Transcript: Nightly Business Report- November 18, 2015

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

Federal Reserve sends its clearest message yet that a December rate hike is
likely, and stocks take off.

Elite police units move against a terrorist hideout in a Paris suburb. At
least two were killed, seven detained. But the mastermind of last week`s
carnage is not among the arrested. We have latest details.

HERERA: What`s in your fund? Why regulators are taking a closer look
at some mutual funds that are popular with small investors.

All that and more tonight on NIGHTLY BUSINESS REPORT for Wednesday,
November 18th.

MATHISEN: Good evening, everyone, and welcome.

New developments out of Paris tonight, and we will have a full report
later in the broadcast.

But we begin tonight with the stock market and the Federal Reserve.
It said the economy, quote, “could well handle” a rise in interest rates.
The minutes from the Central Bank`s last meeting in October provided the
clearest evidence yet that most but not all policymakers think the time is
right for a rate hike and that a delay could increase market uncertainty.

That helped stocks extend their gains. The Dow Jones Industrial
Average rose 247 to 17,737. NASDAQ jumped even more in percentage terms,
gaining 89 points, and the S&P 500 added 33.

Steve Liesman has more now on the thinking inside the Central Bank.


Fed`s October meeting make explicit what the statement had already said,
that the Fed is fast on its way to its first rate hike in nine years at the
upcoming December meeting. The October minutes say that most Fed members
thought economic conditions would be met in December to hike interest
rates, and they made clear that the October statement was designed to send
a message that will be appropriate to hike at the next meeting.

To be sure the meeting took place before the horrific terror attacks
in Paris, but one hawkish member of the Fed said in an exclusive CNBC
interview that he did not expect much change in the economic or the rate
outlooks as a result.

like this before in which, you know, some disruption of certain
geopolitical or military nature affects things. And you know, for a time,
people can get cautious and pull back a little bit. These tend to be
transitory. So, keeping our fingers crossed and waiting and seeing.

LIESMAN: The October minutes say specifically that no decision had
been made. A rate hike remains contingent on the economic data, and there
are obviously some dovish members on the committee who remain unconvinced
and worried about global weakness and U.S. economic weakness. But the
center of the committee looks to believe that those risks have diminished
and the economy`s in pretty decent shape, a point driven home by the recent
strong October jobs report that came after the meeting.

All members of the committee agreed that once rate hikes start,
they`re likely to rise slowly afterwards, and there was general agreement
that starting hikes earlier would allow future hikes to be gradual rather
than forcing the Fed to play catch-up. So, as much as any central bank
ever does, the Fed is telegraphing a December rate hike, a rate hike that
only very weak economic data at this point could derail.

For NIGHTLY BUSINESS REPORT, I`m Steve Liesman in Washington.


HERERA: Housing, an important pillar of the economy, saw new home
construction slide in October. Housing starts fell 11 percent from a month
earlier with construction of multifamily units, including apartments and
condos, plunging 25 percent. Multifamily construction drove much of the
demand during the summer, but new applications for building permits, a key
indicator of future construction, did rise 4 percent last month.

MATHISEN: Higher mortgage rates are not deterring home loan
borrowers. Mortgage applications rose more than 6 percent last week from
the prior week — this according to the Mortgage Bankers Association, and
most of that gain came from new home purchase applications.

HERERA: And a strong housing industry helped Lowe`s report an
increase in sales and profit during the third quarter. The company also
backed its forecast for the full year. The CEO says consumers are
allocating more of their budgets to home improvement projects. Shares
finished the day on the up-side.

MATHISEN: While Lowe`s bucked the broader retail trend, Target
(NYSE:TGT) did not. The company saw traffic at its stores pick up but says
it`s facing margin pressure and will not meet its fiscal year forecast for
online sales growth, but Target`s CEO was nonetheless optimistic.


BRIAN CORNELL, TARGET CHAIRMAN & CEO: We saw traffic growth in store
and online last quarter. So, I feel good about our overall strategy with
digital. Obviously, we significantly out-performed the industry.

I just saw the October e-commerce numbers for the U.S. last night, up
8.6 percent. With that as a backdrop, our 20 percent looks really strong.
So, we`d better make sure we`re growing share in that space. We`re
continuing to outpace the industry, which we are.


MATHISEN: Shares, though, declined more than 4 percent on the day.

HERERA: Oil prices briefly fell below $40 a barrel, first time since
August, but the commodity recovered after the minutes from the Fed`s last
meeting were released. By the settle, domestic crude rose just slightly on
the trading session.

MATHISEN: The low oil prices and cheap gas have helped drive auto
sales to a record pace, making it one of the most profitable years ever for
almost every automaker — with one big — very big exception, Volkswagen.
The diesel emissions scandal has hit VW hard.

But as Phil LeBeau reports from the L.A. auto show, executives for
VW`s Audi brand believe they can ride out the storm and keep the luxury
mark in the fast lane.


Angeles auto show, Audi executives are all smiles, despite a growing diesel
emissions scandal which is keeping Audi dealers from selling diesel
versions of five models.

SCOTT KEOGH, AUDI OF AMERICA PRESIDENT: We`re still continuing our
record sales growth, so there`s good demand for Audi. But to me, honestly,
it`s not about sales or not sales. To me, it`s about these customers were
impacted, and my responsibility is to make it right for these customers.

LEBEAU: Volkswagen admitting it rigged emissions for more than 11
million vehicles worldwide has primarily hurt sales of the VW brand. But
Audi is also impacted. While the diesels versions in question make up a
small percentage of Audi sales in the U.S., the cheating scandal has the
potential to tarnish a brand that has raised its image with luxury car

JACK NERAD, KELLEY BLUE BOOK: Certainly, their engines have been
affected by this, but the publicity has not surrounded Audi so much. So,
as long as they can stay out of the public eye or not be the biggest dog in
the fight, they can probably steer clear of this problem.

LEBEAU: Still, Audi is optimistic about business over the next
decade. In fact, it`s targeting strong annual sales in the U.S., and by
2025, more than 25 percent of those sales will be hybrid or electric

KEOGH: When we get something right, we know how to do it, it gets
executed. We feel this revolution is coming on electric, and we`re going
to be ready for it.

LEBEAU: The sales forecast is ambitious, because it counts on growing
demand for hybrids and electric vehicles — even though many believe gas
prices will remain low for at least the next couple of years.

But if Audi is right and if it can get past the emissions scandal with
limited damage, then it could continue a strong run of sales in a U.S.
market where luxury vehicles remain in strong demand.



HERERA: Still ahead, the raids in Paris that had Wall Street and the
world watching.


HERERA: Investors had been watching developments out of Paris, where
French SWAT teams raided a cell that was ready to launch new attacks, but
the ringleader`s status is still unknown as of this evening.

Michelle Caruso-Cabrera has our report tonight from Saint-Denis,


is the street where a SWAT team raided a second-floor apartment in the hunt
for those responsible for the attacks on Friday night that left 129 people

The raid began at 4:30 in the morning. On video recorded at the time,
you can hear the tremendous and continuous volume of gunfire.


CARUSO-CABRERA: During the raid, a woman inside the apartment
detonated a suicide vest, killing herself and another man.

Hours later, police had arrested eight people, seven men and one
woman. However, the two men for which there has been an international
manhunt, the suspected accomplice, Salah Abdeslam and the alleged
mastermind, Abdelhamid Abaaoud, they were not among those arrested.
Prosecutors declined to say if they were among the dead. They said they
could not or they would not because they weren`t certain of the identities
of the bodies that they found.

The police are still searching the building. It`s slow going because
the third floor collapsed and they need to bring in reinforcements in order
to keep going.

This neighborhood is about a mile from the Stade de France, the
stadium that was attacked by two suicide bombers Friday night from the
northern periphery of Paris, and it has a heavy concentration of immigrants
from North Africa.

The people who lived here said it was a terrifying night.

In Saint-Denis, France, Michelle Caruso-Cabrera, NIGHTLY BUSINESS


MATHISEN: House Republicans are moving forward with a bill that would
temporarily halt the president`s plan to allow Syrian refugees into the
U.S. House Speaker Paul Ryan called for a pause in the program until
authorities can verify that those entering don`t pose a security threat.
The legislation is expected to be brought to the floor for a vote Thursday.

HERERA: The president`s plan calls for 10,000 Syrian refugees to be
allowed entry into the U.S. next year, but how exactly does a refugee enter
this country, and what systems are in place to help them integrate into the
American economy?

Dina Gusovsky explains.


Roustom is no stranger to sights and sounds like this.

Whether at this refugee camp in Jordan or from the place he fled.

HUSSAM AL ROUSTOM, SYRIAN REFUGEE (through translator): I left Syria
in April 2013, and the reason why I left Syria is because there was death,
destruction, dead bodies everywhere.

GUSOVSKY: But he considers himself lucky. His is one of only a few
Syrian refugee families who were able to resettle in the United States and
become part of the American economy.

documentation provided by the United States citizenship immigration
services is given to a refugee as they arrive at the airport. They also
receive an employment authorization document.

GUSOVSKY: The family has been living in this New Jersey apartment
since June.

MAHMOUD: The way Hassam came to our organization is through the
Department of State, because the Department of State administers the United
States refugee admissions program.

GUSOVSKY: That organization is Church World Service, one of nine
resettlement non-profits that helps families like Hussam`s get back on
their feet, but only after the State Department clears them for entry. A
number of federal agencies, including the FBI, Department of Defense and
Department of Homeland Security are part of the vetting process, and in
terms of health care —

MAHMOUD: We take them to social services to have them apply for
Medicaid. Social Services allows that to happen, as far as receiving
health services, for eight months.

GUSOVSKY: The State Department gives a little over $2,000 per refugee
to these resettlement agencies to cover things like rent, clothing and food
for the first 30 to 90 days. In 2015, the State Department provided over
$406 million for refugee admissions programs. For fiscal year 2016, the
president has asked for over $442 million. The United States takes in more
refugees than any other resettlement country in the world.

As for Hussam, he`s one of only a few people willing to speak out,
especially in the midst of political controversy, about whether or not
America should even let people of his nationality into the country.

AL ROUSTOM: The Syrian conflict has to be told from my point of view,
because all the doors that are closing to Syrians and the refugees that are
fleeing, they`ve been fleeing from all of this terror.

City, New Jersey.


HERERA: Hussam now works at a local bakery and he and his family are
learning to speak English.

MATHISEN: Coming up, why regulators want to learn more about the
value of securities in some of the most popular mutual funds.


MATHISEN: The U.S. is reportedly pursuing criminal cases against
executives at JPMorgan (NYSE:JPM) and RBS. According to “The Wall Street
Journal,” the bankers may have been involved in selling flawed mortgage
securities before the financial crisis. Officials are trying to determine
whether they ignored warnings about those securities and whether that
constitutes fraud.

HERERA: Barclays agrees to pay $150 million to resolve an
investigation related to its foreign exchange unit. Regulators say the
bank used super fast trading systems to reject unprofitable client orders
and failed to say why the trades were rejected. Back in May, Barclays was
fined more than $2 billion for manipulating the currency market.

MATHISEN: A multibillion dollar deal is where we begin tonight`s
“Market Focus.” ON Semiconductor (NASDAQ:ONNN) will buy Fairchild for
about $2.5 billion. ON says the move will increase its presence in the
industrial, automotive and smartphone market, and will add to earnings
right away.

ON Semiconductor (NASDAQ:ONNN) down, though, nearly 8 percent.
Fairchild went the other way, 8.5 percent higher at $19.40.

And while two companies merge, another separates. ConAgra will split
into two publicly traded outfits, spinning off its frozen potato products
unit into another business.

The CEO says the move will enhance each business.


SEAN CONNOLLY, CONAGRA FOODS CEO: As you can see from the market
reaction today, we think our investors agree that they will be rewarded by
creating these two peer plays, which will unlock the value that we think is
inherently within each.


MATHISEN: And some value on lock today. Shares up 4 percent to

Staples (NASDAQ:SPLS) reporting profit that slipped in its most recent
quarter as sales continue to fall there. This comes as the retailer awaits
regulatory approval for its buy of Office Depot (NYSE:ODP). Shares down
nearly 3 percent to $12.11.

Meantime, Canadian Pacific made a cash and stock proposal to acquire
Norfolk Southern (NYSE:SO) for about $28 billion, while Norfolk Southern
(NYSE:SO) said it would consider the offer, its response was lukewarm, said
the number was below premium and the deal would face significant regulatory
hurdles. Both companies, however, up more than 5.5 percent.

HERERA: Qualcomm (NASDAQ:QCOM) is facing antitrust charges in South
Korea. The company says the antitrust agency has alleged that the company
violated anti-competition laws, and they say that Qualcomm (NASDAQ:QCOM)
should be fined. Shares tumbled more than 9 percent to $48 a share.

Nokia (NYSE:NOK) says it has received approval from French authorities
for its offer to exchange its shares for those of Alcatel-Lucent
(NYSE:ALU). This is part of the company`s proposed nearly $17 billion bid
for the firm, which it announced in April. Nokia`s shares were up a
fraction. Alcatel rose more than 1 percent.

And Salesforce posting results that beat estimates on both the top and
bottom lines. The cloud computing company also hiked its full-year revenue
guidance. Shares jumped initially in after-hours trading. During the
regular session, the stock was up just a fraction.

And the same story for Keurig Green Mountain. Results came in better
than expected and they hiked its quarterly dividend. The new payout is a
little more than 32 cents a share. The stock surged right after the market
closed. During the regular session, the stock was almost 1 percent higher.

MATHISEN: Mobile payments company Square is expected to price shares
for its initial public offering tonight and begin trading tomorrow. Square
is one of the so-called unicorns or private companies valued at $1 billion
or more that plan to go public this year.

Kayla Tausche takes a look at the challenges Square faces.


with a small plastic square plugged into a smartphone, giving small
businesses an affordable way to take credit cards. But now, Square, once a
small business in its own right, is trying to convince Wall Street it`s
worth billions of dollars.

On the conservative side, $3.5 billion, but that alone is a steep drop
from the company`s last private market valuation. In an attempt to woo new
investors who want more assurance the stock will perform well once it
trades publicly.

That new reality takes a few things into account. First, volatility
in the IPO markets. So many of the newly traded stocks are below their
offer price. Second, there`s the fact that CEO Jack Dorsey also has
another day job, running Twitter. And number three, there`s increasing
competition in the payment market.

Square charges merchants using this simple payment process or a flat
2.75 percent fee, but Square`s customers are trying to win its business.
Smaller rivals are charging merchants less. Bigger rivals are adding data
and analytics.

So, Square branched out, too, offering now marketing and also loans
for merchants to grow, trying to retain these customers as they become
bigger. And investors are optimistic that last piece of the puzzle, Square
Capital, promises huge growth.

But for now, the bulk of square`s revenue, about 95 percent of it
comes from those core transactions, those credit card swipes. We`ll see
how square can do tomorrow with a large transaction of its own.

For NIGHTLY BUSINESS REPORT, I`m Kayla Tausche in New York.


HERERA: According to the “Wall Street Journal”, the Securities and
Exchange Commission is looking closely at how some big mutual fund
companies are valuing tech start-ups that don`t trade publicly and whether
that process gives an accurate estimate of a company`s worth.

Russ Kinnel is director of managing research at Morningstar
(NASDAQ:MORN) and he joins us now.

Russ, good to see you. Thanks for joining us.

I think many people out there might not even be aware that these types
of securities are in their mutual fund.

You think of a fund owning publicly traded stocks, but for years, we`ve
seen funds dip a toe into venture capital and own privately traded
companies that don`t trade on stock exchanges.

MATHISEN: Is it a big toe or a little toe, and are there limits as to
how much they can own of these illiquid securities?

KINNEL: That`s the big question, and the answer is, it`s a little
toe. So, the exposure for typical investor via some major funds from a
Fidelity or a T. Rowe is pretty small. So, the issue is not too big.

Overall, a fund is limited to 15 percent in illiquid securities.
That`s 15 percent of the total fund can be in however many illiquid
securities they want. Now, very few funds come close to that level.

HERERA: You know, Russ, one of the things about mutual funds is you
get a price at the end of the day. But how do they then value these
companies if they don`t trade publicly, and is the price that gets posted
at the end of the day actually accurate?

KINNEL: Yes, that`s the tricky part, because as you say, you`ve got
people coming in buying or selling a fund every single day, and obviously,
it`s important that the fund company give both people, both sides of that
transaction a fair price. With stocks that don`t trade like this, they
just have to make a best estimate. That is, they might say assign a
valuation based on multiples or say whatever the industry`s trading at,
we`re going to keep adjusting that way, but there is some art to that, for

MATHISEN: So, the presumption or sort of the subtext here is that
there`s a lot of risk involved in this, or that sort of seems to be the
cloud that`s hanging over our conversation here. But there can also be
reward. If I`m recalling correctly, T. Rowe Price funds did
extraordinarily well with some private holdings of Facebook (NASDAQ:FB),
among others.

So, how do I know whether my fund has these illiquid securities in it,
how much they have and what they are?

KINNEL: Yes, you can look at the annual report or any display of the
complete portfolio holdings, and you can see those names. Usually, they`re
displayed separately. You may notice they don`t have a ticker. So, you
can see how they`re displayed.

And you`re right, there`s a lot of upside. And one of the things that
limits the downside is, even a fund that might, say, have 4 percent in
these kind of names, that 4 percent could be spread out over 30 names.

I was looking — Fidelity Contrafund has a 19 basis point position in
Uber. So, obviously, the risk to investors of Contrafund of Uber having
problems is not great at all.

HERERA: It`s not great, yes.

All right, Russ. Thanks for clarifying all of those issues for us.

Russ Kinnel with Morningstar (NASDAQ:MORN).

MATHISEN: Coming up: grocers know that consumers like cheap turkeys,
and that might be something to be thankful for this Thanksgiving.


MATHISEN: Here`s what to watch tomorrow. The weekly jobless claims
number is out. The Philadelphia Federal Reserve will release its business
outlook survey, an important read on manufacturing and the economy in the
mid-Atlantic, and we`ll hear from some prominent members of the Federal
Reserve. And that`s what to watch Thursday.

HERERA: The American Medical Association is calling for a ban on
direct to consumer ads for prescription drugs. The group of doctors says
that it contributes to rising costs as patients demand treatments that may
not always be appropriate.

According to the AMA, drug makers have spent $4.5 billion on the ads
in the past two years. That`s a 30 percent increase. The pharmaceutical
industry opposed the American Medical Association`s stance.

MATHISEN: The New York attorney general has reportedly added Yahoo
(NASDAQ:YHOO)! to the daily fantasy sports investigation. Until now, Eric
Schneiderman`s office had just gone after DraftKings and FanDuel. But
according to reports, Yahoo (NASDAQ:YHOO)! has also been subpoenaed. Yahoo
(NASDAQ:YHOO)! runs the third largest daily fantasy site.

New York attorney general alleges these companies violate gambling
laws by offering games of chance, rather than skill, and he wants their
operations shut down in New York.

HERERA: And finally tonight, there have been a number of warnings
about the price of your Thanksgiving meal following the country`s worst
avian flu outbreak earlier this year. But as it turns out, consumers won`t
be the ones bearing that extra cost.

Morgan Brennan has our story.


is fast approaching, and that means turkeys.

But that traditional dinner centerpiece has gotten more expensive.
After bird flu wiped out nearly 8 million turkeys earlier this year,
production is down 8 percent for the quarter, according to the U.S.
Agriculture Department, the lowest level in more than a decade. While it
hasn`t led to shortages, it does mean higher prices.

What the USDA is predicting is compared to last year`s cost of $1.14 a
pound for turkey, this year, they are predicting in the fourth quarter that
average turkey prices are going to be $1.34 a pound, and that`s up 20 cents
or 18 percent relative to last year, and that`s a very big food cost

BRENNAN: That`s for eastern market whole turkey, and it`s the
wholesale price, an increase that may not actually impact consumers.

While wholesale turkey costs are on the rise, the prices paid at
grocery stores tend to be stickier. Experts say that`s especially true at
this time of the year when retailers roll out offers to lure shoppers who
will likely buy other Thanksgiving products as well.

Take Stew Leonard`s. Between its four stores, the northeastern
grocery chain expects to sell 1 million pounds of turkey between now and
Thanksgiving. The company says it`s seen a tightening in the turkey
market, with wholesale costs it pays jumping 10 percent.

In response, it raised the price of fresh turkey only slightly and
didn`t change the price of its most popular and expensive offering. CEO
Stew Leonard Jr. says he`s OK with pocketing less for the product.

STEW LEONARD, JR., STEW LEONARD CEO: We want everybody to come in and
buy mashed potatoes. We want everybody to buy the gravy. We`ll sell like
15,000 quarts of gravy this year, already made. Obviously, it`s more
profitable than turkey.

So, we want people to come in, and of course, buy their turkey, and
then buy the mashed potato, gravies, Brussels sprouts. You make more money
on those than you do the turkey.

BRENNAN: And Stew Leonard`s isn`t alone. Across the U.S., many food
retailers are eating less for foot traffic. As the poultry industry
continues to recover from the worst bird flu outbreak in U.S. history,
turkey supplies are expected to return to normal by next spring, meaning
next year, those plump Thanksgiving roast won`t likely be accompanied by
this year`s plump costs.

For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan in Yonkers, New York.


HERERA: Look at the size of those turkeys!

MATHISEN: Those are big birds.

HERERA: How many people are coming to dinner?


HERERA: Lots, yes, exactly.

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

MATHISEN: And thanks from me as well. I`m Tyler Mathisen. Have a
great evening, everybody, and we`ll see you right back 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
investment advice. (c) 2015 CNBC, Inc.

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