Nightly Business Report – July 10, 2019



this is nightly Business Report with super arrow and bill driven uncertainties around trade tensions concerns about the strength of the global economy continue to weigh on the US economic outlook the Fed chief signals an openness to a rate cut and the market responds the SP breaks through 3000 for the first time ever and the Nasdaq closes at a record battles for content major media players are in Sun Valley as the industry enters a new era and competition among streaming services intensifies the top State for business why Amazon had it right when it shows Virginia for its second headquarters those stories and much more tonight on nightly Business Report for Wednesday July 10th good evening everyone and welcome well the stage is set and investors cheered Federal Reserve chair Jerome Powell today bolstered the case for a possible interest rate cut when policymakers meet at the end of the month he suggested that lowering the benchmark rate would bolster growth and cited a number of uncertainties both here and around the globe that lifted optimism on Wall Street sending the Nasdaq to new highs and the sp500 briefly through the 3000 mark before it pulled back the Dow Jones Industrial Average was 76 points to 26,000 860 the Nasdaq was up 60 and the S&P 500 gained 13 we have two reports tonight Bob Pisani is at the New York Stock Exchange but we begin with Steve Liesman and the Fed Fed Chairman Jerome Powell all but guaranteed the Federal Reserve will be cutting rates probably as soon as this month that's from his semiannual testimony in the house today well he said the US economy is in a good place he emphasized trade uncertainty global economic weakness and low inflation as the more important factors guiding Fed policy would it be fair to characterize based on what we're seeing on those two factors specifically that a strong case could be made for lowering so yes as I mentioned we think that uncertainty around around trade policy and also global growth it's it's not all down to trade policy there's there's something going on with growth around the world particularly around manufacturing and investment in trade and so that uncertainty is is we think weighing on the domestic economy powell said he was not swayed by the strong jobs report this past friday and in fact said the economic data had continued to disappoint that leaves the most important question how many rate cuts after July Fed Funds futures are pricing in a 100 percent chance of a rate cut in July markets see a 56 percent chance of yet a third rate cut in December for 75 basis points or three quarters of a point of rate cuts this year 25 basis point cut it seems very likely in fact there's a decent probability they can consider a 50 basis point cut they want to be aggressive they want to be early and they want to ensure that this is a recovery that can continue and they're not waiting to see evidence of slowing in the data I'm a separate note Powell was asked by Maxine Waters the chair of the House Financial Services Committee if he thought President Trump could fire him mr. chairman if you got a call from the president today of tomorrow and he said I'm firing you pack up it's time to go what would you do well of course I would not do that I can't hear you my answer would be no and you would not pack up and you would not leave no ma'am because you think the president doesn't have the authority is that why you would not leave I have I've kind of said what I what I intended to say on the subject and what I've said is that the law clearly gives me a four-year term and I fully intend to serve it stocks and bonds both like the message from Powell on the outlook for interest rates we'll see if he continues that message in testimony before the Senate tomorrow for nightly Business Report I'm Steve Liesman and as sue mentioned investors did indeed like a Fed chiefs message especially early in the trading day when all three major indexes hit intraday highs Papa Sonny's at the New York Stock Exchange stocks marched higher pushing the sp500 beyond 3,000 early on though we did and well off of those levels Federal Reserve chair Jay pal testified before the House Financial Services committee today reassuring the markets that there is indeed a case to be made for a rate cut later this month in particular pals comment that uncertainties have increased pushed the SP into record highs but we came off of those highs fairly quickly we didn't end above 3000 right now there's a clear consensus in the markets around a 25 basis point insurance cut for July is some are calling it some investors likely would be surprised now if there was no rate cut but others would be surprised if there was a 50 basis point rate cut so the consensus is just 25 sector winners today big tech names like micro and Cisco Intel and Microsoft they're the same stocks that power us to 3,000 from 2000 energy was another bright spot crude oil prices are knocking on the door at $60 a barrel here crude inventories showed a much bigger drawdown and expected that helped the big oil names Exxon Chevron and Hess one group left out of today's rally bank stocks JPMorgan fifth third all down as bond yields continue to drift lower for nightly Business Report I'm Bob Pisani at the New York Stock Exchange the minutes of the feds last meeting were also released today they show officials growing more concerned about the economic outlook and many back to move if the economy continued to struggle economists say that the minutes add to the sense that the central bank is prepared to lower rates when they meet at the end of the month let's turn now to Brian Nick to talk more about the Fed and the markets ease chief investment strategist at Nuveen Brian thanks for joining us tonight thanks for having me as your heard the guessing game has hit a new level today the it's either 25 or 50 basis points according to Morgan Stanley your Bank of America but everybody seems to feel that by the end of the year rates will be 75 basis points lower than they are today what's your guess I don't think it's gonna be necessary for the Fed to go three times with rate hikes this year I think what's been priced in brace house you mean over eight cuts I'm sorry we're only six months removed from rate hikes I'm still adjusting to the new reality here so we do think they will go at the end of this month if Chair Powell wasn't intending to cut rates at the end of this month he would have had to say so today and he obviously didn't and then the the very high likelihood that they'll go again into ten and then probably pause and and the the hope I think on the feds part and on our part is that by the end of the year some of the risks that the Fed is concerned about will have dissipated that global growth will be showing signs of being on the upswing and at least some of these sources of policy uncertainty whether it's the debt ceiling or Briggs it or even a potential deal on the US and China on trade at least those risks will not have have gotten worse and that they'll feel comfortable that they've done enough so but the equity markets have the rally in the equity markets have been to a certain extent built on the expectation of those rate cuts what's your outlook of equities if indeed we do get that cut in July yes so the stock market in the US is up about twenty percent year-to-date our mid-year outlook is to expect a tougher climb that's particularly true if we think US stocks which we don't think are poised to give anywhere near the returns they did in the first half of the year because once these rate cuts are sort of priced in that's the market basically saying look we need some help from the Fed we think we're going to get that help and even if the Fed follows through and does cut rates two or even three times it's going to be hard for the markets to rally further especially given the fact that what we're concerned about in the next couple of quarters is a very soft period for corporate profits and at the end of the day if corporate profits aren't growing there's only so far the markets can travel upwards and then there's the the story the bond market seems to be telling as we continue to see yields go lower there to some in some cases three year lows how do we reconcile that with what the equity markets been doing it's not typical that you have a prolonged period when bonds and stocks are rallying at the same time and that is again another reason why we're very cautious about the second half of the year for both fixed income and for equities because this correlation probably isn't going to last it's gonna resolve in some way probably with interest rates rising moderately again keeping that optimism alive for the end of the year with growth looking to be a bit better by q4 which means that interest rates should go up a bit but also the reality of corporate profits and where valuations are probably limiting the degree to which stocks continue to move up so we're looking at flattish returns for the rest of the year in stocks flash for bonds as well fortunately for investors the first half of the year was very good indeed Brian Nick with new bean again thanks for joining us tonight thanks very much those comments from the Fed chair rippled through the housing sector the idea being that if the Fed cuts interest rates mortgage rates will dip making home purchases more affordable lower rates would also offer some relief for home builders who have seen higher labor and land costs giving that sector a lift today but there is another shift underway in the housing market and the change may be bad for buyers diana Olek explains it's all about supply we've been in a pretty severe housing shortage for the past several years which meant that as demand rose prices did as well but this year we started to see more listings and prices easing but that may be short-lived supply is expected to drop again this fall and potentially hit a new low according to realtor.com inventory gains began to slow this year from 6.4 percent growth in January to 5.8 percent in February gains continued to slow throughout the spring and supply was up just 2.8 percent annually in June it's now expected to flatten over the next three months and could hit its first decline in October of this year of course all real estate is local the housing shortage is worsening in smaller more affordable markets like Oklahoma City Memphis Raleigh Richmond and Pittsburgh according to Redfin but in pricier markets where demand has fallen off like Seattle San Jose Denver Chicago and Boston the supply of homes for sale is increasing a looming shortage could help the home builders but they still need to either lower prices or build more entry-level homes because that's where demand is strongest and supply is leanest for nightly Business Report I'm Diana Olek in Washington more now on oil prices which as you heard settled at a 7 week high today two things drove the rally first the government confirmed a larger than expected drawdown in oil supply and second is that storm taking shape along the Gulf Coast forecasters warn that it could turn into a hurricane by the end of the week and that has prompted the oil industry to shut in production and evacuate rigs ahead of time so domestic crude settled four and a half percent higher today above $60 a barrel it is time to take a look at some of today's upgrades and downgrades caste was upgraded to buy from neutral and it was added to the conviction by list at Goldman Sachs the analyst cited the company's strong fundamentals the price target is $54 the stock hit a new high during the training session to close at forty three seventy nine comcast is the parent company of CNBC which produces this program HCA health care was upgraded to buy from neutral at Goldman Sachs the analyst cites the healthcare services company's bargaining power at the local level the price target is a hundred and sixty dollars the shares rose one percent to one thirty six sixty eight Deere was downgraded to neutral from by at UBS the analyst says demand will likely weaken in the next one to two quarters as farmers hold back on purchases the price target is 167 the shares fell one-and-a-half percent to one sixty eighty-one we don't often report from beautiful Sun Valley Idaho but once a year it becomes the center of the media world when Allen and company hosts its annual conference over the years the seeds of some of the biggest deals in history have been planted there there was Jeff Bezos purchase of the Washington Post Verizon's acquisition of Yahoo and most famously Disney's merger with ABC back in 1995 but this year the focus may be less on mergers and more on content Julia Boorstin is there for us tonight with media moguls such as brian roberts john malone and greg maffei arriving here in sun valley one of the big topics is how the media and tech giants are battling for content with the number of new streaming services set to launch from Disney Apple 18 teased Warner Media and NBC Universal no one's gonna compete with Netflix and gross subscribers I believe they have won the game and I think that there's nothing that I can see that's gonna dislodge them Amazon's in a completely different business in that it's selling prime which gives you all sorts of services just among them a video and television Disney has the best chance just because of its very very popular content with so many media and tech companies such as Apple and Amazon competing for premium shows and movies which Barry Diller calls an arms race some of the companies here are looking for value elsewhere like Discovery's David zasloff who's building on his company's strengths with unscripted content around food the home and science they all kind of look the same Apple is doing it scripted series scripted movies great company's gonna be fighting over that market share price of content going up it's great to watch I think it's great for consumers but it's incredibly crowded with CBS and Viacom's controlling shareholder Shari redstone here along with former 21st Century Fox CEO James Murdoch industry veteran Michael Ovitz says is way too soon to determine which of the tech and media giants will come out on top Netflix has got the most extraordinary install base an amazing head start Disney's put together a phenomenal group of brands and Warner's you know it's got some track record over the years plus HBO and you got hulu out there too so I think that it's just gonna be a competitive environment and now everyone's watching to see how consumers will respond to Warner media's upcoming HBO max launching next spring as well as Disney plus an Apple TV plus launching this fall for nightly Business Report I'm Julia Boorstin in Sun Valley Idaho still ahead wages are ticking higher after being stagnant for years but there is some concern that higher pay will threaten profit margins [Applause] [Applause] the White House is ordering an investigation into france's planned attacks tech tax technology companies the probe is going to examine whether france's digital tax plan would hurt us tech firms and unfairly target them according to reports the investigation could potentially lead to the u.s. imposing new tariffs or other trade restrictions a new goldman sachs report says higher wages is putting pressure on corporate profit margins and that S&P 500 companies could be affected the most by higher costs from a less competitive labor market so how much of a threat could that be matt meili equity strategist at miller Tabak joins us now to talk about that Matt great to have you here welcome so tell me you think it will have an impact on profit margins but maybe not right away yeah it's kind of interesting because it it's definitely having a little bit of an impact and one of the course of the concerns is that we it's kind of the boil quiet Oh quiet wolf we've heard for so many years wages are gonna have to increase wait wages are gonna have to increase and they never have so people have gotten to the point where they just kind of dismiss it and have not built it into any of their assumptions and now that we're finally trying to see we're finally starting to see a little bit of that it's gonna you know affect not only earnings overall but a miss of Earnie expectations which is always tough for stocks but there's also a hidden danger that you alluded to so it's just the that you know a lot of these companies out there you get to a certain point and they're not gonna be willing to pay above that level and they have a lot of technology already in place to replace those workers yeah I mean it's it depends on the sector of the economy we're talking about technology wages are going up there's no question about that Healthcare wages are still going up because demand is there but when you get into industries like for example food service where margins are slim to begin with when wages go up which they have been doing that will cut into profit margins right away won't they and there's no question and at some point there is a level where they will just change I mean a great example is what happens with McDonald's I mean they have had the the technology in place for several years that can replace a lot of the people that work in there in their restaurants whether it be making a cooking the food that the cash registers etc the one thing though is that all their studies over the years have told them hey it's good for us both economically and for public relations to hire people in the neighborhood we want to be a good neighbor we want to be a good partner within the neighborhood but there comes a level where they get that gets too expensive it used to be at $15 an hour now it's a little bit higher than that but like I said this technology is already in place so it's not like something will take three years to implement it take a very short time and that would get people then suddenly with unemployment at a very low level could start to creep up and you mentioned the $15 mark and a number of companies have are phasing in that $15 mark but at what point do you think we really start to see the impact is it at fifteen or is it below fifteen well I think 15 it's it's it's depending on the company and obviously the industry and it depends on the area too a lot of people will say well $15 in New York City obviously doesn't get you very far and so it kind of it's it's kind of a roving number or a wide range but I think anything when you start to creep above $15 it definitely has an impact and of course a lot of these service jobs are ones that people don't really have the qualifications to do other things and if unemployment goes up on the unemployment rate goes up that has an impact on earnings of other companies as it spreads through the system all right Matt mailee with Miller Tabak Matt thanks so much thank you American Airlines raises its revenue forecast and that's what we begin tonight's market focus with the airline's saying that it's seeing fuller flights and as a result it anticipates up to 4% increase in its unit revenue however the carrier also did say that its pre-tax profit would take about a hundred and eighty five million dollar hit due to that prolonged rounding a Boeing 737 max planes the stock today rose nearly two percent to thirty two ninety four elsewhere am Neil Pharmaceuticals is looking to reduce its annual expenses through a newly announced restructuring plan the drug maker has been dealing with supply issues for its epinephrine auto-injectors which are used to combat life-threatening allergic reactions shares lost more than a third of their value today following nearly 36 percent – four thirty-six cents and Chinese electric carmaker neo Today reported more deliveries than expected company said had delivered more than 1300 vehicles in June just last week recall that its US rival Tesla exceeded its own delivery estimates in fact neo is often called the Tesla of China neo was off a fraction today to $3 68 vishay inter technology is cutting its quarterly outlook late today the chip maker said it is seeking weaker than expected demand from its distribution operations shares initially dropped in after-hours trading but closed the regular session up a fraction to 1608 and after the bell Bed Bath & Beyond posted mixed results as it topped earnings expectations but fell short on revenue the home goods retailer also saw a drop in same store sales shares initially rose in after-hours trading they closed the regular session up a fraction at 1152 here we are in July the start of the new school year may seem far away but already retailers are gearing up for back-to-school sales and this year gadgets may take a bigger bite out of parents budgets Courtney Regan has more for millions of children in the u.s. school just let out for the summer but back-to-school shopping is starting soon and expected to peak later this month and in early August that's when more than half of annual school related spending happens and a new survey from Deloitte forecasts the total spent nearly 28 billion dollars will be on par with last year it doesn't mean the consumer isn't healthy but rather the back-to-school supplies are largely commodity type items a pencil is a pencil for the most part that ups the ante for retailers you have to be sharper in terms of what the proposition is for the consumer so one of the questions we always ask us tell us what's important to you in terms of picking either the venue or the specific brand that you're shopping we hear over and over its price its product it's convenient nearly 90 percent of shoppers say mass merchants retailers like Walmart and Target are the top destination for back-to-school online retailers like Amazon are now the second shopping preference for back-to-school some retail experts say Amazon's primed a shopping holiday has helped it grab more supply share Amazon is basically taking over along with Walmart and Target back-to-school and electronics are an online business that electronics is going to be the big growth area Deloitte says spending on electronics will surge nearly 30 percent with the growth coming from mobile devices and the smartest shoppers Deloitte survey says don't procrastinate those who wait till last minute spend a lot more money than those who start certainly in kind of the middle of the peak about three hundred and seventy dollars more on average buyer beware for nightly Business Report I'm Courtney Reagan and still ahead the top state for business when Amazon was choosing its top state for its five billion-dollar hq2 project it came here to Virginia but how does Virginia stack up by the numbers I'm Scott Cohen will have this year's rankings coming up on nightly Business Report the District of Columbia is suing Marriott over what it calls deceptive fees the Attorney General says the hotel did not disclose the additional mandatory costs upfront to its customers and rates displayed online the lawsuit alleges that Marriott made millions of dollars by violating consumer protection laws for at least a decade it was filed after an investigation conducted by all 50 state attorneys general Marriott says it does not comment on pending litigation CNBC is out with its annual list of the top states for business all 50 states are graded on more than 60 measures of competitiveness including infrastructure workforce and the cost of doing business this year North Carolina came in at number 3 thanks to a strong state balance sheet and steady economic growth at number 2 Texas with a high growth rate and low unemployment and as you heard topping the list virginia thanks to its workforce and strong education system Scott Cohen has the story behind this year's top State for business from the mountains to the sea an American original and a business powerhouse tonight the celebrations have begun Amazon has found its next home Virginia was already a winner beating out more than 200 bidders for Amazon's hq2 project we were really excited by Virginia what it had to offer probably the most important thing was the attraction of this place to talent and particularly tech talent the numbers bear that out Virginia has America's top work force smart and tech savvy tied for the top in education and number three for business friendliness with a bipartisan program to cut regulations what functions very well in this state is government officials business officials local citizens groups people talk to each other a lot when businesses large and small want to call Virginia home that is a one-two punch for our economy but not all is perfect the governor's own history has helped revive questions about this state's inclusiveness we are really focusing on those inequities and and our cabinet members are addressing those but you know I want to let let this country know and certainly Virginians know that we are an inclusive state and then there are the cost an expensive place to live and do business for now it's a price companies are willing to pay it's no coincidence that the last time Virginia was this strong competitively was in 2011 after that defense spending started to decline and no state is more dependent on the Pentagon now that budget is back and so is Virginia for nightly Business Report scott kohn bentonville Virginia and before we go here's another look at the day's final numbers from Wall Street the Dow rose 76 points to 26,000 860 the Nasdaq was up 62 close at a record and the S&P 500 gained 13 and I already saw a couple of traders on the floor the New York Stock Exchange with SP 3,000 bats there I'm sure they will have those on tomorrow that does it for us tonight I'm super aera thanks for joining us i'm bill griffith have a great evening see you tomorrow

13 Replies to “Nightly Business Report – July 10, 2019

  1. Today there were 82 new 52-week highs and 21 new 52-week lows on NASDAQ. On the NYSE there were 139 new 52-week highs and 13 new 52-week lows. The slope of the US Treasury yield curve steepened sharply: 39 basis points separated the 1-month yield (2.18%) from the 30-year (2.57%). Volatility, as measured by the volatility index multiple I follow, UVXY, ended the day down sharply. UVXY closed at 27.11, off 4.61%.

    Winners of the day included Americold (US ticker: COLD) and American Assets (US ticker: AAT). Regarding COLD: "Americold is the world's largest publicly traded REIT focused on the ownership, operation and development of temperature-controlled warehouses. Based in Atlanta, Georgia, Americold owns and operates 179 temperature-controlled warehouses, with over 1 billion refrigerated cubic feet of storage, in the United States, Australia, New Zealand, Canada, and Argentina." It has 11,000 full-time employees. Regarding AAT, a REIT: "The company's retail portfolio comprises approximately 3.1 million rentable square feet, and its office portfolio comprises approximately 2.7 million square feet. In addition, the company owns one mixed-use property (including approximately 97,000 rentable square feet of retail space and a 369-room all-suite hotel) and 2,112 multifamily units."

  2. Why are they putting these squirt kids on T.V.??? They aren't old enough to pee straight. Their opinion is meaningless.

  3. Powell raises in Dec 2018, drives the market into the ground and then spends 7 months questioning his own decision, long term vision , not . Ego contest with Trump, yes. Idiot ! We are just back to where we were in Sept. 2018. Greenspan did the same in the 1990's.

  4. Well. T least it's not "Yesterday's," episode posted "As," today's. Anyway. As for streaming services for the internet…how do video stores, even those pollution-causing video kiosks, stay in business since the entire world (even the Congo), has smartphones or tablets, where anyone can stream & watch movies/t.v. episodes for free.

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