Transcript: Nightly Business Report – December 13, 2019

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

BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR:  Phase one.  The U.S. and  China make it official.  Agreeing to a limited trade deal, removing what  many considered a big uncertainty for the market.  

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR:  Market monitor.  Looking for  earnings growth to fuel your portfolio.  Well, our guest has a list of  names he says are buys.  

GRIFFETH:  New breed of banks.  Tech companies, big and small, are getting  into the banking business.  But how do you know if they`re right for you  and your money?  

Those stories and much more tonight on NIGHTLY BUSINESS REPORT for Friday,  December 13th.  
HERERA:  Good evening, everyone, and welcome.  

U.S. and Chinese officials have agreed to a limited trade deal, halting the  all out tariff war between the two largest economies?  President Trump  removed the threat of new tariffs that were supposed to go into effect on  Sunday.  And he rolled back some others as well, but not all of them.  
Beijing made promising to purchase American agricultural goods.  It`s an  event investors have been waiting for.  And while stocks rallied sharply  yesterday on reports of agreement, today, they moved only slightly higher.   But it was enough for a record close on the Nasdaq.  

The Dow Jones Industrial Average added three points to 28,135.  The Nasdaq  was up 17.  And the S&P 500 was up just slightly.  
Both countries spoke about the phase one deal today, one offering up more  details than the other.  So, we have two reports tonight.  Eunice Yoon is  in Beijing, but we begin tonight with Kayla Tausche at the White House.  

KAYLA TAUSCHE, NIGHTLY BUSINESS REPORT CORRESPONDENT:  After nearly three  years of negotiating President Trump today, hailing the first phase of a  China trade deal as phenomenal.  

DONALD TRUMP, PRESIDENT OF THE UNITED STATES:  I affectionately the farmers  have going to have to buy larger tractors because it means a lot of  business, a tremendous amount of business.  

TAUSCHE:  The U.S. says China has agreed to about $40 billion in additional  purchases of agricultural purchases of products over the next two.  China  will buy another $150 billion of manufactured goods and energy.  

There are also provisions on forced technology transfer, intellectual  property and currency.  In return, Chinese officials said the U.S.  committed to remove tariffs step by step.  The rate on a round of tariffs  that hit in September will be cut in half.  And tariffs on toys and phones  set for this weekend will be shelved.  

But the White House is keeping the rest of the tariffs as leverage.  
TRUMP:  Tariffs will largely remain at 25 percent on $250 billion.  And  we`ll use them for future negotiations on the phase 2 deal.  

TAUSCHE:  Ambassador Bob Lighthizer, the lead U.S. trade negotiator, told  reporters he expects ministers, not leaders of the two countries to sign  the deal the first week of January in Washington.  It will take effect 30  days after that.  

This process has seen many false starts before.  As recently as October  when President Trump touted a deal being reached before it was finished.  

LARRY KUDLOW, NATIONAL ECONOMIC COUNCIL DIRECTOR:  Really should believe it  this time.  This is a major development, large phase 1 deal.  

TAUSCHE:  As for what happened the last two months, Lighthizer says the  countries had made notional agreement but needed time to work out the exact  figures behind it.  He hailed this deal as unprecedented.  Even so, he said  it`s wise to remain skeptical as to whether China can actually deliver.  
For NIGHTLY BUSINESS REPORT, I`m Kayla Tausche in Washington.

EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT:  The Chinese have  agreed to a phase 1 trade deal with the U.S.  At a late night Friday press  briefing in Beijing, senior members of China`s negotiating team said that  reaching a deal would benefit China, the U.S. and the world.  

The key highlight was that the Chinese did not commit to a specific figure  for purchases of U.S. goods, which was a key demand of the Trump  administration.  Instead they said China would buy more goods without a  doubt but based on market needs.  

Other interesting points, the Chinese said the U.S. agreed to keep its  promise to cancel tariffs step by step, some existing levies and future  ones.  And the ministers stressed how both sides were making compromises  and commitments to avoid having the deal appear unequal in the eyes of the  Chinese public, with the U.S. imposing changes on China.  

It appears there`s plenty of work left to do.  The Chinese said that both  sides still need today finalize the texts and take other steps before  deciding when and where they would sign the deal.  
For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon in Beijing.  

GRIFFETH:  Michael Farr joins us now to talk more about trade and the  markets.  He, of course, is the president and CEO of Farr, Miller and  Washington.  

Michael, always good to see you.  Thanks for joining us tonight.
MICHAEL FARR, PRESIDENT AND CEO, FARR, MILLER & WASHINGTON:  Thank you,  Bill.  Great to be with you.  

GRIFFETH:  Does this deal in any get you to look at the markets in a  different way?  

FARR:  If we have a deal, Bill — I mean, so much of this negotiation has  been loosely promising to hold the football for Charlie Brown and Charlie  Brown trusting her and ending up flat on his back.  There`s been a bit of  that for markets.  

When you hear Bob Lighthizer who is an old friend say that we`re really  there, I feel better about it.  What I like for stocks is it does seem to  be removing more and more uncertainty even incrementally.  So, I think it  gives a more stable platform to the negotiations that`s going to quiet some  of the noise.  And investors are going to be able to focus a little bit  more on the numbers, on earnings and on what makes stocks valuable.  

HERERA:  Michael, would you be stepping into some of the names that have  suffered because of the length of the trade war?  

FARR:  I think so, Sue.  But not necessarily with an idea that they`re  going to rebound all that quickly because this still promises to be a long  process.  But I like to buy things when they are beaten up.  

So, for those very good companies that have suffered, you know, you buy  them when folks don`t like them.  You try and buy them when cheap.  A lot  of them have become less expensive.  There is opportunity there and yes I`m  looking at those.  

GRIFFETH:  You`re getting phase one now of a trade deal.  You`ve got the  Federal Reserve which pretty much signaled this week they`re out of the  picture for the foreseeable future and you got the stock market at all-time  highs.  

Is it too good to be true?  Or what are you looking at into the New Year  here?  

FARR:  You know, Bill, I`ve been doing this so long, any time everything  feels good I get more nervous.  But yes, at 17.5 times earnings, stocks  aren`t cheap but they`re not awful.  Earnings growth for 2019 may be 1.5  percent really, 17.5 times earnings, the economy is doing OK.  The Federal  Reserve says they`re going to be on the sideline for a while.  

And we know in an election year the fed doesn`t want to do anything.  So,  you get past April and May, Fed is quiet, interest rates low.  This is a  constructive, bullish environment for stocks.  So, yes, I think it could  continue to go along not — I don`t expect another 25 percent year, but a  positive year for 2020 — yes, I`m reasonably bullish.  

GRIFFETH:  All right.  Michael Farr with Farr, Miller and Washington —  always good to see you, Michael.  Thanks.  Have a good weekend.

FARR:  Great to see you.  Happy holidays to everybody.  And as my friend  Paul Kangas used to say, I wish everybody the best of goodbyes.  

GRIFFETH:  Very good.  

HERERA:  A handful of economic reports today give hints about the outlook  for growth.  Import prices rebounded in November, rising 0.2 percent, the  fastest pace in six months.  But the gain was tied to oil prices, meaning  underlying inflation pressures remain muted.  A separate report showed  business inventories rose 0.2 percent, lifted by stocks at retailers,  suggesting that inventory management could contribute to economic growth in  the fourth quarter.  

But retail sales not a as strong as expected in November.  They also rose  0.2 percent but economists say the short fall may be because of the late  Thanksgiving, which pushed the first big weekend of holiday spending into  December.  

GRIFFETH:  In his first public comments since the Federal Reserve`s policy  meeting this week, the president of the New York Fed said today that this  year`s interest rates cuts have positioned the economy for solid growth in  2020.  

JOHN WILLIAMS, FEDERAL RESERVE BANK OF NEW YORK PRESIDENT:  The economy is  it in a good place.  Unemployment is at 50-year low.  The economy is  growing.  The economy is performing about as well as we have seen in  decades.  

The real issue is, you know, how do we keep the economy strong?  How do we  keep inflation at — back to 2 percent?  And then, you know, what are the  risks and uncertainties out there?  

GRIFFETH:  Williams said he does expect the economy to grow about 2 percent  annually over the next couple of years.  

HERERA:  Although much of the attention today was on trade relations with  China, the trade fight with Europe is still brewing.  Tonight we learn that  the U.S. is considering tariffs of up to 100 percent on European products  that were previously absolved from such duties.  Those products include  things Irish and scotch whiskeys, cognac, Spanish olive oil and French  cheese.  

GRIFFTH:  And in the United Kingdom, Prime Minister Boris Johnson spent his  day celebrating his decisive election victory.  He pledged to unite his  country and move forward with the U.K.`s exit from the European Union.  
Willem Marx is in London for us tonight.  

BORIS JOHNSON, BRITISH PRIME MINISTER:  I am forming a new government.  

WILLEM MARX, NIGHTLY BUSINESS REPORT CORRESPONDENT:  Boris Johnson came to  power in 10 Downing Street over the summer promising that he would deliver  Brexit by the end of October.  When it looked like that wasn`t possible, he  fought through an election to win a new parliamentary majority.  After five  weeks of a very divisive campaign, he`s ended up with a significant  majority for his Conservative Party, the largest since the 1980s.  

His opponent, Labour, led by Jeremy Corbyn, saw the most disappointing  results since the 1930s and that allows Boris Johnson to move forward with  his own divorce deal for the E.U., looking forward to the end of January  when the U.K. will now move very likely, formally leave the European Union  as part of that divorce arrangement.  

The next challenge for the prime minister, of course, is how he forms a  trading relationship with the U.K.`s largest trading partner, the European  Union.  He will face a huge amount of pressure to rush that through in  terms of the negotiations to get approval from his own party and from other  members of the parliament here in the U.K.  And the challenge is he  promised to do that by the end of next year, 2020.  If he fails to do that,  investors, businesses, voters concerned about the possibility that any will  have a hard Brexit, U.K. will leave the European Union at the end of next  year if there is no trade deal and return to WTO terms, something  economists have said will be very damaging for the British economy.  
For NIGHTLY BUSINESS REPORT, I`m Willem Marx outside 10 Downing Street in  London.  

HERERA:  It is time to take a look at some of today`s “Upgrades and  Downgrades”.

Bristol Myers Squibb was upgraded to buy from hold at Argus.  The analyst  cites the company`s drug pipeline after the completion — completed  acquisition of Celgene (NASDAQ:CELG).  The price target is $80.  The stock  fell a fraction to $63.82.  

Snap was upgraded to outperform from market perform at JMP Securities.  The  analyst there cites the company`s ability to grow its user base and attract  advertisers.  The price target is $20.  The stock rose 4 percent to $15.09.  

GRIFFETH:  Regeneron was upgraded to outperform from neutral at Credit  Suisse.  The stock was also named a top pick for 2020.  The analyst cited  sales of the company`s macular degeneration drug.  And price target is now  an even $400.  The stock rose 1 percent today to $376.42.

Hanes Brand was downgraded to underperform from neutral at Bank of America  (NYSE:BAC) Merrill Lynch.  The analyst cited a slowdown of sales for the  company`s Champion athletic apparel brand.  Price target down to $13 now,  and shares were down 5 percent to $14.40.  

HERERA:  Still ahead, a year`s long high stakes labor case and a big win  for one of America`s biggest companies.  

GRIFFETH:  A long running labor union case has finally come to an end.  And  it was a win for the world`s largest fast food restaurant chain.
Kate Rogers (NYSE:ROG) has the story.  

KATE ROGERS, NIGHTLY BUSINESS REPORT CORRESPONDENT:  A big win for  McDonald`s in the big debate over the franchisee franchiser relations and  how much responsibility franchisors like the restaurant giant have over  actions taken at their franchise locations.  The National Labor Relations  Board instructing a federal judge Thursday to approve settlements to  resolve complaints against McDonald`s (NYSE:MCD) and 29 of its franchisees  in a case that`s been under way for three years.  

UNIDENTIFIED MALE:  What do we want?  
ROGERS:  Workers claimed they faced retaliation for participating in  rallies calling for $15 an hour minimum wage and unions.  The decision  still has to be finalized.  But it means McDonald`s (NYSE:MCD) escapes  joint employer liability which would hold corporations accountable for  violations at franchise locations.  The settlement places liability on  franchisees.  

CATHERINE MONSON, FAST SIGNS INTERNATIONAL CEO:  McDonald`s (NYSE:MCD),  like all franchisers such as Fast Signs International puts together a  brand, an entity, training, supply chain and everything.  But our  individual franchisees are the ones who hire, fire make the pay decisions,  et cetera, do all the management.  So, to finally have some closure on this  vagueness of the expanded definition of joint employer is a really positive  for Fast Signs and the entire franchise industry.  

ROGERS:  The International Franchise Association says that an expanded  definition of the joint employer rule from 2015 has stifled industry growth  and increased litigation against franchise businesses by 93 percent over  that time period.  

MONSON:  It has reduced the addition of over 370,000 jobs in those five  years and actually eliminated about $33 billion of economic growth because  of the uncertainty.  Franchisors have been hesitant to grow and franchisees  really didn`t know what was happening to their business.  So, this is a  very positive, positive step for all of franchising, whether you`re a  franchiser or a franchisee.  

ROGERS:  In a statement, McDonald`s (NYSE:MCD) said in part that the  decision allows our franchisees and their employees to move forward and  resolve all matters without any admission of wrongdoing.  Additionally,  current and former franchisee employees involved in the proceedings can now  receive long overdue satisfaction of claims.  

Workers rights group Fight for 15 and a union said it plans to forcefully  appeal, adding: The settlement is not valid.  McDonald`s (NYSE:MCD) is  walking away with a get-out-of-jail-free card after illegally retaliating  against low paid workers who are fighting to paid enough to feed their  families.  

HERERA:  A surprise FDA approval for Sarepta, and that`s where with we  begin tonight`s “Market Focus”.  

The biotech second drug for Duchene muscular dystrophy was given the green  light by regulators.  Sarepta already makes the first FDA approved  treatment for the disease.  And until now, it had been the company`s only  commercialized therapy.  Shares soared 31 percent to $132.05.  

The CEO of Kate Spade is leaving her position at the end of the year, after  less than two years on the job.  Same store sales at the handbag maker have  been falling since Kate spade was acquired by Tapestry back in 2017.   Shares of Tapestry were down 1.5 percent to $25.94.  

GRIFFETH:  The Department of Justice is reportedly preparing legal action  against live nation.  According to the “Wall Street Journal”, officials are  looking into allegations that the live entertainment company tried to  strong-arm concert venues into using its Ticket Master subsidiary.  Shares  fell 7 percent on the news, down to $64.34.  

And AT&T (NYSE:T) is also increasing its quarterly dividend by 2 percent.   It`s going to be payable February 3rd to shareholders of record as of  January 10th.  AT&T`s dividend yield of course is a healthy 5.3 percent.   The company also plans to retire about $100 million worth of stock in the  first quarter of next year.  The stock fell about a fraction today to  $38.26.  

HERERA:  It is time now for our weekly market monitor.  He likes three  companies.  He says the shares are industry leaders that could see strong  earnings growth over the next 12 months.  

Nick Giacoumakis joins us.  He is president of the New England Investment  and Retirement Group.  

Nick, welcome.  Nice to have you here.  


HERERA:  And we start with the Adobe.  You say that they basically have  been innovative.  They transformed their business in many sectors.  That`s  one of the reasons that you like it.  
Why else do you like it?  

GIACOUMAKIS:  Sure, I mean, they have expansion of business in the  artificial intelligence side of the business with their building that out.   Also in addition to that the e-commerce side of the business has been  lucrative and if you look at the earnings release that came out today, even  the older line business such as Acrobat and Photoshop, they are really,  really, you know, hit the numbers for the company to be that large and  producing those types of numbers, 21 percent of revenue growth.  That`s  pretty fantastic.  So, I think the train going forward should continue.  

GRIFFETH:  Next you have is retail — the furniture retailer now called RH.   It`s the old Restoration Hardware.  What a year this company has had, both  earnings and stock-wise.  Do you think they can keep up this momentum up  going into the New Year?  

GIACOUMAKIS:  I think so, Bill.  I think it`s a situation where creativity  and innovation is kicking in where RH has decided to go into the brick and  mortar side of the business and they have some beautiful, large creative  gallery stores that really been drawing in the public and creating a lot of  buzz.  

For example, just recently they came out with the ski home lifestyle store,  obviously right in time for the winter season.  I think really they`ve  differentiated themselves from the typical retailer that we see out there  that`s just relying on online sales.  

HERERA:  And next, we finish with J.P. Morgan.  And you make the point that  it is basically executing to a gold standard here in the United States.   And it has also had a nice one-year gain.  

GIACOUMAKIS:  Yes.  And you know, between the leadership of Jamie Dimon  obviously over the years, building the business to the gold standard that  they are, even as large as J.P. Morgan is, they are continuing to reinvent  themselves.  More recently, they`re putting a thrust and drive towards the  wealth management side of the business where they partnered up some of the  Chase locations on the advisory side of the business for the high net  weather and also ultra high net worth side of the business.  
And this will help to not only increase revenue, but also to smooth out  earnings if and when we see a slowdown in the more traditional side of the  business such as commercial banking and lending.  

So, for that reason, we really continue to see good things for J.P. Morgan. 

HERERA:  On that note, Nick, thanks so much for joining us.  

GIACOUMAKIS:  Thank you for having me.  Appreciate it.
HERERA:  Nick Giacoumakis with the New England Investment and Retirement  Group.  
GRIFFETH:  And coming up, getting away for the holiday this season.  Well,  watch out for hidden fees on your hotel bill.  

HERERA:  We all pay them.  And we all get annoyed when we do.  We`re  talking about resort fees which are added to the cost of your hotel room.   And while they`re annoying to travelers, they are a lucrative source of  revenue for the industry.  And they are expected to go up.  
Seema Mody has the details.  

SEEMA MODY, NIGHTLY BUSINESS REPORT CORRESPONDENT:  As you prepare to  travel for the holidays, watch out for the pesky resort fees that may be  added onto your hotel bill at checkout.  Hotels say the resort fee, which  can range from $25 to $45 a night covers activities or specific amenities  such as free Wi-Fi or access to the gym.  It`s seen as an effective way for  properties to collect more money from customers without raising the room  rate.  

PATRICK SCHOLES, SUNTRUST ROBINSON HUMPHREY:  It`s been very challenging  the last couple of years to push room rates higher.  And one way that  they`ve been able to at least make profits higher is by tacking on these  resort fees.  

MODY:  Resort fees are quickly becoming a source of frustration for  travelers who may not even be using any of the amenities that are included  in the resort fee.  Like complementary drinks at the bar, or a beach chair.   And it`s not just hotels and travel distinctions like the Caribbean.  Many  hotels in cities are implementing an urban fee.  

Research from hospitality firm Skift shows an increase in a number of urban  hotels in cities such as New York, Chicago and Los Angeles that are  charging fees even if they don`t have the swimming pools and other  amenities that resort fees are normally supposed to cover.  Other guests  complaint they`re often not made aware of these fee when booking the hotel.  

Lawmakers have taken notice.  Earlier this year, the attorney generals in  Washington, D.C. and Nebraska filed lawsuits against the two largest hotel  operators, Marriott and Hilton, for not properly disclosing the fees.  But  experts don`t see the fees going away any time soon.  

SCHOLES:  I think for many hotels it`s been quite successful.  And it`s not  just the revenue.  It doesn`t cost anymore employees to tack these fees on.   And because of that, you have a high profit stream from them.  

MODY:  According to SDR Analytics, for the fifth year in a row,  miscellaneous income which includes resort and cancellation fees was the  biggest source of growth at more than 11 percent.  If fees continue to  rise, experts caution that may push more travelers to off to stay at a  short-term rental over a hotel.  

SCHOLES:  You know, as people start to notice that more, yes, if something  that`s costing more you may look at an alternative accommodation such as  Airbnb or the like.  

MODY:  Depending on where you are staying, there may be a way to get out of  paying the resort fee.  Travel consulting firm TPG recommends booking  hotels using awards or points and advises clients to check in with the  hotel manager to see if the resort fee can be taken off the bill if you`re  not planning to use the amenities or services it covers.  

GRIFFETH:  And finally tonight, they are called non-bank banks, among other  things.  And there are a lot of them out there to choose from these days.   Big and small tech companies are getting into the banking business by  offering credit cards and savings accounts and other services.  But before  opening an account with one of them, it`s important to think about how you  bank.  

Our senior personal finance correspondent Sharon Epperson is here with some  tips on that tonight.

What — how does this differ from traditional bank?  

SHARON EPPERSON, NIGHTLY BUSINESS REPORT SENIOR PERSONAL FINANCE  CORRESPONDENT:  Well, they are called challenger banks and they can be from  big tech companies or smaller fintech, financial technology startups.  And  the purpose of them is to allow you to have easier access to banking with a  branchless bank, digital bank, get checking account, savings accounts and  then most of the time but you have to check on this, they`re partnered with  a federally insured FDIC insured bank to actually provide you that kind of  protection.  

But there are a number of companies that are doing this from companies like  Chime that has 6.5 million accounts, to other companies, SoFi, which is a  refinancing company for student loans but now also has SoFi Money and has  then there`s T-Mobile Money, as well as Betterment.  So, a lot of companies  that are in the mix doing this.

HERERA:  What are the advantages if there are some for consumers?

EPPERSON:  Well, they are lower cost because there may not have overdraft  fees, there may not be a minimum balance, there may not be — may be higher  rates that you can get on loans and there — and your savings accounts and  then you may have greater access to credit because artificial technology  making it easier to get more access.  And then the specialized services as  well, whether it`s checking or sayings, or payment options, you want that  specific option, that`s for you and it`s right on the phone.  

GRIFFETH:  Disadvantages?  What happens when the lights go out, for  example?  

EPPERSON:  Exactly.  So, there`s no human interaction.  If you have an  issue, there is nothing you can do to talk about it.  If you want to go one  place and get your mortgage and credit card and your checking, that`s not  for you, because it`s going to be a specialized offering.  

And then your data is out there.  Any time that you`re doing something with  —  


EPPERSON:  — technology like this, you`re putting your data out there.   So, you may be at greater risk.  You need to think about this.  Basically  ask how do I want to bank and then decide which is best for you?  

GRIFFETH:  As always, Sharon Epperson, thank you.  
EPPERSON:  My pleasure.  
GRIFFETH:  See you later.  

HERERA:  All right.  Well, before we go, let`s take a look at the day`s  final numbers for the Wall Street and also the end of the week.  The Dow  added three points to finish at 28,135.  The Nasdaq was up 17 to close at a  record, and the S&P 500 was up just slightly.  

All of the major averages were also higher for the week.  Pulled it off on  this Friday the 13th.  

GRIFFETH:  It is.  You know, I was just going to say Friday the 13th, but  we still finish with these record highs.  

HERERA:  Yes.  

GRIFFETH:  And now we got a Fed behind us and we got a trade deal behind  us.  

HERERA:  Yes.  

GRIFFETH:  What will come next week?

HERERA:  What will come next — what I was going to say.

That does it for us tonight.  I`m Sue Herera.  Thanks for joining us.  

GRIFFETH:  I`m Bill Griffeth.  Have a great weekend.  See you Monday.  
HERERA:  See you Monday. 


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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