Transcript: Wednesday, November 26, 2014

NBR Thum ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Susie Gharib, funded in part by —

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TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Data deluge. A raft of new numbers suggests the economy might not have what it takes to kick into top gear.

Critical decision. Will they cut or won’t they? OPEC members gather to answer that very question about oil production. And some are calling it the most important meeting of the organization in years.

And the Christmas creep. The pressure to get holiday shopping started is coming earlier and earlier every year. But is it worth it?

All that, plus a drumstick, for this Wednesday, November 26th.

Good evening, everyone. And welcome on this Thanksgiving Eve. Susie has the night off.

It was a quiet day on Wall Street ahead of the Thanksgiving holiday, with a winter-like storm blasting the East Coast with snow, sleet and rain and temperatures that would freeze anyone’s giblets.

But gobblers — well, they gobble up enough to push the Dow and the S&P 500 to a new all-time closing high and the NASDAQ to a fresh 14 1/2-year high. And this happened despite another slump in oil prices, and a flood of economic data that that was as soggy as the weather.

Steve Liesman takes a closer look behind the numbers and what they may mean for the economy moving forward.

(BEGIN VIDEOTAPE)

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): The weather turned sour ahead of the Thanksgiving holiday, and so did the economic data. A feast of economic reports released earlier than normal due to the holiday mostly came in below expectations and raised doubts about whether the upbeat economic data from the third quarter is continuing into the fourth.

Business investment fell in October when the Street was looking for a gain. Jobless claims spiked up by 21,000 to register the first read above 300,000 since early September and lackluster housing data came along with a lukewarm report on how much Americans earned and spent in October.

Still, economist John Ryding remains optimistic.

JOHN RYDING, RDQ ECONOMICS: With five and a half years into the recovery, we wouldn’t expect it to be booming at this point, but the economy is advancing, and it’s advancing when you compare to the difficulties Europe dealing with, or you compare to some of the countries in Asia, I think the state of the expansion is in fairly good shape.

LIESMAN: But it’s hard to argue after today’s data we are headed for another plus 3 percent quarter of growth. More likely, the U.S. is on track for an average quarter, with growth around 2.5 percent, enough to reduce the unemployment rate but not enough to make up for lost ground from the financial crisis.

The 5 percent savings rate reported today suggest that when Americans have extra money in their pockets, even from higher incomes or lower gasoline prices, they remain cautious inclined to save it rather than spend it.

Retailers can only hope that doesn’t remain true when spending starts in earnest for the holiday season.

(on camera): The proposition that the U.S. economy is accelerating gets another chance to prove itself next week with important surveys on manufacturing and services and then there’s the much-watched jobs report, economists looking for 200,000-plus jobs created to have been created in the month of November. That’s 200,000 people with more money in their pockets to spend for the holiday season.

Have a great holiday. For NIGHTLY BUSINESS REPORT, I’m Steve Liesman.

(END VIDEOTAPE)

MATHISEN: And as Steve just mentioned, there was a round of housing reports out today, a triple dose of data and it all tells the same story.

Diana Olick has more.

(BEGIN VIDEOTAPE)

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): The one thing not cooking with gas this Thanksgiving is the nation’s housing market. New reads on October sales were disappointing. Signed contracts to buy existing homes fell unexpectedly even amid a 5 percent jump in listings.

It was the lowest sales pace since June and went along with a drop in mortgage applications during the month.

BILL PULTE, PULTE CAPITAL PARTNERS CEO: Largely dependent on interest rates and, obviously, what the macro economy is going to do in ’15 and ’14 for the remainder.

OLICK: Mortgage applications have surged at the beginning of November, but fell off again last week even as 30-year fixed rates dropped below 4 percent.

The realtors still blamed tight credit for slow sales, but some say that’s old news.

DOLLY LENZ, REAL ESTATE AGENT: The biggest problem is stagnant income and no possibility of that getting better any time soon. So, people really feel nervous about the future, and I think that is what’s making them not go and spend the big bucks on a house.

OLICK: Another read on new construction was also disappointing. Sales for the builders were up less than 1 percent in October compared to September, but only because September’s gains were revised down.

Year to date, new home sales are nearly flat. The only jump was in prices. Up a whopping 15 percent in October from a year ago to a record high and million-dollar homes are seeing sales sour.

NANCY TAYLOR BUBES, REAL ESTATE AGENT: Just sold this house, another property right across the line in Maryland in the low 4s and got two offers on that this week, too. And right at Thanksgiving.

OLICK: While the rest of the market falters, the high end is on fire.

BUBES: With the market up, rates are down and they just say, gee, could it be more next year? I should make this decision now.

OLICK (on camera): The high end maybe juicing numbers for now but there are a limited number of those buyers, barely 2 percent of the market. For housing to really start cooking, all levels of fires need to have a seat at the table.

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

(END VIDEOTAPE)

MATHISEN: More now on the action or lack of action today on Wall Street.

The major averages close slightly higher on a low volume day ahead of the holiday and in spite of that mostly disappointing economic data. Still, the Dow was up 12 points to a new all-time high. It finished at 17,827. NASDAQ added 29, a 14 1/2-year high there. We so frequently say it, and the S&P up five, new record close of 2,072.

So, will they or won’t they? Just one day to go now before a highly anticipated OPEC oil ministers meeting where member nations will vote on whether to cut production to try to end the five-month slide in oil prices and apparently energy traders do not think a cut in crude prices is coming. As they settle add a fresh low with domestic oil down 40 cents, it ended at $73.69 a barrel.

Brent Crude, the international benchmark, down 58 cents to $77.75 a barrel.

Our Steve Sedgwick is Vienna, Austria, with a preview of tomorrow’s big OPEC meeting.

(BEGIN VIDEOTAPE)

STEVE SEDGWICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Here in Vienna, the OPEC ministers are set to meet on Thursday for what is seen as the most highly anticipated meeting in many years. Of course, the price of oil has fallen aggressively 30 percent since June, as well, and OPEC is desperate to try and find some defense in that price, with the oil price under $80 a barrel.

And yet, who would do the cutting if there was an OPEC cut, and that’s where distinction within the ranks and with other producers remain. The Russians came to town early this week and they said, yes, they would like someone to come but weren’t prepared to do so. Don’t forget, the Russians are the biggest producer in the world, producing about 10.5 million barrels a day.

So, who would be doing the cutting? Well, it wouldn’t be the Iranians. They’re going to put oil in the market and are prohibited at the moment because there are sanctions over the nuclear situation. So, the shoulders would have had to bear the brunt of that cut would have been Saudi and GCC allies and it looks like they are looking now to play the long-term game, i.e., they’re not gong to defend price, but what they want to do is to defend market share. They’re very concerned that shale producers and not OPEC producers have been stealing market share as the prices come off and they don’t want to lose more.

It looks like we may, despite many people’s expectations, actually get no cut in production in the next 24 hours.

This is Steve Sedgwick in Vienna, for NIGHTLY BUSINESS REPORT.

(END VIDEOTAPE)

MATHISEN: And John Kilduff us now to talk more about the upcoming OPEC meeting. He’s the founding partner with Again Capital.

John, good to have you back with us.

JOHN KILDUFF, AGAIN CAPITAL FOUNDING PARTNER: Good evening.

MATHISEN: To cut or not to cut? What do you think they’ll do and what do you think is next for oil prices?

KILDUFF: I don’t think they’ve cut — I don’t think they will cut. The Saudi’s need to hold firm, let the market stabilize and work its way out and also draw a line here to try to squeeze out some of the higher cost competition out there — the very shale production that has brought prices down so much and the cartel to its knees potentially.

MATHISEN: The last time you were here, you said that what you saw or were starting to see was the dawning of a price war, and that the Saudis were going to try and squeeze out and basically say, we can produce a lot more profitably and at a lower price than you shale guys can here in the U.S. Is that what you’re seeing?

KILDUFF: Absolutely. You know, they tinkered with the price. They’ve been aggressively discounting, so have the Kuwaitis, particularly to China, to hold on to market share and the Saudis are again telling everyone, we can produce cheaper than the shale guys. Let’s sit tight with this and squeeze them out.

And to their credit, we’ve seen several companies in the U.S. shale space announced reductions in their capital spending plans for next year because of what they’re seeing is a lower price environment. So, it may be already to the Saudi’s advantage —

MATHISEN: So, we’re at $73 now on West Texas on domestic crude. Where do you see that going in six months or so?

KILDUFF: Well, I think the market is going to take this in no decision to cut tomorrow, badly, you know, from a price perspective. It’s going to head 70, 68 over the next couple weeks here fairly rapidly, in fact, and I think come the first — mid first quarter next year, you’ll see a price down in the low to mid-50s.

Everyone’s metal is going to be tested —

MATHISEN: Low to mid-50s sometime early next year. For gasoline, what does that mean?

KILDUFF: That will translate into a national average potentially below $2 a gallon to maybe as low as $1.80 in areas.

MATHISEN: Is this on balance good for America or not good for America — an oil price at that level if it’s not sustained?

KILDUFF: I still think it’s unequivocally good. This is — ours is a consumer economy. Eighty percent of consumer spending drives the economy and this is a shot in the arm at tax cut, all the various analogies that we come up with when this happens, and it is also a huge competitive advantage to our industry that energy intensive like the transports but like heavy industry and other companies that have a huge energy input here, this is tremendously stimulative.

MATHISEN: One of the other things you said, I believe the last time you were here, was that there are a lot of smaller producers in the U.S., the frackers who are out there, who are: A, highly leveraged; and B, do not have the capital behind them potentially to withstand oil prices at these levels. And you thought there was high risk for some of them.

KILDUFF: There are most certainly high risks for some of them. What we’ve been finding out however is that their break-even point or their breaking point is much lower than we thought.

The range of cost goes from as low as $25 up to about $80, and they spread the cost of their fracking process overall the barrels that come out of the ground, so your incremental barrels get cheaper and cheaper.

However, that is still going to be the worry. You’ve seen the sector very hard, Tyler. I think it’s going to continue to get hit very hard and there could, in fact, be some bankruptcies. Some of my colleagues worry that this could be representative almost of a renewed financial crisis. I don’t think it will be that bad, but it will — $50 a barrel oil, like I said, will test everyone’s metal. There will be some casualties. It will range from smaller or more highly leveraged to Venezuela itself, which will likely default on their debt next year.

MATHISEN: Provocative words. John Kilduff, thanks very much. Happy Thanksgiving to you.

KILDUFF: You too, Tyler. Thank you.

MATHISEN: Thank you, sir.

All right. Business is really picking up at the ride sharing service Uber, after a new round of fundraising that reportedly secured at least another $1 billion in investments. That company that matches riders with drivers through a smartphone app now has an evaluation estimated to be as high as $40 billion for a cab service. That’s more than double the value in June and would make it more valuable than the likes of Twitter and Hertz.

Now, whether you’re in a car hopping or hopping in a car or on a plane or taking a train, the start of the annual Thanksgiving getaway is getting pummeled by a wicked East Coast snowstorm, making a mess of a lot of highways, delaying and cancelling flights, some of the nation’s busiest airports. But this year, there are millions of drivers getting a reason to be thankful.

Phil LeBeau has more.

(BEGIN VIDEOTAPE)

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): Traveling for Thanksgiving is never easy, with crowded airports and highways. But this year, the estimated 41 million Americans driving at least 50 miles will be paying far less to fill up their car. Gas on average is selling for $2.81 a gallon, almost 50 cents cheaper than a year ago.

UNIDENTIFIED MALE: Gas prices being lower, it’s really great. I’m really happy about it.

UNIDENTIFIED MALE: It has influenced my thoughts for going just about anywhere. Recently with the gas prices where they are, I just go.

LEBEAU: They’re not alone. The number of people traveling for Thanksgiving is up 4.2 percent, the highest level since 2007.

MARSHALL DONEY, AAA CEO & PRESIDENT: And clearly, the economic picture is brighter this year than it was last year at this time. And it’s helping to fuel consumer expectations and drive the increase in Thanksgiving travel.

LEBEAU: It will be a messy trip for many due to a winter storm churning its way up the East Coast, but Amtrak says it’s ready for the snow and cold.

JOSEPH BOARDMAN, AMTRAK CEO: We’re going to be able to operate. We see there is snow probably from North Carolina, all the way up in through New England, but we believe that we’re going to be able to operate and move people, and we appreciate the fact that it will be difficult for all the travelers.

LEBEAU: That includes 3.5 million Americans flying for Thanksgiving. Overall, airfares are slightly higher this year — and yes, those who waited to book tickets are paying more to fly over Thanksgiving.

DARA KHOSROWSHAHI, EXPEDIA CEO & PRESIDENT: We looked at actually bookings the week of Thanksgiving or just the week before Thanksgiving versus advance bookings, and prices tend to go up around 9 percent or 10 percent.

LEBEAU (on camera): Regardless how much people are spending to travel this holiday weekend, they all have one thing in common — the chance to spend Thanksgiving with family and friends.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago.

(END VIDEOTAPE)

MATHISEN: And coming up, nearly half a trillion dollars in tax breaks for business are on the table, and with little more than a month to make them permanent, the president threatens to veto. What now? We’ll take a look.

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MATHISEN: The administration is looking to clear the air by tightening regulations on ground level ozone, which has been linked to some serious health problems. A new proposal from the EPA which won’t be penalized until October would lower current ozone emission limits coming from autos and power plants. But industry groups and congressional Republicans say the stricter rules would mean higher cost for businesses and would place a heavy burden on the U.S. economy.

Well, something a lot of Republicans and Democrats agree on, passing a so-called tax extenders bill which would lock in nearly a half trillion in permanent tax breaks for businesses. But President Obama has already threatened so veto the legislation.

Our John Harwood joins us from Washington with more.

John, good evening.

What is in this bill and why would the president veto it?

JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT: Tyler, it’s a $450 billion over 10-year bill with renewals of the research and development tax credit, expensing depreciation for small business, things that every year Congress knows they’re going to extend and they are this time again, too, but they don’t do it on a permanent basis in order to preserve something that will be an engine to take other legislation through Congress. It is kind of a game but Washington has not decided to get rid of the game.

Now, what happened is the Democrats and Republicans negotiating and Democrats knowing they are losing control of the Senate in January to Republicans negotiated a deal to make some of those tax breaks permanent. That creates two problems for the administration.

One, is it lowers the amount of future revenue the government is going to have so that if we do a tax reform deal that is revenue neutral next year, that means the government is starting from a lower base, won’t have as much money to fund the things the president believes they need.

The second is what gets permanent status. And the things like the research and development tax credit would be permanent, but the earned income tax credit, which goes to low income working families would not be made permanent, liberals and the president say no go.

MATHISEN: Is any of this dispute tied up in what the president did last week on immigration? That’s number one. And briefly number two, I thought that the deal that had been struck had been in part negotiated by the Democrats own Harry Reid, the current majority leader, soon-to-be the minority leader.

HARWOOD: That’s right. This reflects the fact that they are at odds, reflects some tension between, of course, the Senate Democrats who just lost their majority, and a lot of their members blame President Obama and the White House. The difference for administration is that some of these tax breaks like the earned income tax credit by not being permanent, that represents a rejection of Democratic priorities and the president simply says he can’t live with that and that means they’re going to go back and have to negotiate a different package, but these extenders will eventually get passed.

MATHISEN: All right. John, thank you very much and happy Thanksgiving to you.

HARWOOD: Same to you.

MATHISEN: All right. Shares of Deere dipped on a shaky forecast. And that is where we begin tonight’s “Market Focus”.

The farming equipment maker posted fourth quarter results that were stronger than Wall Street pegged it on. But the company said its revenue and profit will keep falling in the new fiscal year as sales for its products remain weak. The stock down nearly 1 percent to $86.99, the finish there.

A sigh of relief for football fans who are Dish subscribers. CBS (NYSE:CBS) and Dish Network have agreed to another extension of their contract talks, meaning no CBS (NYSE:CBS) blackout over the Thanksgiving Day weekend. This is the second contract extension in six days. CBS (NYSE:CBS) shares down a fraction to $54.20. Dish 2 1/2 percent higher, they finish at $78.24.

Bristol-Myers Squibb (NYSE:BMY) says the FDA declined to approve the use of its experimental Hep C drug, which would be used in combination with other antivirals. The company wanted to market the drug with another experimental medicine that it abandoned in October because of competition for more potent rival drugs. Now, despite the rejection, shares there of Bristol-Myers up about a half percent to $58.86.

And one of today’s big movers was Seadrill, that stock plunged after the Bermuda-based offshore oil drilling contractor reported earnings that missed some analyst estimates. The company also said it was suspending dividend payments to cut debt. Investors were not happy about that shares, not at all. Shares fell almost 23 percent to $15.99.

Shares of GoPro took off after reports that the company is launching its own line of consumer drones with hi-def cameras. The company plans to sell the new devices late next year for between $500 and $1,000. The stock up about 6 percent to $79.05.

Well, there’s no avoiding it. It’s Christmas creep. The pressure from retailers to get consumers to do more holiday shopping and do it earlier and earlier and earlier each year. But are consumers taken abate and does the strategy even work for those stores?

Courtney Reagan now with a look.

(BEGIN VIDEOTAPE)

COURTNEY REAGAN, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): The holiday shopping season unofficially kicks off Friday or is it tomorrow? It’s gotten harder to pinpoint the start of the holiday season with the Christmas creep moving earlier every year. It’s all about market share for retailers and what it takes not to lose it to a competitor. The ultimate early bird gets the worm.

It’s always been competitive. Retailers sell discretionary goods. So, convincing consumers to buy non-vital items is a feat in itself. Add in the Great Recession and the influence from online shopping, which never closes, and the holiday dollar fight got even hotter and never cooled off.

THOM BLISCHOK, PWC STRATEGY& CHIEF RETAIL STRATEGIST: It is a fight for market share. I think what’s occurring is that the retailers have recognized that with this every dollar counts economy, that they must in fact bring shoppers into the stores as early as possible. Christmas creep is actually changing the shopping experience as we know it. So, shoppers have learned they are going to search for deals, they’re going to search for prices, they’re going to search for availability early in the season to sort of a war game where will they’re going to shop this season.

REAGAN: Kmart started running TV commercials about holiday layaway in September, that while poking fun at the Christmas creep were in fact holiday commercials before back to school wrap up.

Target (NYSE:TGT) offered Black Friday deals on November 10, and have had various deals since.

In 2012, Macy’s experimented with a midnight opening on Thanksgiving. It worked. So, other retailers began to pull Black Friday door busters forward to Thursday night and now, it’s a game to see who makes what move first then everyone piles on.

(voice-over): And shoppers are responding. IBM says online sales the weekend before Thanksgiving increased nearly 19 percent year over year and the national retail federation says nearly 55 percent of Americans begin holiday shopping in early November or before.

(voice-over): Many consumers do refuse to shop on Thanksgiving, but last year, an estimated 45 million Americans did shop on Turkey Day, and of those planning to shop on Thanksgiving this year, the majority of them did it last year, too.

Most retailers pay over time, offer meals and extra discounts for employees, in addition to asking for volunteers for Thanksgiving hours.

JCPenney CEO Mike Ullman says the store employees voted to open at 5:00 p.m. on Thanksgiving, so they could be earlier than competitors.

While it’s debatable whether earlier deals add to total sales or simply shift the timing, expects don’t expect the Christmas creep to ever really retreat.

For NIGHTLY BUSINESS REPORT, I’m Courtney Reagan.

(END VIDEOTAPE)

MATHISEN: Up next, need help in the kitchen? Well, we’ll show you a high tech assistant for whipping up that Thanksgiving meal.

(MUSIC)

MATHISEN: Thanksgiving is just a day away on course and you can almost smell the turkey roasting right now, unless of course you can’t cook. But, of course, there is an app for that.

Jane Wells has more.

(BEGIN VIDEOTAPE)

JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT: I think I’m charring the Brussels sprout rather than browning them, but we’re going to go for it.

(voice-over): If cooking in the kitchen this holiday leaves you sliced and diced, there is an app for that, more on that in a minute. It is that time of the year we spend time in the kitchen and spend money to be there, but the American Farm Bureau Federation says food inflation is having little impact on Thanksgiving. The average turkey dinner for 10 will cost $49.41 this year, only 37 cents more than last year.

(on camera): In fact, the turkey is a little cheaper this year and you might want to also consider turkey for Christmas because if you try a roast, it could roast your wallet.

(voice-over): The federal government now estimates sky high beef prices already up over 11 percent this year will rise another 5 percent in 2015. This even as the cost of feeding cattle stays low.

Why the disconnect? The USDA believes beef producers will feed cattle longer to fatten them up, and also hold back cows as they expand herds.

Back to help in the kitchen, that new app is called SideChef which talks you through recipes with pictures and audio cues. It’s kind of like a GPS, created by a former game developer Kevin Yu, who grew frustrated trying to cook with other apps.

KEVIN YU, SIDECHIEF CREATOR: Instead of my computer had like YouTube running at the same time. And I was like trying to open up all these different things and cooking and throwing ingredients in. You know, it came out and looked somewhat similar to the photos. But honestly, it was a big mess.

SIDECHIEF APP: Add crushed red pepper flakes, one half tsp and one piece to the sprouts and cook.

WELLS: I tried it out on a challenging side dish with farro, ferchotto (ph) and Brussels sprout.

(on camera): Well, I burned the garlic, some of it, but I’m going with it.

(voice-over): Despite my shortcomings, the result?

(on camera): Wow.

(voice-over): A definite improvement. Now, if I can only figure out what to do with the turkey.

For NIGHTLY BUSINESS REPORT, Jane Wells, Los Angeles.

(END VIDEOTAPE)

MATHISEN: And finally tonight, if cooking a thanksgiving dinner isn’t for you, the Old Homestead in New York City is offering what it calls the most extensive feast in Thanksgiving history. Nine course extravaganza, foie-gras stuffed squab centered around an organic turkey dressed with imported ground Japanese Wagyu beef. Sounds delicious but so does the price tag: 35 grand for four people.

That’s NIGHTLY BUSINESS REPORT for tonight. I’m Tyler Mathisen. Thanks for watching. Enjoy your Thanksgiving. We’ll see you back here tomorrow.

END

Nightly Business Report transcripts and video are available on-line post broadcast at http://nbr.com. 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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