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Economy; Elections; Politics; Cancer; Health and Medicine; Pharmaceuticals>
ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Sue Herera.
SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Off the table? Stocks rise as Fed Chair Janet Yellen walks back talk of a possible rate hike. Just about one week before the next central bank meeting.
TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Economic unease. Why some of the most influential economists in business blame the presidential race for an economic slowdown.
HERERA: At what price? The big question hanging over some of the most promising cancer therapies ever to hit the market.
All that and more tonight on NIGHTLY BUSINESS REPORT for Monday, June 6th.
MATHISEN: Good evening, everyone, and welcome.
Timing, as they say, is everything. Especially with respect to when the Federal Reserve might increase interest rates for just the second time in about a decade.
In a speech today, Federal Reserve Chair Janet Yellen did not say when a hike could come. Backing off comments she made just a few weeks ago. Last month she said rates would move up again in the "coming months." today she dropped that reference. She also said she and her colleagues will wrestle with last week`s weak job data when they meet next week.
Investors liked the sound of that because it suggested that a rate hike is now off the table. Dow Jones Industrial Average up 113 points to 17,920. NASDAQ added 26. The S&P 500 rose 10 to its highest level of the year.
Steve Liesman has more now on the Fed chair`s workout.
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STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Fed Chair Janet Yellen said in a major speech the Fed remains on track to raise interest rates. But reacting to Friday`s dismal jobs report declined to say when that rate hike might come.
JANET YELLEN, FEDERAL RESERVE CHAIR: If incoming data are consistent with labor market conditions strengthening and inflation making progress toward our 2 percent objective, as I expect, further gradual increases in the federal funds rate are likely to be appropriate and most conducive to meeting and maintaining those objectives.
LIESMAN: Two weeks ago, Yellen said a rate hike could be appropriate "in coming months," a phrase she pointedly omitted this time. She called the Friday jobs report disappointing and said the recent jobs slowdown, quote, "bears close watching."
But she noted strong payroll gains over the past several years and said she expects the economy to pick up from a weak first quarter. Yellen also said she expects inflation to move towards the Fed`s 2 percent target as the effects of the strong dollar and low oil prices wane.
Yellen said the economic outlook is highly uncertain, according to four key areas of concern. They include resilience of domestic demand, whether or not consumers are spending. Foreign economic weakness, with particular concern about repercussions of the U.K. leaving the European Union, or Brexit. And productivity growth, Yellen saying she was cautiously optimistic about that, as well as inflation.
She offered a pretty upbeat outlook for each area of concern.
Overall, Yellen affirmed the market`s view that a June rate hike is unlikely, probably July as well, barring a strong bounce back in jobs. It was clear that before the Fed hikes again, the Fed chair wants more certainty that her forecast for a rebound is the right forecast.
For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.
(END VIDEOTAPE)
HERERA: Former Treasury Secretary Larry Summers says electing Donald Trump as president would plunge the U.S. and the world into recession. In an op- ed in today`s "Washington Post (NYSE:WPO)," Summers says Trump`s unpredictability when it comes to everything from NATO to the national debt could easily create instability and that would ripple through the global economy. Summers also cites Trump`s positions on things like global trade agreements and his potential to set off what Summers calls the worst trade war since the Great Depression. Summers is a Democrat and he served as an economic adviser to President Obama from the years 2009 through 2010.
MATHISEN: In their latest quarterly survey, members of the National Association for Business Economics say they are pessimistic in their outlook for U.S. economic growth. And that uncertainty over the upcoming presidential election has been damaging.
Economists polled expect now the gross domestic product to grow just 1.8 percent this year. That`s down from forecasts just three months ago. Nearly 4 of 10 economists view the rise of, quote, "nationalist views" around the world as an important factor likely to constrain economic growth over the next two years.
Lisa Emsbo-Mattingly, president of the National Association for Business Economics, joins us now.
Ms. Mattingly, welcome.
It is that phrase "nationalist tendencies" around the globe that caught everyone`s attention today. Do you have anyone in particular in mind?
LISA EMSBO-MATTINGLY, NABE PRESIDENT: Oh, I think we can see many of these nationalist, protectionist policies coming through in many different countries. We have the Brexit vote coming this month in the U.K. We have nationalist protectionist policies being touted by various organizations across the globe. And the panel from NABE believes that this was going to be one of the biggest hindrances to global growth the next two years.
HERERA: And given what you just outlined, do you think some of that sentiment was reflected in the abysmal jobs report that we got Friday?
EMSBO-MATTINGLY: Oh, I think the jobs report on Friday probably is an outlier in terms of the data. And we will continue to monitor that. I think the panel believes that job growth is going to re-accelerate into the rest of this year.
MATTINGLY: When I hear the phrase nationalist in an economic context, and I have to say that I can`t imagine that you`re not speaking here referring domestically to Mr. Trump`s positions and perhaps to a lesser degree, Mr. Sanders` positions. But when I hear it, I hear a fear of protectionism and tariff and trade wars. Is that -- because that`s the transmission mechanism?
EMSBO-MATTINGLY: Yes, yes. Remember, this is a survey of professional forecasters, business economists, within the United States and also globally. And Econ 101 is that protectionism is a hindrance to growth. So, I think the panel came back with those findings was that they believe that if countries start to walk away from free trade, that it will be one of the biggest hindrances to global growth over the next couple of years.
HERERA: Do you get the sense from the panel that after the election is over and there`s more certainty, as Ty mentioned, it`s the uncertainty creating the problem here for many of the members, that perhaps they might be a little bit more on the mystic, depending on who winds up in the White House?
EMSBO-MATTINGLY: Right. We did ask the panelists about the U.S. electoral process and whether uncertainty around that was a headwind to U.S. growth. And nearly, as you mentioned, nearly 60 percent of the panelists believed that it was a headwind.
And I would just put it in the terms of all else equal, if I`m a business person who`s making decisions about hiring and investing, if I have uncertainty about what the tax code is going to be, how I`m going to be treated as an employer, et cetera, I may be holding off maybe some of those decisions. And so on net, it is a hindrance to growth.
MATHISEN: Just to put a button on it, the overall forecast now for 2016 growth is, what, 1.8 percent down, from 2.3 percent three months ago?
EMSBO-MATTINGLY: That`s correct, yes.
MATHISEN: And further, that you expect the Fed to raise rates twice this year? That`s what your panelists believe, correct?
EMSBO-MATTINGLY: Right.
MATHISEN: All right.
EMSBO-MATTINGLY: So, the survey was done in may and the panelists believe that the Fed will hike rates twice in the second half of this year and then four times next year.
MATHISEN: OK.
EMSBO-MATTINGLY: Of course, they hadn`t gotten the employment report we all got on Friday.
HERERA: Right.
EMSBO-MATTINGLY: So likely the number came down quite a bit.
MATHISEN: All righty. We have to leave it there.
Lisa Emsbo-Mattingly with the National Association for Business Economics.
HERERA: A high-stakes meeting between the world`s first and second largest economies is under way. Officials from the U.S. and China are trying to work through a number of economic issues where the two countries disagree.
Eunice Yoon reports tonight from Shanghai.
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EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: U.S. Treasury Secretary Jack Lew is in Beijing for the strategic and economic dialogue. His main concern is China`s excess capacity and what he describes as its potentially corrosive impact on the country`s growth as well as the global market. China has excess capacity in several industries including steel. It`s become a major trade issue with many of Beijing`s partners, including the U.S. they believe China is dumping products in the world market, distorting prices, and hurting their own industries.
In response, Chinese officials like Finance Minister Lu Wei said the issue of overcapacity is being hyped up. He said that China is pressing ahead to make production cuts.
Also, Jack Lew`s Chinese counterpart Wang Yang pointed his finger at the U.S. saying Fed policy is also creating uncertainty in the emerging marks.
JACK LEW, U.S. TREASURY SECRETARY: The United States and China account for one-third --
YOON: On the other hand, Lew has been downplaying what`s become a standard complaint of Washington, the value of the renminbi ahead of the meeting at a university, the U.S. treasury secretary said the U.S. wouldn`t be critical of Beijing if it allows the yuan to fluctuate.
On the security front, the U.S. is also urging China to cooperate with the White House`s efforts to cut off North Korea from the global financial system, to pressure it on its nuclear program. China is a primary trading partner with North Korea and its cooperation China`s cooperation is seen as critical for these efforts.
Secretary of State John Kerry, who`s also in China for this visit, said that the two sides have made progress on this issue. The high-level discussions continue into Tuesday.
For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon in Shanghai.
(END VIDEOTAPE)
MATHISEN: Vice President Joe Biden calls for a public database to help in the fight against cancer in the meeting of thousands of cancer doctors and researchers. Biden said the database would help tailor new treatments for patients.
(BEGIN VIDEO CLIP)
JOE BIDEN, VICE PRESIDENT OF THE UNITED STATES: Shares of data behind breakthroughs so the field as a whole can move forward faster and avoid unnecessary redundancy.
(END VIDEO CLIP)
MATHISEN: And at that meeting, the focus was on one type of cancer medicine in particular.
Meg Tirrell reports from the American Society of Clinical Oncology`s annual meeting.
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MEG TIRRELL, NIGHTLY BUSINESS REPORT CORRESPONDENT: The first in a new class of drugs that harness the immune system to fight cancer was approved at the end of 2014. Now there are three medicines of this kind on the market and they continue to dominate the conversation at the world`s largest cancer research conference, called immunotherapies, they`re made by Merck (NYSE:MRK), Bristol-Myers, and Roche, which just got its drug FDA approved last month.
Merck`s medicine KEYTRUDA was used to treat Jimmy Carter`s (NYSE:CRI) stage 4 melanoma. Carter announced recently he was cancer free.
DR. ROGER PERLMUTTER, MERCK RESEARCH LABORATORIES PRES.: It releases the brakes on the immune system and permits the immune system to actually seek out and destroy tumors. It`s exactly what was observed in the case of Jimmy Carter. What`s remarkable and what we`re seeing here at this meeting is that it seems to be active across a very, very broad range of tumors, nearly all. We`re seeing that in a whole variety of different settings. It`s very exciting.
TIRRELL: The competition among pharmaceutical companies in this area is only intensifying. With AstraZeneca, Pfizer (NYSE:PFE), and others bringing their own version through clinical trials.
A key question as many of these therapies enter the market is their price. As cancer finds a way of escaping one drug, many see combinations of medicine as the future of treatment. But with many medicines costing more than $1,000 a month, how do we pay for that?
DAN O`DAY, ROCHE PHARMACEUTICALS CEO: This is a really important topic, something we take really seriously, how do we make sure we have access to life-saving, life-sustaining medicines for patients?
TIRRELL: Options in the table include outcome-based pricing or paying based on how well a drug works. Or in companies that own both drugs in the combination, they can offer a different price for both drugs together than on their own.
As the market for cancer drugs is projected did reach $150 billion worldwide by 2020, the price of medicines is sure to continue to be a focus in cancer care.
For NIGHTLY BUSINESS REPORT, I`m Meg Tirrell in Chicago.
(END VIDEOTAPE)
MATHISEN: Tomorrow, Meg will tell us about the quest to develop blood tests that could diagnose cancer earlier, when it can be easier to treat.
HERERA: Still ahead, from texts to health care. There are new trends helping reshape America`s biggest company.
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MATHISEN: The multi-billion dollar hotel industry often considered a barometer of the economy, people are traveling even for business or pleasure, usually a good sign that the nation`s economic engine is running smoothly. But as Simon Hobbs reports, new lodging industry data have some concerned right now.
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SIMON HOBBS, NIGHTLY BUSINESS REPORT CORRESPONDENT: The start of the lodging`s industry biggest investment conference, NYU Hospitality, overshadowed by renewed concerns the industry may be slowing from its record rates of recovery. Data suggesting developers are finally in their stride now opening up the supply of new hotel rooms faster than demand can actually grow, leading to a slight down tick in rates of room occupancy across the whole industry.
MARK WOODWORTH, CBRE HOTELS: Occupancy of Q1 this year was actually down, the first time we`ve seen that happened in about five years. Primarily as a result of supply going up 1.5 percent while demand only go up 1 percent.
HOBBS: Lodging stocks are off their winter lows. But it`s not been a great 12 months as slowing data continues to worry investors.
PATRICK SCHOLES, SUNTRUST ROBINSON HUMPHREY: We`ve been hearing from CEOs for over a year now that we`re at the bottom. You know, I look at my research. I don`t see clear evidence of that yet.
HOBBS: For the industry`s two biggest CEOs, a slackening of pricing power now would be particularly bad news as each is seeking to drive through its own transformative deal.
Marriott CEO looking to close his $13 billion purchase of Starwood, a behemoth that would employ half a million people. Hilton`s CEO moving more asset-lite with a tax-free spinoff of its time share business and a $10 billion REIT containing 69 of its properties to be called Park Hotels and Resorts.
CHRIS NASSETTA, HILTON WORLDWIDE PRESIDENT & CEO: What really is the issue driving the lodging cycle is the broader economic cycle, OK? So if you`re confident that the business cycle, while it maybe more tepid growth than we would like, if you`re confident you`re going to see broader GDP growth continue, you`re going to continue to see the cycle for lodging be quite positive. You`re going to continue to see pricing (INAUDIBLE)
ARNE SORENSON, MARRIOTT INTERNATIONAL PRESIDENT & CEO: If GDP declines it`s going to show up in our business. If GDP grows more modestly, which it did in the first quarter, by the way, as well, that will show up in our business too, with less robust growth.
HOBBS: The silver lining for investors may be that while Marriott and Hilton are clearly bellwethers for the industry, some analysts believe that each of their deals is so transformative that both of them could ultimately outperform.
For NIGHTLY BUSINESS REPORT, I`m Simon Hobbs in New York.
(END VIDEOTAPE)
HERERA: Hertz is splitting into two publicly traded companies, and that is where we begin "Market Focus."
The company`s board of directors has okayed the planned separation of Hertz car rental and equipment rental businesses. The chain is expected to take effect on July 1st. The equipment rental business will operate under the name HERC Holdings, while the car rental business will remain under Hertz Global Holdings (NYSE:HTZ). Shares rose about 7 percent to $10.77.
Groupon (NASDAQ:GRPN) has sold its Indonesia business to a Malaysian-based business KFit for an undisclosed amount. Under the deal, Groupon (NASDAQ:GRPN) Philippines will become a subsidiary and strategic shareholder of KFit. Shares of Groupon (NASDAQ:GRPN) up more than 1 percent to $3.58.
And Devon Energy (NYSE:DVN) will sell some of its oil and gas assets for nearly $1 billion. The company plans to divest properties in Texas and Oklahoma as well as an overriding royalty in the northern midland basin. Devon Energy (NYSE:DVN) shares rose more than 4.5 percent to $37.56.
MATHISEN: Shares of Adamis Pharmaceuticals were cut in half today. The Food and Drug Administration denied the drugmaker approval for medication intended to treat anaphylaxis, citing limited studies. Adamis said it`s going to conduct additional testing and resubmit the results by the end of the year. Shares of Adamis cratered today big-time, nearly 54 percent, to $4.09.
Another pharmaceuticals company that saw its shares tank today was Ocular Therapeutix. That`s spelled with an "ix", in case you were wondering. During a late-stage clinical trial, the company`s drug for treating pink eye failed to reach its primary goal and that sent shares plummeting more than 42.5 percent to $6.81.
And quarterly profit fell at United Natural Foods (NASDAQ:UNFI), but it was still good enough to top analyst estimates. The organic food distributor did see an uptick in sales although those results were shy of targets. In addition, the company also lifted its full year guidance. Shares spiked in extended trading following the news and during the regular session. Shares were up a fraction to $38.83.
And FedEx (NYSE:FDX) will raise its quarterly dividend to 40 cents a share up from a quarter. The yield on the stock is just under 1 percent. That news sent shares of FedEx (NYSE:FDX) up slightly in after-hours trade. Shares ended the regular session down a tick at $163.57.
HERERA: The Fortune 500, "Fortune" magazine is out with its annual list of the largest 500 companies in the U.S. by revenue. The top five are all pretty familiar names. Walmart tops the list with revenue of more than $480 billion. Followed by ExxonMobil (NYSE:XOM), Apple (NASDAQ:AAPL), Berkshire Hathaway (NYSE:BRK.A), and McKesson (NYSE:MCK).
And this year, there were some big shifts.
So, Susie Gharib is here. She`s the senior special correspondent with "Fortune". She joins us now.
Always good to see you, Susie. Welcome back.
SUSIE GHARIB, FORTUNE MAGAZINE SENIOR SPECIAL CORRESPONDENT: Thank you.
This year`s list is a story about winners and losers, and some big shifts.
HERERA: Specifically in tech and health care.
GHARIB: Yes, tech. Amazing, we`re continuing to see a rise in tech companies, so Apple (NASDAQ:AAPL) is now number three, up from number five. Amazon (NASDAQ:AMZN) is in the top 20 for the first time ever. Netflix (NASDAQ:NFLX), one of the fastest-growing, up 95 slots. Usually, a company goes up or down one or two, Netflix (NASDAQ:NFLX) up 95 slots.
MATHISEN: And a lot of the ones that fell out as we might have intuited along the way were energy companies.
GHARIB: Yes. No surprise. We`ve been covering that story all along. But these are dramatic drops. Phillips 66, which is a company that Warren Buffett is heavily invested in, out of the top ten. It`s actually number 30.
Chevron (NYSE:CVX), used to be number three, is out of the top ten. And interesting companies like Exxon, always was neck and neck with Walmart in revenues. And now it`s half the revenues of Walmart.
And then, a company like black stone group, an investment firm, off the 500 altogether because it got hit from its energy investments.
HERERA: OK. Now, they also talked to CEOs out there and some of the biggest challenges, how do they feel about the economy and what challenges?
GHARIB: The number one challenge as you can guess, because of what we said about tech, is that tech is changing so fast. They can`t keep up with all of the changes.
HERERA: Right.
GHARIB: Government regulation is another big worry.
But on the economy, relatively positive. They think it`s going to be about the same. Some of them say they will be hiring over the next two years. They have strong views about the presidential election as well.
MATHISEN: Always interesting to learn how female CEOs are in there. How many this year, who`s in and out, up and down?
GHARIB: All right. Twenty-one female CEOs, down from 24 last year. Another way of looking at it, only 4 percent of Fortune 500 CEOs are women. So, it`s small.
Off the list, Ellen Kullman of Dupont (NYSE:DD) because of that activist battle. Xerox (NYSE:XRX) CEO will be off next year, she`s retiring.
Two new faces. The new CEO of Occidental Petroleum (NYSE:OXY), and a new company altogether on the list, it`s a paper company, Veritiv, and the CEO is a woman, Mary Laschinger. So, two women to watch.
HERERA: To watch, exactly.
Thanks, Susie, as always.
GHARIB: Great seeing both of you.
MATHISEN: Good to see you.
HERERA: Good to see you, too. Susie Gharib.
MATHISEN: And coming up, he was the champ. But Muhammad Ali`s net worth may not be as great as you think.
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MATHISEN: You might want to think twice before co-signing a loan. A new study from creditcards.com says 4 of 10 co-signers had to pay off some or all of the loan. Another 28 percent saw their credit scores drop because the borrower, the co-borrower, made late payments or skipped them altogether. Only half the people who co-sign loans are parents who have done so on behalf of their children.
HERERA: Muhammad Ali who passed away over the weekend was more than just a very successful boxer. His name is a brand known pretty much worldwide.
And as Jane Wells reports, with all that fame came fortune.
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MUHAMMAD ALI, BOXING LEGEND: I am the king of the world!
JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT: He may have been the greatest, but he was not the richest.
ALI: I will be the youngest heavyweight champion in history.
WELLS: Muhammad Ali hit the scene at a time when boxers made their money in the ring. He became a polarizing figure, the kind Madison Avenue avoided. And he missed out on prime earning years when he was shut out of boxing for fighting the draft.
Still, Ali`s wife and children will not be poor. "Forbes" estimates he had a net worth between $50 million and $80 million. His most lucrative fight was $8 million, fighting and losing to Larry Holmes in 1980. He earned $6 million in his final fight against Joe Frazier in 1975. The Thrilla in Manila was also the first pay-per-view fight and Ali won.
Both Ali and George foreman were each paid $5 million for "The Rumble in the Jungle" in 1974, in what was then Zaire. Ali won that fight too. But Foreman ended up wealthier.
Foreman was reportedly paid $137 million for the rights to his name for that grill. But in later years, Muhammad Ali had what he called collaborations.
ALI: I have the prettiest footwork, the prettiest face --
WELLS: His voice and image used for companies like Under Armour (NYSE:UA) and Toyota (NYSE:TM).
ALI: I`m going to show you how great I am!
WELLS: Still, imagine what Muhammad Ali might be worth if he hit the scene today.
Floyd Mayweather has an estimated net worth of between $400 and $600 million. Manny Pacquiao is maybe worth half that. In fact, those two made more money fighting each other in one bout than the total net worth of the greatest fighter of all-time.
For NIGHTLY BUSINESS REPORT, Jane Wells, Los Angeles.
(END VIDEOTAPE)
MATHISEN: And before we go, here`s a second look at the day on Wall Street that saw Fed Chair Janet Yellen hedge on the timing of an interest rate hike. The Dow up 134 points to 17,920. NASDAQ added 26. S&P 500 rose 10 to its highest level of the year.
HERERA: And that is it for NIGHTLY BUSINESS REPORT. I`m Sue Herera. Thanks for watching.
We`d like to remind you, this is the time of year your public television stations seek your support.
MATHISEN: And I`m Tyler Mathisen. We thank you for your support. Have a great evening, everybody. We`ll see you back here tomorrow.
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