>> announcer: this is "nightly businessss report" with tyler mathisen and sue herera. climbing the food chain. amazon buys whole foods to become a major player in the grocery business and a competitive threat to the entire industry. charting a new course. president trump has a different vision for u.s. relations with cuba than his predecessor. and big business is taking notice. market monitor. as more money flows into etfs, our guest tonight has some picks you might want to consider. those stories and more tonight on "nightly business report" for friday, june 16th. good evening, everybody, welcome. i'm sue herera. tyler mathisen is off tonight. amazon is on a mission to conquer new territory. today it agreed to buy grocery

chain whole foods. the price tag, more than $13.5 billion. the deal is amazon's biggest yet, and is an ambitious plan to push into a business that's been hard for online retailers to crack. if successful, it could give amazon a slice of the $800 billion grocery business. the e-commerce business has already been testing a grocery service, amazon fresh. and it's been experimenting with brick and mortar stores like amazon go that don't need cashiers. shares of whole foods soared, rising 29%. amazon was also higher. the rest of the supermarket industry felt pain. kroger's and other markets all tumb tumbled. sara eisen has more on the threat to the grocery industry. >> reporter: the grocery

industry in the u.s. may be forever different. amazon's bid to buy whole foods sent stocks of grocery stores, from kroger to walmart, tumbling. why? amazon has deep pockets. that means it can lower prices of whole food's natural and organic food products, leaving other groceries no choice but to cut prices as well. lower prices might even make that organic food more accessible to a wirder customer base and steal customers. that's why the packaged food companies like hershey's also saw stocks fall on the news. amazon has a broad national reach through its prime program, prime fresh, prime pantry, and other lines that could help sell whole foods branded products all over the country, far beyond the 400-plus stories that whole foos operates. but the biggest question for the grocery industry, how does appears see the future of

groceries? is it online, in-store, some sort of hybrid? we don't know yet, but the biggest online retailer buying one of the biggest organic groceries could bring an experimental testing ground for the way we buy food. for "nightly business report," i'm sara eisen. it's not just food and grocers that find themselves in the crosshairs of the amazon deal. any store that sells food saw their shares take a hit, including the country's biggest grocer, walmart, which generates more than half its annual revenue from food sales. walmart could be the real target of amazon's deal, which sent the stock falling more than 4.5%. courtney reagan has more. >> reporter: amazon is buying whole foods but plans to keep its more than 450 stores and brand intact, along with whole foods' ceo john mackey. the real worry is what it means

for any other business that sells groceries, especially walmart. the country's largest grocer. walmart says this in response. quote, our customers are looking for shopping experiences that provide everyday low pricing and a mix of physical and digital channels that work best for their needs. we feel great about our position, with 4500 stories around the country and fast-growing e-commerce and online grocery businesses. walmart does have ten times the number of stores as whole foods, and has online grocery pickup at 700 locations and growing. it also has increased its fresh and organic options. whole foods and walmart do serve very different shoppers. whole foods' customers tend to be more urban, higher income, and walmart serves a lower income, more rural or suburban shopper. but investors aren't so sure that walmart won't be hurt by amazon's purchase of whole foods. when amazon enters a category, whether books, video streaming, or cloud computing, it plays to win and it pushes prices lower.

amazon cares less about profit and more about pleasing customers. whole foods has a reputation for high prices. if prices fall, it could attract new shoppers. walmart has already been lowering its prices, in part to get back to its lowest price roots, and in part to compete with leadel, a german grocer with rock bottom prices on its own label products that opened its first u.s. stores this week. >> this is one space that walmart was continuing to dominate. they hadn't yet felt the threat from amazon. and now we have a brand-new player in this very, very challenging market, which is grocery. the grocery space is challenging from a profitability perspective. nobody has really cracked the code of how to deliver groceries via e-commerce to consumers. it hasn't passed that tipping point yet. this could be a big game changer. >> reporter: perhaps the bigger concern for walmart and other

grocery retailers is if amazon begins to use whole food stores as pickup points. that's something walmart has over amazon -- at least right now. for "nightly business report," i'm courtney reagan. a.b. mendez joins us to talk more about the amazon/whole foods deal. he's portfolio manager with frost investment advisers, good to see you, a.b. >> good to be here, sue. >> let me start first of all with what you think about this deal. >> the criticism you hear is that it will be diluted or negative for amazon's margin. while whole foods has lower margins, it will actually replace some capex, some investments that amazon has been making and would continue to make, and could also be synergistic to revenues. there are a number of different ways to talk about where they could increase the revenues of the combined business. >> let me turn you to the walmart angle which courtney

reagan just left off on. amazon prime and whole foods, those are kind of the same kinds of customers. so that maybe is a parallel. but if amazon is able to squeeze suppliers and lower prices enough at whole foods, do you think they present a threat to a walmart? >> you know, honestly, i don't think they present a threat. but i think we should talk about that. i think the threat they present to walmart is less on the grocery side, where i'm more concerned about the traditional grocers. amazon has done a great job at electronics merchandise, shipping those to you, prime membership makes that very easy. on the other end, they've been experimenting with grocery for ten years now. so you get fresh and organic produce from whole foods. but the big face that amazon has not filled and has begun to with dash buttons, ordering by voice powered by alexa, and subscribe and save which they've been

promoting heavily, the generalized merchandise that you get from a kroger or walmart, all those things that i don't want to walked through the store and look for, paper towels, soap, shampoo, have amazon can get the right frequency to automatically deliver those things when you need them, that's a massive opportunity. >> there was a lot of talk today that there my be a bidding war, because although amazon has deep pockets, we saw the prices of some of those competitors in the grocery space like a kroger's or a supervalu, take a big tumble. there's a lot of speculation that they cannot afford not to try to make a bid over this particular deal. >> agreed. it's not going to be without its challenges, for amazon to complete this deal. one of those challenges might be competitive bids. one challenge that the competitive bidders such as an a kroger or other traditional grocer would face, people ask about antitrust. if you already have a large

share of grocery and you're buying somebody else who has a large share of grocery, that might get more scrutiny, whereas amazon is less than 1% of u.s. grocery sales as of today. something else to consider is whole foods had already begun to roll out this new slightly lore price, smaller footprint whole foods 365 concept, which i think appeals more to millennials, more technology-forward, more data-driven, which could be positive for kroger but that could fit very well with amazon's data-driven models. >> we will see. to be continued. a.b. mendez, thank you. >> thank you, sue. to show how wide reaching the sale of whole foods to amazon could be, wall street is concerned that traditional grocery stores found its shopping centers are no longer safe assets. as a result, regency centers and weingarten realty all fell in

trading today. the selloff caused the consumer staple sector to drop. the dow jones industrial average rose 24 points to 21,384. the nasdaq fell 13. the s&p 500 was up fractionally. and after a tough run for the tech stocks, the nasdaq was the only major index that was lower this week. consumers are feeling a bit less optimistic. a survey by the university of michigan showed the biggest drop in sentiment since october. that slide reflects concerns about the president's economic policies and whether congress will pass new legislation. according to the survey, more respondents expect a recession in the next five years than those who saw an uninterrupted expansion. in theory, the more optimistic people feel, the more they spend. and spending is a key component of economic activity. the number of new housing projects started in may fell for the third straight month. given the lack of homes listed

on the market, you would think builders would be eager to break ground, but that wasn't the case. according to the commerce department, housing starts dropped 5.5% last month and building permits also fell. economists say this could be a sign that the shortage of houses for sale might worsen. president trump today announced his new policy towards cuba, rolling back some of what president obama did, but not all of it. michelle caruso-cabrera reports tonight from miami. >> reporter: in a speech full of anti-castro rhetoric, president donald trump promised a largely cuban-american audience a new attitude towards cuba. >> we will very strongly restrict american dollars flowing to the military, security, and intelligence services that are the core of the castro regime. they will be restricted. >> reporter: the new policy prohibits americans from doing business with companies owned by the cuban military. that's nearly everything on the

communist island, including hotels, restaurants, the airports, and the ports. however, at the same time, any company already doing business in cuba is grandfathered in, meaning cruise lines like norwegian and carnival and airlines like jetblue and others, can continue operations. marriott can presumably still manage a military-owned hotel. >> i wouldn't call it a policy change in any way, shape, or form, because you see much of the same conditions. >> reporter: one change that will impact individuals, tighter travel restrictions. americans can no longer simply self-certify that they're going on a cultural exchange. it will have to be an officially licensed exchange with a tour group. at the iconic cafe versailles in little havana, president trump was applauded. >> obama basically opened up the whole field for them, go ahead. he gave and didn't get. now this guy will perhaps turn it around, saying you've got to

give a little. we'll see how it works out. >> reporter: final details on the new policies won't emerge for 90 days as we await the treasury department to actually write the new regulations. president trump held off the possibility of better relations with the cuban government but only if they improve their record on human rights and hold free and fair elections. for "nightly business report," i'm michelle caruso-cabrera, miami. still ahead, why some airlines are telling passengers to say "cheese." the health insurer startup oscar is teaming with the cleveland clinic to offer a new health plan in ohio even as

other insurers leave that state. the deal will give residents both on and off the obamacare changes access to one of the nation's top health systems. for oscar, it's the first co-branded plan with the system. >> for most people, it's a fractional experience. you rarely know which physician to go to for which condition. you forget about things they tell you in the e.r. on your way out. by going deep with a provider system that is excellent as cleveland is, we're creating a much more seamless experience for people's health care. >> the cleveland clinic says it makes sense to try to collaborate instead of replicating capabilities. and in the push to get passengers through airports with few delays this summer, the airlines are trying a new approach, using facial recognition systems to identify travelers. as we reported, one airport where the high tech system is already being used is boston's logan airport. phil lebeau has more.

>> reporter: smile for the camera. that's all you need to board jetblue's flights to aruba from boston. no more boarding passes or searching for your passport to prove your identity. >> ultimately i think we see a future where your face is your passport for travel, where you can show up in an airport and your face checks you in, your face allows you to drop your bags, allows you to go through the tsa checkpoint and ultimately board a flight. >> reporter: delta agrees. it will soon use facial recognition to identify passengers checking their luggage before boarding certain flights out of minneapolis. >> this is just another step towards giving a customer something, if they're happy to do their own bag drop, let them do it, they're willing to. >> reporter: airports are addi facial recognition for two reasons. first, apps have become so popular, passengers are not only comfortable with the technology, they use it to move quickly through the airports.

second, facial recognition systems are tied into databases like the one kept by the u.s. customs and border patrol. so carriers can let a machine verify the identity of travelers, freeing up gate agents to concentrate on those passengers needing extra attention. what do travelers think? >> it's pretty cool. it worked pretty cool. i don't know, that was really interesting. >> it seems like it's going a little slow, i think. i don't know, in comparison. but it didn't hurt. >> very easy, america. >> reporter: jetblue says it takes less than five seconds for its facial recognition system to verify the identity of each passenger, about the same amount of time it takes for gate agents to physically look at a passport and a boarding pass. ready or not, airlines are using high tech selfies to speed up how quickly they can get you on flights. phil lebeau, "nightly business report," chicago. the tech startup impinge may benefit from amazon's bid to buy

whole foods. the company makes radiofrequency identification tags which are used in retail to track inventory. amazon is reportedly part of a group led by the company that encourages adoption of the technology. there is speculation amazon could potentially use the technology at some point in whole foods' stores. shares of impinge jumped 19% to $55.71. but shares of the payment processing company vantive were lower because of the deal, because of worries that there could be fewer demands for the company's services. it's called a mild negative for the company. vantive shares were off 3.5% to $60.60. activist hedge fund triand filed a notice for a board seat at procter & gamble. back in february, they disclosed a $3.5 billion stake in the

consumer products company. p&g shares rose a fraction to $89.66. and a former century link employee has filed a suit against the company, after raising concerns about fraudulent customer billings. according to bloomberg, the complaint says century link customers were charged millions of dollars for accounts they never requested. shares were off 4% to $25.72. time now for our market monitor, who has names of stocks and etfs he says you'll want to own over the next two years. last time he was on, it was in december, and his recommended stock picks were anheuser-busch, inbev, nike, and tjx. their performances are mixed. joining us is hank smith, chief investment officer at haverford trust. nice to have you here. >> good to be with you, good evening. >> your first pick is dupont. basically you say there's significant cost reductions

going on at that company. >> right. >> eight over the last 18 months. and basically, there's going to be a split into separate companies. there are a lot of things going on at this particular stock. >> right. the first catalyst is near term in august, the merger with dow and dupont occurred, then over the next 18 months, they're estimating $3 billion of costs taken out. all in the context of an improving underlying environment for their end markets. the agriculture cycle is improving. global economy has picked up. that's all very helpful. then they split into three companies. a material sciences company, especially a products company, and an ag science company, agriculture science company. and that should be the next catalyst to create shareholder value. and from there, we might even get more breakups from those individual three companies. so we think this is a very good two to three, four-year play for

buyers of dupont today. >> and you have a couple of etfs that you want to share with us as well. the first one is ijr, the s&p 600 small cap etf, which was doing pretty well, and then it has a bit of a setback. >> that's right. it did very well at the beginning of the so-called trump trade from the elections to year end. but we've seen a reversal in that trump trade. and the sectors and areas like small stocks that did well have given back some of those gains. and we think that's an opportunity today to take that relative weakness, add to those positions. because you're not paying much of a premium over the valuation of the s&p 500 for the small cap representative index. and you're getting better earnings growth. so we like that today. >> and again, maybe a two-year hold on that particular issue. and let's finish up -- >> absolutely. >> let's finish up with another etf, the iemgi shares, which is

a corps msci emerging markets etf. this is how you're playing a global play. >> correct. i think you get much better diversification attributes investing in emerging markets as opposed to developed international markets. plus emerging economies have bottomed and have started to grow again as commodity prices have come off of the bottom. and this is an area that has been such a relative underperformer for a handful of years, and we think is poised to do very well, because the valuations are quite attractive compared to the developed markets. >> hank, we'll leave it there. have a great weekend. >> same to you. coming up, 'tis the season to hit the links. >> reporter: i'm dominic chu at the u.s. open in wisconsin. we'll talk about why father's day and the u.s. open made for a

great pairing when it comes to the retail industry for golf, coming up on "nightly business mcdonald's will no longer be a sponsor of the olympic games. after supporting the event for 41 years, and contributing more than $1 billion every four-year cycle, the fast food giant pulled out of its contract early. the company said the decision comes as it shifts its focus to different priorities. it may be the middle of june but for golf equipment retailers it feels like christmas. dominic chu tells us why it's the most wonderful time of the year for this industry. he's at the u.s. open in aaron hills, wisconsin.

>> reporter: when it comes to the world of retail, it's all about the holiday shopping season. november and december are when stores sell the most stuff. but in the world of golf, peak shopping season is right now. a week with both father's day and the u.s. open golf championship being played this year at aaron hills in wisconsin. >> father's day is like christmas in june. it is extremely important. in fact this is the number one week of the year, and christmas is actually our number two week of the year in sales. >> reporter: golf retailers like pga super stores and others will be looking to get as many customers in the door and shopping online as possible. while much of the attention in the golf world revolves around big ticket equipment, like drivers and irons, many of the bestsellers around the summer season will be gifts with smaller price tags as well. >> the bestselling items are always golf balls. and the titleist dozen golf balls is probably the best gift

for dad. we've got tremendous footwear, the under armour shoe. we've got all the technology, the watches, the range finders, new drivers from callaway, the epic drivers. lots and lots to choose from. >> reporter: golf clothing and equipment company cobra puma says on average, sales of its polo shirts soar by around 50% during the father's day season. along with its hats and caps, which rise by around 30% this time of year. this year could be critical when it comes to momentum for the game, which is finally showing signs of stabilization after a down trend since the financial crisis. and industry executives want to make sure that sales continue to grow. >> i think if we continue to do the right things, not just manufacturers but more importantly, the governing bodies of the sport, and allow accessibility across all generations, all ethnicities, all genders, to get into the game and enjoy it the way we do, i'm confident that golf will be fine long term.

>> reporter: a record 2.5 million newcomers entered the game in america last year. now the industry has to figure out whether they can convert those newcomers into regular golfers. for "nightly business report," i'm dominic chu, aaron hills, wisconsin, at the u.s. open. our big story tonight was the amazon acquisition of whole foods, which could change the landscape of the $800 billion grocer industry. what do whole foods shoppers think of the deal? we decided to find out. >> i think it's exciting. you can buy everything on amazon. so it just makes sense. it's a brilliant strategy. >> i'm old school, i just like that experience of actually going into the store to see what's there. >> i'm curious as to how it will affect the amazon grocery delivery as it stands now. hopefully it will give us more options as amazon prime members. >> hopefully the prices can be a little more competitive. >> i have three very young logistically, it's tricky to shop with all of them.

>> i kind of like amazon. but what do they know about fresh food? >> i will switch over, i love whole foods food, i think it's better than fresh direct. the stock went up, so they absorbed it for nothing. it looked like a great deal. >> the stock went up a lot, actually. good luck. we'll keep you posted on how that works. that's "nightly business report" for tonight. i'm sue herera. thanks for joining us. have a great father's day weekend, everybody out there. we'll .