♪ this is "nightly business report" with sue hererthand bill grif ♪ >> one and done? the federal reserve lowers interest rates for the first time in a decade, but a single --m f the chairman sent stock on a volatile afternoon ride. that's a wra trade talks end with little progress made rg leavi, leaving major unctainty in the market. worker sdividend, that' how a senator describes his bill which targets corporate bye bac -- buybacks which could hit a reco this year. those stories and more on "nightly business report" for wednesday, july 31st. welcome, everyone. the federal reserve has not cut interest rates since 2008, that

as until today. the move a controversial one and it comes at a time when the u.s. economy remains solid. the risks come from a slowdown in global growth, so the decision to lower rates is considered an insurance cut designed to hel stave off the possibility of an economic downturn.bu the chairman signalled that this is not the start of a trend and stocks dropped sharply. the dow jones industrial average dropped 333 points to 26,864. it had been down more than 450 points. 500 was off by 32. and the s&p steve liesman reports tonight from the federal reserve. ♪ overnight lending among bank, down by one quarter percentage point to a new range between two and at2.25%. s largely what the market expected but in a press conference after the statement came out, the fed chairman

appeared to dial backns expectator future cuts. >> the committee is really thinking of this as -- as a way of adjusting policy to aor somewhat accommodative stance. we think of it as i essentially the nature of a mid cycle adjustment toli . >> stocks sold off immediately as the market began to question whether the fed will deliver the two cadditional rates priced in. powell went on to clarify saying he did not mea to imply the fed was done after this single cut. importantly, the fed providefu rther easing by ending the redutsion of balance sheet two months earlier than planned. the fed in its stement said that it comes amid a u.s. economy that is still growing, but with growing concerns about overseas weakness. >> to insure against down side risks from theo outlo of weak global tensions. we feel w likek global growth and trade tensions are having an effect on u.s. economy. you see it in the secon

quarter. you see weak investment, you see -- manufacturing. so support -- demand there. also to support return of inflation at . >> powell did not have the full support of his committee. two fed bank presidents ted toted saying they w hold interest rates unchanged. asked how investors can know what comes next for the fe powell said there is noex rience among central banks in knowing how to respond to global trade wars. he said the f is, quote, learning by doing. for "nightly business report", i'm steve liesman in washington. > and joining us to talk more about the fed, the economy and the stock market reaction, we have with us tonight richard scher, the former president and ceo of the federal reserve bank ofll , and michael hartnet, the chi investment strategist at bank of america/merrill lynch. >> of. good to see yboth. >> thank you. >> richard, if you were with the fed how would you have voted and why? >> i would have accompanied boston and kansas city. i think it was an ithortant g for them to do.

it shows that there is not consensus on the need to cut. eric rosengreen, onef the great thought leaders on the committee when i was on the committee remai so. esther in kansas city is similarly well-respected. i think it was very important by the way to send a signal to the president of the united states, whose reaction thus far has been fairly mild, that it is an independent body. the federal reserve bank presidents are not appointed by the president. they're not confirmed by the united states senate. it is structured that way on the open mart committee so you can have independent views, and i think it was actually aim very rtant development. there are two things that happened there. one, it shows that there'sot full consensus the economy is weakening, mainly because nsumption is strong. personal spending in the last report was up 4.1% the last gdp report. >> right. >> consumption drives the economy. secondly, shong tha it is an independent body and the

president cannot induce the committee to do what he wants for political purposes. i think it is a win/win decision. i'm glad they did it the way they did it and it is clear that ey're going to havo think about things if they want to continue. i think basically they've given back theber rate increase and we're now at the neutral rate and i think they're comfortable with it. >> michael, what did you make of the marctt's rn? i mean it was widely anticipated that we would get exactly what we didn terms of an interest rate cut today, but was it simply thesa mng from the ibd chief? what is respo for the sell-off? >> i think the bottom line is they didn't need -- you know, when you cut intest rates, you know, if you are really easing and providing stimulus, your currency goes down, the yield curve steepens, and corporate bond spreads, youor know,rd. none of those things happened today. the fed cut 25 basis points, the dollar wasup, spreads widened, the yield curve

so wall street's view really is there was no easing of policy, you know,od. wall street clearly wanted more and wall street still has a haoblem with the communication of the fed and the fed is really trying to identify as the thing that it will really anchor policy going arward. know inflation is incredibly low. we know e the globanomy is not doing well. we know the u.s. economy is doing rather were. so people very, very uncertain as to what the fed's intentions and what is leading the fed going forward from here. >> michael, does this change anything about your view of the stock market, whether or not they -- the market is expecting another rate cut -- >> yeah, i mean, look, today wat the time that a central bank has cut interest rates since lman brothers went under. .n fact, brazil just cut rates, so 729 n the markets are up massively since then.

the markets love interest rate cuts. the markets are addictedo liquidity. so i think that, you know, part of the reason, you know, been very bullish this year is we've seen a pot by the central banks, everyone has been arish. expectations that the global economy will find a trough. i think it tempers the upskee for m in the near term without question. we will have to just see what the creditarkets do. that will be very important. >> richard, the fed chief made note of the fact that there's some uncharted territoryere in terms of the trade negotiations, the trade tensions and the situation between t. and china. how do you think they're going that?igate >> well, i'm sort of doubly hexed because i was the u.s. trade representative under president clinton and i was head of the reserve bank of dallas. policy ear monetary cannot offset protectionism. if they cutoi 100 basiss it

wouldn't change the trade dialogue. they're trying to think this thing through. the other thing it iseamportant to in mind, because the european central bank and the bank of japanre following a radical negative interest rate policy, it doesn't mean that -- 5% of markets. one of the things that i worry about, sue, again, i ran a hedge fund for ten years before i did all of this other stuff, is i really do believe markets are hearing what they want to hear. >> right. >> they're not listening to what is actually being said. this has been signalled, eric rosengren in boston had a good interview with your folks at cnbc, m it very clear, very logical what he was spelling out. the market tends to ignore him. the market is wishing, wishing and wishing for help. whenou cut interest rates it changes the way you discount the present value of future cash flows. we did that deliberately when we poured on, went to zero interest prates andred on three rounds

of quantitative easing. that was t purposent a signal to the market. discount future cash fw in 2009 literally to infinity and the market has been doing that. now the process is slowly being unwound. it is painful for the markets. i don't expect them to necessarily cut. i think it is one and almost done for a while. it depends on the data as powell said. >> they've been data independent ford years. rich fischer, michael hartnet, thank you for joining us tonight. >> thank you. >> pleasure. more evidence that the u.s. economy remains steady. according r to a newort companies added more jobs than expected in july. adp says private payrolls increased by 156,000, showing that firms are still willing to hire despite economic uncertainties such as the ongoing trade fight withchina. but there are more signs of slowing growth overseas. for example,he eurozone's economy expanded by just .2% inu the second ter. it was half of what the prior quarter's growth rate was. this latest report increases the

chances that t european central bank will launch stimulus measures this fall. and then in china, factory activity there contracted in ght for the third str month, deteriorating global demand led to a decline in export orders and total new orders also moderated. over in shanghai tde talks between the u.s. and china eed with few signs of progress. ayman javers is at the white house. it was smiles and handshakes in shanghai as u.s. and chinese negotiators wrapped up two days of conversations on the fate of the trade relationship between to two superpowers. while the body language was positive, the outcome was less than clear. the white house r statement calling the talks constructive but not listing any specificoic specutcomes. instead they said the two sides discussed topics like

agriculture. they confirmed their commitment to increase purchases of united states agriculture exports. >> we have people inhina right now. >> as negotiators were on the ground in shanghai, the presidentuggested that the chinese simply wanted to stall n.til after the 2020 presidential elect the chinese made an accusation of their own as chinese foreign ministry spokeswoman saidt t the united states continued to flip-flo e concrete development that markets were looking for, the two sides said talks will continue. the next session will be in washington in september. for "nightly business report", i'm ayman javers at the white house. despite those ongoing concerns over trade and today's pullback, the major averages on wall street closed out july with gains for theecond straight month. it was a month that saw the s&p and the nasdaq both reach new record highs. the nd still ahea fall-out from the grounding of boeing 737 max hit one of ge's units. ♪

general electric shareholders got welcome news today. earnings topped expectations and the company gave an upbeat outlook for the cash flow. ithows how much money the company has left after paying operating expenses and capital spending. the company said that the improvement came from a stabilization in i struggling power business, but shares today were off a fraction to close just above $10 a analysts say if ge is to rebound further it willeed the help of its aviation division which makes jet engines, but g aviation is wrestling with the

impact of the grounding of boeing 737 max. it is not just ge. the fall-out is being felt from washington to wichita. here is phi lebeau. >> reporter: since the grounding of the 737 max, boeing has cut monthly production from 52 42. the ripple effect is being felt at ge's plant in cincinnati, ohio, where it is still buildins engi for the max. but with delivery suspended, ge expects a $400 million hit in both the third and fourth te qu. >> the 400 million of cash pressure here in the back half, 400 per quarter is, you know, what is likely toapn if we do not see a return to service. >> rephiter: in w, kansas, where spirit aero systemusuilds the lawmaker for the max, they cut cost but have not laid off workers as they wait the see what happens next. with boei >> we have looked at lowing down production. we have looked at temporary pauses in production.

so we have all of that prepared to be ae to -- to implement, w dependinghen the max gets back into service. >> reporter: boeing expects the max to take off again later this year, provided regulators off on a fix for the flight control system. at a hearing on capitol hill, looking into the faa over the max, o senatore again raised concerns about the plane's future. >> i would say for the 737 max every back into the air, boeing official should be flying that plane for one month to make sure that we have t confidence for a passenger to get back on the plane. >> reporter: boeing, airlines and suppliers close to the max program admit it will take some time toth restore f in the plane. when it is finally determined to be safe to fly again. phil bulebeau, "nightlness report", chicago. membership growth helped humana post strong earnings, and that's whee begin tonight's market focus with the health care company beating estimates thanks to more sign-ups for its

medicare advantage health plan. humana raised its full-year guidance and announced a $1 billion share buy backm. prog the stock rose more than 4% today to 296.75.so hern company reported mixed results. it beat earnings estimates but numissed on re which was hit by the sale of gulf power and other assets and byower electricity sales and usage. shares rose more than 1% though to56.20. strong sales of pickupks trushed fiat chrysler past past estimates. the company kept its full year outlook intact and shares rose more tn 1%. missed quarterly estimates due u toavorable weather conditions and declining demand, particularly its flagship brand alcoors light. , the brewers ceo will be retiring in september and will be t replaced by head of the

s. subsidiary miller/coors. . blooming brands missed revenue target as they saw a decrease in same-store sales at out back, bcarrabba's ande fish. after the bell qualcomm posted results, beating but missing on revenue. shares initially d after hours trading. they closed the regular session down more than% to 73.16. companies are on pace to buy back a record amount of their own stock this year, and according to a new report from goldman sachs theost of buybacks has started to exceed company's free cash flowimor the first since the financial crisis. meanwhile, today in washington a new proposal from a prominent senator want share repurchase programs to directly benefit company eloyees.

ylan mui has details. >> reporter: for senatorrr s brown buybacks are a symptom of a bigger problem on wall street. >> wall street's obsession for accumulating welt for the people that have it comes at the direct expense of american workers, all workers. we need to reorient our economy from wall street greed to the dignity of work. >> reporter: to do that the democrats in ohiod propo new legislation today that would require publicly tradedo companiesive each of their workers $1 forve $1 million spent on buying back their own stock. brown calls this the worker dividend. so if a company spends $20 billion in share repurchases, each employee wld get a one-time rayment of $20,000. brown singled out walmart and jp morgan as norious offenders. >> the entry level of a jp morgan chase teller is about $35,000. you can't support a family on that, comred to the

$31 million the bank paid its ceo last year. >> reporter: ther dividend would be paid directly to the employees after the end of the fiscal year. the proposal would lower the cap on themount of shares companies can repurchase from o 25average daily volume to 15%. and the sec would be in charge of enfcing the new rule. but the u.s. chamber of commerce quickly opposed this idea of anti-growth. >> putting the government in the middle of those decisions would actually harm everybody, including the emploes who have a lot at stake, not only the future of their company and economic growth, but also their own retirement >> reporter: brown is not the only one on capitol hill who .ants to target buybac a bill from democratic senators chuck schumer and bernie sanders requires companies to raise wages and provide more benefits in order to buy back stock. senator chris van holland wants to limit executives from trading after a buyback. today brown acknowledged his proposal won't pass any time soon, but he said he's prepa td fos fight to last years.

for "nightly business report", i'm i ylan mui washington. ed cliffhold joins us to talk more about this and the ovall trends he i seeing in buybacks. he is chief rearch strategist at ed davis research. nice to have you here. >> thanks. >> there's a lot ofst an capitol hill about the increased buybacks and the consistency of some companies to buy back their shares. if washington gets involvein some way, shape or fofrm, whrm, would the impact be? >> what companies would do is find other ws to return capital to shareholders, and that's what buybacks have become. because they are not taxed like dividends, companies have figured out that's a more tax efficient way to do that. what you have seen is buybacks suffering over the last four quarters. th hit a record high of $750 billion for the s&p 500 companies, and that's - that's a 50% jump over what you saw

before the t cuts a couple of years ago. >> going back to that goldman sachs report, the one stab that caught my eye was the idea that at a point now where sometimes the cost of the buyback exceeds the cash flow that a company has. are we getting to a point nowi- ean buybacks have been going on for a number of years now and growing. are weti g to a tipping point now do you think in the buyback process? >> well, i think there's two things going on here. one is that companies could repatriate cash that had been overseas as a result of the tax cut. so youil probably see buybacks start to slow down asn companies b through that repatriated cash or cash, again, that was overseas for a long time. the other thing is that companies tend to continue to buy back until the economy goes into a recess that's the quickest thing they

can do to start to conserve cash. so i wouldn't expect a huge drop-off in buybacks until the next recession. >> do you see that as the biggest risk, right? >> yes. the biggest risk is -- is, in fact, that when you get to the s next ron because one of the side effects over the last few years is that buybacks have become a bigger and bigger percentage of daily volume. and so if buybacks go obviously during a recession the stock market tends to fall, earnings tend to utfall, then you are going to take away a big buyer in the market, which had been companies buying back their akn shares. that could things even tougher during the next recession. >> ed, thank you s much. ed cliffhold with ned davis research. coming up, why democrats are divided over health care. ♪ ♪

♪ ♪ a large fire has hit an exxon plant in texas, the bay town complex includes a 560,000 barrel a day refinery. its website says it is one of the largesteg ited and most technologically advanced refining petrol campuses in the world. it sits along a ship channel that is the nation's largest energy port. the trumpinistration is opening the door for allowing prescription drugs to be f importm canada and other countries. the proposal is part of the white house's push to try to lower the cost of medicines.

health and human services alex azar says that the process would be safe andh effective w oversight from the fda. details were scarce however, and it is unclear how soon consumers might see>results. oughly half of the 2020 democratic presidential hopefuls took the debate stage last night and health care was in the spotlight. >> it keeps working great for the insurance companies and the drug companies. what it is going to take is real courage to fightack against them. these insurance companies do not have a god-given rht to make $23 billion in profits. >> the answer is to get r of the profiteering of the drug companies and insurance companies -- >> clearly the issue is dividing the party. some candidates called thest tegy of medicare for all bad policy. others said it would stabilize the system. john harwood is in detroit tonight where the rest of the candidates are debating this

evening. wjohn, what did learn about the democratic candidate's stand on health care overall? >> well, we learned most significantly that elizabeth warren is sticking strongly witr position that the private insurance industry should effectivelye abolished as part of a medicare-for-all plan. k it is divide in the race. it is not popular with voters to propose getti rid o the insurance industry. bernie sanders is for it. elizabeth warren is for it, but joe biden is not. she was challenged by other moderatet on the stage l night -- john delaney, tim ryan, that, bullock, people like that said, don't go that far, it is too far for our electoral good. it may be too far to get through congress elizabeth warren stayed there. if she's the nominee, she will hear about it >> what about the contrast on other economic issues, john? >> reporter: well, you have a big tax contrast. elizabeth warren again the

policyr lean the race, proposed a well it tax. delaneyted with john over whether or not the well it tax was a good idea. john delaney, the moderate democrat from maryland said, yes, taxes on the wealthy should gop but not inhat way. elizabeth warren kind of glee rubbed her hanogether when she was talking about going after the wegalthy delaney's money, a moment s may s again in 2020. >> doe w expect anything different tonight? >> reporter: i expect joe biden to make the same contrast with warren and sanders that the moderates last night made. there's aed a dimension though, in light of president trump's behavior in recent days. joe biden will be flanked by kamala a harris cory booker, two senators that are african-american. the issue of race was put on the table by kamala g harrisen joe biden's long record in the first presidentialebate on

msnbc. they will go after him and he is going to try to respond on that. that adds a different and more volatile element to this contest. >> john harwood in detroit. again, thanks, john. b hore we go,e is another look at the day's final numbers from wall street. the dow dropped 333 points. it had been down more than 450. the nasdaq slid 98 and 500 was off by 32. the major averages were all higher however in july. >> welcome to august. >> yes. >> that is "nightlrtbusiness re for tonight. i'm sue herera. thanks for joining us. >> i'm bill griffeth. have great evening. see you tomorrow. ♪ ♪

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