tv Nightly Business Report PBS March 27, 2019 5:00pm-5:31pm PDT
>> announcer: this isbu "nightl ness report" with sue herera ealth care powerhouse. centene is buying wellcare for more than $17 billion, but the acquisition comes just as washington readiesor itself another policy fight. new normal. mortgage rates are falling fast, and that may not change for a while. switching sides. mcdonald's will no longer fight minimum wage increases, putting one oftrhe cos largest employers on the other side of a controversial issue. those stories and much more tonight on "nightly business report" for wednesday, march the 27th. good evening, everyone. welcome. health care deal-making is, healthy.etty insurer centene has agreed to
wy managed care provider wellcare, somethi told you was possible last night. that deal adds to the flurry of the get-togethers that we've seen this year. usin fact health iy mergers globally have had their biggest first quarter in 12 years. shares of the companies moved io te directions. wellcare was up 12%. centene fell nearly 5%. it is important to note that both centene and we have a number of things in common, including significant business around government h programs. and that could prove to be either a risk or a reward. bertha coombs h the details. >> reporter: centene has grown its medicaid business tenfold over the lastade in part through regional acquisitions. the $17.3 billion deal touy wellcare will be its biggest transaction yet. >> these are two good companies in my opinion. you're putting the, togeth they're high growth industries. they have complementary products that work well together.
we've had the objective to build our medicare product. they have a strong medicare product. we have a technology platfor they need for their work. would e combid company become the nation's fourth largest health insurer, cementing the safety net programs and the affordable care exchange marke the combined company a million medicare advantage members and 4 million medicare part drug plans across all 50 states. what concerns some investors about the deal, centene is projecting slower earnings growth in the first year. s&p credit analysts aren't worried about that. >> with a deal this size, there's always integration risk. so we think integration risk in this case is a little bit muted than some of the other larger deals that we have looked at. now, regulatory, that's a very fferent question. >> anti-trust regulators may raise concerns about overlap and centene and wellcare's
medication businesses in georgi missouri and nebraska. their combined market share tops 60% in those states. >> wn we look at the possibility that both georgia eed missouri would require divestitures to approval, that would be something a little bit above th15% o combined medicaid membership. that's a lot. ut i think that that's manageable. that may not be necessary. >> investors have already seen risks in centene's exposure to the affordable care itact, the trump administration now asking the federal courts to overturn the law in a case that's under appeal. centene's ceo thinks the supreme court will ultimately uphold the law. >> i've always found when there's a certain amount of uncertainty, in a challenging that's the time to act. >> ifapproved, centene expects to close the deal late next year. for "nightly business report" action i'ma coombs. chris meekins joins us to talk about this deal and, boy, e up in the air policy landscape in washington when it
comes to managed carend health insurers. he is the health care policy analyst at raymond james. chris, thanks for joining us tonight. >> thanks for having me. >> so what do you think, does this deal make sense or will we know down the road after things have been resolved, if they n be resolved any time soon on policy in washington? >> i think hindsight is always 0 0. looking at the deal today when i looked over the information i providhink it makes a lot of sense. centene had adecision, dohey want to be acquired or do acquiring. they decided to go outnd pick up wellcare. there's a little overlap in a few states but with some divestitures they should work their way out. when you look at the care names, which so far year to date are basically flat to down 1% as a whol it's a good time to jump on while these names are a little cheaper than they were at other times. >> do you anticipate m seeinge deals, even with the regulatory uncertainty in washington?
>> yeah, i think you're going to probably see some additional deals. when i lookt who could be next on the acquisition list, i look at names like malena, magellan health, even humana who has talks about mergerst in the p but hasn't found the right fit so far. i think there's opportunity here. as you lookng forward, you ear a lot of stuff in d.c. about medicare for all and single payer. one great examplen is wouse democrats had an opportunity this week to introduce a new health care bill as their signature thing in the new congress, what they di is they went after building on the affordable care act and it better. they didn't look at moving forward completely up ending the entire medicaid and commercial rkets. >> one thing everybody agrees on is costs need to come down. thatould seem to put a cap on some of the growth opportunities for some of these insurers.re do you is that a problem for them?
>> there's no question that as they look at ways to regulate costs, there are opportunities. right now there's actually kind of a reverse incenve because insurers are only able to keepl the medica arab ratio of 85%, they can only keep 15% for them, they don't really have an incentive to drive cos even greater. with new advances in technologies, there's greater opportunities for value-based care and finding ways to make sure those that are the highest drivers of cost, make sure they take medication, make sure they get the help that they need. you' seen a lot of great leadership like united health and optum that are leading t way. i think as you get to scale with some of these companies, we're only going to see those areas grow. >> clearly in issue is back on th agenda in washington, so we'll see what happens this year. hris meekins, again, thanks for joining us tonigh >> thanks so much. on wall street, stocks fell as the yield on the 10-yearea ry hit its lowest level since 2017.
concerns about the health of the global economy fueled the decline in yields and that d weighen stocks. the dow jones industrial average was down 32 points to 25,625. the nasdaq fell 48 and the s&p 0 was off 13. meanwhile, our trade deficit with the rest of the world narrowed sha ly injanuary. the commerce department said this morning the deficit in trade a services shrank by 15% to $51 billion. that's smaller t than $57 billion that was forecast by economists. in fac the smaller deficit was driven by a decline in imports from china and other countries as well. even as economists grow concerned about the health of the economy, it's also important to kno what americans think, because they're the ones driving a lot of the activity. and that's whe cnbc's all america survey comes in. here's steve liesman. >> while markets day in and day out worry about a coming n, recesshat doesn't seem to be the case for the american public.
cnbc all america economic survey of 800 amecans nationwide findsis optimm on the economy. it's down a bit from th lofty levels of last ye h, butalf of all americans think theis econo in good or excellent shape. two-thirds see the economy i eithroving or staying the same in the year ahead. >> consumer condence leads to consumer spending. as we know consumer spending accounts for 70% of gdp growth. is it below peak? it is. but that supports the theme of slowing but growing. we expect theconomy to continue to grow. not at the levels we saw last year but certainlyti ce to grow. >> aricans outlook for wages are down from last year but 42% believe their homes will rise in price. both are on par with the averages for the past several years. the outlook for stocks also down from the levels hit last year near the market peak, but it'sc back from the lower levels hit amid the december sell-off. th >> february t beginning of the fall, economic confidence
was fairly high. when we sawur imx, we saw people become more engaged at that time. starting in octer and wilf and i talk about this a lot, october, november,mb de, our clients actually drew down their engagement witthe marke in january. >> 41% say it's a good time to invest in stocks,p three points from the last survey, and 30% say 's a bad time, down six points. for "nightly business report," i'm steve liesman. and as interest rates fall, so do mortgage rates. borrowers and buyers alike are reactithis new normal. diana olick has more from washington. >> reporter: mortgage rates continue to fall todayve edging close to the 3% range on the 30-year fixed. mortgage news daily reporting an average 4.03% for loans with 20% downpayment, so some lenders are already in the 3s. today we got the response to last week's drop inates. mortgage applications jumped more than 9%.
refinances tk the lead, jumping 12% for the week. for the last two years refi volume just plunged but clearly we're seeing a turn-around all because res have been dropping. you can see the sharp plunge after the fed's announcement st wednesday that it would not raise rates any more this year. mortgage applitions to buy home also rose 6% for the week, although just4% higher than a year ago. on that note, once again the average loan size hit a new record. this is likely because when rates drop people with bigger mortgages benefit more from a refinance. on the buy side lower rates help peopleorfford home. i'm diana olick in washington. one of the mosramatic stories today took place across the atlantic in th united kingdom where prime minister theresa may said she wl resign if parliament passes her brexit deal. the move is an attempt to push members of parlient to approve a plan. willem marx is coverg the
story from london. what happened today and perhaps more importantly,ha whaens next? >> reporter: well, sue, today wasment to be about parliament deciding on which shade of brexit it could find a majority for. 're just a few moments away from getting the results of these satcalled inde votes where they indicate their preferences in a nonbinding y. before that voting kicked off, theresa may met with membersf her conservative party and under a huge amount of pressure promised that -- essentially implying t wt sheld not be prime minister in two months time. may 22nd, as of tonight, was one of two official legally binding brexit dates. the other one is april t 1h. if she can get her deal through, it will be that later date in may. if she can't as of rig now the
default is they will leave the european union april 12th. what happens now? rythe government will to bring her deal to a vote. it was defeated by 149 votes last time. she sti has a hug amount of work to do. but by making this promise, by assuring mps that she would be in ping down at some poi the not too distant future, she already seems to be getting somr me of her party back on her side. but one caveat, the small northern irish party that helps prop up her government, theig have said t they will not back her deal regardless of this offer for her resignation. >> but irony or ist, b johnson of all people said that he would vote for it tonight. who do you ink, assuming she does then end up stepping down, who dyou think leads the charge in the negotiations in the future? any names coming to surface yet? >> reporter: there's a few. one of them would be her former brexit secretary, dominic robb who's been very quiet the last 24 hours.
he's not one of the big high-profile figures in the conservative party. he said they will now this deal. that allows him to win support from the hard line ce mbership of the conservative party, which is not necessarily representativee rest of the uk, let alone the conservativety parliamentary p behind me. he is the one obvious fichre. l gove has also been quite loyal to theresa may in recent months but has a a reputation an intelligent politician and comes up with intelligent so there are a few men and women in the mix but those are two that come to mindimmediately. >> well, we will beatching it closely. willem marx in london. ome of e to look at today's upgrades and downgrades. coverage of boeing was resumed y with a rating at citi with the analyst there basing his call on a multi-month grounding of the 737 max aircraft with what he anticipates will be a manageable fix.
the price target $450. that stock was up 1% todo $374.21. ralph lauren was upgraded to outperform from market perform at wells fargo. the analyst citedal the poten for growth to accelerate and he called ralph lauren a rare standout. price target, $150. shares were up 2.5% to $125.34. on semi conductor was upgraded from buy to neutral. the analyst cites opportunities ger growth. the price t is $26. the shares fell 2% to $20.56. s krchsketchers was upgrade. the price target is $37. the stock rose more than 3% to 3 2.58. still ahead. boeing's next move.
>> boeing outlines changes it plans for thed groun737 max. how long until the planes get back in the air? that story coming up on r southwest airlines today trimmed its first quarter revenue growth forecast. the company cited the grounding of its fleet of boeing 737 max planes. southwest now expects revenue per available seat mile, which is a key metric, to grow between 2% and 3%. it had been expected torow by 4%. but the softer outlook did not impact the stock today. it was up 2% in today's >>ssion. the acting head of the faa was on capitol hill answering questions about its oversight of
boeing. the certificati process came into focus following the crash of those two boeing commerci in five months. dan elwehe saidgency plans to revamp the oversight process but that it would need an additional 10,000 employees and ly $2 billion if it were to assume all responsibilities for aircraft certification. meantime, boeing believes it now has theix to resolve those issues that forced regutors to groun its 737 max jets. it's been two weeks now since the faa joined other aviation agencies around the world in shutting down the popular plane following those two crashes. phil lebeau is in seattle withn boeingheir push to get the max flying again. >> reporter: is the737 max one step closer to taking off again? boeing thinks so. today boeing's vice president briefeeporters on changes being made to the max and increased training for 737 pilots. >> we're working with customers and regulators around the wor
to restore faith in our industry,nd also to reaffirm our commitment to safety and to earning the trust of the flying public. >> reporter: after analyzing crashay have caused the of the 737 max last october, boeing is limiting how often tht flight'sated controls can influence the max's flight path. it's alsupdating the cockpit display so pilots arert a when the system kicks in. a criticism boeing has facedsh since the cf a max in ethiopia earlier this month. will these changes ease the pressure boeing is facing? >> it's not going to alleviate the pressure. it's going to explain what happened and how they came to the processes and decisions they came to. but until the airplane is back in service and proven to be safe, if you sswill, pe will remain on boeing for quite a while yet. >> reporter: the m is not
flying until boeing clears several hurdles, including having the faa clear the software update and lift the grounding. foreign governments will still need tove the fix. >> the 737 is a safe airplane. the737 family is a safe airplane family. and the 737 max builds on that tremendous history of safety that s we'n for the last almost 50 years. >> reporter: boeing believes the changes it has outlined can be implemented in a matter of days. but until the faa and regulators around the world approve the afety of the 737 max, these anes remain grounded and some lieve that could last another 6 to 12 weeks. phil lebeau, "nightly busiss report,"seattle, washington. lennar builds a solid foundation. the home builder reported a 24 increase in orders and a 30% rise inde veries, signaling improved demand for new homes.
the company said falling mortgage rates will be a catalyst for the industry, and that helped offset an earnings and revenue shortfall in the most recent quarter. the stock rose 4% to $51.67. investors had their first chance to react to results from shoe carnival and they liked what they saw. the retailer reported better-than-expected earnings and same-store sales driven by demand for women's boots. the stock soared 22% to $37.30. meanwhile, apparel maker pvh is forecasting full-year profit above estimates. they cited strong demand for its ommy hilfiger and calvin klei brands. the company also reported better-than-expected profit and sales for this most recent quarter. that sent the sto higher in initial after-hours trading. it clod the regular session u a fraction to $110.89. and lulemon had a strong holiday quarter. they record a profit that blew past anysts' estimates.
shares rose in initial after-hours trading and gained 2% during the regular session to $146.80. coming up, mcdonald's just made a decision thae could h a big impact on wages across the co ned today shift hap in the debate over minimum wage. mcdonald's had been a vocal opponent of the push to raise it,ut now the large employer is having second thoughts. kate rog. >> reporter: mcdonald's changino urse on minimum wage. the fast food giant sending a letter to the national restaurant association tuesday saying it would no longer lobby
in support of t efforts oppose or defeat minimum wage increases. the letr said in part the conversation about waging is an important one. it'sne we wiso advance, not impede. ultimately progress must come from all corners of our society, and mcdonald's corporation is committed to playing a meaningful role in the spaces we occupy. the letter went on tsay mcdonald's workers at its company-owned locations have an average sg wage of more than $10 an hour. while it doesn't contrt pay franchise locations, mcdonald's believes it is likely similar. theompany declined to comment beyond the letter to cnbc. mcdonald's statement comes as pressure builds to hike the federal minimum wage which stan at $7.25 an hour and has not been raised since 2009. congressional democrats have renewed a push to increase it to 5 an hour by 2024 with the raise the wage act, which the national restaurant association opposes in i current state. the largest food service trade group in the world said in part
our members are as diverse as the communities theyserve, and the economies of every region are different. advocates say mcdonald's' move is a start but not enough. >> definitely a welcome statemt but it'seally a reflection of the mainstream consensus now.19 tates are raising their minimum wage this year.nc 2012, 22 million workers have received raises. lots of cpanies are adopting 15 as their baseline. it's really where most of the country is at right now. the notables adopt 15. >> reporter: forne "nightly bu report," i'm kate rogers. so what kind of impact will mcdonald's big shift on minimum wages have onro wagesd the country. joining us right now to talk abt it is markh hamrick. >> hello, bill. >> walmart, target amazon, now mcdonald's.
they have come out in favor of $15 federal minimum wage. is that enough to make this become closer to a reality or not, do you think? >> bill, first of all, i'm a little more cautious about what mcdonald's either said or did t say. it seemed to me that what they really did signal was they didn't want to be seen as opposing a federal minimum wage increase. i didn't hear them say that they're going to raise their own minimum wages to$15 an hour. so let's stand back from that ju a little bit. as the reporter package ow indicated, there are only a minority of states across the country which are essentiallyte ered to that low federal minimum wage. states and localitiesave moved ahead of the federal government. the other politic reality is simply because house democrats want this to happen doesn'tean that the white house and the senate will move along. i think this is talking point. i think it's something that does engage mcdonald's in an
important conversation it's a good pr move as well. >> on that note, it seems as though you don't think they did this through the goodness of their heart but because they would be feeling social pressure, maybe from some of their customers. they don't want to be left out, rather than putting both feet in. >> absolutely. there has been a vocal political pressure for mcdonald's to essentially stop opposing thd. the other part is we think about some of the more dynamic players in this space that are doing the right things in the eyes of the all-important, for example, millenial market. so part of that is being what people might view as being a good global citizen and also helping their own workers to attain a more workable wage that can get them above that $10 an hour level that they referenced in their >> but let's face it, just this week mcdonald's made the largest acquisition in the last 20 years
buyinghis technology company that's going to produce a more hi-tech drive-through line there. so i'm wonderi if their cost structure goes down because of tenology, if they feel maybe they could afford more wages at sesome point bec they'll be hiring fewer workers maybe? >> well, i think that t remai be seen, bill. obviously there is going to be a dance that never ends between the c technologyponent of this and the involvement of human workers in those stores. it may be,s is often the case, they may move people from one task to another. i still go to the grocery store. i'd prefer tohork w a cashier than go to that automated station that never seems to work. >> that's where you and i differ. do like the automated station. thanks for joining us tonight. >> great to be with you. an update to our brexit story tonight. the results of those parliamentary votes are
the results show that there is no clear majority for any brexit opveon. >> not or yet. >> no. >> but here's the final numbers from wall street today. the down was d 32 points, nasdaq fell by 48, the s&p was down by 13. >> just the storyhat keeps on giving. >> yes, it is. >> that's "nightly business report" for tonight. m sue herera, thanks for joining us. >> i'm bill griffeth. have a great evening. we'l