Transcripts For KQED Nightly Business Report 20170729

The president broke the news in his favorite way, over twitter. Writing, quote, i am pleased to inform you that i have just named generalsecretary john f. Kelly as white house chief of staff. He is a great american, and a great leader. John has also done a spectacular job at homeland security. Hes been a true star of my administration. Mr. Priebus is the former Republican Party chairman, and he clashed with other officials in the white house, including the new director of communications, anthony scaramucci. John harwood joins us tonight on the phone from washington. John, welcome, good to be with you. How big a surprise, john, is priebus departure . And how big a surprise is the appointment of kelly as chief of staff . Well, i think the departure of Reince Priebus wasnt a surprise. The timing was a s i had been talking to people during the day who were saying, you know, sometime in the next couple of weeks, certainly by labor day, so, that wasnt unexpected. John kelly had been rumored as a candidate for the job. So had other people, including gary cohn, the former Goldman Sachs executive. Deena powell, also formerly from Goldman Sachs. The real question is what does this mean . How does it change the functioning of the white house . Most things from the Trump Administration have revolved around the president personally, not his aides, but well see whether general kelly can bring a greater amount of discipline. What more what changes, other changes, might be possible . For instance, mr. Bannon was targeted recently by mr. Scaramucci. What do you see ahead, john . It is very difficult to predict this administration to say the le most conspicuous potential change that has been signaled is the departure of the attorney general jeff sessions. Now i dont know if thats actually going to happen. The president has suggested as much. I had a someone close to trump tell me today they expected bannon to stay. But i dont think you could make a heavy bet on any of this. One thing i think is interesting, though, i was talking to an ally of paul ryan, the house speaker, who said that the departure of preebious is essentially untethering the Trump White House from the Republican Party and, in fact, predicted that the next phase of the Trump Presidency may be to go to war against the Republican Congress and blame them for his problems. Well, he was mr. Priebus, certainly, part of the Republican Party establishment, former chairman of the party. So what could this change mean, not only for the operation of the white house, john, but for the president s policy agenda . Well, if general kelly can bring a greater amount of focus and discipline to the white house, and to the president , for that matter, it is possible that they could have a better experience with tax reform, which is the next big reform than they have had with health care reform. Obviously a lot of the problems on health care were inherent to that issue, and i think a lot of the responsibility lies with the congress, and not with president trump. But, general kelly is not experienced in politics. And one of the advantages of having Reince Priebus there was, in fact, youre trying to get an agenda through with republicans on capitol hill. And, general kelly does not have any track record of doing that. All right, john harwood. Thanks very much. Working late on the weekend night. John harwood in washington well, while the drama in washington continues, wall street is blocking out the noise and staying squarely focused on the fundamentals. Earnings and Global Growth are all supporting stocks, which saw the Dow Jones Industrial average close at a new high. The blue chip daow index advancd to 28,130, the nasdaq lost 7 and the s p 500 fell 3. For the week, the dow was the big winner. Bob pisani has more on whats driving the market. The stock market has a high class problem right now. An awful lot is going right. First and foremost, earnings have been strong. Were past the halfway mark. Earnings are up more than 10 year over year. Revenues are up 5 . Estimates are strong for the third quarter, as well. Valuations are higher, all right. But the margins are comfortable as long as there is Earnings Growth and the economy is improving. And the Global Economy has been improving. Money is flowing into european stocks this year. The credit markets are in great shape. Defaults are low. And a recession, nowhere on the horizon, next, the dollars been dropping. Providing a tailwind for exsporters. And rates are low. And the feds reiterated this week that rates will stay low for a long time and nobodys expecting a rate hike until de. All right. What could go wrong with this . Yes, washingtons a mess. But the markets doengt care as long as tax cuts are somewhere on the horizon. In 2018 has proven good enough so far. Theres definitely some kind of premium in the market for a tax cut but we dont know how big this premium is. Another issue that is sort of puzzling market watchers is geopolitical risk. Today the North Koreans fired a missile into the sea of japan but the markets shrugged it off. Earlier this week a significant geopolitical event like north korea would usually carry a higher risk premium. But so far that hasnt been the for nightly Business Report im bob pisani at the new york st. So what, if anything, will it take for the market to turn its attention to washington in a more focused way . Jeff moore is Senior Analyst at global Risk Insights and he joins us now to discuss. Jeff, how can the stock market and bond markets be so zen when washington is so not . I think that the precedent was set a long time ago as far as the character of this administration, and the interplay between the white house and congress, so theres a little bit of a desensitivity issue as far as how that translates into market risk. But i think its going to take something substantial and maybe some outside the domestic scene to actually introduce some of that volatility. Might that be north korea . I think s but more than north koreas actions, i think more importantly, judged by the market is going to be the reactions of the trump admi. Any escalation as far as military action on the Korean Peninsula will be something that introduces a spike in volatility, that could really unravel a complacency thats been going on in the market so far. Spike in volatility would be the most favorable outcome it might well seem, if Something Big happens on the Korean Peninsula. Lets talk a little bit about the gop agenda. I dont want to just call it the trump agenda. A big part of it seems to have, for now, gone down in flames on health care. It is no easy push to push tax reform through. Infrastructure, immigration, there are a lot of things standing out there which of those has the potential to move the needle marketwise one way or another . Or the most potential, i should say. Yeah, i think tax reform probably has the most potential of actually following through, because you probably have a high level of consensus among congress, and the white house, of getting some tax reform policies pushed through and signed into law. But the question is, how theyre able to do that, when theyve got a second or third on the list behind health care, which so far has been a debacle. You know, jeff, we just had john harwood on the phone and he mentioned that he was hearing from sources that the next move by the white house may be to go after congress, because of the lack of movement on things like health care. If we start to get mutiny between congress and the administration, what do you think wall streets reaction would be to that sort of a development . Hypothetical this point, certainly. Yeah. I think outside of some Foreign Policy issue that creeps up and escalates, that open mutiny between congress and the Trump Administration, if the Trump Administration were to go after the Republican Party, and the republican majorities in congress, that could really escalate to the po investors really coming to terms with some of these agenda items, there are possibilities of actually getting passed really really sinking. And to this point none of that has actually been passed through congress, and you would think the markets would have reacted negatively to that already. But, this kind of open Political Warfare between the white house, and congress, being of the same political party, would be really something that causes investors to question where this is going as far as Economic Policy standpoint. All right, jeff, have a nice weekend. Jeff moore with global Risk Insights. To the economy now. Which rebounded this spring after a weak start to the year. Gross domestic product for the Second Quarter was 2. 6 . And while that was more than double the revised economic output of the first three months of the year, it was slightly below expectations. Consumers ramped up their spending, and businesses invested more on equ. Inflation, though, retreated and wage growth decelerated, despite an economy thats considered to be at or near full employment. It was the best week of the year for oil prices. After rising today for a fifth straight session. Domestic crude up more than 8 this week, as crude and gasoline inventories fell more than expected and saudi arabia said it would reduce future oil output. That alleviated some oversupply concerns. But the price of oil varied widely in the Second Quarter. That hurt exxonmobils results but not doing much damage to chevrons quarter. Shares of the countrys two Oil Producers moved in opposite direction. Chevron the best performing dow stock today, exxon the worst. Jackie deangelis has more. Investors werent expecting much from exxonmobile. Thats why this earnings miss really stings. The wide range in crude prices is partially to blame even though they were higher than they were a year ago. The other reason is weak performance from exxons exploration and production business. The downstream business, refining, was stronger but weak here in the un the ceo said the companys job is, quote, to grow longterm value by investing in our integrated portfolio of opportunities that succeed regardless of market conditions. Since woods took over on january 1st, succeeding rex tillerson, who is now secretary of state, exxon has faced accusations of sanction violations, probes into whether the company hid data on Climate Change and questions of how it would grow oil output. Its a slightly different story for rival chevron the second largest u. S. Driller behind exxon. Its swung to a profit thanks to higher expected output from its wells even as returns from its refining business shrank. What will be key for both companies is how they proceed Going Forward with oil just under 50 a barrel, do they keep drilling or do they pare back and allow prices to stabilize . The u. S. Is the swing producer right now. For nightly Business Report, im Jackie Deangelis still ahead, profit and performance should mean fewer headaches for American Airlines, right . Well, thats not really the. Billions of dollars in market cap went up in smoke. Shares of the Big Tobacco Companies fell after the fda said it wants to cut nicotine and cigarettes to nonaddictive levels. Such a move would represent a sweeping federal effort to reduce smoking since congress required cigarette packages to carry health warnings. Altria and British American tobacco were hit hard. Aditty roy has the details. Nearly 90 of all adult smokers started the habit before they were 18. And then became hooked. Thats the premise of the food and drug administrations sweeping new plan to regulate tobacco and nicotine. We need to take a fresh look at nicotine itself. The goal is to save lives. In a statement announcing the news the agency said unless we change course, 5. 6 million young people alive today will die prematurely later in life from tobacco use. The agency also reports a direct health care and lost productivity costs stemming from tobacco use add up to nearly 300 billion. The fda wants to lower neck teen levels in cigarettes to nonaddictive levels and will take measures that will quote make Tobacco Products less toxic, appealing and addictive. But if the other chemical compounds in tobacco and in the smoke created by setting tobacco on fire that directly and primarily cause the illness and death, not the nicotine. In other words, the fda commissioner says by curbing the nicotine, more people will quit smoking and wont be exposed to the more harmful elements of cigarett. Upon the news shares of cigarette stocks like altria and British American tobacco, plummeted. But some analysts say the regulations could help the market for cigarette alternatives. Some Tobacco Companies like altria are developing less harmful products like smokeless tobacco and ecigarettes. I think the economics arent as good right now, but as the market develops, and perhaps with these changes, there will be a greater push and acceleration of growth in Electronic Cigarettes that longerterm the economics could improve. He adds companies have some time before the regulations would take effect. Before the plan can go into motion, the fda will have a Public Comment period. Its unclear when that will start or how long that will take. Then the agency will evaluate the comments before final as iing the p for nightly Business Report im aditi royce, san francisco. American Airlines Reported better than expected earnings for the Second Quarter. Demand is strong at the worlds Biggest Airline and that is pushing up average fares, fees and overall revenue. Meanwhile, the companys ceo says american is not backing off its fight to stop the growth of persian gulf carriers in the u. S. Phil lebeau reports from fort worth, texas, where american is headquartered. For American Airlines business is taking off thanks to strong mabd and a industry leading ability to drive greater passenger revenue. In fact, revenue per available seat mile is up almost 6 . In part because about half of the american passengers who buy a basic economy ticket are paying more to upgrade to a main cabin seat where they have more options to choose from. We had Revenue Growth, unit Revenue Growth of almost 6 . More than the industry is up. Its evidence to us that the investments were making in our product and our people are working. For parker the profit and performance his team posted last quarter should mean fewer headaches for but thats not happening thanks to qatar airways. The middle east carrier wants to buy up to 10 of american. Even though parker has repeatedly criticized qatar for using government subsidies to expand flights to the u. S. A practice that parker says has hurt american and other u. S. Carriers the reality is, those three carriers are subsidized by their governments, and theyre competing against American Airlines, and other u. S. Carriers, in an unfair way and it shouldnt be allowed. While american pushes back against qatar, its core business remains strong, with a healthy economy driving demand, and International Travel not slowing down. Even as costs rise due in part to new labor contracts, doug parker believes american is poised to fly even higher as it heads into the remainder of this year. Phil lebeau, nightly Business Report, fort worth, merck tops expectations, and thats where we begin tonights market focus. The Pharmaceutical Company said cost cuts and Strong Demand for its top selling cancer drug led to higher than expected earnings. Merck also said the intern cyber attack back in june which disrupted its manufacturing operations would, indeed, cut into profits for the remainder of this year. The company did, however, raise its sales outlook. Shares rose slightly to 64. 11. Goodyear said higher raw material costs and weaker demand for tires hurt results in the latest quarter. Despite seeing a drop in profit, the Company Reported earnings that were in line with estimates. But sales missed the mark. The company also cut its outlook for the entire unit sales, and segment operating income. Shares fell more than 8 to 32. 51. The furniture and electronics rental company aarons reported a better than expected rise in sales as the company kept a tight lid on cost and benefited from growth in its Progressive Leasing division. Earnings also beat analyst expectations and shares took off, rising 17 to 47. 54. Magellan health missed estimates as the Health Care Company said it experienced pricing pressure in two of its commercial accounts. Revenue edged higher and was stronger than expected. Shares of Magellan Health off more than 3. 5 on the session at 75. 90. The online Real Estate Broker redfin went public on the nasdaq today. The Company Offered more than 9 million shares at 15 apiece. Redfin shares, look what they did . Soaring 44 in their debut. They closed the day at 21. 70. A quarter of the s p 500s climb this year is due to five facebook, amazon, netflix, googles parent alphabet, and apple. Our market monitor says some of those big tech names are ones you may want to own. This is his first appearance as our market monitor guest though he has been on the program before. We welcome back Ernesto Ramos Portfolio Manager that beamo global asset management. Nice to see you again, welcome. Thank you. Lets get right to your picks. You pick apple. You say they have yet to enter the hot new markets such as virtual reality, original content, and things like that. Yes, indeed. Apple is essentially an iphonemaker, and they are tapping that market very well. But, theyve not yet really realized the full potential of other areas of the market that they have products that theyre bringing to market. So we think they have potential for growth in new areas, and they still have a magnificent cash cow in their iphone, and the new iphone 8 release in september will be a pretty big event similar to what the iphone 6 release was a couple of years ago. So we think the stock is trading at below market valuation is a very good pick for both its valuation, and its growth characteristics. Ernesto, your second choice is another tiny Little Company that nobodys heard of that also be thats the flip to apple is amazon im sure youre talking about. That stock is valued through the roof but its growth is just incredible. Theyve posted, i cant remember off the top of my head, how many consecutive quarters of 20plus percent sales growth and the earnings fluctuate simply as a function of how much theyre investing back into their business on any given quarter. So that number last night didnt bother you at all . No. What were looking at is the topline growth, and the disruption that amazon is bringing to markets, you know, they started as an online book seller, or actually online book seller but selling physical books, then they went into other areas of the market and now theyre basically trying to enter any area where the consumer might want to spend money, they want to be present there. Right. And jeff bezos is succeeding pretty much at anything he tries. So were excited about this company, despite the very rich valuation. Lets quickly move on to microsoft. Now a major player in cloud. Theyve really shifted their Business Model consist well, microsoft is sort of a hybrid between apple and amazon. Theyre disruptors in the sense that theyre adapting their business out of the Legacy Software and computers into the icloud, and in particular the hybrid icloud where users cannot only tap into the icloud but leverage their existing infrastructures to combine the both, which companies in the u. S. , such as still in microsoft world and now we have access to icloud and that is a new area and theyre doing it very well. On that note, ernesto, thank you. Ernesto ramos. Coming up theyre young, theyre hip and theyre fuelling the growth of, would you believe it, the rv market. The treasury secretary tonight sent an update as to when the country will reach its debt limit. That new date is september 29th. Steve mnuchin says the nation will run out of cash to meet its obligations on that date. Wells fargo improperly charged more than 570,000 auto loan customers for Auto Insurance they did not need or were not told about. The bank debited the borrowers Bank Accounts for that coverage. Members of the military on active duty were among thoseek in payments to compensate customers. Wells fargo was fined 180 million last year for opening as many as 2 million accounts without customers permission. Get your motor running. More rvs are heading out on the highway these days. But its not retirees who are looking for adventure. Landon dowdy tells us about the new crop of drivers hitting the road from petaluma, california. Kyle miller is 32 years old and is on his second rv. He grew up camping and takes his young family on the road every month in the summertime. We picked this one because it has a bunk house system in the back as well as the outside kitchen. So its something we can grow familywise. A record 9 million u. S. Households now own an rv according to the recreation vehicle industry association. The industry has traditionally relied on retirees to drive growth. But now, younger buyers are getting behind the wheel. It just allows us to come together in a different way in sort of this, as you can see, see how we are in a fun way. But we also save money, so we can do some things that we might not otherwise get to do if we stayed in a hotel. When we come for thanksgiving, specifically, we have probably four to five trailers that come. And we all book spots right by each other. And then we have a couple family members who like to come but dont have trailers, so they get cabins so that they can still be with us and enjoy the trip, too. Younger buyers are opting more for towable trailers and come to camp grounds like this one here in california, wine country, to really experience the outdoor lifestyle trend. And that has campground owners like chris wood investing in things like wifi and communal areas for millennials to mingle. For the millennial generation, you know, were looking at space here on the campground which was set up for pot lucks and bingo halls 30 years ago. And were setting it up for what we call third spaces. New data shows june towable shipments topped 20 year over year while motor homes were up a more modest 6 . Ought thoughmakers like Thor Industries are taking note, offering new models to new buyers and updated with new technology. Upgrading the electronics, just adding the features that theyre used to. So a lot of the rvs are compatible to, you know, an iphone. You know, a lot of the appbased things that run your ac, your awning, your jacks when you get there. Just makes it easier to camp. Once buyers get rving in their blood, they get hooked. Still analysts warn that while millennials are showing interest in rving its too early to know if those young buyers will drive the industry like the boomers did. For nightly Business Report, im landon dowdy, petaluma, california. And that is nightly Business Report tonight. Im sue herera. Thanks for joining us. And im tyler mathisen. Thanks from me, as well. Have a great weekend, everybody. Well see you back here monday this is a bbc america. Funding of this presentation is made possible by. The freemen foundation. And coal Fuller Foundation pursuing solutions for americas neglected me. Planning a vacation escape thats relaxing inviting. And exciting. Is a lot easier than you think. You can find it here in aruba. Families couples and friends can all find their escape on the island