Business Matters Full Broadcast (April 19)

China has infiltrated critical U.S. infrastructure. That's including pipelines, water treatment plants, telecommunications. This is according to the FBI. Coming up on Business Matters. Good afternoon and thank you very much for joining me here today. I'm Don Ma. To start off, let's go to markets. NASDAQ, S&P 500 ending lower today. And Netflix was actually among the bigger drags on the benchmark S&P index and NASDAQ. After the video streaming company's second quarter revenue fell short of analysts' expectations, while the company also unexpectedly said it would no longer provide subscriber count. More on that later. So Wall Street's fear gauge hit its highest in more than five months today, as well as businesses amid geopolitical tensions. Let's talk about oil as well, because there's some discussion here on that. Oil prices edged higher today following an earlier spike on reports that Israel had attacked Iran. So markets' fear of a major escalation in the Mideast appeared to ease a bit. At least oil prices initially actually jumped on concerns that the Middle East oil supply could be disrupted. The benchmarks surged more than $3 before dipping back down. And tensions have also led airlines to quickly change flight paths over Iran, some canceling flights as well due to security concerns. So by 12.45 a.m. Eastern time today, the airports and airspace had reopened. Before the airports reopened, FlyDubai said it had canceled its Friday flights to Iran. One of its earlier flights turned back to Dubai, it said, and Germany's Lufthansa canceled all flights to Tel Aviv and Erbil until Saturday, and it said it would fly around Iraqi airspace during the same period. Let's talk a little bit about cryptocurrencies now. It fell heavily, and Bitcoin broke below $60,000 today. This is due to a rush out of risky assets, actually, following reports of a missile strike on Iran. By 2 a.m. Eastern time, though, as these details emerged, safe haven assets like gold, oil, and bonds, which had rallied sharply on initial news of the attack, were off their highs. Bitcoin was back up after the initial drop, and the decline in Bitcoin came just hours ahead of its so-called halving today. And this is basically what it is, is a change to its underlying technology designed to cut the rate at which new Bitcoins are created. Okay, on to Netflix. Made some risky moves last year, but paid off to some capacity here. The streaming service cracked down on users sharing passwords, which pushed users to get their own accounts. And now, in the first three months of this year, Netflix announced it had gained more than 9 million subscribers. And that brings Netflix to a record high number of subscribers, nearly 270 million. So Netflix also announcing Thursday that it will stop sharing its quarterly subscriber numbers, starting next year. Okay, a few more earnings to talk about. Procter Gamble raised its annual profit forecast on lower costs. This is as consumers, particularly in the United States and Europe, they kept buying its pricey Tide detergent and Dawn dish soap. So Procter and Gamble also weighed on the market, actually, after reporting lower revenue for its latest quarter than what analysts had expected. Even though P&G's third quarter net sales fell short of expectations, the company had been able to boost its bottom line, building on the benefits from raw material prices coming down from the peaks during the pandemic. So for more on P&G, which, by the way, is the bellwether for the consumer products industry, I spoke to Amanda O'Neill, Retail Director at S&P Global Ratings. Okay, Amanda, thank you very much for your time today. Procter Gamble earnings today, sales miss apparently, but strong forecast. From where you're standing, what's the story here? At S&P, we rate Procter and Gamble double A minus with a stable outlook. And from our credit perspective, the company is in line with our base case forecast to maintain the ratings. I think what the street was looking for today in Q3 earnings was the return to volume growth, which actually ended up being flat. The company is still growing through price increases, but the overall quarter was flat. So the story of last year was the company grew through significant pricing increases and this year they're lapping them. And the back half of the year was supposed to be returned to volume growth. So I think the street is a little concerned that as of Q3, we haven't seen that return to volume growth when the rest of the year is based on that volume growth coming through to drive the top line. So overall, this earnings report, would you say it's meeting your expectations? Yes, overall, the company continues to perform in line with our expectations. I think what was unique about this earnings release is that Procter and Gamble has maintained their stance that the consumer is not trading down. Typically, we see the consumers trade down during weaker macroeconomic times to private label brands. They've maintained that private label has been steady at a 16.5% share over the last two quarters. They believe that they are growing share in volume and that they believe the consumer is actually trading up within the Procter and Gamble portfolio. So what that looks like is the consumer buying into those innovations and really paying for those innovations. And Q4 will be to tell if they do return to volume growth to see if that is still holding up. And can you tell us about which parts of the company are doing well and which parts are not so much? Yeah, I think if you look at this quarter, in terms of healthcare, that was down from a volume perspective, as well as baby, feminine care and family. Some of that is price elasticity, where price increases have drove consumers to maybe buy less or have drove volumes down. Healthcare, that segment was impacted by a slower flu and cold season. And then the other parts of the business in beauty and grooming and fabric care posted low single digit volume growth, but price is still driving that, although price has come down from the high single digits in those categories to the mid to low single digits. And I just want to focus a little bit on the consumer here. What are we seeing in terms of consumer behavior from this earnings report, if we can see at all? Our view is that the consumer is still very price sensitive. They are looking for discounts. They're looking for deals. They're still preferring to spend their money on services over goods. But Procter & Gamble and other consumer staples products benefit from having daily use products that consumers use frequently and need replenishment. And then Procter & Gamble also benefits from having the leading number one and two brands in those categories. What are some of the challenges that the company might have to consider for the next quarter? Yeah, I think the challenges that they're facing are geographically specific as well. So they really they get a lot of questions on if they can return to growth in China. They actually said that that's one to two quarters away, that they have seen sequential improvements. So I believe that some of the bigger question marks will start to be answered in the next few quarters on the stability of some of the regions that are maybe causing some of the bigger fluctuations in their earnings today. Any risk that the consumers will start trading down? In the U.S., private label doesn't typically go above 20 percent, that that's on an aggregate. So them quoting 16.5, there maybe is some room. But I think consumers did go back to brands during the pandemic when maybe some of the private label companies had capacity constraint issues when consumers were pantry loading. So I think it is a different time just coming after the pandemic and we're seeing brand loyalty. All right. Thank you very much for the insight today, Amanda. Thank you so much for having me. All right. That's enough of earnings. Let's move on to Apple now. The company said it has removed WhatsApp and threads from its app store in China. And this is to comply with orders from Chinese authorities. Now, Beijing claims it's due to national security concerns. NTT's Sean Marshall brings us more. Apple said on Friday it had removed Meta's WhatsApp and threads from its app store in China after being ordered to do so by the Chinese regime, which cited national security concerns. Telegram and Signal, two other foreign messaging apps, were also removed from the store on Friday, according to app tracking firms QiMai and AppMagic. Well, I find it interesting that Apple recently and after meeting with senior Chinese officials, including Xi himself, opened a new office in Shanghai, even as a crackdown on U.S. companies is escalating. In a statement, Apple said, we are obligated to follow the laws in the countries where we operate, even when we disagree. The removal of the four apps suggests growing intolerance from the Chinese regime towards foreign online messaging services that fall outside of its control. Other Meta apps, including Facebook, Instagram and Messenger, remained available for download, but Chinese users still can't use them because of China's great firewall that restrict use of foreign websites. I think China is trying to create a uniform method of communications among everyone who is in China or even communicates with China, or with the outside world, for that matter. They have their own social media chats called WeChat and similar other ones that are entirely controlled by the government and send all of the data information to various sections of the Chinese government for oversight and surveillance. Apple has removed apps in its China app store before. In 2017, Apple removed the New York Times news app, saying it violated local regulations, a move that came amid rising new censorship. In the world's second largest economy, it remains unavailable on Apple's China app store. Sean Marshall, NTD News. And lawmakers from both parties are expressing outrage at the Chinese embassy. It's reportedly lobbying against a TikTok bill. Now, the bill would require TikTok to separate from its Chinese parent company ByteDance or else be banned from U.S. app stores. Politico reported this week that the Chinese embassy met with congressional staffers to lobby against it. Now, the bill has passed the House with bipartisan support, currently pending in the Senate. The House is expected to vote on an amended version Saturday. Staying with China for a bit longer here. The country apparently is inside critical U.S. infrastructure. FBI Director Christopher Wray says they're waiting for the right time to strike. NTD's Dave Martin has more. China is positioning its enormous hacking enterprise to give itself the ability to physically wreak havoc on our critical infrastructure at a time of its choosing. In a speech at Vanderbilt University Thursday, FBI Director Christopher Wray says China's hackers outnumber FBI personnel 50 to 1, not including the number of cybercriminals China hires. Hackers successfully infiltrated America's communications, manufacturing, utility, transportation, construction, maritime, government, information technology, and education sectors. It considers every sector that makes our society run fair game in its bid to dominate on the world stage. And that its plan is to land low blows against civilian infrastructure to try to induce panic. Wray says the FBI is going after China's own infrastructure and its hackers, along with everyone who works with them. The government has partnered with private firms to shut down many of China's threats to America's infrastructure. These attacks can actually have significant, devastating impact on human lives. A cybersecurity attack on a hospital could in fact cause human deaths, and a cyber attack on a water treatment plant could result in impure or dangerous water being provided to, you know, thousands or millions of citizens. Cybersecurity expert David Ratner says much of America's infrastructure wasn't designed with cybersecurity in mind. Systems are improving, but China is trying new ways to break in. China's embassy in Washington says some in the U.S. have been using origin tracing of cyber attacks as a tool to hit and frame China, claiming the U.S. to be the victim while it's the other way around. FBI Director Christopher Wray says hacking victims need to immediately contact the FBI because the FBI can gather key information from victims, then use that information to help them and prevent other attacks. This is Dave Martin for NTD News. We're just going to take a short break now. But when we come back, the question is, is diversity, equity and inclusion leading to more discrimination court cases? An attorney breaks down for us a recent case where discrimination was at the heart of the lawsuit. And as well, Tesla is recalling thousands of Cybertrucks. 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Imagine being a child, you know, having a child mentality and these evil people come and wheel you away from the only safety you've ever known. Welcome back. Just some quick headlines for you. American Express's first quarter profit beat estimates today, and it's thanks to its affluent customers. The high-income clientele has shielded it amid concerns over consumers' financial well-being. The company is looking to broaden its appeal to small businesses. More details will be shared at its investor day on April 30th. Shares of Paramount Global rose more than 10% today. This comes after a report that Sony Pictures and private equity firm Apollo were discussing a joint bid to acquire the media company. Paramount is currently in exclusive deal talks with independent studio Skydance Media. And the CEO of Warner Bros. Discovery was paid nearly $50 million in 2023. This is according to a filing today to the SEC. David Zaslav's pay rose nearly 27% last year. Meanwhile, the media conglomerate reported a $3 billion loss last year. And the Supreme Court is making it easier for people to sue their employers for discrimination when they're transferred against their will. It's a unanimous decision at the highest court this week, where the justices sided with a St. Louis police sergeant. Daytona Claiborne Muldrow claims her department discriminated and retaliated against her when it forced her to transfer out of an intelligence division. At the issue is whether she could sue the city for sex discrimination. To help us break down this case and what it means for employers, I spoke to Mark Miller, senior attorney at Pacific Legal Foundation. Mark, thank you very much for being here today. So what I wanted to ask you was, first, can you help us just briefly break down the case for us? What's the police sergeant's argument and what did the ruling say? Yeah, thanks for having me on, Don. This is an interesting case. Employment discrimination cases are sort of the bread and butter of our federal court system. Having worked in the federal court system much earlier in my career, I can tell you the law clerks and the judges spend quite a bit of time on these cases. Now here, Sergeant Muldrow was alleging she was discriminated against by her St. Louis police department where she worked because she used to work in intelligence and she was transferred without any sort of notice to just managing beat cops. They took away an unmarked police car that she had when she was in intelligence. She no longer had that car. They also moved her hours around. She went from working just a regular nine to five work schedule to having to work weekends sometimes. So even though her pay stayed the same and her title of sergeant stayed the same, she felt she was being treated differently because she was a woman. She had heard that this change was made because they wanted to replace her with a man in intelligence. Can you also comment on the significance of the ruling here in terms of, for example, balancing the interest between employers and employees? Your thoughts? Yes. So what's interesting about the Supreme Court when it reviews cases is generally it's thought not to be just an error correcting court. They're supposed to be changing the law, something significant, not just fixing an error. But here, some might argue the Supreme Court was just correcting an error. What I mean by that is they felt that the balance of power between the employer and the employee in this employment discrimination case was wrong. They felt that the lower court had said that Sergeant Muldrow had to show significant harm before she could even get to a jury with her Title VII discrimination in an employment case. And Justice Kagan wrote an opinion for the six of the justices. All nine agreed Sergeant Muldrow should get to go to a jury with her claims. But Kagan wrote an opinion for six of them saying that significant harm doesn't have to be shown. You just have to show some harm and a transfer that involves, you know, some sort of benefits being taken away like that car or maybe your your role seems to be not as prestigious like going from intelligence to just beat cop, that that's enough for a jury to at least consider whether this was actual discrimination. And as well, do you expect the ruling to have an impact on workplace diversity, equity and inclusion programs? For example. Well, Don, that's a great question. Certainly when this case was argued, that was considered to be a subtext of the case that DEI, you know, and in the workplace would lead to more of these claims and that perhaps some of the justices in the case would use this case to talk about DEI and whether it's constitutional and what parts of DEI are constitutional or parts maybe are not. But that didn't come up in the opinions, even in the opinions of the justices who concurred Alito and Thomas, for example, who would say be on the more conservative side of the court. They didn't mention DEI in any sort of significant level. Justice Kavanaugh as well. Justice Kavanaugh was very interesting. You read his opinion closely. He seems to think that he that Justice Kagan and the six justices she wrote for were too hard on the employee. She he thinks that almost any alleged allegation of discrimination, if there's anything to it, should get to go to a jury. But he was off on his own there. It was a very interesting theory. It's not something you might have expected from Justice Kavanaugh. All right, one final thing quickly for our viewers, what do you think they should take away from this important points? Well, I think it's a good example, and this is a theme I brought back on and on on NTD when when I've been on as a guest, which is Chief Justice Roberts wants to show that this court is not political, that it's not broken down by red and blue, by who appointed you Democrat or Republican. And here he got all nine justices to agree that this was a case of employment discrimination that should go to a jury. So it shows that Chief Justice Roberts is doing what he's trying to do and show that our court is not politicized. And I think that is a good that will say that I think as someone who believes in the rule of law, Chief Justice Roberts efforts in that regard should be respected. All right. Always a pleasure speaking with you, Mark. Thank you, Don. And we have another quick update for you on Tesla. The company has been ordered to recall nearly 4000 Cybertrucks because the accelerator pedals can become stuck in the down position. Now, according to the National Highway Traffic Safety Administration, workers improperly used soap to help fit the pad onto the accelerator panel, and that can cause the accelerator pedal to stick in place. Now, the safety regulator said it has reached out to Tesla for more information on the issue, which affects all model year 2024 Cybertrucks. Meanwhile, a Southwest Airlines flight nearly collided with a JetBlue plane yesterday on a runway at Ronald Reagan Washington National Airport. No injuries were reported. According to the FAA, air traffic control directed the Southwest flight onto the runway where the JetBlue flight was taking off. And air traffic controllers can be heard yelling, stop, stop on audio posted on YouTube. The FAA says it's going to investigate further. And just a quick thing before we go, just wanted to let you know that I'm actually hosting these international reporters roundtable this week. And I spoke to a panel of very intelligent people here about the big picture when it comes to the world economy. I just want to show you a sneak peek here. So the impoverishment of the middle class is the is the is the main consequence of this enormous level of monetary stimulus and fiscal stimulus, which at the end of the day are actually the same. All this message about the reduction in inflation comes after two changes in the calculation of CPI. So it's not just that inflation has not been contained, is that the new ways of calculating CPI. This week's international reporters roundtable is going to premiere this Saturday at 7 p.m. Eastern Time, so don't forget to watch. That's all the stories we have for you today. Thank you very much for watching. If you have any feedback for us, feel free to let us know in the comments down below. And don't forget business matters. Have a good weekend.