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QUEST MEANS BUSINESS
Dow Surges after Suffering Massive Loss; Tech Gadget Breaks Language Barriers; Rescues Underway in Taiwan for Quake Victims; Elon Musk's Super Rocket Lifts Off. Aired 4-5p ET
Aired February 6, 2018 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN HOST (voice-over): Huge change on Wall Street, Dow Jones industrials up more than 550 points, closing bell ringing, hit the
gavel and trading is over on an extraordinary day here in New York.
It is Tuesday. It is the 6th of February. Tonight, the Dow moves through more than 1,000-point range in one day of trading, down 500, up 600,
closing at 569.
Global stocks are not so lucky. They'd seen the worst of the Dow. Now they will have a chance to react to a better position on Wall Street.
And Donald Trump continues to say a government shutdown would be good. That is if there's no deal on immigration.
I'm Richard Quest live on the floor of the New York Stock Exchange where, of course, I mean business.
QUEST: Good evening and a warm welcome to the floor of the stock exchange. Trading has just finished on the New York market and what an extraordinary
day it was.
Volatility rules the market, that was the story of the day. Take a look at the big board and you see the chart tells the story. The market opened
down 500 points, starting at the worst point of the day, 537 points. That would took it well and truly into correction territory, which, of course,
is a 10 percent fall from the recent highs and then it went up by 367 points. But even that gain was eclipsed in the afternoon when the market
once again turned positive and went up more than 600 points.
In the end, we've got the best point gain in two years and throughout all of this there has been nothing but volatility. I want to show you the way
the chart looks as we see it from down there.
Just look at this and you'll see exactly. You've got the Dow Jones, just top left, up 568 points. You've got the dollar index that was also high,
the S&P 500 which is up 8846 and volume which is at 1.3 billion shares at the moment, the VIX index which is just here, that's down 7.5 and gold,
which also came off the top of the worst of the day, that was -- tell me (ph).
Hey. Good to see you. What a day.
PETER TUCHMAN: Unbelievable day.
QUEST: Tell me what it was like in the trenches here on the exchange.
TUCHMAN: The market -- I do not think I've ever seen anything so volatile in my life, the movement late in the afternoon was volume is significant
that's major. Whether it feels like we did it, we established a bottoming process, we opened down huge this morning --
QUEST: 537 points down.
TUCHMAN: Correct. We ended up rallying the whole thing. We brought it back up 1,200 points basically because we ended up going up 380 points --
QUEST: But what was happening that caused that --
TUCHMAN: Any analysis I've been able to come up with, the day is -- in all these ETFs, all these triple-weighted volatile VIX, ETFs, were forced to
sell a lot of stock on the opening. That's what people are seeing.
So that for -- even though the market was trading down, 900 premarket, 400 premarket, that forced a lot of stock coming into the market on the
opening, caused it to open 300-400, went down about 600 and change and then there was just like -- was it a short cover?
Was it just people basically coming in to buy bargains?
I think more that than anything else because of the way we closed. It felt like that was the beginning of a bottoming process.
QUEST: When we saw throughout the course of the day these 100-point swings, down 150, two minutes later up 170.
TUCHMAN: It really feels like this massive -- the imbalances were huge on the close. They were all for sale. That did not come to fruition. It was
a bear trade (ph). The buyers came in for all that was for sale. So that kind of says the moves -- the fact that we moved hundreds of points over
moments is just like -- it is an enigma to me. I don't even understand it.
Basically it's a matter of stocks were going up and down multiple points because these numbers are not just made-up numbers. This is actually a
fine-tuned machine. The stocks were going up and down like crazy. But it really felt like people were coming in to --
TUCHMAN: -- buy big and then they were coming in to sell big, an extraordinary day.
The fact that we ended up 600 points, we rallied 700 off the midday low --
QUEST: -- ask you about tomorrow.
TUCHMAN: I don't know. We do not know about tomorrow.
QUEST: That's my point --
TUCHMAN: We know Richard did well today.
QUEST: (INAUDIBLE). Never mind how I did.
TUCHMAN: Always a pleasure.
QUEST: Thank you.
That's Peter Tuchman, which gives you some flavor of the way the day -- Art Hogan joins me hopefully, the chief market strategist at the rally.
Art, are you with me?
ART HOGAN: I sure am.
How are you, Richard?
QUEST: Good to see you, good to have you with us. Art, tell me about the machinations of the day. These ETFs, this VIX index futures contract that
arguably caused so much trouble yesterday.
HOGAN: Yes, it is interesting. So none of these ETF products, at least the interesting ones around volatility, the inverse volatility, were really
created for retail and (INAUDIBLE). Unfortunately, that is where they live. They certain lived in the hedge funds.
Last year there were triggering investment because there was no volatility, in terms of volatility and you see what happens. So I think the ETFs in
general have caused more of a broad market selloff, right, so we have seen indiscriminate selling over the last couple days, including this morning
because people are selling ETFs that represent the entire market.
I think this afternoon broke that correlation a little bit, we actually see sectors that are moving better. We saw stocks that were responding to good
earnings. So some of the (INAUDIBLE) stocks that came out with good earnings today, their stocks actually went up.
So I think we broke some of those correlation and some of that broad market selling. Hopefully technically closing above the (INAUDIBLE) moving
average of the S&P 500 is important.
QUEST: OK, stay with me, Art. Stay with me. I want to get to Mike.
Because, Mike, you've just finished -- your face tells it all. That was a very intense 10 minutes, 15 minutes at the close.
MIKE PISTILLO, DESIGNATION MARKET MAKER, GTS: The last couple of days have amazing, Richard. It's like the old days again. You know, the way the
markets are moving in and out, up and down 100 points at a time, this is the energy the floor needs, the human element back here, the market makers
actually adding all the privy to the market and --
PISTILLO: We're using our capital along with our algorithms and we're there on both sides of the market trading. The (INAUDIBLE) market is
whipping back-and-forth 100 points at a time, getting out. You look at that VIX now; 400 ties yesterday that VIX was up.
The VIX had been at 10 for the last 5-6 months. Now all of a sudden it went to 40 yesterday. That volume and volatility in trading is amazing.
QUEST: Stay with me, Mike.
Art Hogan, how useful, from your point of view as a strategist, is the VIX index and these volatility indices that allow you to have a trading
strategy or a market strategy?
HOGAN: I don't think they're useful at all. I don't think they were invented to be an asset class or a useful barometer. I think they're
supposed to tell us what the temperature of the market is. If there is no volatility, the VIX is going to be at 10. If there is a lot of volatility,
the VIX is going to be north of 40. That is all it should be telling us. It should not be looked at as an asset class or a predictor. It should be
a reflection of the volatility that's in the market.
Unfortunately, it has become too popular and that is what happened. It was never meant to be the investment class that it's become.
QUEST: Stay with me, Art.
Mike, when you look at the way -- were you able to feel real buying this afternoon rather than just price rising?
PISTILLO: So, Richard, you look at the volume now, 1.4 million.
QUEST: -- 1.1 up versus 282,000 down.
PISTILLO: -- average daily volume for the last couple of months, 700 million shares. Double the volume right there. And this isn't an
expiration, this is a regular trading day.
QUEST: So is this a correction, just continuing -- which may continue for several more months?
PISTILLO: I just think that (INAUDIBLE) trading has changed now. You have to get used to these moves in the market again, where we had those doldrums
before Christmas and the holiday season and then it followed through in January, where the market was just ticking and dripping higher on not a lot
Then that last 1,000-point where, in two weeks, the market moved 1,000 points. Today proved that there is buyers out there. The rally that we
saw back yesterday tried to rally two times, saw what, down 1,000 points and then today, come in the market about 1,000 premarket and then we opened
the down 500 points and then we rallied. We had 560 to close.
QUEST: A great synopsis. Have a good evening.
PISTILLO: Thank you.
PISTILLO: Get the job done.
QUEST: Art, we're going to get the job done, absolutely. Back to you, Art Hogan.
Let's raise this up if we may, Art, out of the day's trading as such and push it forward. An investor watching what's happened needs to make sense
of this and needs to have a strategy.
What is that strategy?
HOGAN: Well, three things. First and foremost, you don't want to panic. That is always proven to be the wrong move. The second, you want to have a
plan, right, and you want to make sure you're rebalancing to your plan.
So if you are at 60-40, 60 equities, 40 fixed-income, and you have not readjusted, you're out of black already. You need to readjust on a regular
basis, you do not want to panic.
And the third thing is -- and this is the most important thing -- you want to look at --
HOGAN: -- creative vehicles like those inverse ETFs and the two and three times ETFs as both buyers as gambling. That's not part of investment
strategy, that is not what they were made for. They're made for people to trade hourly or daily, not for the people at home to be using as an
More importantly, I think -- think about the fact that ETFs in general cause broad market selloffs and that causes dislocations in sector. I'll
give you one example, we were worried about rising interest rates being bad for the market.
We sold everything, financials were the worst performing sector over the last two weeks, they should be doing very well in a rising rate
environment. So that is the dislocation that active investors can start taking advantage of here.
QUEST: All right. And so finally, Art, we've seen what -- (INAUDIBLE) just to make sure so I get the exact number to see exactly where we are.
So we're up 2.3 percent on the Dow. Next to trade will be Asia, next couple of hours, then you are up obviously.
If yesterday follows true, then it is going to be a strong day in Asia, potentially.
HOGAN: Yes, interesting is we had that terrible 4 percent selloff yesterday. Asia markets actually were down much more than we were. Europe
actually did much better.
So on a relative basis, I think we have an opportunity to have this carry over and actually be a positive for Asian markets and Europe actually might
get to bid tomorrow. So we'll have to see how that plays out. But typically they follow us.
QUEST: Good to see you, Thank you, Art.
Art Hogan joining us.
Now we talked about the volume and the range that it went through over the course of the session. Just going to look at the numbers, 537 on the
downside; 600 on the upside. Put all that together. (INAUDIBLE) with me.
How did the market perform during what are exceptionally volatile times?
STACEY CUNNINGHAM, NEW YORK STOCK EXCHANGE: I would say trading was very, very volatile but trading was very orderly and that is really what is --
what is most important, that the markets move smoothly.
QUEST: Your systems are well designed to cope with well over 1.4 billion shares, correct?
CUNNINGHAM: Yes, absolutely. Our systems are designed to cope well in all sorts of market conditions and, in fact, today's market volatility, while
the numbers are really big and you've seen 1,000-point swings in that, that seems like a big market move, from a market percentage standpoint, is
wasn't actually a significant move at all.
QUEST: So as the Dow and the market indices (INAUDIBLE) have risen, so to use the phrase that we say on QUEST MEANS BUSINESS, 1,000 points isn't what
it used to be because, if you had to continually upgrade the systems to cope just with these larger numbers.
CUNNINGHAM: We're always upgrading our systems to maximize performance. But a day like today didn't put any strain at all.
QUEST: And, Stacey, looking at the underlying trends that you're seeing in terms of, for example, we've talked about the VIX index and the way in
which that may have caused the spike yesterday, do you know anything about the spike yesterday?
CUNNINGHAM: Well, I think the VIX, what we saw in the VIX was an increase in overall volatility. And so that is reflected in the market. I think
what you see is that when there is a spike like that in the VIX, you see liquidity migrate back to the exchanges, back to the lit markets. It's a
So you see that and that's exactly what we saw over the past couple of days, a lot of liquidity coming back to the exchanges directly.
QUEST: And do you see that then as between the equities and the bond market, where we saw (INAUDIBLE) the 10-year -- actually, the 10-year yield
down 26 basis points and the price up --
CUNNINGHAM: Certainly market events like this, you're looking at the correlation across all asset classes and seeing how the interplay works and
that's really an evolution we've seen over the past decade or two.
QUEST: (INAUDIBLE) you talk about this and it's great in that sense. But when I've got people like Peter Tuchman who I'm sure you're familiar with -
CUNNINGHAM: I know Peter well.
QUEST: -- (INAUDIBLE) says, look, (INAUDIBLE) of a certain age have never seen anything like this today.
CUNNINGHAM: Yes, the numbers are bigger.
QUEST: The numbers are bigger.
So do you not have a moment of.?
CUNNINGHAM: We're always mostly -- the most focused on investment confidence and making sure trading is orderly so that investors know that
while the markets might not always go up and there will be down days, they're confident in that they're functioning the way they're supposed to.
QUEST: Good to see you.
CUNNINGHAM: Great to see you.
QUEST: When we come back, we will look at the global selloff and Julia Coronado (ph) is with me, who is going to help me -- come on. You're going
to help me understand the economics of all of this, where economics meets Wall Street when we return after the break.
QUEST: Look at the Dow 30, you see 26 of them are in the green, four are in the red and not surprisingly the companies are benefiting on both ways
because of the tax cuts of the Trump administration's recent proposals.
Julia Coronado is with me, former Fed economist and now founder of Macro Policy Perspectives.
JULIA CORONADO, FORMER FED ECONOMIST: That's right.
QUEST: You've been very kind and standing and waiting and listening and you've heard all the excitement of the day.
CORONADO: Very exciting day.
QUEST: Now give me the economics of the day.
CORONADO: Well, I think everything that we are hearing points to a significant repositioning. So the one thing we can say for sure is that
the low volatility of last year is behind us. We're in for a lot of rethinking about what the outlook looks like, what it means for inflation,
what it means for Fed policy and what it means for risky assets.
QUEST: But when you say the volatility is back, what does that mean?
Does that mean -- ordinary investors aren't buying and selling like this.
Where is this volatility coming from?
CORONADO: I think the size of the moves and the size of the swings and the volume point to institutional investors repositioning large portfolios.
So, no, this isn't mom and pop. This is people that came in thinking the world was one way, rethinking their entire outlook in terms -- and then
let's remember, the bond market started this off.
It was the backup in yields that sort of caught stocks by surprise.
QUEST: So if there is a rethinking of portfolios, which way is it going?
Because it's too simplistic to simply say it's risk on, risk off; it's going to bonds?
What are these large portfolio institutionals doing?
CORONADO: OK, so I think one thing that we're learning is that when you do a large fiscal stimulus and the economy's at full employment, some that is
going to go into inflation and rates. And what we call in economics crowding out. So higher rates are going to take away some of that
stimulus to the real economy.
So that's sort of the textbook economic explanation. That means a little bit of that risk premia comes back into risky assets. There's been no risk
premia in stocks, in high-yield bonds. That's coming back a little bit.
That means a correction.
QUEST: All right but if there is that correction, those high yield also affect those companies that have got huge debt, which either have got to
reprice and refinance or new debt coming into the market at higher levels, which will affect -- which will affect profitability.
CORONADO: Yes, it will affect corporate financing decisions; it will affect the sort of decisions that people have been making, that low-
hanging fruit from low volatility, low rates in recent years. Some of that is going away.
QUEST: I just want to look here, TNX and (INAUDIBLE), so the 10-year bond down a quarter, down to 2.76. So 3 percent on the bond looks to retreat.
But come on, Julia, there's no logic for that, other than the market volatility. The same fundamentals that mitigate it toward a 3 percent 10-
CORONADO: Well, they do and so we can go back there. We can -- we regain some of the yield that we -- the market rallied, yields fell in the last
couple of days. They rose almost 10 basis points. The 10-year rose almost 10 basis points today.
We could test 3 percent very easily in the next few weeks.
QUEST: OK, we tested it or we got toward it on Friday and the market fell out of bed. My experience is that when it sees something for a second time
QUEST: -- like a horse --
QUEST: -- so frightened and it takes it more in its stride.
CORONADO: That is possible so we will see. What is true is that the discount rate that is applied to that future stream of earnings is going to
be a little bit higher. So that does mean that there is a correction that should come.
Where is the fair value?
That's up to the investors to decide.
QUEST: Great to see you. Great day on the market, exciting.
CORONADO: Very exciting.
QUEST: Thank you very much.
As you can see, those of us who do this on a daily basis, really, we have to bring a certain amount of excitement of the day.
Look at the way the global stocks traded and you'll see the heavy losses of Monday were well reflected in what happened. Europe recovered slightly
after the New York opened but Asia, of course, with the Nikkei losing all the gains of the year.
Diane Swonk is with us from the Midwest, founder of DS Economics in Chicago.
Now, Diane, we are sort of at the exchange all caught up in the moment of these extraordinary moves. But thankfully, hopefully, in the Midwest,
you're going to give us a bit of real-life economics in terms of how it looks globally.
DIANE SWONK, CHIEF ECONOMIST, GRANT THORNTON: Well, I think we actually are seeing a very positive situation. I would agree with Julia. She is a
good friend of mine and I'll see her in a few days actually. I think the most important issue is that we've got a global economy that is in
synchronous growth now. We've got a global economy where all central banks are just pouring money into the system.
They are now starting to pull a little bit out. They're getting that, watering that punch bowl down a bit and, as they do that, people sort of
don't know, is the party over?
Oh, my gosh, should I stop?
And that was sort of the reaction we saw, the idea that it could -- we could have a little inflation because we had fiscal stimulus late in the
cycle, as Julia alluded to. Last week Treasury also announced it was going to have to issue more Treasury bonds and because the tax cut, the debt
ceiling is going to be hit sooner than we thought originally.
So all of those things together give us this idea that the ceiling we once had on those long-term rates has now been lifted. Now it does not mean
it's going to blow up but I do think we will see well over 3 percent by the end of this year, as the Fed does what it needs to do.
And we see the economy adjust and the markets adjust to what really a more normal situation, in which more normal volatility, higher interest rates
and higher wages.
QUEST: All right, now, on this point then, I looked overnight. Now Shanghai, for some reason, went on a frolic of its own. But if you look
overall, which of these markets, in Asia or Europe, which has been the hardest job to -- some will decouple automatically from New York and from
But it is going to be very hard.
SWONK: It is hard and we know now that it is -- we are a global economy. And we are globally linked, although we did see Europe come back more
quickly than Asia. I think Asia still has to figure out where it is at. I think we'll see Asia come back as well.
But I think at the end of the day, I think Julia is right. We're in for more volatility going forward in niche markets overall, whether they be in
U.S., Asia or Europe. They were priced to perfection that did not exist. They were sort of -- we are partying like it is 1999. In reality, we're in
a 21st century economy that, although we're a lot further from the financial crisis, we still had deep scars from the financial crisis.
QUEST: So on the macroeconomic level, the Fed seeing what has happened, seeing -- what does it do?
How does the Fed manage to withhold -- well, (INAUDIBLE) much more simply than that.
What does the next statement say?
SWONK: I think the Fed is going to, at the March meeting, which is Chair Powell's first meeting that he's going to preside over, I still think
they're going to raise rates at that meeting.
I also think that he's going to make a step towards transparency and say we're going to have a meeting, a press conference at every meeting and by
doing that he will make every meeting live.
That means that markets will get the message that they could raise rates at any meeting.
QUEST: Diane, who is also chief economist at Grant Thornton, very glad to have your perspective from Chicago. Thank you. Good to see you as always.
SWONK: Thank you.
QUEST: I do promise you we're bringing you all the views that you need to hear, that helps make sense of what are extraordinary days in the markets
at the moment.
Now we've been speaking the language of economics throughout the course of the program. And technology advances on the stock exchange has seen these
sort of $1.4 billion market moves.
But also, for example. they're also breaking language barriers as a result of technology. In our series, "Biz Frontiers," the breakthrough that will
make us all multilinguists.
SAMUEL BURKE, CNN CORRESPONDENT (voice-over): Inside one of the Netherlands' largest startup hubs is a team convinced that the artificial
intelligence inside their small device will soon rival the best linguists - -
BURKE (voice-over): -- out there. Founded by CEO Brend Kouwenhoven, the $200 crowdfunding gadget has the potential to bridge barriers of language
by allowing on-the-spot translations in an array of languages.
But with so many alternatives on the market, especially the dominant and free Google Translate, how can Travis keep itself from being lost in
BREND KOUWENHOVEN, CEO, TRAVIS: It is not about competition. It's using the best translation available. So Google is one of our engines we use.
So they are more a tech company and getting at the best technology available, we think of the best translation available on the spot. And
that is a combination of software and hardware.
So for us, the end-user is our main focus.
BURKE: And how many languages are available on the device when it's connected to the Internet?
KOUWENHOVEN: It is almost 80. We're striving for 80 so that it is our promise and we do a lot of work together.
BURKE: And what areas are you seeing the Travis device have the most success?
KOUWENHOVEN: We have now our consumer product being sold to a lot of people; 25,000 units are shipped already.
We already have question from the medical market, for instance, so you get into consulting room and you're unable to express yourself or explain
what's at hand.
But our main focus now is Asia because, when you go over the border in Asian countries, you have nobody speaks your language.
BURKE (voice-over): With limited offline capabilities, Travis works either via Wi-Fi or through a SIM card you buy separately. So it is time to see
if Travis can actually talk the talk.
UNIDENTIFIED FEMALE: (Speaking foreign language).
BURKE: OK, so it was designed here in Holland. That is why we are testing it out here.
So did you think the translation was good?
UNIDENTIFIED FEMALE: The translation is good.
UNIDENTIFIED FEMALE: Yes.
BURKE: What's the most beautiful city in Portugal?
Is that a good translation?
It was perfect?
UNIDENTIFIED MALE: Perfect.
BURKE: Do you think you would pay for a device like this?
UNIDENTIFIED MALE: Yes, I am going to buy it.
UNIDENTIFIED MALE: I think we will translate as it is free and since everybody has a smartphone already and 200 euros, that is quite a lot of
UNIDENTIFIED FEMALE: (Speaking foreign language).
If this device works that good, then I think it's very interesting thing to have.
UNIDENTIFIED FEMALE: I'm a student.
BURKE: We'll try and get you a discount.
BURKE (voice-over): Samuel Burke, CNN, Rotterdam.
QUEST: Samuel Burke on the "Biz Frontiers," and we'll have more of that, of "Biz Frontiers" as the week goes on.
As we continue tonight on QUEST MEANS BUSINESS from New York, truly shocking pictures of an earthquake in Taiwan. Two people are known to have
died; hundreds have been injured especially when you look at the pictures of this hotel, which just about collapsed -- after the break.
QUEST: Hello, I'm Richard Quest. There is more QUEST MEANS BUSINESS in just a moment.
Donald Trump says he'd love a government shutdown if he does not get his way on immigration.
And the Falcon has flown the nest. It's a very big nest because it was a giant Falcon. I'm referring of course to Elon Musk's rocket, which is now
on its way to take one of his cars into orbit and leave it there. We'll explain as we continue. This is CNN and, on this network, the facts and
the news always come first.
QUEST: More now on the earthquake in Taiwan. CNN's Alexandra Field is in Hong Kong and joins me now.
What more do we know?
ALEXANDRA FIELD, CNN CORRESPONDENT: Richard, this happened in the middle of the night so we will not know a lot more until daylight hours. We do
know that the search and rescue operations are very much underway. Two people killed, at least 200 people injured. The question now, how many
more could be trapped, how many are missing. That is what rescue workers are attempting to get their arms around.
At this point at least three buildings collapsed as a result of this quake, 6.4 magnitude, again, happening in the middle of the night. One of those
collapsed buildings, a hotel and that is where the majority of the injuries are centered at this point.
Beyond those buildings, of course, we're seeing damages to roads and bridges, of also course there is the risk of other buildings collapsing.
That is why it is important to get people out and get them out quickly. They reported feeling that violent shaking in the middle of the night.
We're hearing from people who went outside of the building. They saw quickly that glass had been smashed. Some people were actually crawling
out of their own windows in order to get to safety, of course, for fear that more buildings would collapse.
Taiwan's leader has tweeted out a message, telling people to try and stay safe. Letting people know that government services are out there in full
force, along with armed forces. We've even seen some rescues happening by crane again. At least 200 people injured.
But Richard, we know in these scenarios that certainly it can take hours if not longer to find people who could be trapped in various compartments in
QUEST: Now because of Taiwan's history and of earthquakes in that region, one assumes that the authorities in Taiwan, are well versed and
professional at dealing with this tragedy.
FIELD: Yes, and not just the authorities; frankly people who live there and that is what we're hearing from them this morning. they say, certainly
they knew right away what was going on.
This is an area that has actually experienced several quakes within the last few days. This certainly being the most significant at a 6.4
magnitude. There was another aftershock that was felt quickly thereafter, coming in at 5.1. Certainly people have to brace, they anticipate for the
possibility of additional aftershocks.
But, yes, this is something they live with. This is something that they prepare for but those images that you are seeing on the screen, certainly
jarring, causing a lot of concern for people this morning again. They will have to continue to assess the damage, try to brace, try to stabilize any
structures that could be at risk of collapsing in those daylight hours.
We're talking about some disruption for flights and train services as well so certainly a lot of cleanup work to do. But the most pressing issue
right now, the rescues that have to continue underway -- Richard.
QUEST: Alexandra Field thank you. We'll talk more about that in the hours ahead as we continue on QUEST MEANS BUSINESS live from the New York Stock
So President Trump says he'd love a shutdown if he can't get a deal on immigration. That's throwing down the gauntlet for the Democrats -- after
QUEST: Extraordinary day on the stock market, look at the numbers and you'll see it ends with an outstanding rally. The Dow shed more than 560
points right at the open; the futures have been down overnight very sharply, suggesting 600 or 700, so 567 was perhaps something of a relief.
And then it went positive, recovering losses in the afternoon. I wanted to look at this graph here though. You see the Dow but that graph in the
middle is the S&P 500. That graph really tells you the story of the day and, as you can see, the S&P, which closes up 46 on an index of 2695, that
rallying of some 2 percent is extremely powerful.
Throughout the day, everybody was wondering what the administration in Washington was going to say about all of this. After all, at the worst
point yesterday, President Trump did not even refer to the stock market while it was down 1,500 points.
Steven Mnuchin, the Treasury Secretary, did decide today was the time to make mention.
(BEGIN VIDEO CLIP)
STEVEN MNUCHIN, U.S. TREASURY SECRETARY: They have been quite volatile today as I normally would not be looking at my iPhone but given that the
market moves, Im checking it. It is now up 187 points. So we're backup today.
UNIDENTIFIED FEMALE: Well, the administration has claimed credit for the markets going up, are they going to claim credit when the markets go down?
MNUCHIN: Again, I think we will still claim credit for the fact that it is up over 30 percent since the election.
(END VIDEO CLIP)
QUEST: Dan Merica, Ive heard you say this, you know what we say down here, live by the Dow, die by the Dow. The administration might have had a
second lease on life on this Dow question after today.
DAN MERICA, CNN DIGITAL CORRESPONDENT: It was looking pretty bad yesterday when President Trump was touting good economic news at the same time that
the Dow was cratering. But he hasn't really weighed in yet on this volatility, this market volatility.
But as you see today, as you know very well, opens this morning down 500, ends up 500. That kind of gets at the point that many advisors have
actually cautioned the president from linking the stock market performance to his economic message because the Dow is very volatile.
Yes, it had a very good run in his first year in office but we saw yesterday, we saw today how volatile that could be. President Trump will
certainly continue to take credit for the booming stock market and his administration has said that they believe the fundamentals of the economy
are very strong.
But you are exactly right, President Trump right now is living by the Dow, dying by the Dow. And if the Dow goes down in the future, he will, at some
point, have to weigh in on --
MERICA: -- whether he's taking credit for a market downturn.
QUEST: The president said today he would love a shutdown if he doesn't get his way or he doesn't get an immigration deal. That's somewhat of an
extraordinary thing for a U.S. president to say.
Am I quoting him out of context?
MERICA: No, it was a remarkable moment in the White House. I actually want you to take a listen to what he said and then I will talk to you about
it after we hear.
(BEGIN VIDEO CLIP)
DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES: I'd love to see a shutdown if we don't get this stuff taken care of. And if we have to shut
it down because the Democrats do not want safety and unrelated but still related, they don't want to take care of our military, then shut it down.
We will go with another shutdown.
(END VIDEO CLIP)
MERICA: That comment certainly caused a lot of heartburn on Capitol Hill, especially among Republicans. The Democrats were trying to strike a budget
deal as we speak right now. Now, a few hours after that comment, White House press secretary Sarah Sanders said that the White House was not
advocating for a shutdown, which it seems to be directly at odds with what the president said.
But in that meeting it is also worth noting that a congresswoman from Northern Virginia, close here to Washington, D.C., who represents thousands
of federal workers, actually confronted President Trump and said that a government shutdown was not needed on immigration policy.
This is a congresswoman who has advocated tougher immigration laws but who basically confronted the president, said that his comments about the
shutdown were not accurate and that a government shutdown wasn't needed.
That really gets at how remarkable this moment was, that a Republican congresswoman would take on the president in the White House over a comment
he made just minutes before. It really was a remarkable moment.
QUEST: Dan Merica, before the year is out, we should swap jobs and see which is more difficult to actually fathom.
MERICA: Do it.
QUEST: The underlying trends of politics or what's happening in the markets -- I think I will stick to the market.
As we continue tonight on QUEST MEANS BUSINESS, Cristina Alesci is with me to try and make some sense on what seems to be a nonsensical 72 hours in
CRISTINA ALESCI, CNNMONEY CORRESPONDENT: It certainly did but as you can see, Richard, and pointed this out to me, we had quite a solid landing.
You know, I was a gymnast for 10 years so when you dismount from the uneven bars or the balance beam right and you nail it, that sort of reminds me of
that, like a solid landing to a very tumultuous day, up --
QUEST: It doesn't make any sense if we look at that. I mean, the volatility we can explain away through algorithms and all that sort of
stuff. But regular viewers are well farm that it is the last your when they buyers see where the land lies and move in -- or not, as the case may
ALESCI: I think the market is trying to find a bottom and we're going to see that for quite some time. What happened today, it looks like, at the
end of the day was that you had bargain hunters come in and try and take advantage of the market dips. And that is essentially what you will see
during correction. You will opportunistic buying that doesn't necessarily we're at the end of a potential downward point or downward cycle in the
QUEST: That is really important to stress, just because we've gone up 2-3 percent, does not mean that we're back off to the races.
ALESCI: No, it certainly doesn't. In fact, this market action over the last couple of days indicates a complete opposite and people are still
going to be nervous, not only about increased volatility but also going to be nervous about, OK, what is this tax cut in the U.S. really mean?
What kind of impact is it going to have on the economy.
Is it going to serve as an accelerator to an already inflationary environment?
And potentially force the Fed to act even further and rise -- and increase interest rates?
QUEST: You've spent a little time now in Washington. The Powell Fed is expected to be not dissimilar --
ALESCI: Rough couple of days on the job, first couple of days on the job, right?
QUEST: -- but they're still looking for a vice chair who is heavy on economics. Larry Lindsey (ph) supposedly ruled himself out, which means
they're still looking.
ALESCI: They are still looking and to be honest, there are positions in Treasury and throughout other parts of the administration that need to be
filled. So we need other pieces of the government to come together.
But the administration generally -- now we're switching from the Fed to a discussion about the administration, the administration, the administration
officials probably if they want to be able to walk away from the market on bad days probably shouldn't be talking too much about the market because as
a politician, you do not want to tie yourself to something that you have no control over and we've seen that happen over the last couple of days.
QUEST: You were down here when we started the program the look of -- I mean, it wasn't panic. There was just a lot of excitement on Peter
Tuchman's face, on Julia Coronado's face, on my face, even your face. This is the sort of day that's exciting.
ALESCI: It is. And I hope to be --
ALESCI: -- to have much more of them on the floor, here, with you.
QUEST: It's a deal.
We continue on QUEST MEANS BUSINESS. (INAUDIBLE) stock, all right. So when we closed at 4 o'clock, Snap was up 1.5 percent. Since then, Snap has
produced earnings and it makes a very different reading. After the break, QUEST MEANS BUSINESS, (INAUDIBLE).
QUEST: QUEST MEANS BUSINESS live from the floor of the stock exchange, the trading day is over. The floor does tend to sort of move out pretty
quickly. In fact, as soon as (INAUDIBLE) and they're in early and they leave early or (INAUDIBLE) afterwards.
Snap shares are soaring after hours, up almost 23 percent on better-than- expected earnings; 23 percent, Clare Sebastian, in after hours.
Why? How? What?
CLARE SEBASTIAN, CNN CORRESPONDENT: Well, Richard, don't forget, when something like this happens it's not just about how well they've done, it's
about how low expectations were to start with.
Snap has really struggled over the last year, their share price is actually down based on today's close, around 48 percent from its high over the last
year. But earnings were definitely better than expected. The daily active users were up 5 percent on the previous quarter. That is the biggest net
(INAUDIBLE) since the third quarter of 2016. Revenue was up 72 percent year-over-year and ad impressions up 575 percent year-over-year.
So that certainly is something that investors are going to be watching. As for Snap's future, obviously we that they've had a bit of a come to Jesus
moment in the last few months. They're redesigning their app, trying to make it easier for people to use.
That has been slightly delayed. We did originally expect it in December. They now say at the end of Q1. So certainly we expected questions about
that on the call. But very welcome gains for Snap after so many months of struggles.
QUEST: Clare, does one swallow make a summer?
SEBASTIAN: Well, they still have a lot of trouble ahead, Richard, no. In the case of Snap, don't forget, that 5 percent adds on users (INAUDIBLE)
takes them out to 187 million Instagram stories which copies that key feature from Snap alone has more than 200 million, Facebook which is also
copied the story's feature has 1.4 billion daily active users.
So Snap still has some pretty giant competition out there.
QUEST: Clare Sebastian, thank you, Clare. I know you are being far too delicate and far too polite to ask me, to delve into personal grief and
misery but regular viewers, you will wish to know, no, a 23 percent rise in Snap just means that my Snap shares are only down 48 percent from what I
Yes, the stock is at 17 and it's something like 27.
All right, thank you.
Now it's not only Snap shares which are soaring. The world's most powerful operational rocket has lifted off.
(BEGIN VIDEO CLIP)
QUEST (voice-over): It's Elon Musk's rocket. It's the Falcon Heavy. Its first unmanned test flight, 27 engines, boosters strapped together,
(INAUDIBLE) thrusters 18 Boeing jumbo jets and SpaceX said it could send humans to the moon or Mars.
Rachel Crane is at the Kennedy Space Center where she spoke to Elon Musk.
Rachel, I saw you earlier broadcasting. We were excited on the stock exchange today with the day. You had your own day of excitement, beside
yourself, quite rightly, on what was a magnificent day.
RACHEL CRANE, CNN CORRESPONDENT: Richard, well, I truly am a space nerd at heart. So I really -- I couldn't contain myself with this historic launch.
I was just so excited. But I was the only one; everybody around me here at Kennedy Space Center was beside themselves with excitement, seeing this
historic maiden launch.
Now we also know that two of the boosters, the side boosters, have landed successfully here at Kennedy Space Center. SpaceX was trying to land all
three of them.
So a lot of firsts happened here today for SpaceX. As you pointed out, this is now the most powerful operational rocket in the world. But this
isn't just a spectacle. This is truly significant for the space industry because the fact that they were able to pull this off successfully, that
means that now SpaceX has a heavy lift rocket at a fraction of the cost of what other heavy lift rockets cost per launch, on $90 million per launch
for this Falcon Heavy.
So truly a huge boon to space exploration because also Elon Musk says that this rocket, the Falcon Heavy, could carry twice as much payload to space,
could go much further into space than the current rockets on the market -- Richard.
QUEST: Now we've got (INAUDIBLE) so remind us, what is this rocket carrying?
It does not have a satellite. It does not have any major science tests.
What is it carrying and what is it going to do with it?
CRANE: Well, that's where Elon Musk sprinkled his extra sauce there. He is a PR maestro and he decided why sent something boring like a hunk of
concrete or some steel to space?
Why not send your own personal roadster to space?
And inside that cherry red Tesla roadster is a space dummy and it's listening to David Bowie's "Space Oddity," on repeat. And right now we
know that it's coasting through space. He's already tweeted out some incredible images that are coming in from the cameras that are on board
that Tesla. Truly amazing to see that.
And yesterday I had the chance to speak to Elon Musk about the difficulty level of this launch. Take a listen to what he had to say.
(BEGIN VIDEO CLIP)
ELON MUSK, TESLA: This is kind of like balancing three rubber broomsticks on -- in a wind storm. The most thing I'm most worried about, understand,
is that you've got these three rockets which even though they look stiff, they're kind of floppy under these halos. So you could have the body
expanding and smacking into each other, 5 million pounds of thrust is 18 747s at full blast.
CRANE: Yes. That's a lot.
MUSK: So it's really a crazy amount of power going through this. And it's really a miracle that that rocket holds together at all.
(END VIDEO CLIP)
CRANE: But, Richard, as we saw, it was a miracle. That rocket did hold together and this launch was a smashing success.
QUEST: Finally, we are a business program so let us give this some business twist. Whether it be Elon Musk or any of the other private
launches, NASA has moved away from the launching of satellites and turned it over to the commercial sector, if you like, the privatization of space.
But as I understand it -- and you'll put me right here -- we are just at the very beginning of the true commercialization opportunities of space.
CRANE: Right and the fact that this launch was successful means that there is a new man on the block, the Falcon Heavy. So that means that now there
will be -- Elon Musk mentioned to me yesterday, that people will be able to make bigger satellites than they've been able to make as a result of the
Falcon Heavy's success today.
Also he went on to say that yesterday that they could have another Falcon Heavy launch in three to six months, Richard.
QUEST: Good to see you, Rachel. Thank you very much, joining us for that.
Let's update you with the markets and how the day traded because it is one of those days that's well worth considering. So the markets opened down
some 560-odd points. It then rallies back up the best part of 367. And throughout the course of the day, it literally goes bouncing up and fell
down through the negative and the positive, finally --
QUEST: -- going up 600 points and we end the day -- I will show you, this is the board that we look at -- we end up 567 points on volume of 1.4
billion shares, all the major indices are up, all the major sectors are up and I will have a "Profitable Moment" after the break.
QUEST: Tonight's "Profitable Moment," if you are seeing, gentlemen and ladies walking behind me with bottles ready to celebrate, it's got nothing
to do with what we saw on the markets today. Rather, an event that will be held on the floor.
But it might just as well be, plenty of time to celebrate because having seen the market go down so sharply on Friday and Monday, there was
something of a recovery today with a 2 percent day and 2.3 percent gain in the Dow.
Let us not make too much of this. We would be fools and naive and be silly to believe that this correctional, this process is over just because there
was one good day.
Instead you have to look at what happened during the day, the wide shifts and the huge volatility that has allowed the Dow to go through the best
part of 1,200 points, that is going to continue for the next foreseeable future.
How do we know that?
Because there is no reason for it not to. Eventually, a bottom will be found and the market will consolidate around a certain level before it can
start to build again. So a good day for the moment but there is plenty more volatility. Keep your seatbelts fastened, is what I say.
And that's QUEST MEANS BUSINESS for this Tuesday night. I'm Richard Quest at the stock exchange. Whatever you're up to in the hours ahead, I hope
it's profitable. I'll see you tomorrow.