>> announcer: this is "nightly business report" with bill griffeth and sue herer rotten apple, the company cuts its guidance for the quarter. badstart. new signs of economic weakness in china have investors worldwide wondering how bad can it get. locked out, while the partial government shutdown is making it hard for buyers to get a loan for their new home. those stories and much more tonight on "nightly business rey rt" for wednesday, janu 2nd. >> we do bid you a good evening, everybody, and welcome. we're kicking off the new year at the new york stock exchange. >> many investors i'm sure were looking for a fresh start after stocks closed out 2018 with their worst performance in a

dede, but that is not what they got. >> late today apple of all companies warned investors that business during the holiday shopping season was not nearly as good as they thought it would b. the company said the current quarter will come in well below estimates and isam g china and the weakness in the emerging markets. during an exclusive interview today, ceo tim cook explained thf issue. >>u look at our results, our shortfall is over 100% from iphone and it' primarily in greater china. as we look at what's going on in china, it's clear that the economy began to slow thereec f thed half. and what i believe to be the case is the trade tensins betw the united states and china put additional pressure on their economy. >> the stock, of course, is widely owned in mutual funds in china accounts and it fell

sh ply in an initial affir hours trading tonight, wiping out billions in market va'se. been falling all fall. we're joined by tom forte from d.a. davidson. it was just a couple months ago they were giving good guidance about iphone sales overall. so what do you make of this announcement? >> if you look at the $84 billion versus the $89 billion, it's about a 6% oushortfall. if look at the fact that the average selling price on iphones was higher this year than last year, for example, 7.5% on even the lowest cost new iphones,t does sugge that unit sales were really weak in the december quarter. it's highly unusual for apple to preannounce in general. so it is a surprise that it is disappointing. of that do you think, though, because the stock

has been falling for some time now, is some ofhis alreadyn the stock, certainly in the afterhours response it doesn't seem so. but what do you think? >> if you look at apple ease shares that have been down about 20% prior to today's ifannouncement. ou look at the market move, 7% after hours, it does seem like some of this was priced into shares, but, again, it's highly usual for apple to preannounce a 5% to 6% on the low end of revenue. not surprised to see a further pullbackftven shares were presumably already pricing some of this presre. >> tim cook is laying this all on china. do you believe that and do you think that's where theakig ss is and why? their economy is slowing down. w much of this is the trade active with the united states, and do you think we're seeing a slowdown in the united states as well in terms of their sales? >>o for apple, i do believe their problems are china

specificin their as waa tigh sales are to chinese consumers, and the company is trying to managehe incremental pressure from paris. i think it's specific to apple. m not surprised there's incremental weakness in their sales within chin >> if you own the stock, what do you do right now and what's your e target on it? >> i have a $280 price target right and i would still hold on to shares. so i think that the good news for apple is that they generate a lot of free cash flow. they had something like 180 blol billion dollars in net cash at the end of besept why is neutral cash position important? they have purchase progr in place right now and generally speaking init april they un--

update us. ths mighthe next 12 m be okay for apple's shoues >> thankor joining us tonight. >> thank you, my pleasure. >> disappointing economic data out of china set the tone for the first day of trading in the year. as you know, it is one of the same worries that plagued the mark in 2018. the dow rebounded then traded i and out of positive territory for the rest of the session. the dow jones rose 18 points to 23,346. theasdaq added 30, is the s&p 500 was up 3. we're joined nowin by jeff k top, the global chief investment strategist at charles schwab. nice to have you here, jeff. let's start with china, if i could. we just heard from apple that greater china was the trn in its side. you're also worried about the slowdown in china. >> i am. on the corporate side we're not

just hearing from apple. samsung announced they were shutting down one of theil production fies in china. we heard from other large ur manufa, particular from japan, for example. and this morning we got that pmi number, the purchasing managers index that showed a furthern slowdownhinese manufacturing, a key gage for what's going on in china. clearly there's a slowdown. sue, in the past what cna would have done is weaken their cu tency. but thde talks are tying their hands on that front. >> i was going to say, is this about the tradetalks? is this about the tariffs that have been battling back and forth t between united states or how much of it also, as you know the their economy to a more consumer-oriented economy. but that's subject of a biness cycle. what's going on? >> china tried to impose a

number of reforms to walk away from some of the undisciplined lending that was taking place. we've seenhe lag effect of those reforms on this slowdown. r me of it troops even a y ago. but it's compounded by a general global economic slowdown. we saw other pmis weaken, including the one in the u.s. that came out this morning. that's being magnified by the fact that china is in a difficult spot on those trade talks, and that is certainly o weighi sales as well. >> very quickly, jeff, tim cook said that he was encouraged bwh he's hearing on trade. there are a lot of othal ts on the street who are not as credentialed by that. where do you stand? how do you think this is all going to play out? bly ltimately there's pro going to be some type of solution. i don't know if it rolls back ri all the s, but it will make future ones less steep. it's sokey. the backdrop is one of global slowing growth and that's the here.factor that's what drove the pullbacks,

including the one in october tied to e fednd financial conditions than trade conditions. so i'mocused on the interest rate and financial indicators. trade is certainly a side show. >> jeff,hank you so much. jeff klein with charles swhap. there are a number of events that investors will be focusing on in this first f weeksf the new year. dominic chu has our road map tonight. >> reporter: the wild ride that 018 will have plenty of reason to stay that way in 2019 thanks to a slew of -moving events in the coming weeks. later on in this week we'll not only get public remarks from jerome powell, but the report. the weak of january 7th, it is expected that trade talks withi will resume in some fashion, and that means possibly more headlines and tweets. the week of january 14th sees the unofficial kickoff to corporate earnings season.

investors expect to see earnings continue to grow, though not as stronglys last year and then the fed interest rate decision of the year on january 29th and 30th. fast forward to march and we get the deadline for reaching a trade deal with china before a newound of tariffs as well as another fed rate decision. by the way, remember, thatll fed rate decisions this year will have press conferences attached to them. a that first in federal reserve history. and those are just a handful of thpotential catalysts. the first economiceport from december showed manufacturing activity in the u.s. get a 15-month low, according to a survey, more than two-thirds of manufactures reported higher costs attributed the rise in prices to tariffs. some affects also reported trouble finding workers and busine sector fell to its weakest point in more than two years >> it doesn't appear that any progress was made at the white house to end the partial

government shutdown. botheplican and democratic ended nd senate leaders h with no deal and no signal that one may happen anytime soon. earlier in the day the president maintained that he will keep the government shuttered for as long as it takes to get funding for a border wall. >> $5.6 million is such a small number, literally. it's one month in afghanistan. and we're talking about national security. this isn't just a border, this is national security, this is health andwellness. this is everything. >> the partial government shutdown is also putting mortgage lenders in a tough spot and it could delay the approval of some home loans. diane o luck explains. >> reporter: trouble in this house is starting to cause headaches for houses like these. the partial government shutdown has fully shut offom some loanam pro and may delay

closings on others. the issue is the irs which is a system to validate a borrower's tax returns. >> lenders are closing loans on time during th shutdown, a they're certainly taking on a lot more risk by doing so.in there are cer items that need to be verified through government agencies, inclualng soecurity numbers and in certain cases, self-employed people, irs tax transcripts. and those things are not occurring right now. >> reporter: there are also issues at the fha, the government insurer of home loans which is part of d. it's operating on a skeleton staff. lenders get automated loan numbers from bfha, if there are problems with the application, they're not likely phone fast.e on the >> if there are duplicate case numbers or a specific inquiry m you need te of staffers, you're probably not going to get the response you're lookingfor. >> finally, there's the

agriculture department's rural home loan prhram. it's a m bigger deal in rural states. it'sot tly shut down for now. all of this couldn't come at a worst time for the housing market and margin markets, interest rates which hadl een rising fback, a great incentive for buyers. thehuown shouldn't seriously shut down most deals. but the longer it goes on and the more it messes with the mohegage market, tougher that decision could be. rir "nightly business report," i'm diane o elein washington. time to take a look at some of today's upgrades and downgrades. wells fargo was upgraded. the analyst cited valuation after a 25% decline in the shares in last year year tde. target is $48. shares rose to $46.96.

bausch was up. thhe analyst says drug maker is exhibiting earnings stability as well as the potential for long-term growth. price rget, $27. bausch is the company formerly known as valiant pharmaceuticals. shares rose 9.5% to $23.23. cvs was updated toqual weight at stevens. stronger pricing, price target now $58 and that stocke r 4% to $45.66. still ahead, some strategist say cas is king in this uncertainty market, but what does that mean, at should you do with your mon?

>> one of the best performing asset classes last year was of all things, sh and more than a few money managers have increased their cash levels because of all of the stock market volatility. joining us tonight to talk short term cash strategies, good to see you happy newyear. >> happy new year. >> i know you're on a little higher cash level than your own portfolio these days. united advocate a long-term cash strategy. if you're holding cash right up, other than just sitting and earning nothing, what do you do with that cash these days, sandy? >> tre's mon market funds that are yielding now 2.28%, whicis much more reasonable than it was a year ago. so you can actually have a bit cash on the sideline and

decrease some of that volatility in the market. >> what about bonds? it's at least paying you something? >> i'd rather stay short. people that try to chase yield, they're either going to go lower in quality or go further in duration. the tenur is at 266 and it's now.long in duration right i'd rather stay shorter and keep the -- and stay on that side of the yield curve. >> how high is your cash position now,nd how longo you expect it to be there? i mean, i assume it's because of the volatility. how much longer do you think that's going to last? >> you know, we hads as much 12% or 13% cash. when the volatility indexst ted to spike as you got intoan christmas evthe day after christmas, we started to put about 40% of that cash to work

between christmas eve and new year's. so we consider it like bullets in the gun tha we want to fire away and use when the stock market gets cheaper oranic is at a high. so we've put some of that cash to work already. >> all right. sandy, thanks for joining us as always. sandyle v tonight. tesla danivered more 245,000 electric cars and suvs last year. that's nearlyy as m as all previous years combined. but it wasn't enough to match analysts' estimates. the stock lowered by 7% in today's session. >> tesla has also become the first electric car maker to cut prices because of the decline in the federal tax credit on some of the most popular electric vehicles. as phil la vo reports, the new year is bringinghanges for many looking to go green on the road. >> reporter: walk into a tesla showroom anded you'll itely

see prices have been cut, down $2,000. the auto makers trying to entice potential customers to still buy a tesla despite the federal ev tax credit being cut. >> this is coming at an inopportune time for tesla. this puts them at a competitive disadvantage. >> reporter: as sales have grown, it has sold more than 200,000 vehicles. the point where automakers start to lose theederal ev tax credit. that credit was put in place by the obama administration toca entice ameri to buy an electric car which would likely co more than a comparable gas powered car. that has helped sales of electric models like the nissan leaf and the chevy bolt. but gm recently sold its 200,000th electric car, so its scustomers willn see what tesla buyer are now experiencing, a substantially

lower tax credit, which rthses e question. will the phase out of that incentive hurt sales of those electric models? >> these automakers do stand to lose a lot of icsales, paarly for gm. tesla might be a little bit more insulated with a less elastic base of buyers, but they can still count on a significant drop in sales. >> the federal tax credit of $7,500 is not going to away anytime soon. for other automakers who have sold few electric vehicles.'t but d look for this credit to be extended any further.mp the tdministration has given no indication it wants to give americans further motivation to plug in their vehicles. "nightly business an energizing buyout to start the year. that's where we begin tonight's maulinity focus. dominion energy completed its merger with scan nah that was

drowning in debt following a failure of a nuclear construction project. it paid $7 billion for the company. dominion shares finished down to 7118. watts iboosts dividend 10%. it's a distributor of heating, air-conditioning and refrigeration products. shares were up $139.19. alphabet's google unit won approval from regularities to dloi a radar based mion sensor device. it can operate the sensor at d.gher power levels than currently allo the agency says the decision will serve theublic interest providing touchless hand gesture technology. alphabet shares were up nearly 1% today to $105,468. according to bloomberg a deal with apollo could b reached by mid-january for as much as $22 a that sent shares higher by

eware. 10%o $18.56. california introduced recreational marijuana one year ago. the industry was expected to take off, but instead, it hit a number of road blocks andne ss for some went up in smoke. >> reporter: for the past five years, northern california based bloom farms has manufactured and distributed videotape pens filled with cannabis concentrate. why videotape pens? >> simple. convenient, easy, very manageable. >> reporter: the founder says in to early years they sold december pen sayers carrying medical marijuana which had been legal in california since 1996. but when the state legalized ij recreational mna in 2018, ray had high hopes about growing his business. >> it was an exciting time we thought was going to be very, very busy. >> reporter: but it wa f't. t, sales went down last

year. ray is not the only cannabis entrepreneur who is struggling. for the first six months of s2018, thete brought in $84 million in cannabis tax of wha, less than half had been estimated. ay blames cumbersome regulations, including the requirement that licensed distributors like bloom farms only sell to licensed december pen sayers. >> in 2017 there were 2,000 retail delivery locations available to sell. >> reporter: once recreational cannabis was legalized, a the preexisting ones had to get approval in order to legally sell marijuana in the state. it's been a slow-moving pancess the state currently only has 1,100 licen d marijuana retailers, down from the year , before and also way below the 6,000 the state had original projected. on top of th base, costly and time consuming skpangds labeling requirements. >> the requirements for child

resistance. you can't open this without scissors. >> reporter: ray says his products are at least 30% more exnsive this year they were last. sending customers to the black market. one market research firm says california's black market for marijuana grew after legalization, from $10 billion in 2017 to more than $11.5 billion in 2018. >> we're exced about this year. we've always been at the top of our game as far as executing our plan, but this year we now know what the rules are. >> ray is hopeful more enforcement will mean a better year ahead. state officialsay they had hoped to have more licensed retailers by now, but the processas been slow, even though recreational cannabis sales are legal at th state level. insiders say less than 20% of cities in california allow . for "nightly business report," san

coming up, the new year is ushering in a number of new laws. a busy day. the newongress convenience. topping the agenda with the the shutdown. automakers released their ales figures for december and investors will get a fresh read on the housing market with two weeks' worth of mortgage application data. that among other things will be among the things we're watch it is a new year, and for several states that means a o number new laws go into effect. eric runs through some of the changes from the serious to the >> reporter: state governments have introduced countless new

measures, many of the laws are straightforward, several states raising the minimum wage, requiring businesses to collect tax on internet sales, and nning from asking a a candidate's jobhistory. but there are the strange lups popping in illinois f school buses are used to transport people above the age of 18 who aren'tsi the bus for school or church reasons, then the school bus sign has to be covered up. and the stop signal arm and ashing lights cannot be used. also in illinois, if you want to go hunting, you can do soar weing bright clothing. in coloradoan beer ce purchased at the aggressor.ve beer a 3% alcohol content had to be purchased at liquor stores. in oregon, drivers can now salvage meat from dee and elk

accidentally struck by vehicles. but you still have to fill out an online permit, and you have to give the antlers back to thee goment. in california, pets are legally considered part of the family when it comes to divorce court. judges can assign joint or shared custody based on what the judge decides is in the best interest of the pet. in washington state, the state's new discrimination lawea will clrly define what a service animal is and creating a maximum $500 penalty for anybody misrepresenting a regular animal as a service one. for "nightly business report," i'm eric chemi. finally, moree peopl may be concerned about a possible recession. google searches for that word have spiked to their highest levels since 2011 back when europe was facing a debt crises that almost l to a collapse of the euro zone. searches for bear market also have reached a record surpassing those of july8f 2y more

than 50%. before we go, here's a look at the final numbers from wall street. theow finished up 18 points to 23,346. the s&p 500 added 3. apple fell after it cut its revenue forecastfor the curr toat will do it for "nightly business report"ght. thanks for joining us. i'm sue herera. >> nice to be back at the new yorkftock exchange, only for just a few days. thanks for joining us.th i'm bill grif we'll see you .

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