Transcript: Nightly Business Report- November 17, 2015

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

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Nervous markets. Stocks fell when a security threat canceled a soccer match in Germany as authorities continue to hunt for the most wanted men in Europe.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Don’t count retail out yet. Sales surprised at both Wal-Mart (NYSE:WMT) and Home Depot (NYSE:HD), two of the biggest and influential brands in the industry.

MATHISEN: And capital fight. Will the next budget showdown focus on America’s plan for Syrian refugees?

All that and more tonight on NIGHTLY BUSINESS REPORT for Tuesday, November 17th.

HERERA: Good evening, everyone. And welcome.

The markets on edge. Stocks gave up most of their gains, the Dow Jones Industrial Average wiping out a triple digit rise after news that a soccer match between Germany and the Netherlands had been canceled less than two hours before kickoff.

The reason? What German officials called, quote, “concrete evidence”, end quote, of a plan to detonate a bomb in the stadium. Chancellor Angela Merkel and other German officials were to attend the game in Hannover, Germany, but had not yet arrived.

Shortly before U.S. markets closed for the day, German officials said no explosive device had been found in the stadium.

But some market watchers say that selloff is evidence that investors are nervous as money flowed out of stocks and into the safety of bonds.

MATHISEN: Meantime, Sue, in Paris, the hunt for suspects continues. Authorities reportedly looking for one additional attacker, maybe a second as France continues a wave of strikes against the Islamic State in Syria, with the promise of more.

Michelle Caruso-Cabrera reports tonight from Paris.

(BEGIN VIDEOTAPE)

MICHELLE CARUSO-CABRERA, NIGHTLY BUSINESS REPORT CORRESPONDENT: It is four days since is the terrorist attack on Paris, France, and Salah Abdeslam is still the most wanted man in Europe. The 26-year-old say French police is directly connected to the attacks that occurred here on Friday night. They say he rented a car that was found abandoned outside of one of the attack sites. One of his brothers died during the attack and another one of his brothers was detained for several days.

Abdeslam narrowly evaded capture as well. He was stopped near the French/Belgian border but police let him go because there hadn’t been an alert put out for him yet.

Now, as authorities continue to search for him today, U.S. Secretary of State John Kerry was in Paris, meeting with French President Francois Hollande. Both of them vowed to do more in the fight against the Islamic State, the terrorist organization that has taken responsibility for the attacks here over the weekend.

While here, he also defended the United States’ decision not to put U.S. troops on the ground in Syria in order to fight ISIS.

JOHN KERRY, U.S. SECRETARY OF STATE: We need people on the ground who live there who are prepared to take back their communities, and working with us who will kick ISIL out and secure their communities when they’re out.

CARUSO-CABRERA: Overnight, the French military doing another round of airstrikes in Raqqa, Syria, which is the self-proclaimed capital of the Islamic State, and Russian President Vladimir Putin also making a military move, shifting Russian navy assets to the Mediterranean to help assist the aircraft carrier Charles de Gaulle in its fight against ISIS.

We also learn today, French President Francois Holland will travel to Washington, D.C. on Tuesday to meet with U.S. President Barack Obama and then to Moscow on Thursday to meet with Putin, to see if he can get greater coordinated action in the fight against ISIS.

In Paris, France, Michelle Caruso-Cabrera, NIGHTLY BUSINESS REPORT.

(END VIDEOTAPE)

HERERA: As for the markets, stocks finished mixed. Some encouraging earnings report and economic news sent stocks higher early in the day but as we reported, the major averages gave up those early gains, pushing the S&P into negative territory. At the close, the Dow Jones Industrial Average rose six points to 17,489, the NASDAQ was one point higher, the S&P 500 fell two points.

As for oil, prices declined more than 2 1/2 percent on oversupply concerns. And with the decline in crude, AAA says the national average price for a gallon of regular gasoline is expected to drop below the $2 level by Christmas. And the Midwest could see prices as low as $1.50, according to the oil price information service.

MATHISEN: Shares of Wal-Mart (NYSE:WMT) and Home Depot (NYSE:HD) helped lift the market early today. The troubled retail sector got some positive news from the word’s biggest merchant by revenue, and from the world’s largest home improvement chain. Home Depot (NYSE:HD) says people are spending, willing to buy big ticket items to improve their homes. Wal-Mart (NYSE:WMT) saw U.S. sales strengthen. The two the were easily the top performing stocks in the blue chip Dow index today with gains of at least 3 1/2 percent.

Courtney Reagan has more now on those companies’ results and how they delivered in a difficult environment.

(BEGIN VIDEOTAPE)

COURTNEY REAGAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: It turns out, not all retailers are disappointing investors this earning season. Consumers are certainly still shopping and spending at Home Depot (NYSE:HD), Wal-Mart (NYSE:WMT), T.J.Maxx, Marshals and Home Goods.

Continuing its streak of outperformance, Home Depot’s third quarter results beat expectations for profit, comparable sales and it narrowed its forecast for full year earnings to the high end of its previous guidance. Consumers continue to show willingness to spend on home improvement as the housing market strengthens, but perhaps at the expense of other kinds of retail spending.

BRIAN NAGEL, OPPENHEIMER: Home Depot (NYSE:HD) is a bright spot. We’ve seen home improvement has performed better than other areas of retail. I tend to think and retailers like Macy’s (NYSE:M) and maybe more of the clothing retailers, those companies are probably hit harder by weather.

REAGAN: While Wal-Mart’s U.S. CEO did say unseasonably warm weather had some negative impact on the quarter, the world’s largest retailer slightly outperformed analysts’ estimates for profit while upping the lower end of its full year earnings guidance.

Wal-Mart (NYSE:WMT) also logged the fifth straight quarter of positive U.S. comparable sales growth and the fourth straight quarter for positive traffic, crediting solid back to school and Halloween seasons.

PAUL TRUSSELL, DEUTSCHE BANK: These are notable improvements but there’s a balancing act. There’s obviously a high cost to Wal-Mart (NYSE:WMT) achieving these traffic gains. Operating income was down 9 percent year over year, and in essence, we still have a story here that is not growing earnings and probably won’t still for some time.

REAGAN: Despite increasing competition from more retailers entering the off price space, the T.J.Maxx, Marshals and Home Goods operate in, the parent company of the three brands beat the street on its profit, revenue and same store sales for the third quarter, leaving several analysts to forecast a strong holiday quarter for TJX.

For NIGHTLY BUSINESS REPORT, I’m Courtney Reagan.

(END VIDEOTAPE)

HERERA: Our guest tonight is expecting a strong holiday season. He says holiday shoppers will spend on average about $702 on Christmas gifts this year. That’s up strongly from the $767 spent a year ago.

He is Jesse Tron, vice president for the International Council of Shopping Centers.

Welcome. Nice to have you here.

JESSE TRON, INTERNATIONAL COUNCIL FOR SHOPPING CENTERS: Thanks so much for having me. Appreciate it.

HERERA: You know, we saw the good results from Wal-Mart (NYSE:WMT) and T.J.Maxx. However, you have to contrast those with very disappointing outlooks from Macy’s (NYSE:M) and some of the higher end retailers.

So, what leads you to believe it’s going to be a strong holiday season?

TRON: Yes, we’re looking overall a little bit more long-term at the traditional November, December period and seeing that it’s going to being about a 3.3 percent increase. That’s very nice gain on top of last year’s already strong results. So, even though there have been some mixed earnings reports out there right now, I think that for a longer view, we expect it to be a very strong and long holiday shopping season.

MATHISEN: How do you expect the mix between physical store shopping and online shopping to changing if at all this season?

TRON: Probably not change too much over last year. We did see that there’s a slight dip in the amount of people that want to shop at pure play online retailers and a slight increase of people spending online but at retailers that have a physical presence. So, we attribute that to stores are doing a much better job right now of the overall omni channel retail picture.

HERERA: How much of this discounting we’ve seen so far and some of it has been fairly aggressive, Terry Lundgren, the head of Macy’s (NYSE:M), saying that basically he expects that he is going to have to discount to move merchandise. Do you agree with that? Are we going to see that continue?

TRON: Well, it really is a case by case basis with a lot of retailers. I think what you see right now is actually what is called planned promotion. That’s going to be the most prevalent. And that’s everything that retailers have already predetermined what they’re going to set pricing at.

Now, of course, that could fluctuate throughout the season as markets dictate. But I think, right now, we’re really still solidly in that planned promotion area which is a good thing for retailers. Deep discounting after the fact, post-Christmas and in January, that would be, you know, trouble to look out for. But right now, I think a lot of this is still planned.

MATHISEN: What are your members tell you, if anything, about their increased plans for security in light of the Paris attacks and do any of them express concern that people might be less inclined to go and congregate in large public places, the so-called soft targets like malls?

TRON: Well, there’s always that concern without a doubt when something like this happens, but the shopping center industry takes security very, very seriously. It’s unfortunately something that we’ve been dealing with for a very long time. So, it’s not anything new.

You know, this seems to come up when an attack like this happens or unfortunate events like active shooter. But this is a 365-day a year thought process for these security professionals. They’re always looking at ways to secure their shopping centers and it’s something they take very, very seriously.

HERERA: On that note, Mr. Tron, thank you very much for joining us.

Jesse Tron with the International Council of Shopping Centers.

Ty?

MATHISEN: Well, Sue, there are some signs inflation may be, get this, picking up a little bit after two straight months of declines, prices do look to be firming. The Labor Department reported a 0.2 percent increase in its Consumer Price Index, reversing September’s drop. The CPI (NYSE:CPY) measures what Americans pay for just about everything, from clothes to health care.

HERERA: Industrial production a broad measure of everything made by American factories declined in October but manufacturing output which accounts for almost 3/4 of overall industrial production posted its strongest growth since July on more production of steel, cars and computers.

MATHISEN: Home builders are feeling less confident. Sentiment fell more than expected in November. This according to a monthly industry index. The National Association of Home Builders says growth in the sector is pressured by the scarcity of land and of workers.

HERERA: The chair of the Federal Reserve strongly opposes a bill that would reform the central bank. In a letter to House Speaker Paul Ryan and Minority Leader Nancy Pelosi, Janet Yellen called the law a, quote, “grave mistake.” Yellen says the legislation would undermine monetary policy and would expose the central bank to political pressures.

The proposed law requires the Fed to tie interest rate policy to a mathematical rule. The White House is threatening to veto the bill.

MATHISEN: Still ahead, defense stocks getting a lot of attention, including some names that are under the radar. We’ll tell you about them.

(MUSIC)

HERERA: U.S. Senate Majority Leader Mitch McConnell says a moratorium is needed on the president’s Syrian refugee program. But Senate Democratic Leader Harry Reid says he doesn’t think the refugee program should be paused at this stage. And now, there appears the possibility that this issue could play a role in the next government funding debate.

Eamon Javers joins us from Washington.

Good to see you, Eamon.

EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Hi, Sue.

HERERA: So the president has said that the U.S. should not slam the door on the refugees, but can he keep to that position if the Democrats start to the disagree with him and publicly?

JAVERS: Yes, that’s going to be one of the big questions we’re going to watch over the next 24 hours or so. What we’ve seen over the past 24 hours is as many as 30 governors of states across the country, overwhelmingly Republican governors have said they do not think they want Syrian refugees resettled in their states. They want a pause in that program. They want to be able to assess and look at whether or not ISIS is able to infiltrate the refugee program and then possibly move forward at some point after that.

What we saw late today though was Senator Chuck Schumer, a Democrat from the New York, also saying he thinks he would like to see a pause in that program, as well. And that gives you the sense that maybe Democrats are starting to crumble here and the support that President Obama needs on Capitol Hill may not be there when we’re sitting here talking about this tomorrow night.

So, we’re going to have to watch that. It will be tricky for him to go forward without support of at least one party up on Capitol Hill.

MATHISEN: What would a pause mean? What would happen during such a pause?

JAVERS: Well, that’s the big question here. What some of the legislators have said on Capitol Hill and some of the governors said in the states around the country is that they want to understand more about what the vetting process actually entails.

There have been wild rumors floating around, including that only the U.N. is vetting these people, not the United States. U.S. officials, administration officials here today held a conference call to brief reporters on the details of that vetting. They insisted it is very elaborate, involves the FBI, the Homeland Security Department, the Department of Defense, U.S. intelligence agencies, and that anybody coming in from Syria has an actual face to face meeting with the Department of Homeland Security official who grills them on their background.

They say it is a very serious vetting process and yet, Republicans and other critics have said look, it’s only as good as the FBI’s terrorist database. And, obviously, in France, we saw an attack that was not anticipated, some of those people who were involved in the attacks seemed to have not been in any databases at all. And that raises concerns.

HERERA: Indeed. Eamon, thank you very much. Eamon Javers in Washington for us.

MATHISEN: Defense stocks have gotten a lot of attention in the days since the Paris attacks. This as Western nations say they will accelerate their efforts to fight terror groups.

And as Jane Wells tells us, it’s not just the big names that are in focus but some lesser known companies, as well.

(BEGIN VIDEOTAPE)

JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT: As war in Iraq and Afghanistan seem to wind down, defense stocks still went up. Now, we see that terrorism lives on and defense stocks still keep going up, as the Islamic State declares war on the West, the U.S. among others are conducting airstrikes in Syria, raising the need for more bombs, better intelligence, and not just for us.

The Pentagon has approved the sale of $1.3 billion worth of over 20,000 smart bombs to Saudi Arabia to replenish those used in the fight against the Islamic State — bombs and guiding systems which are made by Raytheon (NYSE:RTN), Lockheed Martin (NYSE:LMT) and Boeing (NYSE:BA).

The need for more intelligence is seen as a boon for the booming drone market. And more drones are also being sold to allies, helping General Atomics and AeroVironment (NASDAQ:AVAV), and potentially helping Northrop Grumman (NYSE:NOC).

But defense companies have had to operate in a fog of war budgetary environment. Congress is still debating this year’s Pentagon spending plan. But expect more pressure to raise spending, especially in an election year. And in the short term, expect more spending on things outside the defense budget in homeland security.

Protecting domestic sites would mean more purchases from companies which provide surveillance and intelligence.

Drexel Hamilton points to possible new business for fleer systems which specializes in border security and chemical, nuclear and biohazard protection.

Cowen thinks domestic tranquility needs will boost business for Leidos Holdings and Booz Allen, which both help the National Security Agency.

And Orbital ATK, which doesn’t just make rockets but also guns and ammo.

All signs that the war which has dominated the 21st century may be changing, but it’s not ending.

For NIGHTLY BUSINESS REPORT, Jane Wells, Los Angeles.

(END VIDEOTAPE)

HERERA: A $13 billion deal is where we begin tonight’s “Market Focus”.

The French industrial gas group Air Liquide announcing it will buy U.S.-based Airgas (NYSE:ARG). The combination will Air Liquide increase its exposure to the United States and reduce its dependence on Europe, which has seen a decline in heavy industry.

Shares of Airgas (NYSE:ARG) soared nearly 30 percent to $137.35. Air Liquide trades overseas.

Dick’s Sporting Goods (NYSE:DKS) slashed its outlook. The retailer saw its profit slump in its most recent quarter, partially because it has too much merchandise. The company also said it expects this holiday season to be more promotional. Shares tumbled more than 9 percent to $36.96.

General Electric (NYSE:GE) has completed the spinoff of its consumer finance business Synchrony Financial. This follows the company’s share exchange which was more than three times oversubscribed. Nonetheless, shares fell just a fraction to $30.32.

And say good-bye to McDonald’s (NYSE:MCD) dollar menu. The burger chain says it will debut a McPick two value menu starting in January, which will let customers pick two select menu items for $2. This is the latest effort by the company to stem its sales slump. The shares were off just slightly to $110.94.

MATHISEN: Well, Angie’s List has rejected IAC Interactive’s proposal to buy it for more than a half billion dollars. The customer review site says the proposal undervalues its business. Angie List’s up 1 percent on the day, IAC down more than 3 percent.

Shares of GNC, Vitamin Shoppe (NYSE:VSI) and Herbalife (NYSE:HLF) all fell sharply before federal agencies announced the results of an investigation into nutritional supplement companies. But none of the companies ended up mentioned in the report and then the shares fared their losses. Still, GNC fell more than 6 percent, Herbalife (NYSE:HLF) down 1 1/2 percent, Vitamin Shoppe (NYSE:VSI) almost 5 percent lower.

And a dividend increase helped lift shares of La-Z-Boy (NYSE:LZB). The furniture maker’s new payout is ten cents a share. It’s going to be made to shareholders in December. So, the stay in your La-Z-Boy (NYSE:LZB) until then. This as the company’s earnings were in line with estimates.

Shares popped initially after the close. During the regular session, the stock was off a fraction. It finished at $25.97.

American companies issued a record $107 billion in dividends in the third quarter. That’s a 23 percent rise from the prior quarter, according to Henderson Global Investors. A special payout from the Kraft (NYSE:KFT) following its merger with Heinz accounted, though, for nearly half the increase.

MATHISEN: Well, as Jane Wells reported a moment ago, the need for more intelligence is seen as a boon for companies that manufacture drones. And today, at a conference in San Jose, more than 1,500 people gathered to debate the future of the industry, which goes far beyond military uses.

(BEGIN VIDEOTAPE)

JOSH LIPTON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Drones are taking flight, with consumers and companies rapidly adopting these unmanned machines. But a big concern is how to securely integrate drones into the U.S. air space where they share the skies with helicopters and airplanes.

Dave Vos, who heads up Project Wing at Google (NASDAQ:GOOG) X, which is the company’s project to make deliveries with drones, offered up a solution.

DAVE VOS, GOOGLE X: Take responsibility. I mean, a large part of what we’re dealing with here is the fact that our community, our small UAV community, hasn’t taken enough responsibility to ensure that we’re all educating each other as to staying within the rules.

LIPTON: But regulators aren’t just relying on the industry. They’re proposing their own new rules. The FAA, for instance, has proposed limiting the vehicles to flying during daytime hours, staying below 500 feet, and remaining within sight of the operator.

Those rules could go into effect late next spring. Today, representatives from the FAA talked about the challenges they will face.

MARKE GIBSON, FAA: I somewhat facetiously say people want to fly their kite. These kites can get up to several thousand feet and have capabilities we’ve never had to deal with before. So, even though it’s different, it will fall into some regulatory piece because they’re going to have the ability to operate in the same air space that manned aircraft are flying and these other commercial aircraft, as well.

LIPTON: The appeal of drones is easy to understand. For consumers, they’re a fun hobby and for companies, they can provide a fast, easy, and relatively cheap way to accomplish a range of tasks from surveying farmland to inspecting oil fields.

That’s why despite these potential regulatory challenges, analysts at ABI Research estimate that the commercial drone market will jump from $3 billion last year to nearly $9 billion by 2019.

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

(END VIDEOTAPE)

HERERA: And coming up, ’tis the season for charitable giving. But where do people donate the most? And has social media changed the way people give?

(MUSIC)

MATHISEN: Here is what to watch tomorrow: My favorite day of the month, the Federal Reserve releases the minutes from its October meeting. Nothing beats the reading of the minutes, folks. A read on construction activity with the housing starts report comes out, and another economic indicator — weekly mortgage. That, folks, what to watch Wednesday.

HERERA: General Motors (NYSE:GM) got two gold stars from “Motor Trend” magazine. It named the automaker’s Chevy Camaro as the car of the year saying it is one of the finest driving vehicles in the world at any price. It beat out seven finalists including the Audi TT, the BMW 7 Series, the Honda Civic and a few others. And GM’s Chevy Colorado model was named Truck of the Year for the second year in a row.

MATHISEN: Wow.

All right. Americans gave away a record pile of cash to charity last year, nearly $360 billion. That according to the Giving USA Foundation. So, what will the season of giving look like this year?

Joining us now, senior personal finance correspondent Sharon Epperson with more.

The generosity unprecedented last year. What are the people who follow this expecting this year?

SHARON EPPERSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, Giving USA, one organization that follows it says when you look at the stock market and the rise in the stock market, you can expect giving to increase about a third as much as the gains you see in the stock market.

So, when you have a flat market, we have to see what will happen there. But keep in mind that’s one of the things they look at.

The good news is 95 percent of households actually give which is really encouraging.

HERERA: That’s great.

EPPERSON: And the average amount is about $3,000. So they are giving. We’ll see if the giving keeps pace with what we saw in 2014.

HERERA: Where do they donate the most?

EPPERSON: The mostly to religious organizations. About a third of charitable giving goes to religious organizations. Most people give to their house of worship. Then education after that — but also human services, health, and foundations also get a lot of the money.

MATHISEN: How have social media changed the ways people give?

EPPERSON: You know, if your non-profit does not have a tag right on the Web site, you know, to click on to get to the Facebook (NASDAQ:FB) page, that’s a problem. That is Facebook (NASDAQ:FB), Twitter, YouTube, you have to be present as a non-profit in social media in order to really get that plea out there for what your mission is and also that you need to donate, as well.

But the issue comes with how you use that as a consumer and what you pay attention to. You know, it’s there — you can get sucked in some of these YouTube testimonials and what you see from other people writing on their Facebook (NASDAQ:FB) page. But you still need to do your own homework.

HERERA: Yes. And speaking of doing your homework, how vulnerable I guess maybe a better way to say it is, how secure is it? Sometimes if you’re donating a couple thousand dollars, you want to make sure that everything is secure.

EPPERSON: So, the same way that you would in any type of transaction that you’re going to make online, you want to make sure that you’re going through a secure network, that HTTPS lets you know it’s secure, encrypted. That’s the best way to do it.

MATTHEWS: Is that what that means? I didn’t know that’s what that means.

EPPERSON: There you go. Just learn something.

MATTHEWS: Learn something every night.

HERERA: That’s why she’s in charge.

(LAUGHTER)

MATHISEN: So, are there Web sites that can help you find out how much of your money is actually going to the program, as opposed to fund-raising as opposed to —

EPPERSON: Exactly, exactly. Charity Navigator, a great place to go for that information. Guide Star. You want to look at their form 99, if you want to get technical and look at their IRS forms they submit to see how much does the executive director or CEO of this organization make. That information is out there and available — how much goes to administration, how much goes to programs, all of these things are things you want to find out.

And some of these sites will let you make those online donations right from the site. That’s a good way to do it, as well.

MATHISEN: Sharon, thanks.

HERERA: Excellent.

EPPERSON: Sure.

MATHISEN: Great to be with you.

HERERA: Thanks, Sharon.

And finally tonight, when you’re sitting in traffic this Thanksgiving, you can blame cheaper gas and airline tickets.

AAA is predicting this holiday could be the biggest travel by car event since 2007. Almost 47 million Americans are expected to travel at least 50 miles for the holidays. The average price of a gallon of regular is now $2.15, which according to AAA is 65 cents cheaper than the same time last year. Plane tickets are down by 10 percent for the top 40 routes.

I will not be one of those people traveling.

MATHISEN: On the road, no, I don’t think I am either.

HERERA: No.

MATHISEN: I’ll be here.

HERERA: That does it for — so will I — that does it for NIGHTLY BUSINESS REPORT. I’m Sue Herera. Thanks for joining us.

MATHISEN: And I’m Tyler Mathisen. Thanks from me, as well. Have a great evening everybody. We’ll see you tomorrow.

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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