Transcript: Nightly Business Report — August 6, 2015

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

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Get to work. There`s
one thing the Federal Reserve wants to see before it raises interest rates
and it could appear tomorrow.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: The turning point. The
Dow Jones Industrial Average suffers its sixth straight loss. Is this the
start of a bigger downturn for stocks?

MATHISEN: Taking a stand. Where the Republican presidential
candidates stand on the issues that matter to your money?

All that and more tonight on NIGHTLY BUSINESS REPORT for Thursday,
August 6th.

HERERA: Good evening, everyone, and welcome.

It is almost here, the monthly jobs report. Before tomorrow`s opening
bell, Wall Street and Main Street will find out about how many jobs the
economy created in July and whether the unemployment rate is higher or
lower. The release is a very big deal every month, but this time around,
everybody is waiting for it. That`s because the first interest rate hike
in nearly a decade is on the table.

The Federal Reserve chair has repeatedly said that the Central Bank is
data-dependent and job market is central to its decision.

And as Hampton Pearson reports, the day before the critical report, we
got some additional clues as to the health of the American labor market.

(BEGIN VIDEOTAPE)

HAMPTON PEARSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: One day
before the all all-important jobs report, the number of Americans filing
first-time unemployment claims rose less than expected, up 3,000 to a
seasonally adjusted 270,000, another sign the labor market is tightening.
At the same time a closely watched report in the private sector shows
layoffs topped 105,000 last month, a four-year high, with more than half
the cuts coming from the military.

Last week, the Fed up graded its assessment of the job market,
describing employment gains as solid. A jobs report in line with the
consensus forecast for 215,000 new jobs last month and the unemployment
rate holding steady at 5.3 percent could strengthen the hand of market
analyst who believe the Central Bank will raise interest rates for the
first time in nearly a decade in September.

ART HOGAN, WUNDERLICH SECURITIES: What we`re really trying to tell
clients is, you know, a signal from the Fed that the economy is strong
enough to at least move 25 basis point, maybe 50 basis points in 2015 is
actually something that`s very good. I think not having the Fed move would
send the signal that things are worse.

PEARSON: This week, FOMC member Jerome Paul said he would be looking
at wage growth as well as total jobs before deciding on what`s next for
interest rates, leading market economists believe wages and inflation are
the keys to the timing of the liftoff. But some of the same analysts say
the Fed seems to be in a no-win situation when it comes to market
expectations.

JOSEPH LAVORGNA, DEUTSCHE BANK CHIEF OF U.S. ECONOMIST: The problem
will be for the Fed, if the market doesn`t think the Fed is going in
September, can the Fed convince the market that it`s going because we`re in
this bizarro world where the Fed is low to disappoint the markets of
anything.

PEARSON: Tomorrow`s jobs report is the first of two that will be on
the desk of monetary policymakers by the time they meet again in September.

For NIGHTLY BUSINESS REPORT, I`m Hampton Pearson at the Department of
Labor.

(END VIDEOTAPE)

MATHISEN: The economy may be adding jobs overall but there is one
sector that has been shedding them. We`ve been reporting companies in the
energy business have been scaling back, letting go of rig workers as well
as engineers. This is as oil prices tumble.

Today, the pain continued as crude lost another 1 percent to settle at
$44.66 a barrel.

As Morgan Brennan reports, the job losses in the energy sector may be
far from over.

(BEGIN VIDEOTAPE)

MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: One hundred
seventy-three thousand four hundred and seventy-three, that`s how many
energy-related jobs around the world have been or are in the process of
being lost. Since oil prices began their plunge last fall.

Energy consultancy Graves and Company, which has been tracking layoff
announcements, says a third of that total has come just in the past three
months and announcements have been coming in waves.

JOHN GRAVES, GRAVES & CO. PRESIDENT: There was a fairly significant
wave of service and supply company announcements in late January, February
and early March. We saw additional waves in April with additional
announcements by Halliburton (NYSE:HAL) and Baker Hughes (NYSE:BHI), and
then here recently, just towards the end of July, I think ahead of the
earnings announcements we began to see additional announcements,
particularly by E&P companies.

BRENNAN: Among the oil and gas producers recently slashing jobs is
Chevron (NYSE:CVX), which announced a 1,500-person reduction last week, and
Royal Dutch Shell which disclosed its own additional cuts of 6,500
positions.

But no industry has felt the brunt of low energy prices more than oil
field services companies. More than half of the losses to date have been
in the sector, including Baker Hughes (NYSE:BHI) and Halliburton
(NYSE:HAL), which ahead of their proposed merger have cut a combined 27,000
positions, double than initial estimates.

The pain is rippling out to service and support industries as well,
with more than 23,000 jobs lost, including at law firms, trucking and steel
factories that manufacture products for drilling. Even railroads have been
downsizing as crude, oil and metal fall. It may only get worse.

GRAVES: I think we`re likely to see lower levels of prices for a
considerable period of time. And there are going to be more layoffs. This
will get worse before it gets better.

BRENNAN: Graves also maintains his estimates may be low as companies
are furloughing staff and others are finding ways to simply terminate
workers. What we do know is that U.S. employment in the mining sector,
which includes oil and gas, has tumbled by 71,000 since December, according
to the Labor Department. Tomorrow, when we get the July nonfarm payroll
report, it`s widely expected the sector will log another month of decline.

For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan.

(END VIDEOTAPE)

HERERA: Declines in oil and disappointing earnings weighed on the
major averages. Add to that, nervousness about tomorrow`s jobs report and
Dow Jones Industrial Average posted its sixth straight day of losses. The
blue chip Dow index closed at its lowest level in six months, off 120
points to 17,419. NASDAQ was hit the hardest, losing more than 1.5 percent
or 83 points, and S&P 500 lost 16.

Courtney Reagan at the New York Stock Exchange takes a closer look at
the damage.

(BEGIN VIDEOTAPE)

COURTNEY REAGAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, it was
a red day for stocks nearly across the board, while markets managed to
close at least off session lows. The Dow still finishing at six month lows
and NASDAQ, the worst day in a month or so.

Now, there wasn`t any one catalyst, no earth shattering data points,
though the market is well aware that tomorrow is jobs Friday.

Art Cashin, who is a UBS director of floor operations says the largely
overhang from the slide in crude oil prices and the associated economic
slowdown concern in China that really has the markets worried. Other
traders, though, tell the investors just want less risk.

Now, one stock that started to slide in the day, the S&P broke through
a key support level and selling exacerbated until we saw a moderation about
midday.

Ultimately, eight of the ten major S&P sectors closed lower, with
biotech and media stocks monks the biggest losers in the session. Biotech
is considered a riskier sector, so investors fled today. That, plus some
fear that the outperformers in the group may have already run its course.

Now, when it comes to media stocks, it really resurfaced concerns this
week about the winning power of the bundled services being offered by the
big media companies that sent shares of media names tumbling. And because
the media stocks are widely held with Disney (NYSE:DIS) and the Dow, Viacom
(NYSE:VIA), 21st Century Fox and in the NASDAQ 100 and S&P 500, the damage
was widespread.

I`m Courtney Reagan for NIGHTLY BUSINESS REPORT on the floor of the
New York Stock Exchange.

(END VIDEOTAPE)

MATHISEN: Well, earnings have been a major factor in this week`s
selloff, and it seems as though the markets are reacting irrationally to
seemingly OK quarterly reports.

Joining us to talk about what has seemingly become a sensitive market
is Michael Farr, president, CEO, emperor, god-king of Farr, Millar and
Washington. He`s here to discuss these very touchy markets.

Michael, there are a couple of things that I noticed. And one is this
— and I want to ask you what it says about the state of the market. The
past few days, there have been some misses or some commentary, and stocks
have not just reacted a little. They`ve reacted a lot. Twenty percent
decline, 15 percent decline, 10 percent decline.

Is this a sign of something — of a market that really wants to turn
south?

MICHAEL FARR, FARR, MILLER & WASHINGTON PRESIDENT & CEO: It certainly
feels that way, Tyler. The market has been very unforgiving of any company
with a miss. And yet for the second quarter, 435 companies pretty much
beat expectations, it looks like, out of the S&P 500 reporting, most have
beaten their expectations on the bottom line.

On the top line, the revenues aren`t really growing and people are
concerned. I think investors are concerned about a bunch of things, not
the least of which the market has been making new highs for the past few
years and we`re coming off those new highs. A lot of the leading
industries and a lot of the breadth in the market is contracting.

So, we thought — you all have been talking about energy, we also
heard that some of the biotechs were down, some of the industry leaders,
some of the tech stocks are beginning to stumble. So, where does the
leadership come from? Markets are getting a little nervous.

HERERA: Right. What about guidance, though? It seems as though a
number of stocks that have in the past couple of days, you know, had the
wind taken out of their sails by large percentage moves, it`s not
necessarily on the bottom line results, but it`s the guidance for the rest
of the year. Do you agree with that, Michael, or not?

FARR: No question about it. I think that`s where we all want to look
because stocks basically are forward pricing mechanisms and, yes, the
guidance is very important and the guidance from all of these companies is
pretty much things don`t look great out there from the CEOs and CFOs who
are taking a look at the prospects for their companies and operations and
sales in the U.S. and across global economies.

So, the weakness in China and other parts around the world are having
an effect, as they — and we`re seeing things I guess just contract a bit,
expectations lower and stock prices are showing it.

MATHISEN: We see what you see in terms of the earnings per share
numbers. Those numbers can be tweaked and maneuvered. Revenue is a much
harder thing to tweak and maneuver, as you point out.

So, what should I do with my money in this environment, Michael?

FARR: Right. Tyler, I think, first, you don`t panic. Well, if
you`re going to panic, be the first one to panic. Otherwise, it`s way too
late for everybody.

HERERA: Too late.

FARR: OK. But don`t panic.

Markets do this. We haven`t seen a 10 percent correction in a few
years. Last October was as close as we got and it came close and then, Jim
Bullard from the St. Louis Fed came out and said the fed had to do more and
stocks went back up.

So, we`re due for a correction. You typically don`t get a huge
correction when everybody is out there wringing their hands saying, gee,
are stock markets getting ready to collapse? When they say it`s ready to
collapse, it`s not ready to collapse.

So, it`s probably going to have a pull back. There will probably be a
buying opportunity. Rates look like they are going to be low for a while.
Commodity prices low for a while.

So, keep some dry powder, be cautious but make darn sure know why you
own it and why you own.

MATHISEN: All right. Michael, perfect advice to end on there.
Michael Farr, president and CEO of Farr, Miller and Washington.

FARR: Thanks.

HERERA: It`s been a tough week for a number of IPOs but today wasn`t
all bad. Aimmune Therapeutics, which is a biotech company priced at the
high end of its race, and shares rose in its first day of trading. The CEO
says he`s company is making a big investment in developing treatment for
peanut allergies.

(BEGIN VIDEO CLIP)

STEPHEN DILLY, AIMMUNE THERAPEUTICS CEO: We`re trying to make kids
and adults safe from exposure to peanut protein. This is a treatment that
gradually over time, you build up the level of desensitization so they can
tolerate the kind of levels they`ve seen in accidental exposure.

(END VIDEO CLIP)

HERERA: Planet Fitness also made its debut and it was a disappointing
one. Despite the uninspiring start, though, the CEO remains optimistic.

(BEGIN VIDEO CLIP)

CHRIS RONDEAU, PLANET FITNESS CEO: (INAUDIBLE) economics are very
strong in that model. In the franchise, these are bullish on the concept,
and they keep building more stores. I mean, last year, 87 percent of our
new units opened by existing franchisees. So, they are putting the money
back into our system and build because they`re happy with the returns.

(END VIDEO CLIP)

HERERA: Shares of Aimmune Therapeutic rose 50 percent. Planet
Fitness, after starting lower then gaining ground ended pretty much flat.

MATHISEN: Still ahead, debate night in Cleveland where the Republican
presidential hopefuls stand on things like taxes, entitlements and the
fast-changing job market. We`ll tell you.

(MUSIC)

MATHISEN: An activist investor is taking aim at a major food company.
Bill Ackman has build a $5.5 billion stake in the Mondelez, the market of
Ritz crackers, Oreos and other popular snack foods. His investment comes
as the food industry undergoes a transformation and tries to deal with
changing consumer taste and slowing growth. Many speculate that Ackman`s
investment could make Mondelez a takeover and that sent the stock higher
today, even as the broader market declined.

HERERA: Russia has launched a sophisticated cyberattack against the
Pentagon. As first reported by NBC News, the hackers got into the
Pentagon`s joint staff unclassified e-mail systems. The attack occurred
sometime around July 25th and affected about 4,000 personnel. The system
has since been shut down and taken offline.

MATHISEN: A San Francisco judge hearing arguments today in a case
against uber. The debate centers around their workers and whether they
should be classified as independent contractors as they are today or as
employees.

It may not sound like a big difference but as Kate Rogers (NYSE:ROG)
tells us, the ruling could have major implications, not just for Uber but
for other companies as well.

(BEGIN VIDEOTAPE)

KATE ROGERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Outside of a San
Francisco courthouse, Uber`s attorney is defending the company`s model of
classifying its drivers as independent contractors.

TED BOUTROUS, GIBSON DUNN PARTNER: If it went forward and they
prevailed, one of the devastating consequences would be to the drivers who
wouldn`t be able to work on flexible schedules. They would be on fixed
wages. They wouldn`t be able to be entrepreneurs, driving when they want,
which is really the essence of what so many of the drivers say they love
about Uber.

ROGERS: The scope of a lawsuit against Uber stands to impact the
sharing economy in a major way. Many start-ups rely on the independent
contractor model as a way to pair down their costs. Other companies,
including Washio, Handy, Instacart, Caviar and Postmates have been hit with
similar lawsuits.

Homejoy, a startup that connects cleaners with projects, just recently
folded on July 31st, citing a pending lawsuit against the company as one of
the reasons it was unable to raise capital.

One of the big questions that remains in the Uber case is how much it
could cost the company to reclassify its workers as employees.

Now, Re/code estimates it could cost Uber upwards to $290 million,
including worker`s compensation and unemployment insurance. Now, that
number does not include gas and mileage reimbursement which are two of the
things plaintiffs are seeking in the case.

The employee versus independent contractor debate has regulators
across the country fired up.

SCOTT WIENER, SAN FRANCISCO BOARD OF SUPERVISORS: We all want to make
sure that these workers are treated fairly and compensated fairly and have
the same social safety net as other workers, and we need to do it in a way
that allows innovation to occur.

ROGERS: Even 2016 contenders like Jeb Bush and Hillary Clinton have
entered the fray to weigh in on the gig economy.

HILLARY CLINTON (D), PRESIDENTIAL CANDIDATE: I`ll crack down on
bosses who exploit employees by misclassifying them as contractors or even
steal their wages.

Jeb`s response, of course, was to hail an Uber.

For NIGHTLY BUSINESS REPORT, I`m Kate Rogers (NYSE:ROG).

(END VIDEOTAPE)

HERERA: The so-called “gig economy” and the changing labor market
could be a hot topic at tonight`s first Republican debate, along with other
issues important to you and your money.

John Harwood is there. He`s in Cleveland, at the site of tonight`s
debate.

Good to see you, John.

So, when it comes to the new way that people are working and employee
protections that we just discussed here, Uber is one example, certainly,
where do the candidates stand on that?

JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, I expect
all of the candidates to say, as Marco Rubio said when Hillary Clinton
criticized the aspects of the gig economy, that this is 20th century
economics. We need to move to the 21st century. We need to embrace these
new forms of work, the sharing economy as a way to enhance future
prosperity. So, the argument is going to be engaged and I wouldn`t expect
them to differ much with one another.

MATHISEN: Let`s talk taxes. Ms. Clinton out with her plan on capital
gain taxes ten days or so ago. What should we expect to hear tonight from
the candidates on the GOP side?

HARWOOD: Well, there`s disagreement, Tyler, on tax policy on
Republicans. They want them lower. They are not going to be for Hillary
Clinton`s plan but there are variations within the field. You`ve got some
people, Ben Carson, Ted Cruz, who are talking flat tax. You`ve got other
people, Chris Christie, Marco Rubio who are talking lower rates.

And Donald Trump, the leader in the polls, he`s all over the map in
the past. He`s been for a wealth tax which would be very large but lately
he`s been talking flat tax himself. So, they`ll get a chance to lay those
out tonight.

HERERA: One hot button issue is likely to be entitlements. So, what
kind of reform might the candidates propose tonight?

HARWOOD: Well, that`s another example. You`ve got people like Jeb
Bush and Chris Christie talking about raising the retirement age. Chris
Christie is talking about eliminating benefits for people with incomes over
$200,000.

But Mike Huckabee, populist former governor of Arkansas, he said, no,
don`t go after Social Security.

Donald Trump says, no, don`t go after Social Security. Politicians
only do that because they don`t know how to grow the economy. I will.

MATHISEN: Let`s talk about their records on the economy. Several of
the men on stage tonight have been governors of state. We can look at job
growth state by state and see who did well and who didn`t among other
numbers.

Where do — how do they rank?

HARWOOD: You can expect to see governors trade barbs about their
record. The one with the best economic record, Rick Perry, was in the
first debate tonight but the governor legislator divide will be big and, of
course, there`s one candidate who doesn`t a record, which gives him the
freedom to claim that he`s going to do great things. That`s Donald Trump.

HERERA: It`s going to be fascinating. John, thank you very much.
John Harwood in Cleveland.

MATHISEN: Shares of Michael Kors surged on an earnings beat and that
is where we begin tonight`s “Market Focus”.

The handbag maker managed to post results that trumped, no Donald,
estimates on both the top and bottom lines. Its full-year guidance also
came in above consensus. Profit did fall for the second straight quarter,
but investors overlooked that, sending shares up 11 percent to $43.77.

Brinker International (NYSE:EAT), the parent company of the restaurant
Chili`s, posted disappointing quarterlies. Revenue rose, but missed its
own estimates because of weaker sales. Shares were off nearly 5 percent to
$56.48.

And Molson Coors brewed up a beat on the bottom line, but sales were
below analyst estimates. Cost cutting and demand for higher-margin beers
did help the firm`s results, however. Shares were up almost 5 percent
higher to $73.65.

Meanwhile, shares of Generac went the other way. They tumbled after
its earnings and revenue came in well below estimates. The maker of power
generators blamed the miss on a record low level of power outages. The
stock was off 14 percent to $29.10.

HERERA: “The New York Times (NYSE:NYT)” saw its earnings rise nearly
80 percent after it cut operating costs. Revenue was off because of weak
advertising sales. That sent shares down 3 percent to $12.80.

Costco (NASDAQ:COST) reporting same-store sales that were flat in
July, but that`s better than the drop off that Wall Street was expecting
from the wholesale retailer. Still shares were off slightly to $146.44.

Dow component IBM is buying the medical image company Merge Healthcare
in a deal worth $1 billion. The firm will combine with Big Blue`s new
health analytics unit. Shares of IBM fell less than 1 percent to $156.32.
Merge surged over 31 percent to finish at $7.10.

Coming up, as more companies offer more perks for employees, are they
raising the bar? And will it change the workplace as we know it?

(MUSIC)

HERERA: Some sobering statistics for the nation`s heartland.
Farmland values grew at the slowest pace in about five years, with the Corn
Belt region seeing declines. The department of agriculture says the
average value of crop land in the Corn Belt, which includes Illinois,
Indiana, Iowa, Missouri and Ohio, fell more than 2 percent from a year ago.
The drop reflects both lower corn and soybean prices.

MATHISEN: We told you last night, Netflix (NASDAQ:NFLX) announced an
employee benefit that`s generating a lot of buzz, allowing new parents to
take an unlimited amount of parental time off at full pay in the first
year, after the birth or adoption of a child. Perks have become the norm –
– that have become the norm in the Silicon Valley, though, aren`t the norm
in the rest of the country.

So, are catered lunches and unlimited vacation days at tech companies
making it hard for other businesses to compete for talent?

Jacob Morgan is an expert on the subject and advises some of the
biggest companies in the world on the evolving workplace. He joins us now.

Mr. Morgan, welcome. Good to have you with us.

JACOB MORGAN, “THE FUTURE OF WORK” AUTHOR: Thank you.

MATHISEN: I`m very interested in this topic, very interested in what
Netflix (NASDAQ:NFLX) did. But you tell me, are benefits at large
corporations getting better overall or worse?

MORGAN: Well, I think we`re starting to see the shift for
organizations to focus on the overall employee experience. Benefits are,
of course, a part of that. So, I think we`re going to actually start to
see them improve.

HERERA: It also depends on what the company does, does it not? I
mean, you`ve made the point that maybe in Silicon Valley, it`s — they
produce something different than, say, General Motors (NYSE:GM) does or IBM
does. So, therefore, the experience for workers who work for a traditional
company might be quite different than those that work for a cutting-edge
California, Silicon Valley company.

MORGAN: Oh, absolutely. I mean, I think the biggest thing that
organizations around the world can take from this is that they should be
listening to their employees and treating their organizations more like
laboratories and less like factories. So, it`s testing ideas and figuring
out what makes sense for your company and not necessarily trying to copy
what everybody else is doing.

MATHISEN: I wonder, Jacob, whether some companies are substituting
lower cost thrills, like unlimited lattes and M&Ms at the company`s canteen
in place of more expensive, traditional benefits, like defined benefit
pensions and like more lavish, less employee costly medical plan.

MORGAN: Well, when we think about the employee experience, there are
three environments that the companies have to think about. There`s the
digital environment, physical environment and cultural environment. So, I
think those are the three areas the companies are investing in. Of course,
there`s no substitute for pay, but a lot of the organizations that I speak
with and a lot of the employees that I speak with are actually willing to
take a pay cut in order to get some of these other things.

HERERA: So, how competitive is it going to become for more
traditional companies that perhaps have not had to look at the overall
employee experience, as they compete with companies that are trying to lure
millennials and people who care more about the total experience?

MORGAN: I think we are moving more towards the talent that hasn`t
been more fierce and as we continue to move forward in the next three to
five years, we`re going to see unbelievable battles and wars for talent,
unlike the business force has ever seen before.

MATHISEN: Jacob, thank you very much for your insights tonight. We
appreciate it.

MORGAN: Thank you for having me.

MATHISEN: Jacob Morgan, author of “The Future of Work”.

HERERA: And finally tonight, the Super Bowl may still be six months
away but a record has already been broken. CBS`s CEO says a 30-second ad
is selling for as much as $5 million, and that figure easily beats the
prior record of $4.5 million. Ad prices have gone up right along with
viewership. The Super Bowl earlier this year had the largest audience in
history and that`s why marketers are willing to pay so very much for an ad.

MATHISEN: And it was a great game.

HERERA: And it was a great game. It really was. It was a lot of
fun. And those ads are great to watch.

That does it for NIGHTLY BUSINESS REPORT for tonight. I`m Sue Herera.
Thanks for joining us.

MATHISEN: I`m Tyler Mathisen. Thanks from me as well. Have a great
evening, everybody and we 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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