Transcript: Nightly Business Report — August 3, 2015

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

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Power plan. The White
House issues historic new regulations that could change not only the energy
industry but also the potential cost for American consumers.

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Rolling along. Why
the boom in auto sales shows no signs of slowing.

HERERA: On the radar. Want to know if the Federal Reserve will hike
rates in September? And there are a few things you need to watch for in
August.

All that and more tonight on NIGHTLY BUSINESS REPORT for Monday,
August 3rd.

MATHISEN: Good evening, everyone, and welcome.

The hot month of august got off to a very cool start for stocks. More
on today`s market decline in a moment.

But we begin tonight with sweeping new rules from the White House that
could change the energy industry as we know it. The president today
released an ambitious set of regulations design to cut power plant
emissions and emphasize the use of wind and solar and other renewable power
sources. The landmark action could alter the way power is generated and
consumed. The measures are even tougher than earlier drafts.

And as Hampton Pearson reports, that has opponents vowing to fight.

(BEGIN VIDEOTAPE)

HAMPTON PEARSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: President
Obama said this generation is the first to feel the effects of climate
change and maybe the last to stop it.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: If we don`t get it
right, we may not be able to reverse. And we may not be able to adapt
sufficiently. There is such a thing as being too late when it comes to
climate change.

PEARSON: The plan requires industry to reduce carbon emissions 32
percent below 2005 levels by 2030, by using incentives, to invest in
renewable energy and away from coal-fired electricity. The coal industry
is already struggling with falling prices and a threat of regulation.

Alpha Natural Resources (NYSE:ANR) with 60 mines in five coal
producing states filed for bankruptcy, the fourth in the last two years.

Attorneys general from coal-producing states vowed to go to court to
block the federal government plan.

PATRICK MORRISEY, WEST VIRGINIA ATTORNEY GENERAL: We`re going to be
mobilizing a coalition that people haven`t seen before. Miners, consumers,
businesses, a large bipartisan of state attorneys general will be standing
up and fighting this lawless proposal.

PEARSON: According to the Department of Energy and EPA data, if the
clean power plan is implemented, coal share of power generation would fall
to 27 percent by 2030, versus 39 percent last year. Renewable energy use
would rise to 28 percent. Natural gas would remain at roughly 30 percent.

Manufacturers say that shift away from coal and other fossil fuels
will impact their global competitiveness.

ROSS EISENBERG, NATIONAL ASSOCIATION OF MANUFACTURERS: If you`re
manufacturing in China, if you`re manufacturing in India today, if you`re
manufacturing in Brazil today, some of our largest global competitors, you
don`t have any constraints along the same lines that we do in the United
States as of right now.

PEARSON: So, what happens to power bills?

The administration predicts the plan will lower the average energy
bill by about $85 in 2030. But energy producers say the costly conversion
to renewable energy will most likely mean higher utility bills.

Nothing will happen overnight. States could get up to five years to
finalize their emissions plans. In the meantime, the clean power plan will
fuel the environmental debate in the 2016 presidential campaign.

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

(END VIDEOTAPE)

HERERA: And those power plant proposals will have a very big impact
on some very vital sectors of the economy.

Jackie DeAngelis breaks down the potential winners and losers.

(BEGIN VIDEOTAPE)

JACKIE DEANGELIS, NIGHTLY BUSINESS REPORT CORRESPONDENT: President
Obama`s plan to cut carbon dioxide emissions by 32 percent over the next 15
years, going to help some and hurt some within the energy industry.

The coal producers definitely going to take a hit. This group has
seen coal prices plummet and has been bleeding cash. We`ve been seeing
bankruptcies on the rise more than 25 over the last few years.

The stocks to watch here, some of the biggest producers, Peabody
Energy (NYSE:BTU), also ArchCoal and Alpha Natural Resources (NYSE:ANR),
actually just filing for Chapter 11 bankruptcy this morning.

Meantime, steel producers, they use a lot of energy for production.
The affordability, the reliability of this energy production could be put
at risk for the steel producers. So, some of the name to watch there: U.S.
Steel, Steel Dynamics (NASDAQ:STLD) and also Nucor (NYSE:NUE).

But there is always the canary in the coal mine. Some alternative
energy names could benefit from this plan. Consider the solar stocks:
First Solar (NASDAQ:FSLR), Solar City, Trina Solar, and also the ETS as
well. These could be a good investment on this plan.

Natural gas producers, they could see a pop as well, that`s because
there`s plenty of supply on hand and more innovatively to use nat gas to
being developed every day. Some of the names, Dominion and Ultra Petroleum
(NYSE:UPL) as well.

But, remember, this is not the kind of bill that will pass
immediately. There are going to be opponents to it. They are gearing up
for a big fight. The industry is expecting to see litigation surrounding
this issue.

For NIGHTLY BUSINESS REPORT, I`m Jackie DeAngelis.

(END VIDEOTAPE)

MATHISEN: Today`s power rules and the far-reaching implications, the
talk of Washington today.

John Harwood has been following it all for us.

John, two questions here — the president has broad, broad authority
to impose these regulations. But was there anything surprising about his
announcement today?

JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT: The main thing
that was surprising, Tyler, was that the final target of 32 percent
reduction from 2005 levels by 2030 was actually more far-reaching than the
draft proposal had been in a year ago. It was only 30 percent then. We`ve
seen this president across a range of fronts being very aggressive and
trying to pursue things that he believes in before he leaves office and
push them as far as he can go. He`s pushed this about as far as you can
imagine him going.

The question now is, can he sustain it?

HERERA: What kind of pushback can we expect on the political fronts
in Washington, John?

HARWOOD: Well, a very strong pushback. We`ve already seen it from
Senate Republican Leader Mitch McConnell who sent a letter earlier this
year telling states — ignore the president`s plan. Remember, this plan is
to be implemented state by state. We`ll see whether states take that point
of view. But at the same time, the politics, and it`s going to be not just
in Congress but in the 2016 campaign.

Hillary Clinton has embraced this. Republicans, you can expect them
on the debate stage in Cleveland on Thursday to take issue with the
president`s plan. We`ve also got a big legal fight that`s going to play
out over a much longer time frame of years.

MATHISEN: Let me ask two questions again. One is kind of random,
will this stand legally? That`s the critical one. And number two, if the
president is going to be this sort of aggressive with respect to
environmental regulations, he hasn`t ruled yet on the Keystone pipeline.
Where does that stand and what does this suggest as to where his head may
be on that?

HARWOOD: Very interesting about Keystone, Tyler. That strikes me as
one of the places where he has played the most politics with the decision,
because there has not been from his own aides, a demonstration that this
pipeline made a big difference one way or the other.

He hasn`t really said, he seems to have been holding this back. I
have long been predicting that he would approve the Keystone pipeline. But
he hasn`t done it yet, and he`s got some time to go. And notably, Hillary
Clinton did not take a stand on it when she was asked the other day.

MATHISEN: All right. John, thank you very much. John Harwood
reporting in Washington.

HERERA: Oil prices sank to near five-month lows on weaker economic
data here and in China, the world`s largest energy consumer. Crude settled
down 4 percent to $45.17. Brent fell below $50 a barrel for the first time
since the end of January.

And if oil prices stay at these current low levels, AAA predicts gas
prices could drop 15 cents more per gallon this summer.

MATHISEN: Those lower oil prices pressured shares of Chevron
(NYSE:CVX) and Exxon, which in turn weighed on the Dow index. The energy
sector was the worst performer today, among the 10 sectors, and the S&P
500. Not helping things either, Apple (NASDAQ:AAPL) which traded today
into correction territory, off more than 10 percent from its recent high.

By the closing bell, the Dow Industrials were of 91 points to 17,598.
It was much worse earlier, well off that nearly 200-point decline midday.
NASDAQ was off a dozen points and the S&P 500 lost 5.

HERERA: And now to that weak economic data we mentioned. The pace of
growth in the manufacturing sector slowed in July, according to the
Institute of Supply Management. It is the latest in a string of mixed
reports to come out of the factory sector, as that industry struggles with
soft overseas demand and the strong dollar. One positive sign in the
report was an increase in new orders often viewed as the leading indicator
of activity.

MATHISEN: And spending in the construction sector barely budged in
June, rising just 0.1 percent. That`s the smallest rise since January.
The decline being attributed to a big drop in non-residential building
activity, which offset a third straight increase in home-building.

HERERA: But we did see a modest drive in consumer spending in June.
The Commerce Department reports that purchase increased 0.2 percent last
month after jumping in May. Many citing gains in the job market and
personal income also rose 0.4 percent. The measure is closely watched
because consumer spending makes up more than two-thirds of economic
activity.

MATHISEN: Bright spot today, auto sales, which blew past
expectations, making July one of the strongest months of the year. General
Motors (NYSE:GM) and Fiat Chrysler both saw 6 percent sales gains from a
year ago. Ford`s U.S. sales up 5 percent. And that puts the industry on
pace to pass 17 million vehicle sales for the year for the first time since
2001.

As Phil LeBeau reports, pick-ups, SUVs and crossovers were in high
demand, thanks to moderate gas prices.

(BEGIN VIDEOTAPE)

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: Pardon the pun,
but the American consumer is riding high once again. SUVs, crossovers,
picks-ups, models where we sit up higher push the auto industry to one of
its best monthly sales for the year. Take GM trucks, up 51 percent. Sales
of the Ford Explorer climbed 27 percent, while Jeep was up almost as much.

ERIC LYMAN, TRUECAR VP OF INDUSTRY INSIGHTS: We all want as big of a
vehicle as we can afford for a specific lifestyle as well. So, if you`re
out in the rural area, you`re going to love that bigger Explorer, that
large Tahoe, the big SUV. But the compact SUV makes a lot of sense for us
folks living in the city where maybe parking is at a premium.

LEBEAU: Low gas prices are a big reason why trucks and utility
vehicles are in the demand. But there`s also a wave of new models offering
more space, features and often more luxury. That`s why people are paying
close to a record high for new vehicles.

LYMAN: We`re paying more for our vehicles, whether it`s on the luxury
side or whether it`s a bigger, more functional utility vehicle. We seem to
be happy to do that. As we`ve been saying for months, the auto industry is
really leading the charge in the economic recovery here.

LEBEAU: With Americans steering towards bigger vehicles and worrying
less about fuel economy, cars and specifically hybrids are falling out of
favor. Take the Toyota (NYSE:TM) Prius, which is the best selling hybrid
in the country, sales last month were down 13 percent.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago.

(END VIDEOTAPE)

MATHISEN: Sales are up but so are prices. According to Kelly Blue
Book, new car prices have risen 2.5 percent from a year ago. The average
price now, for light vehicles in the United States is about $33,000.

HERERA: Today`s economic data is just the start of a pretty packed
week. Tomorrow, we get factory orders. Wednesday, ADP, International
Trade and ISM services. Thursday, jobless claims. And Friday is the big
monthly employment report.

And the Federal Reserve will be paying close attention to that last
one, along with a number of others.

Steve Liesman tells us now what the Central Bank will be watching.

(BEGIN VIDEOTAPE)

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Whether the Fed
hikes raise in September for the first time in more than nine years depends
on a series of critical economic reports to be issued beginning this week.
Two keys to the rate hike: jobs and inflation, making the July payroll
report coming this Friday an important one.

DIANE SWONK, MESIROW FINANCIAL CHIEF ECONOMIST: The biggest issue, of
course, is employment. We need to see two solid months of employment
improvement.

LIESMAN: Economists expect one this week. The forecast for 215,000
jobs and for the unemployment rate to remain at 5.3 percent for July, still
the lowest since the `08 recession.

BRUCE KASMAN, J.P. MORGAN CHIEF ECONOMIST: If you look at the how
past the unemployment rate has been moving over the last two years, it`s
moving more rapidly than at any point when they got to the first tightening
other than early `80s over the last 40, 50 years.

LIESMAN: The Fed at its last meeting called the job market solid, and
said it only needed to see some further improvement in order to hike rates.
So, even a moderately strong August employment report could seal the deal.
But the inflation data also have to cooperate and move back to the Fed`s
targets.

SWONK: I think that`s where the real debate is going to be. Is —
are they really confident inflation is going to make it back up to 2
percent? I think it remains steady. That will be enough to nudge the Fed.

LIESMAN: What could stop the Fed? Many economists point to overseas
weakness and concern there could be a bigger impact from the Chinese market
meltdown that could affect the U.S. economy. They could combine to stay
the hand of the Fed in September.

For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.

(END VIDEOTAPE)

MATHISEN: Still ahead, China`s push to stabilize its stock market
puts a major U.S. hedge fund in the crosshairs.

(MUSIC)

MATHISEN: AT&T (NYSE:T) launches the first ever TV wireless phone
plan after it has completed $49 million acquisition of DirecTV. The
company hopes the promotion, which rolls out next week will attract new
customers to the satellite television service.

HERERA: An easy earnings beat for AIG is where we begin tonight`s
“Market Focus”.

The insurance giant beat on the bottom line and announced some more
good news for investors. It upped its share buyback plan by $5 billion and
said it more than doubled its quarterly dividend to $28 per share. The
stock was volatile in after-hours trading. But during the regular session,
the stock was upped a few cents to $64.15.

Tenet Healthcare (NYSE:THC) also out with late earnings. The top
consensus, the hospital operator raised its full year forecast for earnings
as it treated fewer uninsured patients because of the expansion of Medicaid
for the poor under the Affordable Care Act. Shares were higher initially
after hours in the regular session, the stock closed at $56.71. That`s
just a slight gain.

Tyson Foods (NYSE:TSN) out with earnings that missed estimates.
They`re blaming weak beef sales. The food giant also missed on the top
line and on that, it lowered its financial outlook for the full year.
Shares tumbled, down almost 10 percent to $39.96.

Opposite story for Clorox (NYSE:CLX). The household products maker
announced bigger than expected fourth quarter earnings results, helped by
recent price increases. But the firm did issue downbeat earnings guidance
for the coming fiscal year because of currency headwinds. Nonetheless,
shares rose nearly 3 percent to $115.

MATHISEN: Goldman Sachs (NYSE:GS) increased its estimate for possible
legal costs by nearly $2 billion to about $6 billion, this according to a
regulator filing. The extra set aside is to resolve possible mortgage
security related claims. Shares were a fraction lower at $204.69.

Citibank meantime under investigation for its student loan servicing
practices. The bank disclosed the probe and said regulators may order the
bank to pay a penalty. Shares were off a fraction at $58.44.

Sears (NASDAQ:SHLD) meantime reported a profit for the first time
since 2012, thanks to a gain from spinning off some of its real estate.
But that could not disguise troubling sales results, especially at its
namesake Sears (NASDAQ:SHLD) and Kmart stores. Shares slid 10 percent to
$19.31.

And Barnes and Noble (NYSE:NE) completed the spinoff of its college
book store unit called Barnes and Noble (NYSE:NE) education. Investors
didn`t share the trading debut however, but the CEO says the company is
well-positioned to compete with the big players in the textbook business.

(BEGIN VIDEO CLIP)

MICHAEL HUSEBY, BARNES & NOBLE CEO: Competition puts positive
pressure on what we do. And I think that`s one of the advantages of the
spinoff is that we have a separate board, and we have a separate management
team that`s allowing us now to really focus on education`s needs and how
we`re going to compete against these other companies. We compete very well
against Amazon (NASDAQ:AMZN) on the campuses where we have the in-store
contracts.

(END VIDEO CLIP)

MATHISEN: Still, shares fell 8 percent to $13.19.

HERERA: Greek stocks plummet hard. That country`s benchmark index in
Athens reopened today after a five-week closer. Greece`s four biggest
banks all fell 30 percent, the daily limit almost immediately after the
open. By the close, the index shed about 15 percent of its value.

MATHISEN: Stock market regulators in China suspended more than 30
trading accounts as it continue to try to stabilize that country`s volatile
market. One of the trading accounts includes one owned by the brokerage of
an American hedge fund Citadel.

Eunice Yoon has the details from Beijing.

(BEGIN VIDEOTAPE)

EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Citadel has
confirmed that one of the trading accounts has been suspended in China.
This is part of the ongoing investigation by the regulators to what it
calls suspected trading irregularities. The Citadel counts as one of more
than 30 now that have been restricted in this way, but the Citadel account
is the only one that`s coming from a foreign financial institution.
Neither Citadel nor the regulator has really disclosed what the issue is
for the suspension. But the backdrop here is that the Chinese government
has been pushing ahead with the very aggressive investigation into short
selling and those who are betting against the market.

Citadel has said that they are working very closely with the
regulators. They were also quick to point out this was only one trading
account and many more are still operating normally here. And they also
said that this account was at the brokerage and not at the hedge fund and
it does not involve client money.

How this plays out is still up in the air. But many foreign investors
are concerned because they`ve already been put off by the government`s
heavy handedness in the Chinese markets.

For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon, in Beijing.

(END VIDEOTAPE)

HERERA: In the U.K., a former trader was sentenced to 14 years after
being found guilty of conspiracy to rig a global benchmark interest rate
known as LIBOR. This is the first criminal conviction of an individual for
manipulating the widely used benchmark. The jury reached the unanimous
guilty verdict after a nine-week trial. Tom Hayes was accused of
manipulating LIBOR to benefit his own trading position.

MATHISEN: Well, Puerto Rico didn`t completely miss that big payment
that was due August 1. The island paid just a fraction of what it owed,
marking the first default, though, by the commonwealth.

As Kate Kelly reports from San Juan, the island`s financial problems
run very deep.

(BEGIN VIDEOTAPE)

KATE KELLY, NIGHTLY BUSINESS REPORT CORRESPONDENT: Puerto Rico`s
default resolves days of unanswered questions about whether a $58 million
payment due to bond investors would be paid in full, in part or not at all.
In a move like that, the first at a U.S. stateside entity since 1933 could
well have ripple effects.

Puerto Rico already saddled with expenses it can`t easily meet will
likely lose access to the credit market as a result of a default as rating
agencies like Standard & Poor`s and Moody`s (NYSE:MCO) downgrades them.
With unemployment already high and the cost of imported goods and new local
taxes to deal with as well, some residents were already worried.

UNIDENTIFIED MALE: I went to the bank this morning to do a
transaction and ironically enough, that was the subject of conversation in
the lobby of the bank. It was all about how it`s impacting them and how
now, apparently, they`re going to tax them some more. There were some
people talking about they were going to get $105 taken off their Social
Security.

KELLY: Small business owners like Nilda Flard (ph) who sells rum in a
family owned shop in old San Juan say they are getting squeezed.

UNIDENTIFIED FEMALE: I`m worried. I mean, we have to take it day by
day, because right now, we`re getting hit by the economy, plus it`s a slow
season. We`ve only been here two years. We have to see what`s going on.
But yes, we have conversations all the time in the family to see what`s
going to be our next step.

KELLY: Some Puerto Ricans we talked to, including Congressman Pedro
Pierluisi are looking for Chapter 9 bankruptcy protection as a good option.

PEDRO PIERLUISI, P.R. RESIDENT COMMISIONER: That model is not working
anymore. We`ve been lagging for decades. We should either take either of
two paths, either the path toward statehood or the path towards national
sovereignty. I believe statehood is the answer. We should be on equal
footing with our fellow American citizens.

KELLY: That Chapter 9 legislation is now under consideration by the
U.S. Congress. But some think it could be a long shot before it comes to
pass.

Meanwhile, some people here in Puerto Rico would like to see a federal
government bailout.

But the Obama administration has so far offered little reason to hope
for that. So, Puerto Rico for the moment is on its own.

For NIGHTLY BUSINESS REPORT, I`m Kate Kelly, in San Juan.

(END VIDEOTAPE)

MATHISEN: And late today, Oppenheimer Funds, which owns a large of
Puerto Rican debt in its funds, said it was disappointed that Puerto Rico
didn`t make its full payment.

HERERA: Coming up, how many money is being poured into wine country?
Well, the numbers are eye-popping.

(MUSIC)

HERERA: A pioneer in private equity has died. Jerome Kohlberg, one
of the original architects of the leverage buyout and co-founder of the
private equity firm KKR (NYSE:KKR) was 90 years old. Kohlberg founded
Kohlberg Kravis Roberts in 1976 and became a major force when it took over
RJR Nabisco, though Mr. Kohlberg left the firm a year before that deal was
completed. The leverage buyout industry is now valued at more than $2.5
trillion.

MATHISEN: An update now to a story we told you about back in April.
The CEO of Gravity (NASDAQ:GRVY) Payments, Dan Price, made a splash, a
radical move to raise his companywide minimum wage to $70,000 over the next
three years.

However, today, according to a “New York Times (NYSE:NYT)” report,
that plan has backfired. Customers withdrew their business, their clients
that were attracted because of the new plan haven`t started paying off yet.
And some higher ranking employees have quit since they didn`t receive
raises comparable to the huge jump for entry level staff.

HERERA: Well, we`ve told but the rising price of housing in Silicon
Valley, of course. But that pales in comparison to the real estate market
two hours north of San Francisco. Josh Lipton tells us what is driving the
sky high listings in California`s wine country.

(BEGIN VIDEOTAPE)

JOSH LIPTON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Tech money is
flowing into wine country. Here in Sonoma County, which is about two hours
north of San Francisco, realtors say listings for high end homes are
surging.

CHUCK LAMP, SOTHEBY`S INTERNATIONAL REALTY: Because of the success of
so many start-up firms in San Francisco and other businesses, there`s a lot
of money that`s being manufactured in the Bay Area and a lot of it is going
into real estate.

LIPTON: The most expensive home on the market right now in Sonoma
County is this one, the property, which rests on 600 acres, is a 20,000
square foot estate created in the style of an Austrian country villa —
five bedrooms, 12 bathrooms, wine cellar, home theater, infinity pool. The
price? $32 million.

The owner is Ed Kozel, the former chief technology officer of Cisco
(NASDAQ:CSCO) who also served on the board of Yahoo (NASDAQ:YHOO) for many
years.

Right now, buyers have their pick of mega mansions in the area. There
are more than half a dozen homes on the market priced at $25 million or
higher.

LAMP: San Francisco`s market, Palo Alto`s market is very strong.
Prices are pushing up radically. And we`re feeling, as the ripple effect,
some of that up here. It`s increasing in terms of intensity. When those
markets boom, it lags a little bit. But we then ultimately boom too.

LIPTON: Luxury listings, meaning those homes priced north of $1
million make up about a quarter of the market and they`re up nearly 90
percent year over year, according to Sotheby`s. Now, that might encourage
talk of a bubble, but realtors we spoke to say it`s just the new normal
here.

For NIGHTLY BUSINESS REPORT, I`m Josh Lipton in Calistoga, California.

(END VIDEOTAPE)

MATHISEN: I could live in a closet there. Just in the closet.

HERERA: Or the wine cellar.

MATHISEN: Yes, maybe that`s better. I see, I see, Ms. Herera.

HERERA: All right. That will do it for — not the whole time. For
NIGHTLY BUSINESS REPORT for tonight, I`m Sue Herera. Thanks for joining
us.

MATHISEN: I`m Tyler Mathisen. I`m with her. Forget the closet, go
to wine cellar.

HERERA: Go to the wine cellar.

MATHISEN: Have a great evening, everybody. We`ll see you tomorrow.

END

Nightly Business Report transcripts and video are available on-line post
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