>> annncer: this is "nightly businesseport" with bill if ng the curtain. new details have emerged on why the federal reserve decided to make an about-face p onolicy and what it might do next. in pain as cvs health integrates its aetna acquisition. an old takeover is company a real headache. and living in fear of an audit. what are the odds that the irs will actually come after you? those sries and reserve's januar

meeting that almost all fed members want to end the balance sheet reducti later this year. that's news to the market who thought that the $4 trillion balance sheet would be reduced over aonger riod, say well into next year. but the fed said in its minutes will supplant too halt that many in the ng and market think that could happen as soon as march. the fedthoticed tha market inflexible on the balance sheet reduction, not paying enough attention to changes in the economy, so the fed adopted a patient and flexible policy approach to balanc sheet reduction and that led to a new statement that came

out on the balance sheet at thy janumeeting. on the critical issue of interest rates, the fed explained its pivot to a pause from gradual rate increases because it saw growth risks increasing. it noted that financial conditions had the big sell-off in the market. there was also the government shutdown and tnsde tensio leaving the fed to expect slower growth in 2019 than it previously had. it also saw softer business and consumer sentiment and the oueiook for f growth also turned weaker. at the same time, inflation was muted so the fed saw itsisk in pausing. how ng will thatause last? well, some in the minutes said that the ted might return hiking rates later this year, depending upon economic developments and somehought that was not likely. we'll have to watch economic data and listen closely to fed speak over theext couple of months to know if a returning to rate hikes is possible in 2019. for "nightly business report," i'm steve liesman in washington. scott brown joins us now to talk about those minutes and fed policy overall. he's chief economist an raymond

james. scott, thanks for joining us tonight. >> my pleasure. >>n those minutes they also express surprise at the d tline stock market in december as it seemed that the market misunderstood theirpolicy, that maybe they weren't as hawkish as the stock market seemed to think. do you think the market has been wrong about fed policy? >> i think that you've certainly seen a very heightened lev of sensitivity to even minor changes in the fedouook. back in december, you know, in his press conference that policy meeting, fed chairman powell said that the low inflation outlook would allow the fed to be patient so used e same language in january. so really i a don't think it wa drastic change. the fed has gone from sort of a mild tightening bias to essentially wha is neutral. and the bottom line is that the future fed policy decisions will be data dependent still. >> right.

and there were some today and there have been for the last few days on wall street who feel that the fedngs probably g to have to raise rates before the end of the year, maybe in the fall sometime. what do you think? >> well, ther correct ans is always it depends. if the economy picks up and of e certainly seen a lot downside risks. you had the government shutdown, you had trade policy uncertainty. we saw a pretty sharp drop in business and consumer expectations in y. a lot of those fears and downside risks may be starting tobate a little bit. if the economy continues to gain strength, then, ye it would be appropriate to maybe, you know, tap on the brakes a little, maybe a rate increase in ne, maybe another one in december. but we're stillay a long from that. the fed has plenty of time. we're not seeing a lot of pressure from inflation. >> before you go, if the fed starts raising rates, what do you think the market doesbout that?

>> well, it depends on why the fed is raisingrate if it's because the economy is strong and you'd like to see continued growth in earnings, i choke off here's any danger growth here and i think that's still a positive outlook. >> all right,cott own, the chief economist of ray mond tonight. >> thank you. on wall street s me andered for a second day. a rise in technology stocks helped the nasdaq turn in its s eighaight day of gains. by the close the industrial average was up 63 points to 24,959, theda n added 2 and the s&p tacked on about 9 points. the resolution of the u.s./china trade talksst could the thing that drives equiti higher. bob pisani takes a look at where stocks might be heading. >> the market is pricie in a trdeal. the question is how much exactly

is priced in?t cashman thinks it's 50% but it could be more. with that comes potential risk ra the recent y. if a trade deal is announced by the march 1st deadline, the n uptick stocks should be fairly modest if it's priced in, and the market seems comfortable knowing the deadline could be pushed back or delayed. bu w if thete house announces no trade deal and tariffs on china go to 25% from 10 that's not priced in.oc could drop significantly, perhaps even back to their december lows. so with the s&p 500 hovering near 2800, what could push it over 3000? besides a trade deal, talk of the federal reserve possibly easing would be significant. any clear sign that the fed would slow down the unwinding of its $4 trillion balance sheet. let's talk about an earnings recession. i think let's talk about a global slowdown. some positiv growth inurope would help. some economic stability in

china, that would help. and even better economica d out of the u.s. than we got last week with those dismal retail sales an disappointing production numbers. meanwhile new highs are expanding. the market looks good. there's little reason to and the dow is on pace for a ninth week of gains. it's hard to argue that the market is cheap right now, given how far it's advced off of the december 24th lows. the bottom line is this, it's oking very hard to move the market forward notably unless you get stability on the global growth front and somef kind trade deal in the mix. for "nightly business report," i'm bob pi sasani. oil prices did rise to their highest level of the year after nigeria said it was willing to reduce its output. the energy administration is expecting 8.5 million brels of

l per day. domestic crude settled above $56 a barrel posting its sixth straight day of ga ts. tim take a look at some of today's upgrades and downgrades. transocean was upgraded tode trght from overweight. they said socean could benefit from a transformed offshore industry. the price target is $10. despite that upgrade, shares fell a fraction to $8.69. charles schwab was downgraded to a sell from neutral at ubs. thenalyst cited growth concerns and says that buybacks will not cushionhe blo from rising costs. the price target now $42. that stock fell more tha 1% today to $46.45. and a southwest was downgraded to a sell from neutral at goldman sacks with the analyst saying that the airline's new route to and from hawaii could be too costly., separatehe airline cut its outlook for the first quarter saying that revenue decline due

to the recenten govershut do down were bigger than expected and it fell to $51.41 and the other airlines fell in sympathy on southwest guidance and that put a drag on the transportation sector today. so whats the southwest airline downgrade and the weak guidance telling us about the state of the airline industry right now? joining us tonight is seth kaplan, managing partner with airline weekly. seth, good to see you. thanks for joining us tonight. >> likewise, bill. good to be here. >> higher costs and maybe slower traffic due to th government shutdown. is that sort of the perfect storm the airlines face right now? >> yeah. southwest obviously has its own set of problems. no surprise that it led the sector lower, as you said. a few minutes ago you wereg talkout higher oil prices, their highs for the year. you know, you can't talk about oihout also talking about airlines. now, these airlines all think they're better structured than ever to deal with higher oil

prices but theac immediate i of higher ill prices is higher costs for airline h >> they done the pricing power to raise prices commensurate with the rise in jet fuel? >> over the medium andong term, they do, and really do it through capacity moves. airlines are always charging as much as people are willing to pa the way they get to higher fares is by concaraining city. if they think oil prices are going up, they're constrain less but there's lag time. me immediate impact is that if jet fuel cose tomorrow than it does today, everybody tomorrow is flying around on tickets that they bought months ago, schedules that were filed months ago and that comes out of the airline's pocket. >> traditi airlines are very economically sensitive. are they telling us souething the economy right now or not, do you think? >> well, right now the ec yomy, as know, is resilient. the question becomes, well, what happens going forward? there have been patches of ftness, bill, where yeah, it

could be a broader indicator. december had some moments of what's going onith business travel. generally speaking, more good than bad right now. the quest wn becomest happens if the economy does turn down and what does at mean for airlines? obviously not good things but it would depend on premium traffic, the deltas of the world. southwest may not be exposed to on th> still ahead, cvs' checkup. while an old auisition could slow the health company's . cvs health is now tellingor inve that 2019 could be a

rocky year for the company. they issued a profitorecast that was well below wall street estimates. that sent the stock down mor th 8% in today's session. it also raised questions about it ability to integrate its recent acquisition of aetna as quickly as it would like. bertha coombs has details for us. >> reporter: this year cvs health is tryin to focus on integrating its acquisition of health insurer aetna and out new services. the problem is an old acquisition isn't working out as planned. cvs took a $2 billion charge for continuing losses in omnicare. th pharmacy unit had a major ng-term care client file for bankruptcy in december. >> the growth opportunity with omnicare was always focused on the independent and assisted living spaces. those oortunities still ist. the challenges that we have in that business are really askund led nursing facilities which have been worse than we

originally expected. >> reporter: cvs' pharmacy benefits businesses also facing pressure. they want to ban discounts that cvs and other firms negotiate th drug makers proposing that medicare drug plans pass discounts directly to seniors at the pharmacy unter. the ceo warns that the move will raise pricesn medicare drug plan premiums. >> we see the rebate roll takg us backwards, not forwards. we've been very publicct about e hat 100% of rebates are turned over in the medicare business, and have been utilized to buy down premiums. you look at that dynamic, premiums will increase and some ial reports have it growing 52%. >> reporter: cvs expects to combat the issues weighing on its units. the big cost is integrating i.t.

systems with those of aetna. total costs are expected to be $200 billion above the projected savings from so-called merger synergies ts year for "nightly business report," i'm bertha coombs. so what next for ndcvs for health care overall? let's face it.in jo us is an equity analyst. ross, thanks foing us tonight. >> absolutely. > first on cvs, the aetna acquisition was build as the next step in the futur of health care. is that still the case or is that a whole different story now? >> yeah. i mean i think the entire time this was going to take quite a ways and quite a lot of investment to get to where they need to be to serve, you know,c the ame people with a more integrated model for health care, but obvious today the base was a little bit f whereinting in terms we're jumping off from. but i think the premise and the

logic of why they came together still holds. >> what i'm interestein, just around the time this ak scquisin was announced, there was a scramble between others together and none of that ever happened. the anthem/cignaeal fell apart. humana ended up only partnering wi walmart t try to reduce costs. there's been no other blockbuster merger. what happened? >> yeah, i think, look,n the health care complex, large-scale mergers are always challenging and they're hard to agree to. understanding how thepe lands will change, particularly given all the political noise, is not icularly easy. but these assets made a lot of sense together. what they're aiming to do eventually with the boxes at the stores and with aetna member base all should eventually lead to lower costs for people. it's just the path there will take more me. these are pretty complex deals and these are very large pbusinesses. ting them together in a dynamic environment is certainly not easy.

>> s cvs says this will be a challenging year for the companin what do you of the stock? >> we still recommend it. i think the stock is quite inexpensive. the entire time we thought it would take multiple years to get to a place wre you could start for them seeing them lower aetna's medical costs, which essentially should be passed on also to individuals, which it helped them gain so that's the whole premise here. unfortunately, the starting point or the base for earnings is going to be lower than many of us expected, and so we're jumping off of a lower point. but i sll think the ability to sort of revolutionize parts of health care still holds. >> maybe weo ust need patient. it is a big deal.ro , thanks for joining us tonight. >> thank you. constellation brands is slimming down and that's where we begin tonight's marke focus. the spirits company said today it is looking to sell some of its lower-end wine brands so it can focus on the more profitable

high-ending market. e thect to take a hit from canopy growth, which reportedss ast week. the stock of constellation fell 4% t $166.98. speaking of marijuana, na company rij tilray plans to buy manitoba harvest, the world'sge l hemp food maker, for more than $300 million. tilray's ceo sees the deal as an opportunity to speed up its entry io thenited states. >> they have relationships with 30,000 acres of hemp grown by farmers. they have a state-of-the-art processing facility whereke the hese products. and then they have a distribu channel thrgh 13,000 of the largest retailers in the u.s. our intent is to use that supply cbain to help accelerate the products that we will introde by this summer. >> tilray's shares rose more than 5% today to 81.10. tesla's top lawyer is leaving afterust two months on

that job. the electric car maker's general counsel, who represented ceo elon musk last year wn he was sued by the s.e.c. has now decided to return to his old law firm. it is the latest in a string of gh-level departures at tesla. shares were down 1% today to $302.56. health care company magellan is considering selling itself after coming under pressure from starboard value. magellan is in the early stage ofxploring such a deal. shares rose nearly 11.5% on that news to $72.45. and gannett missed earnings and revenue estimates despite a spike inigital subscriptions. the newspaper publisher has been hit by layoffs and declines in print revenue. the results come ase they an unsolicited takeover bid from hedge fund owned mng enterprises. stock dropped today. disney and nestle said they

were pulling ads from youtube afte reports of a pedophile network showing up in the comment section of certain vios. youtube has come under fire before from advertisers who do not want to show their brands reesented next to offensive or extremist content. well, your cableill is likely a big monthly expense, but ditching cable and cutting the cord is not necessarily a simple process. in part because of all the options available, which can seem overwhelming, of course. in the end, consumers just want w if it's worth it. julia boorstin digs into this. >> reporter: welcome to the bundle. consumers are creating their streaming bundles. first there are the spo apps, such as espn plus and ww e! network. second there are-f ree premium content apps such as hbo and show time alongith netflix. third, skinny live tv bundles from, hu youtube, directv and

sling. ms there's a plus side for the consumer in t of the increased choice, but there's the other side of that coin, which is that choice creates dynamic and difficulties. you have to make decisions. >> reporter: is it worth it to cut the cord? to compare traditional tv with the new options, we created two sample digital bundles. ke a look at what a sports lover might pick. along with high-speed dbbrd, directv is a good option for sports fans because you can access nfl sunday ticket. if you add boxing service to zone, espn plus and netflix, this bundle would cost $138,m down fe $215 a cable bundle can cost in los angeles. but if you don't care about sports andntre moreested in premium cable content, you might bundle your broadband access with hulu forive tv adding hbo, showtime and netflix, that uould add to $154. digital bundles can end up

costingmore, depending on the discounts you get on your cable bundle and how many streaming apps you choose. broadband costs increase when you call to cancel cable. for people who don't want to pay, there are a range of companies -- there was $28 billion in revenue accorng to e-marketer. >> there's no question there is a real marke forad-supported streaming video. there are an enormous number of advertisers that really wanting to getxposure and make connections with consumers who are using those bcservices. >> universal is creating an ad-supported tv service fortv p subscribers. facebook is licensing more professional content for its watch vid hub. and viacom bought pluto tv.ar thes among a range of ad-supported services, including the roku channel, zumo, crackle, and walmart's vudu. we'll see how disney and upcoming options change the

landscape. with all of these choices e, availahether it's worth it really depends on what you want. for "nightly business report," i'mulia boorstin and coming up, tax audits. they're time consuming, costly and stressful. but what are the odds that the irs actually audits your returns? samsung has unveiled a new line of galaxy phones, and they fold. the company hopes that thega xy fold will help turn sales and provide the innovative kick that tmartphone industry is looking for. samsung spent five years developing its foldable technology which comes with a price t of nearly $2,000. meanwhile, hershey is addins

ame to the list of companies raising their prices. remember yesterday we told you about eryday items that are likely to see a bump in prices this year. today hershey said that it planp to a new pricing structure in place in north america in om19. the cny says it will use extra revenue to maintain its stro i investhe business and offset rising operational costs. there's tax time and there's one thing all filersave in common, concern that they might be audited. the answer might bethifferent year. robert frank explains. >> reporter: as many taxpayers are discovering, the new tax code is filled with loopholes and gray areas, but their ghchances of getting c by the irs are the lowest in 15 years. the irs h audit rate fallen by half since 2011. only six in every 1,000 returns were audited in 2017. the irs did 630,000 fewer audit

last year than they did in 2011. the wealthy, which are audited the most, have seen the biggest reductn. among tho making $1 million or more, about one in six used to get audited. now it's less i than 1 20. the main reason many say is budget cuts. the agency's total budget is down 16% since 2011. its staff has been cut by 24,000. the number of auditors, known as revenueagents, has fallen from about 14,000 to under 10,000. that is the lowest number since 1953. you havehis perfect storm of these budget cuts followed by this very complex law. now you have honest taxpayers in the first filing season of this law trying to file theirtaxes. if they have a question, which they have many questions, they call the irca thet get the phone answered. they just passed the most complex claw, thegress passed that. it's the congress' responsibility to give the irs theources to complement it. many republicans say it's a blow to bureaucracy that became

politicized under the obama administration and should be reformed and cut even further. now, while some in congress are seeking to increase funding for the agency, especially to improve its outdated technology systems, others say the agency itself could be made obsolete if we just made the tax code a little simpler. >> if we had ale si neutral fair system like a flat tax, a lot of these problems would disappear because you wouldn'th need big fights between rich taxpayers and the government because t system could be simple if politicians would let it be. >>ut for w, it looks like the biggest rewrite in the tax code i more than 30 years will be administered by an agency short on cash. for "nightly busess report," and finally tonight, fast company is out with its o list most innovative companies in the world. at number one is a t chineseh platform that expedites booking ad delivery services like food, hotel stays movie tickets. number two is an app called grab.

's a singapore-based ride-hailing company that expanded into otherservices. rounding out number three is the a. theagazine cited its move into e-sports and it has seen growth in its streaming service as well. before wego, a final look at the day on wall street. kind of a quiet day with the dow up 63 points, the nasdaq added just 2, the s&p added 5. that is "nightly business report" fortonight. i'm bill griffeth. thanks for watching. .

>> this is "bbc world news america." funding of this presentation is made possible by e freeman foundation, and kovler foundation, pursuingu ons for america's neglected needs. >> wow, that is unbelievable. ♪ ng! ♪ >> stay curious. ♪