REPO-01
Brennan, John Harwood, Kate Rogers (NYSE:ROG), Phil LeBeau>
Infrastructure; Protests; Automotive Industry; Business; Products>
ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Sue Herera.
SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Blue chips see green. The Dow has its tenth record close since the election. And now some are wondering whether this aging bull market has found the fountain of youth.
TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Pipeline plans. A controversial infrastructure project was stopped over the weekend, but the fight is likely far from over.
HERERA: Record year? Used cars may have logged more miles, but they have never looked better to millions of Americans.
Those stories and more tonight on NIGHTLY BUSINESS REPORT for Monday, December 5th.
MATHISEN: Good evening, everyone. And welcome.
The rip-roaring rally just keeps on going. The blue chip Dow index started the week at levels it has never seen before. Banks, which have been leading the advance, saw big gains today and it didn`t stop there. Technology shares, which have lagged the post-election run-up also rose sharply.
The Dow Jones Industrial Average added 45 points to 19,216, its tenth record close since the election. The NASDAQ was up 53, and the S&P 500 was higher by 12.
The current bull market is one of the longest in history, and instead of slowing down, it seems to have been reenergized.
Mike Santoli takes a closer look.
(BEGIN VIDEOTAPE)
MIKE SANTOLI, NIGHTLY BUSINESS REPORT CORRESPONDENT: The current bull market in stocks is old by historical standards, but at the moment refuses to act its age. The market run that began in March 2009 is nearing its eighth birthday, making in the longest climbs in recent months. And particularly since the election of Donald Trump, the sector is doing best resemble the usual leaders of a bull market that just getting started. Smaller, riskier stocks surged ahead of big stable ones. Economically sensitive industries such as railroads, autos, hotels and banks are among the biggest winners lately.
And very few of the typical hallmarks of an older market advance have emerged. These would include very high valuations, overheated investment fads or rampant speculation among smaller investors.
So, what explains the youthful behavior of such a mature bull market? Well, at face value, the rapid shift toward more cyclical faster-moving stocks simply reflects a strong run of economic data on jobs, spending and business spending. Along with optimism about possible tax cuts, fiscal spending and deregulation under a President Trump.
Some market-watchers also argue that the bull market is not truly as old as it looks. A bull market usually is considered in effect until the broad S&P 500 index falls at least 20 percent. This hasn`t happened since 2009, but the index nearly got there in 2011 and in late 2015 and early this year, global equities, small cap shares and most industrial stocks all dropped at least 20 percent.
In any case, the S&P has generally gone sideways for nearly two years. By this view, the market had a rest and retrenchment that might have refreshed buying interest in stocks that rely on stronger economic growth. What it means for future returns is hard to say. Despite the flat market trend since early 2015, stocks did not become notably cheaper relative cheaper relative to corporate profits, and it`s unclear how much higher interest rates can climb without slowing down the economy or demand for stocks.
For now, though, investors are enjoying a long-running ball that is reliving its energetic youth.
For NIGHTLY BUSINESS REPORT, I`m Mike Santoli at the New York Stock Exchange.
(END VIDEOTAPE)
HERERA: So, does this market have you trying to figure out what you should be doing with your money? If so, you`re not alone.
Michael Yoshikami joins us to discuss the market and money moves you could make. He is the CEO of Destination Wealth Management.
Good to see you, Michael. Welcome back.
MICHAEL YOSHIKAMI, DESTINATION WEALTH MANAGEMENT CEO: Hi, Sue.
HERERA: You think that caution is warranted at this point for a couple different reasons. Tell us why.
YOSHIKAMI: Well, the first reason is I think we have had a pretty unbridle the enthusiastic market rally all based on what I believe are expectations, not just of what`s happening currently in the economy, but expectations of stimulus, tax cuts, really a very rosy scenario going forward. And I think the legislative process is a bit messier than just proposals.
So, I think we need to be very, very careful to not get too excited. In fact, Caterpillar (NYSE:CAT) just gave you an idea, one of the stocks rallied significantly this year. It`s really driven a huge part of the Dow rally. And Caterpillar (NYSE:CAT) itself came out with a press announcement, saying they actually didn`t believe the rally. Actually, it`s going to be still challenging conditions for them going forward.
So, I just think it makes sense to really just not get too overly enthusiastic about some of these cyclical plays. It may make sense in terms of expanding your portfolio strategy to include these names that hey didn`t include before. But let`s not get ahead of ourselves.
MATHISEN: Let`s say I`m lucky enough to have, say, $10,000, and I want to put to work over the next few months. How would you start to salt that in, and where?
YOSHIKAMI: Yes, that`s a good way of putting it, Tyler, actually salting it in. I think that investors oftentimes try to find the exact perfect day to invest money. I think the first thing I would do with $10,000 or any amount of cash is to drip it in over time. I`m not talking about days. I would say weeks, maybe even months, to move that over time.
Some of the sectors I think that are still interesting that I think are rallying for in reason are financial services companies, banks that have really suffered greatly with low net interest margins. I think there are still opportunities despite the huge run in banks over the course of the last couple weeks. Technology is still beat down. There are still a number of names that have not recovered based on the expectations of may be protectionism being brought into the forefront in terms of the American economy.
If you`re buying fixed income, I`ll tell you what I would do. I still think it makes sense to buy fixed income as a balance near portfolio strategy, but I would absolutely remain short duration, and I would creep down from the AAA credit quality yields and go more towards AA on average, maybe AA minus so you can get some noninvestment grade. Those have held up pretty well relative to treasury.
HERERA: You like dividend-paying stocks, as well.
YOSHIKAMI: Well, you know, that`s really a hard thing to say out loud when dividend-paying stocks have actually done so poorly over the course of the last three weeks in response to this rotation to cyclicals. But many of these names have really been beaten down. Health care names, even consumer staple names, have been beaten down.
I think there are some attractive opportunities. Some of these names paid 3, 4 percent yield. Yes, they`re going to be interest-sensitive names. But if you look at the history of dividend, high-quality dividend-oriented stocks, as long as they`re growing their dividends over extended periods of time, these stocks tend to do well even in a rising rate environment.
HERERA: All right. Michael, always a pressure to have you with us. Thank you for joining us.
Michael Yoshikami --
YOSHIKAMI: All right. Thanks, Sue.
HERERA: -- with Destination Wealth Management.
MATHISEN: A Federal Reserve official today said there is a chance a central bank may have to increase interest rates at a faster pace than originally thought. The president of the New York Fed said that since the election, equities have risen, bond yields have gone up. The dollar is firm, on the expectation of more fiscal stimulus.
(BEGIN VIDEO CLIP)
BILL DUDLEY, FEDERAL RESERVE BANK OF NY VICE CHAIRMAN: If fiscal policy were to turn more expansive and led support to economic activity, then probably the Federal Reserve would probably move accommodation a little more quickly over time.
(END VIDEO CLIP)
MATHISEN: But Mr. Dudley also emphasized that we do not yet know what the fiscal policy will be. How big or when it`s going to occur.
HERERA: And the president of the Chicago Fed said conditions are ripe for inflation to rise back to the central bank`s target level of 2 percent. Charles Evans cited potential policies from the incoming Trump administration over the next few years. The prospect of higher inflation also helped lift the financial sector today. Goldman Sachs (NYSE:GS) hit a nine-year high. Bank of America (NYSE:BAC), Citi, J.P. Morgan and Wells Fargo (NYSE:WFC) also higher.
MATHISEN: Companies in the services sector expanded last month at their fastest pace in more than a year. According to the Institute for Supply Management, the industry has grown for 82 straight months. The report is considered an encouraging sign for the economy since services companies, like accounting firms, real estate, restaurants, account for more than 70 percent of nonfarm jobs.
HERERA: But despite signs of continuing expansion, a group of business economists say Donald Trump`s growth forecasts are too rosy. The National Association for Business Economics expects GDP to end the year with an annual growth rate of 1.6 percent, and then strengthen next year to 2.2 percent. That would be in line with the average pace of growth since the end of the Great Recession. In September, Mr. Trump said his proposals would result in a growth rate of 3.5 percent.
MATHISEN: Volatile day in the oil markets today. Prices started higher, helped by last week`s historic OPEC agreement to cut production. But those gains then fizzled after traders lost confidence that the cuts would be enough to reduce the glut of oil on the market. Domestic crude settled up just slightly at about $51 a barrel, almost $52.
And a new "Reuters" survey shows that in the days before the agreement, OPEC output was the highest in recent history. That could mean the cartel will have a tougher time complying with its plan to curb supply.
HERERA: The recent rally in oil prices is also fueled by potential changes to the industry under a Trump administration. But with the commodity up nearly 20 percent in a month, has the rally gone too far, too fast?
Jackie DeAngelis takes a look.
(BEGIN VIDEOTAPE)
JACKIE DEANGELIS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Energy investors are betting big on president Trump. The industry is hoping to see less regulation and speedier approval for drilling, pipeline and refinery projects.
DONALD TRUMP (R), PRESIDENT-ELECT: I will cancel job-killing restrictions on the production of American energy, including shale energy and clean coal, creating many millions of high-paying jobs.
DEANGELIS: Not only are big oil stocks moving, but the exchange-traded funds that track the different energy-related companies are also soaring. The XLE is up more than 10 percent in one month. The OIH, the oil services ETF, up more than 20 percent in the same time.
Drilling down on the names, in big oil, you`ve got Exxon, Chevron (NYSE:CVX) and Hess (NYSE:HES), all moving to the upside and taking the major averages with them. Remember, when drilling regulations are looser, big oil prospers. The servicers, Halliburton (NYSE:HAL), Baker Hughes (NYSE:BHI) and Schlumberger (NYSE:SLB) also outperforming. They provide big oil the tools it needs to drill. And then the refiners, Valero, Phillips 66, Repsol, they`ll be turning more crude into gas.
ALAN HARRY, HARRY RE TRUST CEO: Crude oil has made quite a bit of rally. OPEC has put in some real cuts. The market liked that. The market reacted, it went up, and the market is also looking at possible cuts now from non-OPEC countries. So, although we have made quite a bit of rally, we may see a little bit more.
DEANGELIS: Crude oil itself up almost 20 percent in the last month. Part of that is off the recent OPEC announcement to cut production. But a lot of it is also attributable to the Trump trade. The question now, how much higher can the commodity end the stock`s go?
HARRY: The reason I think we move too far too fast, the right count going up, we have Donald Trump who is pro-drilling, and we have the U.S. who has done very well, showing us they have done very well in production of crude oil. The costs have gone down, the price of crude is rallying, more wells are going in. More wells go in, more crude gets on the market, more oversupply, down we go.
DEANGELIS: For NIGHTLY BUSINESS REPORT, I`m Jackie DeAngelis.
(END VIDEOTAPE)
MATHISEN: Protesters in North Dakota celebrated the Obama administration`s ruling this weekend to stop the expansion of a controversial pipeline. But the company behind the project says it has no plans to reroute the line right now.
And as Morgan Brennan reports, the fight isn`t over just yet.
(BEGIN VIDEOTAPE)
MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: The energy industry was taken by surprise when the Army Corps of Engineers denied an easement for the Dakota Access Pipeline.
The move was unprecedented since Energy Transfer Partners met its permitting and legal requirements. But the battle for a controversial 1,100-foot crossing, the missing link and a nearly 1,200-mile pipeline is far from over. Especially since next president has vowed to make America energy-independent. Analysts believe the Trump presidency will be a boon for pipelines, especially if the regulatory process at the federal level is streamlined.
That starts with the Dakota Access, which many believe the incoming administration will support.
DARREN HOROWITZ, RAYMOND JAMES, MANAGING DIRECTOR: A lot of it is really going to depend on what happens when President-elect Trump gets sworn into office, and how the agenda with regard to the priority list for energy and infrastructure shapes up within the first few months.
BRENNAN: Dakota Access is a nearly $4 billion project but the midstream energy companies that profit, store and transport oil have billions more in proposed pipelines, including TransCanada`s Keystone XL northern leg and Enbridge`s line 3 replacement.
Overall, experts expect the Trump administration to benefit the pipeline industry in several big ways. First, a red tape roll back at the federal level. And second, the enactment of policies that accelerate oil and gas drilling, which would drive up demand for transportation.
HOROWITZ: From a sector perspective, we remain very bullish and constructive on U.S. energy infrastructure and from a large cap perspective, we continue to like Kinder Morgan, Enterprise Products Partners (NYSE:EPD) and Magellan Midstream Partners (NYSE:MMP).
BRENNAN: But there are risks. While analysts expect oil and natural gas prices to continue recovering in 2017, renewed weakness would dent pipeline volumes, a key industry metric. And while more streamlined federal approach would help usher in new projects, they will still be subject to state and local rules.
And then there are protests and lawsuits, which no amount of business- friendly policy in Washington can prevent. Even for Dakota Access.
For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan.
(END VIDEOTAPE)
MATHISEN: Still ahead, where the jobs are. We`ll take you inside the industry that`s expected to hire a lot of workers in the coming years.
(MUSIC)
MATHISEN: New developments today on the president-elect`s cabinet picks. Former rival, Ben Carson, has been tapped to be the next secretary of the Department of Housing and Urban Development and a meeting scheduled tomorrow with ExxonMobil (NYSE:XOM) CEO, Rex Tillerson.
John Harwood joins us from outside Trump Tower.
John, we know Dr. Carson is a respected neurosurgeon. But why did Mr. Trump pick him to head the housing agency?
JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, he adds diversity to the cabinet, Tyler, as an African-American and the constituency of the Department of Housing and Urban Development has a significant African-American element to it.
However, he does not have experience in housing policy. This is an objection that Democrats and even some Republicans have raised about this pick. He may have a challenge getting confirmed.
HERERA: And what about Rex Tillerson and the meeting tomorrow with the Exxon CEO, John?
HARWOOD: Well, I think, Sue, that that represents the fact that Donald Trump does not seem satisfied with the choices that he`s got for secretary of state. He had been looking initially at Rudy Giuliani, Mitt Romney, Bob Corker, David Petraeus. All those remain possibilities, but it does seem to me that Donald Trump is signaling he doesn`t like the menu, he`s looking for other options, and Rex Tillerson may not be the only one.
Also, John Bolton, who was the U.N. ambassador under George W. Bush, appearing to be back in the mix.
MATHISEN: Jon Huntsman (NYSE:HUN), the former governor of Utah and ambassador to China, one also apparently in the mix, as well. And speaking of China, over the weekend, as you know, John, Mr. Trump took a tough line with China, one of our top trade partners, second largest in the economy.
How has China reacted?
HARWOOD: Well, it`s very interesting. We have seen dual reactions, both from the Trump -- incoming Trump administration and from the Chinese. Initially, Mike Pence came out over the weekend and said this was merely a courtesy call initiated by the president of Taiwan. And Russia through the foreign ministry said, well, this was a trick played by Taiwan.
But Donald Trump has gotten tougher in his remarks. He tweeted today that China didn`t ask our permission before they devalued their currency or implemented tariffs to make it more difficult for U.S. exporters. And China, through one of its official editorial outlets indicated that Donald Trump had been risking a breach in relations.
So, we don`t know whether this is just brinksmanship. Both sides need each other. China lends us a lot of money, which we need and we also buy a lot of their goods. But at the moment, it does seem to be a rise of tensions from that initial reaction to that phone call.
MATHISEN: All right. John, thank you very much. John Harwood, outside of Trump Tower in New York City.
HERERA: And Trump Tower is where the president-elect has spent the majority of his time since Election Day. And that has increased security measures around one of New York City`s busiest neighborhoods.
So, today New York City asks the federal government for up to $35 million to help cover those additional costs.
MATHISEN: The CEO of United Technologies (NYSE:UTX), the parent company of Carrier, spoke today about the decision to keep jobs at an Indiana plant and not to move them to Mexico. We reported on the action last week, along with the announcement made by President-elect Trump that the state of Indiana had promised $7 million in incentives.
In an exclusive CNBC interview, the head of United Tech said the decision will pay off over the long-term.
(BEGIN VIDEO CLIP)
GREG HAYES, CEO OF UNITED TECHNOLOGIES: There was a cross as we saw about keeping the Indiana plant open. At the same time, you and I know each other, but I was born at night, but not last night. I also know that about 10 percent of our revenue comes from the U.S. government. And I know that a better regulatory environment, lower tax rate, can eventually help UTC over the long run.
(END VIDEO CLIP)
HERERA: And Donald Trump is going after another company for sending jobs overseas. In a tweet sent late Friday, the president-elect targeted Rexnord, a Milwaukee-based maker of bearings and gears. He wrote, quote, "Rexnord of Indiana is moving to Mexico and rather viciously firing all of its 300 workers. This is happening all over our country. No more!"
He also reiterated his position that companies that move production abroad would face consequences, including a 35 percent import tariff. Shares of Rexnord fell about 1 percent.
MATHISEN: Under Armour (NYSE:UA) inks its first uniform deal with a professional league, and that is where we begin tonight`s "Market Focus".
The athletic clothing maker signed a ten-year deal with Major League Baseball to supply all on-field training and game-day apparel, starting with the 2020 season. Financial terms of the partnership were not released. Under Armour (NYSE:UA) shares rose 1 percent to $30.43.
In a recent letter to U.S. transportation regulators, Apple (NASDAQ:AAPL) expressed its support for the development of self-driving cars while also revealing it has invested heavily in the autonomous technology. The tech giant called upon regulators to limit the amount of restrictions placed on testing of self-driving vehicles. Shares of Apple (NASDAQ:AAPL) fell a fraction today at $109.11.
HERERA: New Oriental Education and Technology Group responded today to reports that we told you about on Friday, alleging the company committed college application fraud. China`s largest private educator said the media reports could mislead readers about the company`s legitimate businesses and may harm the reputation of New Oriental. It added that it plans on penalizing any employee misconduct. The shares rose 4 percent to $43.90.
Amazon (NASDAQ:AMZN) has opened a first of its kind grocery store, where customers make purchases without waiting in a checkout line. The Seattle store called Amazon (NASDAQ:AMZN) Go, uses sensors to track what`s placed in a shopper`s cart. Any products that leave the store are billed to the customer`s account. Currently, the service is only available to Amazon (NASDAQ:AMZN) employees, but it`s expected to be open to the public early next year. Shares of Amazon (NASDAQ:AMZN) rose 2 percent to $759.36.
MATHISEN: Unemployment has been at or below 5 percent for nearly a year, and as we report on Friday, November was the 74th consecutive month that the economy added jobs. But there is one industry that is expected to be one of the fastest-growing job generators in the country -- marijuana.
Kate Rogers (NYSE:ROG) reports from Denver.
(BEGIN VIDEOTAPE)
KATE ROGERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Cannabis has been a gold mine for Andy Williams and his company Medicine Man. A life-long entrepreneur, Williams started a small family business in 2009 and now runs nine separate marijuana related ventures. And he plans to expand.
ANDY WILLIAMS, MEDICINE MAN CEO: We have very unique problems for this industry as it`s growing and coming from the black market into the light. And every problem that exists is another opportunity for an entrepreneur to make that problem go away.
ROGERS: The marijuana industry offers a myriad of career paths for job- seekers from plant cultivation to manufacturing and retail. The pay ranges from $13 an hour in a dispensary to six figures for a management role.
About 150,000 people work in cannabis today. A number of analysts say could double or even triple in the years to come. However, one unknown remains and that is how President-elect Donald Trump might handle the regulation of the marijuana industry.
CHRIS WALSH, MARIJUANA BUSINESS DAILY: With the new states that legalized, we`re going to possibly triple retail sales in a couple years. And that`s going to have massive impact on communities and states and you`re going to see the creation of at least 100,000 new jobs, maybe double that. You`re going to see thousands of companies start up, as well.
ROGERS: Pi-Ta Pitt of the Warm Springs Native American Reservation in Oregon, where seasonal unemployment goes as high as 85 percent, hopes marijuana will bring jobs to his community. Earlier this year, tribal members voted to launch a cannabis business operation despite marijuana being illegal.
PI-TA PITT, WARM SPRINGS CANNABIS PROJECT: The Cannabis Project is a wholly owned tribal entity, 36,000 square feet greenhouse that`s going to grow, cultivate, extract and wholesale and retail cannabis into the state of Oregon.
ROGERS: The project, one of the first of its kind, is currently in the planning phase and will cost up to $7 million, creating about 70 jobs for tribal members.
PITT: Our goal is always to invest in our people and get family wage jobs.
ROGERS: While marijuana is one of the fastest-growing industries in the nation, it`s also one of the most complex. That`s why the Northeastern Institute of Cannabis has enrolled 400 students from across the country in its 12-course program that covers science, law, marketing and patient service.
CARA CRABB-BURNHAM, NORTHEASTERN INSTITUTE OF CANNABIS: When you walk into a job interview, being able to say I have a certificate that says I`m confident in cannabis industry and knowledge, it`s definitely a leg up for somebody who doesn`t have any background or formal experience with cannabis.
ROGERS: Experience that is welcomed by employers like Andy Williams, who need professional staff to continue to build their cannabis businesses.
For NIGHTLY BUSINESS REPORT, I`m Kate Rogers (NYSE:ROG), Denver, Colorado.
(END VIDEOTAPE)
MATHISEN: To read more about high employment in the marijuana industry, head to our website, NBR.com.
HERERA: Coming up, almost new. Why this year is shaping up to be a record one for used car sales?
(MUSIC)
HERERA: Drivers are hitting the road. Motorists logged about 3 percent more miles in September when compared to a year ago, a record-setting pace. According to the Department of Transportation, just under 2.5 trillion miles were driven on roads and highways, the most ever during the first nine months of the year.
MATHISEN: Heading into the final weeks of the year, used vehicle sales are on pace to hit a record. What`s driving the love of pre-owned cars and trucks?
Phil LeBeau reports and the answer may surprise you.
(BEGIN VIDEOTAPE)
PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: Sure, they`ve got a few miles under their belt and some may have a few dings and dents. But used cars have never looked better to millions of Americans -- almost 41 million, to be exact. That`s a record high for used auto sales in the U.S.
Pre-owned is taking off in part because there`s a wave of low mileage cars and trucks coming off of three and four-year leases. Those are attractive models for buyers, especially since used car prices are not rising as fast for those as new vehicles. And increasingly, those buyers are the people with the best credit scores. In fact, experience says those with prime and super prime credit scores now take out more than half of the used vehicle loans.
The improvement reliability of cars and trucks also make used models more attractive, and helps explain why the average vehicle in the U.S. is now almost 12 years old.