this is "nightly business report" with bill griffith and sue herera. ♪ g >>d evening, everybody, and welcome to this special edition of "nighsiness report". sue is off tonight. you know, believe it or not, we are halfway through 2019, so t we're going spend this evening looking at the outlook for the second half of the yeai for every from the markets to the fed to housing, and we beginonight with stocks and the economy. this year performance has been a bi bumpy. stock rallies have given way to new highs, but there have been some sha and severe slumps as well. at the center of most of those moves has been the federal reserve. we have two reports on that

toniitt. to start we have steve liesman who will tell us what is ahead for the central bank, but first dominic chu has the outlook fks stoc >> reporter: after a blistering run for stocks in the first half of the year, here are three things to watch as the markets head bnto thek half of 2019. first, trade. deal or no deal? despite the fits and starts over trade negotiations between the u.s. and china,e investors h largely been optimistic that a resolution will come to pass, but what happens if things drag out? and we're not even getting into what happens if america decides to stir things up with other trading partners around the globe. cond, the fed. to cut or not to cut? that is the question. at this point markets are largely expecting that the economic data will lead the federal reserve to ease financial conditions by cuttite benchmark rest rates. will it push the stock market to record highs or signal weakness ahead? and third, mega cap stocks, specifically those in tech,ic commion services and

retail like microsoft, amazon, apple and facebook to name a few. they've had a lot of ionluence he market rally, but will the threat of increased government scruty derail t trait? three of the big market themes toecatch in the sond half. for "nightly business report", i'm dominic for the second half of the year the federal reserve will be focused on when to make a move on rates and how big a move to make. here is what toch w. first, gauge the economy ahead of the meeting july. unle t strength measurably from the 2% growth now cut interest rates. second, how much to cut? perhaps a quarter point with a few more in the months aheadr perhaps a more muscular 50 points basis cut. the fed could pause for taking stock and for inflation to hit its target. third, when to stop. the fed will be reluctant to do more than a few cuts. it holds exactly nine quarter point rate moves in its arsenal before the powder runs dry and it is back to zero.l the fed w want to avoid

another long spell at zero rate and won't want quant easing, that is expanding the balance sheet to drive down rates unless it has to. f look near-term rate cuts om the federal reserve, but it will be limited unless the economy gets measurably worse. for "nightly business report" i'm steve liesman. let's turn to a couple of guests forheir outlooks on the economy in the second half. christina hooper, market strategist at invesco. good to see you both. thank you for joining us thtonight. >>ks, bill. >> great. thank you. first, christina, on the markets themselves, you expect some more volatility, don't you? >> absolutely. we have the potential for more in the way of trade tisruption back half of this year. it doesn't look like the u.s. is going tonge or standdown in terms of its trade aggressiveness. >> jim, you see a lower growth how much slower? >> well, bill, that's the question, and obviously there is a lot of uncertainty related to

the trade battle in particular. over the last fou quarters, real gdp is up 3.2%, which is a pretty good number in comparison with the cycle to date. but certainly there are reasons to expect slowing, so i've got it down to basically 2% in the second half of the year and 2% into 2020. but, again, there's clearly a lot of uncertainty with the tradenegotiations. >> and with the fed -- and i want to address the fed to both of you becau what the fed does will have an impact on both of your forecasts. christina -- i mean both of you do expect the fed to cut rates at some point. christina, what are your expectations there? >> my expectation is that tfe will cut rates at least once in the back half of this year, nd i do believe it is a game changer. if we didn't have the fed take a more dovish turn, i don't think we wou have such a rosie outlook for stocks. but given that the fed has made every indication that it is willing to get more accommodative, i think it is going to provide a put underha

stocks should help them counter the kind of headwinds created by the ongoing trade conflicts. >> jim, you see two cuts coming, don't you? >> yes. i mean certainly athe last f 1 c meeting the fed told us unless the uncertainties as they call them related to trade disappear by the end of july meeting they will be easing. how much remains to een. it depends on what the data do, what markets do, what happens on the trade front, et cetera. i am assuming a quarter point in july, another quarter point in september, and then assuminghe economy is not weakening dramatically the fed stops there. obviously it will depend on the data and backdrop in general. >> jim, is this because inflation isot getting up to the target that the fed wants, around 2%? why would ty want to cut a couple of times do you think? >> the immediate trigger recently has been to offset the ial drag, the down side risks as fed officials put it from the trade, si from trade negotiations weighing on

business confidence, and the slowing in global growth in exports that we've already seen. the's been the big cha in the last couple of months, but there's no question inflation is part of the ory, to the extent inflation numbers have been weaker than expected, to extent the fed is changing its strategy on inflation, from what used to bealled aygones are bygones approach, where they want to get inflation back 2%, now they want to make up for missed inflation in the past and go above 2%. when you put the two together, it made the f more dovish here. >> briefly, christina, on trade the longer it goes the tougher it gets for companies to deal with the higher tariffs. what are your expectations on that? >> my expectations is companies are going t pull back in terms of cap spending, on businessme inve. we have already seen that and the fed alluded to that. that could continue and g rse as time goes on. that's what happens with economic policy when it goes up, business

investment goes down. of course, we have added economic policy on certainty next year, given we are headed into the 2020 presidential election. >> right. christina hooper with inves yo, jim o'suivan with high velocity. thank you. >> thank you. movement in the u.s. marke can be driven by what happens overseas. we asked seema mody to the key issues ahead for the global market. ns, eporter: elect geopolitics and trade will keep global investors on edge in the second half of the year. first, the volatile and drawnout trade discussion between the u.s. and china will push even more american companies to shift production out of china, which countries like vietnam, cambodia and india becoming bigger destinations for manufacturers, retailers and technology companies. second, expect ee ran to become a bigger geopolitical risk. further conflict between the u is andran could raise tensions in the middle east, which

accounts for 20% of the world's oil output. any disruption to oil output could send provides prices at the pump higher. u.s. companies will continueil out infrastructure here tos become les dependent on thet middle eas for oil. plenty of changes in countries like uk, argentina, but financial markets will focus on the race for mario ahgi's job, perhaps for the most powerful job i europe. anachange in his approach could disappoint investors. for "nightly businesseport", i'm seema mody. now, the two biggest sectors of the market are technology and the banks, and the fir was a volatile one for tech. that group either led the market high or dragged it lower, while the financials, they just continued to struggle along. in a moment, wilfred prost will give us an break d at the banks, but first josh lipton takes a look at what is next for

big tech. >> reporter: even with the looming threat of a trade war tech is the top performing sector so far thisyear. here is what else to watch for in the rest of 2019. first, new iphones. tim cook tells cnbc that the iphone xr hasen consiy been his top seller which is least expensive of the phones launched last fall. that means this fall when cook introduces his new line-up he might focus moren mid tier phones with new features, capabilities and marketing dollars. two, jedi.th u.s. department of defense is deciding which company will win a big cloud compuntng coct known as jedi, worth up to $10 bnelion. the w could be announced as soon as august. amazon and microsoft are in the nenning. the w could use the deal as a selling point, convincing companies and other data-sensitive industries from finance to health care to entrustt with the information, too. regulatio state, federal and internationav regulators all tech in

their sigh, including alphabets google, apple, amazon and facebook. that meahere's little likelihood of approval for any big acquisitions. a that could be challenge as these companies hunt for growth, and one their civneses don't face. for "nightly business report", i'm josh lipton, san francisco. interest rates, credit quality and whether the ipo bonanza can continue are the t y thin watch for banks in the second half of the year. first up, yields. banks typically like high rates and a steeply-risingcuield e. that lets them borrow money at lower rates and lend at higher rates. they've got neither of those things at the moment. that means even if a fed rate cut does come it might not be so bad as will at least steepen the curve even as it lower rates and i should boost the economy which will help the banks. second, cret quality. banks' own credit quality has remained robust despite fears of a slowing economy. there are growing fears about

the huge rise in leverage loans and direct lending, but this is not s much an issue specifically for the banks asra fereserve chair jerome powell recently stated, the fed feels banks are in a good place andhere concerned about nonbanks that made those sorts of loans. third, the ip orkts bonanza, q 2 was strong for the banks. mnaicked up towardshe end of the quarter. can it continue and help the likes of goldman sachs and morgan stanley? i'll wilfred frost. the health care sector was the best performing in the stock market in 2018 but things reversed in first half of 2019. now investors want to know if theto s is ready to rebound. bertha coombs takes a >>look. eporter: pressure from washington will continue to loom large with the health care sector with the trump administration now taking up transparency on hospital prices. in the next few months analysts

say watch for the adminisation to finalize its drug price blueprint policy, iluding a ban on pharmacy rebates from medicare drug plans and potentially pegging drug prices to international riees. the pol 3r0eproposed in the last year just after drugmakers rais raised list prices. >> if you assume drug companies are going to raise list prices the beginning of july this year, we can assume the allinistration o what it did last two times which is issue additional regulations immediately thereafter. >> outrage over drug prices hit pharmaceutical stock hard in the last presidential cycle in 2015. this time around health insurers have been hit hard following senator bernie sanders campaign lach in april and again after he introduced the medicare for all bill which was endorsed by kamala harris, cory bookers and others. analysts say stocks found their

footing after joe biden entered the race. the front-runner is not seen endorsing singl h payerlth care. >> if you were to see one of the candidates like bernie that believes in medicare for all and believes inng get aggressive on drug pricing take the lead, at that point i think you would see native impact on health care stocks going forward. >> on the fundamental side, the major insurer havell forecast stronger earnings in the second half, which also helped sstabilize their sto over the last month, but it may be tougher for them to move higr id the regulatory and political pressure they will face this electionle c for "nightly business report", i'm bertha coombs. and still ahead, will the second half be a turning point for the housing, retail and airline industries? ♪ ♪

to a few consumer-related sectors. first, retail. it is not secret the industry has been struggling to keep shoppers happy and compete with competition. while some achieved the right combination of brick and mortar and online, man others have not. as a result, the outlook overall is a rocky one. here is courtney reagan. >> reporter: the firstalf of 2019 has been rough for retail, but with back t school and the holidays, the second half unknownsore and the are piling up. first, tariffs and trade. manyn retailers have b working for years to move manufacturing out of china, but it still is the number one sourcing location for u.s.-bound clothing and shoes. if a new round of h tariffss shows categories, shopps may

face higher prices at places like macy's and steve madden in time for christmas. second, shipping wars, walmart, amazon and target a racing to deliver faster. amazon i spending 8 hadn't million dollars in just one quarter to get closer to e-y shipping for prime members. walmart is expanding one-dapp free shig without a membership to more city as the year goes on, and target is offering same-day shipping for $10. third, store closure. around 7,000 store closures have already beenhi announced t year, outpacing all of 2018. core site research projects total closures couldit 12,000 by end of the year, opening up opportunity for those left. for nightly business report" i'm courtney reagan. for many buying a home is th largest financial transaction they will make in their lifetime, and that's why so much attention is p to the health of the housing market. but this year the typically hot spng market was cool and homeowners want to know if that

will be the case for the rest of the year. dih olick takes a look. >> reporter: mortgage rates, home prices and supply could all make for a meaningful change in the pace of home sales in second half. mortgage rates have been falling steadily since the start of the ar. the 30-year fixedbo was just 5% last fall, now it is below 4%. lower rates are already bringing out buyers and increasing competition. if rates stay this low or lower, we could see a big sales boost in the second half. but that will juice prices again. the big h gains ine prices were shrinking dramatically in the first half but made u-turn in may, suddenly gaining again. erat thanks to lower rates that helped buy afford more. at some point though affordability kicks in and even lower rates won't help buyers, especially first timers. that's what happened in the spring of last year. the only thing that could help would be more supply. housing starts have been very weak so far this year, but t builders sy are starting

to pivot to cheaper entry level homes, exactly what the market needs. for "nightly business report", i'm diana olick in washington. cheryl young joins us to talk about her t outlook for housing market the rest of the year. she is senior economist at truly. cheryl good to see you again. thanks for joining us tonight. >> thanks for having me. >> home prices have been going up but you are sensing a slow down in that price increase, yes? >> that's right. since the beginning of the year, and i think what we're goi to e through the rest of this year, is that continued slowdown in price appreciation. we're not talking about price dropping yet, but we are seeing a slowdown a possibly a flattening through the rest of the year. >> even with interest rates going lower -- mortgage rates at thist, two-year lows point. is it because demand is going to go down or what is going on there? >> no, that's right. mortgage rates are low and that's going to help drive demand. itoing to bring more people back into the market as mortgage rates go down and stay down, but

what we're seeing is that we've really hit sort of an affordability ceiling. price growth has far outstripped wage growth over the past several years and that's simply not sketainable in the m right now. so people have been very hesitant to come back in, but with t softening of prices and also low interest rates, hopelly we'll s more people, especially those first-time home buyers, coming back into market. >> and it is well-documented that homebuilders aren't keeping pace with demand because it is just tooxpsive. the supplies surprises are up and labor is tough to find these days, right? >> that's true. labor costs are really high. there's af shortage labor in the construction field, and right now iis very difficult to build housing. so while demanders it doesn't really make sense for a lot of builders especially to build that sort offfordable housing, which is what we're looking for. and it is going to be tough to get that supply up for all of the demand that's been pent up

over the past few years. >> ye know, talk about how tough it is for home buyers even with these lowra interest s, but it is not a picnic either for home sellers these days, is it? >> it isn't quite what it has been for home sellers. home sellers have really had the upper handy would s i would say fast few years because of the low supply a the appreciation. they're not quite in the driver's seat anymore and that' not necessarily a bad thing because there are still a lot of people out there looking for using, but they certainly shouldn't expect quite the market conditions that they're used to. >> will it take longer to sell a home do you think as a rult? >> yes, we've actually seen that homes have been sitting on the market a little bit longer and that's goi to probably continue as we've seen somein supply c back on to the market, and that's going to be a little t for sellers who have really seen homes fly off

the shelf. but, like i said, i think we still have a lot of pent-up, demaspecially among the first-time home buyers. it is still m healtket out there. it is just slowing down a little bit. >> cheryl young with truly. again, thanks for joining us tonight. >> thank you. elsewhere, a record-breaking numb of americans are traveling over the 4th of july holiday. nearlyar 49 millioplanning a getaway. according to aaa, the majority wi travel by car while many others travel by plane. tonight phil lebeau tells us i whs in store for both of thosesectors. >> reporter: in the second half ofhis year airlines and investors will be focused on international markets, keeping p with demand, and the return of the max. boeing 737 max is expected to bl ng by the end of the summert' but tha not a sure thing and any further delays could have a ripple effect onhe entire industry. with so many max planes grounded, airlines are pushing hard to keepp with demand. one area where some airlines are

seeing softness? international r wtes. thatl be a focus for large, international carriers in the scond half of t year. for the auto industry and investors, the second half of the year is about tariffs, sales and potential merger deals. on tariffs, the big question is if the.s. puts a tax on vehicles imported from europe. if that happens, it could ihiact sales slowed slightly in the first half of this year. and don't be surprised if nissan, renault, fee yacht chrysler and other automakers revive the idea o potential merging operations. that could rev up auto stocks in the second half of the year. phil lebeau, "nightly business report", chicago. and another consumer sector entertainment. that industry is undergoing some very bighaes. and as julia boorstin reports, there could be more to come. >> reporter: as we second half of the year, three things for media investors to watch are consolidation,

streaming war and box office. first, consolidation. re media deals are expected ahead with a focus on viacom and cbs. sources tell us they're in talks not and lion's gate is on the block. second, the streaming wars will get t biggest new entrance in years. disney plus, apple tv plu and a beta version of at&t's warner to launchice, all set before the end of the year, puttingressure on consumers to choose and putting pressure on the cable giants to find way to hold t on toheir customers. third, the theatrical movie business will be put to the test. the domestic box office is down nearly 9from last year. the question is whether huge franchises hitting theaters, spider-man, line king, frozen 2 and a newil "star wars" f turns it around, or whether franchise fatigue and the opposite to stream at home weighs on results. for "nightly business rort", i'm julia boorstin in los

angeles. coming up, nowha t you have an idea what is ahead in the second half, what should you do with your money? so advice coming up. ♪ ha now the first half of the year is behind us, how should investors prepare themselvai for the rer of the year? joining us to talk about that, diana la sue, founder of the investment firm la sues swirly. great to see you tonight. >> great to be he. >> a lot of our viewers want income from their invest. nts. >> rig >> depending on where rates are

going, it gets tougher to find income, isn't it? >> you hav to look for total return, which means you have to have that equity eosure in order to get any kind of real long-term return to generate that income and cash flow. >> and cash flow is one thing you should try and keep tabs on and see if -- make sure it is aligned wit i yourestments as we go into the second half of the year, right? >> absolutely. you need to look and see wha your needs are going to be over the next six to twelve mons and mak sure you have cash available, especially for emergency nee >> the risk level in your >>rtfolio, how do you assess that? ou really look at your allocation based on how much exposure you have to the equity markets, because that'soi to drive risk, volatility, and, obviously, long-terreturn. nd then we often talk about rebalancing, you do thatal period. you know, trim some of the losses or gains at this point. is this a good dime to beng that? >> absolutely.

rebalancingors very int right now because we want to stick to that buy low, sell high adage. now is a great time to be taking some profits in that equity market and not leaving that money out on the table. >> does it matter to you as a financial adviser what the fed is going to do? i mean we just had a couple of analysts on here who see at least one, maybe two interest rate cuts before the end of ts year. what does that do to the people looking for that income>>till? t doesn't help them an awful lot because that means the bond side of the portfolio is gng to have lower flow in terms of interest payment that also means they need to look at their overall portfolio and figure out what kind of return they need over the long-term in order to meet their cash flow needs. >> you know, when i began my career, people were desperate to try a stay ahead ofhe rate of inflation with their investments. that's not so hard to do these days. is that still a y bogey for to

try to stay ahead of inflation with your portfolio? >> absolutely. it is still important and we on't know that inflation has disappeared for the long term. we could still see it raise its uglyheead down road, but for right now it is mor about risk management in terms of your overall portfolia. >> la sues with la sues gwirly. thanks for stopp by. >> thank you. >> appreciate it. thank you for stopping by and watching thispecial edition of "nightly business report". i'm bill griffeth. have a great evening. see you tomorrow night and happy 4th. ♪ ♪

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