Transcript: Friday, November 14, 2014

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


And in that month, the Dow Industrial Average has popped almost 9 percent.
So, which sectors have bounced back the most?

As stocks gain, oils slide. Crude has fallen for seven straight weeks. Its longest such streak since 1986. Will lower prices force companies to merge?

And one year later, health care enrollment under the Affordable Care Act begins tomorrow. And this time around, there are changes, challenges, and still some unanswered questions.

All of that and more tonight on NIGHTLY BUSINESS REPORT for Friday, November 14th.

Good evening, everyone, and welcome. I`m Tyler Mathisen. Susie Gharib is off.

Tonight, much of the country is seeing the first blast of winter and today, stocks acted as if they were frozen in place. The Dow, NASDAQ and S&P, with little change, but who`s complaining?

For stock investors, the past four weeks, all winners felt like a month at the beach, following a very chilly, early autumn stretch. Here`s how things looked today at the closing bell. The Dow down a modest 18 points but the NASDAQ was up by 8 and S&P 500 ended a fraction of a point higher, but that was just enough to mark the index`s 41st record close this year.

For the week, the Dow rose a fraction, the NASDAQ was up more than 1 percent, and S&P edged a little bit higher, too, as you see there.

Bob Pisani now with more on what`s been driving the markets sharply higher since those lows back just a month ago.


BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: It`s been an up and down week for the stocks with only fractional gains with the major indices but the bottom line is we`re essentially back to historic highs.
Not surprisingly, the market has been led back by sectors that had the biggest decline earlier in October.

Health care and tech stocks were having a great year going into October, but they got hit in the period between October 8th and the bottom on the 15th.

Now, that made sense. In a broad market decline, the leadership stocks are the ones that usually get hit the most. So, Intel (NASDAQ:INTC), for example, was up 34 percent going into October, but it dropped 7 percent in the first half of that month.

But since then, both tech and health care have recovered all their losses in our essentially right back at historic highs. That period in early October also corresponded to a big drop in oil, which had been dropping for months, but fell an additional 10 percent in the first half of October.

That put pressure on energy stocks and here`s where the story is different — energy stocks have not recovered like the rest of the market has because oil took another leg down just as the rest of the market was bottoming in mid-October. That has limited the recovery in energy stocks.
They are only up about 5 percent since the bottom on October 15th.

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


MATHISEN: A very important vote in Congress today, with the House overwhelmingly approving a bill that would resume construction of the long- delayed $8 billion Keystone XL oil pipeline. Supporters in the Senate say they have enough votes to pass their own version of the bill okaying the pipeline next week, and that would set up a showdown with the president.
He has stopped short of issuing a veto threat, per se, but said today he opposed a bill that circumvents an executive branch`s approval process, controlled, oddly enough, by the State Department.

Now, the U.S. is producing more oil at the same time global demand for crude is weakening. That led the international energy agency to predict that oil prices, which tumbled 3 percent this week alone, will fall even further. Today, domestic oil did spike, $1.61 a barrel, closing just below $67. Even so, this marks the seventh weekly loss in a row for West Texas crude.

Well, despite today`s gains, oil prices were down about 3 percent this week with West Texas Intermediate even touching a four-year low and trading under $75 a barrel for a time.

Now, this steep price decline is spurring some interesting discussions within the industry.

Jackie DeAngelis has more.


JACKIE DEANGELIS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Oil prices in free fall, down 30 percent year to date. The main issue: a global supply gloat. The U.S. is ramping production, trying to gain market share and OPEC players are keeping production levels stable not wanting to lose shares.

Some analysts and traders are predicting that prices could fall even further. Talk of $50 a barrel working its way through the pit.

ANTHONY GRISANTI, GRZ ENERGY PRESIDENT: Realistically, I see oil trading as low as $65. The reason I say $65, because at that point, banks will stop giving loans for new exploration and many companies will find it hard to operate profitably with those low prices.

DEANGELIS: Crude price action has taken a toll on industry stock. In fact, the S&P 500 energy sector, the worst performer over the last three months, with a drop of more than 10 percent. Amidst this backdrop, news that oil field services companies Halliburton (NYSE:HAL) and Baker Hughes
(NYSE:BHI) are in preliminary merger talks. The timing of the talks coinciding with crude price declines. Industry insiders speculating that costs cuts and synergies will be key for companies in this space if prices do go lower from here and stay there.

KURT HALLEAD: It`s an interesting time to try to put two of those companies together. Oil prices have been on the decline. I would have to imagine that Halliburton (NYSE:HAL) is looking at this as an opportunity to consolidate at a time when oil field service stock prices have declined about 25 percent to 30 percent. So maybe they are thinking they can get a better valuation opportunity here.

GRISANTI: I`m sure some companies are finding it difficult to operate profitably with these low energy prices, and I would expect more M&A activity in the sector if prices remain low.

DEANGELIS: One thing that could change the game, the OPEC meeting later this morning. If the cartel makes a move to cut production to stem price decline, all bets could be off.



MATHISEN: A double shot of strong economic data out today. The Commerce Department says retail sales rose more than expected in October as Americans bought more cars and shopped for more items online. And a new reading on consumer sentiment for November is at the highest level since 2007.

Now, the news was a little less favorable across the pond, gross domestic product in the 18 nation eurozone bloc grew by two-tenths of 1 percent in the third quarter. That`s basically nothing. In a surprise turnaround though, some of the countries that were hardest hit by the debt crisis are now seeing the fastest growth, including Greece and Spain.
Well, eurozone officials are joining President Obama in Australia tonight at the kickoff to a weekend G-20 Leader Summit.

While organizers are preparing for world leaders, they`re also bracing for protesters who are already out in force today.

Oriel Morrison has more now from Brisbane.



ORIEL MORRISON, NIGHTLY BUSINESS REPORT CORRESPONDENT: There are a number of key issues here at the G-20 in Brisbane, trade, economic growth, jobs. One of the main issues, surprisingly enough, is security. That`s after reports that there are Russian troops moving into Ukraine.

U.K. Prime Minister David Cameron talked about this in a press briefing early on on Friday, essentially saying that sanctions are on the table if Russia refuses to cooperate.

Now, aside from security, tax evasion is also key, very high up on the agenda. But the elephant in the room is certainly climate change. Tony Abbott has made it clear — he doesn`t want that on the table. He said it will clutter (ph) the agenda.

But there are others here that say that economic growth and climate change essentially go hand in hand.

Tony Abbott has conceded to have one paragraph on climate change in the final communique.

One hundred million dollars is being spent on security for this particular event, which involves 5,000 police and 1,000 Australian defense personnel.

Back to you.


MATHISEN: And that was Oriel Morrison reporting from Brisbane.

Well, back here in the United States, it is that time of year again, starting tomorrow, enrollment opens on the Affordable Care Act`s newly revamped Web site.

So, what`s in store for 2015?

Bertha Coombs has more.


BERTHA COOMBS, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): start page has a new page. President Obama`s new HHS Secretary, Sylvia Burwell, says the online marketplace is ready for a fresh start.

SYLVIA BURWELL, HHS SECRETARY: We have done the testing. We have put in place all of the contingency plans. We have tested everything from loads to end to end.

COOMBS: Despite the disastrous launch of open enrollment a year ago –

KATHLEEN SEBELIUS, FORMER HHS SECRETARY: Clearly, the end-to-end testing was not sufficient.

COOMBS: Eight million Americans enrolled in plans for 2014, after a massive fix of This year, the online application is shorter, there`s more information up front. The small business shopping portal will launch after a one-year delay and more insurers are offering plans.

United Healthcare is selling plans in 23 states this year, up from five a year ago.

JEFFREY LUCHT, UNITED HEALTHCARE SR. VP: Certainly, from everything we`ve heard from HHS, their expectation is that this would be a much simpler experience for consumers. The window shopping functionality seems to have worked well this week.

COOMBS: For investors, there`s more confidence the insurance industry can make money on the exchanges, even with older enrollees who tend to use more services.

ANA GUPTE, LEERINK PARTNERS: We`ve gotten to the point where companies like WellPoint, Health Net (NYSE:HNT), and even Aetna (NYSE:AET) are signaling that this could be and is a profitable business.

COOMBS: But new headwinds loom for ACA. The Supreme Court is going to hear King versus Burwell, a case challenging the plan subsidies in 36 states on health, arguing ACA only allows them for state-run exchanges, and a new Republican majority in Congress is not likely to legislate a fix.

GUPTE: I think both of the things coming together makes it challenging.

COOMBS: But near term, analyst Ana Gupte says the focus will be on enrollment numbers. Already, the Obama administration has tempered growth expectations.

(on camera): Even if these exchanges work properly, the administration and insurers still face the challenge of getting people to sign up during open enrollment, which this year will be shorter this year, running four months instead of six. An awareness remains just as low.

According to the Kaiser Family Foundation poll, 90 percent of young people surveyed were not aware that open enrollment was beginning.



MATHISEN: Ceci Connolly joins us now to talk more about what we`ve learned over this past year about the Affordable Care Act and what you need to know for this open enrollment period. She`s managing director with PWC Health Research Institute.

Ceci, good to have you here with us. Is it going to work this time?




MATHISEN: Won`t work necessarily for everybody but basically the shut down of the system that occurred last year won`t occur?

CONNOLLY: We feel much more confident. The government feels much more confident that this time around, the built-in capacity, they`re a little more ready for the crash this time.

MATHISEN: What`s new or different this year? What should people expect when they logon?

CONNOLLY: Well, the best news for consumers this time around, Tyler, is you`re going to be able to window shop. They can logon to that and they can start doing comparison shopping without putting in all of their information and starting to enroll. That was a big problem last year where people didn`t really get to shop before they got locked into a choice.

MATHISEN: That`s right. I remember trying to logon and you had to log in and get all set up and some of that process was buggy, to put it mildly, before you could start to really go and look at different plans to see which one would work.

What do we know, if anything, about pricing this year versus last year?

CONNOLLY: Our Health Research Institute has tracked all 50 states and the District of Columbia. The average premium increase across the nation for individual plans is 5.6 percent.

But there`s wide variations. You can actually get cheaper plans and you can see big increases.

So, people really need to shop around and that`s most important, Tyler, for the people that signed up last year because we`re noticing a trend where folks that bought the lower-priced plans last year are seeing the biggest increases.

MATHISEN: The so-called silver plans?

CONNOLLY: The silver plans.

MATHISEN: And what was it, gold, silver, bronze, or what was it?

CONNOLLY: It`s like the Olympics — bronze, silver, gold and platinum.

MATHISEN: And platinum being the highest priced one?


MATHISEN: Let`s talk about the success and failure of the program, so far. Are more people covered by insurance than a year ago and who are they?


MATHISEN: Are they the young people that I know the insurers were there to help them with their risk pool?

CONNOLLY: We have about 10 million people who have health insurance today who did not have it a year ago, a big jump. We also have a few million more that have gotten in prior to that if they were under 26 and they signed up under their parents` plans.

So, significant increase in terms of newly insured in this country.
Young people did OK. Not fabulously. But they did OK. And that`s pretty encouraging sign.

The other big gap right now are Hispanics. Disappointing —

MATHISEN: Who have not signed up in the numbers that were expected?


MATHISEN: Let`s go back to the question of pricing and the point that was raised in Bertha`s piece over the subsidies.

How big of a threat, really an existential threat, to this entire Affordable Health Care act is that Supreme Court case? If the subsidies are ruled unconstitutional, is the whole system going to collapse?

CONNOLLY: Well, the fight in the Supreme Court is over just the federal exchange. So, you`re looking at about half of them in the country.

But I think existential threat is absolutely correct, Tyler. If you wipe these away, we have 85 percent of the people who enrolled a year ago qualified for subsidies. In most incidents, the people who got a subsidy paid 24 percent of the published premium price. So, their monthly premium

MATHISEN: So, they were paying $80 a month as opposed to $400 a month?

CONNOLLY: Exactly.

MATHISEN: Or thereabouts?

CONNOLLY: Very, very significant for the consumer and the insurer.

MATHISEN: Ceci, thank you for coming out.

CONNOLLY: My pleasure.

MATHISEN: We`ll check in with you as the system goes along, the year goes along.

Ceci Connolly with PWC Health Research Institute, great to have you with us.

Still ahead, looking for stocks that could see double-digit gains over the next year, even if interest rates rise. Our market monitor has some recommendations.


MATHISEN: Virgin America has really lifted off as a publicly traded company with shares soaring more than 30 percent in today`s trading debut.
The IPO marks the latest move by an airline to cash in on the sector`s surging popularity with investors.

But is Virgin America likely to fly high, like other airline stocks have this year?

Phil LeBeau has our report.


PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): A soaring debut for Virgin America. A rousing opening passengers on Virgin America flights toasted with champagne as they watch the IPO live on TV.

DAVID CUSH, VIRGIN AMERICA CEO: We`ll come out of this with a very strong balance sheet, a good liquidity position, and a good debt coverage position. So, it`s an extremely important day for our company.

LEBEAU: Over the last eight years, Virgin America has gone from losing money to turning a profit in 2013. Along the way, the airline based in San Francisco has primarily focused on cross country flights that emphasize passenger service. One example, on Virgin America, you order food and drinks from your seat instead of waiting for the drink cart to amble down the aisle.

MICHAEL BOYD, THE BOYD GROUP CHAIRMAN: There`s a niche for a carrier like Virgin because, frankly, there are people out there that really aren`t brand loyal to American or United or even JetBlue and you get those people.

LEBEAU: But Virgin America faces stiff competition from established airlines — Delta, American, United and even JetBlue are all pushing this on Transcontinental flights as they try to win over the most lucrative customer, business travelers who frequently fly from coast-to-coast.
Business flyers generate 40 percent of Virgin America`s revenue and the CEO believes he can keep those customers.

CUSH: If you look at our first class, for example, we have eight seats up there. It`s a small cabin. It`s an intimate cabin and it`s a controlled cabin. So, it`s more like a private flying experience. So, it`s a very different experience you get with, you know, having 30 or 40 flights on United and American.

LEBEAU: Airlines are enjoying one of their most profitable years ever with some stocks, like Southwest, more than doubling over the last 12 months.

(on camera): Will Virgin America shares climb even higher, thanks to renewed interest in airline stocks? That depends on whether bookings remain solid while jet fuel stays in check.

But for now, Virgin America and its investors are toasting a big day for the little airline.



MATHISEN: An activist hedge fund takes a stake in McDonald`s
(NYSE:MCD) sending shares higher, and that is where we begin tonight`s “Market Focus”.

According to a filing out today, Jana Partners now holds a position in the burger chain that`s worth more than $81 million. This comes as the fast food giant has seen weak sales across all of its units so far this year. Shares were almost 1 percent higher, though, today at $96.21.

The accounting issues at Hertz are worse than originally thought. The car rental giant says it will restate its 2012 and 2013 earnings. This is in addition to restating its 2011 results, which we already knew about.
Shares tumbled 4 1/2 percent to $21.69.

Shares of Graham Holdings climbed higher after it announced plans to spin off its Cable One cable division into a separately publicly traded company. Investors cheered the breakup of that company. It has, of course, sold its “Washington Post (NYSE:WPO)” newspaper unit last year to Amazon`s CEO Jeff Bezos. Graham Holdings today up more than — at $85 higher at $878.87.

And, Pandora surged after a filing revealed that its chairman and CEO purchased 25,000 shares of the stock. This marks the first purchase by any Pandora insider since its IPO over three years ago. The stock was up 16
1/2 percent. It closed at $21.51.

Our market monitor tonight says it`s never too early to be thinking about stocks that will do well in a rising interest rate environment. He`s Derek Bruton, CEO with Lucia Capital.

Derek, welcome. Good to have you with us.

Do you think rates are going to go up any time soon? And, if so, how much?

DEREK BRUTON, LUCIA CAPITAL CEO: You know, I don`t think so, Tyler.
I think we`re really looking at mid to late 2015. Any type we see a hype we may see the Fed move off their dovish stance, what we tend to see is more weakness, more spottiness, a little more uneasiness in the GDP, whether it`d be labor, whether it`d be housing. And so, I still think we`re not going to see any moves until late 2015 or so.

MATHISEN: But these stocks that you`re going to mention to us, beginning with NXP Semiconductors (NASDAQ:NXPI) you think would be good for the current environment and I guess could benefit or withstand rising rates? Tell me about NXP.

BRUTON: NXP is really about Apple (NASDAQ:AAPL) Pay. And I can`t say enough about Apple (NASDAQ:AAPL) Pay. All of the excitement about the iPhone 6, but I really think Apple (NASDAQ:AAPL) Pay is really going to transform the world much the same way iTunes did in the music world.

What we`re seeing right now is NXP Semiconductor provides the chips for the phone that communicates with the retailers. Should Alibaba or anybody do anything with Apple (NASDAQ:AAPL) Pay — I think this is really going to take off. They`re also involved in autos, in security for credit cards. I think they are well-positioned and they`ve got a lot of room to run here.

MATHISEN: Let`s move on to another one that has been a hot company, Gilead Sciences (NASDAQ:GILD). You`ve got a price target of $135 to $140 over the next 12 months. Why do you love it?

BRUTON: Well, I love it because of the — just the massive pipeline of drugs they have coming out under review right now, both HIV drugs, cardiovascular, they`ve gotten a lot of talk right now about their hepatitis C drugs. They are leaders in the industry first to market.

There`s nearly over — there`s over 11 million treatable patients out there with hepatitis C. I see this stock really being able to take off and taking advantage of its dominance in the market.

MATHISEN: Let`s move on to number three and that would be Dow Chemical (NYSE:DOW).

BRUTON: Dow is just more so than any of its competitors right now, leveraging natural gas and shale oil production. It`s a cash-rich company.
You probably saw the increase their dividend by 14 percent. They announced a massive buyback of shares and they`re also doing well, they respond to criticism out there about being in unprofitable business lines. They are divesting those business lines, focusing on really strong, high value chemical and service sales.

MATHISEN: Overall, Derek, do you like the market where it is today and think it can turn higher?

BRUTON: I absolutely do, Tyler. I think, you know, we see the spottiness in the market like in GDP as I talked about but these are just opportunities to get the dollar cash average back in the market. We did so in October with nearly a 10 percent drop.

I think we`re on the road with some bumpiness, 3 percent to 5 percent corrections depending on what happens overseas, what happens in some of the earnings reports. But we`re in this Santa Claus rally and I think it will take us right into a strong first half of 2015, and then we`ll finish off in hopefully high single digit percentage growth in 2015.

MATHISEN: Well, ho, ho, ho, Derek. Thanks very much. Santa Claus rally.

Derek Bruton with Lucia Capital.

BRUTON: Thank you.

MATHISEN: Coming up, how the freelance economy is changing the way companies hire and Americans work.


MATHISEN: And finally tonight, have you ever thought about becoming your own boss working for yourself, maybe even as a freelancer? Millions of Americans do it with the so-called freelance economy growing every year and changing the way America works.

Sharon Epperson has more.


Kyle Davidson has been on many adventures, but one that`s been most meaningful came after he left Living Social, an online market place that features local deals for its subscribers.

KYLE DAVIDSON, SOURCED ADVENTURES FOUNDER & CEO: Living Social decided to sort of refocus the core business, refocus sort of their strategy a little bit, and decided, as a result, to shut down the adventures division nationwide.

EPPERSON: Davidson had worked on that team, crafting deals on snowboarding, skiing, rafting, wine tours and other trips. When his job came to an end, he embarked on a new adventure, launching his own business, creating an online marketplace designed specifically for consumers seeking active excursions. And he hired a bunch of freelancers to work with him, mostly members of his old team.

DAVIDSON: So, I rehired a lot of my part-time staff from Living Social, we have 23 freelancers and we call them group leaders. They are our guides on our trips and, yes, every single one is a freelancer.

EPPERSON (on camera): There`s been a dramatic increase in the number of people working for themselves over the past decade. About 53 million Americans are doing freelance work today. That`s about one-third of the entire U.S. workforce, according to a recent study commissioned by the Freelancers Union.

MICHAEL PARRISH DUDELL, ENTREPRENEUR & SMALL BUSINESS EXPERT: The whole landscape is changing. The digital age has played a huge role in that. The market right now, I can get great freelancers. So, if I can have access to that from anywhere, why wouldn`t I work with freelancers?
It only makes sense for a CEO or anybody running a company to do that.

EPPERSON (voice-over): For Davidson, having a freelance staff is essential for his business.

DAVIDSON: It`s much easier to have a larger staff because you have more flexibility in terms of scheduling. The more people we have, the more options there are for who can work.

EPPERSON: Hiring freelancers provides more options for businesses large and small.

DUDELL: It`s going to change the way that corporate America works, that the small business landscape operates, because you have access to different kinds of people on shorter term assignments. The working environment is changing from thinking about long-term careers, which is what sort of we used to do in the past, to thinking about work on a project basis.

EPPERSON: The freelance economy changing the way that Americans work and the way companies hire.



MATHISEN: And that is NIGHTLY BUSINESS REPORT for tonight. Thanks for watching. I`m Tyler Mathisen. Have a great weekend, everybody. We`ll see you back here on 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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