NIGHTLY BUSINESS REPORT for November 18, 2016, PBS

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Julia Boorstin>

Fifth Avenue; New York; Business; Consumers; Holidays; Police>

ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Sue Herera.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Reversing course. Why Ford decided to keep production of one of its models in Kentucky.

Record week. The stock market is hitting new milestones, but did it come too far too fast.

Fifth Avenue frenzy. With one week until Black Friday, there is not much cheer along one of the most prominent corridors in the country.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Friday, November 18th.

Good evening, everyone. Welcome. I`m Sue Herera. Tyler Mathisen is off tonight.

It was a week of records with the Dow, NASDAQ and small cap Russell Index reaching new all time highs.

But we begin with Ford, which is heavily criticized with President-elect Donald Trump on the campaign trail for its decision to move some of its car production to Mexico. Now, the automaker said it has decided to switch gears and keep production of one of its small SUVs in Kentucky.

Phil LeBeau has more on Ford`s decision.

(BEGIN VIDEOTAPE)

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: It`s not a huge selling model for Ford, but the Lincoln MKC has become a big deal for President-elect Donald Trump and his promise to protect American jobs. While running for president, Donald Trump repeatedly blasted Ford for planning to move production of small cars to Mexico. Despite the bashing, Ford said it would still build certain models south of the border where costs are lower.

Then came this tweet from Trump, "Just got a call from my friend Bill Ford, chairman of Ford, who advised me that he will be keeping the Lincoln plant in Kentucky. No Mexico."

So why did Bill Ford agree to keep MKC production in the U.S.? Well, officially, Ford said it`s always reviewing production plants. But this move helps the company in two ways. It allows Donald Trump to take a victory lap for saving jobs while not having a big impact on the automaker. The company built just 38,000 of the small SUVs last year, and while Ford was planning to move the model out of Louisville by 2019, and likely would have shipped it to a plant in Mexico, keeping in the MKC in Kentucky doesn`t change the company`s overall production blueprint for the U.S., Canada and Mexico.

MARK FIELDS, FORD CEO: You have to keep in mind, the production and supply chains are deeply integrated between the three countries, and that integration also supports a lot of American jobs.

LEBEAU: Ford maintains, American jobs will not be cut even as it moves forward with plans to move some production south of the border. The question is whether that promise, along with the commitment to keep the MKC in Kentucky, will finally convince Donald Trump to stop attacking Ford.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago.

(END VIDEOTAPE)

HERERA: The decision by Ford follows reports that Apple (NASDAQ:AAPL) is looking into possibly moving production of its iPhone to the U.S., which we reported on yesterday. Ford and Apple (NASDAQ:AAPL) were two corporations criticized by the president-elect on the campaign trail.

So, are companies feeling the pressure?

Robert Salomon, professor of management at New York University`s Stern School of Business, joins us now to discuss.

Welcome, Professor. Nice to have you here.

ROBERT SALOMON, NYU`S STERN SCHOOL OF BUSINESS: Thank you for having me.

HERERA: Do you think they`re feeling outright pressure by the president- elect or are they just feeling uncomfortable with the rhetoric?

SALOMON: Yes, I don`t know if it`s outright pressure. But I do think there is a certain amount of discomfort with certainly Donald Trump`s rhetoric on the campaign trail and I think that these overtures that Apple (NASDAQ:AAPL) and Ford have made actually don`t surprise me. They`re trying to get out in front of whatever policy may emerge.

HERERA: How unprecedented is it for a president to put to use that kind of rhetoric to call a company, say, and influence business decisions?

SALOMON: Well, it would certainly be unprecedented for a president to call CEOs and say, you must do this or must not do that. But it isn`t unprecedented for a president to speak with CEOs and industry leaders about the kinds of policies they have on -- that they are proposing. And to speak candidly and frankly about the kinds of things they would like to see. Now, whether or not CEOs follow those -- you know, those -- or whether they influence CEOs is another thing.

HERERA: Yes. How -- compare the Trump administration to the more pro trade administrations of the last, say, quarter century.

SALOMON: Yes, it`s really interesting, because if you look at the regimes that, over the last 25 to 30 years, they`ve certainly been pro-trade. And on the campaign trail, Trump`s rhetoric has been protectionist and anti- trade. So, this is a big change in regime and it will be interesting to see how companies respond, because right now, all we have is words. All we have is rhetoric.

It will be interesting to see how policies emerge over time. And right now, there`s a lot of uncertainty about what those policies will be moving forward.

HERERA: You have a couple of recommendations for CEOs or the heads of companies that may be feeling some, you know, uncomfortable feelings about what may lie ahead, because we don`t know what the policies are going to be in the new administration. You say speak directly to policymakers.

SALOMON: Yes, there are several things that companies can and often do do in these situations. The first thing is to do what Ford and Apple (NASDAQ:AAPL) did which is to try to remind the American people they create a lot of jobs here in the U.S. and they are good citizens here in the United States.

Another thing that companies often do is they will speak directly to policymakers to try and shape how they think about the kinds of problems and decisions they have to make. And so, it doesn`t surprise me to see Bill Ford pick up the phone and to try and speak with President-elect Trump.

Another thing policies do is band together with other companies, industry associations and other companies facing similar situations to influence policy.

HERERA: OK.

SALOMON: And, finally, another avenue is through lobbying which companies will often turn to when they want to influence policy in their favor.

HERERA: All right. On that note, Professor, thank you very much.

SALOMON: Thanks for having me.

HERERA: Professor Robert Salomon with New York Stern School of Business.

Volkswagen plans to eliminate 30,000 jobs in an effort to cut costs. The automaker says the decision is part of a long term plan to improve its balance sheet and ship resources. The company is still recovering from its emissions-rigging scandal that hurt the company`s reputation and cost VW billions of dollars.

On Wall Street, the Trump rally took a breather. Stocks pulled back today, dragged down by the healthcare sector. The Dow Jones Industrial Average fell 35 points to 18,867. The NASDAQ was off 12, despite hitting an intraday high during the trading session. The S&P 500 was down five.

And the small cap Russell 2000 Index continued its hot streak, sitting a record with 11 straight days of gains. For the week which saw the Dow hit an all-time high, the major indexes were up continuing a trend that we have seen since the election.

But as Bob Pisani reports, some are starting to express concerns that the market may have come too far too fast.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: The major indexes are right near new high and that`s great news for the polls. But it could be a cause for concern. So, three key factors are moving the market. First, the economy is getting strong. We saw a healthy does of jobs, housing, retail, and CPI (NYSE:CPY) data this week, all of it pretty good. GDP is on pace to post its strongest quarterly reading in nearly two years. Second, there`s an assumption Trump`s victory will mean more spending, more stimulus, reduced regulations and lower taxes.

Finally, the Fed speak has been more upbeat recently with many officials insisting a rate hike could be coming soon. Now, normally, that would be bad news. But the talk of more growth is convincing everyone the markets could handle higher rates without freaking out. OK. What could go wrong?

Well, first, the market is completely ignoring the dark side of the Trump rhetoric around trade. A trade war particularly with China would be very damaging to both countries and to the stock market.

But the biggest risk is that Trump won`t deliver to the extent the markets are really pricing in. That the stimulus will not be as big as people think it will be. That the tax cuts won`t be as great as people think will be. And the regulatory reform will take much long than expected.

Now, for the moment, the markets like the better economic numbers and the hopes for higher growth. But if the market`s euphoria can`t be justified, one analyst says it could be a head fake of historic proportions.

For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock Exchange.

(END VIDEOTAPE)

HERERA: Today, the dollar climbed to its biggest level in almost 14 years, and bond yields continued to rise, extending a trend that started following last week`s election. And today, New York Fed President Bill Dudley said the market moves are not altering the Central Bank`s policy plan.

(BEGIN VIDEO CLIP)

BILL DUDLEY, FEDERAL RESERVE BANK OF NY VICE CHAIRMAN: Financial conditions have changed and they`ve changed but in part because of an expectation of a potential shift, at least my opinion, on fiscal policy. So, the movement in markets seemed consistent with a change in expectations about how economic policy might evolve. So, I don`t think what we`re seeing in financial markets are, you know, to me concerning in terms of the implications for monetary policy.

(END VIDEO CLIP)

HERERA: The Fed takes financial conditions, inflation and employment into account when deciding when to raise interest rates.

Still ahead, a business owner`s message for the president-elect when it comes to trade.

(MUSIC)

HERERA: The Obama administration is blocking new oil and gas drilling in the Arctic Ocean. The decision hands a victory to environmentalists. The plan for drilling can be rewritten by President-elect Trump, but that process can take months or years. Alaska`s elected officials support drilling in the Arctic.

Donald Trump has called on the Trans Pacific Partnership, the trade deal, a job killer. But a Seattle businessman whose company has operations in five countries disagrees and he has a message for the president-elect.

Eunice Yoon reports tonight from Yancheng, China.

(BEGIN VIDEOTAPE)

EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Far from American politics, Seattle native Fred Crosetto has had to upend his investment plans. A major free trade pass initiated by President Obama was expected to boost his business making disposable gloves for U.S. consumers. But with the surprise election of Donald Trump, that deal looks all but dead.

FRED CROSETTO, AMMEX FOUNDER: I guess all bets are off until we know what happens with the TPP.

YOON: The TPP or Trans Pacific Partnership encompasses 12 nations as far- flung as New Zealand and Peru.

But the agreement has come under attack by critics, including Donald Trump.

DONALD TRUMP (R), PRESIDENT-ELECT: We will also immediately stop the job- killing Trans Pacific Partnership. That`s going to be the next disaster.

YOON: Crosetto, who has his gloves made in five countries, thinks the TPP would be great for America, cutting prices for consumers and tariffs for U.S. companies in Asia and back home.

CROSETTO: There are 18,000 products that are going to come out of the United States in the TPP countries. And those are going to be more or less duty-free and it`s an enormous golden age of opportunity for American manufacturers and American suppliers to ship things to Asia, because Asians has got rising incomes. They want to spend and they have a high appetite for high quality products.

YOON: All of these products made here in China are headed for North America. But if the TPP passes, chances are more businesses like this will shift to countries that signed on to the TPP.

Crosetto was going to scale back his production in China, which isn`t part of the TPP, in favor of Malaysia and Vietnam, which are. With the TPP near death, he now fears his hiring plans back in the U.S. will also stall.

CROSETTO: We think the TPP in our particular company is going to generate numerous, high-paying jobs. Most in the services, social media designs, sales and marketing.

YOON: If you got a chance to sit down with Donald Trump, what would you tell him about the TPP and Asia?

CROSETTO: I would say, look, Asia is an very important place. The United States would really be wise to sit down and say, how can we actively engage Asia, China? Because this is where things are going to happen in the next 50 years.

YOON: For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon.

(END VIDEOTAPE)

HERERA: To read more about this business owner`s take on the TPP, log on to our website, NBR.com.

Well, it`s being called the White House in midtown. President-elect Donald Trump`s residence at Trump Tower in the middle of Manhattan is creating a traffic and security nightmare. It`s also creating a headache for some of the most recognizable retailers in the world.

And as Robert Frank reports, the flagship stores are concerned as the busy holiday shopping season approaches.

(BEGIN VIDEOTAPE)

ROBERT FRANK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, with only one week to go until Black Friday, many of the top retailers here in Midtown Manhattan are not feeling much cheer. The reason: security and crowds here at Trump Tower.

New York City Mayor Bill de Blasio and the New York Police Department announcing steps today to try to alleviate the security blockades and all those crowds around Trump Tower. Trump, of course, lives and works in the building, located in one of the busiest intersections in the country. But the security measures and protests around the president-elect have turned the entire area into a green zone, choking off businesses for many of the luxury retailers. Gucci is located in the bottom floor of Trump Tower and it has largely been empty. Tiffany (NYSE:TIF) had its flagship store in the corner until recently, its main entrance was closed, it is still surrounded by blockades.

Analysts have started trimming their own estimates for Tiffany`s, with Cowen`s analysts saying, quote, "There`s now way to sugarcoat this. The big worry is what will happen over the nxt few months."

Other retailers affected include Prada, Abercrombie & Fitch (NYSE:ANF), Piaget and Bulgari. Now, many smaller retailers are also suffering.

KEVIN HILL, CROCKETT & JONES MANAGER: Well, it`s been a mix of trepidation and exasperation and there are people that, you know, come to us, just to come to get our shoes. And they have called us, can we come? Haven`t made it through.

FRANK: Now, rents in midtown are some of the highest in the country, so any loss in business could have a dramatic effect on their profitability. The head of the business district in midtown saying, quote, "Traffic in retail stores has dropped dramatically."

The mayor and the New York Police Department saying today they may block off roads, close some lanes and try to divert traffic and crowds around the area. Now, that measure may help, but it`s going to take a miracle on 56th Street to help retailers near Trump Tower to have a merry Christmas.

Guys, back to you.

(END VIDEOTAPE)

HERERA: Robert, I`ll take it. Thank you very much. Robert Frank in midtown.

President-elect Donald Trump has agreed to settle lawsuits related to Trump University, the president-elect`s now defunct for-profit college. New York`s attorney general says the civil fraud case will be settled for $25 million. Former students claim they were falsely promised that they would learn Trump`s real estate secrets. Some paid up to $35,000. Trump has denied any wrongdoing.

Same-store sales fall for the third straight quarter at Abercrombie and Fitch (NYSE:ANF), and that is where we begin tonight`s "Market Focus".

The clothing retailer said weak performance in its tourist and flagship stores Sluggish traffic caused the decline. The company also saw profit and revenue fall with results sharply missing estimates. Shares fell almost 14 percent to $14.60.

Foot Locker saw its profit rise in the latest quarter, topping analysts` expectations. Revenue was in line with the estimates. The athletic apparel and footwear company also said same-store sales improved but not at the pace analysts were expecting. Shares finished up a fraction to $71.78.

Yum Brands (NYSE:YUM) is tacking on another $2 billion to its share buyback. The new allocation is expected to be used by the end of next year. Shares rose 2.5 percent to $62.36.

Well, you probably know this. You can pretty much order anything you want on Amazon (NASDAQ:AMZN). But what about a car? Well, soon, that will be possible. The e-commerce giant has signed a deal with Fiat Chrysler to offer three models on its platform at a discount. So far, that service is expected to be available in Italy.

Amazon (NASDAQ:AMZN) shares rose marginally to $760.16. Shares of Fiat Chrysler fell 4 cents to $7.43.

And according to a regulatory filing, Facebook (NASDAQ:FB) has approved a $6 billion share buyback that will begin early next year. Shares finished the day down a fraction to $117.02.

This week`s market monitor like stocks that he says could benefit from President-elect Donald Trump`s economic plan. The last time he was on in April, he recommended Visa (NYSE:V), which is up 4 percent, Priceline which gained 18 percent, and McKesson (NYSE:MCK), which is down 13 percent.

He is Kevin Norris. He`s president of Univest Wealth Management.

Welcome, Kevin. Nice to have you back.

KEVIN NORRIS, UNIVEST WEALTH MANAGEMENT PRESIDENT: Thanks for having me back. Thank you.

HERERA: And as I understand, you still own all three, Visa (NYSE:V), Priceline and McKesson (NYSE:MCK), correct?

NORRIS: We do. I wish I didn`t own McKesson (NYSE:MCK) any longer.

HERERA: I`m sure.

NORRIS: But that sometimes happens.

HERERA: All right. Let`s get to your new picks. There are three very interesting ones. And as we said, some of them are based on expectations of what the president-elect`s economic plan will be.

The first one is Masco (NYSE:MAS), which is building products.

NORRIS: Right. So, we`re -- we really like Masco (NYSE:MAS) because of the continuation of the housing market recovery. They are in the home improvement and home construction industries. A real solid company, pays a dividend of over 2 percent.

And we think it`s going to be a beneficiary of a continuation of the housing market recovery, and even on the renovation side, you know, they`re expected -- this year is expected to be the biggest year or the biggest year since the recession of renovation spending. And that was in 2007.

HERERA: Right.

NORRIS: So, we think it`s a great company and a great position.

HERERA: Does that renovation side of the story offset the rise in interest rates?

NORRIS: It counteracts it. So, if we get higher mortgage rates, for instance, and the new housing market slows down, the renovation market will offset that to some degree. And that was a move Masco (NYSE:MAS) made several years go to get into the renovation business. So, it`s a nice play with a little bit of downside protection.

HERERA: Harris (NYSE:HRS) Corporation is next on the list. It is a tech company. Tell us about it.

NORRIS: So, right. Harris (NYSE:HRS) Corporation is a tech company. This is a Trump play. If we get continued, if we get increased defense spending, as president-elect has laid out, this should be a beneficiary of it. So, they do technology systems for defense, civil government applications and in addition to commercial.

It`s a solid company with a solid balance sheet, high profit margins, again here a 2 percent dividend. And just well-positioned for the Trump presidency, provided the details back up the headlines.

HERERA: Right. It`s up better than 20 percent this year. Do you worry that it`s gone too far?

NORRIS: Well, our estimations, it`s got another 20 percent in it next year --

HERERA: I see.

NORRIS: -- if they execute and they have good growth prospects.

HERERA: And Schlumberger (NYSE:SLB), an oil play, is last on the list.

NORRIS: Sure, again, this is a little bit of a Trump play in that if we get some deregulation in the energy sector, Schlumberger (NYSE:SLB) will be a beneficiary of it. Schlumberger (NYSE:SLB) is an oil field services company to the international oil and gas exploration and production industry. They really weathered the down turn very well early in the year. They`re poised to benefit from some deregulation and if we get some kind of OPEC agreement, oil price is moving higher, it will benefit Schlumberger (NYSE:SLB). And so, it`s another 2 percent dividend pay, so you could pay to hold it.

HERERA: All right. On that note, Kevin, thank you so much. Have a great weekend.

Kevin Norris --

NORRIS: You as well. Thank you.

HERERA: -- with Univest Wealth Management.

Coming up, why Warner Brothers has a lot riding on what it hopes will be a magical weekend at the theatre this weekend.

(MUSIC)

HERERA: Here`s a look at what to watch for during next week`s holiday- shortened week. On Monday, the antitrust trial challenging Anthem`s $53 billion acquisition of Cigna is scheduled to begin. On Tuesday, we`ll get a fresh read on the housing market when existing home sales are released. On Wednesday, the Federal Reserve will put the meetings of its last meeting and that is what to watch for next week.

McDonald`s (NYSE:MCD) is entering the next phase of its turn-around, going digital. The world`s largest fast food chain is rolling out in-store, mobile ordering and digital payments next year in an effort to attract millennial customers and increase foot traffic. But some critics say McDonald`s (NYSE:MCD) is playing catch-up. But the CEO says that`s OK.

(BEGIN VIDEO CLIP)

STEVE EASTERBROOK, MCDONALD`S CEO: We have a very advanced stage of rollout in this in Canada, in the U.K., and France and Australia. So, therefore, they are almost like a live learning labs and we can bring a more finely tuned, that we can get the kinks out. We can get a much more home and business model and bring it to the U.S., which is our largest market. So, if you want to scale it here, you want to scale it right.

So, you`re right. We`re not always going to get first movement advantage. But we have enough phenomenal scale advantage and that`s what we think will differentiate us from anyone else.

(END VIDEO CLIP)

HERERA: As part of its strategy, McDonald`s (NYSE:MCD) will also offer table service to customers.

DraftKings and FanDuel are joining forces. The two largest daily fantasy sports companies have agreed to merge, ending months of speculation. The companies say the merger will help accelerate their profitability. DraftKings and FanDuel have faced legal challenges around whether their contests are games of skill or gambling. Comcast (NASDAQ:CMCSA) (NYSE:CCS) Ventures and NBC Sports Ventures have stakes in FanDuel. Comcast (NASDAQ:CMCSA) (NYSE:CCS) is the parent company of CNBC, which produces this program.

It has been a rough ride for movie sequels reasonable recently, which have disappointed at the box office. But this weekend, Warner Bros. has a lot riding on its "Harry Potter" spinoff. But will the movie work its magic?

Julia Boorstin has our story.

(BEGIN VIDEOTAPE)

JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Warner Bros.` hopes are high for "Fantastic Beasts and Where to Find Them" based on J.K. Rowling`s best-selling "Harry Potter" spinoff. It`s the first in the five- film series about a magical zoologist chasing his creatures through 1926 New York City. The film costs a reported $180 billion to make. This projected to gross more than $200 million worldwide this weekend, bolstering Warner Bros. with a new franchise.

ANTHONY DICLEMENTE, INSTINET MANAGING DIRECTOR: The general strategy for Warner Bros is to invest in tent-pole franchises because the economics of those franchises have proven to be superior to films that are not part of a franchise. We see that with the D.C. comics films. We see that now with "Fantastic Beasts".

BOORSTIN: Warner Bros. hoping that it will live up to Harry Potter. Its eight films grossed nearly $8 billion at the global box office.

JEFF BEWKES, TIME WARNER CEO: We`re very excited about "Fantastic Beasts," a new story based on the wizarding world of Harry Potter that we think would be a global hit, not just in the box office, but in consumer products across all platforms.

BOORSTIN: And Time Warner (NYSE:TWX) is not the only company banking on "Fantastic Beasts" box office success. AT&T (NYSE:T) is in the process of acquiring the giant for more than $85 billion as it looks to diversify with the movies and TV shows its customers want to watch.

DICLEMENTE: We`re moving to a world of global distribution of content using technology. And big franchises matter more in that world, because you can sort of use that content, use those franchises to support existing businesses, existing platforms like AT&T (NYSE:T) Wireless.

BOORSTIN: And it`s not just Time Warner (NYSE:TWX) and AT&T (NYSE:T) that could benefit from a hit. The films could also drive even more interests in the attractions built around Harry Potter, the Wizarding World of Harry Potter in Universal (NYSE:UVV) Studios Orlando and Hollywood. And a range of partners are on board to boost awareness and get some of the wizards magic, Amazon (NASDAQ:AMZN) enabling users to unlock special content and Android users can cast Harry Potter`s spells using Google`s voice assistant.

And so far, the films` early showings are drawing crowds. It grossed nearly $9 million in North America Thursday night, and it`s already grossed $23.5 million overseas.

For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Los Angeles.

(END VIDEOTAPE)

HERERA: And finally tonight, your Thanksgiving dinner will cost you just a little bit less this year. According to the American Farm Bureau Federations annual survey, a meal for ten people will cost just under $50. That`s 24 cents less than last year. And that`s because of the food deflation trend we have been reporting on. Turkey prices, milk, pumpkin pie mix, carrots and celery all cost less today than they did a year ago.

That is NIGHTLY BUSINESS REPORT for tonight. I`m Sue Herera. Thanks for watching. Have a great weekend, everybody. We will see you here Monday.

END

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