Published: 13/03/2018

Channel: NBRbizrpt

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Tonight on Nightly Business Report, the red hot semiconductor sector cools as the White House blocks what would have been the biggest tech deal ever.

Plus, CVS and Aetna shareholders approve the merger potentially changing the health care industry as we know it.

Source: YouTube

 Video Transcript:

this is nightly Business Report with
build rivet tool around ship flip the
red hot semiconductor sector cools and
the white house blocks what would have
been the biggest tech deal ever new
prognosis CVS and ethnic shareholders
approve their merger paving the way for
a new era in health care impacting
everything from coverage to costs
remodeling returns which projects pay
you back big those stories and more
tonight a nightly Business Report for
Tuesday March 13th and we bid you good
evening everybody these days it seems
that as tech goes so goes the market
that’s exactly what happened today the
tech sector which is up double digits
this quarter three times the gain of the
S&P; 500 but today it fell sharply the
Nasdaq snapped its 7-day win streak
brought the major indexes down with it
at the same time the Dow when all was
said and done dropped 171 points today
to close just above 25,000 the Nasdaq
lost 77 and the S&P; 500 fell by 17
within technology that focus today was
on the semiconductors sector the white
house late yesterday he may have heard
blocked broad comms hostile takeover of
Qualcomm for national security grounds
and that sent today’s chill through the
group that investors had been flocking
to in the meantime Dominic Chu picks up
our story for us from here companies
tied to the computer chip industry have
been on an absolute tear as of late one
of the bigger exchange-traded funds that
tracks these types of stocks the van eck
vectors semiconductor ETF ticker smh is
already up 15 percent this year
and up around 44 percent over the last
12 months it includes some of the
biggest names in the business including
Intel Nvidia Texas Instruments and
micron and some experts think the upside
momentum can continue there’s a lot of
growth opportunities for all of them if
you think about the Internet of Things
where more things are connected think
about autos where more and more
semiconductors are being used in order
to connect how the vehicle works and
even without driverless car
we’re just seeing a lot more technology
be embedded into a variety of different
products and I think that’s a great
growth growth opportunity for all of the
semiconductor companies computer chip
stocks have been one of the bigger
driving forces behind the bull market
leadership coming from the tech sector
of the five S&P; 500 companies that have
seen their stocks at least double over
the course of the past one year – are
tied to chips micron with a market value
of around seventy billion dollars has
gained around one hundred and thirty
seven percent nvidia is worth around a
hundred and fifty billion dollars and
has gained a whopping 145 percent in
that span but there are reasons for
caution many investors probably need to
pull back on tech not because the
opportunities aren’t good but because
prudent portfolio management says never
let one sector get above twenty percent
of your portfolio the technology sector
is arguably the most important part of
the market making up around a quarter of
the entire S&P; 500’s market value while
stocks like Apple alphabet Facebook and
Microsoft get much of the attention
these chip stocks could be one of the
big indicators for whether or the
overall bull market can continue for an
IT business report I’m Dominic Chu as
bill mentioned the White House blocked
singapore-based broad coms hostile
takeover of Qualcomm citing national
security concerns the 117 billion dollar
bid would have made it the biggest tech
deal in history and that sent both
stocks lower in trading today David
Faber has more on this failed merger it
was an unexpected end to a hard-fought
takeover battle in which Broadcom has
been trying for months to acquire
Qualcomm in steps the committee for
foreign investment in the u.s. about a
week or so ago and last night well they
delivered the order that will stop the
deal the president also signing that
order and so it becomes a presidential
decree saying that Broadcom cannot under
any circumstances acquire Qualcomm
because according to the US government
there are national security concerns
involving broad coms potential
acquisition of Qualcomm such that the
national security of the US might be
compromised by that deal as I said it
was a deal long in the
and it was very much unclear whether
Broadcom would succeed regardless but
when Sofia stepped in about a week or so
ago right before the company was
scheduled to hold its annual meeting it
changed the entire landscape since then
Broadcom did not seem to do itself any
favors in fact yesterday we reported on
a letter from Sophia’s to Broadcom
saying that you’ve already violated the
interim order we issued on March the
fifth three different times well if
Trust is the thing at issue here
violating that trust didn’t do them any
help one key question now has the u.s.
government created a national champion
in Qualcomm a company that is key to
rolling out 5g or the next generation of
wireless services not just here in the
US but potentially around the globe and
that is in competition with China’s
Huawei a company that does business
around the globe but not here in the
United States for nightly Business
Report I’m David favor the tech sector
could also be impacted by a report late
today according to Reuters the White
House is looking to impose tariffs on 60
billion dollars of Chinese imports
targeting technology and the telecom
sectors among others well we have a lot
to talk about now with Daniel flax he is
talking about that semiconductor sector
and what it will mean for the overall
technology industry itself he’s senior
research analyst at Neuberger Berman
Daniel good to see you thanks for
joining us tonight
good to see you both thanks Bill where
to begin first of all just why have the
the chip stocks been so hot what’s going
on these days that has people driving
into them what’s underway bill and it’s
been going on for the past several years
is that these semiconductor companies
are finding their way into lots of
different and new markets besides the
traditional ones such as
personal computers and smart phones and
so whether it be on the factory floor
floor or within automobiles they’re a
whole wave of new areas that these
semiconductor companies are able to grow
in and we think that is likely to be
sustained well into the future one of
the things that I’ve noticed is the push
into artificial intelligence and and
virtual reality so there are actually
not just in tech there in entertainment
there they’ve really broadened out the
base I think that’s right su part of
what’s going on is that there’s enormous
compute power that is available in the
cloud and you then have software on top
of it which is able to do tremendous
things around analytics and if you take
a company like Google for example or
alphabet they’re really a leader in
artificial intelligence and helping to
push the boundaries of what’s available
by analyzing data and delivering
solutions and outcomes to their users
and that’s very exciting all right now
what about this late word of the
possibility of sixty billion dollars of
tariffs on Chinese imports that could
affect technology how vulnerable for
example are the chip stocks to those
possible tariffs I think in the shorter
term bill they are vulnerable given that
these are global companies with global
supply chains
obviously customers all over the world
what what I suspect will happen is as we
see what some of the new regulations are
how they evolve these companies which
have responded to changes and adverse
changes in the past I suspect you’ll see
them do that again over time so it could
absolutely lead to some short-term
disruption but medium-term I think
they’ll be able to figure out a way to
get around or really operate in that new
Daniel flags from Neuberger Berman
thanks again for joining us tonight
appreciate it thank you to economic news
where inflation rose slightly last month
consumer prices were at point two
percent in February which was in line
with expectations
today’s report tempered concerns that
inflation is heating up and appears to
keep the Federal Reserve on its expected
path of interest rate increases
policymakers are scheduled to meet next
week in Washington President Trump fired
his top diplomat today Secretary of
State Rex Tillerson who as you know
formerly served as Exxon Mobil’s CEO he
will stay on through the end of the
month some on Wall Street see the move
as nothing more than a game of musical
chairs at the White House others though
say Tillerson is firing along with the
blocked Broadcom Qualcomm merger could
result in increased tensions with China
president has nominated by the way CIA
Pompeo to be the next Secretary of State
there is a closely watched special
election being held in western
Pennsylvania today to fill the seat
vacated by Republican Tim Murphy who
resigned last fall the district has
voted Republican in recent elections and
it’s home to a number of large a large
number I should say of Steel Workers
John Harwood is in Scott Township
Pennsylvania tonight John good to see
you as always so how has the president
how as the president’s decision on steel
tariffs possibly impacted this race no
sign of it so far sue both candidates
have embraced the tariffs
Connor Lamb the Democrat with a little
more equivocation than his Republican
rival Rick ciccone but it does not
appear to have changed the late momentum
in the race that Connor lamb has
developed Rick ciccone in this very as
you noted Republican area had built a
large lead in the polls early in the
race Connor lamb has been coming back
and in the last surveys we’ve seen lamb
is slightly ahead if he wins this race
tonight it will be a huge upset that
will send shockwaves through the rest of
the campaign for Congress this fall all
right what about there’s tariffs but
what about the other t tax cuts does
that necessarily benefit the republican
Ciccone Republicans have been counting
bill for tax cuts to save their
majorities in the fall campaign given
all the political turbulence around they
started advertising heavily in the early
part of the race on tax cuts but it’s
notable that late in the race they’ve
moved away from that message gone after
Connor Lamb the Democrat on crime and
immigration so that suggests Republicans
don’t have a great deal of confidence in
the tax issue in this race we’ll see how
it plays out in other races across the
country do we have any idea on turnout
how it has it been normal heavy light
well in the school right behind me the
poll workers tell me that they’ve had an
unusually heavy turnout about half of
the registered voters have shown up so
far polls are still open for a while
longer tonight so that indicates that
the all the tens of millions of dollars
that have been spent in this race have
had at least some effect in arousing and
getting voters out today all right John
thanks so much john harwood in Scott
Township Pennsylvania all right let’s
take a look at some of today’s upgrades
and downgrades and we begin with JP
Morgan lowering its price target on
General Electric to $11 the firm’s cited
concerns over the outlook for GES free
cash flow and earnings the analysts
maintained his underweight rating and GE
shares fell more than four percent today
to $14 43 cents Jefferies meanwhile
raised its price target on Amazon to
eighteen hundred and fifty dollars the
firm says that amazon’s market cap could
swell to that magical one trillion
dollar mark by the year 2022 the analyst
cites Amazon’s aggressive push to expand
its advertising business and was on
shares though fell with the rest of the
market today it was down a fraction at
fifteen hundred and eighty eight dollars
and 18 cents bill JC Penney was
initiated with an underperform rating at
Credit Suisse the analysts there says
the retailer could close more stores and
is facing margin pressure the price
target is two dollars and 50 cents JC
Penney closed up nearly one percent
though at 3:28 Guggenheim calls t-mobile
the best idea in the telecom sector the
firm cites t-mobile’s growth outlook
it’s conservative guidance and its share
of the handset market the analyst has a
Buy rating on the stock and an $80 price
target t-mobile shares were up a
fraction to 64 ninety-eight still ahead
a the former CEO of Aetna and the head
of the Cleveland Clinic’s discussed the
rapidly changing healthcare industry and
their vision of the future
CBS and Aetna shareholders today
approved the drugstore chains 69 billion
dollar acquisition of the insurer this
merger is expected to close in the
second half of the year assuming that by
the way it’s okayed by regulators in
just a moment we’re going to talk about
how this merged company could usher in a
transformation of the entire healthcare
industry in the meantime shares of CVS
fell by 1% today Aetna shares rose a
fraction the health insurer Centene is
making an investment in our ech rx
advance which is a cloud-based pharmacy
benefit manager pharmacy benefit
managers negotiate with the big drug
makers to get better prices on
prescription medications the size of the
deal not disclosed but the investment
comes days after Cigna made a 52 billion
dollar offer to buy Express Scripts both
deals are part of a bigger wave of
consolidation in the healthcare industry
and let’s talk about that what will this
wave of consolidation in the industry
mean for the future of healthcare both
for providers and for patients we have
two prominent visionaries with us
tonight both industry veterans here to
share their thoughts Ron Williams is the
former Aetna CEO he’s now chairman and
CEO of rw2 enterprises and Toby cosgrove
is former president CEO of the Cleveland
Clinic’s where he is now currently
executive advisor it’s great to see you
both thank you for joining us tonight
thank you baby well thank you for having
me Ron let me start with you here’s what
puzzles me about the Aetna CVS deal it
would seem that their motivations are at
odds with each other let’s face it when
you raise drug prices it’s better
profitability for the drug companies and
the drug retailers but the insurance
companies would seem to want lower
prices they want to cover less of the
price of those particular drugs how is
this merger going to transform and make
health care better for customers well I
think the underlying idea in my mind I
don’t have to say I’m not an insider I
have no inside information related to
the transaction it’s really not about
pricing it’s about creating more value
in the healthcare delivery system and if
we look at chronic patients only about
50% of the prescriptions written for
patients who have died
hypertension cardiovascular disease only
50% of those prescriptions are filled
and of the 50% that are filled in total
about 20% of the patients are truly
compliant with their medication regimen
if you can actually increase medication
adherence and compliance you can reduce
health care costs fundamentally you can
create more value in terms of lower
premiums and improve quality so I think
the pricing angle is looking at it
through the wrong lens would you agree
with that Toby and and weigh in on what
what Ron just mentioned it seems as
though getting patients under that one
umbrella with an Aetna CVS merger might
actually form more compliance with with
the regimen that they’re assigned well I
hope they do see it more compliance but
what we’re going to see in the future as
far as healthcare is concerned is you’re
gonna see a major changes you’re gonna
see increasing emphasis on keeping
people well and the people who are sick
are going to be treated differently
they’re going to have different diseases
more chronic disease they’re going to be
local taking care of in different
locations or outpatient than inpatient
and they’re going to be looked after by
a different group of people it’s not
going to be just doctors but it’s going
to be a physician’s assistants and
nurses so the whole industry is changing
the diseases are changing the treatments
are changing and we have to drive the
efficiency and the value to have an
affordable health care delivery system
and we hope this is going to be one of
the steps in that direction Toby I’m
curious your thoughts on the the
proposed what do you want to call
alliance that Jeff Bezos has put
together with Warren Buffett and Jamie
Dimon at JPMorgan they don’t even know
what kind of business they want to get
into but they just want to know that
they can bring cost down and improve
service well let you think they’re gonna
do well I know I must say I similarly
don’t have much insider information on
this but if you look at what the
potential is you’ve got Jeff Bezos who
clearly has a delivery system and
service for drugs and certainly a lot of
IT that it can use certainly Berkshire
knows about handling risks through Geico
and I can imagine that they could do
something and farmers a mutual insurance
company and certainly there’s a plenty
economica cumin with JPMorgan I’m
delighted to see actually the private
sector step in in the way that they have
because I think they’re going to bring
fresh ideas fresh approaches and new
energy to the private sector and
hopefully continue to drive us in new on
new ways and to be very innovative you
know Ron picking up on on Bill’s thought
one of the things that mr. Bezos said
and also Warren Buffett said when they
formed that alliances they feel the use
of technology will ultimately be the
main driver to bring down costs to bring
up efficiencies and and therefore
streamline what has been a very onerous
healthcare system would you agree with
that is technology the ultimate answer
or no well I think technology as an
empowering tool for physicians is one of
the answers I think technology to
empower patients and give them better
data and better decision-making I agree
with with Toby that these are
intellectual Giants in terms of Amazon
the ability for Berkshire and the
ability for JPMorgan to collaborate and
bring their respective strengths and be
able to really help patients help
physicians help hospitals exactly how
it’s going to work I don’t think anyone
knows but I would say that there is huge
opportunity the healthcare system really
needs disruption needs continuity and
the use of data analytics decision
support tools can be a very important
attribute in increasing value Ron before
we let you both go I can imagine the
people watching it’s pretty simple they
want to pay less they want a simpler
situation when it comes to their
relationship with their insurance
company and and the relationship
therefore with their doctor is that
where we’re headed our expectations off
base here well I think the only thing I
would add is that the patient and
consumer themselves has to become a more
active participant in the delivery of
the healthcare I think that they really
do want in need a simpler relationship
through the whole system our system is
not really a system it’s a patchwork of
activities and
a lot of the consolidation you’re seeing
is really efforts to integrate that
system in a way that it can create more
value and hopefully provide more access
more affordability for the patient we
could have done all 30 minutes on this
tonight gentlemen but we must go at this
time thank you both for your insights
Ron Williams former CEO of Aetna now
with rw2 enterprises and of course toby
cosgrove the executive advisor at
Cleveland Clinic’s thank you both thank
you pleasure holiday sales disappointed
Dick’s Sporting Goods and that’s where
we begin tonight’s market focus despite
seeing strength in its online sales the
retailer reported a drop in same store
sales and weaker than expected revenue
but earnings edged past estimates the
shares finished up nearly 1% to 3288 DSW
reported weaker than expected sales but
it delivered a profit beat and improved
margins the shoe retailer also gave an
upbeat earnings forecast for the year
and it raised its quarterly dividend 25%
to 25 cents a share DSW shares jumped
ten percent to twenty one dollars and
seventy one cents United Continental
says that revenue this quarter has been
improving across all regions the airline
also gave earnings guidance for the year
that was in line with expectations
shares of United rose fractionally to
finish the day at $72 60 cents an
industrial distributor HD Supply saw a
rise in sales and a smaller than
expected loss the company also gave
upbeat guidance for the whole year and
said it was providing employee bonuses
thanks to tax reform shares of HD
climbed three percent today to $38 nine
cents coming up how to get the biggest
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today’s pricey and competitive housing
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what will your investment get you diana
Olek takes a look for us tonight
emma chan let Avery has a vision for her
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Business Report I’m Diana Olek in
Washington and before we go here’s
another look at the day on Wall Street
the Dow dropped 171 points the Nasdaq
was off 77 and the S&P; 500 fell 17 and
that does it for nightly Business Report
tonight I’m sue Herrera thanks for
joining us we want to remind you that
this is the time of year your public
television station seeks your support
I’m bill Griffith and we do thank you
for your support
have a great evening everybody we’ll see