a value- driven recovery from pretty rough levels in the summer.  In order for value  to persist, you would need to get to a higher sustainable level of growth.   I don`t believe we`re getting there.

GRIFFETH:  Very good.  Brian Levitt — 

LEVITT:  Thank you.

GRIFFETH:  Again, Brian, thanks for joining us.  
Wall Street strategists are starting to put out their forecast for next  year.  And today, Credit Suisse put a 3425 target on the S&P 500 for the  end of next year.  That`s a nearly 10 percent rise from where that index  stands today.  And that would be on top of the nearly 25 percent gain.   We`ve seen that index so far this year.  

For several years now, Wall Street and Silicon Valley have been obsessed  with finding companies that stir things up and disrupt certain industries.   Think technology or retail.

But some old guard companies that would seem to be vulnerable to disruption  and are actually been defying expectations and they`re leading this market  higher.  

Mike Santoli takes a look now at these companies that are standing strong.  

MIKE SANTOLI, NIGHTLY BUSINESS REPORT CORRESPONDENT:  We can call them the  undisrupted champions of Wall Street, a small group of enormous elite  consumer companies once seen as vulnerable to onrushing digital disruption  and shifting public taste has persuaded Wall Street that they have a sturdy  plan to meet the future.  

Their stock prices have outrun the S&P 500 over the past year, and  investors have endowed them with a valuation premium to the broad market of  between 40 and 50 percent.  This group of beloved consumer giants include  Walt Disney (NYSE:DIS), Walmart, Nike (NYSE:NKE) and Starbucks  (NASDAQ:SBUX).  The company shares are all up more than 20 percent of the  past 12 months, compared to 14 percent for the S&P 500 index.  

And based on expected earnings next year, they trade at those rich  valuation premiums of up to 50 percent.  The reason, investors have  determined that the companies have successfully adapted to the digital  world while keeping a firm hold on their customers` loyalties.  Disney`s  new video streaming service was an instant success, Walmart is taking  market share with online ordering.  Nike (NYSE:NKE) has done so well with  its e-commerce app that it quit selling through Amazon (NASDAQ:AMZN) and  Starbucks (NASDAQ:SBUX) has figured out online ordering itself, and has the  second biggest mobile payments app in the world.  

The question now, have investors crowded a bit too eagerly into these  popular blue chips?  

Disney (NYSE:DIS) and Walmart shares did pull back a bit after strong  results reported last week and Nike (NYSE:NKE) and Starbucks (NASDAQ:SBUX),  they`re both several percent below their respective record highs.  But on  the whole, it seems Wall Street will remain willing to give these winners  in the digital disruption wars the benefit of the Dow.  

GRIFFETH:  Elsewhere, first thing this morning, President Trump and Federal  Reserve Chair Jerome Powell met at the White House to discuss economic  issues.  We are told they talked about trade, growth, employment trends and  inflation.  As you well know, the two have been at odds over the direction  of monetary policy.  But the president described this morning`s meeting as  good and cordial.  And then afterwards, the Central Bank issued a statement  saying that Mr. Powell`s comments to the president were consistent with his  remarks to Congress last week.  

Here in the United States, the stock market has been encouraged lately  about the ongoing trade talks with China.  But in Beijing, there`s a  growing sense that getting a deal done will not be easy.  
Here`s Eunice Yoon for us tonight.

EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT:  Sentiment appears to  have turned pessimistic in Beijing that a deal can be reached at least this  year?  A government source familiar with the trade talks told me that  people were troubled when President Trump said over a week ago that there  was no agreement on phasing out tariffs, which a major point for the  Chinese.  He said the Chinese side felt they had an agreement in principle.  
There continues to be disagreement on basic points of the deal too.  For  example, the U.S. is pushing for specific commitments on agricultural  purchases.  China is resisting because it feels the move could alienate  other trading partners.  People here are also unclear of President Trump`s  political standing, because of this possible impeachment and the election  only a year away.  

So, he said the Chinese will continue to negotiate.  That there`s a big  push to prioritize supports for the domestic economy.  In fact, China  surprise the market today by cutting a short term funding rate for the  first time in four years.  Analysts expect the central bank to cut its new  benchmark rate the LPR on Wednesday.  
For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon in Beijing.

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

And we begin with shares of Sherwin Williams who were downgraded to neutral  from buy at Goldman Sachs (NYSE:GS).  The analyst cited the stocks  valuation after a nearly 50 percent run-up so far this year.  Price target  now $578.  That stock fell 1 percent today to $586.08.

Workday was downgraded to equal weight from overweight at Morgan Stanley  (NYSE:MS).  The analysts cited the company`s growth outlook.  Price target  now $180.  Those shares also fell about 1 percent to $164 even.
And Trip Advisor was upgraded to market reform from under perform at Cowen.   The analysts cited a potential recovery in that company`s online search  metrics.  Price target $30, shares rose one-and-a-half percent to $31.61.  

A large study which includes some of the most rigorous research to date on  heart disease is raising questions tonight about a procedure that millions  of heart patients have undergone, but did they really need it?
Meg Tirrell has the story.  

MEG TIRRELL, NIGHTLY BUSINESS REPORT CORRESPONDENT:  For millions of people  with a condition known as stable heart disease, the medical wisdom on  treatment may be less is more, a landmark study released this weekend  showed that routine intervention with stents or heart bypass surgery did  about the same as drug therapy and good health habits alone in preventing  events like heart attack.  The results were presented at the American Heart  Association`s annual conference in Philadelphia.  

The trial included about 5,000 patients with stable heart disease, defined  as those with blocked arteries that aren`t causing an immediate issue, said  Dr. Robert Yeh, associate chief of interventional cardiology at Beth Israel  Deaconess Medical Center.

DR. ROBERT YEH, BETH ISRAEL DEACONESS MEDICAL CENTER:  These patients may  have some chest discomfort when they go outside and walk up — walk up  hills, when they shovel their snow, et cetera.  

But for the most part, this is a reliable symptom that happens when they  exert themselves it gets better when they rest, for example.  

TIRRELL:  For those patients, the trial results can help guide  conversations with their doctors.

YEH:  When one is told that they have a or percent blockage in their heart,  they get concerned they want that blockage to be addressed, they want it to  go away.  Part of our role as physicians is often to reassure those  patients and say, you know, even though that 60 percent blockage is there,  that 70 percent blockage is there, and, yes, while I do have a therapy that  I can give you that can make that that reduce that blockage to zero, it`s  not actually going to change anything for you.

TIRRELL:  The trial did show that interventions like stents helped  alleviate chest discomfort known as angina more than medicines alone.  On  Wall Street, investors closely watch the results to see their effects on  shares of stent makers Boston Scientific (NYSE:BSX), Medtronic (NYSE:MDT)  and Abbott Labs.  

It`s a market Cowen analyst Dr. Josh Jennings says amounts to about $3  billion a year.

JOSH JENNINGS, COWEN:  Its overall positive relative to not facing the  worst case scenario for all three players.

TIRRELL:  Some investors, he said, were concerned to study which show  stents caused worse outcomes.  Instead, there were situations where they  showed a benefit.  

JENNINGS:  The quality of life benefit in the standing arm is the big  positive clearly and I think that will continue to drive utilization in  those stable angina patients that are symptomatic.

TIRRELL:  And doctors emphasize stents and other interventions still have  an important role for many patients.  Dr. Yeh cautioned that patients  experiencing chest pain that doesn`t go away after a few minutes could be  having a heart attack and this study doesn`t apply to them.  For those with  stable disease, it provides more information to guide treatment.

GRIFFETH:  And still ahead wise stock pickers are still struggling this  year.

GRIFFETH:  Senate Majority Leader Mitch McConnell said today that the White  House has signaled to him their support for legislation that would avert a  government shutdown at the end of this week.  The stopgap measure would  finance federal agencies through December 20th.  The House votes on that  bill tomorrow and McConnell said he`s confident it would then pass in the  Senate and that the president would sign it into law.
The money spent on sports betting here in the U.S. could be tripled out of  the U.K. by the year 2023.  That`s the conclusion of a new report from  analysts at Jeffrey`s who are forecasting growth to $12 billion.  The  report cited record football betting in New Jersey last month and the quick  shift to gambling online.  

A separate report from Jefferies looked at gaming in Macau and said that  November is shaping up to be a more difficult month because of the protests  in Hong Kong.

In fact, in the year and a half since the Supreme Court cleared the way for  sports betting in the states other than in Nevada, a growing number of  states have legalized sports gambling and those states are learning that  the real driver to maximizing revenue is pipe by putting bets in the palm  of your hand.  
Contessa Brewer is in Las Vegas for us tonight.

CONTESSA BREWER, NIGHTLY BUSINESS REPORT CORRESPONDENT:  Walk into a sports  book and you`ll see players laying down bets.  But more and more, they`re  skipping the line and wagering right on their mobile phones.

SCOTT BUTERA, MGM INTERACTIVE GAMING PRESIDENT:  This is very convenient  and it`s fun and there`s a lot more that you can do on your phone.

BREWER:  A lot of the betting takes place within the game, who will score  the next touchdown jump shot or home run.  That actions too fast for  traditional wagers.  The seven states now offering mobile sports gambling  are working to maximize revenue, both in handle, the total amount gambled,  and in taxes collected for state and local government.

JOE ASHER, WILLIAM HILL U.S. CEO:  Support right here in Nevada, we do  about 70 percent of our handle on mobile, and that`s despite the fact that  we have 113 retail locations in Nevada, and in other states that proportion  of mobile to retail is higher.

BREWER:  What`s more, mobile sports betting increases business for online  casinos, pushing players to plunk down their pennies on digital slots  blackjack roulette and poker in New Jersey, MGM Resorts (NYSE:MGM) online  casino business doubled after legal sports gambling was offered on mobile  phones, and the company predicts mobile could bring in 80 percent of gaming  revenues in the future.

BUTERA:  Anything that drives people to the mobile they can see a whole  host of options of things that they can do and they just get very  interested in it.

BREWER:  There`s a lot of competition for those eyeballs, casinos, online  sites, offshore sites, offering big bucks to lure in new customers.  The  app makers and tech wizards are crucial in offering slick intuitive, easy  to use platforms and companies are looking for an edge anything to put the  odds in their favor to capture market share.

An estimated $130 billion was bet illegally before the Supreme Court  decision paving the way for legal sports gambling.  Since then $11 billion  has been bet legally.  The convenience of mobile gaming makes it easier to  compete against those illegal and offshore operators.  

MATT KING, FANDUEL CEO:  The reality is sports betting is happening today.   It`s happening on people`s phones.  They`re just using illegal sites.  And  so, if you don`t offer a competitive mobile product in a state, people  aren`t going to change the behavior.

BREWER:  Half a dozen more states will soon roll out mobile gambling and  the sports leagues and media companies are betting the move to mobile will  boost their bottom lines as well.  
In Las Vegas, Contessa Brewer, NIGHTLY BUSINESS REPORT.

GRIFFETH:  HP says no to Xerox (NYSE:XRX) and that`s where we begin  tonight`s “Market Focus”, with HP`s board voting unanimously to reject  Xerox`s $33.5 billion buyout offer, saying it was too low, and not in the  best interest of its shareholders.  HP fell a fraction to $20.01, while  Xerox (NYSE:XRX) was up a fraction to $39.30.

T-Mobile said today that CEO John Legere is going to be stepping down on  April 30th of next year.  He`ll be succeeded by the chief operating officer  Mike Sievert but Legere will remain on the company`s board.  T-Mobile says  that the move is just part of its previously determined succession plan.   T-Mobile shares gained a fraction today to $78.19.

Coty is taking a controlling stake in reality TV star Kylie Jenner`s makeup  and skincare business.  The cosmetics company is paying $600 million for a  51 percent stake which means that Jenner`s 4-year-old company is already  worth roughly $1.2 billion.  Coty is looking to tap into her large social  media reach to attract younger consumers.  Coty shares rose more than two  and a half percent today to $12.22.

2019 is going down as another bad year for stock pickers.  According to  Barron`s, over the weekend, only three of the top 20 actively managed  mutual funds in the U.S. are beating the market this year.  So, once again  we asked an age-old question, are you better off investing in passively  managed index funds or exchange-traded funds?

Joining us tonight once again, Todd Rosenbluth, who`s director of ETF and  mutual fund research at CFRA Research.
Todd, good to see again.  Welcome back.


GRIFFETH:  Once again, the actively managed funds continue to struggle, but  it`s not just because they they`re picking the wrong stocks, they already  have these fees involved, so they have to perform even better than those  index funds, don`t they?

ROSENBLUTH:  That`s right.  So, the average actively managed mutual fund  charge is about 1 percent for its fee, versus the index which is free, or  you could get Vanguard or iShares ETFs for just pennies on the dollar, just  three pennies on that dollar or four pennies on the dollar.  So, actively  managed funds have to perform even better.

And as you mentioned, we have a strong market.  We`re up more than 20  percent many of these mutual funds are doing well.  They`re just not doing  well enough if the benchmark is the S&P 500, as it should be.

GRIFFETH:  I did note that those three funds that are doing better than the  market all have the word growth in their name, which you know, as we`ve  already established growth — this has been a growth kind of a market here.
But what role does an actively managed portfolio play in somebody`s typical  portfolio these days?

ROSENBLUTH:  Well, more investors have actively managed mutual funds.   We`re seeing index base or passive ETFs from iShares, from Vanguard, State  Street (NYSE:STT), Schwab and others are gaining share but it is still a  smaller part of the portfolio.  So, most of our viewers are in actively  managed mutual funds that are often underperforming that broader benchmark  and there`s choices that are relatively cheap for them to consider.

GRIFFETH:  And I`ve often maintained that, you know, the actively managed  funds are going to underperform an up-market, but they`re the place you may  want to be in a down market where index funds have no place to hide, right?  

ROSENBLUTH:  That`s correct.  So, the active manager can move money to cash  can take advantage when there is volatility in the market place.  On  average, they stand a better chance the data is a little bit mixed as to  whether or not they do well in the fourth quarter that we just had in 2018,  we didn`t see that outperformance as we would have hoped for, but  hopefully, the next time is different.

GRIFFETH:  So quickly maybe a blend of active and passive for the typical  portfolio these days?

ROSENBLUTH:  We think so.  If you`re looking at equity strategies, active  management has struggled.  If you`re looking at bond portfolios, we`ve seen  more success with the active management versus the index based approach.   So, you can certainly combine active and passive together in one portfolio.

GRIFFETH:  Todd Rosenbluth with CFRA Research — again, Todd, thanks for  joining us tonight.
ROSENBLUTH:  Thank you.
GRIFFETH:  And coming up, Ford`s electric horsepower.

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT:  This is the new  Mustang and yes, it`s an SUV, an electric SUV.  What`s behind the Mustang  Mach-E?

I`m Phil LeBeau in Los Angeles.  That story coming up on NIGHTLY BUSINESS  REPORT.

GRIFFETH:  Emirates Airline has ordered 50 planes from Airbus in a deal  valued at about $16 billion.  Those jets ordered are the A350s which  Emirate says will give the airline flexibility in terms of capacity and  range.  
Now, the order was announced over the weekend at the Dubai Air show where  an Airbus executive was asked whether his company has benefitted from the  grounding of Boeing (NYSE:BA) MAX.  And his answer was emphatic.

CHRISTIAN SCHERER, AIRBUSH CHIEF COMMERCIAL OFFICER:  This does not benefit  anyone in this industry, the least of which would be Airbus.  It`s a —  it`s a tragedy.  It`s an issue for Boeing (NYSE:BA) to resolve, but it is  not good for the competitors to see problems on any one particular  airplane.

GRIFFETH:  In fact, experts expect orders for both Airbus and Boeing  (NYSE:BA) to be smaller this year than in past years.
Finally, tonight, Ford believes that the Mustang is ready to go electric.   The automaker has put the iconic Mustang name on the company`s first all- electric SUV.  But will it have the horsepower and the appeal to be a game  changer for that company.

Phil LeBeau, as you saw is in Los Angeles for us tonight.

LEBEAU:  This is no pony car, but it is the all-new, all-electric SUV, the  Mustang Mach-E, a name Ford`s chairman resisted when his team first  approached him about calling it a Mustang.

BILL FORD, FORD EXECUTIVE CHAIRMAN:  They weren`t very happy with my  response, but the product kept evolving, both the performance of it and  also the styling of it, to the point where, you know, there was a point  where I finally realized, whoa, this is an amazing vehicle, and, yes, it`s  worthy of the Mustang pony.  

LEBEAU:  With a range of up to 300 miles fully charged and 47 miles after a  ten-minute quick charge, Ford believes the Mach-E has the power to energize  its dismal electric car program.  In the U.S., Tesla dominates E.V. sales,  while GM, Nissan and VW share much of what`s left over.  Ford hasn`t sold a  single pure electric car this year.

The truth is electric models like the Chevy Volt and Nissan Leaf lack the  style and appeal of Tesla`s, while other recently introduced electric  models have also failed to connect with buyers.  Which is why many are  wondering if the Mach-E with a more aggressive look and plenty of power  will finally be the E.V. that challenges Tesla.

JESSICA CALDWELL, EDMUNDS:  I think the E.V. segment has really needed a  shake-up.  I think Tesla`s proved that these people want utility, they want  a — you know, environmentally friendly car but they also want something a  lot of design and I think Ford has proved that.  You can do this at a  pretty affordable price point.

LEBEAU:  Will Mustang fans care that this electric SUV bears little  resemblance to the pony car?  Maybe, but Ford needs all the horses in its  stable to remind Americans it does more than sell pickup drugs.  

JIM HACKETT, FORD CEO:  The heart of the company is on trial here because  we have to we have to get this right because our Mustang share performance  just keeps getting better and better.  We`re now the number one sports car  in the world with Mustang, and this was important not to disrupt the state  of that.

LEBEAU:  The Mach-E rolls out late next year with a base price starting at  about $44,000, competitive with Tesla`s new Model Y, a crossover utility  vehicle which is expected to start selling in the mid $40,000 range.  The  E.V. race is starting to heat up.

GRIFFETH:  And before we go, a final look at the day on Wall Street.  Very  modest gains for all three major averages, but enough to put them in record  territory with the Dow up 31, the Nasdaq gaining about nine points and the  S&P up just one.

That is NIGHTLY BUSINESS REPORT for tonight.  I`m Bill Griffeth.  Thank you  so much for watching, as always.  Have a great evening.  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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