Transcript: Nightly Business Report — July 7, 2015

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

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Massive turnaround. The Dow plunges more than 200 points, only to reverse course and stage a stunning comeback.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Sunday summit. Germany’s Merkel is demanding even more from Greece as that country’s creditors scheduled another high stakes meeting this weekend.

MATHISEN: Held hostage. The multibillion dollar industry that’s based on fear, risk and hope. Tonight, a special report on the big business of ransom.

All that and more tonight on NIGHTLY BUSINESS REPORT for Tuesday, July 7th.

HERERA: Good evening, everyone, and welcome.

What began as a selloff turned into a rally. Stock reversed earlier losses and a choppy and volatile day of trading. And what triggered it was exactly what dragged it down earlier, oil prices. Crude pared its losses and that commodity climbed and so did stocks.

At the close, the Dow Jones Industrial Average was 93 points higher. It had been down more than 200 points, the NASDAQ rose five points and the S&P 500 gained 12 points.

Mary Thompson is at the New York Stock Exchange with more on today’s dramatic turn.

(BEGIN VIDEOTAPE)

MARY THOMPSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: A remarkable turnaround on Wall Street Tuesday. The Dow recovering from 200-plus-point decline, finishing up 93 points, and marks its biggest one-day reversal since October of 2011.

The markets rebounding after the European markets closed, indicating heavy selling from those investors weighed on U.S. stocks in the early trading. Oil, which finished lower, did close off its worse level for the day and that recovery helped to support stocks as did the performance of the S&P 500.

The index falling below a key technical level, it’s 200-day moving average, during the session. It then recovered though to finish above that level held by what traders described as broad based buying that was seen later in the day. Still, investors took a decidedly defensive stance as they await news from Greece on Wednesday, the start of the U.S. earnings season. That’s when Alcoa (NYSE:AA) reports and, of course, any more signs that the Chinese government’s efforts to stem a slide in the stock market are working. The groups that led the markets higher in Tuesday’s session — utilities and consumer staples.

For NIGHTLY BUSINESS REPORT, I’m Mary Thompson, from the New York Stock Exchange.

(END VIDEOTAPE)

MATHISEN: Though oil losses may have pared their losses by the close of trading today, they still fell for a second straight day. Gold prices also tumbled and a cooper off more than 3 percent. That’s because the commodities markets are still very wary of what’s going on in Greece and maybe even more in China.

Jackie DeAngelis reports.

(BEGIN VIDEOTAPE)

JACKIE DEANGELIS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Concerns about Eurozone’s stability and market volatility in China sending investors fleeing from energy and metal. A crucial part of the story is dollar strength. With other currencies weakening on the back the turmoil, the dollar continues its rise. Commodities like oil, gold and cooper are all priced in dollars, which makes them more expensive for traders using other currencies.

PETER AMANDIO, CHICAGO ENERGIES: I think the situation in Greece is what everyone was looking at, but it was a political situation where nobody really wins. So, the only one real sure thing out of that situation is a stronger dollar that had a lot of impact on all the markets.

DEANGELIS: The dollar most definitely a factor in increased selling pressure in crude after logging its second steepest loss this year, oil sold off again today.

Traders tentatively eyeing the nuclear talks with Iran, extended again, as a sign that genuine progress is being made, which could bring that country’s oil back on line.

AMANDIO: I think the selloff in oil had to do with fundamentals. For a long time, we were strong based upon I think fear in the market, what we had going on in Syria, all I think is supply and demand finally caught off with itself in the selloff.

DEANGELIS: And a double digit loss for gold on the day. The precious metal no longer considered a safe haven in times of turmoil, feeling the pain from the dollar index.

Copper down 10 percent this morning, an indicator for how the market feels about global growth and China specifically. Its selloff shows that confidence is weak.

For NIGHTLY BUSINESS REPORT, I’m Jackie DeAngelis.

(END VIDEOTAPE)

HERERA: And as for that volatility in China, stocks in that country fell once again, despite those emergency measures that we told you about yesterday. The Shanghai composite is made up of shares bought and sold largely by retail Chinese investors and fell to fresh bear market lows. Stocks are now off more than 27 percent there since their highs of mid June.

MATHISEN: Well, for more on Greece, where after a four-hour summit of Eurozone leaders, there is still no deal, little progress, little time left to agree on one. What they did agree on was to meet again on Sunday, as the demands on Greece intensified.

Geoff Cutmore has the ever changing play by play from Brussels.

(BEGIN VIDEOTAPE)

GEOFF CUTMORE, NIGHTLY BUSINESS REPORT CORRESPONDENT: The bottom line on this leader summit in Brussels is that we still don’t have an agreement.

The German chancellor Angela Merkel left saying that there are still not enough proposals on the table for that to be negotiations. Now, it’s hoped that over the next couple of days, Greece will come back with something fresh. The German chancellor wants the time at least to take that through her own parliament.

Right now, plenty of commitment to the Eurozone, plenty of talk about the importance of keeping Greece within the eurozone, but right now, it’s not clear that Grexit can be avoided. We will find out more over the coming days and definitely that emergency leader summit that will take place on Sunday will draw this issue to a close.

This is Geoff Cutmore for NIGHTLY BUSINESS REPORT in Brussels.

(END VIDEOTAPE)

HERERA: Meanwhile in Greece the economy continues to grind to a halt as banks remain closed and small businesses struggle to transfer and conduct operations.

Michelle Caruso-Cabrera has more from Athens.

(BEGIN VIDEOTAPE)

MICHELLE CARUSO-CABRERA, NIGHTLY BUSINESS REPORT CORRESPONDENT: Tourism is the single most important industry in Greece, providing more than 20 billion euros in revenue last year. July and August the peak of the season.

ALEX ANGELOPOULOS: This is a period where I should say that everything is going fine, we’re in the middle of July. Things are in a period where everything should be running along. It’s quite the opposite right now.

CARUSO-CABRERA: Alex Angelopoulos is on board of directors of the hotel association and says cancellations are rolling in.

ANGELOPOULOS: Because are in the front page of every newspaper in the world. I’m really hoping this is not going to last for very long.

CARUSO-CABRERA: But businesses of every kind are suffering. The banks have been shut for more than a week. And although online banking is permitted inside Greece, no one is permitted to transfer money outside of Greece. Meaning, business owners can’t pay foreign suppliers.

Kosta Kanaroglou is the CEO of Cana Laboratories, which distributes pharmaceuticals and manufactures products like antibacterial soap. He needs to purchase materials and products from overseas.

KOSTA KANAROGLOU, CANA LABORATORIES: The fact that we can’t transfer money is creating some issues with our providers. We import a lot of products. We import raw materials. And although a lot of our partners have given us some space to breath, if this goes on for longer, it’s going to become a real issue.

CARUSO-CABRERA: The crisis, which started in 2009, has been very tough on the company. Five years ago, revenues were 60 million euros a year, and now they have fall to only 25 million.

KANAROGLOU: I haven’t been sleeping OK in the past five years to be honest.

CARUSO-CABRERA: Even Internet companies based in Greece are having a tough time.

Manolis Nikforakis, the founder of a weather website, hosts the site on servers in the United States.

MANOLIS NIKROFAKIS: You need servers on the Cloud, like Amazon (NASDAQ:AMZN), Google (NASDAQ:GOOG), Microsoft (NASDAQ:MSFT), (INAUDIBLE) space, you know, this kind of infrastructure. In order to rent these machines and deploy your software, you obviously need to be able to pay them.

CARUSO-CABRERA: But right now, he can’t.

Unemployment in Greece has finally started to improve late last year, but this banking crisis threatens to undo all the progress that’s been made.

For NIGHTLY BUSINESS REPORT, Michelle Caruso-Cabrera, Athens, Greece.

(END VIDEOTAPE)

MATHISEN: Now to the U.S. economy. The U.S. trade deficit widened in May because of a drop in exports. That could heighten concerns over weak overseas demand and a strong U.S. dollar. The difference between imports and exports grew to $41.9 billion, which was a little bit less than expected.

HERERA: Job opening remained at a record high in May. According to the Labor Department, the number of open positions rose 16 percent when compared to the same period last year.

But the report highlighted the growing split between openings and hires as the number of filled positions fell and that could be a sign that employers are having trouble finding qualified candidates.

MATHISEN: The International Monetary Fund warning today that if the Federal Reserve raises interest rates too early, the Central Bank could risk stalling the U.S. economy. This is part of the IMF’s push to put off a hike in U.S. interest rates until 2016, saying there’s still too much uncertainty around, hovering specifically around inflation, employment and wages for the Fed to pull the trigger.

HERERA: A hostile bid in the pharmaceutical sector, Ireland’s Horizon Pharma is bringing its $3 billion takeover offer for Depomed directly to its shareholders. This after Depomed rebuffed Horizon’s attempt to negotiate. Horizon manufactures drugs to treat arthritis and rare diseases. Depomed focuses on products that treat pain. The takeover attempt is just the latest in a number of deals on the drug industry. Shares of Depomed soared 38 percent. Horizon fell about 2 percent.

MATHISEN: Meantime, health insurers lower today on antitrust concerns, just a couple of days after Aetna (NYSE:AET) and Humana (NYSE:HUM) made their merger official. Cigna, Anthem and UnitedHealth, which are the subjects of merger speculation themselves all finish lower, along with Aetna (NYSE:AET) and Humana (NYSE:HUM).

Mergers and acquisitions worldwide now are on a pace for one of the best years since before the financial crisis. According to Dialogic (NASDAQ:DLGC) more than $2 trillion worth of merger deals have be announced so far this year, and while that may be good for investor and good for Wall Street, is the same true for consumers and Main Street?

We’re joined by Diana Moss, who is president of the Consumer Advocacy Organization, American Antitrust Institute, and Adel Aslani-Far who is a partner at Latham & Watkins law firm.

Welcome to both of you. I appreciate you being here.

Adel, let me begin with you. There are a lot of industries from insurance where the big six may go down to the big three or four, in cable television where the dominant players are going to control 50 or more percent of broadband if some mergers go through, airlines where the big four control 80 percent of the marketplace.

Why shouldn’t consumers be worried that this is not good for them even though it’s very good, very good for the CEOs who pull the mergers off?

ADEL ASLANI-FAR, LATHAM & WATKINS LLP: Well, I guess, let me first begin by saying I’m not necessarily sure that it’s good for the CEOs that pulled them off. One of the things that I think —

MATHISEN: The Time Warner (NYSE:TWX) Cable CEO stands to make about $100 million for selling the company.

ASLANI-FAR: Sure. But I think on the acquiring side, one thing I think people need to understand is that certainly trying to pull off a major transformative type of acquisition is a very, very big proposition for an acquiring company CEO and board to go down the path. And while it could be a success, it could also turn out to be something that gets them turned out of office pretty quickly.

So, I think one of the things that’s driving the M&A activity we are seeing is increasing con of executive CEOs and boards and that’s really the driver. And I think the concern of consumers is certainly addressed by the regulatory frameworks that we have in place and you’re seeing just as much in the news today regulatory agencies, the U.S. regulators suing the block deals, as you are at any time in the past.

HERERA: Diana, why don’t you weigh in on that? Because, yes, we have also seen some deals blocked, but we’ve also seen an enormous amount of consolidation and there are those, I think you’re one of them, who feel as though that really reduces competition and also the quality of service.

DIANA MOSS, AMERICAN ANTITRUST INSTITUTE: It does. And we have seen a tremendous amount of consolidation in the last 20, 25 years, and that’s been largely due to lax merger enforcement and a lot of mergers being passed through on the basis of claims that these deals will reduce costs and those costs will be passed on to consumers.

And we’re just not seeing it. We are seeing huge consolidation in key industries and health care and airlines and food, and yes, we are seeing more challenges by the antitrust authorities, by the consumer is getting lost in this feeding frenzy, in this shuffle of tremendous consolidation. The number of competitors is down to two and three major competitor, that limits the consumer’s choice. We have now seen evidence of price increases post-merger. Quality is certainly a key issues especially in big mergers where privacy is important.

And we’re very concerned about the effect on consumers and also frankly the effect on competition, when you have just a few competitors, and it stifles innovation and entrepreneurship.

MATHISEN: Ms. Moss has given you much to respond to Mr. Aslani. Why don’t you just go ahead there?

ASLANI-FAR: Well, look, I think part of the issue is that especially today and what I think we would all acknowledge is an increasingly global economy, I think it’s very difficult to ask companies, certainly in this country, to continue to grow and to be competitive on the necessarily global platform without M&A as a tactic for delivering that growth, be it either in terms of product offering, which consumers are the ones that are calling for.

MATHISEN: But let’s take the example of the health insurance companies, they are not global concerns. They are competing only within the United States. Cellular telephone companies and the cable companies, basically the same. They are not — I take your point in the world of finance, potentially, or in the world of pharmaceuticals, where they are really global enterprises, maybe even in auto business where a big proposal from Chrysler to merge with GM has been floated out there.

But the ones — a lot of them are not — it’s not a question of global scale.

ASLANI-FAR: But it is the case of increased scale from the historical roots of those businesses, take cable which is essentially a very local enterprise in its beginnings. The national platform is, you know, what I would call the necessary global expansion of cable.

And so, as the market reach has increased because consumers are demanding more and more product, services and access, as part of the product offerings of the companies, companies need to grow and, you know, it’s the basic — it’s the basic calculus of, do you buy or do you build it? And in some cases, it’s not just feasible to try to build it yourself and buying it is the course of the path of least resistance and greatest value delivery.

HERERA: Diana, very quickly, final word.

MOSS: Yes, I would debate that premise. I think a lot of the expansion is driven by the desire of firms to be larger, not necessarily by consumer demand. And a lot of these scale economies and scope economies are not, in fact, being realized and markets are, in fact, smaller in some cases. And the question is, are we going to promote globalization and growth on the backs of the American consumer in terms of higher prices and less choice?

MATHISEN: Fascinating conversation. We can probably spend an hour on it. Alas, we can’t.

Ms. Moss, thank you very much. Mr. Aslani, we appreciate you being with us as well.

ASLANI-FAR: Thank you.

MOSS: Thank you.

HERERA: And still ahead, crafting the perfect pitch to the world’s largest retailer. What one small business owner is doing to get its products on Walmart shelves.

(MUSIC)

MATHISEN: We begin “Market Focus” tonight with a licensing agreement between Allergan (NYSE:AGN) and Merck (NYSE:MRK).

The Botox maker will buy the exclusive rights to two of Merck’s experimental migraine drugs for $250 million. Merck (NYSE:MRK) could also receive royalty payments. Allergan (NYSE:AGN) was up a fraction to $307.00. Merck (NYSE:MRK) was also up slightly, it finished to $57.99.

Gaming & Leisure Properties, which is a company that leases real estate to casino operators, upped its hostile bid for Pinnacle Entertainment’s real estate assets. The offer values the firm at around $5 billion, including debt. Pinnacle hasn’t publicly rejected the company’s offers and says it’s reviewing the current proposal. Gaming & Leisure down 2.5 percent to $35.72, Pinnacle up nearly 6 percent to $39.64.

HERERA: A rare sell ratings sent shares of Shake Shack sliding in today’s session. Morgan Stanley (NYSE:MS) downgrading the stock, writing that it’s simply overpriced. Separately, the company debuted a chicken sandwich today, but it will only be available in Brooklyn. Shares tumbled 7 percent to $54.74.

And Carnival (NYSE:CCL) is setting its sights on Cuba. The cruise operator gaining U.S. approval to travel to the country, but it’s still waiting to get the OK from the island nation’s authorities. Shares of Carnival (NYSE:CCL) were almost 2 percent higher to close at $50.20.

MATHISEN: Got to go to Brooklyn for that sandwich, Sue, I’ll tell you.

All right. Hostess says don’t expect an IPO any time. “Reuters” had reported that Hostess brands whose snacks include Twinkies, you can get them in Brooklyn and everywhere, Ding Dong is planning to pursue an initial public offering, instead of a sale. But the company denied that report saying it was premature to consider either a sale or an IPO.

HERERA: Hundreds of entrepreneurs are at Walmart’s headquarters, hoping to sig a deal that would get its products on its shelves and the world’s largest retailer wants those products to be American made.

Courtney Reagan reports from Bentonville, Arkansas.

(BEGIN VIDEOTAPE)

COURTNEY REAGAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: It’s every small business’ American dream.

GEORGE PETERS, KETTLE PIZZA: Being able to pitch your product to the world’s largest retailer certainly for us who’ve just been in business, just about four years, it would be, you know, business changing event for us.

REAGAN: Today, the founders of Kettle Pizza got that chance. Their grill accessory for making wood fired pizza is just one of thousands of products Walmart is considering adding as part of its pledge to buy $250 billion worth of “made in the USA” products by 2023.

The duo hopes kettle pizza will be the next Taco Plate. At last year’s open call event, Walmart ordered 1 million of them on the spot.

Two and a half years into the effort, Walmart declines to quantify exactly how many made in America products it sells or exactly how much closer it is to hitting that big target, other than to say it’s right on track where it needs to be to hit the goal.

MICHELLE GLOECKLER: There’s three ways that with we’ll hit that $250 billion goal. One, this is a great example of finding new products that are made in the U.S., that aren’t currently sold at Walmart or on Walmart.com. The second one is reshoring products making them closer to the point of consumption. And then the third is buying more of what we’re already selling that’s made in the U.S.

REAGAN: Jobs are another part of it. The Boston Consulting Group estimates that 1 million new U.S. jobs will be created through Walmart’s initiative. For the six-person Kettle Pizza Company in Groveland, Massachusetts, creating American jobs was always mission number one.

PETERS: Jobs are important. It’s a ripple effect for a family. They have a steady income and they can take the personal pride in what they make. That’s very important to us.

REAGAN: So far, neither Walmart nor analysts can quantify a measurable sales impact from the made in the USA initiative. While consumer reports says almost 8 in 10 American consumers would prefer to buy U.S. made products over imported ones, it remains to be seen if actual buying follows stated intensions.

But for Kettle Pizza, inking a deal with the world’s largest retailer would be winning enough.

For NIGHTLY BUSINESS REPORT, I’m Courtney Reagan in Bentonville, Arkansas.

(END VIDEOTAPE)

HERERA: And late today, Walmart said it is working to get Kettle Pizza on Walmart.com as quickly as it can and says it expects to have the product in a small number of stores next spring.

MATHISEN: Coming up, pirates do it, so do terrorists. Hostage taking is big business for criminal organizations — but also for the experts trying to counter it. The first part of our series, “Held Hostage: The Big Business of Ransom”, is next.

(MUSIC)

HERERA: Here’s what to watch for tomorrow. Federal Reserve will release the minutes from its June meeting. It’s the unofficial start of earnings season. Alcoa (NYSE:AA) reports its quarterly results and a gauge of demand for housing, with the report on weekly mortgage applications. And that’s what to watch for Wednesday.

MATHISEN: All right, Sue.

Even hacking companies aren’t immune to hacks. An Italian firm called Hacking Team (NASDAQ:TISI) that sells software, allowing governments to hack into computers, has become a victim of hacking itself. Files stolen from the company indicate it sold surveillance to dozen of countries, including Russia, Sudan, and the United States.

HERERA: It is certainly not something any business or person ever wants to be involved in, but kidnappings are on the rise.

According to the State Department, majority of overseas kidnappings of U.S. citizens go unreported. And last year alone, more than two dozen Americans working for companies were taken in terrorist incidents. Tonight, a rare glimpse into the companies responsible for rescuing and training people who find themselves in danger zones around the world.

Eamon Javers has the first part of our series, “Held Hostage: The Big Business of Ransom”.

(BEGIN VIDEOTAPE)

EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Images like these would send chills down anyone’s spine, and the more prevalent they are, the busier companies responsible for rescuing victims are becoming as well.

MARK HARRIS: Our business has probably increased, I’d say, 40 percent year on year since we launched the business in 2013.

JAVES: We’ve got a glimpse into the many companies involved in kidnapping, ransom and extortion right here in Washington, D.C.

Starting with someone like Michal Gnatek, a hostage insurance broker.

MICHAL GNATEK, HOSTAGE INSURANCE BROKER: It’s thinking of everything that could go wrong. That’s how we get paid is to think of what might go wrong, and to connect those organizations with the companies that can help finance their risk.

JAVERS: To help finance the risk, Michal advises his clients, which range from NGOs to multinational corporations to purchase kidnap and ransom insurance.

ROB SCHUELER: It’s insurance policy that will provide for reimbursement of any losses that a company or a nonprofit organization has in the event of a kidnapping or extortion threat that involves a demand for a ransom.

JAVERS: Policies range from a few hundred to tens of thousands of dollars per year.

UNIDENTIFIED MALE: While a group is on retainer with us, and we pay for their services. That’s where the most immediate payout goes.

JAVERS: Olive Group provides crisis consulting and hostage negotiating services.

HARRIS: We are advising clients on how to resolve the situation, how to speak to the kidnappers or the extortionist, how to maintain that dialogue, divert the negotiations and then we remain with them through the duration of the case.

JAVERS: And before a company or NGO sends one of their employees to a potentially dangerous region, they most often take a simulated kidnapping training course like this.

MARK STANSFIELD: To give them a taste of what it might be like and hopefully they’ll take the lessons forward if it’s for real.

Business has increased massively in the last year, 12 months.

JAVERS: Pilgrims charges around $2,500 per person for a two-day training course. Crisis consultants charged roughly $3,000 to $3,500 a day.

And overall — how much total ransom in all those thousands of cases is paid out every year?

GNATEK: It’s roughly about a $2 billion a year industry.

JAVERS: Two billion?

GNATEK: Uh-huh.

JAVERS: That’s a lot of money.

GNATEK: It is a lot of money.

JAVERS: It’s going to a lot of bad people.

GNATEK: It’s all funding their criminal activities.

JAVERS: And these kinds of companies don’t have to worry about going out of business any time soon.

HARRIS: Kidnap for ransom is very much an on going and growing problem for the world. As such, I think we will have business for many years to come.

JAVERS: For NIGHTLY BUSINESS REPORT, I’m Eamon Javers.

(END VIDEOTAPE)

HERERA: For more on the multibillion dollar business of kidnapping, head to NBR.com. And tomorrow, a rare look inside one of those simulated kidnapping training courses in the second part of our series “Held Hostage: The Big Business of Ransom.”

And that will do it for NIGHTLY BUSINESS REPORT tonight. I’m Sue Herera. Thanks so much for watching.

MATHISEN: And thanks from me as well. I’m Tyler Mathisen. Have a great evening, everybody. And we will hope to see you right back here 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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