Transcript: Wednesday, October 22, 2014

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


Just when you thought it might be OK to step into the market, a fresh worry
appears — a shooting in the heart of the Canadian capital. A soldier
dead, a gunman killed in the parliament there. That, plus plunging oil
prices send stocks tumbling.

disappointment. Dow component AT&T (NYSE:T) reports weaker-than-expected
earnings after the closing bell and warns that revenue won`t be as strong
as first thought.

MATHISEN: Recall widens. And now, the Manhattan district attorney is
reportedly investigating the company that made those faulty airbags, as the
auto industry deals with another serious and massive safety recall.

All that and more tonight on NIGHTLY BUSINESS REPORT for Wednesday,
October 22nd.

GHARIB: Good evening, everyone.

Two powerful forces combined today to make already jittery investors
even more nervous, sparking a big selloff in the markets. One trigger:
another sharp drop in price of oil. The other, an act of brutality that
rattled investors in two countries, and around the globe — a Canadian
soldier was gunned down outside of a war memorial in that country`s capital

That was followed by heavy gunfire inside Canada`s parliament, by what
appears to be a lone gunman was shot and killed by police. The motive
unknown. The identity of the shooter, unclear.

MATHISEN: What was clear, especially after the U.S. embassy was
locked down, was that investors were rattled, volatility spiked, and early
market gains were wiped out, sending stocks tumbling.

At the close, the Dow was down 153 points, the NASDAQ ended 36 points
lower, and just a day after its biggest gain of the year, the S&P 500 fell

After remaining stable for a few days, oil prices fell sharply again
today, down nearly $2 a barrel to close at the lowest level since June of

Bob Pisani has more on today`s selloff in stocks and oil from the
floor of the New York Stock Exchange.


day mixed but began moving lower about noon Eastern Time on two
developments. First, the Canadian shooting incident was a source of
considerable confusion midday as it wasn`t clear how many gunmen were
involved or what the motives were. But lone wolf-type attacks are a source
of concern and can affect market psychology.

average life by taking shots at people and, you know, running down with
cars. That re-introduces the risk with the market.

PISANI: A second development also weighed on the markets midday, oil
has renewed its decline, which was a significant part of the reason the
markets dropped last week. The catalyst today occurred at 10:30 a.m.
Eastern Time when the Department of Energy reported a big build in oil

West Texas Intermediate crude immediately dropped almost a dollar,
although it recovered its losses in the next hour, it then dropped again
around Noon Eastern Time.

That drop occurred independently of the Canadian headlines coming out
at the same time and it put additional pressure on the market with energy
stocks leading the market down.

The problem is simple — there is just too much oil in the world.
Although oil dropping is good news for the U.S. economy, the decline in oil
has become a proxy for deflation and slowing global demand in general. So,
it`s been viewed with some concern.

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


GHARIB: Well, it wasn`t just today, investors have been nervous for
weeks with new figures showing that they pulled out nearly $6 billion from
stock funds in the week ending October 15th as the market skidded on
worries about slowing global growth and fears about the spread of Ebola.
The Investment Company Institute also said bond funds saw a pullout of $4.5
billion during the same week.

MATHISEN: Here to provide some perspective on today`s stock market
action is Nick Colas. He`s chief market strategist with Convergex.

Nick, the market was higher earlier in the day, but was it just ready
to pullback or was these two instances that we talked about, oil and the
shooting in Canada, a real trigger for something?

NICK COLAS, CONVERGEX: It absolutely was a day that should have been
very quiet. We`ve had three very strong days after that really strong
pullback last week. So, as we began the day, it looked like we should be
fairly stable ands it was that news out of Canada and then the drop in oil
that really send stocks down towards the end of the day. But it should
have been a quiet day.

GHARIB: You know, Nick, we hear from a lot of people talking —
market strategists talking about the markets in terms of the fundamentals.
And then we have others who talk a lot about the psychology of the markets,
and the fear factor. It seems that investors are much more sensitive these
days to headlines rather than the fundamentals. Is that how you see it?

COLAS: Yes, absolutely. There`s two reasons for that, that I think
both equally important. The first is the Federal Reserve is ending its QE
program later this month, and that will give investors something to worry
about as so far as what the pace of the recovery in the U.S. going to be
without that stimulus.

The second point is that fear tends to weigh with investors in the way
that you`ve seen over the course of the past couple of weeks. It isn`t a
problem until it is, and then it`s a pretty big one. Fear is a very
powerful motivating factor in the markets and we`re seeing that right now.

MATHISEN: It was a week ago today that we were all talking about a
correction when the market was down 400 and some odd points. The Dow was
at least.

Do you think now in retrospect that that was the bottom for whatever
correction we went through?

COLAS: You know, my perspective is the following: it was a bottom,
it`s probably not the bottom. But even if it is, it`s very important to
note that volatility will probably pick up between now and the rest of the
year. We`re pretty optimistic on stocks, U.S. stocks in particular. We
think this is a pretty economy, everything considered. But the volatility
has been artificially low. It`s going to start going higher.

MATHISEN: One that I noticed, Nick, was that the utility index was at
an all-time high, showing that a lot of investors are putting their money
in a safe place. I mean, given that are you changing your outlook or your
investment strategy?

COLAS: We are not. But you raise a good point. The utilities up 16
percent or so on the year, best performing group in the S&P 500. Just
highlights how important it is to stay diversified in a stock portfolio and

A lot of people were bad-mouthing bonds earlier in the year. That
proved to be horrible advice. Bonds have done very well, hence the
utilities have done very well, stayed diversified through this period of
volatility, absolutely.

MATHISEN: All right. Nick, thank you very much. Nick Colas with

GHARIB: More corporate earnings today, after the market closed.

Investors got a wake-up call from Dow component AT&T (NYSE:T). The
telecom giant reported quarterly earnings below analysts` estimates. It
earned 63 cents a share, missing by a penny. Revenues also short of
forecasted, $33 billion on a lower-than-expected of new wireless customers
and a slightly higher turn rates of customers dropping out of their plans.
But the number was higher than last year.

AT&T (NYSE:T) shares were initially lower in after-hours trading and
were down a fraction during the regular session.

Morgan Brennan joins us now with more on all of this.

So, Morgan, you`ve looked over the numbers. What`s the one key take-

goodness. Well, the key take-away is the fact that we`ve just seen stiffer
and stiffer competition among the U.S. wireless carriers, and that`s really
starting to play out in AT&T`s earnings.

So, we have that profit miss. We saw less subscribers added than

But I think most tellingly is we saw the company revise downward their
sales for the entire year. And there were a couple of factors tied into
it, but one big factor is they`re not seeing people sign up for their next
plan. And that`s the company`s installment plan for new smartphone
devices. Basically, they have been trying to attract — they`ve been doing
this really aggressively, trying to attract more subscribers who pay for
their smartphones outright but in turn don`t have to sign contracts and can
upgrade more frequently. That`s been part of the way they`ve been
competing in this landscape with other carriers. And the fact that we`re
seeing less people sign up for that plan is very worrying moving forward.

GHARIB: All right. Morgan, thank you so much for coming by — Morgan

MATHISEN: All right. Earlier today, strong earnings from another Dow
component, and that would be Boeing (NYSE:BA), helped by a big demand for
commercial jets by airlines around the world. Boeing (NYSE:BA) says it now
has a backlog of more than 5,000 orders, worth more than $430 billion.
Even though profits shot up 18 percent, investors were looking for more and
that sent shares 4 1/2 percent lower today.

GHARIB: More troubling news for the auto industry — federal
prosecutors are reportedly looking into Japanese auto parts maker Takata
and whether it misled the automakers about the number of defective air
bags. The report follows a major warning from the federal government
regarding those faulty air bags that the recall has now been expanded to
nearly 8 million vehicles. And for the owners of some of those vehicles,
they`re being told not to allow people to sit in the front passenger seat
until the airbags are fixed.

Phil LeBeau has more.


After numerous recalls about faulty air bags, over the last few months, the
federal government is now telling millions of car owners to get their cars
fixed immediately. The warning by the National Highway Traffic Safety
Administration covers 7.8 million vehicles, built between 2000 and 2008,
models from 10 automakers from defective air bags that need to be fixed.

The airbags are built by Takata, a Japanese company that is one of the
largest auto suppliers in the world. The warning has created a bit of a
problem. Dealerships say it may be weeks, even months before they have the
parts to fix some of the air bags, because the priority is to repair models
in the high humidity states, like those along the Gulf Coast.

Investors believe humid conditions are causing the air bags to
malfunction and send the metal fragments flying when the airbags deploy.

Because of added concerns about vehicles in southern locations,
General Motors (NYSE:GM) is sending letters to a select number of customers
telling them not to allow anyone to ride in the front passenger seat until
the airbag is fixed.

Toyota (NYSE:TM) is going a step further. They have disabled the air
bags of some recalled vehicles until they can be repaired.

(on camera): And that may take a while. We`ve reached out to Takata
to get a sense of when it believes repairs will be finished, but we`ve yet
to hear back from the company. So for now, there are millions of Americans
driving vehicles with faulty airbags.

And as they`re driving around, they may be asking themselves, am I
taking a risk counting on an airbag that may or may not protect me during a



MATHISEN: Switching back to the economy now. Inflation is in check,
and how consumer prices rose just a 0.1 percent in September. Key factor,
falling energy costs. Over the past year, consumer inflation has risen
just 1.7 percent.

GHARIB: And that low inflation is why Uncle Sam is giving 64 million
Social Security beneficiaries such a small raise next year. The government
will increase benefits by just 1.7 percent in 2015, which averages out to
about $22 more for pensioners and the disabled.

This marks the third year in a row that the annual cost of living
increase will be below 2 percent.

MATHISEN: Still ahead: Johnson and Johnson making a big push that
many other drug makers are not, the vaccine for Ebola. That story, next.


GHARIB: The U.S. tightened rules today on travelers coming from West
Africa. There are now special Ebola symptom screenings and fever checks.
Meanwhile, the race to develop treatments to combat the spread of Ebola has
kicked into high gear. Johnson & Johnson (NYSE:JNJ) has emerged as a
leader in developing an Ebola vaccine, and its shares rose nearly 1 percent
today, one of the few gainers in the Dow.

So, how close is J&J or other drug makers to finding an effective
vaccine or other remedy?

Meg Tirrell takes a look.


know, Johnson & Johnson (NYSE:JNJ) as the maker of Tylenol, Baby Powder and
Listerine. The health care giant also has a major pharmaceuticals
business. And today said it`s making a big push in the fight against
Ebola. J&J is developing a vaccine for the virus. The company said today
it will invest $200 million to accelerate and expand production. It aims
to make more than a million dosage of he regimen next year, a quarter of
which it expects to release for clinical trials in may.

J&J is one of several drug makers working on an Ebola vaccine. It
joins GlaxoSmithKline and NewLink Genetics among others. The question is,
can development happen fast enough to help in the current outbreak?

production side of the vaccine that caused the difficulty, especially when
you`re doing — working on large scale. They claim they will be ready to
go into testing by May. To me, that sounds ambitious. But I hope.

TIRRELL: More than 9,900 people have been infected by Ebola,
primarily in the West African countries of Guinea, Liberia and Sierra
Leone, more than 4,800 people have died.

J&J says it`s working with the World Health Organization and the
National Institutes of Health on its vaccine. It and others have received
government funding.

But the lack of financial return for diseases not frequently seen and
affecting primarily poor countries means companies usually don`t focus on
viruses like Ebola.

FUNTLEYDER: We really ought to use this as a trigger to have a
discussion about a policy regarding emerging infectious diseases, because
the world is shrinking. And what happens in emerging markets ultimately as
we discovered comes to mature markets.

TIRRELL (on camera): Many companies are also working on drugs to
fight Ebola. There are no currently approved vaccines or drugs for the
virus. And while the financial return, according to Les Funtleyder, an
investor, would potentially be small, the benefits to human health would be



MATHISEN: GlaxoSmithKline out with an earnings beat and a cost-
cutting plan and that is where we begin tonight`s “Market Focus.”

The drug maker pledged it will reduce expenses by $1.5 billion over
three years and it will explore a spinoff of its HIV business. This as
earnings topped estimates, but revenue fell a little bit short. And
separately, as Meg Tirrell mentioned just a moment ago, the company is
working on an Ebola vaccine, and today, it said that it expects to have the
first doses ready for testing maybe even late this year. With that, shares
were up nearly 2 percent to $44.41.

Shares of Biogen Idec (NASDAQ:BIIB) fell hard today after the drug
company reported sales of its new multiple sclerosis drug fell short of
expectations. The company also confirmed the first case of a serious brain
infection in a patient who took the drug and recently died. Not even
earnings that whipped analyst forecasts could turn the tide. The stock
wilted $17.70 to $309.07.

Dow Chemical (NYSE:DOW) say its profit jump last quarter, helped by
higher sales in its plastics and performance materials units. Earnings and
revenue topped the Street`s forecasts. The company also out with a plan to
cut costs by $1 billion over the next three years. Despite the cost cut,
the CEO says the company has been able to deliver for shareholders.


results. It was a good quarter. We`re very pleased with it. Good cash
generation. And year-to-date, our share buybacks are on track, $3.4
billion, dividends $1.3 billion. So, we`re generating a lot of cash giving
it to our shareholders as we bring other big projects on line next year.


MATHISEN: Nevertheless, shares were off more than 1 percent to

Stanley Black & Decker (NYSE:SWK) saw its shares rise on strong
results. Profits up by more than 40 percent as the toolmaker managed to
increase margins and sales. That`s usually a good thing. It tightened its
earnings outlook for the year, though, but that didn`t seem to bother
investors. The stock up 1.5 percent higher to $87.41.

GHARIB: It was the opposite kind of story for Norfolk Southern
(NYSE:SO). Profits at the railroad operator rose, but not enough to meet
analyst estimates. Revenue also came up short.

The CEO also commenting on the recent merger talks between CSX
(NYSE:CSX) and Canadian Pacific, saying he doesn`t see the potential in
rail mergers.


issues of any kind of rail M&A of major scale. Most importantly, it`s a
regulatory environment that would not be conducive to doing that. And in
which even if you could gain regulatory approval, you would have to give
up, we believe, most if not all of any potential benefits.


GHARIB: Shares of Norfolk Southern (NYSE:SO) feel 3 percent today to

A disappointing outlook sent shares of 3D Systems (NASDAQ:TDSC)
tumbling. It`s a projecting quarterly revenue below analyst estimates and
cutting its full year revenue guidance because of manufacturing constraints
to meet demand for 3D metal printers. The stock dropped 15.5 percent to

Caterpillar (NYSE:CAT) also had a difficult day. The construction and
mining equipment dealer said its dealer sales fell 10 percent for the three
months ended in September. Sales in its mining equipment division hit the
hardest. The stock was off 1 percent to $94.57.

And then, after the bell, Visa (NYSE:V) hiked its quarterly dividend.
The credit card company upping the payout by 20 percent to 48 cents a
share. That will be paid to shareholders in December. Shares spiked
initially after that news. During the regular trading day, the stock was
down 1 percent to $210.92.

MATHISEN: FedEx (NYSE:FDX) anticipates a record-breaking holiday
shipping season. The delivery giant says it will ship nearly 300 million
packages between Black Friday and Christmas Eve. That`s nearly one for
every single American. FedEx (NYSE:FDX) already pegging Monday, December
15th, that to be the busiest day of the year with more than 22 million
packages going out.

GHARIB: And as we head into the holiday shopping season, some big
banks and credit card issuers are sending customers new cards containing
cutting edge technology designed to tighten security and cut down on fraud.

Kayla Tausche has more.


For millions of Americans, the month of October brought a thick envelope in
the mail, carrying a familiar plastic card but imbedded with a new metallic
chip. As banks and credit card issuers raced to get more secure cards in
the hands of shoppers ahead of the holiday season.

First Data Paul Kleinschnitz says each new security breach has been a
reality check.

PAUL KLEINSCHNITZ, FIRST DATA SVP: As the additional breaches are
happening, additional exposure to the ecosystem, our issuers are
accelerating their plans that were already in play.

TAUSCHE: Since then, this EMV technology has come into focus. It`s
popular abroad because it requires a unique code to carry out a
transaction, not just to swipe.

to a chip-and-PIN system, they cut fraud in stores by 70 percent.

TAUSCHE: Not surprising then, the banks and credit card issuers
focused first on replacing cards most use by international travelers and
frequent flyers, to cut down on overseas theft. But this month, it went
main stream with Bank of America (NYSE:BAC) replacing old debit cards with
chips. More banks and government-issued cards will do the same early next
year, anticipating a widespread change of the checkout that requires
retailers to get new terminals, too.

President Obama highlighted the issue at the Consumer Financial
Protection Bureau last week.

OBAMA: I`m happy to say the private sector is already deeply engaged
in this effort. Today, a group of retailers that include some of our
largest — Home Depot (NYSE:HD), Target (NYSE:TGT), Walgreens, Walmart and
representing more than 15,000 stores across the country. All of them are
pledging to adopt chip-and-PIN technology by the beginning of next year.

TAUSCHE: While the banks will pay a bit more to put chips in cards,
the retail terminals can cost up to a thousand dollars apiece and require
training for employees and consumers to use. Although there is one more
motivation to upgrade, Apple (NASDAQ:AAPL) Pay.

KLEINSCHNITZ: There is not just one justification for new terminal
purchases for merchants, there is three. So, the point is, NFC, and EMV,
and encryption are enabling all the new generation terminals and point of

TAUSCHE: By this time next year, some half a billion new chip cards
will be in our wallets. Though by some estimates, only 60 percent of
retailers will be ready.

For NIGHTLY BUSINESS REPORT, I`m Kayla Tausche, in New York.


GHARIB: Coming up, Swedish massages for rabbits, watching grass grow,
that`s how some of your taxpayer dollars are being spent, and that`s not
sitting well with one senator. We`ll explain, right after this.


GHARIB: Are you saving enough for retirement? Well, too many of us
aren`t. A new Wells Fargo (NYSE:WFC) survey found that middle class
Americans have saved just around $20,000 on average for their golden years,
and that`s down from 25,000 a year ago.

The report also found that four in 10 middle class folks between the
ages of 50 and 59 are currently not saving at all for retirement. And
about a third already admit they won`t have enough money to survive in

MATHISEN: Well, you know the old man`s saying one man`s trash is
another man`s treasure — well, as he does every year, Oklahoma Senator Tom
Coburn has a twist on that, that one man`s prime government expenditure is
another man`s wasteful pork barrel spending. And it`s all listed in the
2014 edition of the “Wastebook”, $25 billion worth, including the part
about monkeys being trained how to gamble.

Eamon Javers joins us now from Washington with more on what`s in the
senator`s crosshairs.

What did he find, Eamon, including the monkeys?

JAVERS: You know, Tyler I wish I could be trained to gamble. But
Senator Coburn found 100 specific items here that he says are just waste,
fraud and abuse in the federal budget.

Let me read you a couple of highlights here from the report. This is
the kind of thing that gets under his skin, he releases it every name.
It`s sort of the name and shame operation by Senator Coburn up here on
Capitol Hill.

He found $331,000 for a study involving couples sticking pins into
voodoo dolls to see if they stick the pins in more aggressively when they
have low blood sugar and they are hungry. Another one was NASA was forced
to spend $350 million to build a launch tower that was immediately
mothballed because the type of rockets it was built for have been
discontinued years ago. They were forced nonetheless to spend all that
money by the politicians here in Washington.

And, finally, this gambling monkey thing, $171,000 for a study to see
if the monkeys had the same misplaced belief that we all have when we`re
gambling that when we get on a hot streak, it might actually continue.

GHARIB: So, Eamon, what did those scientists discover in all that

JAVERS: They found that monkeys are just as bad as gambling as we
are, and that when they were on a hot streak, they did tend to believe that
that hot streak might continue. That`s not — there is no basis in fact
for that. The monkeys thought it, and human gamblers think it as well.

MATHISEN: What about sports stadium —

JAVERS: Sports stadium is interesting, $146 million for sports
stadium, Coburn singling out here, the tax exemptions on government bonds
for sporting facilities. So, that`s an interesting one for sports fans
around the country.

MATHISEN: All right. Eamon, thanks very much. Eamon Javers
reporting from Washington.

JAVERS: You bet.

GHARIB: And finally tonight, one of few remaining original Apple
(NASDAQ:AAPL) One computers sold at auction today for a stunning $905,000,
far more than forecast. The pre-assembled computer is believed to be one
of the first batches of 50 machines built by Apple (NASDAQ:AAPL) co-founder
Steve Wozniak, in Steve Jobs garage back in the summer of 1976. The name
of buyer not disclosed.

You know, Tyler, you can get a brand-new Mac for about a thousand
dollars, but, of course, it doesn`t have that nostalgic romantic.

MATHISEN: And I wonder what the original Apple (NASDAQ:AAPL) 1 or
Apple (NASDAQ:AAPL) 2 costs. Probably nothing near —

GHARIB: A few hundred dollars.

MATHISEN: A few hundred dollars.


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

MATHISEN: And I`m Tyler Mathisen. Thanks for me as well. We hope
you have a great evening and even more than that. We hope we`ll see you
right back here tomorrow night.


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