Vatican Condemns Abuse of Minors; World Mourns Queen of Soul Aretha Franklin
RICHARD QUEST, HOST, QUEST MEANS BUSINESS: The Dow showing very good gains, off the best of the day. It's given back maybe 50-odd points or so, but still a robust healthy session across all the major indices and that's the sort of gavel you need to bring trading to a close on Thursday. It's August 16th. Tonight, bouncing back, the Dow's just had its best day in many months. Larry Kudlow says China is looking terrible as new trade talks are put into the diary. And football is coming here. I'll speak to the company taking Spanish football stateside, and by that, I mean football, none of that American stuff. I'm Richard Quest live in the world's financial capital, New York City, where, of course, I mean business on a good day for the Dow. Good evening. Tonight, Wall Street comes surging back. China says trade talks are back on again, and the delegation is heading soon to Washington. These are the reasons why you're going to see such a strong performance at the Dow Jones Industrials, indeed, and the S&P 500. The Dow has been driven higher by those stocks which benefit particularly from the China deal or the China potential talks and Walmart results, so, Boeing is 100 points. Walmart is 60 points. Goldman Sachs is 30 points, Caterpillar 30 and Apple 25. It puts perspective into how the Dow has made such good gains in one day. Larry Kudlow is the Director of the White House Economic Council and promising this rally still has room to grow.</s>LARRY KUDLOW, DIRECTOR, WHITE HOUSE ECONOMIC COUNCIL: Our economy, our investors, our workforce are crushing it right now. We are crushing it. And people say this is not sustainable, it's a one quarter glitch, just nonsense. An absolute nonsense. Any business economist worth his or her salt will look at these trends and tell you we're going for a while. The single biggest story this year is an economic boom that is durable and lasting and that most people thought was impossible.</s>QUEST: Durable, lasting, and most people thought was impossible. Paul La Monica, guru is with me. He's right. I mean, there is an economic boom taking place in the United States, and, well, politically, one could disagree on whether people thought it was possible, but the economics are there.</s>PAUL LA MONICA, CORRESPONDENT, CNN: Yes, this is a very solid economy right now, Richard, and I think that Larry Kudlow is correct to assert that it could be sustainable. One of the things that a lot of people forget sometimes when they talk about how the economy is, you know, the economic boom is getting old, is that it wasn't that big of a boom to begin with for a lot of people. It was such a shallow rebound that it felt sort of as if the US was stagnating for a while. So, now we're picking up some steam. I think the hope is that if you resolve some of these trade issues, and that's why the market rallied today, that could give the economy and hence, the market a further lift.</s>QUEST: That's an interesting point that you've just have been talking about, the early days of the post great recession recovery. Were down less than 1%, 1.5%, whatever. Are you saying that really this bull market, which is one of the longest in history, this bull market really we should look at it as being from a later date in the sense of those first times where they don't really count.</s>LA MONICA: Yes, I don't know if you would go so far as to say as they don't count. I just think that people who only look at the age of the bull market and decide that, well, the economy now must go into a recession soon or that the market has to fall from these levels, I think that is a bit of a fallacious argument. You could have the rebound go on longer, as long as earnings growth is there and so far, it's been there. Remember, the first quarter was supposed to be the best, as good as it gets for a while, what was it? High water mark going to Caterpillar and the second quarter has turned out to be pretty much just as good, if not better.</s>QUEST: So the earnings season gave a certain oomph to this. Walmart, which we'll talk more about in just a moment. Walmart has given further reason for us to accept it was a good earnings season, things are as good as they're likely to get.</s>LA MONICA: Yes, I think the Walmart numbers, which I know you're going to talk about in more detail were very solid, it shows the health of the US consumer. Don't discount Cisco. Cisco was also in the Dow, it's a lower priced stock, so it doesn't have as much weight, but Cisco's results and outlook really gave the tech sector a boost today and I think that was much needed.</s>QUEST: Netflix was down and Facebook was down.</s>LA MONICA: Netflix and Facebook were down, but I think we're at a stage now where as long as the mature tech companies - Cisco, Apple, Microsoft - if they can keep doing well, you throw Google on or Alphabet in there, that's not the worst thing in the world if Netflix and others aren't doing as well.</s>QUEST: Good to see you.</s>LA MONICA: Thank you.</s>QUEST: China says trade talks with the United States are back on and it comes as the country's stocks certainly could do with a boost. The Shanghai composite is on a four-day losing streak and is fast approaching what one would describe as a bear market. Now, you remember, a bear market is where - well, a correction is up to 10%. Bear market, you're heading towards 20% down. So these are the falls and the serious fall on Wednesday, and a year to date fall of 18.2%. China's powerhouse tech giants are feeling the pressure and we're seeing that in the numbers. Tencent was down again following a disappointing earnings; jd.com, earnings also were short. Larry Kudlow, who you heard a moment ago, the head of the Economic Council, the Chief Economic Adviser, I should say, Larry Kudlow says the Chinese economy right now looks terrible.</s>KUDLOW: Their economy is just heading south. Retail sales, business investment is collapsing in China according to the numbers. Industrial production has fallen, and now is plateauing at a low level. People are selling their currency. There may be some manipulation but mostly, I think, investors are moving out of China because they don't like the economy and they're coming to the USA because they like our economy. I'm not a China expert, although I'm boning up as fast as I can. I would just say right now their economy looks terrible.</s>QUEST: Larry Kudlow brings great credibility to the whole process when he gives answers like that. David Dollar is in Washington. David serves as the US Treasury Emissary to China and is now senior fellow at the Brookings Institution. Do you agree with Larry Kudlow that the Chinese economy is in his words looking terrible?</s>DAVID DOLLAR, US TREASURY EMISSARY TO CHINA: Chinese economy is decelerating, there's no question about that, but I would not say that it's terrible. It's still growing pretty well. It's going to do 6.5% or more for the year, so I think it's an exaggeration to say that the economy is cratering, but clearly, the Chinese economy has decelerated while the US economy is accelerating. So the two are moving in different directions. That's certainly affecting their respective stock markets.</s>QUEST: And the reason for that deceleration can often be described as bad debts, overhanging of debts in the market, under Chinese government policy, but also the trade tariffs will eventually also play into that reason.</s>DOLLAR: Yes, I would put most of the emphasis on the government policy, you know, China has been growing very much based on credit growth for a long time and starting last fall, they really began to rein that in. And so you saw their stock market starting to fall after January and that was a result of their deleveraging campaign and now the trade war is piling on, on top of that, so definitely the trade war is not helping. The market is down 24% from a high in the middle of January, so in that sense, it really is in a bear market now.</s>QUEST: But there is a feeling that there's an orderliness to it. But if the goal is to take the steam out of a Chinese economy to allow the currency to find a more natural level, then there's a certain success in the way it's been implemented.</s>DOLLAR: Yes, I was just in Beijing meeting with officials and academics. They're pretty relaxed. Some of this slowdown is exactly what they wanted. There has been overinvestment in China. The only way to correct that is for investment growth to slow down, so I think they're mostly on target, maybe a little bit - the July data, a little bit too low in terms of investment, so then they fine tune. They come back with a little bit more credit with fiscal stimulus, so I think they had the tools to hit their target.</s>QUEST: And from your recent visit, were you able to glean their stomach for a full-fledged trade war with the United States?</s>DOLLAR: Yes, I think they're preparing for a long-time conflict, so it's good news that their Vice Minister of Commerce is coming to talk. That's a pretty low level, so that's just keeping the lines of communication open. I think the Chinese expect that this will last throughout 2018 and they have to find other types of stimulus to keep their economy going. They're not really counting on quick resolution of the trade conflict.</s>QUEST: Good to see you, sir. Thank you. Please come back again and give us the perspective. We appreciate it. So breaking news I need to bring to your attention. The Vatican has responded to this week's detailed report on the historic abuse of children committed by hundreds of Roman Catholic priests in the United States state of Pennsylvania.</s>QUEST: Barbie Nadeau is on the line from Rome. What's interesting about this, we've been waiting for the Vatican's response. We've had various diocese from across the United States, and now the Vatican's given its word.</s>BARBIE NADEAU, CORRESPONDENT, CNN: What's interesting about this is the language that they've chosen. They're using the word, "carnal." Now, that's something we haven't heard from the Vatican when it comes to clerical sex abuse. We hear them talking about sins and omissions and forgiveness and prayers, but this is really the first time in a statement by the Vatican we've heard them acknowledge these accusations as criminal, and I think that that is exactly what the victims have been asking for, that validation that these are crimes. These aren't sins, these are actual crimes punishable by courts of law and prison term and officers are saying it happened in secular society. And I think the victims will be pleased that this is a step in the right direction, but there's probably still a long way to go before they feel justice, Richard.</s>QUEST: Why do you think the Vatican has taken that extra step of calling - of describing them as crimes? Why are they moving forward in that fashion?</s>NADEAU: Well, I think because it's been a public relations nightmare for the Pope, this Pennsylvania grand jury has really called attention to seven decades of rampant violence against children in one state alone in the United States, and I'm going to guess that that pressure actually came from the United States church, who have admitted their own culpability and their weaknesses in this area and having the Vatican endorse them in trying to make valid changes and in trying to keep people in the pews, keep people in church. Right now, you've got a situation where you think, as (inaudible) a thousand children were abused for seven decades, that can't be secret, people knew about this, and the catholic church in the United States takes this sort of thing very seriously, and I think it's probably pressured, the Holy See here in Rome to make a statement that counts. I don't think (inaudible) the main spokesperson from the Vatican is American. I think that probably weighted into it quite a bit when we're seeing language emerge from the state and it's coming from the spokesperson who certainly knows what language would work.</s>QUEST: Barbie Nadeau who is in Rome, thank you. Aretha Franklin won her first Grammy for this. She would go on to win 17 more. The head of the Recording Academy joins me to remember the legendry artist.</s>QUEST: With a powerful voice and a no nonsense attitude, Aretha Franklin belted out one unforgettable hit after another. Fans around the world are mourning the Queen of Soul. She died on Thursday morning at her home in Detroit, surrounded by friends and family. The first woman inducted into the Rock and Roll Hall of Fame, Franklin won 18 Grammys in her long career, including best R&B vocals for her ode to her home city's defining industry. Ahe also championed the motor city in another way. She actually sang the ads for Chevrolet cars, and so, let's look at her contribution not only as a leading singer, but her contribution as a leading woman - a female singer in the world. Neil Portnow is the President of the Recording Academy, which runs the Grammys. Good to talk to you, sir. The achievement of Aretha Franklin, how would you sum it up?</s>NEIL PORTNOW, PRESIDENT, RECORDING ACADEMY: It's pretty hard to put into words, you know? As a musician, I first heard Aretha as a young person, and just learning to listen to and appreciate all kinds of music and when I remember hearing Aretha, I was thinking, "Who is that?" And how does anybody possibly evoke that kind of emotion and soul and feeling in three minutes on a record and then I explored further, obviously, so many of us had. She's a one of a kind, you know, we've heard the words national treasure. She's really an international treasure. She's treasured the world over, and hard to imagine seeing the likes of a talent like that come again.</s>QUEST: And in an industry where, as you know, there have been - there have been questions over the ability of women to make it to the top, to become that sort of global star, she didn't just do that. She defined the book on that. I mean, doing - I mean, she wrote the book, defined it, and then put it in the library. But was she seen as a trailblazer for women in that sense?</s>PORTNOW: Well, no question. I mean, Aretha would probably tell you whatever she did, she did. She didn't rely on others. She relied on herself. She's not only great as an artist, but she was great as an entrepreneur and a promoter of her own work and was certainly going to move forward because she had her own vision, and she had the tenacity.</s>QUEST: Right.</s>PORTNOW: And she certainly had the talent.</s>QUEST: And that of course, is crucial. It's the tenacity, the talent, and the ability to fight on through. As she won Grammy after Grammy and you saw her picking up more and more of them, she remained, as I understand it, extremely approachable, extremely humble, extremely normal in that sense.</s>PORTNOW: Yes, absolutely. I mean, I had the pleasure of working with her in the 1980s when I was running the west coast of Arista Records for the legendry Clive Davis and I'm sure many of you will be speaking to Clive about her career, and she couldn't be more gracious, down to earth, warm, kind, but also, you know, I'll bring back tenacious because she's somebody that knew what she wanted for herself at every minute, and she depended on and trusted her instincts and her vision, and she also made great choices in who she would work with, whether producers and picking great songs and working with ...</s>PORTNOW: ... great entrepreneurs and record label people.</s>QUEST: Yes.</s>PORTNOW: So she had it all.</s>QUEST: Neil, thank you for taking time and coming to talk to us and putting it in perspective. Thank you. We appreciate it. As we continue, Walmart is reasserting its dominance in US retail, even as other chains crumble because of online competition. Now, the numbers that came out today saw the shares go up more than 9% after the company said its US sales grew at the fastest pace in a decade. Investors were pleased that the online sales in the grocery business is growing strongly. Clare Sebastian is here to take me down the aisles.</s>CLARE SEBASTIAN, CORRESPONDENT, CNN: Yes, well, if there's one thing you take away from this earnings report, Richard, it's that it's not just e- commerce, it's not just the physical stores, it's the combination of the two that Walmart is doing really well and that's what's got investors so excited today.</s>QUEST: Let me just jump in, though. What have they done differently? I mean, in a quarter or in the half of a year, are we just seeing the results of the policies put in place or have they changed anything recently?</s>SEBASTIAN: They've just been investing more and more, Richard. Their grocery has been a big thing in the last few months. They've been investing in click and collect and delivery and all of that kind of stuff. That's very expensive, but this is essential because they're not just competing with Amazon now, they're competing - they're trying to meet the demands of a new generation. Take a look.</s>RYAN, YOUTUBER: We're so excited to see and ride a real toy.</s>SEBASTIAN: This is how Walmart now sells toys.</s>UNIDENTIFIED MALE: Three, two, one, go!</s>SEBASTIAN: Six years old, Ryan has racked up billions of views reviewing toys on his YouTube channel.</s>RYAN: Look at the boxes with my face on it.</s>SEBASTIAN: Now, he has his own line at the world's biggest retailer. Retailers are waking up to a younger and younger generation of influencers.</s>EMMA CHAMBERLAIN, INFLUENCER: It's a cute shirt, trust me, just this angle is bad for it.</s>SEBASTIAN: Seventeen-year-old Emma Chamberlain recently partnered with Dote, a mobile shopping app designed to appeal to Gen Z. Her line, High Key sold out in three hours.</s>OLIVER CHEN, ANALYST, COWEN: Influencers and others online can offer you a really authentic kind of connection or experience or knowledge about a product where a consumer can really see him or herself in that blogger or influencer.</s>MCKENZIE SULLIVAN, GEN Z: Give it to someone you know, like someone you watch videos of and you're like trust their opinion. They wouldn't, like, advertise a product that's bad.</s>SEBASTIAN: At the eighth largest mall in America, Palisade Center, north of New York City, we meet Gen Z siblings McKenzie, Sydney, and Tyler Sullivan. Who do you guys follow on You Tube for example?</s>TYLER SULLIVAN, GEN Z: On YouTube, I like David Dobrik.</s>DAVID DOBRIK, YOUTUBER: May I ask for a little help for my friends at - we've got a new car, baby!</s>SEBASTIAN: That means they're exposed to brand sponsoring influencers.</s>DOBRIK: If you press a button, it turns into a disco ball and it flies.</s>SEBASTIAN: While other influencers like Shane Dawson with 16 million YouTube followers even have their own merchandise. Dawson sells his on Amazon.</s>T. SULLIVAN: When he advertises something, it's not because he's, like, getting a sponsor. So that he really like wants to advertise it.</s>CHEN: New generations of shoppers are open to new brands and not necessarily wedded to trusting the old and former brands. We're really seeing the transformation in terms of the customer having more power.</s>SEBASTIAN: And let's say, Gen Z doesn't differentiate between online and physical stores. They're more interested in value.</s>M. SULLIVAN: You could go into the store, try something on, you fall in love with it, go online, get it for like 20% off.</s>SEBASTIAN: You guys will do that?</s>T. SULLIVAN: A little.</s>SEBASTIAN: And they want personalization.</s>T. SULLIVAN:  L: ike the shoes I'm wearing right now, I went on the Vans website and I, like, picked out the color here and I picked out what the fabric was going to be.</s>SEBASTIAN: It's kind of this connected generation are shifting the power to set trends away from the retailers.</s>RYAN: My favorite is ...</s>SEBASTIAN: The old guards are scrambling to catch up.</s>SEBASTIAN: A little glimpse, Richard, there into how the younger generation do it, but the point about this is, it's very expensive, even for Walmart to do all of this and innovation. Walmart are losing money in e-commerce. They expect that to continue for the rest of the year. But the thing about Walmart compared to, for example, JCPenney, which I know you're going to talk about is that they can afford to do this, and that's why they're in this leading position.</s>QUEST: Good to see you. Thank you, Clare Sebastian. Now, so far, this year's shares in US retailers have either skyrocketed or gone sky diving. Now, take a look. JCPenney is down 42% year to date. Sears, even worse, 59%. But Macy's and Kohl's are each up around 40%. Nordstrom's earnings are out. Their shares are up 14% after hours. They're looking to invest in the digital side of their business. We'll talk more about the digital side and the winners and the losers. Keep in mind now, Kohl's is up 38% and Macy's up 41%. JCPenney and Sears down heavily. Barbara Kahn is the professor at Wharton and author of "The Shopping Revolution." When I look at those two share price differentials ... [16:25:12 ]</s>QUEST: ... it looks as if JCPenney and Sears just do not get it, and probably, maybe, never will.</s>BARBARA KAHN IS THE PROFESSOR, WHARTON SCHOOL: I couldn't agree more. I think the difference is, one, that Walmart and to some degree Kohl's and Nordstrom and Macy's, they have a strategy, and JCPenney, right now, it's CEO-less. It lost its CEO, and really doesn't have a strategy. What's the reason to go shop at JCPenney? And I think JCPenney in particular compared to Walmart suffers from the fact that their locations tend to be in malls, and mall traffic is down. They don't have the right mix of merchandise, they don't have a reason to go into the store, and people aren't going to the malls.</s>QUEST: Okay, but is the - is the bricks and mortar, we know it's not dead, but people still like going into a shop and trying it on. So it's the ability, surely, for a Macy's to balance physical presence with online presence. I'm old-fashioned enough. I still like to go and try an item of clothing on, but if I'm buying a pair of undershirts or underwear, well, I can buy that online.</s>KAHN: Exactly, and like your previous guest said, it's really an omni channel strategy and that is another reason why Walmart has done so well. Walmart spend a lot of money investing in their website, investing into making it frictionless, online-offline, making it really easy to shop, and if you compare Walmart, say, to Amazon, and Amazon, you're paying an Amazon prime membership, but Walmart, you're not paying that membership price. You've got really low, low prices in their store. They've always been a low-price retailer, and when they get their website and their online equation right, that's a winning - that's something winning for the customer and you see it in their top line and bottom line.</s>QUEST: But they haven't - they don't have the cache. They haven't managed to get the cool factor. Whatever you want to call it, I'm sure you have a professorial word that would put it into true perspective. But the reality is, Walmart, look, I'll admit, and I suspect you are, too, I am a prime member, Amazon Prime. They're getting and their hundred andwhatever it is dollars a year from me, and possibly from you as well. Now, that's an achievement.</s>KAHN: Yes, but Walmart is aware of that. When they bought jet.com, that's a separate platform still, they're operating under a different platform. They have a partnership now with Lord & Taylor. They have bought a lot of very sexy digitally native vertical brands, like DeNovo and Millicent, so they're upping their wow factor as well. They're aware of that.</s>QUEST: When was the last time you went into a shop and bought something? An item? Clothing?</s>KAHN: I have to tell you, I go in stores all the time. I'm a brick and mortar person.</s>QUEST: Excellent. Good to see you. Thank you very much indeed. We'll talk more about this in the future.</s>KAHN: Sure, thank you.</s>QUEST: You need to keep up to date on the business headlines. We have it for you and it's just a 90-second Daily Briefing Podcast, updated twice a day, before the start of trade and after the closing bell. Just ask "CNN Money flash briefing" to Alexa or the Google device. As we continue, the threats are still coming from Washington to Ankara. We'll hear from the Turk's chief executive who says Turkey can withstand the Trump administration's onslaught.