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QUEST MEANS BUSINESS
The Dow Is Still On Track For Its Worst Month In Two Years; "Davos In The Desert" Now Underway Despite The International Outcry Over The Killing Of Jamal Khashoggi; Just Two Weeks Left Before U.S. Midterm Elections And The Struggle For Seats On Capitol Hill Is Being Fought Right Across The Country; Turkey's President Erdogan Says Khashoggi's "Savaged" Murder Was Carefully Planned; Putin Shows Interest in Meeting Trump After Bolton Meeting; Migrant Caravan Headed to the U.S. Border Resumes Journey on Wednesday; Mexico Braces for a Powerful Hurricane Willa; Dow Fights Back as Closing Bell Approaches; Stocks Tumble Amid Earnings Concerns; Nasdaq Recovers After Entering Correction; Tesla Shares Surge After Short-Seller U-Turn; Billions Up for Grabs in U.S. Lottery Fever; Richard Quest Takes a Look at Kenya's Mobile Banking Revolution; China Opens World's Longest Sea Bridge; Investors Face Market Sell-off Disappointing Results. Aired: 3-4p ET
Aired October 23, 2018 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
PAULA NEWTON, CNN INTERNATIONAL CORRESPONDENT: You know, the Dow has clawed back more than 400 points from session low. This is the kind of day
if you took your eyes off the screen, the market changed. We could be positive in the next hour, folks. This is what's driving the day on
Tuesday, October the 23rd.
Back from the brink, the Dow as I was saying is clawing its way back after a brutal day for stocks. Saudi Arabia signs billions of dollars of deals
as its Davos in the Desert is underway and how would you spend $2 billion? No, I really want to know. I'll speak to the lead director of America's
largest ever lottery. I'm Paula Newton and this is QUEST MEANS BUSINESS.
OK, we have to remind everyone, the Dow is still on track for its worst month in two years. Here in the QUEST MEANS BUSINESS trading post, it was
a sea of red, still is pretty much, but a lot of stocks coming back. The Dow was off more than 500 points at one point Tuesday morning before
hauling back much of that loss. Tech stocks, once a bright spot in this market are taking some of the heaviest losses though.
For a part of today's session, the NASDAQ was technically in correction territory, more than 10 percent below this year's previous peak before
staging somewhat of a partial rebound. Cristina Alesci has been watching all of the action from the New York Stock Exchange today. I mean, Cristina
we watched it kind of trying to pull its way back, but this is quite a comeback today. Bargain hunters out there?
CRISTINA ALESCI, CNN CORRESPONDENT: Absolutely, you saw some buying and I think this is the new normal, right? We saw a very dramatic low at the
open throughout the morning. The Dow down 50 points now, it's only down by a hundred. Look, this is what it's going to be like for the next couple of
months, volatility is back. Nobody knows if we're going down much further from here, but one thing is for sure, we're going to see a lot of days like
this, and it's perfectly understandable that investors are reacting to the negative headlines.
Look, the US economy is coming off of a sugar high from the corporate tax cuts at the very same time that it is facing headwinds from the impending
trade war specifically with China. So this is what companies are grappling with and the timing of all of this coming together is what has investors so
nervous of course, against the backdrop of a potential hike in interest rates, you put that all together and investors are in a rather negative
mood, but to your point, they are using these opportunities to go in and bargain hunt and do the buying.
We will see what happens later in the week when we have some of the big tech companies reporting earnings. I think investors are going to pay very
close attention to those earnings as well as the economic figures that we get later in the week, Paula.
NEWTON: Yes, and we will continue to stay tuned throughout the hour, Cristina. It could even turn positive. Appreciate it. Now, disappointing
forecast from some of the Dow's industrial giants sent stocks spiraling downward. Let's take a look at the reports just out from three bastions of
Caterpillar says costs going up because of those US tariffs. Now, that's the spike the company reporting its best ever. I want to stress that best
ever third quarter profit. 3M meantime warned 2018 earnings will be lower than expected. It blamed those currency fluctuation, but a lot of people
blaming that strong US dollar. This quarter sales meantime were shy of analyst forecast and that was the real story there.
And Harley-Davidson revealed its steepest decline in US sales in eight years. Bad news all around there, although strong demand was coming from
overseas, it made up for a lot of that leaving Harley with a big rise in quarterly profit. But with another company though that's also warning
tariffs are leading to higher cost.
Our Clare Sebastian has been following it all. You and I were saying before the show, we kind of had to check to see where these stocks were at.
A lot of people might be bargain hunting, but as Cristina was saying, a lot of the technical is going forward for 2018. It's just - it's just is that
headwind. It's impossible to ignore.
CLARE SEBASTIAN, CNN CORRESPONDENT: Yes, this is not the same climate that we were in six months ago. Certainly, not the same climate that we were in
six months ago, certainly not the same climate that we were in a year ago, and I think it's interesting when you look at these earnings because
certainly Caterpillar is really the battling one in some ways.
Today, it's still down seven or so percent even though the market is climbing back and this really wasn't that bad of an earnings report. As
you say, it was their best quarter in history. They beat expectations on top and bottom line. They even said, do they see China continuing to grow
going forward and they are going to be able to offset the costs of tariffs.
I think the question that that market is asking today is, is this as good as it gets? Caterpillar wants to pass some of the cost of tariffs to
continue with if global growth is slowing, will they still be able to do that and it just revives the whole narrative around this trade war, Paula.
NEWTON: And yet, we have had a lot of different talk from both China and the United States on that trade war. We did have in fact China saying,
"We're not that worried about the trade war." Which kind of sent people - you've got people especially in Asia even more upset thinking this could go
on for a long time.
NEWTON: When you look at that forward guidance for any of these companies, whether you're talking about Harley-Davidson. It's not looking as rosy as
it was in 2018, is it?
SEBASTIAN: I mean, it really isn't. I mean, Harley was an interesting one because they are being hit from all sides by different kinds of tariffs.
We saw some of the numbers here, they said, $15 million to $20 million for the year is the cost of steel and aluminum tariffs, approximately $25
million for the EU tariffs, those reciprocal tariffs that are specifically targeting motor bike sales and since the US has increased tariffs for
certain products coming in from China that's going to add an extra $3 billion. That's north of $40 million for the year in extra cost.
So this is - well, Harley did actually beat expectations in terms of profit. They are seeing falling sales in the US and they do have to stay
on their toes and this is just making it ever more difficult.
NEWTON: We did see one stock that was up today which was McDonald's. It was up between 5 percent and 6 percent the last time I looked. Interesting
that it was able in that moment to continue. We have it up there now more than 6 percent. We have a very busy earnings week, Clare. In terms of
looking forward especially when it comes to that forward guidance. What's the market expecting?
SEBASTIAN: I think they're in pretty disarray. I think that's the sense we're getting. I mean, there are a lot of big tech companies. Those are
the real big ones that everyone has been looking for. Tesla, we're hear about it tomorrow and then we get Alphabet, Amazon, Snap, Twitter,
Microsoft is also tomorrow - you name it.
I think people are going to be looking at them and there are different issues surrounding those stocks. Things like can they keep up with the
profits they've been making versus the revenues. These are all high revenue companies. But it is going to be all about the guidance.
This is the moment where we are still seeing a bit of the overhang from the tax cut, but we're still seeing strong growth in the US, but will it
continue, I think that's the question everyone is asking.
NEWTON: Yes, extraordinary that you have analysts saying that the valuations were just fine, thank you very much and now, even at these
levels, the valuation is looking a pretty high. Clare continues to follow what is a very busy earnings week for us. Appreciate it.
Now, we want to take a look at how the markets in Europe closed. They were down across the board as you see them there on a day when the EU
Commission, they did in fact reject Italy's big spending budget proposals asking Rome to revise them and submit a new plan within three weeks. It's
the first time the European Commission has rejected a member state budget since the Euro was introduced.
We now turn to Saudi Arabia and the investment conference dubbed "Davos in the Desert." It is now underway despite the international outcry over the
killing of Jamal Khashoggi. Now a raft of taut business leaders have pulled out as we have been covering here, but even if they don't want to be
seen with the deep talkative Saudis right now, they still want their money. They are being heard. Riyadh said it signed deals worth about $34 billion
on day one and that includes energy contracts involving operators from eight countries, among them France and South Korea.
Now, Softbank CEO, Masayoshi Son was scheduled to speak at the conference, but that's happening now and it's unclear if he will even be there. Now, I
want you to remember, he launched a $93 billion tech fund last year with Saudi Arabia putting up half of that money. That was some of the big
headlines. John Defterios joins us now with the very latest from Riyadh, and John, I know for you, especially it's been a fascinating day. Just to
kind of see how all of this has unfolded and they have done quite a job of salvaging what they assumed would be a real bust.
JOHN DEFTERIOS, CNN EMERGING MARKETS EDITOR: Well, in fact the Crown Prince, Mohammed Bin Salman who you talked about there, Paula, was
steadfast with determination not to delay though some are suggesting early 2019 after the investigations of Jamal Khashoggi was over would be better.
But he declined to take that offer. This is a very small event compared to 2017 though. They lost almost a thousand attendees, 30 A-listers dropped
off the list. We have about 60 less speakers, but they've got a lot of regional support today.
King Abdullah of Jordan escorted in Mohammed Bin Salman or MBS into the hall. MBS only stayed for about 15 minutes, but the impact was strong. He
actually toured the main hall while we were on the air and all kinds of cameras going up taking selfies. The rule of Dubai who is also the Prime
Minister of the UAE came in with a large delegation.
The neighborly backing suggesting we do support you despite this cloud of uncertainty and the investigations taking place in Turkey. I posed that
question to Amin Nasser who is the CEO of Aramco saying how can you move ahead with an investment summit when all of this taking place in the
backdrop? This is what he had to say.
(BEGIN VIDEO CLIP)
AMIN NASSER, CEO, ARAMCO: Everybody feels sorry for the death of Jamal Khashoggi. We feel sorry for this family and what happened, but at the end
of the day, you know, we need to move beyond that. It happens. The Kingdom recognize what happened and taking steps to make sure it will be
addressed through the legal system that exists within the country in dealing with the people that committed this crime.
DEFTERIOS: What has the death of Jamal Khasghoggi done to Saudi Inc., the brand of Saudi Arabia and the willingness for people to invest into the
country as you look to diversify?
NASSER: We need to keep a good investment. We have - the global economy depends a lot on what we do here in terms of availing crude to our
customers globally, and with what we are doing is making sure that we are ready, we have the right investments, our strategy continues to be the
same. We are availing crude, chemicals, products from our different plant with different customers, but this is something that we continue.
DEFTERIOS: The high profile CEOs, especially the bankers decide to not come to Riyadh for this investment summit, but I see bankers all over the
place. The regional CEOs, our high level executives is business still being done behind the scenes when it comes to Aramco for example.
NASSER: You see in the audience, we have a lot of people. We have a lot of meetings with ...
DEFTERIOS: Western bankers are here.
NASSER: Well, a lot of our partners, let me put it that way are here.
(END VIDEO CLIP)
DEFTERIOS: Once again, Amin Nasser, the CEO of Saudi Aramco where they are talking about an IPO perhaps a 2020-2021. We talked about the bankers,
Paula, it's interesting, HSBC, Standard Charter Bank, JP Morgan Chase, CitiBank. I'd noticed they were all here just not the major CEO. So they
were doing the transactions.
The one criticism perhaps, $50 billion of MOUs today that you talked about in the lead in there, $34 billion went to energy, so they are trying to
diversify outside of energy, but at the end of the day, it's a major oil producer. The banks want to be in and so do the investors in this space.
NEWTON: Yes, I'm sorry to hear from you, John, the fact that look, the numbers twos and the number threes are there. The CEOs made a grand
gesture, but everybody else is there on site. You were just talking about energy. Total here, the French company taking a completely different
DEFTERIOS: Well, you know, I think Total is an interesting case, so is Steve Mnuchin. But let's start with Patrick Pouyanne of Total. Joe Kaeser
of Siemens made it very clear, he wrestled over the decision whether to come or not and decided not to may be coming with pressure from Angela
Merkel of Germany, of course.
Although, Emmanuel Macron of France condemnation of Saudi Arabia over the weekend and this joint statement that was put out. Patrick Pouyanne and I
grabbed in the hall and said, "Do you want to talk?" And he says, "No interviews. But why wouldn't I be here? I have better than $8 billion
deal with Saudi Aramco and I need the support of Saudi people.
The investigation continues." Free force but very prescient, and Steve Mnuchin, I thought it was amazing, Paula that last Thursday, the great
hullabaloo at the White House saying, "I am not going to be going to Riyadh. I am not going to the future investment initiative." Lo and
behold on Monday, he met with Mohammed Bin Salman, the Crown Prince saying the dialogue was important. We have to stay engaged.
And the bottom line there, even Donald Trump wants to maintain his contracts inflating the employment numbers, but they want to stay engaged
with Saudi Arabia until the investigation is done. They have business interest and regional interest and that was crystal clear with the visit by
Mnuchin here to Riyadh on Monday.
NEWTON: Yes, John, and you're best placed to answer this question. I mean, look, a lot of countries here are grappling with the fact that they
don't want to do anything that really is not in the best interest of their citizens, of their companies, of the voters quite frankly. You know, I
know that you follow this so closely. Some people would say it is better to be in country and have the influence and even Europeans and European
companies would point to Iran.
And the fact that look, if we're there and we have influence, we have a more credible voice on human rights. Has there been a lot of discussion
about that and the fact that that's why you stay engaged with Saudi Arabia?
DEFTERIOS: Well, Saudi Arabia is a very big player both in outbound investment, particularly going into the United States. You talked about
the Softbank Vision Fund, Blackstone with its infrastructure fund, that's one part of the puzzle. But Paula, it took a deep dive last week before it
came out in Saudi Arabia. We're looking at $1.4 trillion - trillion dollars of infrastructure spending that's on the cards, $455 billion or
$456 billion has already been earmarked and out there.
If you're in that space, like a Siemens or a GE or Total and petrochemicals, how do you avoid Saudi Arabia and the argument that
Pouyanne was making to me that is, like it's better to be engaged even Joe Kaeser said that in his statement, rather be engaged but the political
pressure is very hard, so you can see them trying to strike the balance.
Saudi Arabia is a major player all the way around because it's the number one oil exporter in the world, he will remain that way, Paula, even though
the rise of US shale is there in the United States counterbalancing the three major producers -- Saudi Arabia, Russia and the US.
NEWTON: Such good insight into that again, John. Thanks so much. I know it's not business as usual, but I have that unsettling feeling that that's
where we're headed, and John continues to cover all of this for us from Saudi Arabia. Appreciate it.
NEWTON: Now, two years ago, US farmers in their droves voted for Donald Trump. Now, as midterm is fast approaching, their loyalty and the farming
sector itself are being put to the test as that trade war with China escalates.
And we delve into tech stocks on a horrible day, just a horrible day for the NASDAQ. It is still flirting with correction. We'll have that when we
OK, just two weeks left before US midterm elections and the struggle for seats on Capitol Hill is being fought right across the country. Some of
the tightest races for the House of Representatives right there in yellow on this map are - you guessed it - in those farming states -- Minnesota,
Iowa, Kansas -- in the US heartland, there are a lot of people really feeling the consequences of the President's trade war with China.
CNN has been speaking to some of these voters. In Wisconsin, dairy farmers told us uncertainty over trade is literally choking their industry.
(BEGIN VIDEO TAPE)
JEFF SCHWAGER, PRESIDENT, SARTORI CHEESE COMPANY: We are a family owned cheese business. We buy the milk from 130 Wisconsin family-owned dairy
farms every day. Cheese businesses don't make a ton of money, but what used to be profitable business, we're now losing money on.
UNIDENTIFIED FEMALE: Ask any business owner and they'll tell you economic uncertainty threatens their company, but here in Wisconsin, dairy farmers
are especially stressed because in some ways, they have to predict the future.
SCHWAGER: The cheese that we're talking about for Mexico and Canada, we made a year ago and we thought we knew what the trade rules were going to
be. The question is, what cheese do we make today for a year from now because what are the trade rules going to be?
UNIDENTIFIED FEMALE: Mexico and China have targeted America's dairy industry with up to $1 billion in tariffs on milk and cheese. It's
retaliation for the tariffs President Trump slapped on billions of dollars of products that they export to the US.
DONALD TRUMP, PRESIDENT OF THE UNITED STATES: We are going to win the great state of Wisconsin ...
SCHWAGER: I think it's interesting when you look at the states that kind of got hit the hardest, they tended to be the ones that have supported the
UNIDENTIFIED FEMALE: In a win for Trump, Canada agreed in September to set new quotas for dairy imports from the US, but uncertainty has already taken
its toll and an escalating trade with China still looms.
DEAN STRAUSS, MANAGING DIRECTOR, MAJESTIC CHASING DAIRY: We have 13 robots that milk our cows daily on this farm. Sartori is a great company, it's a
family owned company. It is neat because it's only - the community awaits, six to seven miles from our farm. Everything on our farm, all our
milk goes to Sartori. They have to succeed and then it helps us succeed.
As a farmer, I am watching the dairy markets all the time. Daily, they are on my phone, your iPad, you're watching it. You're trying to work
relationships and if your stirrups don't improve, it's going to continue to be tough, but when things are a little bit slower from an economic
capacity, it can resonate your hardware store or your feed mill or your veterinarian. They are all part of our community. They are people.
UNIDENTIFIED MALE: Plymouth is a vibrant small town America. If we don't have access to the export markets, we're going to stop growing, stop adding
jobs. If the exports market close to dairy, there will be fewer family farms and fewer manufacturing jobs. We are trying to hold on to the
business and that's really frustrating. We would rather be spending our efforts and resources growing the business and markets have been good to us
the last few years.
NEWTON: CNN's Dan Merica is here and you know, you were just telling me what a place like that means to small town Wisconsin. You have done
something really interesting in terms of deep diving into this election. Explain to me what it means, the kitchen table election.
DAN MERICA, CNN POLITICAL REPORTER: It's significant because these are Trump voters. These are at the base. These are people that elected him in
2016 and what they do in 2018 and 2020 and beyond really will matter because it will tell us whether this Trump bump was a one-time thing or
whether it continues.
And when you lay a map down of where trade tariffs are really impacting farmers, it's the same place that he got a lot of votes, which is
intentional by China and other places. The thing that I think really - I took away from this is that this trade war has become a referendum on these
They are on the idea that they can weather the storm that is being implemented and put on them by the Trump administration. They are
questioning their vote in 2016, but the reality is, they remain very loyal to him. They're very loyal. They agree with him on other policies, but
it's because they don't want to acknowledge in some cases that they may have made a mistake in 2016 in thinking the trade talk wouldn't impact them
and that's why it is really significant going forward because will that continue into 2020? When Trump runs again, will these folks buy the trade
message that he is selling or will they think twice and maybe say, "Well, look what you did in the last four years. I may try and go another way."
Democrats have not had success with these voters and these folks are not folks that are going to be willing to listen to Democrats in many cases.
They disagree with them on a host of policies, but if Democrats can reach out to these voters, there is a way for them to make inroads in rural
America with a certain type of messaging that would resonate especially at times like this when their bottom lines are being directly impacted.
NEWTON: And like you said, it's not obvious right now that they have been able to make those inroads especially when on trade, if you look at what
Bernie Sanders has said. It's not that dissimilar to what Donald Trump has said.
I want to point something out, you said something about farmers needing to remain resilient and the administration hoping they can hang on. I want
you to the Agriculture Secretary who spoke to me a little while ago about this very issue. Take a listen.
(BEGIN VIDEO TAPE)
SONNY PERDUE, AGRICULTURE SECRETARY OF THE U.S.: Well, obviously, it's a legitimate anxiety. It's a little bit like a drought. You don't know when
it's going to end, is it going to rain tomorrow, next week? And you're sitting there with a legitimate anxiety, but the good news is, farmers are
pretty supportive of understanding why these things are taking place and they understand a lot more than I think many people do.
NEWTON: In terms of it understanding it though, I can tell you what they understand is that they don't want to put tens of thousands of dollars into
expanding or buying new equipment right now. They are scared, Secretary Perdue.
PERDUE: Well, that's the way business works. Obviously, when there is uncertainty, we see those kind of things go out in the marketplace, so
you're not going to have people go out and there are a lot of investment during these periods of time until the trades get resolved.
NEWTON: Yes, but it's not - its uncertainty of the Trump administration is making. I think a lot of people, a lot of farmers want to know what's the
end game here and how soon will we see it?
PERDUE: Well, again, I think we need to ask China that. When is China going to stop doing unfair retaliation? When are they going to do fair
trading practices? When are they going to stop stealing intellectual property? Those are the kinds of things. This is not on President Trump,
not on the United States. He is simply responding to unfair trade practices that have taken place over a number of years.
NEWTON: And then, I guess, what I am trying to get at there, I mean, the farmers are willing to take some short term pain here because they don't
like the trade rules. How long do you think their patience is going to run?
MERICA: I mean, it's pretty telling what he said. This is not on President Trump. There are a lot of farmers who don't agree with that.
They agree that President Trump has ratcheted up this rhetoric and some of this is on him. That doesn't mean they won't vote for him or will hold
their nose, in some cases, and vote for Republicans in 2018, but it's a pretty risky bet for the administration to be saying this isn't on the
MERICA: This is on China. These farmers are going to blame China. Sure, maybe some of them will, but if you have depressed turnout in some of these
key states where there's governor's races, House races and most importantly, especially in 2018 Senate races where there are so many red
states, rural states that are at play for Republicans and they need them to keep control of the Senate. That's a risky bet for Republicans and you've
got to imagine that two years down the line, when President Trump is running again and he's out there rallying his base, will these farmers be
depressed and not be willing to come out?
I talked to some farmers who went to Trump's inauguration, they were such big supporters, who went to rallies of his across the country. These are
big time Trump supporters and even they are questioning, is this worth it for me? He said he wanted to make America great again. Some of them are
now thinking, he wanted to make America great again at my expense.
NEWTON: Before I let you go, Dan, if you're a Democrat right now in these areas, what are you thinking not just for the midterms, but really, looking
forward to 2020. How do you get them?
MERICA: For a Democrat in these areas, I mean, they're all different. Democrats in California and Wisconsin have a more vibrant party than say
Kansas for example, another state that I went to. But these are kind of incremental steps. You think, if you're a Democrat in Kansas right now,
you haven't had many good years for the party. You've taken a beating over the last three decades.
If these tariffs are impacting farmers' bottom line and the Democratic Party of Kansas can offer a difference or some policy proposals that help
them out and propose things that they are open to listening to, if you can make those incremental steps, they may be able to make broader inroads when
it comes to red states like that. It's going to be a long process because they have taken such a beating over the last 30 years, but that's kind of
what they're thinking. They're a hearty bunch as well.
I mean, if you're a Democrat in Kansas, you are a Democrat. So, they think that they can make inroads with voters like this and it remains to be seen,
but they certainly are hopeful.
NEWTON: OK, two weeks to midterms, two years really to 2020, Dan, I expect I to see you here a lot, OK. Come back.
MERICA: I'll be back. I'll be back.
NEWTON: Appreciate it. Now, a rough day on the street as we were telling you, but the Dow could turn positive. Remember that happened in the last
half hour of trade. You could see down only 36 points now. We will check to see what's going on in Wall Street when we come back.
[15:30:00] NEWTON: Hello, I'm Paula Newton, coming up in the next half hour of QUEST MEANS BUSINESS, tonight is the night for that big lottery
draw makes the history books for the United States. The head of the Mega Millions Lottery will be right here with me in the C-suite.
And there's one stock bucking that tech trend on Wall Street today, Tesla shares are up more than 10 percent. First though, these are the headlines
on Cnn at this hour. "A savaged, meticulously planned murder", that's what Turkey's president calls the killing of dissident Saudi Journalist Jamal
Recep Tayyip Erdogan rejected Saudi claims that he died in a brawl, saying a hit squad was sent to Istanbul to kill him. He says everyone involved
should stand trial in Turkey. He is demanding to know who ordered the hit. U.S. National Security adviser John Bolton spoke with President Putin in
Moscow today. Bolton said Mr. Putin expressed interest in meeting President Trump in Paris on November 11th.
According to the Kremlin, a preliminary agreement for the summit has now been reached. Organizers of that huge migrant caravan going to Mexico say
they plan to resume their journey on Wednesday. The caravan took a one-day break on Tuesday to mourn a Honduras man who died when he fell off a truck
that was carrying some migrants.
Forecasters say Hurricane Willa is an extremely dangerous storm as it barrels down on Mexico's Pacific Coast onto many popular tourist
destinations. Now, the category three hurricane is expected to make landfall within hours. It could bring a life-threatening storm surge along
with torrential rain, flooding and mudslides.
OK, we are back to the Dow because you never know what's doing. Unfortunately there, it is off -- I mean, it had lost pretty much 500
points, and now trying to crawl its way back, we'll see what it does in the next half an hour or so. I mean, traders say that there are a range of
factors that are causing headaches, not least of which is those worrying earnings report.
On the short-term, they look very good, but it is that disappointing guidance from corporate America that is bothering everyone. Companies are
voicing concerns over tariffs of course, saying they're forcing costs to rise. Now, President Trump is talking of the U.S. economy, but a lot of
analysts say global growth is slowing and that can't be ignored.
Prices of oil and copper slumped today, putting pressure on those energy stocks. And political events aren't helping at all right now. The Italian
budget was rejected by the EU Commission this Tuesday and those midterm elections are just around the corner.
Now, the market was down around 450 points when I spoke to him, but I spoke to trader Peter Tuchman and he told me it's not all bad news. This is
certainly been seen that way.
PETER TUCHMAN, STOCK TRADER: There are a lot good news and positive narrative going on, and that's where people put their focus, right? Today,
we're buying into that, now that's psychological evaluation. Right now, in the absence of any good news, we came in this morning, nothing but bad
So even things that are sort of positive are being interpreted as negative. Cap tractor(ph) did not come in or underperforming this --
NEWTON: No, there's --
TUCHMAN: The expectations were fine. Because stock is down $12, it's down 8.5 percent, so what is that? So what they're doing is it's a perfect
NEWTON: Right --
TUCHMAN: They're lopping all the negative interpretation of even positive things, plus, the negative interpretation of bear(ph) things. So you know,
that's what we're seeing.
NEWTON: Peter, I'm going to ask you to get political now, we do have midterms in two weeks in this country, some people are wondering what is
going to be the effect -- let me finish, what is going to be the effect of perhaps Democrats taking the house, the Republicans keeping the Senate and
the fact that those business-friendly policies the Trump administration has been all about evaporates.
TUCHMAN: You know what? I really don't want to touch on it because I don't think the midterms are going to affect it. You know, look, trust me, this
could be a complete shake-up, we have two possibilities here that the Democrats don't take over. If the Democrats do take over --
NEWTON: And still a possibility --
TUCHMAN: They're promising a lot of aggressive behavior against the president, that could be some unknowns we don't even know about. And if
they don't, then we're going to maintain the narrative of a more friendly - -
NEWTON: But the point is, you don't think this is burdening the market right now in terms of whether the midterms have gone --
TUCHMAN: You know, the market at the end of the day in my opinion, the long-term trades off the fundamentals. And these are all short-term
things. We saw in the beginning of the year that even headline-driven reactions were short term. It didn't change the fundamentals.
[15:35:00] At one point, remember, the first time the market broke over the last 12 months was first tossed out by Mr. Trump about capitals(ph),
200 billion, and then 400 billion and then whether -- they still go off, but at the end of the day, if there was a bid in the market -- a couple of
days ago, we've had -- last week, we had -- we peaked out at an all-time highs two weeks ago.
Then the next weeks, some negative narrative came in, we were down 1,300 points, we rebounded 900 points, and then we're seeing some further pain, a
little fragility. So you know, at the end of the day we're still just around 25 down in the Dow, yes, the S&P is off 200 points of its high.
Some stocks are being -- are down 10 percent from their 52 --
NEWTON: OK --
TUCHMAN: Plus consolidation, it could today, there's a lot of negative news out. Whether this follows through tomorrow --
NEWTON: OK --
TUCHMAN: I'm not clear, but you know, one day, that's not a market maker.
NEWTON: You know, it didn't even follow through to the afternoon. Now, we told you that tech stocks have been bearing the brunt of the sell-off, and
stocks were all deep in the red earlier Tuesday. But take a look at this, they're actually mixed now as we head into the close.
And especially, I want you to have a look at Netflix here, it was up 1.4 percent. Have a look at that, we were in correction territory at the
NASDAQ, and then we pulled out of it. The Composite index entered correction territory as I have been telling you, and then here too, two
gainers, Alphabet and Netflix.
Many earnings coming out this week, Paul La Monica is here and he's following it all for us. Paul, in terms of what people are looking for,
that's bargain hunting right there? There's still a lot of skepticism, right, as to whether or not forward guidance will be good for a lot of
these tech companies.
PPAUL LA MONICA, CNNMONEY DIGITAL CORRESPONDENT: Yes, I think there are legitimate worries and concerns about what the outlooks are going to be
from some tech companies, although Netflix, they've already reported, their numbers were extremely good to subscriber growth, was better-than expected,
so is their outlook.
So that in theory I think has people more hardened about the potential outlooks from big tech. But a lot of people are telling me, this is the
time where you have to be more discerning, and this whole notion of lumping everything together as FANG, maybe doing a disservice for investors because
they're not all the same.
There's a lot of things going on, on Facebook right now that aren't going to affect Netflix and Apple for example.
NEWTON: Yes, we definitely outgrown that, and even if you like you said, if Netflix has gone like this just in the time since it's reported --
speaking of a stock that's very difficult to keep track of. Tesla, quite a turnaround today, what happened there?
LA MONICA: Tesla's variation, one, they announced a bit of a surprise after the bell yesterday that their earnings which people thought was going
to be some time in November, they're going to announce them tomorrow after the close which has people thinking maybe it's going to be good news
because you're going to bump it up if you think it's going to be actually good.
But also Andrew Left is Citron Research, a notable short seller who has been -- short Tesla in the past, changed its tune, and even though he's
still suing Tesla over that funding secured tweet with SEC, he thinks that the Model 3 sales are going to be really good, that's why he's now a little
bit bullish in the short-term on Tesla even though he's been on Cnn.
Now in the past, talking about how maybe Tesla will be better off if Elon Musk passed the CEO reins to someone else so he can just focus on strategy
and presumably tweeting less.
NEWTON: And yet, Elon Musk has said over and over and over again, don't count me out, this will happen, so we're expecting that tomorrow, we will
hear more about for instance meeting those targets on production -- not running out of cash, all those --
LA MONICA: It could be profitable, I think that's what a lot of people are hoping. But you know, some have argued that this may be the best quarter
for Tesla and it's all downhill from there. That's what some other shorts have been saying, that waits to be seen, of course.
NEWTON: Never a dull story with Tesla.
LA MONICA: No, it is not.
NEWTON: We do have for instance things like Amazon and Alphabet reporting. In terms of the outlook you see forward, you know, we've seen -- not in
tech stocks so much, but we've seen extraordinary numbers on both the top line and bottom line and still the stocks get hammered.
Is there a sense that that's where we're going with this?
LA MONICA: Yes, I think people are really just focused on the outlooks right now, and the outlooks have to be extremely good. The problem with
Caterpillar for example today, the earnings in sales did beat forecast, and the guidance wasn't bad, it was just a low Wall Street consensus, even
though it was in line with the company's internal forecast.
And that's not going to cut it in a market like this. People want to see for this bull market dead, its 10th anniversary in March, they want to see
companies say that earnings are going to be even better than you people thought.
NEWTON: Well, because the evaluation is just aren't justified any way, you slice it if you don't come true with that kind of fore guidance. OK, Paul,
another busy week, appreciate it.
LA MONICA: Thank you.
NEWTON: We want you to head to cnn.com-slash-join right now. After the break, it's got millions of Americans dreaming of billions. Are you -- did
you buy a ticket, Paul?
LA MONICA: Not yet.
NEWTON: Well, get and buy a ticket, it is lottery. If you think you could win $1.6 billion, I have great confidence in you, Paul, consider this.
There's more chance of you being struck by lightning and bitten by a shark at the same time -- oh, my gosh, at the same time. But that doesn't stop
those New Yorkers from chancing their luck.
We're talking lottery-mania after the break.
[15:40:00] (COMMERCIAL BREAK)
NEWTON: OK, I love this part of the show even though I can't join in. Time to get your phones out, everyone has an opinion on this and I mean
everyone. Go to cnn.com-slash-join, we're about to ask you how you would spend a $2 billion lottery jackpot and we'll put your suggestions to the
man who runs the whole thing. He's sitting right here because tonight, the U.S. is on lottery tenterhooks.
The Mega Millions Jackpot is estimated to be the nation's largest ever. One lucky player could land the big prize, approximately $1.6 billion, and
that's not all. Wednesday's Powerball Jackpots stands at 620 million, it just gets better. So in the space of 24 hours, more than $2.2 billion is
up -- I mean, it's breath-taking to even just say that.
The amount spent on lottery tickets is equal to about $325 per year for every adult in the United States. That's just over 60 percent of the money
taken in ticket sales and handed out in prizes. Now, as many people know, the rest goes into states and local governments coffers for good things
So our question for you tonight, imagine you won the whole $2 billion or there about, the whole shebang, I know, you don't have a problem imagining
that. What's the first thing you will do with the money? Save it, spend it, donate it or invest it. Go to cnn.com-slash-join and place your votes,
we'll put them to our next guest.
Gordon Medenica is here --
GORDON MEDENICA, DIRECTOR, MEGA MILLIONS GROUP: Yes --
NEWTON: And he -- you are the director of this whole shebang. This must be a heck of a lot of fun when people get this enthusiastic --
MEDENICA: Oh, we're having a time of our lives, I mean, this doesn't happen very often. And so this is just a thrill for everybody, and it's a
national, cultural phenomenon. Everybody is talking about it, everybody is buying some tickets. It's just a big national party right now and we're
enjoying it, we're riding that wave.
NEWTON: And I have to put this other. Some people say that look, if you look at all those stats, we just have the stats on right there. You have
to be --
MEDENICA: Sure --
NEWTON: Same odds of getting by lightning and bitten by a shark --
MEDENICA: Yes --
NEWTON: At the same time. What do you say to people about the odds?
MEDENICA: Somebody is going to win, regardless, somebody is going to win. Plus, there's lot of other prizes. I mean, people forget that the second
prize is a million dollars --
NEWTON: Yes, and that's a good point --
MEDENICA: Nothing stays at, third prize is $10,000. And so there are nine levels of prizes, people win all the time, but of course those super big
jackpots are what brings out everybody to play.
NEWTON: But people are wondering why it's gotten so big like this around. What's happened here? Why has it gotten to this level?
[15:45:00] MEDENICA: You know, this has been rolling up since July, and we've actually had a fairly slow roll, and of course when there isn't a
top-tier winner, you know, those funds go into the next one and it just keeps building and building. And we've noticed that after about 20 or 22
draws, it starts to just pick up momentum.
This is snowball effect. And what we're seeing now is just the ultimate of that snowball effect, and everybody -- well, they have FOMO, fear of
missing out. So everybody needs to get a ticket now, and it's just the natural sort of the lifestyle of the game.
NEWTON: Now, as I said, someone has to win and someone does. Sometimes, it's groups of people --
MEDENICA: Yes --
NEWTON: I mean, what's been more heartwarming for you because some people say, oh, the money will ruin you, you don't want it anyway. Is that the
MEDENICA: Oh, no, those stories are really just exceptions. Most people do really well. In fact, there was a great new study, I think it came out
of Sweden recently where they studied lottery winners and their lives are better. And of course, we know that.
And there's so many lottery winners around the country, I think thousands of millionaires every year among all the different lotteries, and you never
hear about all the great things that they do. And to your poll question earlier, you know, one of the answers might be all of the above. And I
think we've seen that and there are some great heartwarming stories out there and we're happy to help.
NEWTON: Now, let's see, we do have some recording, we do have some other polls --
MEDENICA: OK --
NEWTON: According to those of you voting on cnn.com-slash-join, most of you are saying invest it, that's great for this show, it probably has to do
about the audience of the show --
MEDENICA: Yes --
NEWTON: And yet, I'm sure that you have very good stories as well about people who have given it to charity, right, I mean a guess --
MEDENICA: Absolutely. People create their own foundations, and you think about really wealthy people, what do they do? Bill Gates; he's a
philanthropist now, he's giving away his money. And so we see those stories all the time. And for these kinds of amounts, it's very common,
and I think it's very gratifying for the people too.
NEWTON: Yes, it really is, in terms of seeing their money do that --
MEDENICA: Good --
NEWTON: And that doesn't include all the family members that you probably give your money to immediately --
MEDENICA: Absolutely --
NEWTON: Right. Now, we have another question, Blonded(ph) -- "Gordon, "if you won the jackpot, how would you want the money?" So it's one big
lump sum or you would take the payment in installments every year. So we didn't get it all at once, it would apportioned at over a number of years.
The installment option means you actually walk away with more in the end. A lottery winner needs to somewhere to put all of that money of course. At
this point in time, when you're looking at it. We had trouble kind of going over the details, how it works.
So if someone had to ask you, you're the guy, I'm asking --
MEDENICA: Yes --
NEWTON: Your advice --
MEDENICA: Yes --
NEWTON: Do I take it in a lump sum or do I take it in installments, what would you say?
MEDENICA: It depends on your level of self-discipline. If you're fairly disciplined about it and know how to manage your money, actually the lump
sum is better. Because the way we calculate the cash option is to discount that future stream of cash flows at a relatively low interest rate,
basically treasury bills.
And when you do that, you come up with a cash number that is fairly low. So any sophisticated investor can probably beat that number while investing
that amount. Now, if you don't have self-discipline and you go off and you spend it all, that obviously you're probably better off taking the annuity
just as a check on your own impulses if you will.
NEWTON: What is more popular, normally, what do people normally use?
MEDENICA: Almost everybody takes the cash.
NEWTON: Seriously like --
MEDENICA: Yes, almost everybody --
NEWTON: Hands down --
MEDENICA: Yes --
NEWTON: Lump sum --
MEDENICA: Yes --
NEWTON: I take -- I take the cash. And I guess given the diversity of the people playing lottery, I know rich people win sometimes too, but really,
there are a lot of stories of people who have been working 40 years in the same job that all of a sudden win a lottery and can say goodbye to a job
they really hate.
MEDENICA: Absolutely, but you know, what's hot is the number of people who don't quit their jobs.
MEDENICA: Yes, and it makes their lives better, maybe not if you win $1.6 billion, but certainly if you win, let's say only a few millions. People
have, you know, connections, where they enjoy work and it's amazing how many people's lifestyles don't change that much, but it just gets a little
You know, you don't worry about paying your bills, you can put away money for your college, kids college education. You don't have to worry about
you know, the tax collector coming along, so it's a great comfort to people, and that's why, you know, especially this recent study that came
out, why people's lives are better --
NEWTON: Yes, definitely, and just like you said, the enthusiasm, we can all put ourselves in those shoes, right?
MEDENICA: Yes --
NEWTON: I don't know why we can all imagine it so easily, but we can.
MEDENICA: But what we're really selling is the dream, and it's all about, you know, you can go to the movies and spend 10 bucks and for two hours,
you'll laugh, cry, have a nice experience, talk about it with your friends. If you spend $10 and make millions, and do the same thing, two hours, you
know, think, cry, happy whatever.
Talk about -- it's like rooting for your sports team --
NEWTON: Yes --
MEDENICA: You know, perhaps shocking your friends.
NEWTON: And if you don't win that, we can do it all again the next year --
MEDENICA: Yes --
NEWTON: Gordon, thanks so much, really appreciate, we will be keeping track of it --
MEDENICA: My pleasure --
NEWTON: Nothing to win, gosh, if someone doesn't win, I don't know what can happen --
MEDENICA: Thank you --
NEWTON: It could be pandemonium. According to our voters, we're just going to give you that last vote on cnn.com-slash-join, most people say,
yes, Gordon guessed it, they're taking that lump sum, they're going with the money, baby, good luck to absolutely everyone.
Now, a lottery winner needs somewhere to put all that money. This week, Richard has been busy exploring Kenya's mobile revolution. Take a listen.
(BEGIN VIDEO CLIP)
[15:50:00] RICHARD QUEST, CNN INTERNATIONAL HOST: M-Pesa, it's mobile banking in East Africa. QUEST MEANS BUSINESS comes live from Nairobi on
Thursday and Friday. We'll be looking at high-tech East Africa. How their mobile banking revolutions really taken off.
Quite simply, it's easier to mobile bank and pay with your phone than in London, Paris or New York. It's QUEST MEANS BUSINESS live from Nairobi on
Thursday and Friday.
(END VIDEO CLIP)
NEWTON: OK, now, you know Richard will be looking for you, he will be speaking to the CEOs and politicians looking to take one of Africa's
largest economies to that very next level. That's at 8:00 p.m. in London, 10:00 p.m. in Nairobi.
Up next, China opens the world's longest sea-crossing bridge, a feat of engineering certainly, but already an object of criticism too. We'll have
more on that after the break.
NEWTON: OK, China opened the world's longest sea bridge, Tuesday, linking Hong Kong and Macau to mainland, China. Now, it is of course an
engineering feat that connects China's very own bay area. But it's not without controversies. Supporters say it will boost tourism and shift
hours off of commute.
But critics argue it's a way for Beijing to tighten its grip over semi- autonomous Hong Kong. CNN's Will Ripley has more.
WILL RIPLEY, CNN CORRESPONDENT (voice-over): China rarely does anything small. But even by Beijing's standards, this is big. So big Chinese
President Xi Jinping attended the opening ceremony. This massive 55- kilometer, 34 mile bridge is the longest sea-crossing ever, connecting two Chinese territories, Hong Kong and Macau to the mainland city of Zhuhai,
cutting travel time from three hours to 30 minutes.
It has two artificial islands, an undersea tunnel and four and a half times more steel than San Francisco's Golden Gate Bridge.
(on camera): A wonder of engineering and a key part of China's plan for a greater bay area, linking 11 cities and 68 million people.
(voice-over): A big plan, drawing big criticism.
CLAUDIA MO, JOURNALIST & POLITICIAN: The regular driver in Hong Kong can use this bridge, not allowed or it's a white elephant, a big white
RIPLEY (on camera): Hong Kong lawmaker Claudia Mo sees the bridge as yet another way for authoritarian China to tighten its grip on semi-independent
[15:55:00] Similar to the high speed rail line in Guangzhou that opened last month, called the Trojan Train by some.
MO: They're trying to flex their muscles, telling Hong Kong people to behave especially after the umbrella movement. They say Hong Kong has
become very unruly, very disobedient and very ungrateful, but ultimately, that's why we need to listen.
RIPLEY: An expensive lesson at that, she says. Hong Kong paid nearly half of the $20 billion to build the bridge, a staggering sum, given the city's
widespread poverty and crippling housing shortage. The bridge took nine years and cost seven construction workers their lives.
Conservationists fear it could also kill off the endangered Chinese white dolphin. Like it or not, this bridge is here to stay, built to withstand
earthquakes, super typhoons and cargo ship coalitions. A symbol of China's determination to push forward with its own agenda no matter what the
critics say. Will Ripley, Cnn, Hong Kong.
NEWTON: Incredible there. We are in the last few minutes of trade, we'll take a look at what that market is doing now, you really can't take your
eyes off of it.
NEWTON: OK, it's been a rough day for shares right around the world. It was a lot worse though on the Dow just a few hours ago. Heavy selling in
most markets amid those disappointing reports from corporate America. Now, the main U.S. indices spent most of the day in the deep red.
It was the fifth straight down day for the S&P 500, we were down, built a better than 2 percent, we've now shaved that to a half a percent. Now,
concerns over tariffs and uncertainty on the outlook for trade are becoming a theme that we're hearing more and more about.
Shares of the construction equipment maker Caterpillar fell 7 percent. The company warning that tariffs on steel were pushing up its costs and
squeezing those profits. And investors are bracing for a slowdown to become more apparent with growth, forecast to decelerate right around the
Now, as we push deeper into this week of earnings, we'll continue to monitor those markets closely. They are vulnerable at this moment and very
fragile. And that is QUEST MEANS BUSINESS, I am Paula Newton, we will bring you the closing bell, there it is, and both the close in just a few
As we said, a very volatile market. That is it for us today, "THE LEAD" with Jake Tapper starts now.