this is "nightly business report" with sue herera and bill griffith. >> flare-up. wall street seems to believe the trade war will last a lot longer than once thought. that sent stocks sharply lower an bond yields even lower. nt tech cold war, the sector is bearing the b of u.s.-china tensions and at stake is the race to dominatehe global rollout of 5g technology. >> buyer's strike. aew report points to a disappointing spring for the nation's homebuilders. those stories and much more tonight on "nightly business report" for this thursday, may the 23rd. >> good evening, everyone, and welcome. the u.s. and china are hardening theirnces in the trade war. no talks are scheduled and china warned the u.s. to change its,

quote, wrong actions, end quote. invests now seemo think that the trade war will last a lot longer and that a prolonged fight could hit economic growth, consumer spendd corporate profits. that sent stocks lower across theoi board. prices slumped, and the yield on the ten-year treasury fell to an 18-month low. the dow jones industrial average fell 286 points to 25,490, but it had been down more than 400 points. the nasdaq was down 122 and the s&p 500 slid 34. bob pisani starts us off tonight from the new york stock exchange. >> trade and t have been the marginal movers of the market and reality is setting in and the reality is there's no set date for tradeks to begin. there's hope that president trump and president xi will meet at the g20 meeting in june, but the underlings have set the groundwork for a meeting and there's nothing on the books to do that. the trade situation has gotten worse and the markets are pricing th it will get better. you have a problem.

if you're bullish on the market yo have to be bullish on global growth, you have to believe trade gets better and you see, it doesn't help that we keep getting the disappointing manufacturing numbers out of europe as we did today. slowly, but surely the trade is piling up includi tech giants intel and apple, but the industrial name, 3m, caterpillar and dow, dupont and the materials are all down big. defensive nameser like pf merck and coke, mcdonald's are up for the monthnd if the trade talks thaw out, global growth estimates for everything will comar down andngs will come down for all of the global companies including the coca-colas of the world. is said hat philip mo today. they said, i'm quoting, domestic pressure and constrain will drive both sides toward further escalation and there's a 65%t chance t they will come in during the second half of the year. for nately business rebrt, i'm pisani at the new york stock exchange.

>> when it comes to the economy the outlook keeps shifting and shifting quickly. even at the highest ranks of the fedeevl reserve. liesman explains. >> it was early may and fed chairman jerome powell was feeling just a bit better about the ups and downs the u.s. economy had been facingwe like global growth, brexit and the trade war. >> while concerns remain in all of ihese areas appears that risks have moderated somewhat. >> a little more thanek three s later, most of those prlems are worse and there are new ones to handle. brexit has flared up aga as an ongoing risk that may topple the government. global economy after europe looks worse than it did, and new pairives for president trump have exploded the trade war and they raised questions about the outlook for u.s. inflation ando . here's what powell said this week about the trade talks and the outcome of the trade negotiations is not known and it wood be premature make sense of that. we'll have to see how this plays out and i'm notoing to

speculate. >> the result is a fed called permahold in order to speed up the economy or hike them to slow it down and the fear is that businessld remain on too. >> i talk to business leaders all of the time. they tell onme, i know what the rules are going to be a year from now so i'm just going to wait and we've had to take pretty significant actions in order to offset that and there have been some price increases and there have been some suppl chain moves and there have been some cost management actions taken, as ,we but we managed to offset that and perhaps what's turned so quickly can reverse course. markets have been on for so long that they might decide that the forecast for continued bumpynd scary ride. for "nightly business report," i'm steve haliesman. >> bumpy ride is exactly what we've been seeing. mikesantoli joins us from the new york stock exchange. good to see you, mike. >> does the shift indu sentimen to all of the trade

concerns? >> i think trade s concernst of pile on top of the other issues and we always expected there to k somed of an economic slowdown and a corporate earnings slowdown this yearnd the trade issue seems like because it got re-escalated has just ecerbated those issues and that's yet markets have kind of gone into thecr defensive ch, and pricing in slower growth and the second half of this year was supposed o be when we might get a re-acceleration of the economy and corporate profits start to grow again. now the sec td half ofs year starts in five or six weeks and it'setng a little close to think that in fact, we can have a pickup in that time. >> i remember the last summer the market became defensive and the strength all of a sudden was today with this sell-off, utilities were higher. so is the market coming more defensive and settling into that mode again? >> without a doubt. in fact, that's been gng on for a while even when the market was much close tots highs and doing seemingly well othe

surface and there was a defensiveness and it was healthcare and big technology stocks like the one that are these big dominant companies and not necessarily semiconductors that sell into china. they were the ones that were benefitting from this areaf doubt about the overall power of the economic expansion. so i do think it's been a defensive task. 's gotten more intense right now especially when you look at what's going o with the bond yields going down and year and a oint and at this that's where we are. i think the market is being held up by theow bond yields of the safer sectors. >>im ine terms, you look at a lot of different charts during the day, mike. are some of the chart patterns in the dow jones industrial average and the s&p 500 mirroring what we're seeing in terms of market action? >> ty areor the most part. for one thing, i think we should maybe emphasize tt if you dial back a couple of years, the stock market has really been in a deys range swinging around for about a year and a half,

2018.january of yes, we made a new high just last month. the decline has not yet really jeardized the most recent uptrend from december just yet and it's getting to this area, for example, in the s&p 500 where if it fell a few more percent fro here and i do have people question whether it's back into a more sloppy environment that will chop m around and ne in a defined up trend. >> mike santoli from the new york stock exchange. >> so what could have protracted a standoff between what the u.s. and china has in stocks and bonds. we have twost ks, and portfolio manager at alpine woods capital a on mark brand, fixed global income at b. riley. good to see you both. >> thank you. >> sarah,ou as heard mike santoli talking about that. do you see the market becoming more defensi t? t where you would be

putting money to work right now, do you think? >> as you look at multiples on consumer staples and the stocks th have recovered quite nicely it wasn't just about the december quarter and the defense stocks were having a hardrime all yast year. so i think that you're starting to see people position themselves more defensively and people are looking at places where there's more u.s. exposure. >> mark, one of the places that they are getting defensive is by moving into the bond market. how much more of thisove do you see, and if you're a longer term investor, would you go out as far, or would you be shorter on the yield curve. so i've been saying for quite a while that yields were going down. the 800-pound gorilla in the room is the fed and the word is an about a face a 180-degree term after the meeting and the fed's next move will be because of the chinese, but i call it

the game of thrones between the two countries. the fed's next move is going to be to cut interest rates, ad i woike to point out when we're talking about china it's not like china is equivalent to the u the chinese economy i41% smaller than the u.s. economy and consequently any kind of protracted trade war, i think, will hurt china far more than the united states. >> how much lower could you see it moving. we're at 230 right now. i think we cann get d to somewhere around the 2%. it wouldn't surprise me at all. i think the fed is very conscious o the -- what's going on with china and i had a great opportunity n long ago to speak with the president of the st. louis fed, jim bullard and one of the brightest guys on wall street, in my opinion and he didn't, of course, say

anything. >> right. >> that was my impression that the fed was very concernth about u.s. economy and the trade wars and was ready to go either way depending upon how things worked out. >> so sivah, the uncertainty and the headline risk, if you're a longer term investor what areas of the market do you think looked a little bit safer. >> i think if you go back to some of the areas that have seen some pretty good appreciation in prices and i'm want sure you j want tp into consumer staples here and i think over the longer term i think some really good opportunities in some of the defense stocks and i also think some of the consumer stocks and there are issues in terms of pricing with home depot ands thi along those lines where you have to worry about tariffs and longer e , those are tariffs that have had long growth over a long peri of time and ihink that will ultimately continue. >> let me just say i had lunch with an investment banker friend today, sar and his opinion was and it's one man's opinion, oh, ey'll figure things out and

he'll be stepping into buying things that willeleng off like the d semiductor stocks. is that risky thinking or what are you thinking this has been a market that's been buying dips for years now. enit d on your timeframe. if you have a long enough me ame, in the long run they will figure it out and which stocks are going to be specifically impacted and if you can get comforthathe places have at least an exposure to the issues that are going on them it's not such a difficult thing. longer term, we'll all be using re semiconductors and all of these trends are not going to stop just because we get into a trade war. >> sarah hunt wit alpine woods y, thankand mark ri you both tonight. >> thank you. >> 5g technology is at the heart of tpu trade d between the u.s. and china as both countries race to be the t first build out high-speed 5g networks, but

why is this b such a deal and why is it the centerpiece of the trade dispute. joining us to discuss that is ian shear. wach, ian. nicehave you here. >> thanks for having me. >> the basic question is why everybody focusing on 5g and yes, it's the next big thing, he but what are implications of whether china wins or the.s. wins. >> a lot of this is bragging rights. that's a very important part of i and what's interesting that china produces a lot of the equipment that makes 5g possible. so what's really interesting here is thatxthere's this layer in all of this going on where the united states government which h been raising alarms about chinese hacking and all sorts of other things ition to this trade dispute going on is trying to actually keep oth countries and ourselves from using 5gki netw equipment from china and this causes quite a bit of consternation, and a lot ofio

conf in the market particularly because there hasn't been that much proof where things aret.oming from >> implicit in the fcc's approval in the deal between sprint and t-mobile was, they said that this would allow for faster rollout of 5g. there it is again and can we roll out 5g with those two merging and with huawei out of the picture? >> i know it's goio be kind of a crazy thing to hear, but i don't think it actually matters much. this whole race to 5g thing on some level it's just about the bragging rights and at the end of the day n in thet few years we'll have it hopefully if it lives up to the markeng hype d it's not going to be an issue, but what it's turned into meis it's be a political fight partially because we're in the middle of this trade war. >> and ang those lines there was an analyst quoted on reuters that this will extend beyond tariffs to force arebuilding of the global technology industry

splitting it into chinese and u.s. fears of influence ain do you it will get that far? >> it would be really interesting to see. so much of the global supply chain specifically through the tech industry flows throughsi and the idea that suddenly we'll put our foot on the break and start producing chips and phones and everything else in china is rd for me to get my head around and not to mention that there are estimates already that these trade disputes will have to raise the prices for a lot os er technology. it's hard to believe that we can actually pull that o w andre talking about years down the line and i guess anything could be possible. >> ian, thank you. i'm sure we'll be speaking again. ian sheer with cnet. >> meantime, the tru administration will give farmers $16 billion to losses from the trade war with china. d on nt rates will dep where they farm and the crops that they grow. farmers, as you know, have been among the hardest hit.

some are sittingn ridiculoecord volumes of soybeans as they pulled back on purchases of the crop this year. >> it is time to take a look at some of today's aupgrad downgrades. qualcomm is downgraded to neutral from buy at mizuho. the analyst cites uncertainty that the company violate antitrust law with its pattern royalty and something that we told you about yesterday. the price target is 65. the shares fell 1.5% to 68.20. chipotle was downgraded to underperform to market perform, and the analyst cites concerns over the spread of african swine flu and the potential impact on margins. the price target is $620 and the stock dropped.5to $667.12. >> target was upgraded to overweight from neutral at j.p. morgan with the analyst cited the retailer had expanded operating income and he called the shares undervalued and the price target is $100. the stock is a bright spot in

today's ma uet. it w 2% at 79.40. morgan stanley cut its price target on kohl's to $50 a share and that's the lowest on wall street. the analyst says the retailer second-half strategy appears risky. as we reported, kohl's cut its full-year profit forecast earlier this week and the firm is also concerned about an increase in promotions. the stock dropped more than 4%o today 51.15. >> still ahead, best buy's turnaround has been called striking, but thefimpact tariffs looms large. ♪ ♪

su> cr electronics giant best buy reported better than expected earnings and shares did tumble after it issued warning that higher tariffs will likely result in higher prices for consumers, but despite today's a pu, this stock is up 25% so far this r.j. is the consumer equity strategist at morningstar joining us to talk about the outlook for a company, r.j. thar ears the people assumed it was going to go out of business because amazon was eating his lunch. what did they do to turn things around? >> it really was a three-prong strategy. it started first clearing out ynnecessary costs. i think t did a great job managing the income statement and getting rid of a lot of unnecessary costs and if you look at the star of the tenure. they cut off close to $1.6 billion o of the cost structure which was a great way to start and secondly, they

became a partner to the competitors and particularly the s ofons and the sony's app the world and the retail store and that dent some people coming back traffic wise and beyond that, they moved more to the service side of the busines now, too and they become smartphone and integrated they've done a good job managing that and using services in the way to extend the customer base. >> so how do you feel about the stock? there are a number of companies this week who wthat the tariffs could be an issue to the bottom line if they don't feel they have the pricing power to pass those tariff costs on to the consumers. would you buy the stock on a ba pu like we saw today? >> i think i'd wait for a bigger llback and to your point and i think the tariffs will have an impactn e business and like appliances and that's where best buy is most exposed and you'll see a pullback because of theg slowales and that, and they're a lot more conshauctive

and would have to wait a couple of quarters, and i do think this is ansinteresting ss model and i do think that over time they'll face more competitionvi on the ss side and amazon will move directly to the service side, but if do see a big pullback because of tariffs. >> i wasust going to say, isn't amazon still a threat to this company? >> yeah. >> they are still lurking, think a lot of the people look at thicks that best buy's done well if terms partnering with vendors and services. both of those are onexposedr term and a lot of the vendors they deal withhether it be apple, amazon and google and they'll be taking the products directly t consumers and services is an interesting business and it's a way to expand the target audience and at the same time these things are being replicated and amazon ho services through kohl's and i think that's a looming threat. i think you l kelsewhere, it's hard to differentiate yourself on service and you'll see price competition on that, as well.

>> r.j. wit morningstar, thanks for joining us. >> thanks, bill. >> the faa is meeting with global air regulators about boeing's 737 max airplane. the group is tryinto determine what is needed to get the grounded plane back in c servic. soriers have estimated that the fleet will be flying again by august, but the fa achieve says there is no eemetable. >> they don't to make any changes to their plans and they just need to know that there isn't a timetable for bridgingi the 737 back to flight and there is one criteria to let the 737 max flight. >> according to reuters, airlines expect the each 737 max jet to require 100 to 150 hours before flying once regulators approve boeing's plan. that includes everything from taking the plane out of storage to engine checks to uploading the new software. >> shares of bicycle

therapeutics hit the brakes in their trading debut today and that's where we begin tonight's marketoc. the biopharmaceutical firm priced its initial public offering at $14 a a share this company say new class of therapeutics based on chemically synthesized medicines called bicycles. the company's stock fell 13% on the first day of trading to $1 even. >> medtronic reported better-than-expected results, and an abrupt closure of one of its plants. theev medicale maker had higher sales made surgical instruments used to treat hernia and ailments. it issued an up beat earnings outlook for the fullier and shares rose more than 3% as a result to 91.64. hormel reported mixed results and the maker of spand other meat products warned african swine fever affected quarter revenues and will continue to impact future sales of its beef

and pork products. the company also cut its full-year outlook as a resultor andl was off a fraction today to 39.13. >> b.j.'s wholesale topd expectations thanks to strong same-store sales. the company saw growth in membership and confirmed the full-yearuidance and shares were up 3% to 26.15. after the bell, htolett-packard ed expectations as the company saw increases in its pc and its printer unit. hp also raised its full-year forecast. the stock initially rose in t after-hoursding and closed the regular session down a fraction to 1919. and ao after the bell, earnings and revenue at lion's gatein enternt missed estimates and this comes as the motion picture producer and stributor reportedly distributes talks to sell itsm prem network stars. it dropped in after-hours se trading and c down a fraction to $15.99. >> coming up, builders are asking where are the buyers a

sales for new homes slump again. ♪ ♪ ♪ ♪ the house passed a bipartisan retirement bill aimed at improving the savings ofan amer the measure would make it easier or small businesses to ban together ter 401(k) plans. it would also eliminate the maximum contribution age on traditional iras whi currently stands at 70 1/2. the proposal now heads to the senate where a similar bill has yet to be voted out of committee. manufacturing activity has slumped to a nine-year low. a new survey points to trade war concerns and a slowdown in demand for american goods and

key export markets. new orders fell for the first time sin 2009. and a separate survey showed a decline in service sector growth, as well. a disappointing spring for the nation's homebuilders. sales fell more than expected in april as prices for new homes continue to rise. diana olick has more. >> a decade after the housing crash, the nation'ss homebuild are still recovering in fits and starts. fewer housing starts tndn expectedow fewer home sales in april. >> we have a bit of a buyer's strike where the pricing has gotten so high and the worldt o the strmong all builders is what are we going to do about it affordab and the prices go up and really hurt the consumer. >> gene meyers built homes in the denver area and says the high cost for land, labor and materials make lowering home prices increasingly difficult. >> builders just don't have a big cushion. it's actually a surprisingly low

margin industry and so we have os choice when c go up, the custer will end up paying. >> the median price of a newly built home a inil shot up nearly 9% to $332,000 and the highest on the u.s. census. the price is strong for entry-level homes and thean buildersut up pricier, high-end homes and that's what's available for sale. at a recent builder conference in southern california, the high cost o regulation was a major concern. >> and you have the lack of availability because of tariffs and impact fees and some of that and we don't have skill labor and there are a lot of things working against us that have builders rethinking every aspect of what they do in order to lowerprices. what we're working on for all of our new product development is smaller, simpler, more constructible, meffordable and beautiful high her formance homes that's our formula.

>> a formula more builders may have to follo in order to make the math work for more consumers. for "nightlyusiness report ", i'm diana olick in washington? one final look at the day on wall street. the dow had been down 240 points and the nasdaq was down122 and the s&p 500 slid by 34 and i guess you plablame trade. >> i think so. that's the theme. that's it for "nightly business report "qwest. i'm sue ilrera. >> i'm griffth. see you tomorrow. ♪ ♪

announcer: this is "bbc world news america." ♪ >> funding of this presentation is made possle by the freeman foundation, and judy and peterlum-kovler foundation, pursuing solutions for america's neglecd needs. >> wow, that is unbelievable. ♪' 'm flying!♪ ♪