Transcript: Thursday, February 12, 2015

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

NASDAQ is at its highest level since March 2000 — just around the time the
dotcom boom went bust. But today`s index is a lot different.

After 16 years together, Costco ditches American Express — and the stock
suffers a big blow.

MATHISEN: Economic ripple. As Congress calls for a resolution, a new
report puts a number on the amount of economic activity tied to those West
Coast ports and it`s big.

All that and more tonight on NIGHTLY BUSINESS REPORT for Thursday,
February 12th.

HERERA: Good evening and welcome.

Stocks rally. The S&P closes in on a record. The Dow Jones
Industrial Average sees a triple digit gain.

But we begin tonight with the NASDAQ, powered today by a 9 percent
move in Cisco, a deal in the online travel industry, and stocks like Nvidia
and, of course, Apple. The index is now approaching that famous or
infamous level of 5,000.

The number is synonymous with the dotcom bubble that peaked 15 years
ago in March of 2000 and went bust fast.

But the technology sector is a lot different now than it was back

Bertha Coombs takes a look.


Health care tech firm Inovalon`s IPO at the NASDAQ market site today is
representative is what is fueling the new boom in the NASDAQ composite.

Investor appetite for new tech stocks helped push the index within 5
percent of its all time Internet bubble high in March 2000. But at the
risk of sounding trite, analysts say this new tech boom is different.

ARI WALD, OPPENHEIMER: In 2000, you had this parabolic move in the
NASDAQ that was following the tail end of this 15-year secular bull market
and now, on the other hand, it`s been a much steadier healthy move into
5,000 on what we see as the — you know, the early stages of a new secular
bull market.

COOMBS: Among the biggest differences? Biotechs are now the biggest
driver of gains up 35 percent in 2014 as companies like Gilead have brought
big drugs to markets.

Another big difference? Tech valuations. Microsoft, the biggest
weight in the NASDAQ 15 years ago, traded at 70 times earnings.

Today, Apple the biggest driver, is valued at 14 times its forward
earnings after posting the highest quarterly profits of all time.

ERIN GIBBS, S&P CAPITAL IQ: I see this as a change in that consumers
are spending more on tech versus enterprise. Microsoft was mainly selling
to businesses. Now, Apple is obviously a very consumer-focused company,
and we`re all basically spending more money on our gadgets.

COOMBS: While the S&P 500 and the Dow industrials continue to set new
records, the NASDAQ composite has yet to take out that milestone, with big
tech stocks like Microsoft, Cisco and Intel well off their Internet bubble

Is the NASDAQ returned to 5,000 a reason for tech investors to take

WALD: Given really the broad-based leadership that we`re seeing
throughout the market, I think a breakout above 5,000 would only lead to
stronger gains for tech stocks.

GIBBS: From a girl`s (ph) perspective and fundamental perspective, I
don`t see it being a top at any reason now.

COOMBS (on camera): The number to watch on the NASDAQ, it`s 5,048.
That was the closing high on March 10th, 2000. The intraday high that day
was 5,138.

From the NASDAQ Market Site, Bertha Coombs, NIGHTLY BUSINESS REPORT.


MATHISEN: So, will it be old tech or new tech that gets the NASDAQ to
the next level?

Let`s ask Brian Blair. He`s managing director with Rosenblatt

Brian, welcome. Good to have you with us.

It was an interesting day today. Cisco had a very nice day after its
earnings. I called that old tech. Tesla had a rough day after its
earnings. I call that new tech.

It`s too easy to write-off some of those old tech companies, isn`t it?

BRIAN BLAIR, ROSENBLATT SECURITY: It is. You know, one of the
reasons is because they have large buckets of cash and they`re throwing a
lot of money into R&D and finding ways to grow and stay relevant now, and
the best ones are throwing money into what they believe will be the trends
of tomorrow.

But, yes, a lot of those companies, Cisco, Microsoft, still fighting
and staying relevant.

HERERA: So, where do you find the most opportunity? A lot of people
thought it would still be biotech this year, but we have seen some of the
biotech stock kind of roll over after massive IPOs last year.

BLAIR: Right.

HERERA: Where do you still see opportunity?

BLAIR: Yes, there`s still a lot of opportunity in the mobile sector.
Smartphones are still only about 55 percent of the global handset market,
and so, if you think about the global market, there`s still a lot of
opportunity to ride the wave of India getting the smartphone, the rest of
China getting 4G, you know, South America, Central America moving on to 4G

So, that`s one big area and I think the Internet itself provides, you
know, a lot of opportunity. I think there`s only about 2.5 billion, maybe
less than half the world`s population has Internet access so I think
there`s still opportunity there as well. I think for years to come.

MATHISEN: I don`t know whether to call Apple old tech or new tech,
and I would just call it good tech. As we look at the classic old tech
companies, the Intels, the IBMs, the Microsofts, the Ciscos, which of those
would you call the ones that are — the Oracles even — which would you
call the most vulnerable or unprepared for today`s new world and which
would you call the ones that are best positioned?

BLAIR: I think intel actually represents one that`s very vulnerable
and I think one that represents in many ways old tech. You know, if you
think about a lot of the most important trends in technology, a lot of them
related to mobile, to smartphones, to tablets, to wearables, which is a new
and emerging space, you don`t see intel. You really don`t see Intel
anywhere. And that`s where a lot of the growth and the volume has been in
the last ten years and Intel has been virtually non-existent.

They`ve still sell into desktops. They still sell into servers. So,
they are still able to put up a nice quarterly number, but they`re not
participating in the growth or where I think things are moving
directionally. So, I would put them on the top of the vulnerability list
in terms of old tech.

You know, IBM is another one that`s been struggling. We see them make
comments about investing in, you know, trying to be a part of big data, the
big data trend, cloud computing. But we don`t see it reflected in their
numbers. And so, I would put those on the top two on the vulnerable list.

On the good list, you know, Microsoft I think is really impressing in
a lot of ways with the future not just in Xbox, but they`re showing a new
virtual reality headset called HoloLens. It`s forward thinking. I think,
you know, they`re definitely looking ahead and they`re definitely in front
of things. I would separate them like that.

MATHISEN: All right. Brian, thank you very much. Appreciate the
answer. Brian Blair with Rosenblatt Security.

BLAIR: You bet.

HERERA: One Dow component that wasn`t up with the rest of the market
was American Express. In fact, it was down quite a bit.

Shares lost more than 6 percent. The Dow`s worst performer today
after Costco said it would stop accepting American Express credit cards at
its U.S. stores.

Dominic Chu is joining us now with how important the relationship is
between Costco and AmEx.

reason why AmEx said you can expect to see earnings and sales way down by
this relationship ending over the next couple of years because believe it
or not, the estimates are that about 8 percent of all spending on American
Express cards comes at Costco U.S. locations.

HERERA: Really? That high?

CHU: That`s how big — that`s how big it is.

And now, Costco is huge. They sell a lot of stuff. The National
Retail Federation says they`re the world`s second biggest retailer in terms
of total revenues. They sell a lot of stuff. And right now, over the past
16 years, the only ways you could pay out of Costco were cash, debit card
or an American Express, and then they linked the AmEx to their membership,
meaning that you could have an AmEx card linked to their membership, and
that`s a reason why it`s so huge.

MATHISEN: So, when will this — they were negotiating, broken it off
apparently. AmEx lost the deal with them. When does the deal end and when
will that revenue stream stop for them?

CHU: March of 2016. So, you can continue to use your AmEx card until
March of 2016. At that point, they`re going to be look for a new
replacement. Of course, the negotiations are ongoing between Costco, any
potential partners.

The big deal is AmEx`s relationship in Canada with Costco ended this
past year as well. They went with Capital One on a MasterCard basis. So,
that`s one of the things people look for.

Who`s going to replace AmEx? Could it be Capital One? Maybe it`s
Discover. Maybe it`s another bank using a Visa or MasterCard payment
processer. That`s to be a big deal.

HERERA: All right. Dom, thanks so much. We appreciate it. Dominic

MATHISEN: Despite the fall in American Express, stocks did end the
day higher, helped by a cease-fire deal between Russia and Ukraine, along
with higher oil prices, all three major indexes ended in the black for the
day. The Dow up 110 points, it finished at 17,972, just a few points shy
of 18,000. NASDAQ up 56, the S&P gained about 20.

HERERA: And more now on that ceasefire between Russia and Ukraine.
It helped ease investor concerns since anymore trouble in that region could
weigh on Europe`s economy. But not all of those issues between the nations
were ironed out.

Julia Chatterly reports from Brussels.


optimism from E.U. leaders I think here, leaving this meeting about the
peace deal signed between the pro-Russian separatists, Russia and the
Ukraine. I think the fact that the talks took 17 hours into the early
hours of this morning on two important points. One, ultimately, they were
pretty tough negotiations and two, the desperation of the lead is behind
them just to get something signed today.

But the billion dollar question now become: will all sides abide by
the cease-fire agreement that begins at midnight on Sunday?

There`s plenty of skepticism here behind the scenes given what we`ve
seen in the past and so that`s the spotlight now falling firmly on Russia.

There were no talks here today about further sanctions, but I think
the message is that pressure will remain and that actions speak louder than
words. We`ve left a lot of meetings bemoaning the fact that E.U. leaders
can`t agree on further sanctions on Russia. Perhaps that overshadowed and
offset today by the announcement of a collective $40 billion bailout for

But behind the scenes, no illusions of the difficulty of reforming a
country that is for all intents and purposes, at war.

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


MATHISEN: Onto the rapidly changing situation in Greece. Last night,
we told you about reports that an agreement in principle had been reached
between Greece and its eurozone creditors, but that quickly fell apart.

Michelle Caruso-Cabrera tells us now what went wrong and what might
come next.


was a night of high drama. Many participants in yesterday`s meeting
believed that they had reached a broad agreement in principle with Greece,
the details to be hammered out at another meeting this coming Monday. But
at the last minute, Greek finance minister, Yanis Varoufakis, refused to
sign the draft statement that they were supposed to release to the public
saying, he couldn`t sign it after putting in a call to Athens.

Despite that high profile breakdown, Greek stocks moved higher today
anyway. Market participants focusing on a leaked draft of what he was
supposed to sign and it showed that the Greeks made concessions that were
unexpected. The draft statement referred to exploring, quote, “the
possibility of extending and successfully concluding the present program.”
That`s something Greece previously said it would never do. And it seems
the crucial step though in order to get continued support for their banks
from the European Central Bank.

Also adding to the optimism, a German newspaper reporting that the ECB
had agreed today to extend even more loans to Greek banks through an
emergency lending program. In one way, this is bad news. It shows that
the banks in Greece are still under stress.

On the other hand, market participants say it shows the ECB is still
willing to support the country. All of Europe`s finance ministers meet
again for another negotiating session on Monday. That day will be key to
see if they can get a solid deal hammered out.

For NIGHTLY BUSINESS REPORT, I`m Michelle Caruso-Cabrera.


HERERA: Still ahead, negotiations at the West Coast ports are
strained and now members of Congress say they`re very concerned.


HERERA: A big miss for retail sales for the second straight month.
Sales fell more than expected 0.8 percent in January. Now, part of the
reason can be explained by the falling gas prices, which lowers receipts at
service stations.

But as Steve Liesman reports, that`s only part of the story.


retail sales report for January sparking an economic mystery. If Americans
are saving more on cheap gasoline, and making more because the nation added
a million jobs over the past three months, where`s the money going? Rather
than the half percent decline expected by Wall Street, the government said
spending in America shops fell nearly a full percentage point in January.

There was an expected 9 percent plunge in gasoline station sales, but
sales were also off at department stores, furniture outlets and auto

Did the extra green bucks just vaporize? Well, that`s not the most
likely explanation. Rather, economists on the case theorize more money is
being saved and used to pay down debt. A recent Visa report found
consumers hanging on to roughly half of gas savings.

Some of the money could be going to services which accounts for two-
thirds of all consumer spending and is not counted in the retail goods
report. Service spending would include increased spending on health

But there`s another solution to the mystery: inflation or in this
case, deflation. The number reports are not adjusted for changes in
prices. If prices fall, Americans could be buying the same stuff but just
spending less for it. So, when the government reports inflation adjusted
or real spending when it calculates GDP, spending could show a gain.

Case solved? Not quite. Optimists aren`t ready to assume consumers
won`t spend the gas windfall and they think the real evidence will come in
the months ahead, when the mystery of the missing money is solved at cash
registers around the nation.

For NIGHTLY BUSINESS REPORT, I`m Steve Liesman in Dallas.


MATHISEN: A big threat to the economy is the slowdown at the West
Coast ports. According to Guggenheim Securities, the L.A. Long Beach port
alone accounts for nearly 40 percent of country`s containerized trade and
it`s estimated that 12.5 percent of U.S. GDP tied to cargo moving through
those west coast ports.

As we told you last night, work has been suspended again, this time
for four days.

Jane Wells has more.


Thursday, more than 40 container ships were either anchored off the West
Coast or we`re circling, waiting for anchorage space, as work loading and
offloading ships again came to a standstill.

DELETED). Stay united.

WELLS: That`s how strained negotiations have become between shipping
lines and terminal operators against the union representing longshoremen.
With cargo backed up, the Pacific Maritime Association or PMA representing
employers, said there was no point in hiring crews TO work vessels,
especially since Thursday, Lincoln`s birthday, would require higher pay, as
much as $92 an hour for the most senior foreman. The same pay for this
weekend and Monday`s President`s Day. So, no ship work either — as the
PMA calls the congestion which it blames on dock workers, a strike with

STEVE GETZUG, PMA SPOKESMAN: Every time we solve an issue that is
important, they layer on new demands. The latest one we can`t live with.

WELLS: According to management, the demand it cannot live with is one
by dock workers to be able to unilaterally fire arbitrators. While the
U.S. economy could suffer as goods take weeks longer than normal to move in
and out of the West Coast, Congress is worried.

REP.KURT SCHRADER (D), OREGON: Well, this is clearly the greatest
threat our nation faces, notwithstanding the stuff that`s going on

WELLS: There would need to be a complete strike or lockout for the
president to be able to force a cooling off period and reopen the ports
under the Taft-Hartley Act. Work is supposed to continue moving containers
out of the yard and as for negotiations which started last may —

MCELLRATH: We`ve been sitting here as I give this speech for five
days waiting for PMA and they haven`t shown up yet.

WELLS (on camera): The PMA says negotiations were resuming today and
the reason that it hasn`t met with the union at all this week is because it
says there has been no point; that while management has offered
concessions, the dock workers, quote, “won`t budge.”

For NIGHTLY BUSINESS REPORT, Jane Wells at the port of Los Angeles.


MATHISEN: The impact of the slowdown is already being felt.
According to Goldman Sachs research, shippers have diverted cargo away from
the West Coast ports even at the expense of increased freight costs and
that`s leading to a decline in intermodal volumes for companies like BNSF,
and Union Pacific. Retailers are also rerouting shipments using air
freight and that is helping companies like FedEx and UPS.

HERERA: We begin our “Market Focus” tonight with disappointing
results from AIG.

The insurance giant saw its profit slide, hurt by weak performance in
its corporate category. The company did announce a buy back about $2.5
billion worth of shares, which adds to the nearly $5 billion in stock that
it bought back last year. It also declared a dividend of about 12 cents a
share that has a yield of about 1 percent.

After the bell, the shares were volatile. Before the close, the stock
was up 20 cents to $52.45.

It was the opposite story for CBS, which also reported after the
close. The Tiffany network reported better-than-expected revenue on higher
ad sales, helped by Thursday night football and the ads for the midterm
elections. That sent shares initially higher in after-hours trading.
Before the close, the shares were up nearly 2 percent to $57.77.

Inflation in Brazil and a stronger dollar took a bite out of Avon`s
overseas revenue. The cosmetics maker`s results missed analysts` estimates
on both the top and bottom lines. The company said those currency
fluctuations will continue to weigh on performance this year, as it does
most of its business outside the U.S. But Avon also told investors it
expects its North American business to turn profitable for the first time
in three years. Shares rose more than 1 percent to $8.69.

MATHISEN: Kellogg still has the breakfast blues. The Corn Flakes
maker posted a big quarterly loss and cut its forecast for long-term annual
revenue growth, as cereal sales continue to be quite sluggish. Shares fell
4.5 percent to $63.30.

Apache also posted a quarterly loss as it wrote down the value of its
oil and gas assets. Revenue lower than expectations also, and it announced
it is slashing its rig count by more than a third in response to crumbling
crude prices. The stock was down slightly to $64.58.

And Time Inc. gave investors a weak sales outlook for 2015, which
weighed on shares in today`s trade. This as the publisher of magazines
like People and Sports Illustrated reported a lower-than-expected quarterly
profit, as it has been dealing with falling circulation and advertising
revenue. Shares off almost 2 percent. They settled at $24.49.

HERERA: Expedia is on a shopping spree. Its latest acquisition,
Orbitz, just a few weeks after buying Travelocity. The deal is valued at
more than a billion dollars take on bigger rival Priceline. Orbitz soared
on the news as did Expedia.

Simon Hobbs takes a look at how this deal changes the global online
travel industry.


Orbitz is one of the smallest online travel industries and would have
struggled in the future against the growing market power of giant rivals
Expedia and Priceline, who spent billions on advertising a new technology.

So, as the saying goes, if you can`t beat them, join them. Expedia
already boasts 13 major brands. For $1.6 billion in cash, Expedia CEO Dara
Khosrowshahi can now add the Orbitz brands the Orbitz`s own CheapTickets,
ebookers and HotelClub. Those four, he says, will be much more profitable
once he`s cut $75 million in cost and gives them access to Expedia`s big
stockpile of hotel rooms for sale.

DARA KHOSROWSHAHI, EXPEDIA CEO: We`ve got one of the broadest global
inventories out there and we think that the complement to the Orbitz
loyalty program, the bank program that Orbitz has. We think that`s going
to be a terrific combination.

HOBBS (on camera): The CEO of his target at Orbitz, Barney Harford,
is well-respected. Over the last two years, he`s reinvigorated the
business with better technology and a private label business essentially
running the back office for ad hoc sites like AmEx Travel, but ultimately
without the power of Expedia and Priceline to fit in real time for your
online business, he went for a trade sale.

BARNEY HARFORD, ORBITZ CEO: People may have tried to write us off in
the past, but I think they can see the continued ongoing growth really
showing through.

HOBBS (voice-over): It was what remains of Travelocity, that Expedia
bought three weeks ago for $280 million. Trivago cost Expedia well over
$600 million, but rival Priceline deal`s are even bigger. OpenTable for
$2.4 billion and Kayak for $1.7 billion.

Despite the consolidation, Dara Khosrowshahi rejects the idea that
there`s a lack of competition or that the regulators should get involved.

KHOSROWSHAHI: We compete in a much larger segment in general and
there`s lots and lots of competition for that top audience.

HOBBS: And for travelers shopping online, the CEO of Expedia promises
that all 17 major brands will operate with an independence that ensures
there`s still a deal to be had even if they`re still all owned by the same

For NIGHTLY BUSINESS REPORT, I`m Simon Hobbs at the New York Stock


MATHISEN: Coming up, what some local florists are doing to keep
businesses from wilting as competition increases and Valentine`s Day


HERERA: Business is blooming for the flower industry but not
necessarily for your local florists. Increased competition in online
delivery companies are pinching many small business owners.

But as Kate Rogers reports, some old-fashioned mom and pop shops are
finding an edge in order to battle back.


year, more than $2 billion will be spent on flowers for Valentine`s Day
alone. But local florists like Caldwell Flowerland in New Jersey are
seeing increased competition and in some cases losses. That`s because of
big e-commerce players like 1-800-Flowers, FTD and ProFlowers.

In fact, local florists saw their revenue slide nearly 40 percent last
year, according to IBIS, a market research group.

Flowerland, in business 30 years, has also seen its revenue fall. But
owner Frank Dellisanti says there`s a silver lining.

but it also educated customers where to come back to. So, it also weeded
out other competitors, too.

ROGERS: Any way you spin it, there are more options than ever, a new
crop of start-ups are blooming in the flower delivery space. Angel List
names 30 of them, including Urban Stems and Bloom That, which delivered
bouquets on demand within an hour or so. Even Whole Foods is getting in on
the action, partnering with grocery delivery start-up Instacart in three

And then, there are the supermarkets and big box stores like Walmart.
Analysts say they could be more detrimental to local florists than
ecommerce. Dellisanti said he has one thing on the action partnering with
grocery delivery start-up Instacart in 15 cities.

And then, there are these supermarkets and big box stores like
Walmart. Analysts say they could be more detrimental to local florists
than ecommerce.

Dellisanti says he has one thing, though, that big box stores are
missing: a personal touch.

DELLISANTI: Yes, we try to keep a year round price and then we try to
keep the consistency and quality.

ROGERS (on camera): Business here at Flowerland is still pretty good.
In fact, they`ll sell about 10,000 of these roses over the Valentine`s Day
holiday weekend this year. But increased competition from other ecommerce
players in the space has hurt other local florists around the country some
of whom have had to close their doors for good.

For NIGHTLY BUSINESS REPORT, I`m Kate Rogers in Caldwell, New Jersey.


MATHISEN: Kate got the rose from the bachelor.

Finally tonight, three people to fight the odds and one, the $564
million Powerball jackpot. Two of them are not sitting here tonight. The
tickets told in Texas, North Carolina, and Puerto Rico. That`s the first
winning Powerball ticket ever sold outside of the continental United

If the winners choose the lump sum, the three would split $381 million
before taxes.

We`re both here, Sue.

HERERA: I know, which means we didn`t win, but if you`re watching,
you probably didn`t either. So, come back here tomorrow night, right?

MATHISEN: That`s right. We`ll see you back here.

You`re having a couple of days off. I`ll see you when you get back.

HERERA: OK, thanks.

That`s it for NIGHTLY BUSINESS REPORT, I`m Sue Herera.

MATHISEN: And I`m Tyler Mathisen. Have a great evening. We`ll see
you back here tomorrow.


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