Transcript: Thursday, March 13, 2014

NBR ThumANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and
Susie Gharib, brought to you in part by —


blue chip index falls more than 200 points as concerns overseas rattle
investors here. What`s driving the decline and how vulnerable is the
market to more selling?

What`s really going on inside the world`s second largest economy? How much
is it slowing and what does it mean for markets across the globe?

MATHISEN: Power outage. The nation`s entire electrical grid could be
blacked out for months with just one small-scale attack. In the wake of
this new report, how safe are our utilities?

All that and more tonight on NIGHTLY BUSINESS REPORT for Thursday,
March 13th.

GHARIB: Good evening, everyone.

A massive and surprise selloff in the markets today, the worst day on
Wall Street in more than five weeks. But it didn`t start out that way.
The major averages actually began the day higher after first-time jobless
claims fell by 9,000 last week dropping to a three-month low.

And then also, retail sales in February were better than expected,
with Americans buying more cars, clothes and furniture. But investors got
spooked over developments in the Ukraine, China and the Eurozone.

At the end of a volatile day, each of the big indexes fell more than 1
percent. The Dow tumbled 231 points, the NASDAQ lost nearly 63, and the
S&P was down 21 points.

Bob Pisani has more from the New York Stock Exchange on today`s market
action and what might happen next.


for the markets, which were battered by events outside the U.S. — in
China, in the Ukraine, and in Germany. We saw first very poor economic
news in China where industrial production and retail sales were both weaker
than expected in February. That`s confirming that China is slowing.

We also saw rising tensions in the Ukraine where the acting president
there said he saw a risk of war with Russia and that there were reports
that Russia fired on a Ukrainian plane over Crimea.

And, finally, strongly worded comments from German Chancellor Angela
Merkel to the German parliament, in which she warned of a catastrophe,
unless Russia backed down, saying it would change the European Union`s
relationship with Russia. Now, that affected Europe. The German stock
market is now at a 3-month low. It`s been a very ugly five days over in
the Europe.

Here in the U.S., stocks were weak right across the board. Everything
from momentum names to consumer discretionary and financials.

One positive standout was utilities, which was up as traders sought
more defensive parts of the markets.

Now, in fact, the yield on the 10-year Treasury dropped about a tenth
of the point, to 2.65 percent. That`s another sign investors were moving
toward safer investments.

Down here on the New York Stock Exchange floor, there was a little
sense of panic. In fact, most traders noted we are still only 2 percent
from historic highs in the S&P 500.

For the NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock


MATHISEN: Well, as Bob just reported, one of the big reasons for
today`s stock market reversal is concern that China`s economy could slow
dramatically perhaps, sandbagging the rest of world with it.

Eunice Yoon explains.


many years, China was seen as a cushion for the world. Chinese economy
clocked double-digit growth while other countries struggled.

But now, the economy is slowing. Exports are falling. The currency
is weakening. And the leadership seems comfortable with the slowdown even
if the rest of the world is not. At the country`s annual gathering of
lawmakers, the premier hinted that Beijing would tolerate a less robust
economy, as policymakers attempt to transform China from the world`s
workshop to a consumer nation.

(on camera): Many investors believe that China`s growth rate this
year could be slower and lower than the official rate of 7.5 percent. What
is the slowest rate of growth that you would find acceptable without
stimulating the economy?

LI KEQIANG, CHINESE PREMIER (through translator): There`s no denying
that we may encounter a more complex situation this year. We set the GDP
growth target for this year at about 7 1/2 percent. This, quote-unquote,
“about” shows that there is a level of flexibility here. You asked me
what`s the lowest possible GDP growth we can live with? Well, this GDP
growth needs to ensure full employment and increase people`s incomes.
We`re not preoccupied with the GDP growth target.

YOON (voice-over): A slower China means less demand for commodities
like copper.

Not only are investors worried about the pace of the economy but the
health of it, too. The financial system hasn`t been able to keep up with
the years of economic boom, fostering an underground banking sector here
which many fear could threaten the world.

(on camera): China`s premier said that some defaults are unavoidable
but that the government would take steps to manage the risks.

For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon in Beijing.


GHARIB: So what would a downturn in China, combined with slipping
prices on commodities like copper, mean for the U.S. economy? And if
prices start falling on Chinese-made goods could that lead to a wave of
deflation in our economy and across the globe?

Steve Liesman has more.


With China now the world`s second largest economy slowing, the inevitable
question being asked is, what does it mean for the rest of the world and in
particular the United States?

Well, that depends on how it slows. A financial meltdown for China`s
banking system could ricochet around the globe, prompting fears of
financial contagion that could lap up on America`s shores. Though, that`s
a worry, it`s not seen as the most likely outcome. Most economists see a
more orderly cooling that for such a big economy would have surprisingly
little impact on the developed world.

That`s because while China imports a lot of stuff especially
commodities, it exports even more stuff. It`s a great big cog in the
global trade engine, but it`s just not consumer-driven economy.
Consumption in China is less than half of its total GDP. In the U.S., it`s
83 percent.

the rest of the emerging markets. It hurts the commodity exporting
countries and the U.S. feels that in terms of its export prospects.

LIESMAN: But that hit is cushioned somewhat by lower prices.

HENSLEY: In the event that China`s weaker, you would see lower oil
and gasoline prices but more broadly, anything that`s manufactured is going
to be having some content in China and other emerging market economies.
And you could see that reflected fairly broadly in the goods sector.

LIESMAN: This charts shows a strong connection between Chinese export
prices and prices paid by U.S. consumers. Over the past several years,
declining Chinese export prices have kept a lid on U.S. consumer prices.

(on camera): So, while a China slowdown worries some U.S. investors
and companies with big stakes in its economy, a more general reason for
worry would come only with a financial meltdown, not just a slowdown in
Chinese growth.



MATHISEN: It`s not just the U.S. and China are raising flags about
the risk of deflation. The strength of the euro, along with years of
ultralow inflation in the currency block prompted European Central Bank
President Mario Draghi to announce that the bank is taking measures right
now to fight possible widespread price and wage declines that could send
the entire eurozone sliding into inflation.

GHARIB: Nick Colas says investors should brace themselves for more
volatility. He`s chief market strategy at Convergex.

So, Nick, you heard all of these reasons for what was going on in the
markets today? What concerns you the most? And is this the beginning of a

there would be problems we`re having in the Ukraine with Russia were top of
mind today. Because while the economic data was very sloppy out of China,
it was better in the U.S. The selloff really came as the issue in Ukraine
began to come to the fore.

As far as the beginning of a correction, I do see a lot more
volatility for U.S. stocks this year. We`re coming off a long period of
very low volatility. But I don`t see the creation of the fundamentals for
say a 10 percent decline. I think we`re going to be stuck in more a 3
percent to 5 percent decline.

MATHISEN: Is deflation a worry of yours, Nick?

COLAS: It absolutely has been for a number of years. A slow economic
growth around the world, combined with a deflation that Chinese exports has
made monetary policy very difficult. And the nightmare scenario for most
policymakers, that don`t we really comment (ph), Japan, which has had ten
years of deflation and is still trying to work through those problems. So,
it`s certainly a concern.

GHARIB: We always hear about inflation worries, especially from the
Federal Reserve, and now, we`re talking about deflation in Europe and in
China. I mean, to what extent can that impact the U.S. economy?

COLAS: You know, deflation is a funny thing, because you would think
that lower prices would encourage consumers to buy. But in fact the
opposite is true. And the reason policymakers worry about it is because it
can really slow down a recovery.

Bottom line is it`s a big concern for the Fed, and that`s why they`ve
been so easy with low interest rates and a lot of money printing over the
past couple of years because they really dread the notion of becoming

MATHISEN: More volatility, possible deflation, Nick, on the screen.
Yet you think the market will end higher this year.

How do you get there?

COLAS: Yes, I`ll tell you. The anchor that we use to understand the
stock market is corporate earnings. And the bottom line is, U.S. companies
have done a fantastic job generating very strong levels of earnings in a
very lackluster global recovery and even a lackluster U.S. recovery. So,
ultimately our confidence comes from the fact the U.S. companies can
continue to make very good profits even in a slow growth and somewhat
troubled global economy.

GHARIB: So, Nick, you always talk about diversification and why
that`s important for investors. So as you look around the globe, is the
U.S. the place to be in a portfolio or should you have stocks in other
international markets? And also, what about gold?

COLAS: Yes. The bottom line on diversification is of course it`s
very important to have both bonds and stocks in a portfolio.

You`ve seen that this year. The stock market is up on the year, the
aggregate bond index up a percent and a half. The U.S. is the best place
to be. If you look at Europe for example, Russia is a huge exporter of
oil. It`s a missing piece of equation. Germany takes 9 percent of all of
Russian oil production.

So, the European economy is going to be very, very troubled as we go
through the problems in the Ukraine.

As far as gold goes, I think it`s a very efficient way to help
diversify a portfolio. We believe a 3 percent to 5 percent weighting in a
portfolio is an appropriate amount of gold for a standard diversified

GHARIB: OK. So much good information. Nick, thanks so much.

COLAS: Thank you.

GHARIB: Nick Colas, chief market strategist at Convergex.

MATHISEN: On this down day in the markets, a rare show of bipartisan
support in the Senate its giving hope to the nation`s long term unemployed.

Hampton Pearson joins us now from Washington with more.

What deal, Hampton, did the Senate agree to and what are the chances
that it`s going to pass?

know, Tyler, first of all, late this afternoon, there was a bipartisan
group of 10 senators announcing an agreement to reauthorize long-term
unemployment benefits for five months. And if passed by both houses and
signed by the president, those benefits would be paid retroactively back to
the end of the year when they expired. An estimated 2 million Americans
have lost those emergency unemployment insurance coverage.

The key sticking point in breaking a political logjam all along has
been how to pay for the extension. This agreement does that by extending
some customs fees that were part of the recent budget deal and also making
some changes in federal pension programs.

Now fact that it is a bipartisan agreement is the key to getting past
of course that 60-vote filibuster-proof threshold that you always have to
deal with in the Senate.

Now, the Senate, however, is about to take a 10-day St. Patrick`s Day
recess, so the jobless package won`t be taken up until after the Senate

But again, this measure calls for those jobless benefits to be paid
retroactively. Then, of course, onto the House of Representatives.

GHARIB: All right. It`s a big development.

I mean, what are the prospects over in the House?

PEARSON: Well, the fact that the Republicans on this bipartisan group
found a way to pay for it, that was the real sticking point for both
Republicans in the House and Senate. And it also doesn`t hurt that among
the leaders of this group is Ohio`s Rob Portman, John Boehner, of course,
the speaker of the House, fellow colleague, leading the charge again.

And it`s also — you`ve got people in high Republicans in high
unemployment states like Ohio, Illinois and Nevada were part of this group
that crafted that extension.

MATHISEN: All right. Hampton, thanks very much.

Hampton Pearson reporting for us tonight from the nation`s capitol.

Still ahead, what would it take to cause a national blackout? A new
report says not much. So how safe are our utilities? That story, next.


GHARIB: The troubles for General Motors (NYSE:GM) worsened today.
The automaker now admits that it knew about ignition switch problems in
some of its compact cars as early as 2001.

Now, that was three years earlier than previously reported. Those
faulty switches resulted in dozens of accidents and 12 deaths.

Phil LeBeau joins us now from Chicago with more on the deepening
crisis at G.M.

So, you know what`s questionable here, Phil, if G.M. knew about the
ignition all the way back to 2001, why didn`t they do more about it?

when you look at the documents is whether or not this was looked at as an
isolated incident. And the 2001 incident was actually a pre-production
model, Saturn Ion that a technician saw stall. They looked at it, did some
analysis, filed a report.

And then there wasn`t another report until 2003 when a dealership had
a technician realize that there was a Saturn Ion that had a stall. Another
report was filed.

So, the question becomes, did they look at these as isolated
incidents, Susie, or did they look at this and say, this could be the tip
of the iceberg of something bigger here? And that`s what investigators are
still trying to determine.

MATHISEN: It seems like they did fail to put two and two together or
one and one together in this particular case. Why I guess is really the
story here.

Phil, the transportation secretary was up on the Hill today and he was
getting questioned about the recall.

LEBEAU: Right.

MATHISEN: Did the government drop the ball on this at all?

LEBEAU: Well, a lot of people in Washington seem to think so, because
you had three accident investigations that were done by the National
Highway Traffic Safety Administration, and there was no recall. In fact,
there wasn`t a recall until February of this year after they had a chance
to analyze a multitude of more cases and examples.

Here`s the transportation secretary defending how NHTSA conducted
itself over the last 10 years.


there were complaints related to this particular vehicle, and despite three
crash investigations and other research, the data was inconclusive. It
just didn`t point to a formal investigation.


LEBEAU: Now, I know what a lot of people are going to say. You had
more than 240 complaints about vehicles stalling an average of two per
month. How could you not connect the dots here? And that`s the main
question that`s going to National Highway Traffic Safety Administration.

GHARIB: And that`s a question that a lot of customers are going to be
asking as well. So, you know, what do you think customers need to hear
from G.M. at this point? And how forgiving can G.M. customers be?

LEBEAU: A lot more forgiving than you think. What do they need to
hear from General Motors (NYSE:GM)? I think when it`s all said and done
whether that comes out in the next three weeks or two months from now when
the investigations are over, they want to hear everything. Not partial,
not “we think”, not, “well, there were some incidents but we looked the
other way” or “we misjudged things”, everything. Get it out there.

And I believe that Mary Barra, the CEO, is going to take that
approach. He`s going to throw it all the out there, almost in effect
saying we made a mistake here. And they will be forgiving to a large
extent, Susie.

You remember what happened with Toyota (NYSE:TM)? They still had a
lot of customers come back even after everything.

MATHISEN: Boy, absolutely, the case. And that was some four years
ago with the floor mats in the car.

Phil LeBeau, thank you very much.

All right. Things still troublesome at Target (NYSE:TGT), still
feeling the effects of last year`s massive credit card data breach that
affected millions of its customers. Published reports now say that a team
of Indian security experts working for the discount retailer and using a
new malware detection tool made by FireEye, alerted Target (NYSE:TGT) about
a possible data breach on November 30th but that officials blew off the
warning that. That same team found more evidence of a hack attack on
December 2nd and again there was no action taken at corporate headquarters
in Minnesota for weeks to come.

Investors, however, did take notice today. They sent shares of Target
(NYSE:TGT) more than 2 percent lower. Shares of FireEye up about 3 percent
on this down day for stocks.

GHARIB: And here`s another crucial security issue that poses big
risks to the U.S. We could suffer a national blackout that could last for
months if attackers knocked out the country`s electric transmission
substations. That warning came from a frightening new report from the

So, just how vulnerable is our electricity grid? Eamon Javers takes a


relatively small attack on U.S. electrical substations could render the
country powerless for as long as 18 months. The U.S. government report was
first revealed by the “Wall Street Journal” this morning. In it, the
government estimated that a strategic physical attack on just nine of the
country`s nearly 60,000 substations on a hot day could cause an epic
economic and social disruption.

But industry representatives say they`re already taking steps to shore
up the system.

kinds of threats. So, I don`t want to suggest we`re complacent at all.
But what I do want to stress is that we are continually looking at ways to
enhance physical security.

JAVERS: Last year, unknown gunmen fired weapons at this substation in
San Jose, California. The attackers fired for 19 minutes and knocked out
17 transformers. The attackers fled and have never been caught.

Although it didn`t cause a blackout last year, the attack rattled
power industry experts.

JIM FAMA, EDISON ELECTRIC INSTITUTE: The day after that attack, we
had companies on the phone talking to Pacific Gas and Electric about what
happened, how they dealt with it, sharing information. So, we worked
together in mutual assistance type approach in these sort of situations.

JAVERS (on camera): Today, the Federal Energy Regulatory Commission
responded to the disclosure calling the “Wall Street Journal`s” reporting a
sensitive information, highly irresponsible.

FERC also said that just last week, it had issued new mandatory
security guidelines for certain facilities.

For NIGHTLY BUSINESS REPORT, I`m Eamon Javers in Washington.

Coming up, General Electric (NYSE:GE) is making a big move to focus
more on its industrial business. We`ll bring you the details, up next.


MATHISEN: If you are an Amazon (NASDAQ:AMZN) prime subscriber, get
ready to pay more. Starting in one week, the online retailer will raise
the price of its popular service that offers free shipping and streaming
media for the first time in nine years from $79 a year to $99, the higher
prices higher earnings. Amazon (NASDAQ:AMZN) was one of the few stocks
ending the trading day a fraction higher.

And if you sign up for Amazon (NASDAQ:AMZN) Prime, in the next week,
you will lock in that cheaper rate for the year.

GHARIB: General Electric (NYSE:GE) files for an initial public
offering of its retail finance unit. That`s where we begin tonight`s
“Market Focus”.

Now, the spinoff is the first step in the company`s previously
announced plan to exit the lending business and refocus on its industrial
operations. G.E. named the new company Synchrony Financial and plans to
sell about 20 percent to the public. The rest will be distributed to G.E.
shareholders. G.E. shares fell more than 1 1/2 percent to $25.34.

Some good news about Pfizer`s blockbuster vaccine. A major trial
showed that the vaccine helps prevent pneumonia and other infections in
elderly patients. The vaccine is already on the market to treat children
and adults. Some analysts say if it`s approved to treat patients over 65,
sales could increase by $1 billion or more. Despite that on this down day
shares of the drugmaker were down more than 2 1/2 percent to $31.12.

An update on Zogenix (NASDAQ:ZGNX). This is an ongoing story that
we`ve been telling you about. The head of the Food and Drug Administration
is defending the agency`s approval of the Zogenix`s controversial
painkiller Zohydro, saying the drug offers a unique option to treat pain.

But experts still oppose it, saying the drug is too powerful and
potentially addictive. Zogenix (NASDAQ:ZGNX) rose 4 1/2 percent to $3.67.

And Sotheby says its board rejected three directive candidates
nominated by activist investor Third Point, the company`s largest
stakeholder. The auction house instead put up two names of its own. Third
Point has been pushing for management changes at Sotheby. Shares fell more
than 3 percent to $44.79.

MATHISEN: And Dollar General`s earnings match estimates but revenue
miss to the company issued guidance it fell well below estimates. Like
other retailers, it blamed the miss and the weak forecast on, you guessed
it, severe winter weather. Shares off about 3 percent, $57.64 there.

New Rubbermaid`s Graco (NYSE:GGG) Brand adds more than 400,000 child
seats to last month`s recall of 3.8 million seats. The buckles on the
problem products can jam. Government regulators aren`t satisfied. They
warned Graco (NYSE:GGG) to add 1.8 million more infant seats to the recall
because they have the same buckles. Shares of new Rubbermaid fell about 4
percent to $29.58.

And the Hollywood studio Lionsgate will pay $7.5 million to settle SEC
charges that it misled investors during a hostile takeover battle with the
activist investor Carl Icahn. The SEC says the company participated in a
complex debt/equity swap that put company shares in the hands of a
management-friendly director without shareholder approval. The stock was
down 3 percent today to $32.20.

And finally tonight, a different kind of investment honoring the
nation`s national pastime. The San Francisco Mint announced plans to
produce new commemorative coins featuring a baseball on one side and a
baseball mitt on the other. The new coins have come out later this year as
we celebrate the 75th anniversary of Major League Baseball`s Hall of Fame.

You can spend them. They come in $5, $1 and half dollar
denominations. But don`t use them in vending machines or toll booths. The
coins are going to be curved. The first time ever that the Mint will make
a kind of bowl-shaped currency, giving new meaning to the word “curveball”.

GHARIB: I hope everybody realizes how fascinated you are by this


GHARIB: And when your birthday comes up, I`m getting it for you
because that would be a home run, wouldn`t it?

MATHISEN: That would be a home run. That`s right. A little —
(INAUDIBLE) pasta.

GHARIB: That`s NIGHTLY BUSINESS REPORT for tonight. I`m Susie

And we want to remind you — this is the time of year your public
television station seeks your support to make programs like this one

MATHISEN: And I`m Tyler Mathisen. Thanks so much for joining us
tonight. And on behalf of your public TV station, thanks for your support.
Have a good evening, everybody. We`ll see you back here tomorrow night.


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