Transcript: Thursday, September 4, 2014

NBR ThumANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Susie Gharib.

SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: World focus. The European Central Bank cuts interest rates, NATO leaders meet to talk global hot spots. What will it take for markets to pay attention?

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Different paths.
Europe is cutting rates. The U.S. is gearing up to hike them. What happens when Europe and the U.S. move in different directions?

GHARIB: And, ready to pop? A look at some of the stocks analysts think can rise 20 percent.

We have all that and more tonight on NIGHTLY BUSINESS REPORT for Thursday, September 4th.

MATHISEN: Good evening, everyone. And welcome. Thanks for joining us.

Well, stocks edged a little lower into the close today, but things didn`t start that way. In fact, the Dow and the S&P 500 both hit record intraday highs this morning, driven by a Draghi big jolt.

Who`s that? What`s that? Well, Draghi as in Mario Draghi, head of Europe`s Central Bank.

And today in Frankfurt, he took monetary steps that electrified markets first in Europe and for a time here in the United States. He slashed interest rates to fresh record lows, nearly zero percent and announced some Federal Reserve-like bond-buying stimulus measures to boost the struggling eurozone economy.

But the Draghi jolt faded. Wary investors pulled back, ahead of tomorrow`s big August jobs report. Indeed, two unemployment numbers out today, unemployment claims and private payrolls, they were both weaker than expected.

At the end of the session, the Dow down eight and NASDAQ lower by 10 and S&P off by three. The dollar rose as the euro fell to a one-year low on those actions by the ECB, dipping below $1.30 for the first time in a year.

GHARIB: Despite today`s modest selloff on Wall Street, the U.S. stock markets are still hovering near historic highs. The American economy is growing, and the U.S. Federal Reserve is not only pulling back from its stimulus measures, but talking about raising interest rates.

In Europe, things are completely different. The central bank there is trying to avoid a recession and is pumping money into the financial system to stimulate growth.

Steve Liesman has more on two continents, two economies and two divergent policy paths.

(BEGIN VIDEOTAPE)

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
European central bank president Mario Draghi surprised markets around the world by announcing new measures to stimulate the beleaguered European economies.

(on camera): The euros plunged by 1.5 percent as Draghi announced the ECB was set to buy bonds to lower interest rates and cut the Central Bank`s own interest rates, lowering from 0.15 percent to a still lower 0.05 percent, and cutting another from a negative 0.1 percent to a more negative
0.2 percent.

What`s a negative rate? It means banks have to pay to the Central Bank to keep euros on deposit there.

(voice-over): Draghi suggested even more could be on the way, if the current round of stimulus doesn`t do enough to reverse the continent`s flagging growth and declining inflation levels.

MARIO DRAGHI, ECB: Should it become necessary to address risk of too prolong the period of low inflation, the governing counsel is unanimous in its commitment to using additional unconventional instruments within its mandate.

LIESMAN: All of this in stark contrast to Fed Chair Janet Yellen who is facing increasing pressure to raise rates sooner. A report on the service sector was practically near boom-time levels. Unemployment insurance claims are low and Wall Street is expecting another strong jobs report tomorrow for the month of August.

While the two central banks move in different directions, the policies could be complementary at least short term. While Yellen eases back, Draghi is pushing on the throttle, potentially reducing the pain of a Fed course reversal.

While Yellen likely next year will take action that could raise interest rates, Draghi is taking action to lower them and had a powerful effect on not just European rates, some of which are below 1 percent for 10-year bonds but also on U.S. rates.

While a weaker euro will challenge U.S. companies, especially exporters whose products could be somewhat less competitive in dollars versus euros, a stronger European economy will help the U.S.

(on camera): The downside could come down the road if Yellen needs to raise rates, but the ECB`s actions make it difficult for her to do so. But that`s a problem for another time. The immediate issue is Europe and avoiding another recession.

For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.

(END VIDEOTAPE)

MATHISEN: Europe`s economic challenges are one thing. National security threats are quite another.

And today in Wales, President Obama met with other NATO leaders to discuss what to do about Russia and whether its bellicose moves in Ukraine will mean more sanctions, or maybe even for defense spending. Middle East was on the agenda, too.

Hadley Gamble has more from Wales.

(BEGIN VIDEOTAPE)

HADLEY GAMBLE, NIGHTLY BUSINESS REPORT CORRESPONDENT: The first day of the NATO summit is coming to a close here in Wales and leaders are still working to find some kind of consensus on what to do about Russian aggression in Ukraine.

Now, this is an alliance that`s really been galvanized by the events of the last several weeks, including what`s been happening in Ukraine, but also what`s been happening with the Islamic State and many European leaders, of course, worried about what to do about the spread terrorism.
They understand that as this movement spreads out of Iraq, out of Syria, targets will be in Europe and the United States, as well. Certainly a top priority for leaders gathered here.

Another big topic is defense spending. We`ve seen European leaders committing today to a resolution. They say that in ten years time, all of them will be committing 2 percent of their GDP to military spending to the defense of the NATO alliance, into their countries but a non-binding resolution. We`re really going to have to wait and see if that comes to fruition.

Also in terms of NATO, in terms of the alliance, we`re also going to have to see what they`re going to do about the Islamic threat. Many options on the table, but no clear-cut strategy or plan, as well.

And in terms of dealing with Mr. Putin`s territorial ambitions, that all comes down to the fact the European leaders that I speak to and NATO leaders that I speak to are telling me that they want to use soft power, they want to use diplomacy. They don`t think that a military solution is really going to work.

So, some tough questions for leaders here at the NATO summit. One day down, one to go.

For NIGHTLY BUSINESS REPORT, I`m Hadley Gamble in Wales.

(END VIDEOTAPE)

GHARIB: So, how important are all of these international cross currents for U.S. stocks? And is it time for U.S. investors to pay more attention to troubled spots around the globe?

Joining us to talk about this, Art Hogan, he`s chief market strategist at Wunderlich Securities, and Ian Bremmer, president of the Eurasia Group, a political research firm.

Ian, Art, thanks for joining us.

Just to kick off our conversation, I`d like you to take a listen to the views of two top investors over the past couple of days and then like to get your reaction. Take a listen.

(BEGIN VIDEO CLIP)

ROGER MCNAMEE, ELEVATION PARTNERS CO-FOUNDER: What I`ve been doing over the last week or so is reducing my exposure and moving a portion of my portfolio to T-bills, not because I think anything is going to happen tomorrow but because I don`t understand how you can have so much chaos in the world and still have prices going up every day.

SAM ZELL, EQUITY GROUP INVESTMENTS CHAIRMAN: Do you remember another time where there were more issues going around, around the world all at the same time? Any one of which could overnight turn into a major disaster?
You want to talk about issues? You want to talk about Gaza? You want to talk about the Ukraine.

(END VIDEO CLIP)

GHARIB: So, Art, let me begin with you. Do you feel the same way as these two guys?

ART HOGAN, WUNDERLICH SECURITIES CHIEF MARKET STRATEGIST: Well, it`s interesting. I do. I think, you know, there is as much concern on a geopolitical front globally, as there has been in the 25 years I`ve been in the business.

That said, you know, we have to rationalize that down to economic terms. And when you`re trying to do that, you look at each individual crisis and say, what does that mean to both the domestic and global economy and what type of effect can this have?

It`s hard to drive yourself to worst-case scenarios but sometimes, you often do that and luckily, none of the situations we`ve been faced with have gotten to that point.

So, you know, my feeling is, you know, there is a credible possibility that the global community put a lot of pressure on Russia. That continues.
And Russia backs down on this.

At some junction, we`ve heard some rumblings about that at the beginning of the week. That would be, the first and foremost, the most major of the geopolitical concerns and certainly help the European economy.
Europe is most adversely affected by the sanctions we`re putting on Russia right now.

So, the way I look at it is, hopefully, the global geopolitical conflicts remain local and get resolved without turning into major disasters.

MATHISEN: You know, Ian, the world is always a dangerous place, I guess sometimes more so than others. How would you weigh the risks in the world today as risks to my money and my portfolio?

IAN BREMMER, EURASIA GROUP PRESIDENT: Certainly, in terms of timing, the largest this year is Russia and Ukraine. But it`s much — as Art said, the risks — I don`t believe it`s going to get resolved, at all, but I also don`t believe it`s going to metastasize globally. Those are two different things.

And I think one of the reasons Americans are pretty prepared to shrug this off in terms of the marketplace, they are also prepared to shrug it off politically. Despite everything we`ve seen, there is very little interest of the Americans to truly engage to try to stop the Russians. No one believes the president`s policy is going to do that. That because it affects Russia, Ukraine and the Europeans a lot more than it affects the United States.

After the 2008 financial crisis, a lot of people believed that the United States was the cleanest dirty shirt. That was true economically but it`s even more true geopolitically. All of the things that you heard Sam Zell talking about, whether it`s Gaza, whether it`s Iran, it`s Libya, it`s Iraq, it`s Syria, it`s Ukraine and Russia, the manifold conflicts all of which are connected and structural, but all of which affect a hell of a lot other — more other countries in the world than they do the United States sandwiched in-between remarkably unstable Canada and Mexico.

And so, I think that`s really the issue here.

GHARIB: You know, Art, some people are saying and we`ve heard this from a lot of Wall Street market strategists is that U.S. investors can withstand any of this turbulence because our economy is so strong. We`re in much better shape. Do you agree with that? Or is there a point where that argument doesn`t hold its water?

HOGAN: Well, Susie, that`s a great question, and Ian brings up a very good point. You really look at this geopolitical situation and then try to ascertain what that means to you. It`s not as though we are isolated from the global economy and we certainly aren`t, but what effect do any one of the geopolitical concerns that Ian just brought up and listened very eloquently are going to directly effect the P and E ratio of the S&P 500 or the U.S. economy and its GDP growth rate for the balance this year?

So, as we look at that, there are certainly reactions that could happen. And I would — the biggest concern I would have right now is as a result of sanctions that we`ve put on Russia, you`re seeing the European economy slow down. It was actually slowing down before this happened and it`s getting worse because of sanctions. What has to happen is aggressive monetary policy. We saw that announced today.

The knock on effect of that will be something like a stronger dollar, a weaker euro, and that can have an impact on your investments, if you`re overly invested in things that are commodity based and things of that nature. So, you might need to make sector rotations decisions and things that are going to be affected by the reactions to some of these.

But, you know, in terms of being isolated from some of this, to a certain extent, there is some isolation, global, geopolitical conflicts, you know, affect locally.

MATHISEN: Let me ask Susie`s question to you, Ian. What would it take for American investors to react to what`s going on overseas? What kind of event would take us from our sort of, hey, it doesn`t affect us much very much, to, hey, this really does affect us?

BREMMER: So, four quick things I`d point on. One is if we actually do get a severe recession in Europe as a consequence, the worst case Ukraine scenarios, that clearly is going to knock on all the trade of the United States with Europe. You can only take so much despite what Draghi is doing.

Secondly, likelihood of an Iran comprehensive nuclear deal getting done has actually gone down somewhat because of the distraction of the U.S.
away from Iran, so the Iranians don`t believe we can get it done and the willingness of countries like Russia to try and interfere in that. That means oil prices probably going to swing a little bit higher as a consequence, that certainly affects us.

Third, God forbid, ISIS attacks on American shores, can`t really do much to hedge about that in advance, but afterwards clearly would have a very significant impact on the U.S. economy. But the most significant impact on the U.S. economy is the one no one is talking about right now, and that is the fact that China is actually engaged in historic economic transformation which means — and it may or may not work and if it doesn`t, the potential, not only for slowdown but more importantly, for the ability for American corporations to do well and make money in China. That is a real risk for us.

GHARIB: That is a very fascinating point. This whole conversation is very interesting. We`re going to have to leave it there.

Gentlemen, thank you so much. Ian Bremer of the Eurasian Group, and Art Hogan with Wunderlich Securities.

Tyler?

MATHISEN: Well, thanks to that ECB rate cut, the dollar strengthened and that helped move oil prices lower again. Oil, of course, priced in dollars when the buck bulks up. It takes fewer of them to buy a barrel.
West Texas Intermediate down about 8 percent over the past two months and turn the weakest sector in the S&P today, energy. As a result, oil companies hit Anadarko, Exxon, ConocoPhillips (NYSE:COP), Chevron (NYSE:CVX), all lower.

GHARIB: But that may mean good news at the gas pumps, because of those falling oil prices. Along with a seasonable drop in demand, AAA now predicts gasoline prices could decline by 10 cents or as much as 20 cents a gallon nationwide by the end of October, as long as there are no hurricanes or other major supply disruptions. The national average right now, $3.43.

MATHISEN: It may have been tough getting a burger today at lunch.
Fast-food workers and organized labor leaders in more than 100 U.S. cities took to the streets today or staged sit-ins, calling for better working conditions and a $15 an hour minimum wage.

GHARIB: And coming up, the big cap stock analysts think have the most room to run over the next 18 months. That`s next.

(MUSIC)

MATHISEN: U.S. Postal Service is slashing shipping rates for its biggest e-commerce clients by nearly 60 percent on certain priority mail packages just in time for the holiday season, looking to take away business from its chief rivals FedEx (NYSE:FDX) and UPS. Separately, the Postal Service is launching a trial to deliver groceries in San Francisco through Amazon`s fresh unit.

GHARIB: Home Depot (NYSE:HD) says it`s still investigating whether it was a victim of a massive hack attack, and its customer credit card data was stolen from its 2,200 U.S. stores. While the chain works with the U.S.
Secret Service on the potential breach, it says it will activate computer chip enabled checkout terminals at all of its stores by the end of this year to make sales more secure.

MATHISEN: If you`re an investor looking to bag bigger profits, you need to hunt for stocks with major upside potential, analysts as they so often do, insist there are plenty out there but you have to know how and where to look.

Dominic Chu has more.

(BEGIN VIDEOTAPE)

DOMINIC CHU, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
Investors looking for stocks that could pop often look to the opinions of those who know a company best. Some of those opinions come from analysts on Wall Street that covers stocks for a living. They use price targets and ratings as a measure of what a stocks price will be over the next year to
18 months. Price targets can be helpful to traders looking for investment themes within analyst research.

WARREN MEYERS, ILLUSTRO TRADING MANAGING DIRECTOR: If I look and they have the same idea or the same thought process, I may take that into consideration on my trading strategies.

CHU: Among the large cap stocks currently in the S&P 500, there are only a handful that have price targets at least 20 percent above where the stocks currently trade today.

The company with the highest price target on average is Delta Airlines (NYSE:DAL). In fact, every analyst who covers Delta currently has a buy rating on the company. The airline stock has been volatile over the past few months, but analysts say it could be poised to go up by 32 percent.

SAVANTHI SYTH, RAYMOND JAMES AIRLINES ANALYST: It`s a very attractive U.S. airline industry and beyond that, Delta has made some attractive investments and I think they are just starting to benefit from. So, we expect them to continue to do well and generate a lot of cash and return cash to shareholders.

CHU: Another popular stock is luxury retailer Michael Kors. Analysts have an average $103 target price for the stock. That`s 32 percent above its current price.

And even after its slew of recalls, GM is another top pick from analysts. The automaker is taking a hit this year, but analysts remain bullish with a price target with 26 percent higher than where it currently trades today.

While analysts` opinions are important for a lot of investors, some Wall Street pros say to look beyond the price target when investing in stocks.

PETER COSTA, EMPIRE EXECUTIONS PRESIDENT: In this day and age with the Internet, you can get any information that an analyst can come up with very quickly. Everything is out there. I don`t think there`s any advantage at all to having an analyst report in front of you.

CHU (on camera): Analysts are just one part of the picture here on Wall Street, and while they may not always be right or wrong, they do provide a basis for some investors to form opinions.

For NIGHTLY BUSINESS REPORT, I`m Dominic Chu from the New York Stock Exchange.

(END VIDEOTAPE)

GHARIB: A new court ruling on the 2010 Gulf oil spill rocked shares of BP, and that`s where we begin tonight`s “Market Focus”.

A judge has found the oil giant, quote, “grossly negligent” in the Deepwater Horizon disaster. The decision opens the company to the possibility of as much as another $18 billion in fines. BP says it will appeal the decision. Shares tumbled about 6 percent to $44.89, their worst day in over three years.

Profits at Hovnanian soared as the home builder delivered more homes and its margins strengthened. But revenues came in below analyst estimates. Despite that, shares rose 1 percent to $4.25.

Sweden`s Electrolux is reportedly close to buying General Electric`s appliance business, it could be a $2.5 billion deal. GE confirmed a month ago that it was reviewing strategic options, but now it looks like it is close to selling that unit. GE shares edged up a fraction to $25.96.

Nordstrom (NYSE:JWN) shares touched a new high after the retailer authorized a new stock buyback program of up to $1 billion. This adds on to the more than $320 million left in its existing repurchase program. The stock was up one percent to $70.43, closing below that record.

MATHISEN: The Dow component Verizon (NYSE:VZ) has hiked its quarterly dividend. The nearly 4 percent increase will bring the payout to 55 cents a share. It will be payable on November 3rd. Despite that, shares were down a fraction to $49.72.

And we got a mattress merger to tell you about. Mattress Firm, yes, that`s its name, Mattress Firm, not firm mattress, is buying privately held Sleep Train for $425 million, in an effort to expand its presence on the West Coast. Also, Mattress Firm reported better than expected first quarter profit. Investors will sleep better tonight, shares were up 10 percent to $62.69.

VeriFone also out with results that topped estimates. The company raised its full-year revenue forecast for the third time, encouraged by strong sales of its device that can accept chip-embedded credit cards.
Shares popped 1 1/2 percent to $35.05.

And Mobileye reported sharply higher revenue just one month after going public on strong demand for its products. The company makes cameras used to avoid car crashes. Still, shares down today almost 3 1/2 percent to $45.37.

GHARIB: Auto makers are still revved up on delivering strong sales in August. But that wasn`t the case for all vehicles last month. According to automotive research company Edmunds.com, sales of electric and hybrid cars have stalled this year, grabbing just 3.6 percent of the market.
That`s down the last year`s share.

MATHISEN: Meantime, one electric car maker is betting on powerful sales of its luxury autos Tesla. And today, the company will unveil plans to build a brand-new $5 billion lithium ion battery factory in Nevada.

And that`s where we find Phil LeBeau with more on today`s announcement.

Phil, good evening.

Why Nevada for this Gigafactory?

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, Tyler, look at this strictly from a manufacturing and logistics perspective. It makes perfect sense for Tesla. The Gigafactory will be outside of Reno, along I- 80. Go four hours to the West, and you have the Tesla plant in Fremont, California.

So, logistically, they can build the batteries here. They`re going to be building this factory in conjunction with Panasonic (NYSE:PC), the only active lithium mine. And remember, they`re making lithium ion batteries, for the only active lithium mine in the United States is in Nevada, and there is a rail line there.

Let`s say they capture lightning in a bottle and they eventually want to ship out to Asia — well, that rail line goes to the port of Oakland.
So, logistically, this makes perfect sense in terms of what Tesla is trying to do, and, of course, Nevada is going to be come and step forward with plenty of incentives to make sure this is a good project.

GHARIB: Right. So, does it make sense for Nevada? How much is it going to cost that state? And is it money well-spent? What are you hearing?

LEBEAU: Well, the incentive package is going to be anywhere between
$400 million and $500 million. It still needs to be finalized by the state legislature. But I talk to the few lawmakers here and almost everybody says, look, we`ll eventually get it done.

You don`t have these many opportunities, Susie, to land a manufacturing plant that could bring 6,500 jobs. Is a half billion dollars a lot in incentives? You bet. But it`s not very often that you can bring
6,500 manufacturing jobs into one area and that`s why Nevada believes this is going to be money well-spent.

MATHISEN: So, Phil, this is a $5 billion investment, $5 billion.
That means you got to sell a lot of electric cars. What if the demand for those cars, those Teslas, never takes off? Will they consider selling those batteries to other vendors?

LEBEAU: Yes, yes and that`s the whole idea. These batteries are not strictly for Tesla. They will be for other electric vehicles. They will also be using the energy that they create or develop within this Gigafactory to sell to energy companies. So, there is a component of these batteries being used for energy.

So, yes, some are calling this a moon shot, but Tesla believes that there`s going to be plenty of demand there.

MATHISEN: Phil, thanks very much. Phil LeBeau from Nevada tonight.

GHARIB: And coming up on the program, it`s the time of year many fans can`t wait for, the kick off of football season. We`ll go inside to the big business of the NFL.

(MUSIC)

GHARIB: Google (NASDAQ:GOOG) is about to make a lot of parents very happy, after reaching a settlement with the Federal Trade Commission. It`s agreed to refund at least $19 million to settle charges that it unfairly billed parents for in-app purchases made by their children without an OK from mom or dad. Apparently, kids bought hundreds of dollars worth of goods while they were playing some popular mobile video games.

MATHISEN: And finally tonight, from video games to the gridiron, the
2014 NFL season kicks off tonight with a Super Bowl champion Seahawks hosting the Green Bay Packers in Seattle.

Julia Boorstin is there with a look at the biggest, most valuable entertainment property in American business.

(BEGIN VIDEOTAPE)

JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
Two hundred and five million people tuned into NFL games this past season, more than any other sports or entertainment by far. So, is TV facing more competition and advertisers more options? Broadcasters are increasingly looking to the NFL.

BRIAN ROLAPP, NFL EVP OF MEDIA: There is no other content that they can put on television now that will guarantee ratings like NFL Football.
And in this day and age, that`s very hard to do.

BOORSTIN: CBS (NYSE:CBS) snapping up the rights to eight Thursday night games for $275 million. To deliver the ratings it`s promised to advertisers and boost post-football programming, CBS (NYSE:CBS) is running its biggest ever promotional campaign and weaving NFL analysts into shows.
Look for a Boomer Eisison on “Blue Blood” and Phil Simms in a guest spot on “Elementary”.

(on camera): And NBC leveraging the fact that it`s airing the Super Bowl this year is selling more ads against its NFL games and securing rate hikes, growing the return on this investment of over a billion dollars as part of it nine-year NFL deal.

(voice-over): DirecTV is getting ready to pay for more the rights for its Sunday ticket, closing in on a deal for an annual price tag reported at
$1.4 billion.

The NFL is doing its part to drive viewers to a lot of games and boost ratings. The league`s new NFL Now app offers the largest library of NFL video, along with customized staff on favorite teams and players. Plus, access to the locker room and game highlights.

And all this technology and info isn`t just for fans at home but also those in stands across the country. Stadiums are investing to upgrade Wi- Fi and technology to access the latest stats, as well as custom maps to help with everything from bathroom lines and ordering concessions to instant replays. Looking to differentiate the stadium experience from the coach at home.

The NFL is working to keep fans and advertisers to feeling like their investment in football is paying off.

For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Seattle.

(END VIDEOTAPE)

MATHISEN: Another football season is here.

And that will do it for NIGHTLY BUSINESS REPORT for tonight. I`m Tyler Mahisen. Thanks for watching.

GHARIB: And we want to wish you a very happy birthday.

MATHISEN: Thank you very much.

GHARIB: I hope you have good plans for tonight.

MATHISEN: I do. We have a lovely evening planned. Thank you, all.

GHARIB: Have a great evening and we`ll see you back here tomorrow night.

END

Nightly Business Report transcripts and video are available on-line post broadcast at http://nbr.com. The program is transcribed by CQRC Transcriptions, LLC. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Nightly Business Report, or CNBC, Inc. Information presented on Nightly Business Report is not and should not be considered as investment advice. (c) 2014 CNBC, Inc.

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