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Eamon Javers, Phil LeBeau, Mary Thompson, Steve Liesman, Meg Tirrell>
Elections; Politics; Health and Medicine; Science>
ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Sue Herera.
TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Crude fallout. ConocoPhillips (NYSE:COP), the latest big energy company to slash its spending -- as oil prices stay lower for longer.
SHARON EPPERSON, NIGHTLY BUSINESS REPORT ANCHOR: Tarnished brand? Are the controversial comments from Republican presidential candidate Donald Trump taking a toll on his business?
MATHISEN: And medical mysteries. The big business of finding out just about everything there is to know about your body. The first part of our series "Unlocking Your Health" begins tonight on NIGHTLY BUSINESS REPORT for Thursday, December 10th.
EPPERSON: Good evening, everyone. I`m Sharon Epperson, in tonight for Sue Herera.
MATHISEN: And I`m Tyler Mathisen. Welcome, everybody.
Well, stocks rose even as oil prices fell and that hasn`t happened in a while. What`s even more peculiar, energy shares were among today`s top performers, even as one of the biggest names in the sector said it will slash its capital spending. More on that in just a moment.
By the close today, the Dow Industrials rose 82 points to 17,574. NASDAQ gained 22. And the S&P 500 added four.
As for domestic crude, it fell another 1 percent to close at $36.76 a barrel. A report from OPEC pressured prices. The cartel says it pumped more oil in November than during any month in the past three years.
EPPERSON: Those low oil prices prompting ConocoPhillips (NYSE:COP) to cut spending on projects next year by 25 percent. It also follows similar moves by other big oil companies. Response in the stock price was positive with shares rising about 1 1/2 percent.
Morgan Brennan has more on the latest energy company to feel the heat from the slide in crude.
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MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: The U.S. oil major releasing its operating plan and capital budget for 2016 today and the latest round of cuts are steep. ConocoPhillips (NYSE:COP) 2016 capital expenditures or capex will be $7.7 billion, down 25 percent from its expected budget of $10.2 billion this year. And a hefty 55 percent lower than 2014. It`s the latest reduction from a company that lowered its 2015 budget three times this year.
The other big focus of Conoco`s plan, the dividend, which currently yields 6 percent. A number of energy companies have slashed payouts including Tinder Morgan and Freeport McMoRan.
But Conoco executives insist that maintaining the stock`s dividend is a, quote, "top priority." That`s a factor that has kept investors interested in the largest energy companies, despite ongoing commodity weakness.
JONATHAN HIRTLE, HIRTLE CALLAGHAN CEO: The big issue is that we`re all living in this very low return environment. So, we`ve got negative real rates on the short end, zero real rates at the ten-year bond approximately. So, everything`s been shifted down. People that are really looking for 7 percent plus returns over the next three to five years have to be more creative. And one of the ways is to go to where the pain is.
BRENNAN: Conoco also plans to cut operating costs further in 2016, but production is still expected to grow, 1 percent to 3 percent, as several major projects come online. The company will also continue to sell assets. And all of this follows on the heels of another oil and gas giant, Chevron (NYSE:CVX), announcing that it too will slash its spending 24 percent next year.
For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan.
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MATHISEN: The Swiss mining company Glencore is cutting spending in response to low commodity prices. It also has plans to further reduce its debt load. Glencore has been particularly hard hit by the decline in coal and copper prices.
EPPERSON: Chipotle has been dealing with issues of its own. Today, its founder and co-CEO apologized to his customers who became sick after eating at the chain restaurant.
In an interview on NBC`s "Today" show, Steve Ells defended the brand, addressed the outbreaks, and repeated his pledge to tighten food safety procedures.
(BEGIN VIDEO CLIP)
STEVE ELLS, CHIPOTLE FOUNDER, CHAIRMAN & CO-CEO: It`s a really tough time, but first I have to say I`m sorry for the people who got sick. They`re having a tough time, and I feel terrible about that. And we`re doing a lot to rectify this and to make sure this doesn`t happen again.
(END VIDEO CLIP)
EPPERSON: Despite climbing in today`s session, shares are down more than 20 percent over the past two months.
MATHISEN: Volkswagen is another company in massive damage control following its diesel emissions scandal. Today during a press conference, VW executives said the cheating sprang from a, quote, "chain of error" inside the company.
But as Nancy Hulgrave reports from Wolfsburg, Germany, investors may have wanted to hear more.
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NANCY HULGRAVE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Investors waiting on a watershed moment from Volkswagen will likely leave the Wolfsburg headquarters disappointed. CEO Matthias Muller said in the presentation, the first since the scandal broke, the company is placing an emphasis on customers and corporate culture. He also apologized repeatedly both to the customers and employees.
And when I asked him what his message was to the people of Germany, here`s what he had to say.
MATTHIAS MULLER, VOLKSWAGEN CEO: We are working hard to prepare better Volkswagen. That means we find solutions for the problem very soon and we will have a good customer relationship program as well as in Germany, as well as over the world.
HULGRAVE: A contrite message from the CEO, who once again promised to regain trust and weed out the arrogance that helped drive the company into this crisis. Promising a more humble, efficient, and agile Volkswagen as we go into the New Year.
But make no mistake about it: with so many questions left unanswered, this is a crisis that will linger for a time to come.
For NIGHTLY BUSINESS REPORT, I`m Nancy Hulgrave in Wolfsburg, Germany.
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EPPERSON: And then there`s Donald Trump. The Republican presidential candidate`s controversial statements may be starting to take a toll on the Trump brand. Not just in the U.S. but across the globe.
Eamon Javers has our story.
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EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: In Washington, D.C., the giant Trump sign in front of his forthcoming hotel on Pennsylvania Avenue became the scene of a protest today.
In Dubai, they`re tearing the Trump name off of hotels and resorts, like the AKOYA by DAMAC golf venue, which used to proudly display the Trump name. Not anymore.
And in Toronto, the city`s Trump Tower is a target for one local politician.
JOSH MATLOW, TORONTO CITY COUNCILOR: I`m calling on the owners of the Trump tower here in Toronto to disassociate themselves and therefore our city from the Trump brand. We should see the name of that tower changed.
JAVERS: And in Manhattan, Trump`s comments about banning Muslims from the United States are provoking a mixed reaction from residents of his real estate properties and potential customers.
UNIDENTIFIED FEMALE: I cringed when we moved in here three years ago. So I definitely cringe now.
UNIDENTIFIED FEMALE: I`m proud to live at Trump Place. I think Donald Trump has done a brilliant job with building what he`s built here, and I`ve been proud to know him, which -- and his family. And I think he`s a great American.
UNIDENTIFIED FEMALE: As an immigrant it`s definitely a hard message to hear. You know, you move to this country because you believe in all that it is and all the opportunities. I definitely don`t think I`ll go to the hotel.
JAVERS: Branding expert Mike Jackson says the damage to the Trump Brand could hurt pending deals to license the Trump name.
MIKE JACKSON, EVENT SOLUTIONS INTERNATIONAL CMO: I kind of look at the damage being 100 percent and maybe irreparable as we move forward.
JAVERS: Mike Jackson said that the Trump Organization is going to face long-term significant brand damage from the Trump presidential campaign. But whenever that does come to an end he said, they may want to consider putting out a younger, more attractive and less controversial face, Donald Trump`s daughter, Ivanka.
For NIGHTLY BUSINESS REPORT, I`m Eamon Javers in Washington.
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MATHISEN: So how much damage has Donald Trump done to his brand or alternatively has his presidential run helped it?
Here to explore that is Dean Crutchfield. He`s a brand expert with his own firm, the Dean Crutchfield Company.
And, Dean, we had you on the other night talking about chipotle. We`ll get to chipotle in a minute. But Trump, has he hurt his business? As he curiously helped his business by being the outspoken, some would say incendiary candidate he`s been?
DEAN CRUTCHFIELD, DEAN CRUTCHFIELD COMPANY: Well, the difference between a rut and a grave is the depth. And Trump still seems to be digging as far as he can go.
Let`s be honest. He`s a self-styled maverick. He`s a natural speaker. And he`s a lightning rod figure that goes charging into the public fray. And that gives him great success.
You know, running for president, you don`t do in halves. It`s a bit like extreme sports. You`re all in. To do that, you need conviction and you need commitment. And he does seem to show that.
But the negative impact on his business is huge.
EPPERSON: You`ve also said that he is quite provocative. Why does that work when you`re a candidate but not necessarily when you`re president?
CRUTCHFIELD: Well, because people want to see an opinion. They want to see someone to associate with. They want the honesty. They want to see if they can trust you, respect you, and there are millions of Americans who do trust and respect Trump and there are many of us who don`t.
But basically, you need to stand out of the crowd. And if you don`t stand out, you die.
MATHISEN: We don`t know yet what -- and who knows how much faith you could put in the numbers. We don`t know whether bookings at his property have come down, whether memberships have been pulled from his golf clubs or whatever.
And, of course, many of his buildings are merely licensing deals. He licenses his name. He doesn`t own them.
Over the long term, do you think this is an existential threat to Trump the businessman or not?
CRUTCHFIELD: Yes, I do. I think that, you know, he`s a bit like a loose-fitting part in a machine that goes flailing around. It starts to eat itself up. And I think any damage that`s done by Donald is done by Donald to himself.
EPPERSON: You said that brand is really about who you are. Why is that such an important point to raise when you`re talking about the Trump brand?
CRUTCHFIELD: Well, because brands are about personality. We look to brands like we look for in friends. And so, therefore there`s a lot of personality. Brands are about emotional connection.
But to get that emotional connection you need to have trust and respect first. And for many of us, it just doesn`t exist when it comes to Donald Trump.
MATHISEN: Let`s switch quickly to chipotle. You saw or heard what Steve Ells, the co-CEO, said today. Did he do the trick, very quickly?
CRUTCHFIELD: Absolutely. He put a human face to the leadership of Chipotle. You know, up until that point, everything he said read like it came from an annual report.
So, yes, he`s put a human face. He`s apologized. People like that. They`ll react well to it.
MATHISEN: All right. Dean, thank you.
CRUTCHFIELD: Thank you.
MATHISEN: Dean Crutchfield with the Dean Crutchfield Company.
EPPERSON: Well, General Motor has certainly had its own share of crises to deal with, and today, we learned the automaker paid out $595 million to settle nearly 400 eligible ignition switch claims. The numbers were released in the final report from lawyers hired to compensate victims of GM`s faulty ignition switches. The automaker previously said the scandal cost the company more than $5 billion.
MATHISEN: Fiat Chrysler was hit with a $70 million fine. Federal safety regulators say the automaker underreported the number of death and injury claims tied to potential defects. In a statement, Fiat Chrysler said it accepts the penalty and is looking at its operations to ensure regulatory compliance.
EPPERSON: Tyler, a different automaker is expanding its strategy by getting into the plane business. Honda has received certification for its first airplane, the Honda jet. While the move may seem like an odd one, Phil LeBeau explains why Honda has been long planning to fly.
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PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: It`s not a big business jet, but it is a big step for Honda. This is the Honda jet, an entry-level jet that carries six passengers and sells for $4.5 million. More than 100 have already been ordered, many by small business owners.
MICHIMASA FUJINO, HONDA AIRCRAFT CEO: Many of them are of course high net worth individual but generally entrepreneurs, young entrepreneur for small to medium business. And several of them are also pilot, fly themselves.
LEBEAU: The Honda jet is built in Greensboro, North Carolina, where 1,700 workers are part of Honda`s growing footprint in the U.S.
While most of us think of Honda as an automaker, the company has steadily expanded over the years into motorcycles, financial services and other products like lawnmowers and generators.
But can the Japanese auto giant soar selling planes? Experts say it will be tough because the Honda jet is just one model, going up against a number of jets being offered by Cessna and Embraer.
CAI VON RUMOHR, COWEN & COMPANY: If they ultimately want to succeed, they`re going to have to spend a lot more money and come up with more new products against two very tough competitors in the most price-competitive niche of the market.
LEBEAU: The biz jet business is not only highly competitive, it`s also volatile. In fact, sales are still recovering after the recession, when scores of people and companies sold their planes.
But Honda Aviation CEO believes his company can fly successfully in an often turbulent industry.
FUJINO: So if you take a look at this market, it`s more long-term. I have very good confidence to expand market.
LEBEAU: It`s definitely not your father`s Civic or Accord. But soon, this may be what people think of when they hear the name Honda.
For NIGHTLY BUSINESS REPORT, I`m Phil LeBeau.
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MATHISEN: I want one for Christmas.
(LAUGHTER)
MATHISEN: All right. Still ahead, how the coming rate hikes may impact your retirement.
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EPPERSON: The Islamic State has made more than $500 million from black market oil sales. A Treasury Department official said the group also has more than $1 billion from looted bank vaults in Iraq and Syria.
MATHISEN: The American middle class is shrinking. Barely half of adults are now middle-income earners, defined as a household making between $42,000 and $126,000 annually. A new Pew Research report says that the upper income bracket has grown and now takes home nearly half of all annual income in the United States.
EPPERSON: Walmart is going where it`s never gone before. The world`s largest retailer by sales is entering the world of mobile payments by introducing its own mobile wallet, Walmart Pay. Walmart Pay is for Walmart shoppers only and competes with Apple (NASDAQ:AAPL) Pay and Samsung Pay, which Walmart won`t accept. It`s a move that could have customers opening their wallets a little more frequently.
Mary Thompson has that story.
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MARY THOMPSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Walmart is known for offering everyday low prices. Now it`s offering clients who increasingly use their phones to shop, an end to end mobile experience.
CHARLES O`SHEA, MOODY`S LEAD RETAIL ANALYST: We think it`s a positive for the company.
THOMPSON: Walmart spent the last seven months developing its mobile wallet Walmart Pay. The retailer saying at a time when shoppers use their phones to check into its stores to find deals and directions to the items they want they can now use their phones to check out as well.
Some question how this might reaccelerate Walmart`s slowing sales growth but analyst Charles O`Shea believes it`s a smart move.
O`SHEA: The company is making sensible investments that will leverage its brick and mortar operation online, and we continue to feel that brick and mortar retailers have some fairly significant advantages as they move online and become multichannel rather than just, you know, either a mono-channel brick and mortar, or mono-channel pure play online retailer.
THOMPSON: CEO Doug McMillon says Walmart clients who shop both online and in stores spend on average $2,500 a year. That`s 75 percent more than what`s spent by customers who only shop in the stores and more than 12 times what`s spent by those who only buy online.
Walmart Pay may encourage more-in store and online shopping, but right now, it`s only available in select Arkansas stores. With the national rollout expected to be completed by the summer.
Here`s how it works. You set it up on your phone through the Walmart App, link Walmart Pay to debit or credit cards already stored in your walmart.com account or add another credit, debit, or gift card that you want to use. At check-out open the app and a camera takes a picture of a QR code at the register that`s linked to your basket of goods. An e- receipt is then mailed to you.
No paper receipts, no cards or cash needed for a shopping trip that could ring up more sales at Walmart.
For NIGHTLY BUSINESS REPORT, I`m Mary Thompson.
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MATHISEN: Ciena tumbles after issuing downbeat guidance, and that is where we begin tonight`s "Market Focus".
Even after reporting that its loss narrowed in its latest quarter, Ciena saw its shares move lower. The maker of telecommunications network equipment posted weak revenue guidance as it continues to adapt to new cloud and mobile networking demands. Shares fell almost 17 percent today, 17 percent, to $20.04.
United Technologies (NYSE:UTX) hyped the lower end of its 2015 profit guidance. The company says it expects to record a more than $3 billion tax gain on its Sikorsky divestiture. Shares of the Dow component surged initially after the close as you see on that chart. During the regular session, the stock was off a fraction to $93.90.
Yum Brands (NYSE:YUM) announced today that it is separating its China business after a string of difficulties over there. It`s going to do it by the end of next year. The KFC and Pizza Hut owner will return more than $6 billion to shareholders. Separately, Standard & Poor`s cut its corporate debt rating on Yum Brands (NYSE:YUM). Shares fell a fraction today to $73.18 on that news.
EPPERSON: Tyler, Atlassian`s stock soared today in its debut. The company`s IPO raised $462 million with shares priced at $21. Atlassian`s co-founder and CEO Mike Cannon-Brookes said the company`s strength comes from a unique model.
(BEGIN VIDEO CLIP)
MIKE CANNON-BROOKES, ATLASSIAN CO-CEO: We built this amazing disruptive business model that we have, just focused on building great products each year, and improving them on a constant basis, really listening to the customers in a really, really deep way. And it started working.
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EPPERSON: And get this, shares ended their first day of trading up 32 percent to $27.78.
Restoration Hardware saw its earnings jump for the most recent quarter. The home furnishings company also increased the low end of its profit outlook for the fiscal year. Shares popped in initial after-hours trading. During the regular session, though, the stock was off a fraction to $87.59.
JetBlue announced it expects its sales to decrease in the fourth quarter, partially because of better than anticipated weather. The airline also announced that its November revenue increased from last year. Shares fell in initial after-hours trading. During the regular session, stock was a fraction higher to $25.44.
MATHISEN: Most people think the Federal Reserve will raise interest rates next week. First rate hike in nearly ten years. But once we enter this new era if we do, what happens next?
Steve Liesman takes a look.
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STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: A nanosecond, that`s how long it took Wall Street to go from deciding the Fed will hike rates in December to debating when the next rate hike will come. And maybe another nanosecond until the debate is just how many rate hikes the Fed will dish out in 2016.
Atlanta Fed President Dennis Lockhart recently voiced the oft- repeated phrase from the Fed that --
DENNIS LOCKHART, ATLANTA FED PRESIDENT: At this juncture, I would expect more of a gradual path or going slow than I would a rapid rise in rates.
LIESMAN: Not everyone agrees. Harvard economist Martin Feldstein thinks the Fed will have to move faster.
MARTIN FELDSTEIN, HARVARD UNIVERSITY ECONOMICS PROFESSOR: I think we`re getting to a point with a 5 percent unemployment rate where there`s going to be pressure in 2016 for more rapid increases in wages, more rapid increases in prices. And the Fed may be facing a long end of the market that`s moving up.
LIESMAN: After the first rate hike, JPMorgan (NYSE:JPM) economists say the Fed will hike four more times in 2016. Others see as few as two hikes and a Fed funds rate that ends the year under 1 percent.
Commodity prices are a big unknown part of the inflation equation. Oil prices continue to fall. And even if they just stay at the current price of $37 a barrel, they`ll continue to drag on in inflation into 2016. That should take pressure off the Fed to move quickly. And continued dollar strength will also dampen inflationary pressure by keeping import prices low and hurting some parts of the economy.
LOCKHART: I`m going to be watching the dollar because of the dollar`s exchange value has weighed on our manufacturing sector. I`m treating it as a risk to my forecast at the moment, not building into my forecast a great deal of dollar appreciation.
LIESMAN: Wages could be another story. They`re growing at about a 2.4 percent rate ahead of last year`s 2.1 percent, though still not near danger territory for the Fed when it comes to inflation. Any faster rise in wages and the Fed could be forced to move more quickly.
What`s clear is the Fed is embarking on a process it calls normalization, to get rates on a path back to normal. So, there will be more hikes to come. The best guess for the Fed to move slowly unless the dollar, wages, and inflation force its hand.
For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.
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EPPERSON: So if you`re wondering how a rate hike will impact your retirement portfolio, you`re not alone. The good news is, a rate increase will have an almost imperceptible impact on the household budget according to experts. But if interest rates continue to climb in the next three or four years, you will start to notice it in your wallet and in your investment.
So here`s what you should look out for:
Likely, there will be more volatility in stocks next year, but in the end the broader markets may not move much at all in 2016.
Rising interest rates mean falling bond prices. So, look at the fixed income portion of your portfolio and the duration of your bonds.
And, protect your cash. Lathering the expiration dates on CDs is one strategy. And as rates rise, also keep cash in a money fund, so you can easily take advantage of other investments as you need it.
MATHISEN: Coming up, big science is also big business. Tonight, we look at the money behind the human genome and its promise to revolutionize health care in the first part of our series "Unlocking Your Health."
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MATHISEN: The future of medicine, much of it depends on figuring out how our individual bodies work. That`s where the human genome comes in. It`s like a blueprint of your body and once it`s mapped, doctors can learn a lot about who you are and what your medical susceptibilities may be. Creating that map is not surprisingly a huge business opportunity.
Tonight, Meg Tirrell starts our series "Unlocking Your Health."
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MEG TIRRELL, NIGHTLY BUSINESS REPORT CORRESPONDENT: When the first human genome was sequenced at the end of this century, it took more than a decade and cost almost $3 billion, spelling out all the letters that make up our DNA, it promised to turn medicine on its head.
BILL CLINTON, FORMER PRESIDENT: Genome science will have a real impact on all our lives. And even more on the lives of our children. It will revolutionize the diagnosis, prevention, and treatment of most if not all human diseases. In coming years, doctors increasingly will be able to cure diseases like Alzheimer`s, Parkinson`s, diabetes, and cancer, by attacking their genetic roots.