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Dow Opens Higher; Immigration Negotiations Start; Release of Democratic Memo. Porter's Clearance Trouble; Olympic Games Begin. Aired 9:30-10:00a
Aired February 9, 2018 - 09:30 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:30:00] CHRISTINE ROMANS, CNN CHIEF BUSINESS CORRESPONDENT: : Fear of inflation for the first time in a long time, and the Fed is raising interest rates.
Ironically, you now have trillion dollar deficits that you have to raise money for. The bond market is telling us that these deficits are something that are going to mean higher interest rates are necessary. So that's how that sort of feeds in on itself. So you've got a tax cut plan that adds to higher deficits. This new spending bill that adds to deficits. And a strong economy already. And so you've got bonds -- bonds moving up. And the stock market here, it looks like it's bouncing a little bit, but it's really hard to tell how this is going to hold out here today.
ERICA HILL, CNN ANCHOR: Bouncing a little bit.
Alison, you're there on the floor. We know futures were up this morning. What is the mood like there? I mean how much concern are you seeing among traders?
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: You know what, the mood here is good. Not only because it's Friday, but because, yes, you're seeing a lot of green on the screen. The big worry was when we saw that huge drop on the Dow yesterday, more than a thousand points lower, there were big worries about where investors would start the day.
So, yes, we're watching the Dow move higher, up 244 points. But don't get too comfortable because volatility is going to be holding on with a vengeance. I mean we've seen that happen all week. It's still expected today. Traders here around me, that is the expectation because of the uncertainty about inflation and then, of course, the uncertainty about what the Fed is going to do about interest rates.
But if you look at what the market has been through all week, especially yesterday, that more than thousand point drop in the Dow, that put the Dow in correction mode. The S&P 500 in correction mode as well.
What's a correction? It's a 10 percent drop from a recent high. Now the hope is, is that these levels can sort of stay and now move up. But sounder minds know that may not be the case since volatility really is the only certainty here these days.
HILL: Volatility is the only certainty.
Art, you said that earlier in the week, volatility has returned to the market, which we've seen. If you have your crystal ball out this morning, Art, the big question for a lot of people, of course, is how long does this volatility stay with us?
ART HOGAN, CHIEF MARKET STRATEGIST, B. RILEY FBR & WUNDERLICH SECURITIES: Well, that's a great question. And typically these things take a while to washout. And I think this will be true here.
Remember, Friday's going to be tricky. This is a great opening. Seeing a nice bounce, especially with the magnitude of the flesh out we saw in the last half hour of yesterday. But we get margin calls somewhere between 11:00 and 2:00. That tends to get some action to the south side. Fridays tend to be that day where people don't want to go into the weekend with a long position. And as we look at this, I think we've got to test that 200-day moving average before we have a significant bounce.
So yesterday we broke the 100 day moving average and flirted with the 200-day. We've tested it in the futures markets. So whether that happens today or sometime next week, I think that will signal the bottom.
I think we've done a nice job of getting a lot of that short vol trade out of the way and the volumes there yesterday were significant. The overall volumes have been significant for the entirety of this week. We may have a little more work to do on the downside, but we're getting close.
HILL: Getting close.
Christine, I heard you say earlier this morning on air that you cut deficits when the economy is good. As you just laid out, and as we know with the -- with the bill that the president just signed in terms of the budget, that's not what's happening. So how concerning is that as we -- as we throw that into the mix?
ROMANS: I mean it's really interesting because we heard from the GOP for years they were so against the deficit spending of the Obama administration, so against those trillion dollar deficits, and now we have a $1.1 trillion deficit here for -- for already for 2019. And we thought maybe that would be 2020 or 2021, but 2019 already here. So that's an ironic position to be in with the party in charge who are the deficit hawks.
I will say though, what you hear from the White House and you hear from others, they say that we are going to have growth just explode because of the tax cuts. And the growth of the economy is going -- is going to eat away at those -- at those deficits. So that's what they're hoping for. But right now you've got interest rates rising. And as interest rates rise, it becomes more expensive to service your debt or to issue new debt. You know, something important to watch. HILL: But -- and remind me, too, in terms of that talking point, I
mean it's -- that's all well and good and we may, in fact, see growth in that way, but is there a particular timeline attached to that?
ROMANS: Look, it's very hard to tell what's going to happen to the economy in the near term. This is an expansion that -- and Art can correct me on this -- but it's, you know, nine years old at this point. This is a bull market that's nine years old for sure. So if you've got an overheating economy and a Fed that's raising interest rates, you know, you're -- now you're talking about next year or the year after recession. You know, so what -- what -- we don't know what's going to happen with the economy in the very, very near term.
ROMANS: We do know it is strong today. It is strong today. The job market is very good today. Wages are rising today. You could see the unemployment rate go below 4 percent by the summer, many economists are telling me. That's all good. That's why the economy is heating up and that's why interest rates are rising.
HILL: And when we look at interest rates rising, how much of that -- this is what oftentimes can really bring it home for main street, Art, how much of that do you think is a concern at this point?
HOGAN: Well, that's a concern in three ways. And I think that's what started this particular correction. I think interest rates cut three ways, right? So it costs more for you and I to borrow and spend money. So that slows down our economic activity. Costs more for the government to run their business. And that slows down their activity. And corporate America, it costs them more money.
[09:35:09] But the other way that it cuts is, at some point in time, you look at interest rates and say, well, if I can get three or three and a half percent for 10 years, I'm going to take my money out of the stock market and put it into the bond market. I don't think we're anywhere close to what that level would be. But there's a higher price that you have to pay or you need to return more as a stock in a higher interest rate environment. And that's where things get difficult.
So, for seven years, with a 2 percent yield on a U.S. ten-year, you could run an 18 or 19 multiple on the S&P 500. At three and three and a half, you probably have to be 16 and a half or 17 times. And, oddly enough, that's what the market's recalibrating right now.
ROMANS: You know, the higher interest rates are here, Erica. I mean you look at the 30-year fixed rate mortgage, that's already 4.32 percent. That's the highest in a couple of years. So interest rates are rising in the market. And you've got mortgage rates that are rising as well. So people who are home buyers are noticing this right now, that the rates are going higher.
I will stay, though, these are still historically low interest rates. They're not the super, duper low, artificial low interest rates that we've seen over the past years. But they are still pretty low. The post-war average for a mortgage rate is something like 6.5 percent. So it's still much better than that.
ROMANS: But it's something people are starting to notice.
HILL: All right, Christine, Art, Alison, thank you all.
Minutes ago President Trump saying negotiations on DACA are starting now with less than a month left until the deadline. How confident are Democrats the White House is, in fact, ready to make a deal?
[09:40:37] HILL: This morning the government is back open after shutting down overnight. That second shutdown in three weeks ended thanks to a bipartisan budget deal. And with the funding battle over, President Trump tweeting out this morning that negotiations on DACA are starting right now.
Joining me now, Democratic Representative Peter Welch of Vermont.
Good to have you with us.
So the president just tweeting, fortunately DACA not included in this bill. Negotiations to start now.
On two points there, is it fortunate that there is no DACA deal included in that budget bill, and what do we know about negotiations starting now?
REP. PETER WELCH (D), VERMONT: Well, it's not only unfortunate, it's inexcusable. The president has said he supports DACA. Paul Ryan has said he supports DACA. So if Paul Ryan put the bill on the floor, it would pass by an overwhelming margin. And what clearly has happened is that the president is using these people, many of whom are in the military or first responders, as hostages to try to get his way on his version of what the border security issue should be. Those are legitimate issues. What's illegitimate is holding these dreamers hostage to a political negotiation.
HILL: You voted yes on this budget deal. Illinois' Luis Gutierrez said the following, anyone who votes for the Senate budget deal is colluding with this president and this administration to deport dreamers.
How do you respond to that in regards to your vote?
WELCH: Well, Luis -- well, you know, Luis is our leader on this and he is really speaking from the heart. And what we had is a dilemma here. If we had a shutdown, would that have advance our cause? A lot of us thought that would make things worse, not better. In fact, we saw it with the shutdown we had a couple of weeks ago, the American public -- the American public was against that. And it's not even who's to blame.
But, bottom line, our caucus -- and I think many of the Republicans -- are for the dreamers. We are totally united on that. And Luis has been our leader on that. This question of a tactic, this shutdown as a tactic is another question. But we've got to do it. And it's really on Paul Ryan because he could put that bill out there and he won't.
And, by the way, Paul Ryan made it clear when he became speaker that he wanted to give the House an opportunity to work its will and that he wasn't going to be wedging unrelated things together. So, frankly, I understand where Luis is coming from, but the target really is Paul Ryan.
HILL: So if the target is Paul Ryan, I know that earlier this week you and Representative Upton sent a letter on behalf of the Problem Solvers Caucus asking Speaker Ryan to commit to open negotiation here. Have (INAUDIBLE) speaker or from his office?
WELCH: I -- we haven't directly in response to the letter. But I spoke to the speaker. And, bottom line, the position he's taking is backing away from having the House be the one that works its will. What Fred Upton and I, and about 50 of our colleagues, half Republicans, half Democrats, said, look, let's have a debate. Put the Goodlatte bill on the floor. I think it's a terrible bill, but we can vote on it. Put the Aguillar-Hurd bill on the floor and let the House vote. Let -- hold each one of us accountable. That's a simple approach.
And it would only be a bill that was passed by a majority of the House that would go to the president. And then the president would be free to exercise his authority to sign or reject it.
HILL: So -- I mean just remind me again, why do you think we're in this position? Why do you think -- I just want to hear in your words why you think the speaker is reluctant to have that open negotiation.
WELCH: (INAUDIBLE) Trump and it's the politics of fear on the (INAUDIBLE) on border security issues. What they don't want to do is come to terms with a bipartisan immigration bill. We have -- the Senate passed an immigration bill six years ago. This issue has been here during the entire time since the Republicans have been in control, and they won't put a bill on the floor for debate or a vote.
So it's within their power to do it. Paul Ryan could wake up tomorrow morning and come down here and put a bill on the floor and have us all come back to vote. And we'd be excited to do it. So he won't let the House do its job.
HILL: So your thoughts on that.
We're going to have to move on because I do want to get your take on this.
You know, a week ago we were talking about the Nunes memo, which you called in a tweet cynical propaganda. Do you support the release of the Democratic memo, which we should be hearing about from the president today?
[09:45:04] WELCH: Well, I do. I mean -- yes, I do. It's got to provide context. And, obviously, it was pretty astonishing to me that the Republicans voted to release their memo and then refused to allow the Democratic memo to be released at the same time. So I think both of them should be out there at this point and people are free to read them and come to their own conclusion.
But the bottom line here is the intelligence committee breakdown here is that they're spending all their time on the memos and they're not doing their work on getting the briefings that they would normally get on Syria, on other parts of the Middle East, on all the hot spots around the world where we actually do need oversight an engagement.
HILL: If that's not happening, we're also hearing though that there could be more memos. Devin Nunes saying there is more to come here. Would you support the release of further memos given what you just said?
WELCH: I don't think memos that get into classified information should be made public. You start having a debate in the press about who knew what when. I mean there's got to be some institutional responsibility here that's embraced by Republicans and Democrats to respect the importance of national security secrets. And it's the intelligence committee folks that have the clearance. And they should be sorting that out internally. So I think it's really unfortunate that we've gotten to this point.
And keep in mind, Chairman Nunes, he went running down to the White House with so-called information that exonerated the White House, and it was the White House that provided that information to begin with. He's got the major responsibility as any chair of a committee does to make certain that the institutional responsibility of the House of Representatives is being protected.
HILL: You also serve on the House Oversight Committee. Representative Maloney has requested that the committee investigate the White House's knowledge of Rob Porter's background check, the decision to allow him to handle classified material for over a year without that permanent security clearance. A, do you think the committee should investigate that? And, b, what are the questions that you have about this situation?
WELCH: Well, on, a, I actually think we have the information we need. Rob Porter was a serial wife beater. I mean this guy is astonishing. It's illegal. It's immoral. And, by the way, it's really cowardly.
So -- and what we also know is that General Kelly and the White House was aware of this for over a year. How did this person, who committed crimes, he didn't even have a security clearance, yet he was being allowed to see the most secret documents involving our national security.
So this is just on every level inexcusable. He shouldn't have had the access to security documents without a security clearance. And there's no place in the White House, or anywhere else, for some thuggish conduct by a wife beater.
HILL: Representative Peter Welch, appreciate your time. Thank you.
WELCH: Thank you.
HILL: Star U.S. skier Lindsey Vonn breaking down when asked a question by Coy Wire. What was it that brought her to tears?
[09:52:38] HILL: After months of anticipation, the Winter Olympics officially underway with the opening ceremony and the lighting of the Olympic flame.
Coy Wire joins us live now from Pyeongchang, South Korea, with more.
Coy, what a day. Now it's official.
COY WIRE, CNN SPORTS CORRESPONDENT: Hi, Erica.
Temperatures feel like they're in the low 20s here with single digits in the forecast the next couple of days. These winter games are on track to be the coldest ever.
Team USA at opening ceremony was led by four-time Olympian luger Erin Hamlin. Just the sixth American female ever to be named flag bearer at a winter game. Now, that was an honor that did not sit well with speed skater Shani Davis. One of just three Americans appearing in a fifth Olympic game. He did not attend the opening ceremony. He tweeted yesterday upon hearing the news, in part, I'm an American, and when I won the thousand meter in 2010, I became the first American to two- peat in that event. Team USA dishonorably tossed a coin to decide its 2018 flag bearer. No problem. I can wait until 2022, unquote. He also referenced Black History Month.
Now, when asked why Davis didn't attend the ceremony, a U.S. speed skating spokesperson told CNN that Davis wasn't going to attend due to scheduling and preparations for competition, but was considering to attend when he heard that he may be flag bearer. Davis first competes on Tuesday.
Now, Lindsey Vonn, Team USA's decorated female Alpine skier, has been through a lot. She's competed in -- competing in her fourth and final Olympic games. But it's been eight years since she's competed in one. She missed 2014 Sochi with an injury. And Lindsey's grandfather fought for the U.S. here in the Korean War, not far from the Olympic Games. And she wanted so badly to bring him with her. But that can't happen now because he passed just a few months ago. I had to ask her about the man who has meant so much to her. Listen.
(BEGIN VIDEO CLIP)
WIRE: Given the emotions you've expressed about wishing that your grandfather could be with you here at South Korea on this journey, now that you're actually here, how is his memory resonating with you?
LINDSEY VONN, SKIER: It's really hard. I wish you hadn't said that, because that's really hard for me not to cry. Yes. I just -- I want so badly to do well for him. And I miss him so much. He's been such a big part of my life. And I really had hoped that he would be alive to see me. But I know he's watching and I know that he's going to help me. And I'm going to win for him.
(END VIDEO CLIP)
[09:55:24] WIRE: We're going to continue to bring you inspiring stories like Lindsey from here in Pyeongchang.
HILL: All right, we look forward to it.
Coy, thank you.
A lot of news to cover on this Friday morning.
The president just signed that bill to reopen the government.
The White House in crisis over a top aide's abuse allegations.
And at any moment, that Democratic memo rebutting Republican claims alleging FBI abuses.
We're following all of it this morning.