Transcript: Nightly Business Report – September 24, 2015

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

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Fed speak. The chair
of the Federal Reserve gives her first public comments since last week`s
big rate decision. Steve Liesman with the news and analysis.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: One-two punch. China`s
slowing economy and low oil prices prompting Caterpillar (NYSE:CAT) to
slash its revenue forecast and jobs.

MATHISEN: Bugged and rigged. The latest on the scandal engulfing the
manufacturer of perhaps the world`s most iconic car, the Beetle.

All that and more tonight on NIGHTLY BUSINESS REPORT for Thursday,
September 24th.

HERERA: Good evening, everyone.

Speaking for the first time since the Federal Reserve`s controversial
decision to keep interest rates near zero, Chair Janet Yellen late today
said she supports a rate hike sometime later this year. It was just one
week ago that the head of what is arguably the world`s most powerful
central bank cited low inflation and a weak global economy as reasons not
to raise interest rates.

Steve Liesman joins us now with more on her speech.

So, what did she say?

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: She said that –
– she associated herself as among those who believe that the Federal
Reserve will raise rates, it will be appropriate to raise interest rates
this year. The importance of that is last week when she spoke, she said
that other members of the committee, and wouldn`t answer the question when
asked about what she actually believes. Now, you can count the Fed chair
as among those who think rates ought to go up, quote, “sometime later this
year,” and I think I know what your follow-up question is.

MATHISEN: Does this mean they will, and when, October or December?

(CROSSTALK)

LIESMAN: If the chair says, it`s likely to happen. Although she did
give the obligatory caveat of depends on the economic data, it could happen
later or it could happen earlier. So, the question that the market is
obsessed over is this it will happen next month in October or will it
happen in December? Unclear from what she said. She was very clear that
the two things that are keeping down inflation and the economy today,
energy prices are sinking fast, perhaps every time I seem to drive in, gas
prices are lower. And import prices from two things, which is weak
economic — economies overseas and two, the strength of the dollar.

She says those are going to pass through the system, they`re
transitory. She`s confident that inflation is going to move back to the
Fed`s 2 percent target.

HERERA: What did she say if anything at all about sign-up? Because
in the Q&A after the news conference last week, she was asked a lot about
it, she spoke a lot about it. What about in this particular address?

LIESMAN: So, it`s a 23-page speech with a three-page appendix and
eight or nine graphics in there. So, my recollection is she does not
mention the word China at all because I would have flagged that. She does
mention the idea of overseas economic weakness and dollar strength being
things that put downward pressure on inflation. But this time around,
China was not central to what is really an academic speech about inflation.

MATHISEN: Your instinct, having followed several chairs of the
Federal Reserve, would it be more likely that rates would rise at a meeting
where they have a press conference following it, which is I believe the
December meeting, as opposed to the October meeting? And is there anything
that says they might raise interest rates outside of a meeting?

LIESMAN: I don`t think they have a reason to raise outside of a
meeting. That`s the easy part of the question.

I think they could well do it later in October. Let`s say, for
example, you get up the next payroll report which is the September report,
which comes in early October, and it comes in at 250,000 or 275,000 and the
unemployment rate kicks down from 1.1 percent. Let`s say even below 5
percent. The Fed could go ahead and hike rates.

MATHISEN: That could be the green light.

LIESMAN: And they have a system in place, by the way, which they`ve
made public, to hold a press conference after a meeting in which no press
conference is called. So, they get reporters on the phone and the chair
will both explain herself and explain what the committee did and take
questions from reporters.

HERERA: Given what you know about the market, and obviously you know
a lot, will this speech reassure the market or spook the market?

LIESMAN: So, given the last several months I feel like I know less
about the market than I thought I knew.

(LAUGHTER)

HERERA: Join the group.

LIESMAN: Right, OK.

And I always say if you`re not confused you`re not paying attention.
So, I thought the market would be happy but with the idea the Fed did not
raise rates last week. The market has gone straight down since that time
period. I have to think it`s worth entertaining the possibility that the
reverse is true, that if the Federal Reserve were to hike and remove that
uncertainty over the when, which by the way Yellen says is not a big deal,
the when. She says the more important deal is the rate of increase which
she says will be gradual and will be low. But I think that if that`s
possible the market could rally on that news.

HERERA: All right. We`ll leave it there, Steve.

LIESMAN: It`s anyone`s guess.

HERERA: It is anybody`s guess. That`s what makes the market, right?

Thanks, Steve. Steve Liesman.

MATHISEN: Well, the slowing global economy, specifically China, is
taken a toll on Caterpillar (NYSE:CAT), the world`s biggest construction
and mining equipment maker is slashing jobs and cutting its revenue
forecast. That pressured shares of the Dow component. It fell more than 6
percent today, making it the worst-performing stock on the blue chip index.

Hampton Pearson has more on Caterpillar`s pain.

(BEGIN VIDEOTAPE)

HAMPTON PEARSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: The world`s
biggest construction and mining equipment maker began the year projecting
revenues in excess of $50 billion. A restructuring plan unveiled today
includes slashing that forecast by a billion dollars and cutting up to
10,000 jobs by 2018. It will impact 20 plants worldwide across its major
businesses — construction, mining, energy, and transportation.

A combination of a slowdown in industrial activity in China where
Caterpillar`s machine and construction industry sales were down double
digits in June and a U.S. downturn in oil and gas construction due to
falling oil prices is triggering those job cuts.

Leading analysts say finding the new normal will be a challenge for
Caterpillar (NYSE:CAT), especially given the downturn in key commodities.

ELI LUSTGARTEN, LONGBOW RESEARCH: You have to take down facilities,
overhead to a new normal, which is going to be far lower. Co-production
keeps declining, it`s down another 10 percent this year and haven`t had a
co-plan in almost four years in this country. I mean, that tells you that
you have to structurally change, and that`s what they`re doing.

PEARSON: Caterpillar (NYSE:CAT), a Dow component, saw its stock fall
more than 6 percent today in trading, and it pulled down shares of other
industrial companies as well. Shares of Caterpillar (NYSE:CAT) have fallen
more than 20 percent this year.

BEN MANDEL, JP MORGAN GLOBAL STRATEGIST: Weakness in emerging market
growth and in particular China imbue our outlook for the global economy
with a lot of down side risk. So, anytime you have an event, especially
for a large multinational company that`s directly plugged into the global
industrial sector that corroborates that message, then markets react.

PEARSON: Caterpillar (NYSE:CAT) officials say businesses like
construction, mining, oil and gas sometimes do go through prolonged
slowdowns, but they also say those industries are the right businesses to
be in for the long term.

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

(END VIDEOTAPE)

HERERA: The health of the global economy is issue number one at an
annual gathering of thought leaders and decision makers in Nantucket,
Massachusetts. The meeting is called the Nantucket Project. And some of
the attendees shared their thoughts and opinions with Brian Sullivan.

(BEGIN VIDEOTAPE)

BRIAN SULLIVAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Even on this
small island off the coast of Massachusetts the concerns are decidedly
global.

Here at the Fifth Annual Nantucket Project gathering of business,
political, and creative leaders, the signs of a possible global slowdown
dominate the economic conversation with China and Germany square on the
front page.

Former Barclays Capital CEO Bob Diamond is here, and he said China`s
fate right now is unknown.

ROBERT DIAMOND, FORMER BARCLAYS CAPITAL CEO: We`ve seen 20 years of
very strong economic growth. We have a correction. How strong will that
correction be or how deep will that correction be? I`m not sure that we
know yet. I think a lot of it depends on the quality of the policy
response.

SULLIVAN: It`s difficult to blame anybody for being a bit nervous.
What started as concerns over a China slowdown have spread now throughout
the world. The Volkswagen scandal has helped drag down the German stock
market by 17 percent over the past three months. And Brazil, the world`s
seventh biggest economy, is now in a deep recession and its currency has
been sinking.

Starwood Capital`s Barry Sternlicht, who has developed billions in
real estate and hotel projects around the world for more than 25 years,
says it is a confusing time even for the best investors.

BARRY STERNLICHT, STARWOOD CAPITAL CHAIRMAN & CEO: To me, it feels
like we`re standing on quicksand right now. There are smart people who are
confused, and there are people who say this blip in China does nothing,
China`s rich, and equally smart people who say this is the beginning of the
end of the Chinese experiment because of the overinvestment in physical
plant and that`s not needed, and there`s so much bad debt in the banking
system that the country`s not nearly as rich as people think.

SULLIVAN: Sternlicht added that one way to help end some of the
confusion would be for the U.S. Federal Reserve to raise interest rates.

STERNLICHT: Keeping rates low actually is just creating such bubbles
and such distortions and such bad behavior in the capital markets that it`s
time to raise the short end. I don`t think the long end goes up that much.

SULLIVAN: But we don`t know if the Federal Reserve will heed that
advice until late October or mid-December when the Fed meets again.

I`m Brian Sullivan for NIGHTLY BUSINESS REPORT, Nantucket,
Massachusetts.

(END VIDEOTAPE)

MATHISEN: Well, stocks fell for the third straight session today on
those global growth concerns and ahead of that speech by Federal Reserve
Chair Janet Yellen.

By the close, the Dow Jones Industrials were off 78 points, but they`d
been down as much as 263 earlier in the day. The NASDAQ fell 18 and is now
negative for the year. The S&P 500 declined by 6.

HERERA: Nike (NYSE:NKE) could potentially change the tone of trading
tomorrow. The Dow component easily beat Wall Street earnings estimates,
making it nine quarters in a row of better than expected profit. The
world`s largest sportswear maker reported earnings per share of $1.34
beating expectations by 15 cents. Revenue rose from a year ago, coming in
at nearly $8.5 billion helped by strong sales of higher margin products.
That sent the stock soaring initially in afterhours trading.

Dominic Chu has more on what`s going right at Nike (NYSE:NKE).

(BEGIN VIDEOTAPE)

DOMINIC CHU, NIGHTLY BUSINESS REPORT CORRESPONDENT: Beyond the
headline profit and sales numbers, the reason why many traders and analysts
are even more bullish on Nike (NYSE:NKE) now has something to do with
futures orders growth. Now, simply put, this is a measure of what kind of
growth in future business Nike (NYSE:NKE) expects in the coming months.

And Nike (NYSE:NKE) reported a big number, 17 percent growth if you
take out the effects of different currency movements around the world.
That`s much bigger than the 11 percent growth that analysts were expecting
on average. And that expected growth also came better across all regions
and Nike (NYSE:NKE) reports on. The most important of which could arguably
be North America, Europe, and greater China. Those regions are of key
importance to Nike (NYSE:NKE). The company says those China futures orders
are growing again by about 27 percent.

Now, remember, Nike`s stock has already outperforms the market so far
in 2015, so the question becomes whether this is bullish enough to take the
stock up even higher or if it`s due for a pause.

Back over to you guys.

(END VIDEOTAPE)

MATHISEN: Dominic Chu reporting.

Now to the U.S. economy where the number of Americans who applied for
unemployment benefits rose last week. Despite that uptick, though, the
level is still low and follows a path of solid job growth. According to
the Labor Department, jobless claims up 3,000 to a seasonally adjusted
267,000.

HERERA: A big increase in the number of new home sales last month.
Job grains and low mortgage rates sent that read on real estate to a more
than seven-year high. That`s according to the Commerce Department. The
increase of nearly 6 percent was also well above forecast.

MATHISEN: And that strength is not showing up, however, in
manufacturing. Orders for durable or long-lasting manufactured goods
slipped in august. This according to the Commerce Department. That was
mostly due to a decrease in the number of bookings for new cars, airplanes
and military hardware. On top of that, overall business investment was
weaker.

HERERA: At least 29 state attorneys general have initiated an
investigation into Volkswagen and whether it cheated emissions tests in
some of its diesel cars.

This comes as the automaker`s board prepares to meet tomorrow where it
will likely turn over the reins to another auto executive whose job it will
be to steer that company out of crisis.

Phil LeBeau reports.

(BEGIN VIDEOTAPE)

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: As the scandal
involving rigged diesel engines grows at Volkswagen, the embattled
automaker is preparing for a new CEO. Sources say Matthias Muller, who has
run Porsche the last five years, will be tabbed to take over Volkswagen.
His elevation will come as other executives at VW leave the company. How
many and what knowledge they may have had about the rigged engine software
remains to be seen, but it`s clear regulators in Europe and around the
world are just starting to ask questions. including here in the U.S., where
the researcher who uncovered the deception in VW`s diesel engines says the
amount of pollution the cars were actually spitting out was substantially
higher than what VW had been advertising.

DANIEL CARDER, WEST VIRGINIA UNIVERSITY: We saw the large differences
in numbers. That`s when we knew that the vehicle was exhibiting off-cycle
emission behavior.

LEBEAU: Meanwhile, Volkswagen dealers here in the U.S. are still
unable to sell several clean diesel models. And the negative press may be
keeping customers away from dealerships. TrueCar says Volkswagen is the
only major automaker here in the U.S. to see a drop in sales in September.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago.

(END VIDEOTAPE)

MATHISEN: Shares of BMW, which trade over in Germany, dropped sharply
after a German newspaper claimed that its diesel engines were, quote,
“significantly exceeding regulatory limits.” But late in the day, that
same newspaper made a clarification, saying there was in fact no evidence
of emission manipulation by BMW.

HERERA: Still ahead, people before profit — the message the pope
delivered to Congress today during an historic speech. We`ll give you the
details.

(MUSIC)

HERERA: Pope Francis today became the first pope to address a joint
meeting of Congress. In his wide-ranging speech the pontiff encouraged a
divisive legislature to keep the channels of communication open, telling
them it`s the only way we can solve the many economic and social problems
that face the world.

Mary Thompson reports from Washington.

(BEGIN VIDEOTAPE)

MARY THOMPSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Congress gives
a thunderous reception to the 266th leader of the Catholic Church, bringing
tears to the eyes of this host and fellow Catholic, House Speaker John
Boehner, and shouts of joy from the 30,000 people outside the Capitol.

The first pope to address Congress, telling lawmakers live by the
golden rule.

POPE FRANCIS, CATHOLIC CHURCH: Do unto others as you would have them
do unto you.

THOMPSON: His speech more than a catechism, though. The pope calling
for the world`s largest arms exporter to end the arms trade.

POPE FRANCIS: Why are deadly weapons being sold to those who plan to
inflict untold suffering on individuals and society? Sadly the answer, as
we all know, is simply for money.

THOMPSON: And in describing business as a noble profession urged its
leaders to put people before profits.

POPE FRANCIS: It can be a fruitful source of prosperity from the area
in which it operates, especially if it sees the creation of jobs as an
essential part of its service to the common good.

THOMPSON: The pope`s praise of the late Dorothy Day, a founder of the
left-leaning Catholic workers movement, suggests he remains wary of
capitalism. Though when failing to include a line from his prepared text
that says politics can`t be a slave to the economy and finance, it appears
the pope was wary of being too critical of it as well.

The Vatican calling the dropped line a little oversight by the pope in
a 50-minute speech asking Congress to remember and respect their immigrant
roots and to work toward a culture of care that would combat poverty and
protect nature. In keeping with Catholic principles, Francis made a veiled
defense of traditional marriage, called for respect of life at its earliest
stages and the abolishment of the death penalty.

While the pope`s speech offered something for both sides of the aisle,
in a taped message presidential hopeful Marco Rubio saying he hears the
pope`s call of working towards common goal.

SEN. MARCO RUBIO (R-FL), PRESIDENTIAL CANDIDATE: He reminded us that
whatever our policy differences might be, we`re all called to put the good
of our people above all.

THOMPSON: Differences put aside at least for a day.

In Washington, D.C., I`m Mary Thompson for NIGHTLY BUSINESS REPORT.

(END VIDEOTAPE)

MATHISEN: And a quick transition here to “Market Focus”, and we begin
with KB Home (NYSE:KBH) posting results that topped estimates.

Lower than expected deliveries were offset by an increase in selling
prices. Revenue and home deliveries both increased double digits. Shares
were 1 percent higher to $14.60.

A miss on the top line sent shares of Bed Bath & Beyond (NASDAQ:BBBY)
way down in initial after-hours trading. The home furnishings retailer did
announce a new $2.5 billion stock buyback program. You can see shares slid
initially after the close before coming back just a bit. In the regular
session, the stock was off a fraction to $59.33.

Similar story for Pier 1. The company`s revenue also fell short of
expectations and the firm cut its guidance for the full-year. Shares
slipped initially after the close. In the regular session, the stock was
off 2.5 percent to $8.67.

HERERA: The publisher Scholastic (NASDAQ:SCHL) reporting a wider than
expected loss, but the loss comes right after the company sold its
educational technology unit. The company`s children`s publishing unit
helped drive a jump in revenue. Shares were up a few cents to close at
$42.79.

Accenture also posted a beat on the top and bottom lines. This
despite the negative impact of a strong dollar. The consulting firm also
hiked its dividend by 8 percent and added $5 billion to its stock buyback
program. Shares fell a fraction to $97.77.

A report that Transocean (NYSE:RIG), the offshore rig contractor, may
being linked to the corruption probe of Petrobras, weighed on shares.
According to Bloomberg, a former executive at the Brazilian state-run oil
firm testified that he received payments from someone claiming to work for
Transocean (NYSE:RIG), that in exchange for a contract. Shares tumbled
almost 5 percent to $13.01.

The chipmaker Marvell Technology said it would cut jobs in its mobile
platforming business. The move will result in a nearly 20 percent
reduction in its global workforce of about 7,000. Shares popped in initial
after hours trading. Before the close, though, the stock was up about 3.5
percent to $9.02.

MATHISEN: The most powerful and influential young business people.
You can find them in the latest issue of “Fortune” magazine, and the just
released 40 under 40 list. Topping the list this year is Adam Neumann, co-
founder and CEO of WeWork, a provider of shared — what handsome fellow he
is there.

He`s joined by many other young professionals, some names you`ll
recognize, others you might not.

And here with the highlights is Susie Gharib, senior special
correspondent at “Fortune” and a contributor here to NIGHTLY BUSINESS
REPORT.

I know Alfred E. Neumann. I don`t know Adam Neumann at all.

SUSIE GHARIB, FORTUNE/NBR CONTRIBUTOR: You should, though.

MATHISEN: Where`s Zuckerberg? Where`s Page and —

GHARIB: So many years, Mark Zuckerberg was on that list and Larry
Page of Google (NASDAQ:GOOG). So “Fortune” decided let`s come up 100
percent of new names and they did.

So, a lot of the names you don`t know. The companies you do know.
Besides WeWork which is a temporary work space company. In the top three,
you have Tesla, the top executive of Tesla. You have Uber.

MATHISEN: Not Musk.

GHARIB: Not Musk.

J.R. Starbol. That guy you stumble on the name. And third place, you
got three ride-sharing companies, Uber, Lyft, and its equivalent in China.

So, different names. But you know what the unifying theme here is.
Just like you saw on the cover of the magazine, big bet. These are
entrepreneurs that are making big bets.

MATHISEN: All in.

GHARIB: All in, no limits. And let`s not forget, they`re all under
40 years old.

HERERA: Yes, they are.

MATHISEN: I hate them.

(LAUGHTER)

MATHISEN: Nah, just kidding.

HERERA: A lot of times technology dominates these types of lists.
It`s a much more eclectic list.

GHARIB: Yes. You know, Sue, usually when we think of innovators, we
think of technology companies and entrepreneurs, but actually there are
some rising stars on this list who work at GM, JP Morgan, Goldman Sachs
(NYSE:GS), things like that. But also they`re rising stars in auto
companies. Fitness companies like Soul Cycle. There`s a company that you
featured in “Bright Ideas,” Debbie Sterling of Goldie Blox, the toymaker
that makes toys for girls that have a science —

(CROSSTALK)

GHARIB: Right.

The comedian John Oliver of that HBO program that`s very successful,
“Last Week Tonight.” So, it`s a real broad spectrum.

MATHISEN: And Taylor Swift.

GHARIB: Yes. Again, she was on the most powerful women.

MATHISEN: She was on the most powerful women.

GHARIB: Right. You know, she has really made an impact in the music
industry and taking on Spotify and Apple (NASDAQ:AAPL) to change their pay
model. So, she`s more than an entertainer.

HERERA: She`s a wonderful businesswoman.

GHARIB: A disruptor. And she`s 25. She`s the youngest person on the
list.

MATHISEN: Wealthiest is?

HERERA: Wonderful.

GHARIB: The list is not based on money, Tyler. But probably Ryan
Graves, who is with Uber. And he`s worth I think $1 billion. He`s under
40 years old. You`re going to hate him too.

(LAUGHTER)

GHARIB: And also the founder of Fitbit. The company went public
recently and his shares are worth something like $700 million.

MATHISEN: Good for him.

HERERA: Somebody has to do it.

GHARIB: Extraordinary people.

MATHISEN: “Fortune`s” Susie Gharib and an NBR contributor — good to
see you as always.

GHARIB: Nice to see you guys.

MATHISEN: And coming up, Apple`s top competitor is setting up shop in
Apple`s own backyard. That story next.

(MUSIC)

HERERA: It`s going to be Friday. Here`s what to watch tomorrow.

The final reading of second quarter gross domestic product is out.
Apple`s new iPhone 6S and 6S Plus will go on sale. And a read on the
health of the consumer with a consumer sentiment report. And that is what
to watch on Friday.

MATHISEN: And Samsung expanding its footprint in Silicon Valley,
opening a new $300 million state-of-the-art building and it`s not too far
from the headquarters of its biggest rival in phones, Apple (NASDAQ:AAPL).

Josh Lipton takes us on a tour of Samsung`s new digs.

(BEGIN VIDEOTAPE)

JOSH LIPTON, NIGHTLY BUSINESS REPORT CORRESPONDENT: It`s a 1.1
million-square-foot corporate campus. Welcome to Samsung`s new North
American headquarters in San Jose, California. The 10-story, $300 million
facility is the latest in a tech building boom that includes Facebook`s
state-of-the-art headquarters and Apple`s new campus, which is under
construction.

Samsung hopes to expand its footprint as part of a push to build a
bigger presence in Silicon Valley and get closer to its customers. The
facility will house the components division of Samsung electronics plus
sales and marketing.

SCOTT BIRNBAUM, SAMSUNG: The pace of innovation is growing at this
incredible rate, and if you look at what consumers are craving and what
they`re demanding, they want to have the best, the greatest, the latest.
And it`s moving at such a fast pace. So, this is a perfect time for us to
reinvest even deeper right here in Silicon Valley.

LIPTON: The expansion comes at a critical time for Samsung. While
the tech titan remains the leader with more than 20 percent of the global
smartphone market, its share has been slipping. It faces fierce
competition from rivals like Apple (NASDAQ:AAPL) and Chinese vendors. And
the company`s operating profits have declined year over year for seven
straight quarters.

The bet now is this new campus can help attract top talent in Silicon
Valley. Amenities include the so-called Chill Zone complete with napping
pods and pool tables, a gym with panoramic views. And, of course, it
wouldn`t be a tech campus without free food.

Samsung does face real challenges. The stock is down some 15 percent
so far this year. But the Korean giant is betting that this new campus and
a big footprint here in Silicon Valley can reverse that trend and win back
investors.

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

(END VIDEOTAPE)

HERERA: And that does it for NIGHTLY BUSINESS REPORT. I`m Sue
Herera. Thanks for joining us.

MATHISEN: And thanks from me as well. I`m Tyler Mathisen. Have a
great evening, everybody. 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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