Transcript: Thursday, February 5, 2015

NBR ThumANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Sue Herera.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Massive data hack.
Eighty million customers and employees of the nation`s second largest health insurer, Anthem, had their personal information stolen. And on the black market, that data is worth gold.

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Crisis stage. Why the next few days could be critical for America`s West Coast ports and the global economy that relies on moving all those goods.

HERERA: #Bigbeat. Twitter earnings doubled Wall Street`s estimates.
Revenues grew sharply. But investors are focused on something else.

All that and more tonight on NIGHTLY BUSINESS REPORT for Thursday, February 5th.

MATHISEN: Good evening, everyone, and welcome.

Back in the black — stocks are now positive for the year as the Dow Jones Industrial Average rose more than 200 points, its fourth straight day of substantial gains. More on that in a moment.

We begin tonight, meanwhile, with a massive data breach. Anthem, the nation`s second largest insurer said hackers broke into a database, gaining access to personal information on about 80 million customers and employees.
The breach hit all of the company`s businesses, possibly touching individual policy holders, customers at large employers, and Medicaid managed care plans.

Shares of Anthem formerly known as WellPoint fell on the news, as you see there.

Bertha Coombs has more now on the breach, who`s at risk, the information that was accessed and what makes this one different.

(BEGIN VIDEOTAPE)

BERTHA COOMBS, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
Anthem said it discovered the breach a week ago, quickly contained it and notified the FBI. But the damage could be devastating for the insurer`s past and current customers. In a letter to Anthem, members posted on a dedicated site, CEO Joseph Swedish personally apologizes, saying, “While no medical data appears to have been stolen, personal information up to 80 million current and former Anthem members and employees was compromised, including birthdays, Social Security numbers, street addresses, e-mail addresses and employment information.

Analysts say it`s important that the company win back trust.

ANA GUPTE, LEERINK MANAGING DIRECTOR: Clearly, it is a crisis. They have to manage this properly. They have to assure their customer base that they are taking this very seriously.

COOMBS: Anthem is the nation`s largest Blue Cross operator with more than 37 million current members across 13 states. Accounting for the scale of the attack, the company will pay for credit monitoring for those exposed. Much of that cost picked up by its insurance, nearly half of health care firms have secured coverage and boosted systems to meet cyber threats, at a higher rate than other industries according to Marsh and McLennan, but it`s a race with no end.

PETER BESHAR, MARSH & MCLENNAN COMPANIES: We have to constantly evolve so there`s a technological solution to some of these aspects.
Greater degrees of encryption, for example, two factor authentication for enhanced password protection and detonation software to try to fight off some of the spear fishing campaigns.

COOMBS (on camera): Anthem`s data was not encrypted but a spokesperson said the hackers were able to compromise the administrator`s credentials. So, at that point, encryption would not have thwarted the attack.

Bertha Coombs, NIGHTLY BUSINESS REPORT, New York.

(END VIDEOTAPE)

HERERA: The data that was accessed has a lot of value on the black market.

Eamon Javers has been looking into that story and he joins us now from Washington.

So, Eamon, if this hack was done by cyber criminals, in general, what could this information be worth?

EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, what`s interesting, Sue, is that health information is a lot more valuable to hackers on the Internet black market than, say, even credit card information. I`ve been talking to some cyber security experts today who say you can sell health records online on the black market for between $25 and $250 each. That compares to credit card numbers which are going on the black market from between $1 and $5 each. So, a lot more expensive for that health information, and that really incentivizes those hackers to go out and get just this kind of data so they can resell it?

MATHISEN: When you say health information, Eamon, what are you talking about here? Are you talking about my cholesterol count or my medical history? Or are you talking about the personal information that is attached to those files?

JAVERS: It`s all that personal information you use in a medical record that you file an insurance claim, because a lot of what`s happening here, Tyler, is they`re filing false insurance claims, and that`s where the profit comes in for the criminals. They`re out there filing totally bogus claims or they`re selling the information to foreigners who then come to the United States and get actual health care paid for by these phony cards, or they`re out there buying health equipment like oxygen generators and other things and then reselling those on the black market and getting insurance reimbursement for that, all of it fraudulent.

HERERA: Wow. So, what happens now? What`s the next step, Eamon?

JAVERS: Well, one of the interesting questions here among the people who look at this black market for this information is whether or not the massive amount of information from this hack that could become available on the black market is actually going to drive the price down following the old fashioned law of supply and demand in the black market. Will those health records now be sold for a lot less than they were sold for before, now so much more potentially coming to the black market? That could be unintended consequence for the people who actually did the hack if they try to sell it.

HERERA: Eamon, thank you very much.

JAVERS: You beat.

HERERA: Eamon Javers in Washington.

MATHISEN: Well, the bulls were out in force today. The benchmark index now positive for the year as oil prices rebounded. Earnings, decent.
And Pfizer (NYSE:PFE) entered into a $17 billion deal. We`ll tell you about that in just a moment.

At the close, the Dow Jones Industrial Average tacked on 211 points, finished the session at 18,884, NASDAQ up 48 points, and S&P was higher by 21.

As for oil, many traders expect the volatility to continue. Today, prices rose about $2 to settle above $50 a barrel. Brent also climbed.

HERERA: Now more on that Pfizer (NYSE:PFE) deal. The drug company said it will buy Hospira (NYSE:HSP), a company that makes injectable drugs for $70 million. Shares of both companies rose. Dow component Pfizer
(NYSE:PFE) gained nearly 3 percent and Hospira (NYSE:HSP) gained about 35 percent.

So, what are injectables and what does Pfizer (NYSE:PFE) get out of a deal?

Meg Tirrell has the details.

(BEGIN VIDEOTAPE)

MEG TIRRELL, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
Pfizer (NYSE:PFE) says its purchase of Hospira (NYSE:HSP) will immediately add to its earnings and strengthen what it calls its global established products unit.

AARON GAL, SANFORD: Hospira (NYSE:HSP) is the U.S. largest maker of injectable drugs, which are primarily drugs in the hospital, the majority of those are things like anti-infectives, anesthetics, analgesics and oncology drugs that are very, very common, essentially the stocks that`s used day in and day out with patients.

TIRRELL: Hospira (NYSE:HSP) also has a business in biosimilars, generic versions of drugs made from living cells. Like many medicines for cancer and rheumatoid arthritis. Pfizer (NYSE:PFE) said that`s an area where it plans to grow, as the U.S. finalizes regulation around their path to market.

GAL: Estimates off the size of our market for the next ten years vary all the way from $2 billion and $20 billion. It will depend primarily which drugs make it to the market and when and more interestingly, around what will be the price of those drugs.

TIRRELL: Pfizer (NYSE:PFE) analysts applauded the deal. The drug company dealing with generic competition to many top selling drugs, like Lipitor and Celebrex and it said it`s considering a split of its businesses within the next few years. Analysts say this seal bolsters its unit of older products to better stand alone.

(on camera): And those $17 billion is a lot, Pfizer (NYSE:PFE) still has cash to spend. CEO Ian Reed saying today the company looks for business development opportunities and the Hospira (NYSE:HSP) accusation will not be a distraction. And if its $120 billion attempt to buy AstraZeneca last year is any indication, Pfizer (NYSE:PFE) has the appetite for a lot more.

For NIGHTLY BUSINESS REPORT, I`m Meg Tirrell.

(END VIDEOTAPE)

MATHISEN: Call it debt diplomacy, the finance minister of the newly installed Greek government met today with its counterpart in Germany in an attempt to renegotiate the terms of Greece`s big bailout. But Germany isn`t budging and deep divisions remain.

Annette Weisbach reports now from Berlin.

(BEGIN VIDEOTAPE)

ANNETTE WEISBACH, NIGHTLY BUSINESS REPORT CORRESPONDENT: There was no agreement whatsoever between the German and the Greek finance minister here at the meeting in Berlin. While Mr. Schaeuble, of course, the German finance minister insists that the new Greek government is working together with the European Union and troika and also sticking to the terms of the current bailout. Mr. Varoufakis, who is the new Greek finance minister, insisted that his government is not going to accept the terms of the current bailout, and also, what they want is a bridge program until the end of May so that they can have debt talks and also think about broader reform program for their economy.

The bottom line from the meeting here in Berlin is that Germany has not moved a centimeter and the pressure is ever so high for Greece to actually really present viable program for their economy and also for their society.

For NIGHTLY BUSINESS REPORT, I`m Annette Weisbach in Berlin.

(END VIDEOTAPE)

HERERA: And now to Athens where Julia Chatterly has been gauging the reaction.

(BEGIN VIDEOTAPE)

JULIA CHATTERLY, NIGHTLY BUSINESS REPORT CORRESPONDENT: The Greek prime minister returned to Athens with the defiant message, saying that he`s given the Greek people their voice back. He also said that in just one week, he changed the narrative in Europe a way from austerity. I think some European leaders will perhaps argue that that message was already filtering through in the past month, but there`s one or two people behind me that agree with the message there. You can see what I think for the first time in all the times I`ve been here in Athens, and that is a show of support for the government here. There are people blowing whistles, waving Greek flags, chanting their support of the government and the message they take in and across in the last two days.

I have to admit, it worries me because it makes a comedown or a climb- down by this government very difficult to achieve. What we`ve already heard them say is we`re not going to argue the debt right now. They`ve already softened their message as far as wages and pension, raising its concerns. The question is, can they do enough to appease European leaders and get what they want?

They`re going to announce their program on Saturday. Then, they`re going to have a confident vote in the government on Monday. That is then what they will take to the European leaders next week and that`s going to be crunch time for Greece and the future of this country because the clock is ticking to work out just what can be done for Greece going forward.

For NIGHTLY BUSINESS REPORT, I`m Julia Chatterly in Athens.

(END VIDEOTAPE)

MATHISEN: Meanwhile, in Denmark, that country`s central bank cut its benchmark interest rates again. The fourth cut in less than three weeks.
The move designed to protect its currency peg to the euro which has been stranded since the European Central Bank announced its stimulus program.

HERERA: Still ahead, Twitter`s earnings were better than expected but there was one number that investors are focusing in on.

(MUSIC)

MATHISEN: More fallout from the big hack at Sony (NYSE:SNE) Pictures.
Amy Pascal, co-chair of Sony (NYSE:SNE) Pictures Entertainment and the executive who oversaw is controversial film “The Interview” will now step down. The cyber attack, as you recall, was one of the biggest in corporate American history, leaking thousands of e-mails, many of them embarrassing.
Pascal will leave her post in May.

HERERA: After the close of trading, Twitter surprised investors with its fourth quarter results. The company earning 12 cents a share doubling Wall Street estimates. Revenue was about $480 million easily topped consensus as well. Shares surged initially in after hours trading.

Julia Boorstin has the one big takeaway from Twitter`s results.

(BEGIN VIDEOTAPE)

JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Twitter is making a lot more money even if it`s not adding a lot more users. The company finishing the quarter with 288 million monthly active users, that`s up 20 percent from a year earlier, but means it added just 4 million users over the course of the quarter, fewer than Wall Street had expected. What that means is that Twitter is making a lot more money on its existing user base, with the amount of revenue Twitter makes for every thousand timeline views growing 60 percent over the past year.

The company bolstering its ad business by giving brands new tools to target mobile users in particular. Those mobile users now represent 80 percent of Twitter`s audience and 88 percent of its advertising revenue.

For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Los Angeles.

(END VIDEOTAPE)

MATHISEN: Well, as you know, twitter has garnered a lot of attention since it went public, both positive and negative, and it`s taken investors on a wild ride.

(BEGIN VIDEOTAPE)

MATHISEN: November 2013, Twitter officially becomes a public company.
The social network that allows people to post messages in 140 characters or less priced at $26 a share in what was the most anticipated tech IPO since Facebook (NASDAQ:FB).

And soon after trading began, investors clamored for a piece of the company. The stock surged, closing its first day as a public outfit at $41.65, a gain of 60 percent.

And by the end of the following month, December 2013, Twitter reaches its all-time high of $74.73. But then a proverbial tweet storm, investors demand more — more user growth, more innovation and when they don`t get it, they sell. Shares begin to stumble and today, the stock is about 44 percent below that all-time high. And that is nothing to tweet home about.

(END VIDEOTAPE)

HERERA: LinkedIn (NYSE:LNKD) reports a huge jump in quarterly revenue and that`s where we begin tonight`s “Market Focus”.

The corporate networking site saw sales rise, as more businesses used its service to find job candidates. Expansion in international markets like China also helped LinkedIn (NYSE:LNKD) post a beat. Shares were much higher initially after the close. Before the bell, shares were up 2.5 percent to $237.97.

It was a totally different story, however, for Pandora. The streaming music service reported revenue that widely missed expectations as mobile advertising growth slowed. The bad news didn`t stop there, either. It gave revenue guidance for its current quarter that also trailed consensus.
Shares got slammed initially in after-hours trading. Before the close, shares were off just slightly to $18.41.

Strong holiday demand for its skin care and make up products helped Estee Lauder post better-than-expected results. The beauty company warned that full-year sales would fall more than expected because of the stronger dollar, but investors shrugged that off. Shares popped 8 percent to $78.40.

MATHISEN: A tough day, folks, for shares of Dunkin` Donuts. A lot of people like the coffee and donut chain`s profit trailed estimates and it cut its full-year outlook, blaming consumer challenges and competition in the breakfast environment. It`s really a market. The company did raise its quarterly dividend to around 26 cents a share, for a yield of about 2 percent, and all the sugar (ph) you can inhale. Still, shares fell more than 1 percent to $46.03.

Shares of Sprint, meantime, rose after it said its quarterly revenue fell less than expected. This as the wireless provider attracted more subscribers by cutting prices, offering big promotions. Shares up more than 5 percent. They finished at $4.82.

At the same time, Verizon (NYSE:VZ) is wheeling and dealing after the bell. The company selling some wireline assets to Frontier Communications (NYSE:FTR), $10 billion on that one. The Dow component is also selling some cell towers to American Tower (NYSE:AMT) for $5 billion. It`s going to use some of the proceeds to buyback about $5 billion of Verizon
(NYSE:VZ) stock. Look at the shares moving higher initially after the bell. Before the close, the stock was up a fraction to $47.86

HERERA: And now to the economy. And the trade deficit which jumped in December to the highest level in more than two years. The Commerce Department reports the deficit rose 17 percent to more than $46 billion as exports fell and imports climbed to a record level. And economists expect the deficit to widen even further.

MATHISEN: Well, trade deals have been a key focus in Washington recently, particularly because many there think an ambitious Pacific trade pact could be an area where both parties come to get a deal done. Some estimates say a deal would raise U.S. GDP by half a percentage point.

John Harwood spoke with the U.S. trade representative, Michael Froman, and he joins us now from Washington — John.

JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT: Tyler, you know, trade deals are always hard to get through Congress. This one will be no exception. The majority of Republicans don`t like President Obama.
Democrats don`t like trade deals because they think they may be bad for labor and the environment but Mike Froman told me that this one will be good for Wall Street and workers alike.

(BEGIN VIDEO CLIP)

MICHAEL FROMAN, U.S. TRADE REPRESENTATIVE: This is core to middle class economics in terms of creating jobs, supporting jobs here, improving wages and so, I think there`s an interest on both sides coming out of the election of November to find areas that they can work together on in order to help strengthen the U.S. recovery.

And I`ve heard from a lot of investors, a lot of companies that are looking to determine where they should put their next pact. With these trade agreements, the U.S. will be at the center of a web of agreements giving unfettered access to two-thirds of the global economy, and that makes the U.S. an incredibly attractive place for investment.

(END VIDEO CLIP)

HARWOOD: But if this goes through, it won`t be because of big public demand for it, Tyler. In a recent NBC News/”Wall Street Journal” poll, when respondents were asked to list the areas they want Washington to focus on, trade agreements were dead last.

MATHISEN: Specifically, John, has to happen for this deal to go through. And do these deals go through unscathed or do they get pecked at like a duck?

HARWOOD: Well, there are three elements that have to go through if it will get through unscathed. First of all, Congress has to grant the president trade promotion authority that gives him the right to trade on the up and down vote with no amendments. That`s one agreement.

And then, he`s got to get a final deal with his Asian counterparts.
There`s some big disagreements remaining, especially with Japan over agriculture and autos.

And then, finally, once you got a final deal, then they have to take it back to Congress and have it pass both houses, usually fairly easy to do in the Senate, not so easy in the House of Representatives. They`ll need about 180 Republicans and about 40 Democrats.

HERERA: So, it sounds as though, I know you said at the top of your report, that it was going to be a tough sell. But could you put odds on whether or not it will happen?

HARWOOD: I think it`s likely. This is difficult, but it`s not impossible and since both sides don`t have much they can agree on, they`ve got a lot of incentive to do at least one thing and this is it.

HERERA: John, thank you very much. John Harwood in Washington.

Well, you know, much of the trade between the U.S. and Asia goes through the West Coast ports and all that economic activity could take a big hit if a deal isn`t reached soon between dock workers and management.

As we`ve been reporting, the slowdown has been going on for months now but as Jane Wells reports, a complete standstill could be just days away.

(BEGIN VIDEOTAPE)

JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): It has gotten so bad at West Coast ports, the company say some ships are waiting over a week for a parking space and ships that used to take four days to unload are now taking 15. The group representing shippers and contract negotiations with dock workers warn the system could collapse on itself in five to 10 days.

JAMES MCKENNA, PACIFIC MARITIME ASSN. CEO: Now, the PMA must decide how much longer we pay Longshore workers to work slowly. These slowdowns are having the same result as workers strike, except that workers are still getting a paycheck.

WELLS: In a rare move, the Pacific Maritime Association or PMA has gone public with the contract it is offering dock workers after nine months of negotiations. The PMA said the average dock workers on the West Coast earns $147,000 a year and raises over the next five years will boost that pay to 160 grand. It has offered to continue fully funding all health care with no deductibles, premiums or co-pays.

It also raising pensions 11 percent and giving dock workers jurisdiction over the maintenance of trailers used by trucks to move cargo around the ports. Apparently, this has not been enough.

MCKENNA: The PMA has concluded that the latest offer is far as we can go at this point.

WELLS (on camera): The union says both sides are extremely close to a resolution and to shut the ports down now would be reckless and irresponsible. In the meantime, companies like Honda and Subaru are reportedly paying more to fly in auto parts and in the U.S., hog farmers say the bottleneck here is hurting their exports to Asia.

PMA CEO Jim McKenna said in a conference call with reporters that if the ports come to a complete standstill, the president could step in and force a cooling off period, giving power to a mediator to bring about a contract. But as the shutdown in 2002 proved, it can take months, maybe longer to recover. And this time, there is more competition coming with the widening of the Panama Canal.

MCKENNA: What`s at risk here? The national economy, commerce. Place goes down, we all got major, major problems.

WELLS: How major those problems are, we`ll find out in about a week.

For NIGHTLY BUSINESS REPORT, Jane Wells, San Pedro, California.

(END VIDEOTAPE)

MATHISEN: And still ahead, what will Wall Street and Main Street be watching for in tomorrow`s big monthly employment.

(MUSIC)

MATHISEN: Well, long-rumored RadioShack now makes it official. The company has filed for Chapter 11 bankruptcy protection. The retailer says it will sell up to 4,200 stores to shareholder Standard General and more than 1,700 of the stores will be cobranded with Sprint.

HERERA: A major oil field service company says it plans to lay off
5,000 employees or about 9 percent of its workforce. Weatherford International (NYSE:WFT) is citing the sharp downturn in energy prices and says the move is expected to save the company $350 million annually.

MATHISEN: And the number of Americans filing for unemployment benefits rose last week. Initial jobless claims up 11,000 to 278,000 for the week that ended January 31st.

And now, attention turns to the government employment report for January. It`s due out tomorrow. According to Dow Jones, economists expect non-foreign payrolls to increase 237,000 and the unemployment rate to come in at 5.5 percent.

Hampton Pearson has more now on tomorrow`s report and what it might mean for the Federal Reserve and the markets.

(BEGIN VIDEOTAPE)

HAMPTON PEARSON, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
While more people filed unemployment claims last week, the overall number though seeking jobless benefits remains near historic lows, at just under 293,000, the four-week average dropped 15 percent in the last year.
Economists say that decline means businesses are keeping their workers and potentially looking to hire, after one of the best years for job growth in more than a decade.

JOE LAVORGNA, DEUTSCHE BANK CHIEF ECONOMIST: Last year was best year of job growth since `99. Unemployment is 5, 6. Claims had been well-below
300,000 for two weeks in a row.

Tax receipts are very solid. We`ve got a massive tax cut to U.S.
households. By the way, we had some of the best spending data last quarter we`ve had in about ten years.

PEARSON: The trade deficit jumped more than 17 percent to just over
$46 billion in December. That`s a potential drag on the overall economic growth, including the job market, as the strong dollar makes U.S. exports more expensive overseas. Leading money managers keep a close watch on possible external shots to the U.S. economy.

SHAWN MATTHEWS: I think over the next six months, we`ll continue to see strong job growth, but it`s really about the international marketplace and it`s either any external shocks as far as financial products, which will drive really what happens in the jobs market.

PEARSON: What won`t be in tomorrow`s jobs report is the big spike in planned layoffs in the energy industry due to falling oil prices. In January, firms announce more than 21,000 planned layoffs in that industry according to a report from Challenger Gray and Christmas.

Meanwhile, Fed watchers and leading economists say if the job numbers come well blower the consensus, it`s likely Janet Yellen and her fellow monetary policymakers will be even more patient when it comes to raising interest rates. An upside surprise however, if it also includes positive signs for wage growth, increases the possibility for a rate hike this year.

(on camera): The improving job market is boosting consumer confidence but not worker`s wages. Tomorrow`s job reports contains key annual revisions that should give us a clearer picture of what really happened with jobs and wages last year and a preview of what lies ahead.

For NIGHTLY BUSINESS REPORT, I`m Hampton Pearson in Washington.

(END VIDEOTAPE)

HERERA: And that does it for NIGHTLY BUSINESS REPORT for tonight.
I`m Sue Herera. Thanks for watching.

MATHISEN: And I`m Tyler Mathisen. Thanks from me as well. Have a great evening, everybody, and we will see you back here on jobs Friday, tomorrow night.

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) 2015 CNBC, Inc.

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