Transcript: Monday, September 22, 2014

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

Apple (NASDAQ:AAPL) sells more phones than ever in its debut weekend. And
Alibaba is officially the world`s largest IPO. What these two events mean
for the market and investors.

may not come. What`s behind the slump in existing home sales? And what
does it say about the strength of the housing market?

MATHISEN: Commodities crush. From the oil patch to the metals pit,
why are commodity prices sinking?

All that and more tonight on NIGHTLY BUSINESS REPORT for Monday,
September 22nd.

GHARIB: Good evening, everyone.

Red arrows across the board for the major averages today. Not what
you`d expect after two record-shattering events that would normally give
Wall Street investors a big lift. In the first historic deal, Friday`s
initial public stock offering for Alibaba officially became the biggest IPO
in history, raising a total of $25 billion for the Chinese e-commerce

Now, that`s because initial demand for shares was so great with the
stock surging 38 percent in its debut, an additional 48 million options on
shares were sold by underwriters, putting Alibaba into the history books.

Now, the other record-breaking news came from Apple (NASDAQ:AAPL). It
sold more than 10 million iPhone 6 and iPhone 6-plus smartphones in just
the first three days of sales, its biggest product launch ever. With
demand for the phone exceeding expectation, how many more new smartphones
can Apple (NASDAQ:AAPL) sell? And is the bigger screen iPhone 6 the hit
that Apple (NASDAQ:AAPL) needed?

Josh Lipton reports.


Apple`s CEO Tim Cook says that the new iPhone 6 and iPhone 6-plus represent
the biggest advancement in the history of iPhones. A lot of consumers seem
to share in that excitement. Apple (NASDAQ:AAPL) says it sold 10 million
iPhone 6 and iPhone 6-plus phones through first week of sales.

That`s a new record for the company and even more impressive
considering that the phone hasn`t even gone on sale in China yet.

Apple (NASDAQ:AAPL) doesn`t detail its sales figures between iPhone 6
and 6 plus, but analysts say both will see aggressive demand.

look at a mix between the 6 and the 6-Plus of 50-50. That`s a huge impact
on what the margins and the gross profit dollars are, too.

So, Apple`s really turning all the right dials on this line.

LIPTON: The strong launch wasn`t too much of a surprise given how
robust demand appears for the devices. Munster says lines in New York City
and the Midwest were at least a third longer than last year. Apple
(NASDAQ:AAPL) fans, such as the team at RBC, expect the stock to move
higher from here as the company keeps selling a lot of its flagship

something close to 63 million iPhones in the December quarter. You should
get something very close to 41 million units for September sale. Between
September and December, a little over 100 million units is what we expect
Apple (NASDAQ:AAPL) to sell (ph).

LIPTON (on camera): There are also new products on the way, such as
the Apple (NASDAQ:AAPL) watch, which could excite consumers. But even
bulls Daryanani acknowledge the risk for investors after making a big move
the stock no longer looks as attractively valued he says, with the stock up
about 25 percent this year, the bulls do remain in charge, at least for

Josh Lipton, NIGHTLY BUSINESS REPORT, Silicon Valley.


MATHISEN: Well, the Alibaba IPO was historic, the biggest on record.
But it was so last week. And now, investors focus on a pipeline of IPOs to
come, including a handful this week.

Bob Pisani has more on the next big IPOs for investors to consider.


is out of the way, global markets are gearing up for a raft of IPOs.
There`s a dozen expected in China this week and many in London as well. In
fact, high end shoemaker Jimmy Choo may go public in London in the next few

In the U.S., there`s 12 IPOs expected this week alone, seeking to
raise almost $8 billion. That`s a lot of money to raise one week after the
biggest IPO in history. Alibaba raised over 20 billion.

The test for the broad IPO market this week will be a big bank,
Citizens (NYSE:CIA) Financial. At $3.3 billion, this is a big deal. In
fact, just the second biggest IPO of the year just a few days after the
biggest IPO ever.

There were other large deals as well. Gropo Aval, the biggest bank in
Colombia, is seeking to go public here on Wednesday. As well as Travelport
Worldwide, that`s a travel e-commerce company. There`s also Smart and
Final Store, a high-end food retailer.

One sector that hasn`t been seen in months are tech IPOs. The last
one was Mobileye, that`s an Israeli firm that specializes in collision
avoidance systems for autos. They debuted July 31st, priced at $25 and is
up 91 percent since then.

That`s why everybody is going to be watching Cyber Arc this week.
That`s an Israel cyber security company when it debuts this week. It`s
seeking to raise a small amount of money, about $70, but it`s the first
tech IPO in almost two months.

Now, if they can price in their expected range, that will be a sign
that Alibaba has not taken all the air out of the IPO market.

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


GHARIB: As we reported earlier in the program, the major averages
were all sharply lower today just one day after the Dow reached an all-time
closing high. Now, a lot of the blame is being directed at China after
China`s finance minister shot down any hope of new stimulus measures to
give its economy a boost on concerns about slowing growth.

On Wall Street today, the Dow fell 107 points snapping the streak of
five straight winning sessions. The NASDAQ had its worst session in nearly
two months, falling 52 points. And the S&P lost 16 points, closing again
below the key 2000 level.

MATHISEN: Mark Luschini joins us now to talk more about the markets
and what a record IPO and iPhone sales mean for equities. He`s chief
investment strategist at Janney Montgomery Scott.

Mark, welcome back to the program. Good to have you with us.

Thanks, Tyler.

MATHISEN: OK. The market took a bit of a breather today, worst day
in several weeks for a couple of the averages. But let`s talk first about
Alibaba. Do you look at the market reception to that as a positive? Does
it help equities in the long or midterm?

LUSCHINI: Well, it doesn`t hurt. I mean, there are some very unique
features to Alibaba that I think doesn`t speak necessarily broadly to the
IPO market given the fact that obviously in a space that`s very
interesting, exciting, e-commerce obviously tapping a Chinese consumer base
of 1.3 billion. In addition to that, it had a lot of fanfare associated
with its shear size.

But that said, the fact that it not only was praised but then
appreciated significantly above its initial IPO price I think is indicative
of generally investor appetite for good quality companies and opportunity
and fill an appetite for risk asset.

So, I would broaden out beyond that to say, yes, it is a litmus test
for the overall equity markets and market participants` interest in them
and from that standpoint, it`s a good sign.

GHARIB: And, Mark, what about Apple (NASDAQ:AAPL) selling 10 million
of those iPhones over the weekend? To what extent does that also impact
investor sentiment?

LUSCHINI: Well, it`s certainly a positive for Apple (NASDAQ:AAPL). I
don`t know that I would necessarily stretch that to include any kind of
indictment one or the other about market conditions because I think that
happens to be something a little bit more unique to Apple (NASDAQ:AAPL) and
the fact that, obviously, its upgrade was well-received, probably because
of the screen size but because of other features associated with it.

But nonetheless, it says that for the right company and right product
line, there`s a consumer base out there that`s still buying, which I think
is a good testament to general economic conditions if not so much the

MATHISEN: The market`s come a long way in this quarter. We`re almost
at the end of it. September has been reasonably good, I would say. But
now, there`s going to be a sort of proof in the pudding. Earnings are
going to come out.

And we`re going to have to answer the question, are stock prices
justified by the earnings. What do you think?

LUSCHINI: Agreed, Tyler. I mean, we have in our view full
evaluations in the equity market. Not egregiously priced, but certainly
not cheap. So, that places a lot of demand on earnings and earnings
growth. We had a great second quarter earnings profile about 8 percent or
9 percent year over year.

Expectations are that we`ll see more of the same in the second half of
this year. So, that leaves room for disappointment, clearly, on that
front. That said, we haven`t heard much in the way of preannouncements
that suggests that we`ll see those kind of disappointments coming through,
but nonetheless, economic conditions have to be supportive of the kind of
profit growth that ultimately supports current levels of equity prices, let
alone the expectation that they go higher from here.

GHARIB: And despite all these positive cross-currents that you`ve
been talking about, what do you think happens over these next couple of
months of this year? Will we see any kind of pullback or correction?
What`s your outlook for the rest of the year?

LUSCHINI: Well, Susie, you know, certainly, we like everybody, expect
to see a correction. We have now seen the Dow Jones industrial average go
the fourth longest period of time since it had a correction of 10 percent
or more since 1929. So, clearly we`re due.

That said, any kind of an election cycle that you look at suggests the
midyear elections are typically very good for the equity markets, while the
last 60 years post every midyear election, we`ve had a rally in the year
end that`s taken the market on average about 16 percent. So, it says by
the midyear elections, and so, if we get any corrective phase in advance of
it, use it opportunistically.

MATHISEN: All right. Mark, thank you very much.

LUSCHINI: Thanks, Tyler.

MATHISEN: Mark Luschini, Janney Montgomery Scott.

GHARIB: Two huge mergers, both with German companies buying here in
the U.S. German drug company Merck (NYSE:MRK) is paying $17 billion for
Sigma-Aldrich (NASDAQ:SIAL), this is the St. Louis-based chemical and lab
equipment firm. Sigma CEO said the deal was very a positive one for
shareholders and for his more than 9,000 employees.


KARL-LUDWIG KLEY, MERCK KGAA CEO: What this deal does, it puts two
companies together that have complementary product offering and the reach
overlaps. And that brings something that`s better for the customer and
brings additional value for the customer.

RAKESH SACHDEV, SIGMA-ALDRICH CORP, CEO: If you look at the benefits
of a combination like this and how they can enhance the value proposition
for the customers. And really that`s the thesis, because if strategically
you cannot enhance the value of the customers, you shouldn`t do the deal.


GHARIB: Shares of Sigma surging today, closing 33 percent higher.

MATHISEN: In the second deal, which was reported to be in the works
on Friday, the German industrial giant Siemens will pay more than $7
billion cash for the Houston-based dresser-rand. It`s the maker of
equipment used in oil drilling. Siemens is buying the company to beef up
its position in the booming U.S. shale and natural gas industries, shares
of dresser up more than 2 1/2 percent today.

GHARIB: And it looks like another big acquisition is in the works,
but it`s not a done deal just yet. EMC (NYSE:EMC), which makes data
storage devices for corporations, has reportedly been in talks with two
rivals, Dell (NASDAQ:DELL) and Hewlett-Packard (NYSE:HPQ), about a possible
merger. EMC (NYSE:EMC) is worth about $60 billion. So, any deal would be
the largest tech merger in history. Shares of EMC (NYSE:EMC) edged up just
a half a percent today.

MATHISEN: There`s a big change coming to the Federal Reserve.
Charles Plosser, who has been a president of the Philly Fed, since 2006,
will step down in March of next year. Plosser is known as the central
bank`s leading inflation hawk. True to his reputation in the past two Fed
policy meetings, Plosser voted against keeping short term interest rates,
at record level levels for much longer. He thinks easy money risks higher
prices later.

GHARIB: Meanwhile, the president the New York Federal Reserve is
hoping the U.S. economy starts getting hot. In an interview today, Bill
Dudley said that he hopes to see full employment and a hot economy so
inflation will rise and the Central Bank can begin to increase those
interest rates next year.

MATHISEN: The nation`s mortgage industry could use a little hit right
now. The Federal Reserve reported today that mortgage originations tumbled
11 percent last year after lending rates ticked a little bit higher and
there was a sharp drop in loan refinancings.

GHARIB: More signs of the choppy recovery in housing today. Sales of
existing homes took an unexpected turn for the worse in August, down nearly
2 percent, the first decline in five months. Realtors are blaming the drop
on a sharp pullback by investors. Could that really be the only cause?

Diana Olick has the story.



UNIDENTIFIED MALE: One hundred and sixty-five.

OLICK: They bought. They pushed prices higher.

But now, large scale investors in single-family homes are cutting off
the cash to the housing market.

investors are concerned with the potential rise in interest rate.

OLICK: Realtors blame a drop in investor purchases for the unexpected
drop in August home sales, down nearly 2 percent from July and down over 5
percent from a year ago.

But the drop in the share of investor purchases is far more steep,
just 12 percent to buyers in august, down from 28 percent four years ago.
This does not, however, mean investors are necessarily selling.

TOM BARRACK: In our rental business, we see much better results than
we ever imagined.

OLICK: Not when rents are skyrocketing, thanks to surging demand from

BARRACK: They look at life differently. They live differently.
Their investment expectations are dramatically different. And they`re not
looking at a house as being an investment vehicle any more.

OLICK (on camera): It`s not that millennials don`t aspire to home
ownership some day. It`s just that they`re getting married and having
children later in life and those are the two biggest drivers of home
ownership. They also have a lot more of these to choose from, single-
family rentals. And they don`t see the same stigma attached to renting
that previous generations did.

SHARI OLEFSON, REAL ESTATE ATTORNEY: I would expect that we`re going
to see higher levels of rentership for at least the next five or six years,
after which I hope that those levels decrease and people learn to get into
sustainable home ownership again.

OLICK: The exodus of investors could mean less competition for
younger buyers now, but it remains to be seen if more of those younger
buyers will be willing to play.

For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Washington.


MATHISEN: Still ahead, it`s not just oil that`s sliding. Gold and
silver also losing their shine. How low will commodity prices go?


MATHISEN: Securities and Exchange Commission is paying its largest
award ever to a whistleblower. The anonymous recipient who provided
information that led directly to an enforcement in undisclosed securities
case will receive $30 million. That sum is double the previous record
whistleblower payout and is the fourth award given to an informant living
in a foreign country.

GHARIB: Finance ministers and central bankers from the world`s 20
largest industrialized nations. This is the so-called G-20 met in
Australia this weekend. And the theme was how to grow their economies.
Nearly 1,000 measures were proposed aimed at boosting global growth by 1.8
percent by the year 2018. That`s a little bit lower than previous targets.

A common concern: the weak economy across Europe and the negative
impact that`s having on other economies.

MATHISEN: Well, something else weighing on the economy today. The
falling prices of some top commodities including oil, gold and silver,
which have been hit hard while equities have reached all-time highs in the
U.S. dollar have gotten stronger. So, just how low can these commodities

Jackie DeAngelis takes a look.


near $90 a barrel, gold bouncing around $1,200 and silver just under $18,
sitting at a four-year low. Why the commodities crush when equities have
been rallying? In oil, it`s all about supply.

JEFF GROSSMAN, BRG BROKERAGE: Right now, energy is going down on its
own weight really. We had a market that had really overshot any sort of
real expectations. Anything above about $105 was really in excess. It was
that geopolitical scare that came into play. And really now, just going by
the basic supply and demand, which there is more than ample inventories
right now.

DEANGELIS: And it looks like they`re poised to go even lower,
especially as geopolitical issues are subsiding. Conflict between Russia
and Ukraine tapering and more confidence that Iraq can keep ISIS at bay.

GROSSMAN: I would have to say in the next 6 to 8 weeks, we could see
ourselves certainly below $90, maybe as low as about 88 1/2.

DEANGELIS: The drop in oil prices has been good for consumers and the
economy. The Lundberg Survey says that gas prices have dropped 9 cents
over the last two weeks, 34 cents in the past three months, bringing the
national average per gallon of regular to $3.37.

Now, Deutsche Bank says for every penny drop in gas prices, it`s
roughly a billion dollars. That may be money that`s not saved and spent

In the metal pits, it`s all about the stronger dollar and interest

THOMAS VITIELLO: Everybody is concerned about the rate hikes and
that`s kryptonite for gold. I mean, basically real interest rates that
drives the price in gold.

DEANGELIS: Also, due to inflation and the lack of safe haven buying
both keeping gold traders tentative.

VITIELLO: The only issue is that maybe down the road, if you do see
some inflation and the Fed has to really act, that could get a little bit
messy because they`re not going to be able to squash the economy the way
maybe they did in the `70s with Volcker.

DEANGELIS: But keep in mind, commodity prices tend to move in cycles.
Seasonal factors could serve as a support to oil and gold could a bounce if
Fed policy changes or if conflicts abroad heat up.



GHARIB: Clorox (NYSE:CLX) closed at a record high after announcing
it`s shutting down its operations in Venezuela. And that`s where we begin
tonight`s “Market Focus”.

The maker of home cleaning products said its business there is no
longer viable because of the restrictions imposed by the country`s
government. For nearly three years, the Venezuelan government required the
company to freeze prices, which forced it to sell products at a loss. The
stock jumped more than 7 percent today to $97.23.

Shares of Tekmira also rallying in today`s session. The drug maker
got the OK from the Food and Drug Administration and also Canadian
regulators, for the emergency use of its Ebola treatment in patients who
have confirmed or suspected infections from the virus. The stock surged 17
percent to $23.61.

Shares of AutoZone (NYSE:AZO) went the other way after the auto parts
retailer reported weaker than expected fourth quarter revenue. This comes
as the strengthening economy has encouraged consumers to buy new cars
instead of fixing up old ones. That sent shares down 4 percent to $505.38.

MATHISEN: Blackberry is rolling out a new smartphone and it is
cheaper than the new iPhone. The company`s Passport phone goes on sale
Wednesday. It will retail for $599 in the U.S. That`s without a contract.
Now, Apple`s new iPhone 6 has a sticker price, no contract, of about 650
bucks. Shares of Blackberry up a little bit today to $10.93.

Shares of RadioShack popped after the struggling retailer said it is
in talks with a major vendor in order to avoid bankruptcy. Earlier this
month, we told you that RadioShack said it was running out of cash and
could be forced to seek bankruptcy protection if it can`t find other ways
to shore up finances.

Now, after that early spurt, the stock finished unchanged at about the
price of a connector, 91 cents.

After the bell, Ascena retail posted fourth quarter earnings that
missed estimates. The company, which operates Lane Bryant and Dress Barn,
also gave an outlook for fiscal 2015 that was below consensus. After
hours, the stock fell initially. Look at that chart right there. During
the regular session shares fell about 2 percent to $16.53.

GHARIB: And Tesco (NASDAQ:TESO), this is the world`s third biggest
retailer is slashing its profit outlook. The British food chain says
accounting mistakes in supplier contract means it has to restate past
results, suspend some top executives and cut its profit forecast for the
third time in just the last two months. Shares tumbled to an 11-year low
on London`s stock exchange today.

MATHISEN: Closer to home, hundreds of protesters marched on Wall
Street today for a second day of protest against climate change. Today`s
flood Wall Street sit-in and demonstration in New York City`s financial
district was aimed at getting corporate America to rethink its use of
fossil fuels and the impact that they have on the climate.

The protests may have already had an effect on a family that made
millions from oil. The Rockefeller brothers fund run by the heirs of the
19th century oil baron John D. Rockefeller plans on divesting itself of all
fossil-fuel related stocks, citing concerns about climate change.

GHARIB: And coming up on NIGHTLY BUSINESS REPORT, 10 million new
iPhones were sold over the weekend, as we told you. But before you use any
smartphone, take note — fake cell towers are popping up and could
intercept your calls. We have that story, next.


GHARIB: The death toll in GM`s faulty ignition switch crisis keeps
growing. Today, the automaker`s compensation fund said that fatality
claims rose to 21 and they could go higher. The number of overall claims
for deaths and injuries in crashes related to the defective parts rose to
675. That`s up from 445 just last week.

MATHISEN: Meantime, there is a new recall to tell you about involving
some General Motors (NYSE:GM) cars. GM is now recalling 223,000 late-model
Cadillac STX and Chevy Impalas worldwide for a fire risk related to the
parking brake. GM says no crashes or injuries have been reported as a
result of the problem.

GHARIB: Some staggering numbers to tell you about on just how much
airlines are raking in from all those fees they`re charging passengers.
The Department of Transportation reports that airlines collected more than
$700 million in reservation change fees. That`s the most on record, along
with 900 million in baggage fees. That`s just for the second quarter of
this year. Net profits that same quarter: $3.5 billion.

MATHISEN: Most of us think that our private phone calls are just that
— private. But in the nation`s capital, lately, there have been reports
of clandestine phone interceptors popping up. So, who`s snooping and why?

Eamon Javers looks for answers.


known for years that it`s possible to build a device that essentially
pretends to be a cell phone tower, sucking down all the communications in
the nearby area. Now, technology security company ESD America says it can
tell when your cell phone is being intercepted.

We went on the road with them here in Washington, D.C. to see if we
could find those cell phone interceptors in action.

So, you think somebody`s operating as cell phone interceptor right
here on Pennsylvania Avenue?

AARON TURNER, ESD AMERICA CONSULTANT: Yes, we got definite proof that
someone is here on this area operating some sort of intercept device,
whether that`s just tracking people or listening to calls, we can`t say.

JAVERS: Who is doing it?

TURNER: Who knows?

JAVERS: No idea?


JAVERS: Could it be the U.S. government?

TURNER: Could be.

JAVERS (voice-over): ESD`s device called the cryptophone helps users
tell when they`re being intercepted. And the company says it found as many
as 15 cell phone interceptors operating in Washington. The locations
include some of the most sensitive places in Washington — the Capitol, the
Russian embassy and even near the White House.

ESD says it doesn`t know who`s operating the interceptors. It could
be foreign intelligence, political opposition researchers or even U.S.
national security officials. But they said they suspect corporate

TURNER: They`re looking for someone who has some sort of information.

JAVERS (on camera): Right on this block, there are a lot of big
powerful law firms which are involved in all kinds extensive corporate
disputes. That sort of thing.

TURNER: Wouldn`t it be interesting to know what the background
litigation strategy would be for your opponent and know how to map that,
you know, what their filing strategy is going to be. There`s also several
corporate board proceedings that could be going on in the area.

JAVERS: One thing we should point out here is that this company ESD
America has a invested interest. They`re selling these cryptophones for
more than $3,000 each. But the hacking experts we talked to said that
their technical approach anyway is the right way to go.

One thing we do know is that the FEC is so concerned about this issue
of cell phone interceptors that they convened a task force on it back in



MATHISEN: And finally tonight, a new kind of record on Broadway.
Disney`s long running musical “The Lion King”, based on the animated film
of the same name, has now taken in $6.2 billion at the box office
worldwide. That is the biggest global box office take of any film, play,
book, album or any media released, period, in entertainment history. It`s
good to be the king.

GHARIB: Sure is.


GHARIB: Six billion. That`s an amazing number.

And that`s NIGHTLY BUSINESS REPORT for tonight. I`m Susie Gharib.
Thanks so much for joining us.

MATHISEN: Hakuna matata, everybody.

I`m Tyler Mathisen. Have a great evening. We`ll see you here
tomorrow night.


Nightly Business Report transcripts and video are available on-line post
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