this is "nightly business report" with bill griffeth and sue herera. ♪ rush into bonds. yields fall sharply pullioc stks down with them as ve ors grow concerned that the trade war could threaten global growth. >> on trial. the first major case against an opioid maker goes tort c and j&j, is at the center. >> bulking up. two electronic payment companies join forces in the fast-growing, fiercelypetitive and relavely new sintechndustry. thos stories and more tonight on "nightly business report" for tuesday, may 28. >> we do bid you a good evening, everybody, and welcome. stocks did clo sharp lower and it was the bond marke that,

it fell to under .2. investors are growing more asnvinced that the trade war with china will longer and that economic growth could suffer as a resultnd so whi they were embracing the safety of bonds, investors were reducing risk by selling stocks today and by the close, the industrial averageas down 237 points and that's about the low for the session. the nasdaq felly 29. the s&p was down 23. mike santoli starts us off tonight from the new york stock exchange. >> the stock market has held on to most of its gains for the year during a turbulent month of may, but over the past year, nds have been better to investors thanks in part to the trade war tha is unsettled equities. the drop in the ten-year treasury yield today to a 19-month low under 2.3% highlighted the powerful gain in bond prices which moved in the opposite direction from their yields. this bid for safe assets reflects worries over the global growth outlook which has grown

more urgent on trade rules and tariffs. persistently low inflation has also encouraged the move into bonds and t return of government bonds in germany and japan deeply negative yield has likewise dragged treasury and u.s. corporate debt yields lower. as a result the total return for the barclays, aggregate bond index has been about 6% over the past 12 month, a fraction better than theurn of the s&p 500 index over that time including dividends. the bonds have delivered that return with farolessility in stocks which suffered a quick 20% loss in the end of 2018. what's more it's the part of the stock market that acts most like bond, and dividend--focused utilities which held up the indeckes and there were longer stretches of time as finance jerry says should. the s&p has returned more than 12% annually compared to about 2% a year for bonds.

agains way, bonds have done their job in diversified portfolio with stock market weakness and holding t mostir value when stocks are doing well and the question from here is whdher the barket can continue its impressive performance and they'reci p in a federal reserve rate cut or two in coming months and it wouldequire the requirement to lose more steam in a way that stock investor might n like. this means that any succeaccelen could test the strength of bonds and refresh interes in stocks. >> for "nightly business report" i'm make santoli. what could this mean for the interest-sensitive sectors s of thck market and bill stone join us and chief investment officer of avalon advisersta to about this and you point out that the sensitive sectors, utility,eal estate and consumer staples have all done pretty good during thisd per of time. >> they've significantly

outperformed. they've outperformed both the s&p 500 and also en mor the more cyclically exposed or economically heexposed and -- and also tend to be the sectors with less dividend. so you haveo be careful that it's in many cases the same kind of bet if you're betting on bonds and you're betting on also the high-dividend-yielding stocks and that's why people at the moment like them. ion at thet's my que moment and a lot of our viewers are long-term investors and they're not short-term traders and they don't chase trends for the most part. how long dunk this trend now with yields moving lower will last. >> well, it's hard to say exactly, but i think you have to lookt the relative outperformance of these high-yielding stocks and it's worth noning some of these other areas and you don't want to get rid of all of them because in general high yielding stocks for the long run and in terms of relative attractiveness it's

time to look a little b and if you see a better ou in the trade war until the end you will see significant underperformance, i think. >> you make the point that it's going to take a lot longer than some people think. >> i do. i mean, it's pretty easy to see that it's with all of the rhetoric heating up, it's hard to get to anything even before president trump and xi meet at th end of june. so that leaves you hanging out there until at least then and no guarantees that we get a deal even then. >> what about those sectors that ar being left behind here, the previous leadership and the technology and others. you buy that dip or do you wait for them to come back at some point? >> i think you start dipping in a little bit. we like industrials, consumer discretionhy and they've b been hit very hard. i think technology is also certainly look because again, it is right in the crosshairs of the tradear >> all right. >> bill, thanks so much.

bill stone with avalon advisers. >> and those lower bond yields are pushing mortgage rates down which you can igine is good news for potential homebuyers, but a newhoeport today that the nation's housing market is cooling and that home prices are weakeningretty dramatically in some areas. diana olick has details. >> home prices are still higher than they were year o, but not by much and in some spots they're on the verge of falling. nationally, prices were up 3.7% in march a smaller annual gaina than feb and a year ago prices were gaining at nearly twice that pace according to a monthly report from&p case shiller. of course, all real estate is local, phoenix a las vegas tampa are still seeing much larger gain, but they were the market's hardest hit during the osure crisis and prices are still not back from the previous highs of 2006. in seattle, los angeles, san pricesco and san diego, are up less than 2% because

those markets overheated during the recovery. for example, seattle values were appreciating at 13%ust a year ago and san francisco was up 11%. prices usually lag sales and sales of existing homes have been weak all despite lower mortgage rates. buyers clearly hit an affordability wall andlore no er to start bidding wars especially as the supply of homes for sale the average rate on the 30-year fixed continues to fall and is now at the lowest level since march. >> lower mortgage rat usually light a fire under home prices or at least help stabilize them, but so far that has not eappened. it may that prices overheated well beyond any benefit fromou rates and be in for a fall. for "nightly business report" i'm diana olick in washington. >> a positive sign from the economy came from the report on consumer confidence today that shows americans remain optimistic according to the confidence report consumers are

upbeat about the labor market and appear to be brushing off the prolonged trade dispute for china at least for now. >> but the ceo of jp morgan chase called today the trade dispute a real issue that could damage corporate confidence. jamie dimon says the trade dispute has gone from bng a skirmish to being far more important than that. if this goes south in a bad way, he said, youth have surprises and that could be a part of the thing that changes nfidence and changes people's willingness to invest. >> and with no trade talks scheduled, neither the u.s. nor china appears to be softening itstance. eunice yun reports tonight from beijing. ♪ ♪ >> president trump says the n u. ready for a trade deal and china says it has conditions,oo. the foreign ministry said they want negotiations to be conductedls as eqnd with mutual respect and so far all of

te signs aret beijing is toughening its stance, chaian's book on protracted r against using guerilla warfare is gaining popularity and state tv connues to broadcast new anti-american films and over the weekend, they describe the trade deal, saying changes in transfers impinge on china's fundamental economic system. we've heard this before privately, but now it appears that this opinion is becoming more official which means to expect more deadlocked negotiations, escalating tensions and economic uncertainty. for "nightly business report," i'm eunice yun in beijing. >> the ships carrying chinese good carry a 25% tariffs and they're jusnow arriving at u.s. ports, but who is paying ate higher cost. jane wells ihe port of long beach. ♪ ♪ >> this is where the rubber meets the r literally. on this ship are the first goods

to arrive from china since the first tariffs hit, shares like tires, tv monitors and furniture and they're being loaded on to trucks for the american consumer.he who is paying higher cost? >> trump came out and said the importer would pay. 4e of the tearive and the chinese 24%. in professional opinion it's the opposite. >> on that ship are 72,000 bags of dntal flossers made china. each bag before the tariff was around 42 cents and now it's over 48 cents a bag and that difference alone is over $4,000. stephen ferreira estimates the new car from chi is costing companies $15 million per ship where o of the larger companies are putting pressure on the chinese manufacturers. >> the chinese do not want to lose the business of the macy's, the walmart, the targets, the lowe's and home depots and there will be some type ofia interm device coming in to help the cost between the vendor and the home depot.

>> and the fact is trade continues. look at this image from marine traffic which shows all of the pacific on the pacific today. the green once are cargo ships and while many are coming from all over asia, nothing compares to this, out of shanghai. so what happs if and when tariffs expand to everything we buy from china. >> i'll give you an example. the foot apparel instry, they will have a loss of approximately 40 billion a day. long beach port chief marios cordero shey're waite changing supply chains to vietnam. china imports increased in the united states roughly around 2.5 to 2.9%. the increase from vietnam is in double digits. >> go ahead now. >> change comes with a cost. economists at the federal reserve bank in new york estimate tariffs will cost the averag american household over $800, but most of that cost won't be due to the tariffs themselves, but to the money companies are spending to get arou them. for "nightly business report,"

jane wells at the port of longh beac >> it is time to take a look at me of today's upgrades and downgrades. southwest airlines was downgraded to in line from outperform at ever core isi and the boeing max 737 and says the stocks are rangebound until that airplane formally returns. the priceis targe60. shares fell 2% to 50.03. equal igover to overweight. thenaliyst cites near-term risk on the stock. the shares fell 7% to 88.83. activision blizzard was upgraded to buy from neutral at goldman sachs. the analyst sees an inflexion in the gamemaker'ng ear trajectory. $54.price target is the stock rose 2.5% to 43.50. >> still ahead, an automotive powerhouse in the making? ♪ ♪

>> aandmark opioid-related trial got under way in norman, oklahoma. it pits johnson & johnson against oak klahoma prosecutorsd it's one o 2,000 states and local municipalities against drug compani over their alleged role in the opioid prices. meg terrell has more.& johnson hnson is the sole remaining defendant in the trial of oklahoma in that it helped fuel the state's opioid epidemic. teva and purdue pharma settled lars and tevaof d over the week ebdz. it's the first of a slew of opioid cases eected to play out over the next couple of

years. they paint the drug industry as responsible for the devastation of opioid heoverdose. >> will be testimony being presented by families that were ruined or lives that have been destroyed and those will be tied to whatever company is on the other side oft this. >> i also a very public trial with cameras allowed in the courtroom. >> the evidence is verylear that johnson & johnson knew this truth before they ever started marketing their drugs here in the state of oklahoma. if you oversuspect ppply you wi >> its quote, actions in the marketing and promotion of these imponant prescription p medications were appropriate and responsible. teva saidsets lement, quote, does not establish any wrongdoing and that it's not contributed to the use of opioids in oklahoma in any way. some analysts see parallels to tobaccigation of two ucades ago and says settlements could add quickly. >> teva settled for $85 million to oklahoma.

oklahoma is 1.1% of the u.s. population. f you grossed it out to the entire stipulation, teva has just agreed t if wee that number, but $7.1 billion if you take a t 50 states. t's according to bernstein. together he says the industry could be facing paying tens of billions of dollars and they plan to vigorously fight the ssaims. for nightly busireport, i'm meg terrell. shares of fiat chrysler revved hire as they proposed a merger wh the french automaker renault. it would create the third largest auto company on paper, such a deal makes sense, but will it go through and will it deliver the promised results? phil lebeau takes a look. >>t fiat chrysler's head are the kwaers outside detroit there is a growing sense the automaker will soon be part oh a m larger company. fca, the parenanof several

ds including jeev merge with renault out of plants creating the world's third largest automaker selling 8.1 mil 8.1 million vehicles second to toyota. the deal is the right move, adding in group renault, we found a like-minded partner who sees the future as we do. that means slashing costs and streamlining operation, potentially saving the combined automaker nearly $6wh million e promising not to cut a single job. >> when the renault sd think about this, quote, friendly offer and they call it a friendly offer, and also don't forget, renault is feeling a little jilted by nissan right now. >> remember, renault and nissan have been parers since decades whenut atrities arrested

carlos ghosn it exposed a growing rift between the automakers and it created the opening for fiat chrysler chairman john elkin to approach renault about aha merger tt would let compaes pool resources and in an auto industry where profitarns are being squeezed. renault's alliance with nissan is the unknown factor in this merger offer. with the french company tried to break its partnership with nissan or would it try tng b fiat chrysler into that alliance. the questio theenault board will be pondering as it considers the offer to merge with fiat chrysler. phil lebeau,ightly business port, chicago. >> the sports illustrated brand is sold for $100 million in a rather unusual deal. authentic brands purchased the intellectual property of the iconic sports magazine fm meredith corp. under this deal, meredith will continue to publish thenaper versf the magazine and

manage its website and then it will pay autheic brand a licensing fee for at least the next two years. the stock was down nearly 4% to 52.57. alibaba is reportedly looking to raise $20 blion through a secondary stock offering in hong rdkong. acg to reports the additional shares would help the e-commerce company add liquidity. shares were down a fraction to 84.51. itnnounced that longtime investor hillpath capital plans to increasetstake in the company. that sent the stock higher by more than 16% to 31.77. global payments has agreed to f buylow paymentech tech company total systems services for more than $21 billion and this is the sector's third major acquisition this year and according to the ceo itdd scale in a very competitive

industry that can help the company add customers. >>e md more technology companies, we sell our software directly with merchants and we embed our payments in those software companies. it will continue to be merchant, merchants in the future and other stock economies. >> it was down 3% to 188.87 while total system was down 5% to 118.84. along those lines a new report tsays electronic payments industry will generate $3 trillion a year in revenue in just a few years. so what is this b iness going to look like in five years and who will the winners and losers be? >> joini us tonight chris bentler is with buckingham sesearch. thanks for joining tonight. >> in e-commerce it's about delivery. that's the newnorontier right and getting it there faster. now they're in e-commerce and

it's about payments and electronic payments. >> how much fasters is thing going grow? >> i think that electronic payment proce benefited from the trend in e-commerce and there's lots of growth ahead. you can'tay with cash when you are buying something online and e-commerce is a big focus f visa and mastercard and the payment processors essentially growing four or five times faster than traditional commerce. >> it's about scale, and who is the best positioned if indeed this trend of consolidation and gaining scale continues. >> that's thereat question today because we've seen three of the biggest emerging acquirers get acquired this year and the fst world pay and now and they're trying to competewi the other two mega mergers. my favorite today in terms of near-term and the stock price and i like the combination and i

like world trade long term and it seems like they're trying to join the industry and more o ma defensive at this point. >> where do the companies like square, apple with apple pay and google with the electronic payments and where do they fall in ts are >> square is right smack in the middle and the deal today is about the threat that square proposes to the traditional players. traditionally acqui ng it wa sold through banks and square has a direct model and the only brand namece in the s and square is one of the reasons why you're seeing these mega meers. apple p and google pay are wallets that use visa and mastercard. you think the losers and i'm just curious why they have not invested more in this technologynd could the banks be a buyer down the line of some of these companies that

mentioned >> absolutely. i think banks have been the go-to source for merchant acquiring relheionships and customer walks into the branch and they need to accept visa and mastercard and that was ten, 20 years ago and now tenology has reinvented the space for a direct approach and the banks continu to consolidate and the deal is part of the trend, and they need to consolidate and get skwal a cala compete on technology and they're throwing this money, and they have the best talent and the traditional players need to consolidate. >> chris with buckingham research. >> coming up, tax audits are am down especiallong the super rich. ♪ ♪

people are not spendin as much time on facebook these days. a new report by e-marketer says that the time users spend on the platform each day fell by three minutes to an average of 38 minutes and usage is expected to decline even further next year and may remain flat in 2021. that's importa because advertisers look closely at that particular metric. the reporter attributes the slide to facebook's news feed changes and tthe platform's overall lack of popularity with teens. >> getting audit side a big fear among taxpayers and odds are that won't happen, robert frank explains. >> audits of the nation's s highest earniell to their lowest levels on record. olw data from the irs shows that taxctors audited a little over 6% of all returns, but those making 10 mil oowmore that'sby half from a year

earlier and down 80% from the recent peak in 201 the drop was across the board for the wealthy. those making a million or more or 5 million both saw declines. it is unclear how mucen r has beenn lost from those fewer audits which is a decline now for seven straight years and the top half of 1% from americans accounted for 20% of all underreported income that works out to be $50 billion a year. why the low of audit rates? well, budget cuts to the irs were the main reason which resulted in sharp decreasebe in the n of auditors. kinghe auditors is a w dead bureaucracy. it's been eviscerated that the budget is way down and you can see in these nbers that you are more likely to be audited in the united states if you ke $20,000 a year than if you make $500,000. the battle is heating upss in congver giving the agency more money especially after the

new tax law cated new loopholes and opportunities for avdance. the i estimates that every dollar spent on enforcement generates $5 in revenue. each collections officer generates 4on mil a year in revenue. republicans say they don't want to keep throwing money at a large bureaucracy. president trump is proposing a 1.5% budget this year and adding $15 biion over the next ten years for irsnt enforce think, the voter doesn't have much supporter, and it's the ledt popular of government that's low.fo nightly business report. >> the wife of jeff bezos hasiv revealed to half of her fortune to charity. she has signed the so-called wgiving pledgech encourages

are the world's richest people to donate the majority ofoheir wealth charitable causes. it's estimated to be $35 bilon making her one of the richest people in the world following her divorce. you can read more about her pledge on the website, nbr.com. theow dropped 237. the nasdaq fell 29. s&p 500 down 23. that is "nightly business report qwest "tight, i'm sue herera. have a good evening. e you tomorrow. ♪ ♪

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