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ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Sue Herera.
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JANET YELLIN, FEDERAL RESERVE CHAIR: I consider it appropriate for the committee to proceed cautiously in adjusting policy.
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TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: The chair has the floor. And the Federal Reserve`s Janet Yellen in major New York speech tells investors and her Fed colleagues basically to chill the hot talk about higher interest rates.
SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Controlling the pain. The White House outlines new initiatives and new money to fight the growing epidemic of prescription drug abuse.
MATHISEN: Tax tips for some of life`s biggest milestones. Whether you`re a newlywed or just retired, your finances are changing and so will your annual return to Uncle Sam.
All that and more tonight on NIGHTLY BUSINESS REPORT for Tuesday, March 29th.
HERERA: Good evening, everyone, and welcome.
The chair of the Federal Reserve meant what she said. The central bank will move carefully and cautiously when determining when to raise interest rates. Janet Yellen cited a weak global economy and stubbornly low inflation.
That slow pace of rate increases help propel stocks. The Dow Jones Industrial Average gained 97 points to 17,633, its highest close of the year. The NASDAQ added 79, and the S&P 500 rose 17.
But Ms. Yellen`s tone remains in sharp contrast to some other Fed officials who during the past week were more upbeat on the economy and said the time is near to hike.
Steve Liesman has more on the Fed chair`s cautious sign.
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STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: The question is being raised has the Federal Reserve retreated from the rate rising regime after launching what it dubbed, quote, "rate normalization" in December. Markets from gold to fixed income to stocks reacting with unanimity that Fed Chair Janet Yellen laid out a dovish outlook for rates at her much anticipated speech at the Economic Club of New York today.
She suggested, quote, "greater gradualism is warranted in raising rates" and emphasized the risk from global economic weakness to the U.S. economy.
YELLEN: In particular, developments abroad implied that meeting our objectives for employment and inflation will likely require a somewhat lower path to the federal funds rate than was anticipated in December. Given the risk to the outlook, I consider it appropriate to the committee to proceed cautiously in adjusting policy.
LIESMAN: Fed observer Krishna Guha of Evercore ISI said, quote, "The Fed chair is clearly in no hurry to undertake the next rate hike. Dana Saporta of Credit Suisse said, "Curiously, for a central bank, presumably in the middle of a tightening cycle, Yellen`s speech focused more on downside risk than those to the upside."
Remember that several Fed members have recently pointed to the possibility of an April or a June rate hike if the economy continued to improve. Granted that it has decelerated recently but Yellen offered little possibility of rate hike next month or made it unclear when the next rate hike would come. She also questioned the one obvious reason for hiking, rising core inflation.
Yellen suggested she had her doubts that the pace of inflation gains would continue. Yellen`s comments that the decline in interest rates offset recent weakness from abroad is another way of saying she is fine where bond yields are priced right now. That`s an implicit admission that Yellen agrees with the market priced in now for the Fed, which is to say not many rate hikes at all this year.
For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.
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MATHISEN: Well, the San Francisco Fed president John Williams agrees with Ms. Yellen, mostly. He says the pace of rate hikes should be gradual. But in a speech in Singapore, he also said that fears about the impact of a slowing global economy and financial volatility are overdone. He also characterized the U.S. economy as chugging ahead, and that there are some encouraging signs on inflation.
HERERA: Home prices rose faster than incomes in January. The S&P Case Shiller home price index increased 5.7 percent from a year ago. Home values have picked up in large part because of low inventory in most markets across the country, a strengthening labor market and low mortgage rates. According to one analysis, prices have risen more than two and a half times faster than average hourly wages.
MATHISEN: Consumer confidence bounced back this month. The conference board`s closely watched index of Americans` outlook on the economy rose, thanks to a rally in the stock market and that strengthening job market. According to the report, that helped offset a rise in gasoline prices.
HERERA: Meantime in Washington today, the Supreme Court issued a split decision on a challenge to union fees. The four to four tie preserves a longstanding rule which allows states to mandate fair share fees from nonunion workers. The case was brought by 10 California school teachers who chose not to join the union but are required to pay a fee.
Today`s decision set no precedent. Since the death of Justice Antonin Scalia, there had been two deadlocked cases.
MATHISEN: The Federal Trade Commission sued Volkswagen over deceptive diesel claims the agency says VW falsely advertised, that thousands of its diesel vehicles were environmentally friendly. Volkswagen has admitted that it installed software in more than a half million vehicles that allowed the company to cheat emissions regulations and tests. The German automaker is already facing a criminal investigation in the U.S. and numerous lawsuits.
HERERA: The White House is stepping up efforts to fight the exploding epidemic of heroin and prescription drug abuse. New initiatives announced today are designed to expand treatment and increase coverage for substance abuse services. This is in addition to more than a billion dollars in funding requested last month.
Dina Gusovsky reports.
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DINA GUSOVSKY, NIGHTLY BUSINESS REPORT CORRESPONDENT: Opioids, including prescription painkillers and heroin, killed more than 28,000 people in 2014, more than any year on record with at least half of all opioid overdoses involving a prescription drug. Those figures are big impetus for President Barack Obama to try to tackle this issue, a topic he and the U.S. surgeon general spoke about today.
DR. VIVEK MURTHY, U.S. SURGEON GENERAL: Since the turn of the century, opioid prescription has skyrocketed. And we currently nearly 250 million prescriptions for opioids written every year. That`s enough for every adult in America to have a bottle of pills and then some.
GUSOVSKY: The president said his administration would provide about $100 million specifically for community health centers so people have more access to treatment as well as --
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: We have proposed in our budget an additional billion dollars for drug treatment programs in counties all across the country. The problem we have right now is that treatment is greatly underfunded.
GUSOVSKY: Another $11 million would go to states to buy and distribute Naloxone, a drug that could reverse the effects of overdose. The Centers for Disease Control and Prevention recently released new guidelines recommended for physicians who prescribed these powerful painkillers. The recommendations include when to take opioids for chronic pain, selecting appropriate dosage and assessing the risk in harm in opioid use.
The CDC told us that these guidelines are not mandated. Meaning, they`re not laws but rather a tool for primary care providers to use for reference. A recent survey also revealed a spike in premature death in many rural counties across the country, in part fueled by drug overdose deaths. The issue has major sociopolitical and economic ramifications, costing the United States upwards of $55 billion. Much of that attributable to loss of workplace productivity.
Some hospitals have taken matters into their own hands as well, trying to cut down on opioid use even in the emergency room.
IRINA KOFFLER, MIZUHO SECURITIES USA: Pain management is very different in a hospital setting. Using cocktail medications, they will try to minimize the amount of opioids that a patient get, thereby trying to prevent further addiction once they get out of the hospital setting. The problem with transferring that type of resourcefulness to the outpatient setting is you just can`t inject all these drugs into people who we`re walking around and you need to give them some simple medication that they themselves could take every day.
GUSOVSKY: For NIGHTLY BUSINESS REPORT, I`m Dina Gusovsky.
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MATHISEN: Still ahead, inflation point, content has been king in the sports TV business, but is that about to change?
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MATHISEN: The government has officially withdrawn its battle against Apple (NASDAQ:AAPL). As we told you last night, the FBI found a way into the iPhone use by one of the San Bernardino terrorist without Apple`s help. So, while this court case may be over, the debate over privacy versus security is not.
And as Eamon Javers report, some key questions still remain.
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EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: The U.S. government surprised a lot of people yesterday when they announce they were dropping their case trying to force Apple (NASDAQ:AAPL) to unlock the iPhone of accused San Bernardino shooter Syed Farook. The government saying that an unnamed third party came in and gave them a solution to get into the phone and the government no longer needs Apple`s help in doing that.
All of that ends this particular case, but we`re left with a bunch of unanswered questions including who helped the FBI? The government is not saying. Just that it`s an unnamed third party presumably, not another element of the U.S. government itself. And, of course, will the government tell apple what this new exploit is.
The government is likely to view this as a very useful solution here. Apple`s likely to view it as a threat to security for the iPhone. They`d like to patch it and Apple (NASDAQ:AAPL) would like to know what exactly the government did to unlock that phone, and is my iPhone more secure, is the question people are going to be asking today.
Presumably the answer to that is no, unless you have an entity with government size resources trying to crack into your phone, and they have your physical phone in their hands. Other than that, it`s hard to see how this is a threat to the average person`s iPhone security.
And then, of course, the big question: what is on Syed Farook`s iPhone? That`s the debate that started all of this. The access to that phone was so crucial to this investigation the FBI said, they needed to take extraordinary measures in other words to get into that phone and get that information.
Now, at some point in this investigation, we should find out whether there was anything useful on that phone or not.
For NIGHTLY BUSINESS REPORT, I`m Eamon Javers in Washington.
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MATHISEN: And in a side note to that story, more Americans now side with Apple (NASDAQ:AAPL) in its battle with the government over encryption. According to a new survey conducted by CNBC, 57 percent of Americans agree that privacy concerns trump the needs of law enforcement. That is an increase from 53 percent in December. The survey, CNBC surveyed more than 800 Americans from March 21 to the 23rd, right during the time of those Brussels terror attacks.
HERERA: Baseball`s opening day is less than a week away. Some New York Yankee fans are crying foul. That`s because since November, the Yankees` YES Network has been blocked out by Comcast (NASDAQ:CMCSA) (NYSE:CCS). It`s just the latest fight over the rising costs of sports rights, which as Julia Boorstin reports could represent a major crack in the TV sports business.
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JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Comcast (NASDAQ:CMCSA) (NYSE:CCS) and Fox`s Yes Network has been locked in a stand off over fees since November when Comcast (NASDAQ:CMCSA) (NYSE:CCS) blocked out the YES Network and the pressure is onto strike a deal ahead of Monday`s opening day.
DAVID STERNBERG, CLAYGATE ADVISORS: Content has been king in the sports business. But I think we`ve reached a bit of an inflection point, particularly with regional sports network where the distributors feel emboldened now to say, enough`s enough. We`ve already got four regional sports networks in New York. We`ve got five in L.A.
BOORSTIN: Comcast (NASDAQ:CMCSA) (NYSE:CCS) points out that it serves less than 10 percent of the New York market, saying, quote, "YES is already the most expensive regional sports network in the U.S. and is trying to increase prices by so much that we can no longer justify carrying it anymore."
The Yes Network responding, quote, "Hands down Yankees telecast on YES are among the most popular sports programming in the U.S. on the regional basis and are consistently among the top three rated services in the New York area."
This standoff speaks to TV distributors focus on rising sports cost which account for about a third of the average cable bill according to SNL Kagan. And this isn`t the only battle over rising regional sports fees.
After an ongoing dispute over the costs, the Dodgers network, Sportsnet L.A., Time Warner (NYSE:TWX) Cable which distributes it fold it last week, offering to cut the price by 30 percent. But this pressure on regional was a far cry from the rising value of national sports.
STERNBERG: It`s important distinction to make because the national sports rights marketplace is vibrant. I think you are still going to see a lot of competition, not just for NFL rights but for other major leagues national rights packages.
BOORSTIN: But rising fears about cord cutting and cord shaping, consumers opting for smaller, less expensive TV bundles, we can expect TV distributors to continue to look for ways to trim their customers` bills, but cutting those regional sports nets that quickly add up.
For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Los Angeles.
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HERERA: And Comcast (NASDAQ:CMCSA) (NYSE:CCS) is the parent company of CNBC, which produces this program.
MATHISEN: Yahoo (NASDAQ:YHOO) reportedly sets a deadline for potential buyers to bid. That`s where we begin tonight`s "Market Focus".
"The Wall Street Journal" says perspective buyers have now until April 11th to submit preliminary bids for the tech giant`s core web businesses and its stakes in Alibaba and Yahoo (NASDAQ:YHOO) Japan. Shares of Yahoo (NASDAQ:YHOO) up 3 percent on that news, $36.32, the close.
The discount retailer TJX company is raising its quarterly dividend 24 percent to 26 cent a share. The yield on the stock is now 1.3 percent. Shares of TJX -- owner of my wife`s favorite store Home Goods, by the way - - rose 8 percent to $78.62. Boy, the afternoon`s I`ve spent there.
All right. Shares of SunEdison plummeted after the power company subsidiary Terraform Global said in a regulatory filing that SunEdison may soon seek bankruptcy protection. Terraform said it has the resources to support its ongoing operations if the parent companies files for bankruptcy, but it did delay the filing of its own annual report. Shares of SunEdison fell more than 56 percent, yes, 56 percent, to 55 cents, while shares of Terraform Global fell more than 18 percent to $2.03.
And according to an SEC filing, Warren Buffett`s Berkshire Hathaway (NYSE:BRK.A) has increased its stake in Wells Fargo (NYSE:WFC) now by 10 percent. By the end of 2015, the billionaire`s company had a 9.8 percent stake in the bank. Despite the boost, Buffett said he has no intention of managing Wells Fargo (NYSE:WFC). Shares of the bank fell more than a percent to $48.05.
HERERA: Conn`s (NASDAQ:CONN), which makes furniture and electronics, reported a more than 90 percent drop in its quarterly profit. The company attributed the loss to customer delinquencies and store expansion. Revenue also came below estimates and sales for the year are expected to miss target. Shares fell more than 24 percent to $11.81.
A group of lawmakers has requested a public hearing to lower the cost of a prostate cancer drug made by pharmaceutical company Medivation (NASDAQ:MDVN). In some cases, the medication costs four at least times more in the U.S. than it does in other countries. Lawmakers said the drug was developed with the help of taxpayer dollars. Shares of Medivation (NASDAQ:MDVN) fell 6 percent to $38.75.
A discount airliner Virgin America may be attracting some suitors. Multiple press reports say that JetBlue and Alaska Air Group (NYSE:ALK) will make takeover bids possibly by the end of this week. No airline has commented on the news. Shares of Virgin America up a fraction to $37.99.
MATHISEN: So, what happens to a favorite brand when it gets bought, whether it`s a hotel with a great loyalty program for frequent guests or a discount airline like Virgin America that promises customers they can have it all? So, what are the chances of the brand and that original company`s mission surviving under new ownership?
Let`s turn to Dean Crutchfield, branding expert at his own firm, the Dean Crutchfield Associates, for some answers.
Dean, always great to see you. I know I don`t have to say much to get you started.
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MATHISEN: Let`s say I love Virgin America Airlines and a new airline comes in and takes them over. What do I need be on the look out for? They`ll all say the right things. We`re going to protect the brand. But sometimes, the performance isn`t there.
DEAN CRUTCHFIELD, DEAN CRUTCHFIELD ASSOCIATES: It`s not there. In fact, it`s estimated up to 70 percent of mergers and acquisitions fail. And there`s three real reasons for that.
The first is the heavy aspirations of the deal team on Friday don`t really translate to business as usual on Monday. The secondary is the acquiring company blows out, forgets or overlooks a company that has a better process and a better culture. United buying Continental a classic example of that.
And then the third reason it fails is because of fear. You know, fear to admit you`re buying there`s going to be massive change, and fear among senior management who are often come together and share. They`re worried about their jobs, they`re worried about their teams and that therefore slows down the process of success.
So, that`s three. So, you know, buying a great brand is what people want. But often what`s being sold is the opportunity to streamline, and back off the systems and products and services, et cetera.
HERERA: Right.
Why not just, if you know you`re buying a terrific brand, why not try and embrace the good parts of that particular brand, for instance, the loyalty programs and things like that, and try and make some of that your own?
CRUTCHFIELD: Again, I think a lot of this comes down to sheer ego in terms of that deal team, CEO is obviously leading that and what they`re buying and how they sold that to investors means that`s all they`re interested in. It`s a big numbers game, not a brand game. But the problem is they overlook the fact that someone like Virgin does have really good process. They do have a great culture.
So, Alaska Airlines, no doubt, has I think the hardest job in terms of managing that. For a brand like JetBlue is also known to be a challenge, it also has a strong process and a very strong culture and customer loyalty. So, that to me would be the more viable of the two in terms of the success rate they would have.
MATHISEN: Can you think of mergers and acquisitions that actually were successful and protected the integrity of the acquired brand very well? Perhaps because the acquirer said, we`re going to keep our hands off. You manage your company the way it has been running because that`s why we liked you in the first place.
CRUTCHFIELD: Well, actually, you just had them on the segment. Berkshire Hathaway (NYSE:BRK.A) are a great example of a business that acquires companies, but allows them to thrive, you know, with their existing processes and culture. So, there`s a really good example. You know, there are others, of course, that are not so good. But I think Berkshire Hathaway (NYSE:BRK.A) is a really good example. Look at NetJets. You know, all they did was allow it to ramp up its business.
HERERA: That`s the difference between being investor in the brand and actually running the brand, right?
CRUTCHFIELD: Exactly. It`s being -- you know, back off as an investor is more of an active owner, and I think that`s where the magic happens. How do you make that happen?
But you`re dealing with a business that`s frighten, you know? There is fear in the organization. That can really screw things up. Excuse my French.
MATHISEN: We got you, Dean. Thank you very much.
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MATHISEN: Dean Crutchfield with the Dean Crutchfield Associates firm.
HERERA: Well, speaking of changes, these are a little bit different, though. New changes, new deductions, how major life milestones can change your tax return.
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HERERA: The head of the world`s seventh largest economy is one step closer to being ousted. Brazil`s largest party said it`s leaving President Dilma Rousseff`s governing coalition and pulling its members from her government. According to writers, once members leave, they can then vote for her impeachment. The opposition is pushing for her ouster for allegedly breaking budget laws. Brazil`s economy is on track for its worst two-year downturn in more than a century.
MATHISEN: It is the case that has all of Wall Street talking. A prominent financer, heir to a family fortune, is now in handcuffs. As we told you yesterday, Andrew Caspersen was charged in a $95 million fraud scheme.
And as Kayla Tausche reports, his motive remains a mystery.
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KAYLA TAUSCHE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Andrew Caspersen was fired about two weeks ago from his job as a managing principle at a unit of PJT Partners, formerly part of Blackstone, that helped investors buy and sell stakes in private equity firms. In that role, he`s alleged to have scammed one client, a charitable foundation, into putting $25 million into a new investment that didn`t exist and most of which instead went to his personal brokerage account. He had plans to defraud investors out of $70 million more when the firms and authorities began their investigation, resulting in charges of wire and security fraud, which together carries a sentence of up to 40 years in jail.
Caspersen, according to the charges, both by the southern district and SEC, billed shale companies, fake websites and e-mail addresses to carry out this scheme. PJT has reasons to believe at this point, that Caspersen acted alone and communicated to clients its confidence in that.
Still unknown, though, who were the as yet unnamed private equities firm involved as victims in the scam. Where did the money go? Prosecutors Monday say they can`t find what was in that account. And what would motivate Caspersen, who`s family is heir to a consumer finance fortune, to go to such lengths?
His father is the late Finn Caspersen, sold Beneficial Corporation, and from that windfall became a philanthropist and major GOP donor. He took his life six years amid a battle with cancer and investigations into his own offshore finances which later reportedly revealed some financial troubles.
The family Monday insisted it could not pay the $20 million bail originally sought by the government. The $5 million agreed upon is secured by Caspersen`s two properties in Manhattan and Bronxville, a New York suburb. The next hearing indicates it`s scheduled for April 26th. It`s very much alive investigation on behalf of the government and firm itself.
For NIGHTLY BUSINESS REPORT, I`m Kayla Tausche.
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HERERA: Getting married, having a baby or retiring, they`re all big life events. They change your life a lot. And they also change your taxes. Now, not all the news is bad but there`s a lot to think about which is why we have Sharon Epperson here to navigate the tax.
MATHISEN: Marriage, babies, retirement, oh my gosh.
SHARON EPPERSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Oh my gosh.
HERERA: Let`s start with marriage. Let`s start with love. Say you just tied the knot. What do you need to do for your taxes?
EPPERSON: The first thing you should do, of course, is not to panic. Everything is going to be fine. Your tax situation will be great. Adjust your withholding. That`s first thing you need to look at, your tax withholding.
How much tax is coming out of every paycheck and with each life event? That`s an important thing to do. The other thing is, if your spouse doesn`t claim as much money as y much money as you, you can not claim them as a dependent. Don`t try, that`s not possible.
HERERA: That`s not possible.
EPPERSON: But the thing that you should do --
MATHISEN: Dead weight.
EPPERSON: Exactly, is separate and joint filing. You need to try both ways. Married filing separately, and married filing jointly, and see which works out best to you.
HERERA: And to adjust your tax withholdings through your payroll department?
EPPERSON: You do that to the payroll department and change that before. Yes.
MATHISEN: What if you got untied and divorced in the most recent years?
EPPERSON: Well, here`s some things that some people don`t realize, which is alimony, if it`s paid --
MATHISEN: I realize about that.
EPPERSON: Some people, not you, Tyler. But some people may not realize that alimony that when you pay it, you can deduct it. But if you receive it, it`s income. And you have to pay taxes on that money.
The other thing is only one parent can claim the dependents exemption for the child. You have to decide what that is going to be, and the attorney fees are not deductible.
HERERA: That doesn`t seem fair. That last one doesn`t seem fair.
MATHISEN: Child support is not deductible.
EPPERSON: No.
HERERA: All right. The average cost of raising a child to age 18 is over $245,000. OK, I`ve got three. My God. Kids can bring some pretty hefty tax breaks with them, which is a good thing. So --
EPPERSON: The dependency exemption is one. That`s 1,000 per child.
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EPPERSON: That`s $1,000 in savings, the child tax credit. Another $1,000 that you can save depending on your tax bracket. The dependent care credit is also a key one that a lot of people need to take advantage of.
If you spend $3,000 for one child, $6,000 for two or more, you can claim 20 percent to 35 percent of that in terms of taking that exemption or that deduction, I should say. It`s actually credit dollar for dollar. So, that`s $2,100 that you could get as a credit.
