Transcript: Thursday, September 25, 2014

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

The major averages post their steepest drop in months, making today the
fourth triple-digit move in the Dow this week. Why are big moves back in
the market? And can we expect more?

estimates. That`s what Nike (NYSE:NKE) did with a blowout earnings report,
sending shares initially higher in late trading. Potentially, potentially
changing the tone for tomorrow.

GHARIB: Another recall, this time Chrysler. But the reason is a
familiar one: ignition switches.

We have all that and more tonight on NIGHTLY BUSINESS REPORT for this
Thursday, September 25th.

MATHISEN: Good evening, everyone, and welcome.

Well, if you had gotten used to relatively modest stock market moves
this year, this week has delivered quite a jolt. Call it a double dose of
Red Bull, if you want, or maybe not, the bulls not in charge today, the
bears were. And technology and financial services shares led to major
market barometers down. It was their worst day collectively since late
July and the fourth day in a row for triple digit moves for the Dow, three
of them down were dogs.

Worries about global growth, geopolitical tensions, and some soggy
economic data set the tone, orders for so-called durable goods tumbled more
than 18 percent in August, biggest monthly decline ever, that`s mostly on
the demand pullback for new aircraft. Also, the first time for jobless
claims rose 12,000 even though they`re still sitting near seven-year lows.

All 30 Dow stocks ended lower as the index dipped 264 points, closing
back below 17,000. The tech-heavy NASDAQ down 88, nearly 2 percent, and the
S&P 500 dropped 32. Bonds rallied as investors took cover in treasuries,
yields on the tenure fell to a two-week low.

Bob Pisani with a look at today`s drop and why big moves are suddenly
back on Wall Street.


was the fourth day of triple digit moves in the Dow. Slowing growth around
the world was an issue for the markets earlier in the week. But today, a
couple of additional issues surfaced. First, Richard Fisher, the head of
the Dallas Fed, said that before the markets opened, that the Fed may start
raising rates in the spring of 2015. That`s earlier than most expected.

Now, Mr. Fisher is a hawk. He`s made similar comments before. But
traders are well aware that the markets have struggled when the Fed ended
its stimulus program in prior years. Mr. Fisher took particular aim at
high yield markets, saying he was seeing extreme risk taking. Not
surprisingly high yield exchanged traded funds, dropped, some of them over
a half of a percent. That`s big decline for bond funds, on very heavy

Second, there were vague reports that the Russians may enact a law to
seize foreign assets on Russian territory, likely in response to Western
sanctions. Why is this important? Because Europe is reportedly in a
period of no growth, despite keeping rates low. Any further escalation of
that conflict could throw Europe back into a recession. That`s the

The German market weakened when that story first came out prior to the
U.S. open and ended down 1.6 percent.

From there, it was risk off in the U.S. markets. Emerging markets
ETFs were down over 2 percent, momentum stocks that are heavily traded like
biotech were down 2 percent or 3 percent. While volume at “The New York
Times (NYSE:NYT)” was not particularly strong, there was heavy volume in
the futures markets, suggesting that there were a few large sellers today.

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


GHARIB: And small cap stocks have also been hit hard recently. The
small cap index Russell 2000 has fallen by 7 percent since July when it hit
its peak this year.

So, why are investors turning away from small cap stocks and does the
recent weakness mean there are hidden opportunities?

Morgan Brennan takes a look.


Small cap stocks have under-performed the broader market, down 5 percent
alone this month. But experts say the recent weakness in the Russell 2000,
which includes those small companies, could present a buying opportunity.

performed for a while now so this is the first time they have under-
performed in many, many years. So, I think that`s got a little bit of
people feeling a little uneasy about that. But the earnings are there and
they`re not excessive valuations in small cap, I don`t believe. So, we`re
very — we`re very comfortable buying them down in this level.

BRENNAN: Hodges, who manages a small cap fund, likes Kapstone Papers,
which makes cardboard boxes. Also, Athlon Energy, an oil and gas producer
in Texas Permian basin.

HODGES: We look for companies with great management, that have a high
insider ownership, you know? We want the team to be incentivized not by
pay but by stock performance and stock price. We look for companies that
have maybe a little different way of doing things then the norm.

BRENNAN: Analysts say Goldman Sachs (NYSE:GS) say they look small cap
stocks with strong free cash flow and solid earnings momentum, names like
SunCoke Energy, which Goldman predicts could rise 14 percent in the coming
months. And Darling Ingredients, a stock that could surge 34 percent.

Barclays` analysts say they`re focusing on stocks values rather than
just growth. They like energy companies, names like Eclipse Resources,
Jones Energy and RSP Permian, all stocks that Barclays believes could rise
by double digit percentages.

BRENNAN: Still, there are many reasons to remain cautious. Small
caps can be very volatile. Most of the earnings derive from domestic
incentives. So, they`re much more sensitive to rising interest rates,
which are expected as the Federal Reserve begins to tighten its monetary



MATHISEN: Russ Koesterich joins us now to talk more about what these
big market gyrations mean for your money. He is the global chief
investment strategist at Blackrock.

Russ, welcome, good to have you with us.

RUSS KOESTERICH, BLACKROCK: Thanks for having me back.

MATHISEN: I don`t mean to put lipstick on the pig of a day, but it
occurs to me on a day like this, with a violent move that individual
investors have an advantage. The advantage is that they`re not graded
every day, they`re not even graded every quarter. They don`t have to do

KOESTERICH: I think that`s right. And honestly, in the near term we
might see additional weakness. The market is adjusting to an environment
in which the Fed will be less accommodative. But I think, frankly, the
longer term fundamentals are in place. And if you`re not a federal manager
you`re not quarter to quarter and if you`re comfortable to the stocks you
own, well, the best thing to do might be simply to sit tight and look for
some bargains which this market may present.

GHARIB: But, Russell, why are these big moves back? You know, one
day up by triple digits, another day down by triple digits, why are they
back and are there more to come?

KOESTERICH: I think the answer is yes. There are more to come, which
is unfortunate. I think the market will come with more bumps along the
way. Really what`s changed is we`re getting closer to the point when the
Federal Reserve will start to move monetary accommodation, and that`s very
big deal because for the last couple of years, we have had unusually quiet
market, very little volatility. A large part of that, monetary conditions,
credit conditions have been very easy.

As that starts to normalize, volatility will normalize. It doesn`t
mean we`re going back to 2008. But it does suggest a rockier, bumpier road
that we`ve been used to the last couple of years.

MATHISEN: So, subterranean tremors are starting to show their affects
at the surface here. Was there anything really today that caused the Dow
to go down 260 points?

KOESTERICH: Honestly, I don`t think there was. You know, I`ve seen
all the headlines in Apple (NASDAQ:AAPL) and the Russians. I think the
truth of the matter is, it`s been a very good run. It was a lower volume
day because of the Jewish holiday.

And the reality is again, we`re getting to a point where if monetary
conditions are changing, this becomes a little bit more normal. We used to
get 200-point days on the Dow. It wasn`t that unusual. What is unusual is
we`ve gone so long without them.

GHARIB: You know, and we`ve gotten just used to one new high after
another new high, and just small moves going up. That is why I think a lot
of people wonder if we`re in a new phase. And so a lot of people today
were talking about maybe the correction is coming, it has been a long time
since we have had a correction. What would a correction look like?

KOESTERICH: Well, it depends where you`re sitting. And some places
have already seen that. So, we`re speaking about small caps a moment ago.
Small caps are down 8 percent. They`re close to correction territory.

And I think that`s going to be an important element of this. All the
market won`t all be doing the same thing at the same time. Parts of the
market like the momentum stocks, biotech, some of the small cap names that
have really benefitted from the momentum. Those are the parts I think you
will see experience the most drawdown. So, this is an opportunity for
investors to make a difference and think what makes a relative value in
this market. And I think there are some areas, U.S. large cap, stocks in
Asia, that are parts of the market that were not screaming bargains, still
looking reasonable compared to the broader equity market.

MATHISEN: All right, Russ. Thank you very much. Good sensible
conversation there. Russ Koesterich with Blackrock.

KOESTERICH: Thank you.

GHARIB: After the market closed, some upbeat news from Dow component,
Nike (NYSE:NKE). The world`s largest sports wear maker posted a strong
quarterly earnings, thanks to this summer`s world cup soccer tournament in
Brazil. Excluding special items, Nike (NYSE:NKE) earned a dollar nine a
share. That was 21 cents more than what Wall Street analysts were
expecting. Revenues also beat estimates, about $8 billion to the quarter,
thanks to a 15-percent jump in sales of foot wear and apparel.

Investors bought up Nike (NYSE:NKE) shares after the company said it
has a strong back log of orders. The stock jumped as much as 6 percent in
after-hours trading.

Dominic Chu joins us now with more on Nike`s results.

I know you`ve had a little bit of time now to look over the numbers.
What sort of stood out most for you?

off the conversation call that`s still ongoing right now. But here`s what
the key takeaway. They have a lot of growth in places where they didn`t
have a lot of growth before. Now, we`re talking about developed markets,
Central and Western Europe, North America, all the futures came in better
than the analysts` expectations.

So, that tells you, that`s an indication of future business for them.
If those orders come in better that expected, that means they can expect
better orders from places like North America, Central and Western Europe,
where we saw a little bit of a decline in terms of estimates, in terms of
the analysts estimates. We didn`t see as much strength out of Japan,
China, or the emerging markets.

But what they did say was that their women`s lines continued to
perform that much better than men`s. That`s where the growth is coming
from. It`s one of the reasons why so many of these companies, even the
competitors are making real strides and reaching out to that part of the
population, because that`s where the big money is right now.

MATHISEN: And we saw within the past couple of weeks, Under Armour
(NYSE:UA) doing the same thing.

CHU: Hugely.

MATHISEN: Very aggressive into the women`s market, an area I know you
care about, golf.

CHU: I do. Yes.

MATHISEN: What are they doing there, do you know?

CHU: Here`s the interesting part about golf. It`s a formidable
component within the golf world. However, it`s a very small portion of
Nike`s overall business. So, they are seeing strength. They`re on the
verge of a new product refresh cycle at Nike (NYSE:NKE) Golf. But for
right now, the real strength, the one key takeaway is the strength in
women`s and youth apparel. That`s going to be big for them.

GHARIB: All right. Dom, thanks so much.

MATHISEN: A very big auto recall you should know about tonight and it
doesn`t involve General Motors (NYSE:GM).

Chrysler is recalling 350,000 vehicles from the 2008 model year
because of an ignition switch defect that could cause the key to get stuck
or inadvertently move from one position to another. The affected vehicles
include the Dodge Charger and Magnum, the Chrysler 300 and the Jeep Grand
Cherokee (NASDAQ:CHKE) and the Commander.

Thankfully, the company said it knows of no injuries or deaths related
to the issue, and only one minor crash.

With American auto sales roaring to near record levels this year, the
plants that are building those cars and trucks and SUVs are expanding

Today, both Ford and Chrysler said they will increase the number of
vehicles coming out of plants in Michigan and Missouri.

Phil LeBeau has more on America`s automaker revving up production.


can`t build them fast enough at the Ford plant outside Kansas City. So,
the company is hiring another 1,200 workers, and adding a second shift, as
it moves quickly to keep up with demand for Transit Connect Vans.

out more production in some of our plants, especially our truck and SUV
plants, what the demand is. We feel comfortable we`d be able to support a
higher growth, if there is such a thing in the auto industry.

LEBEAU: They`re making a similar move at the plant in Ram plant in
Warren, Michigan. Ram trucks are so hot, the company is increasing
production, even though it currently builds a new Ram truck every single
minute the plant is open.

This auto boom has plant managers scrambling to crank out new
vehicles. In fact, almost a third of all auto plants in the U.S. are
running three shifts a day — a pace that has some wondering if America`s
appetite for new cars and trucks has hit its limits.

JACK NERAD, KELLEY BLUE BOOK: I think we should be cautious about
where sales are now, because it doesn`t indicate an overall growth of the
economy. And a lot of the sales are built on very inexpensive loans, and
long loans.

LEBEAU: The average auto loan is now 5.5 years long, but an
increasing number of borrowers are taking out seven and eight-year loans,
all to keep monthly payments as low as possible. That`s critical since
prices for new vehicles are close to an all-time high.

HINRICHS: We believe there are still upsides, especially on SUVs and
trucks, because people are demanding more content, more capability. We`re
going to watch it very carefully. And, of course, as we say, as interest
rates rise, that`d become a bigger part of the equation. But for now,
customers are willing to pay for the great price they`re getting.

LEBEAU: If auto sales continue at this pace, the U.S. could see
record sales next year, and it may also force automakers to once again push
their plants to expand and crank out even more vehicles.



GHARIB: More on autos — a vote of confidence for General Motors
(NYSE:GM) today. Standard and Poor`s raised the rating of the automaker`s
corporate get to investment grade. It`s another step in GM`s recovery from
its 2009 bankruptcy.

But its ignition switch crisis is far from over. Today, the first two
families of victims killed in GM cars that had faulty ignition switches
have accepted cash offers to the GM victims compensation fund. The
families of the two teenage girls killed in the crash of the defective
Chevy Cobalt in 2006 did not disclose the amount of the offer.

And still ahead on the program, could the country`s strong supply of
oil easily turn into a mega glut, sending prices much lower? We have
details of a new report.


MATHISEN: Well, the drones are coming but this time, Federal Aviation
Authorities will be ready for them. Just today, the FAA announced that six
TV and movie production companies have been granted permission to use the
small remote controlled outdoor aircraft to shoot outdoor scenes on close
sets in order to maintain safety for all flights big and small.

The FAA will require safety inspections before each drone flight and
no flights will be permitted at night, for now.

GHARIB: Eric Holder, the U.S. attorney general, is stepping down.
The nation`s top law enforcement official, one of President Obama`s longest
serving appointees and the nation`s first black chief prosecutor, will
remain in office until the successor is confirmed. He may be best known
for the multi-billion dollar settlements he reached with some of the
nation`s biggest banks over fraud allegations in connection with the
financial crisis, even though no major Wall Street firm or executive has
ever been criminally charged.

MATHISEN: Oil was mixed today. U.S. crude oil fell 27 cents a barrel
on choppy trading on NYMEX, while Brent was up just slightly. Meantime, a
new report out today suggests that U.S. crude prices could $30 below
international prices unless the nation begins exporting some of the product
it`s producing.

Jackie DeAngelis has more.


boom is on. U.S. production increasing to 9.5 billion barrels per day
earlier this month, outpacing forecast, and up almost 30 percent from last
year according to the U.S. Energy (NASDAQ:USEG) Information Administration.

And analysts think that these production numbers have room to run.
Estimates suggest that the U.S. could be one of the world`s top oil
producers by 2015, boosting its production to the highest levels since

But a new study out by Wood Mackenzie suggests that this strong supply
could turn into a supply glut. That is if the U.S. doesn`t start to export
some of its product. If it does not export, we could see the difference
between Brent and West Texas Intermediate at about $30. Consider the fact
that right now, that`s spread is about four.

validity, but the U.S. is nowhere near energy independence. While we are
at record levels for producing oil, we still import about 7 million to 8
million barrels a day. And until we get a closer number or our number is
closer to the 17 million barrels a day that we use, I can`t see us
exporting at this point.

DEANGELIS: There has been a lot of talk in Washington recently about
lifting the four decade old ban on the oil exports, implemented in the wake
of the Arab oil embargo of 1973. Lobbyists say that the ban is antiquated
and exporting could add another dimension to the U.S. energy market.

GRISANTI: If the U.S. decides to export oil, you`ll see the demand
rise because the demand for WTI, what we produce here will be greater. If
you look at the price differential between WTI and Brent, Brent is higher
at this point. So, naturally, the market participants will go for the
lower priced crude oil, which is WTI.

DEANGELIS: But for the moment, we wait and watch, U.S. crude prices
down 13 percent in the last three months, have put money into our pockets.
Retail gas prices 10 cents lower than they were at this time last year.



GHARIB: When it comes to IPOs, it looks like the second time the
charm for TravelPort, and that`s where we begin tonight`s “Market Focus”.

Shares of the travel services company were higher in their debut on
the NYC today. Four years ago, the company attempted a London IPO, but it
withdrew because it lacked investor support. Now, BlackStone has backed
the company, pricing its shares above the expected range at $16 a piece.

The CEO says the company will deliver for shareholders.


GORDON WILSON, TRAVELPORT CEO: We have no debt due until 2021.
Obviously, because of all the deliveries (ph) we`ve done, our interest
payments have gone down by about half. And we`re a very cash-generated
business, so we anticipate we can be able to deliver (ph) further now with
the public and also, we`re going to pay dividends to our shareholders as a
testament of our confidence in our business going forward.


GHARIB: Shares rose 2 1/2 percent to $16.40.

Scholastic (NASDAQ:SCHL) posted a wider loss than expected as the
“Harry Potter” publisher had disappointing revenue growth and higher
expenses. The company usually reports a loss for its first quarter since
schools here in the U.S. are out of session, but its results were well
below estimates. The stock dropped 5 1/2 percent to $32 and change.

GameStop is almost doubling its numbers of holiday workers as it
prepares for strong demand for new video games and the new iPhone. All
together, it will add 25,000 employees for the seasonal rush. Shares were
off 2 1/2 percent, though, to $42.06.

MATHISEN: Lockheed Martin (NYSE:LMT) plans to buy back another $2
billion in stock and it also hiked its quarterly dividend. The defense
contractor`s new dividend is up to $1.50 a share and is payable in
December. Still, shares were off a little bit. They finished at $177.44.

Shares of Swift Transportation were up on this down day. The trucking
company reaffirmed higher third-quarter earnings guidance with its
president and COO citing improved driver turnover and record driver
recruitment. The stock popped 9 1/2 percent to $20.98.

And shares of Skechers bounced back today after the company released
an upbeat report on the state of its business. This was in response to a
research note out yesterday that questioned the shoemaker`s sales and
tripped up its shares. Today, shares were moving up 3 percent to $54.05.

GHARIB: A warning today from cyber experts about a new computer bug
that`s posing a serious risk to computers using the Linux and Apple`s Mac
operation system. It`s called “Bash”, and it`s an even bigger threat than
the “Hearbleed” bug that infected thousands of Web sites this spring,
because Bash can allow hackers to gain remote control over your computer or
mobile device, installing spyware or running commands.

MATHISEN: Warren Buffet may be the world`s best known investor, but
that doesn`t mean he always gets things right. Buffett`s Berkshire
Hathaway (NYSE:BRK.A) holding company has lost a bundle on British
supermarket giant Tesco (NASDAQ:TESO) over the past year, about $700
million in losses. The chain`s stock lost about 43 percent of its value
this year after suspending four top execs and calling in auditors after
finding some accounting irregularities.

And coming up, sometimes a shift in strategy can save a small
business. We`ll meet one owner who took a risk, made a change and her
decision may be a lesson for others.

The final part of Sharon Epperson`s “Small Business Matters” is next.


GHARIB: U.S. Bank has been ordered to pay a huge fine and restitution
to settle allegations that it charged customers for theft protection and
credit monitoring services that they never received. As part of the deal
with the Consumer Financial Protection Bureau and the comptroller of the
currency, the bank, a unit of U.S. Bank Corp, will pay $9 million in fines,
$48 million back to borrowers.

MATHISEN: Sometimes a change in direction can save a small business
or give a big boost to an already successful one. In the final segment of
our three-part series “Small Business Matters”, Sharon Epperson reports
that it not only takes passion, but sometimes a wise business pivot to
reach wide-scale success.


Meet Alexa Von Tobel.

financial planner who`s extremely passionate about financial advice.

EPPERSON: Von Tobel is founder and CEO of LearnVest, a company that
started out offering financial advice to women.

VON TOBEL: I launched LearnVest a few years ago out of Harvard
Business School, in the heart of the recession and I have big dream of
making financial planning a mass consumer product, as acceptable as a gym
membership. And I dropped out and set out to build it.

EPPERSON: She was her own inspiration.

VON TOBEL: I was client number one. I really truly wise —

mission was, I`m going to help people like me really understand everything
about their money, about their portfolio, about retirement, about how to
save money.

EPPERSON (on camera): Financial advice has been seen in many ways as
a luxury product, unavailable to many Americans. LearnVest goal, Von Tobel
says, is to provide financial planning to the masses, dispensing financial
advice at affordable prices.

(voice-over): The company`s business model of advice on the cheap was
well-received by female clients it was targeting. But that`s not all.
LearnVest also attracted the eyes of investors.

DUDELL: When you start to take investor money, they have had five
rounds, raised over $72 million. You have to think about growth and you
have to think about scalability. And the fact is, you have to think a
little bit bigger.

EPPERSON: Von Tobel did just that, in 2012, she pivoted, changing her
business by expanding LearnVest target audience, to include not only women
but a broader audience of consumer seeking low-cost financial advice.

DUDELL: That`s a huge audience. They`re offering the wide sweep of
tools that allow people who may not be making that much money to actually
see what happened with their money, see where it is going and plan ahead.
That is a big part of it, is that most financial planning is done with the
1 percent of this country.

VON TOBEL: Or going after the 99 percent, the 98.6 percent, if you
will, of America that doesn`t get access to great advice.

EPPERSON: Creating a new product that may become a new model for the
way financial planning is done.



MATHISEN: To read more about the challenges small businesses face and
what some owners are doing to overcome them head to our Web site,

GHARIB: And finally tonight, Halloween is more than a month away.
But consumers are already gearing up for it. And they`re spending more
money this year. The natural retail federation predicts Americans will
spend more than $7 billion this Halloween. That`s up 3 percent from a year
ago. And that works out to an average of about $77 per person.

What are they buying? Candy, costumes, decorations and parties, many
of them for adults up — you know, the number of people going to Halloween
parties up 30 percent.

MATHISEN: Is that right?

GHARIB: Are you going to go to Halloween parties?

MATHISEN: Oh, we have a big Halloween party at our house, yes, for

GHARIB: Oh, good. Invite me.

That`s NIGHTLY BUSINESS REPORT for tonight. I`m Susie Gharib. Thanks
for watching.

MATHISEN: And I`m Tyler Mathisen. You all come. Have a great
evening, everybody. We`ll see you back here tomorrow.


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

This entry was posted in Transcripts. Bookmark the permalink.

Leave a Reply