Transcript: Friday, October 31, 2014

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


October started with a bunch of tricks for investors, but ends with one final big treats. So, how does the rest of the year look for you and your money?

SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: Scary thought. Exxon and Chevron (NYSE:CVX) seeing past estimates. But what happens if oil prices keep falling?

MATHISEN: And crystal ball. Our market monitor thinks that consumer is feeling strong. He`s got three stocks that should benefit.

All that and more for this spooky Halloween Friday, October 31st.

GHARIB: Good evening, everyone.

Well, nothing spooky or scary about this Halloween Friday on Wall Street. Both the Dow and the S&P 500 surged to record highs today and posted gains of 2 percent or more for the month of October, despite all those wild swings. After today`s rally, investors can thank Japan`s central bank for announcing a surprise stimulus plan.

Also helping, some strong economic data right here at home. The Chicago Purchasing Managers Index, this is a reading of business activities in the Midwest rose more than expected. Consumer sentiment hit its highest level in more than seven years. And even though consumer spending fell last month for the first time since January, personal incomes rose nearly 1 percent, the biggest increase in more than six years.

So, add it all up, and it was a blockbuster day on Wall Street. The Dow skyrocketed at almost 200 points, closing at a new record of 17,390.
The NASDAQ rose 64 points, enough to close at a 14 1/2-year high. And the S&P added 23 to the new high of 2,018.

Looking at the scorecard for October, the Dow was up 2 percent, the NASDAQ jumped 3 percent, and the S&P added more than 2 percent.

Bob Pisani has more on this month`s tricks and treats.


BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: October is traditionally a weak month, but it hasn`t turned out that way. The S&P ended the month up 2.1 percent. So, it was a pretty strange month, almost like two months in one. The first part ended with a sharp pull-back that we haven`t seen in some time brought on by fears of a slowdown in Europe and a mild panic on Ebola. The second half saw a sharp snap-back as Ebola fears ebbs.

Last night, the Bank of Japan announced they would expand their stimulus program by buying more bonds, and the Japanese Government Pension Investment Fund, this is the world`s largest pension fund, said they would dramatically expand their buying of Japanese and international stock.

Well, that ignited a global rally. Japan closed at a 7-year high.
The Dow industrials and the S&P 500 closed at an historic high as well.

What will happen for the rest of the year? Most traders believe we will keep rallying at least until the end of the year.

Now, why? First, November and December are traditionally among the strongest two months of the year. Second, November is a big month for company buybacks, since many companies stop or halted buybacks during earnings season in October.

But the most important reason so many believe the rally will continue is that the U.S. economy continues to improve, even if slowly. We have the best economy in the world, and everyone, including the Europeans, are clamoring to get in.

For the moment, there is no other place to put money.

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


MATHISEN: Despite a sharp decline in oil prices this month, closing today at $80 a barrel, two of the nation`s biggest oil companies managed to increase profits the last quarter. So, how did Chevron (NYSE:CVX) and ExxonMobil (NYSE:XOM) do it?

Martha Coombs has the story.


Exxon`s profit in the third quarter was $8 billion up, 3 percent from a year ago, while Chevron`s net rose 13 percent. The two oil giants don`t expect overall profits to take a hit in 2014 despite falling oil prices and they plan to maintain production levels.

Trader Anthony Grisanti says for now, they can.

ANTHONY GRISANTI, GRZ ENERGY FOUNDER & PRESIDENT: Really, it depends how long oil prices stay at very low levels. If it`s a sustained period, say, six to 12 months, then you`re going to have major problems as far as production goes.

COOMBS: The near 20 percent oil price collapse over the last four months has put pressure on oil producers worldwide. But for integrated energy firms like Exxon and Chevron (NYSE:CVX), cheaper oil means lower costs and better profits on gasoline production.

Exxon`s refining units earnings rose nearly 40 percent during the quarter, even as prices at the pump also came down.

GRISANTI: Right now, the benefits to the consumer far outweigh the detriments to any oil company or any of the oil majors.

COOMBS: Analysts at Goldman Sachs (NYSE:GS) say some of the major U.S. oil producers have another advantage to whether to lower crude prices, the boom and shale oil production, increasing efficiency and improved technology of on land drilling operations means they can still profit at lower prices in 2015.

JEFFREY CURRIE, GOLDMAN SACHS HEAD OF COMMODITIES RESEARCH: There are some shale that is relatively low cost and then there`s high cost shale out there. The average of that is somewhere around $80 a barrel. We argue we`ll have to get down in the second quarter to $70 a barrel.

COOMBS: Analysts say for OPEC, and other oil producers outside of North America, production costs are higher and there`s less flexibility to try to combat falling prices.

GRISANTI: They only have one card left, and that is to cut production. I think they`re afraid to play that card right now because that might not be the price spike that they need.

COOMBS (on camera): And even as the price of oil has fallen, OPEC has also held the course on its production levels, although there are rising calls within the cartel for a cut when the group meets at its next meeting end of November.



GHARIB: And with oil prices down, prices at the pump are a lot lower these days. According to AAA, the average cost of a gallon of gasoline in the U.S. hit $3 even today. That`s the lowest we`ve seen in four years, and down a staggering 33 cents just in the month of October.

Now, this may be hard to believe, but the average price of a gallon of milk in September was $3.73.

MATHISEN: You don`t get as good mileage with milk, though, I found.

Let`s turn to John Manley now to find out what he expects the market to do over the next couple of months. He`s chief equity strategist at Wells Fargo (NYSE:WFC) Funds.

John, welcome. Is it clear sailing between now and the end of the year for equities?

JOHN MANLEY, WELLS FARGO FUNDS CHIEF EQUITY STRATEGIST: There`s never clear sailing, but the things that made the market go up so much over the last two or three years is still in place. We still have an accommodative Fed, we still have earnings coming to and valuations are OK. It`s a pretty simple formula, actually.

GHARIB: Talk to us a little bit about the midterm elections. That seems to be like the next big event on the calendar. But it doesn`t seem like Washington will be much of an issue, gridlock will continue.

So, is that a positive for the markets over the next few months?

MANLEY: It`s not a negative. I mean, I think it`s a one-day issue when it happens one way or the other. Whatever happens, I doubt the Republicans are going to lose the House and President Obama is going to be there. So, you still have gridlock and you still have opposing people.

So, it changes something, it may say something, it`s moving in a certain direction, and people may take heart from that, but I don`t think it`s going to be an enormous difference for the markets.

MATHISEN: Do you think stocks are the place to be the foreseeable future?

MANLEY: I`m the equity strategist, but yes, I do.


MANLEY: I think they are. I mean, if you think about it, you`re on the same side as the CEO if you own stock. You have a tremendous amount of baby boomers like myself who are over the next five to 10 years are going to fund retirements and the fundamentals are good as I said at the beginning.

GHARIB: So, what are you — what are you telling people to buy? What are you telling your clients?

MANLEY: Well, we buy industrials at this point in time. We think it`s the expansion phase of the economy we`re playing here. We`re actually also buying euro for what it`s worth. We think they catch up to us, not the other way around. And it`s still — it`s been a cheap market for two or three years versus the U.S. But I think slowly but surely, they`ll reach in a point where it will start to get better. So, Europe`s industrials and technology, that`s what make the corporations here in the U.S. so profitable.

MATHISEN: What about Japan? Would you be nibbling at any Japanese stocks? That market had its best day in years today, on the back of that surprise announcement from the BOJ?

MANLEY: I`m more positive that I`m negative. I think they will make it work, but I have almost no confidence.

The problem is such a difficult thing for them to do. Now, if any nation could do it, the Japanese can do it. But it is a very tough row for them to hoe at this point in time. They had to put a lot of pressure on one of the biggest demographic groups, their retirees. And that`s not always an easy thing to do in a democracy.

GHARIB: You know, John, if you had been on the program just a few weeks ago, we would be asking you about all these negative issues that are out there, all the things on the worry list. You know, whether you`re talking about slow global growth, whether you`re talking about Japan, China
— I mean, a whole of bunch of issues. Right now, what risks do you see?
What should investors be looking for, sort of the red flag?

MANLEY: Well, what makes it go up if it goes away may make it go down. So, I`m looking at earnings, number one. I don`t think the Fed is going to do anything to tighten in the near future. They may raise rates, but that`s not tightening. I think earnings have been very good for a long period of time. I think they`ll get better, but I`ve got to watch those numbers very carefully because I think that`s important.

There`s also psychology, with QE over, we run the risk that people might say, well, maybe deflation wasn`t dead in the U.S., maybe only QE kept it away and when QE goes away, maybe it will come back. I think that`s wrongheaded, but wrongheaded people rule the market many times.

MATHISEN: All right. John, on that note, we`ll leave it there.

John Manley, Wells Fargo (NYSE:WFC) Advantage Funds.

GHARIB: And coming up, spending splurge? Our market monitor is betting big on the U.S. consumer, and he has three picks for your portfolio.


GHARIB: A tragedy in the skies above California`s Mohave Desert today. One pilot is dead, another injured after a Virgin Galactic tourist spaceship exploded during a test flight. There were no passengers on board.

Now, the aircraft known as SpaceShipTwo blew up after igniting its rocket motor, and just as it was released from the plane that carries it to a high altitude. Company founder, British billionaire Richard Branson, says he`s working with authorities to determine the cause of the accident.

MATHISEN: Some of the biggest names in casino gambling are ready to roll the dice and expand into Massachusetts. But Bay State residents could derail those plans with a referendum vote on Tuesday. Could the bet go bust before the first poker hand is even dealt?

Jane Wells has more now from Springfield, Mass.


JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): On two run-down plots of land at opposite ends of Massachusetts, two of the world`s largest gaming companies are betting they can make a killing unless voters decide otherwise or can figure out what they`re deciding.

(on camera): (INAUDIBLE) I think that`s part of the problem.


WELLS (voice-over): MGM Resorts (NYSE:MGM) and Wynn have won licenses to build the first casinos in Massachusetts, promising thousands of jobs and hundreds of millions in revenues. But opponents are asking voters to repeal the law allowing gambling with Question 3.

UNIDENTIFIED MALE: We need the 3,000 jobs. We want the 3,000 jobs.

WELLS: Gaming companies are now spending big to defeat the ban. Here in Springfield, where unemployment hovers around 10 percent, MGM has already invested $40 million, preparing for an 850,000-square-foot mixed use development which will go here.

(on camera): Three years ago, a tornado ripped through this neighborhood and the mayor was afraid it was the final death knell for Springfield.

DOMENIC SARNO, SPRINGFIELD MAYOR: And just as it was time to turn out the lights out on the city of Springfield, the resilience of the people of Springfield, the exact opposite happened. We rose up and the MGM development has put us on the map.

MATHIS: There`s no question that when we bring this resort on, that it will take a little bite out of Connecticut and Rhode Island, and that`s by design. But there`s a local population here that wants their own resort, wants their own facility.

WELLS (voice-over): Steve Wynn thinks he can turn an industrial neighborhood outside Boston into a world class organization.

(on camera): How much is it going to cost you?



WYNN: Nothing is cheap these days.


RODNEY BUTLER, MASHANTUCKET PEQUOT TRIBAL CHAIRMAN: Steve Wynn is a brilliant, brilliant guy, and I admire all he`s able to do in the gaming industry.

WELLS (voice-over): Across the state line in Connecticut, Robby Butler is tribal chairman at the Foxwoods Casino. A quarter of his business comes from Massachusetts and he`s hoping his database on locals will help fight off the big boys from Vegas.

BUTLER: We have the advantage of knowing who those patrons are, knowing what they want, knowing their likes and dislikes and getting the right offers tailor to them to bring back on the property.

WELLS: Polls show most Massachusetts voters walked the casino, but that means voting no on 3, which might confuse people.

UNIDENTIFIED MALE: No means yes on the casino, correct?

WELLS (on camera): That`s correct. Yes means no, and no means yes.

Got it?


UNIDENTIFIED FEMALE: If you`re with MGM frankly, you want to vote no.

WELLS: Betting that voters on Tuesday can figure out that yes means no and no means yes could be the biggest gamble of all.

For NIGHTLY BUSINESS REPORT, Jane Wells, Springfield, Massachusetts.


GHARIB: Wall Street cheered LinkedIn`s earnings, sending shares higher and that`s where we begin tonight`s “Market Focus”.

Three top investment firms Stifel, Canaccord, and JPMorgan (NYSE:JPM) all hiked their price targets on LinkedIn (NYSE:LNKD) after the social media company`s quarterly profits and revenue beat estimates. Shares surged almost 13 percent to $228.96.

Sony`s restructuring plan may be paying off and that gave a big boost to its stock. The company posted a smaller than expected operating loss in its second quarter, driven by strong sales of its PlayStation 4 video game console and camera sensors for smartphones. That offset weakness in its mobile division. Shares popped almost 6 percent to $19.82.

Honeywell is upping its annual dividend. The conglomerate is hiking the payout by 15 percent to $2.07 a share. The increase will be effective starting in the fourth quarter. Shares rose a fraction to $96.12.

Earnings at Expedia (NASDAQ:EXPE) surged 50 percent and investors scrambled to buy the stock. The online travel company said third quarter profits benefited from increased hotel bookings. Shares were up more than
5 percent to $84.97.

MATHISEN: Weakness in the U.S. and Russia kept the lid on Anheuser- Busch`s sales. But the bud brewer said third quarter profit was higher because of cost cuts and strong sales in other markets. The company says it thinks profit growth should bubble up soon. Shares were volatile, but ended almost a dollar higher at $110.98.

Drink the beer, don`t drink the Clorox (NYSE:CLX).

Clorox (NYSE:CLX), the bleach maker, edged higher after reporting sales that topped consensus. The maker of cleaning products said the strength was in its household division. The stock was up 90 cents to $99.50.

Drug maker Abbvie posted revenue well above expectations, helped by strong sales of its Humira arthritis drug. On that, the company hiked its full-year earnings forecast. Abbvie said it could deliver long-term growth without rushing into another merger. Earlier this month it called off its planned purchase of Shire (NASDAQ:SHPGY) Pharmaceuticals. Shares of Abbvie up $2.28, $63.46.

Aegerion Pharmaceuticals (NASDAQ:AEGR) was one company that did not join in today`s rally. The company reported a big loss in its third quarter on weaker than anticipated sales. It also slashed its full-year revenue guidance significantly. Shares plopped 40 percent or $14 to $20.19.

GHARIB: Our market monitor guest tonight says the American consumer is guiding his investment strategy and where stocks go from here. He`s Jim Lowell, chief investment officer at Adviser Investments.

Jim, welcome back to NIGHTLY BUSINESS REPORT.


GHARIB: Let`s start talking about your consumer theme. So, we`ve seen a lot of the consumer numbers recently have been on the positive side, but talk us through your thinking about the consumer and the impact on the stock market.

LOWELL: So, we`ve been fairly bullish on the U.S. consumer year long, and any time we`ve seen significant selling in the markets, we just go back, crosscheck the cross-fundamentals of spending, saving, the availability of credit. For a consumer-driven economy, so long as the U.S.
consumer is faring relatively well, we`ve had great confidence that the economy, too, will fare well as with the markets. We continue to feel that that`s case going forward at least through year end if not beyond.

MATHISEN: Consumer spending, I think the number today was a little soft. It doesn`t worry you at all, does it?

LOWELL: Not at all. Down two tenths of 1 percent, that`s a September number, that comes ahead of the holiday spending season. And, of course, income was up two tenths. So, even at an offset, despite the fact it`s a backyard, not a forward-looking number.

GHARIB: All right. So, let`s go down some of the stocks that you`re recommending that go along this theme. Apple (NASDAQ:AAPL) is at the top of your list. Tell us what your interest is there.

LOWELL: Well, brand power par excellence continues to drive that stock and I think will drive that stock price higher. When you look that it`s the last round of earnings report, we saw nearly 40 million iPhone sales sold, and really only a week and a half of those sales were related to the iPhone 6. We saw 5.5 million iMacs, their desktop equivalent, sell really a stellar number. They now have the highest level of desktop market share since 1995.

And we think that everyone was worried about Apple (NASDAQ:AAPL) not being able to innovate its way to higher profits. But what the iPhone sales and what the desktop sales tell us is that Apple (NASDAQ:AAPL) is doing fine with its core business. That set the stage for consumer continue to buy more of their products, being net good for the stock.

MATHISEN: UPS had a stumble last holiday season. You don`t expect to repeat that, do you?

LOWELL: Well, I don`t. And as a matter of fact, today, they announced they expect an 11 percent increase in December sales. But add into that the fact that gas prices have gone down demonstrably, 20 percent to 25 percent. That`s always good for their bottom line.

So, if they think top line movement is going to be better and their bottom line is improved measurably, thanks to the fallen oil prices, I think the U.S. set the stage for a fairly good rally to year`s end.

GHARIB: All right. And your third stock pick is Visa (NYSE:V) and we know that this week, Visa (NYSE:V) was just doing fantastic. It closed today at $241 and change. If somebody were to buy that stock today, how much up side can they expect?

LOWELL: I would say all these stocks, without talking about it, I expect a 5 percent to 10 percent run by year end. Visa (NYSE:V), in particular, is what consumers turn to when they`re buying their Apple
(NASDAQ:AAPL) products, when they`re doing their holiday spending, and then they turn to UPS to have those goods shipped. So, I think all three correlate fairly well to the U.S. consumer and the ongoing strength that they`re in.

MATHISEN: You`re covering all the bases there. Do you think Visa
(NYSE:V) faces any threat from this growing mobile payments? But I guess the mobile payments have to be processed by somebody, and it could might as well be Visa (NYSE:V), huh?

LOWELL: Tyler, I think you`re exactly right. We also know there`s some stress and strains in terms of the alternative currencies, whether it`s Apple (NASDAQ:AAPL) cash or the CurrentC which has yet to actually be delivered.

Those will sort themselves out. But for me, the big proponent behind my beliefs that Visa (NYSE:V) goes higher from here is still that I think the U.S. consumer heading into this holiday spending season is going to be a little bit merrier than some maybe forecasting.

GHARIB: Well, we`ll leave it on that very positive note. Jim, thank you so much. Have a great weekend.

LOWELL: Thank you. You, too.

GHARIB: Jim Lowell with Adviser Investments.

MATHISEN: And up next, the big business of Halloween and the scary sums people are piling up as they go all out this holiday.


GHARIB: The New York City marathon takes place this Sunday, and as the world`s largest, it provides a big economic jolt to the Big Apple (NASDAQ:AAPL). And road races, big or small, continue to be a growing business.

Mary Thompson has more.


After the starting gun goes off in Staten Island, over 50,000 runners and wheelers will traverse the 26.2-mile course through New York City`s five boroughs.

The marathon on Sunday, a memorable one for the athletes and for New York City as well.

MAYOR BILL DE BLASIO (D), NEW YORK CITY: It`s an extraordinary moment for us economically.

THOMPSON: A study by the New York Roadrunners Club found the race generated $340 million in added tax, hospitality and other revenue in 2010.
Big races in big cities continue to remain big business, says Runner`s World`s Molly O`Keefe.

MOLLY O`KEEFE, RUNNER`S WORLD: They are in iconic cities, and people make them a destination race.

THOMPSON (on camera): During the 44th New York City marathon, the race`s 1 millionth runner will cross the finish line. Its ongoing popularity drawing new sponsors like the home-sharing site Airbnb.

MARY WITTENBERG, NYRR CEO & PRESIDENT: What we really like about the Airbnb deal is it`s a perfect compliment to the hotels when they end up selling out. What we think is going to happen with Airbnb is it provides another option for people, and we`re hoping we see more friends and family come.

THOMPSON (voice-over): A big race also means big money for the winners, half a million dollars. But for 2009 champion Meb Keflezighi, the real money is with sponsors like PowerBar, who see his appeal to the running faithful.

MEB KEFLEZIGHI, 2009 NYC MARATHON CHAMPION: We don`t just sign up because they tell us to sign up or — it`s more (INAUDIBLE) that they believe what I do and I believe what they make.

THOMPSON: These days, big races can also come with big threats. With runners from over a hundred countries on the course, Ebola is a concern for some, but not the city`s mayor.

DE BLASIO: I`ve said it time and time again, there is no cause for alarm in this city.

THOMPSON: A city that is ready to run.

In New York City, I`m Mary Thompson for NIGHTLY BUSINESS REPORT.


MATHISEN: Well, you know, today maybe Halloween, for some big retailers, it`s looking like an early Black Friday. Amazon (NASDAQ:AMZN) is moving up the traditional kickoff to the holiday shopping season by a whole bunch, offering two special online shopping deals every day now through December 22nd. Starting tomorrow, Walmart begins discounting prices on 20,000 items, while it offers free shipping on its top 100 selling holiday gifts.

GHARIB: Yes, yes, but before we get too ahead of ourselves on holidays, let`s remember that tonight is Halloween. But this holiday isn`t just about candy and costumes anymore. Some wealthy people are spending big money to make their homes look positively spooky for the big night.

Robert Frank has our story.


Halloween has become big business, especially among wealthy homeowners looking to out-scare and outspend their neighbor. The total spending on Halloween this year expected to top $7 billion, most of it in costumes and candy.

But home decorating has become one of the fastest growing segments.
And we`re not talking scarecrows and a few pumpkins on the porch. Today`s haunted mansion owners are hiring professional production companies, bringing in stage lighting, actors, Broadway quality sets and sound systems.

Cliff Witmyer is the CEO and founder of Cliffhanger Productions in New Jersey, and he is one of the top Halloween decorators to the rich and famous.

This house in Alpine, New Jersey, is being turned into a scene from “The Walking Dead,” with actors playing zombies, a hearse and lots of spooky smoke and lighting.

CLIFF WITMYER, CLIFFHANGER PRODUCTIONS: They`re literally going to see zombies walking out of the grave, dead, I`m going to show up, I`m going to pull up in the hearse later on, big theatrical production, it`s going to be hundreds of trick-or-treaters here and we`re going to scare the life out of them.

FRANK (on camera): More than 2,000 trick-or-treaters came here last year. This year, in the next few hours, this will become a scene from “Walking Dead”.

(voice-over): But besides the zombies and candy, the homeowner John Klein says it`s all part of giving back to the community.

JOHN KLEIN, HOMEOWNER: We spend a lot of time with the community.
We`ve coached the baseball teams. My kids have grown up here and we`ve done this since they were little. And it`s just our way of having a lot of fun with the town.

FRANK: Cliff also does the Halloween decor for CC Sabathia, the famous Yankees pitcher who lives nearby. That CC has grew from the movie “Despicable Me”.

This year, CC is turning his foyer into a scene from “Frozen”, but Cliff said that this year, zombies are the biggest trend.

WITMYER: Everybody wants to be a zombie. You got dead zombie, you got dead prom queen, a dead celebrity, a dead rock star. Dead is just in.

FRANK: And talk about scary prices, some of Cliff`s clients have spent over $20,000 for their trick or treat props. And candy, well, take a look at this stash that John Klein is getting ready to hand out tonight — a great holiday for New Jersey`s decorators and dentists.

For NIGHTLY BUSINESS REPORT, I`m Robert Frank in Alpine, New Jersey.


MATHISEN: Our next door neighbor used to go all in on this stuff, and it was really scary. Kids were afraid to go.

GHARIB: Tyler, dead is in.

MATHISEN: Dead is in, not for me, I like to postpone for a while.

GHARIB: Dead rock stars, dead anchor, people.

That`s NIGHTLY BUSINESS REPORT for us. Have a great weekend, everyone. I`m Susie Gharib.

MATHISEN: And I`m Tyler Mathisen. Thanks for joining us. We hope you have a spooky treat-filled night. See you Monday.


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.

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