♪ ♪ this is "nightly business report" with bill griffit.and sue here>> on cloud nine. microsoft crushes estimates as the company shows strength where wall street wants to see it most. challenging tradition. ompanies like netflix and now the resurgence of video g are making things tougher for traditional television. we'll look at the changing landscape. >> and under pressure. i the white hou considering several ways to get drug prices under contr. what it means for investors and your medicine cabinet. all that and much moreht ton on "nightly business report" for this thursday, july the 19th. and we bid you good evening, everybody. sue is off again thisev ing. for the longest time now dow component microsoft was called a dinosaur because it relied

almost solely on its windowsop ating system for growth. the stock barely budged for years, but not anymore. the company'sffice software is no longer the central earnings driver. it's the cloud business that is fueling the growth andhe stock certainly reflects that. after the bell tonight, the company said it earned $1.13 a share. a nickel better than estimates and revenue came i0just above illion for the quarter and that's nearly a billion dollars more than estimates and t i stoctially rose in after-hours trading. josh lipton has the key now for inveors. >> for microsoft investors, the focus is on the company's fast-growing cloud computing business. the software giant just reported a commercial cloud revenue of $6.9 billion, up 53% with gross rgins ticking up to 58%. evercore's kirk mcturn says when you see that strong growth off of a much bigger base ith stronger leverage it reiterates

the positive thesis around the cloudtory. he notes that a lot of good news was priced in with the stock priced up 20% year to dateo leading i this report. for nightly business report, i'm josh lipton, san francisco. >> those microsoft numbers could set the tone tomorrow because tn wall streeay investors focused on a batch of mostly disappointing quarterly results. as a result, the dow fell by 134 point, still above 25,000 and the nasdaq dropped 29nt pand the s&p gave back 11. and despite today's pullback stocks are sitting not too far from all-time highs. bob pisani takes a look at this market's recent slow mion melt up. >> stocks have been on a slow motion melt up forhe past couple of weeks. that's got some investors asking what would it take for the market to hit record highs? you know, the s&p 500 is just out 2% away from its historic high in january. traders believe three main factors have been helping markets god higher hat these

trends will have to continue if the s&p is really going to hit historic highs. the first thing is earnings, most important. the companies have not only been beating earnings estimates, but guidance for the rest of the year has generally been very strong. second, interest rate and inflation have been relatively under control. fed chairmanl j. pow painted an upbeat picture of the u.s. economy and said for now he'sen tent on raising rates at a gradual rate. powell had no intention of being overly aggressive and that if economic conditions worsened the fed would stop raising r tes. finallde concerns have not been a dominant issue in the ast few weeks and that's good news. the market's come to believe thataxuts and other fiscal stimulus would far outweigh a negative impact on tariffs. so what could go wrong in the key will be tech earnings. tech is 26% of the waiting in the s&p 500 and tech earnings alone are expected to jump about 25%. so keep an eye on tech llwethers, microsoft,

facebook, paypal, intel and google parental fabbet in the coming weeks. for nightly business report, i'm bob pisani at the new york stock exchange. comcast is bowing out of the fight for 21st century fox entertainment assets meaning that disney has now won the high-stakesar bidding with its offer of more than $70 billion. for itsomart,st says it will focus on expanding its international reach a controlling stake in european broadcaster sky. the remainder of which is owned by fox,s a matter of fact. comcast, as you may know, is the parent company of cnbc which produces this program. shares of comcast andisney were up on the day. fox was down ever so slightly. >> as traditional television and movie studios do scramble for content and viewers an old competitor has been growing exponentially and ttht would be video game industry and the hottest game around right now is fort night and it recently became a billion dollar business. julia boorstin tells us why.

independent game developer epic games has ats hit on hands. the company topping that landmark billion level in large part from in-game purchases around the pular battle royal mode, which allows people to play in one game at a time. in-game purases growing to $318 million in may according to super data research. >> it is unusual to see this s level ofcess that fort night's had being that it's an independen developer. we typically do see the majority of major titles coming from the big three publishers, activision,ct enic arts and take two, i should say. when we look a this title, it's unique. there's not goi to be a lot of title like that that come from independent developers. >> it has become the most popular genre by hours watched with 700 milli hours of game

play with fort nightou aing for 83% of those hours according to super data. >> fort night's success hasn't hurt the success of the public gamemakers such as activision and electronic a artsmany had feared, but it is prompting the whole industry to embrace the battleod royal me after the sociale social element has been successful. >> act vigivision, hadut call o black ops 4 which is set ter launch octob2th and it is entering the space with battlefield 5 when it launches on october 19th. >> fort night has definitely opened up a broader audience for vi goes. it's not necessarily taking market share away from tivision, take 2 or some of the other publishers and it does seem to be expanding the , audiennd we think a lot of that has to do with a younger demographic, as well a introducing more female gamers to theor space. >> ft night's not just having a ripe effect across gamele s, mpd hasd lis hardware

sales, pushing the market to ecord highs in headset spending through video research game, sales in an all-important holiday season is more unpredictable than usual. for "nightly business report," i'm julia l boorstin in angeles. >> let's turn to frank to talk about the changing media landscape and he is media and telecom analyst at raymond james. tonight.r joining us >> thanks for having me. >> i am fascinated by the growth in the video game business, and this phenomenon and this battle royale that's played on many multiple platforms and many ovdeo games will make more money thans when they're released around the same time. are theem video ger attracted to you as an investment these days? >> well, i cover some slightly different areas particularly cable and telecom, and for me, i think this is great. it's driving more data traffic and it's having people use mor data. despite what the changing viewing habits of consumers are

especially a younger demographic, they need data to do that as they're shifting away from traditional, linear tv broadcast over the top and streaming services or features like fort night, they're more data and that's where the companies that i cover really make the most mon in and where the best investment opportunity is. >> and the companies that you follow the most, they're trying to get together. they're scrambling to find a m combination that stll get the ontent and the highest number of viewers. i think of at&t and time warnerk i t the disney/fox now, discovery/scripps and tribune still being considered by the fcc. has this strengthened the industry or is this a defensive le that's going on right now? >> it's a scale issue. when you look at the old model from the broadcast industry, and some of the cable networks, where they sell a large package of channels to consumers who have to buy a large pkage from e cable company or satellite company, that model is broken

down. consumers are demanng small packages and they have a very specific content that they want and they're willing to pay for and theyant those in smaller packages. that's putting presse onome of these larger media conglomerates who have been able to sell a very wide range of products to consum they have to get more discriminating and they'll have to narrow that focus and that's why we're seeing the media companies and they're trying to reduce ways to reduce churn. for example, if at&t can take additional content and they can go over the weless customers or over their internet customers and video customers and tha can lower churn, those are big dollars and comcast's doing the same thing with what they've done with their co aent. >> w the winners then? who do you like? >> think the winners here are the cable and the companies that have the broadband internet effectively how you're seeing everyone continuing to consume media. so as you movem away f broadcast in a linear model toward washington, you haveo

have a broadband pike. so the companies that we think are the best positioned are ally the cable companies that have the broadband pikes into the home that are carrying the data people demed. >> are nearing the end of this tremendous amount of mergers a acquisitions going on here? >> this is a decade-long shiftou so when look at consumers and they shift their prefer ices. we thinkwill take another ten years so i do think you will continue to see a lot o this shift as consumers change. it will be felt more heavily in the mediandustry and there are probably more deals in the cable and telecom space to come. >> fascinating. thanks fors joining tonight. appreciate it. >> thank you very much. time to take a look at some of today'supgrades and downgrades. we begin with need am which has downgraded shares of tesla to underperform which is essentially the equivalent of a sell rating.l tesla is stovervalued unspite pulling back more than 15% from his of 2017 high, and it seems a possible rise in

model 3 cancellations, as well. tesla shares fell 1% today in trade. ubs downgraded procter & gamble to neutral from buy. the analyst there saysinhat ation and pricing pressure will hurt p & g's profits. the price target now $83 and today p & ghares closed at 78.73 and that was down a fraction. lion's gate was upgraded to buy from hold at suntrust robinson-humphrey. the analyst sees potential for the starz network and the price target, however, was lower to $37 from $31 and shares today finished at 2498 up nearly 5%. >> now to the economy where the number of americans filing for unemployment benefits last week fell to the lowest level we've seen in more than 48 years. jobless claims fell by 8,000 to a level sot seence december of 1969.

>> meanwhile, the white house ii aim at lowering drug prices. we'll tell you how and what it means for you. ♪ ♪ earlier today, prdz sat down for a one-on-one withcnbc's joe kernen. during the interview mr. trump broke with the tradition of a sitting president not commenting on monetary policy. >> i've put a very good man in the fed and i don't necessarily agree with it because he's t raising inter rates. i must tell you, i don't. i'm not thrilled because, you know, we go up and every time you go up they want to raise

rate and i don't really -- i am not happy about it, but at the same time i'm letting them do what they feel is best, but i don't like all of this work that's goinghe into whatre doing and you look at what's going on with the eu and they're not doinghat we're doind we already have somewhat of a disadvantage, although i turning that into an advantage. last year and for years we've been losing $150 billion with the eu nations with the european union, and they're making money easy and china, their currency is dropping like a rock and our currency is going up and i have to tell you, it puts us at a disadvantage. now i'm jt saying the same thing that i would have said as a private citizen, so somebody woul say, maybe you shouldn't say that as a president, and i couldn't care less what t because my views haven't changed. i don't like all of this work that we're putting into t a econom then i see rates

going up. i ree china w -- look at what's happening with their currency. it's dropping like a rock. >> the pre event at the white house today with ceos, workers and students aimed at hping employers fill the persistent skills gap. he signed an executirder on job training and created the council for the american worker which will train about $4 million workers and students. >> their task will be to develop a national workforce and ip strategy to e americans of all ages and at all stages of r their car with the skills they need to thrive in the modern economy. >> meanwhile, on c itolhill, the commerce department started two days of hearings on the o possibilit raising tariffs imposed on vehicles built in europe and sold here in the u.s. phil lebu has more. >> with auto sales running to a record high and an assembly

plant building new vehicles, president trump mor slap a $20 25% tariff on auto imports and especially on poddels and parts whiching from europe. at a hearing in washington, industry leaders warned the administration not to it. their concern, tariffs could drive up the cost of new vehicles by most $6900 according to a new study. that could cause sales to drop by as much as 2 mlion vehicles and lead to 750,000 jobs being cut. right nojust 56% of the models sold in the u.s. are built in the u.s., but the trump administration says that number should be higher and instituting tariffs could be one way to make that happen. >>nt so as the presias repeatedly said, the trade war i.d.e. idea is nothg new and it's

ming to the ramparts. >> the big concern among automaker, dealers and suppliers, higher tariffs will kill the best four-year run of has ever the u.s. seen. >> and this year, the u.s. is once again on pace to have a sales top 17 million vehicles, a ofty level that could be in jeopardy, depending on what happens with tariffs on imported vehicles. phil lebeau, "nightly business report," ago. >> earnings fall at property insurer travelers as castrophe losses climb and that's where we begin tonight and the market focus and the d component grew revenues, and payouts due to an increase in tornado activity and res at commercial properties, they cut into profits. shares of travelers fell nearly 4% to $125.18. >> domino's reported weaker than expected sales growth in the u. and abroad even though customer spending grew.e profits c ahead of estimates thanks to a rise in royalty revenues and investors took a bite out of shares of i

domino's sendi lower by more than 2to $276.75. >> a rise in deliveries helped railroad operator union pacific top expectations and the company's operating ratio disappointed as union pacific raised higher fuel costs and also had to p its workers overtime to repair a collapsed tunnels that causing shipment delays and shares were fractionally lore than 40 and 4l and fargo has reportedly been refunding millions of dollars to customers who received add-on products sh as legal services or insurance that they didn't fully understand or know howse to "the wall street journal reports "that the consumer financial protection bureau looks into whether customers were and whether it was made clear to them how to cancel its service. >> the report added that the bank stop selling those types of products last shares fell a fraction to $56.33 today. after the bell, boy, skechers

reported an earnings miss and disappointing guidance for the current quarter and the full year. the shoe company said that it believes it has the rht product to gain market share, but investors were just not having it today and they sent shares sharply lower. s tonight tck finished up nearly 2% to $33.25. meanwhile, cancer drugmaker constellation pharmaceuticals started trading to on the nasdaq today aft pricing its initial public offering at $15 and that was the midpoint of its range and the company d reduce the size of the offering to 4 million 5hares down from million and the share his a tough first day of trade falling 23% to $11.50. mersonna therapeutic has haltedtsancer experimental studies after a patient enrolled in the trial died. it is unclear what caused the death and under the fda's

partial hold, no other participants will be added to that study at this point and those continued to enroll will continue to receive the treatment. shares plunged today. >> sticking with health care news thete house is revealing a proposal by the health and human servi ts departmet could reshape how drug prices are determined. the proposal seeks to cur the kickback exemption that give drug maish drugmakers to provide rebates to pharmaag benefit ms and those pbms certainly got hit on that news here as youan see here. >> brian joins us now to talk more about theha proposedes and what it could mean for you. thanks for joining us tonight. >>thanks, bill. >> these proposals would mainly pertain to the medicare part d program and the optional prescription benefit program and how would thi impacteople in that program, do you think? >> my thinking here is that if the trumprosal which is to eliminate rebating for

prescription drugs actually goes through, what it will do, is it will actuallyncrease the net cost of drugs for the insurance companies and then the i companies will translate that into an increase in the premiums that both the government and the end user, the seniors part of the medicare part d program, thl premiums w increase and effectively eliminating the increase will elimite drug pricing. >> you know, through all of this, the pbms, the pharmacy benefit managers have been portrayed as the bad ys, the middlemen that caused the increases that we see in drug are they? >> i actually think that the pbms have had a purpose. they have been able to bring overall drug costs down over the years. they'ved impr drug safety and you know, they've looked at ways toncase generic penetration and the use of generic drugs and lower cost alternatives and the margins that the pbms have been

making is under scrutiny, as well and why do we need a middle man? ere is a nee for the scale and the consolidation of lies that these gs bring to the table. it's just that there is a perception that they're er rning and that they're the ones responsible for very high drug prices whe i think at the end of the day, everyone down the supply chain from the drug t manufacturer t distributors and to the pbms, they have to givef their own pound flesh, right? it's not just the middle man that's causing high drug prices in the country. >> meanwhile, there is another proposal that talks about allowing drugompanies and hospitals to import drugs from overseas wre they're often very much cheaper. what do you think that will do to the industry? >> you know, it is a tricky move, right? because at the end of the day, part of the reason that we ar paying high drug prices is we do not have ali natiod health care system. so if you look at canada, you look at the uk, right? they're ablto bring drug pricing down because the

government negotiates directly with the drug manufacturers and they're building very tight formularies, meang, let just say for drugs that go after cholesterol, they'll we'll only pay for one type of drug and that's how they bring dg icing down, right? here in the u.s. we have a different system and we have fferent insurance companies, right? so it's not as easy to bring drug prices down nsly. importing drugs is a band-aid i slugd, but think longer term we need to address thectl pricing from the manufacturer instead of just doing free importation. >> we'll see how these proposalo >> thanks for joining us tonight. >> thanks, bill. up next, hackers are turni their attention to law firms and their secrets and it can be a big problem for some businesses and in some case e stock.

finally tonight, how tough do you think it would be to walk into a major business and steal all of its documents? no need to break in through the front door. many companies are leaving computer networks wide open, giving criminals easy t access their crown jewels, if you will. andrea day hasur investigation. >> this is a message board on the dark web, the post is in russian. the writer says he has the records of a major law firm up for sale in new york city, and get this, it's just $3500. >> all of the documes, all of their servers and basically everything, every document owned and proceawed by this firm will be available. >> and that's not all. according to the cybersecurity firm q6 cyber there are law firms for sale in beverly hills an t across country. >> what's your message to law firms right now?

>> my message to law firms is take this very, verseriously. >> we flew to hollywood, florida to meet them at heapeuarters. they hours hunting on the web. >> if you're a law firm involved in major transactions you will have sensitive information, inside informati before it becomes publicly available. >> that could be dangerous in the wrong hands. >> if i'm able to access that i can manipulate stocks and make a lot of money. we'v oseen that kind activity by sophisticated cyber criminals. >> they did not want to reveal the names of the court, and they don't know they're up for sale. > most active firms are not monitoring this. >> but for the sec, trading based on hac information is a huge focus. in fact, the agency has two units now dedicated to tracking it down. they declined to go on camera for this story, but in 2016, w

tradere trading on hacked information nap data stolen from two new york city law firms and according to the sec, they tw raeked irae raked in. >> he spent two decades working for the ooency. >> we for these different types of malicious actors worldwide who are targeting the financial infrastructure of the united sof america. >> a growing number, he says, are now connecting online and working in teams from all parts of the globe. >> they're learning from each other. there are tutorials many times on how to u the malware. >> you can be a criminal in , nigeria, braz in miami and london and all you have to do is afind the right too services and you can be up and running very quickly. it's almostg pd play. >> if major corporations have their entire crown jewel stolen, a law firm wouldn't be anyone that i would be surprised at.

>> matt o'neal is a super asory speciant with the secret service. >> if you were a business operating in theyonited states have to have a defensive posture and assume that somebody access into get your systems. >> for nightly business report i'mndrea day. >> before we go, let's take a final day on the day on wall street. a handful of earnings reports pushed then dow d 134 points and the nasdaq lost 29 and the s&p gave back 11, but we'll see what those microsoft earnings toni mt do to thekets tomorrow. that's nbr for tonight. i'm bill griffith. thanks for watching. have a good evening. we'll see you tomorrow.

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