Transcript: Nightly Business Report – September 9, 2015

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

bears come out in force minutes before the closing bell, for what had been
a relatively calm day into a tizzy.

you scratch mine. How pervasive is that behavior that forced the CEO of
United Continental to resign throughout the rest to the business world?

MATHISEN: And what slow down? Why the faltering of the Chinese
economy could actually be a positive for the United States.

All that and more tonight on NIGHTLY BUSINESS REPORT for Wednesday,
September 9th.

HERERA: Good evening, everyone, and welcome.

Late day drama which saw the markets go deeper into reverse and swing
400 points. The day started with a spark when stocks bounced right out of
the gate but that`s pretty much where it ended.

And the rally started fading shortly after the release of a strong
government report on the labor market, so strong that some say it could
prompt the Federal Reserve to raise interest rates in nearly a decade.
They meet next week. Combine that with the continued uncertainty in the
market and stocks fell and fell even harder into the close.

By the end of the trading day, the Dow Jones Industrial Average
dropped 239 points to 16,253. All 30 Dow components finished lower.
The NASDAQ declined 55. The S&P 500 was off 27.

Oil certainly didn`t help either. West Texas Intermediate fell 4
percent to 4,415 and that pressured any energy shares.

So, Mary Thompson was right in the middle of that with today`s action
at the New York Stock Exchange.


volatile day on Wall Street. The intraday swing in the Dow, 400 plus
points. The Dow opening up over 170 points in early trading following
gains that we saw in Japan and China. The big gains there spurred by
repeated promises of lowered corporate taxes in Japan and more government
stimulus in China. However, that wasn`t new news and that made traders
skeptical the rally could hold here in the U.S., especially following
Tuesday`s big gains.

Well, the U.S. markets were then hit by a report on job openings,
about 10:00 Eastern. And that report said that openings are at their
highest levels in 15 years.

The so-called JOLTS report causes the markets to sell off in early
trading. That`s because it raised expectations that the latest time could
give the Federal Reserve another reason to raise interest rates possibly as
soon as next week when policy makers meet.

The market slide accelerating late in the day, when Apple`s
announcement of a new iPad, update to Apple (NASDAQ:AAPL) TV and new
iPhones, failed to send shares of the tech giant higher, adding weakness in
energy stocks on the back of another down session for oil and the Dow
finished off more than 230 points and back into correction territory.

From the New York Stock Exchange, I`m Mary Thompson for NIGHTLY


MATHISEN: The promise of more stimulus out of China had U.S.
investors cheering early on today. But in reality, the U.S. may be the
country`s least affected by what`s going on over in China. That may sound
counter-intuitive since the global economy is so interconnected and China
is the world`s second largest economy. But that theory has been backed by
recent reports.

And as Steve Liesman explains, a slowdown in China may not necessarily
pose a big threat here in the U.S.


market volatility has been tied to concern over China`s economic slowdown.
But to several economists, it looks like the tail wagging the dog. The
U.S. buys about five times for stuff more stuff from China that it buys
from us. That means China is far more depended on U.S. growth than the
other way around.

In fact, total trade, imports and exports, is only about 3 percent of
the $17 trillion U.S. economy.

tends to have a ripple effect on the whole region in Asia and also emerging
markets more broadly. But when you quantify the impact of a 1 percent
decline and slowdown in China, it only has 0.1 percent impact on U.S. GDP.
So, that means that the impact on the U.S. overall both direct and indirect
is actually very limited.

LIESMAN: A recent study of 27 countries found the U.S. among the
least vulnerable to a sharp Chinese slowdown. Commodities sellers like
Argentina and Russia would fare the worst.

Still, some sound the alarm bells. They note the U.S. corporate
profits as opposed to the overall U.S. economy would suffer because Chinese
consumers buy less from American companies. They add that China is so
ingrained into the world that a cooling of the Chinese economic dragon will
spread a chill felt in the U.S.

WILLEM BUITER, CITI: For the U.S. clearly, domestic demand is much
more important than external demand. The rest world does, however, have an
impact and compensates (INAUDIBLE). The notion that the U.S. can drag the
global economy along is no longer the case.

LIESMAN: Yet a reason study by economists at the Kansas City Federal
Reserve Bank found a new upside for the U.S. from a Chinese slowdown. Tens
of billions of dollars are now leaving the country and ending up in the
U.S. economy.

From condos to companies, the Chinese are buying U.S. assets, helping
prop up real estate and equity prices.

So far, the data back up the optimists. As Chinese economy has
slowed, the U.S. economy`s economy actually accelerated, suggesting that
while the U.S. economy`s fate is affected by China, it`s not ultimately
determined by it.



HERERA: The widely followed hedge fund manager James Chanos remains
bearish on China. In an interview today, Chanos said Chinese economic
growth would continue to decline by about 2 percent a year and he made it
clear that he thinks the Chinese economic model of heavy investment is


JIM CHANOS, HEDGE FUND MANAGER: Investment is still almost 50 percent
of the economy. And they`re running out of room to borrow. That`s the
real problem. The banking system is loaned up. They`ve had to resort to
shadow banking and now the capital is leaving. And that`s the real sort of
news story.


HERERA: Chanos says the founder and president of Kynikos Associates
with more than $3 billion in assets under management.

MATHISEN: The Chinese government reportedly invited BlackRock
(NYSE:BLK) CEO Larry Fink to discuss the prolonged slide in the Chinese
stock market. According to CNBC, Fink accepted the invitation and
travelled to China late in August to meet with officials there. BlackRock
(NYSE:BLK) is the world`s largest asset manager.

HERERA: Now to the scandal in the sky, as we reported last night,
United Continental`s chief executive and two other company officials
resigned amid an ongoing federal investigation. Now, the public and
investors are asking, what went wrong at United? It`s a question that
faces United`s new CEO who vows to lift the airline to new heights.

Phil LeBeau has the story.


scandal rocking an airline struggling to get its act together.

Jeff Smisek, chairman and CEO of United Airlines, resign without
warning as questions mount about the relationship and he two United
executives had with the former head of the New York/New Jersey Port
Authority, which runs the Newark Airport.

Federal investigators are looking into why united add flights from
Newark to Columbia, South Carolina, near a second home of the Port
Authority leader. A route later cancelled when the Port Authority chairman
left his job.

Did United add the South Carolina flights to improve its lease in

JACOB FRENKEL: The issue of, is there something of value? Was there
a quid pro quo or was there a kickback?

LEBEAU: United is not commenting on the investigation. Meanwhile,
its new CEO vows to improve the airline`s performance from a poor on time
arrival record, to lackluster scores in customer satisfaction, United can
do better and the airline`s new CEO knows it.

OSCAR MUNOZ, UNITED AIRLINES CEO: It`s just an absolute and complete
point that we need to reach our customers with a better service project.
And we need to just convinced them that that is our commitment. That`s
just going to take a lot of time and effort.

LEBEAU: Munoz takes over United after running operations for CSX

Given his back ground, they are cautiously optimistic Munoz can lift
United to a level of profitability and performance that matches the
airline`s top competitors.



MATHISEN: So, how pervasive are trading favors in the business world?

John Singer is a partner at the New York law firm of Singer Deutsch
and he joins us now.

Mr. Singer, welcome.


MATHISEN: We don`t know all the details between what transpired
between the folks from United and the former head of the Port Authority of
New York. But one can well imagine that favors often get exchanged whether
they`re asked for or just given without being asked for. Where is the line
drawn between what is acceptable business practice, acceptable especially
in the context of a government official, and what crosses the line?

SINGER: Well, I think in this case you`re dealing with a public
entity. The Port Authority is controlled by New York and New Jersey, by
Cuomo and by Christie. So you`re dealing with taxpayer funds. And I think
in this case, it was a pretty cavalier and brazen quid pro quo in the sense
that there were these private flights to South Carolina from Newark that
did not exist previously and then, all of a sudden, within a few days
consequent to the CEO of the Port Authority leaving, that flight was

Then, of course, you had — that was the quid. Then the pro quo was
United wanted to curry favor with the Port Authority and they wanted lesser
fees, they wanted improvement to the terminal. So, it`s really a classic
quid pro quo and one that was very cavalier and brazen one here.

HERERA: This is obviously a different situation from a private

So, how pervasive is that type of behavior with either publicly held
companies doing business between another publicly held companies or private

SINGER: Sure. I think in the investment banking arena and the
securities industry which is my area of practice, it`s quite pervasive.
Where it crosses the line from permissible into impermissible and then the
impermissible arena would draw the ire of the regulators is when you have
shareholders being affected.

So, for example, this whole harken back to what happened in the early
2000s when you had some of the investment banks like Solomon Smith Barney
and others, and you had Jack Grubman writing research reports that did not
reflect his true beliefs but he would inflate ratings to curry the favors
of the CEO, and then in turn his firm would then garner increased
investment banking fees. That, of course, affected shareholders because
folks rely upon those ratings, they believed they were true and they
affected true beliefs of Mr. Grubman and others, and then, of course, you
had shareholders being affected, and then, all of a sudden, the state
securities commissioners and the NASD, and the Stock Exchange got involved.

MATHISEN: Is it ever OK in the case where a private company is doing
business or negotiating with the public entity like the Port Authority, is
it ever OK for that public company to do something that it knows benefits
the private interests of an individual at that public entity that they`re
doing business with, even if that individual has never asked for it?

In other words, can I do you a favor that you`ve not asked for, just
because I know it will make you happy? Is that wrong? Is that out of
bounds too?

SINGER: Well, I think that`s getting into a little more of the gray
area. I know, that, you know, people act a certain way so they think they
can effect change and maybe benefit someone. But I think in this case, you
had the public figure in this case, Sampson, who was the CEO of the Port
Authority, he was benefitting personally.

MATHISEN: Correct.

SINGER: The taxpayers weren`t benefitting. He was the one flying to
his second home in South Carolina so he was going to personally benefit.
But I`m not sure how anybody else was going to benefit from that.

Now, the question is whether United did anything improperly? I think
United concluded that their CEO did not because I think he walked away with
4.9 in the separation package. So, they did not terminate for cause, if
they had done so, then they —


SINGER: Exactly. I think — he was doing a proper thing for the
United shareholders, because shareholders would benefit if fees were lower
and if the terminal was better. I think the wrongdoing here was
effectuated on the part of the CEO of the port authority, not on behalf of

MATHISEN: OK. John Singer of Singer Deutsch, we appreciate your time

SINGER: Thank you very much.

HERERA: Still ahead, the sector of the economy that`s having a hard
time filling positions and it`s likely not the one you think.


MATHISEN: A new survey says the wealth gap in the United States is a
bigger problem for the economy, ultimately than slow growth is, according
to the Harvard Business School`s survey of its alumni. Inequality poses a
growing threat to competitiveness. Two-thirds of respondents say
addressing middle class stagnation should be a higher priority than
increasing overall economic growth.

HERERA: Boosting economic growth, however, is a key issue for
Republican voters. And today Republican presidential candidate Jeb Bush
outlined his plan to rev up the economy. And it all comes down to taxes.

John Harwood has details on how it compares to the plans of the other
presidential hopefuls.


UNIDENTIFIED FEMALE: Businessman Donald Trump.

from the shadow of Donald Trump, Republican candidates are turning to

Today, it was former Florida Governor Jeb Bush, who proposed a
sweeping reform to slash personal and corporate rates.

JEB BUSH (R), PRESIDENTIAL CANDIDATE: The difference between 2
percent and 4 percent growth is this — at 2 percent, we`ll stay where we
are, with millions on the sidelines, falling behind. At 4 percent we
growth, we grow at a pace that lifts up everybody. And there`s no excuse
for not trying. We need to jump-start our economy and we can do that by
fixing our broken tax code.

HARWOOD: Other Republicans have outlined tax reforms as well, but the
plans diverge on key details. On top rates, Marco Rubio stops at 35
percent, Bush goes to 28 percent and Rand Paul has a 14.5 percent flat tax.

On corporate rates, Rubio goes to 25 percent, Bush drops it further to
20 percent and Paul would institute a 14.5 percent value added tax.

On investment income, Bush goes to 20 percent, Paul applies his flat
tax, and Rubio would eliminate comment gains and dividend taxes altogether.

Two big questions they all face: how much would their plans increase
the budget deficit and how much of a wind fall would they provide to the

Two more questions, what sort plans would we get from Hillary Clinton
and Donald Trump? Neither of whom has offered full proposal.

For NIGHTLY BUSINESS REPORT, I`m John Harwood at the White House.


MATHISEN: More now on the labor report we mentioned earlier in the
program. The government says there were nearly 6 million job openings in
July, the highest ever. But even though companies are hiring, the
secretary of labor says there is still room for improvement.


THOMAS PEREZ, SECRETARY OF LABOR: There`s still slack in this
economy. We can still do better in terms of lowering the unemployment
rate. And one of the best ways to put that upward pressure on wages is to
have even more tightening in the labor market.

And so, I think there`s opportunity to do that. We`re not done yet.
I`m very, I`m pleased with this report but no one is spiking the football.
We`ve got more work to do.


MATHISEN: Well, despite the rise in job openings, hiring fell from
the prior month, meaning companies are having trouble filling the position.

HERERA: And one industry that is having a hard time filling positions
is fast food. So chipotle is making a big recruitment push following a
number of moves taken by other fast food companies to hire and retain

Morgan Brennan has the story from Rye Brook, New York.


a hiring spree opening restaurants three hours earlier this morning to
interview job seekers.

UNIDENTIIED FEMALE: I would love to work at Chipotle because I love
Chipotle. And of course, you get free food. I don`t know. Chipotle just,
it`s a good place to work at. It`s better than most fast food places.

BRENNAN: The goal, hire 4,000 workers in a single day. A move that
would boost the company`s 60,000 person workforce by nearly 7 percent.
Some of that will staff directly 200 new restaurants opening this year but
Chipotle says many of those hires will actually fill open positions in its
nearly 1,900 existing restaurants.

The past casual burrito chain promoted its hiring blitz on social
media sites and music streaming service Pandora. With each location
prepared to interview as many as 60 applicants.

Analysts say it`s a good move for the country.

STEPHEN ANDERSON: Having the extra hope during peak periods will help
get more customers into the door. So, ultimately, it will help Chipotle be
a winner in this situation.

BRENNAN: The hiring binge is the latest aggression of a growing trend
in the fast food business: a tightening labor market. As the economy picks
up and more people eat out, fewer workers are applying for jobs at Chipotle
and other restaurant chains, companies responding. Earlier this summer,
Chipotle beefed up its benefits packages with college reimbursement for
hourly employees, more paid vacation and paid sick days.

The Cheesecake Factory (NASDAQ:CAKE) and McDonald`s (NYSE:MCD)
corporate owned restaurants recently hiked pay, above and beyond markets
where the minimum wage has increased. Starbucks (NASDAQ:SBUX) is providing
tuition reimbursement and financial aid to staffers who enroll in an online
bachelor degree program. And Buffalo Wild Wings (NASDAQ:BWLD) says it will
raise wages faster than competitors to hang on to more workers. It calls
the availability of labor, one of its biggest head winds.

ANDERSDON: It costs less to retain an employee through higher wages
and benefits, rather than to go out and recruit new employees and train
them. So yes, it will affect the restaurant sector. But in our view,
given continued sales growth, it`s a high quality problem to have.

BRENNAN: As for Chipotle, was there enough this to fill positions?
Well, this Westchester County, New York location did well from a handful of
hopefuls and did do some hiring on the spot.

Overall, Chipotle says it has 60,000 applicants pre registered for
today, more than the company hoped for.

Meaning that while the labor market maybe tightening, there are still
that like what this company is cooking up.

For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan in Rye Brook, New


MATHISEN: Well, even though labor market is tightening just a bit,
not every company is hiring, no siree. Lockheed Martin (NYSE:LMT)
eliminating 500 jobs in its information and government services division.
The defense contractor says the job cuts are in response to changing
government priorities and it comes a month after announcing the purchase of
Sikorsky, the maker of the Black Hawk helicopter.

HERERA: Another weak report from Barnes and Noble (NYSE:NE) is where
we begin tonight`s “Market Focus”.

The bookstore chain posted sales that fell for the fifth straight
quarter and a fiscal first quarter loss that widened to $35 million.
Decreased demand for its Nook e-reader tablets and online books weighed on
its results. Shares slid more than 27 percent to $11.80.

Krispy Kreme posted late earnings that disappointed. The doughnut
chain missed estimates on both the top and bottom lines. And on top of
that, its full-year earnings guidance was weak. The company says its
results were hit by weaker than expected demand for its packaged goods.
Shares slipped in initial after-hours trading. Before the close, the stock
was off a fraction to $17.73.

The opposite story, though, for Box. The cloud storage company posted
a loss that was smaller than anticipated and a revenue beat. As more
customers subscribed to its services. Its third quarter guidance was also
better than predicted. Shares were higher right after the close. Shares
ended the regular session up 2.5 percent to $14.25.

Palo Alto Networks (NASDAQ:PANW) posted quarterlies that beat on the
top and bottom lines. It also gave strong first quarter guidance. This as
companies and governments are spending more to protect themselves from
cyber attacks. Shares popped in initial after-hour trading. At the close,
the stock was off slightly to $165.17.


MATHISEN: CSX (NYSE:CSX) Railroad announcing today that weak coal
demand will weigh on its results next year. The firm says it`s going to be
difficult to meet its profit goals and it expects small full-year bottom
line growth. Shares were off a fraction at $27.81.

Meantime, XPO Logistics buying the trucking company Conway in a deal
worth $3 billion. The combination will increase XPO`s revenue to $15
billion, this according to that firm. Shares spiked in initial after hours
trading, as you see right there. Before the close, the stock was off about
2 percent to $35.53.

And McDonald`s is switching to cage-free eggs in the United States and
Canada. It`s going to take them a long time to get there, though. It`s
going to take a full decade to go 100 percent cage-free. This comes just a
few months after the fast food chain announced it will stop using chickens
raised with certain antibiotics at its U.S. restaurants. Shares of Mickey
D`s off more than 1 percent, cage-free or not, at $95.43.

HERERA: As we`ve been reporting a new class of injectable cholesterol
lowering drugs have just been approved by regulators. But according to a
new study, the new treatments are too expensive. A non-profit that
evaluates the cost effectiveness of new medicines says Regeneron, Sanofi,
and Amgen`s new treatments will cost about $14,000 a year per patient. But
they should cost about $2,200 per patient.

MATHISEN: Coming up, Apple (NASDAQ:AAPL) unveiled new devices at a
big event in San Francisco. But will it be enough to reverse the doldrums
in the stock?


HERERA: Here`s a look at what to watch for tomorrow. We get weekly
jobless claims, import and export prices are out. They`re an important
gauge of inflation. And the report on whole sale trade is out as well.
That`s what to watch for Thursday.

MATHISEN: And finally tonight, Apple (NASDAQ:AAPL) introduced the
world to a slew of new iGadgets at its highly anticipated event today.
Investors didn`t seem highly impressed. Shares slipped about 2 percent.

So, what`s new and what failed to wow Wall Street?

Josh Lipton sums it up from San Francisco.


TIM COOK, APPLE CEO: We are about to make some monster announcement
across several of our product lines.

dominance in your living room, a big step in the enterprise and an under
the hood update on your wrist and in your hand all unveil in San Francisco
as Apple (NASDAQ:AAPL) keys up for the key holiday shopping season.

One of the big worries: China. But Cook announcing on stage that the
company saw 75 percent year over year iPhone sales growth. The iPhone 6S
and 6S plus featuring enhanced camera and video capabilities, along with 3D
touch in a more fluid way.

Apple (NASDAQ:AAPL) also announcing a new pricing and upgrade plan,
pay $32 a month and upgrade phones every year.

But will the iPhone refresh and pricing plan ease investors` concerns
about the stock?

DAN IVES: You have less than 30 percent of customers have upgraded to
6. And this is really now going to be the catalyst and I think it`s
improved the situation, a white knuckle situation. But they`ve laid out
the road map on iPhones, on Apple (NASDAQ:AAPL) TV, on the iPads. I think
you walk away from here incrementally confident.

LITPON: Much of the attention focused on the refresh of Apple
(NASDAQ:AAPL) TV, three years in the making.

Cook says the new set top box addresses the needs of the next
generation of mobile and at home viewing.

COOK: We believe the future of television is apps. In fact, this
transition has already begun.

LIPTON: The new Apple (NASDAQ:AAPL) TV will include its own operating
system. It also integrates Siri into a new remote and it will allow you to
shop and play games and like all products, it will be available at some
point over the next two months.

From the living room to the conference room, Apple (NASDAQ:AAPL) also
introduced a new iPad Pro. A 12.9 inch device Cook says is Apple`s
clearest expression of personal computing. A clear play for the enterprise
space and reminiscent of Microsoft`s surface tablets, it comes with an
optional stylus called the Apple (NASDAQ:AAPL) pencil, a product Steve Jobs
famously hated.

But if the Pro reenergizes sales that have plateaued for the iPad
recently, there could be a lot to like for investors.

For NIGHTLY BUSINESS REPORT, I`m Josh Lipton in San Francisco.


HERERA: And that does it for NIGHTLY BUSINESS REPORT for tonight.
Thanks for joining us.

MATHISEN: And thanks from me as well. I`m Tyler Mathisen. Have a
great evening, everybody, and we hope to see you right here tomorrow night.


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