Transcript: Nightly Business Report- December 7, 2015

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

where oil prices settled after tumbling 6 percent, sending stocks sliding
and investors questioning those energy sector dividends.

part of the bond market could be sending a message about the economy and
stock market, too.

HERERA: Global coffee empire. Does the $14 billion buyout of Keurig
Green Mountain make sense?

All of that and more tonight on NIGHTLY BUSINESS REPORT for Monday,
December 7th.

MATHISEN: Good evening, everyone. And welcome.

We begin tonight with the intensifying rout in the energy sector, a
historic decline that is taking the broader stock market along for the
slide. Domestic crude fell nearly 6 percent today to $37.65 a barrel.
That`s its lowest close in nearly seven years and way off its peak of $108
a barrel back in June, just a year ago, 2014.

As for stocks, the main averages were way down by the energy sector
collapse. The Dow Jones Industrial Average fell 117 points to 17,730,
weighed down by both Exxon and ExxonMobil (NYSE:XOM) and Chevron
(NYSE:CVX). The NASDAQ was off 40 points and the S&P 500 sank 14.

HERERA: And natural gas prices are falling, as well. That commodity
was off more than 5 percent settling at its lowest level since October and
down about 28 percent this year.

Jackie DeAngelis takes a closer look at the falling energy prices and
what they mean for you, the consumer.


gift that keeps on giving and just in time, low energy prices. Crude oil
trading under $40 a barrel and natural gas just around $2.10, both down
more than 10 percent over the course of the last month. The crude crash
comes after OPEC said it won`t cut outputs. OPEC isn`t cutting, then none
of the other major producers will either. That means more oil in a world
already awash in it.

about where we can probably bottom out here. I have no idea, you know, if
it will go lower. But right at this point, I`m looking at moving averages.
That seems about as much as you can get near term, that is.

DEANGELIS: And as expected, the focus is on retail gas prices. AAA
says that the national average per gallon of regular is $2.03, just ticks
away from that $2 level.

GROSSMAN: Retail gas looks like it will be under $2 come the
beginning of the year. Again, that`s subject to change. Remember, once
the gas prices go down, everyone seems to drive a little further buying
bigger cars. So, that could change very quickly.

DEANGELIS: Nat gas is suffering because Mother Nature has been kind.
Milder temperatures across the East Coast are easing the need to turn up
the thermostat.

The Energy Information Administration estimates that homeowners using
nat gas, well, they`ll see 10 percent lower heating bills based on its
temperature models. The less people use heating oil and propane, they`ll
see reductions as well.

The causes are different, but the effects are the same. More money
in consumer`s pocket. The question, of course, is, if they`ll spread that
cheer and spend that money this holiday season.



MATHISEN: Low oil prices are prompting energy companies to cut back
on spending. But investors are also starting to wonder and worry what, if
anything, may happen with their dividends.

As Bob Pisani reports in the New York Stock Exchange, there is
growing concern that they could be at risk.


bad day in the energy space. There`s two worries. First, weaker oil is
now well below $40 and second, the Friday announcement by pipeline operator
Kinder Morgan that it was reviewing its dividend policy, meaning they may
cut it.

Now, that dividend review is creating a whole second wave of panic
above and beyond low oil. That`s because a large percentage of oil and gas
investors own these stocks for one reason only — the dividend. You cut it
and the stocks are likely to drop a lot more and fast.

Now, none of the big oil companies like Exxon or Chevron (NYSE:CVX)
have cut their dividend nor have they said that they plan to. However, a
lot of people are finally starting to believe that oil could stay lower for
a lot longer. It is a substantial group who think oil could still be in
the $40 range a year from now, going into 2017.

Well, if that`s the case, then all bets may be off. It`s not clear
then if the dividend may be safe even for an ExxonMobil (NYSE:XOM).

And these dividends are expensive. Exxon pays about $1 billion a
month in dividends. So does Shell, a billion a month. And if you are
waiting for some rocket to bring oil back to $80 or $100, that`s unlikely.
Talks among OPEC members collapsed on Friday because Saudi Arabia, the
biggest producer, refused to unilaterally cut production. They said in
effect, we are going to keep pumping oil even if it means alienating every
OPEC partner we have and every non-OPEC partner.

For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock


HERERA: Amid the slump in energy prices, oil and gas companies are
taking a closer look at their holdings. Today, oil and gas producer Devon
Energy (NYSE:DVN) said that it would buy some assets from Felix Energy for
about $2.5 billion. The company is also looking to sell its stake in
Canada`s access pipeline system which carries heavy oil across Alberta.
Devon shares fell 10 percent in today`s trading session.

MATHISEN: And now to the bond market where high yield or junk bonds
are headed for the first annual loss since credit crisis. And that may be
flashing a warning sign for stocks and the economy.

Mike Santoli explains.


down, junk or high yield bonds have become a leading worry for investors.
Credit conditions have historically led equity markets, especially around
economic turning points. So, with the junk bond market conspicuously weak
in recent weeks, stock investors are wondering if a significant economic
slow down is eminent.

Take a look at the interest rate spread over treasuries. It`s near
its high for the year and not far from its post financial crisis high.

There are three main takeaways here. First, the significant risk
aversion by credit investors as they demand higher yields to compensate for
the hazard of holding them. Second, the default rate in these riskier
bonds has been climbing, with the number of distress bonds now at a six-
year high. And third, the likelihood of a Fed rate hike seems to have
scared some money out of junk bond funds, that`s because no one is quite
sure how the sensitive sector of the bond market might respond to a slight
change in short term rates.

As you can see, the S&P 500 has managed to climb back towards its
highs of the year, despite the continued pressure on how yield bond.

So, what has bond investors so anxious? Much of the pain is centered
in energy bonds, now under stress due to low oil and gas prices. But the
weakness has begun to extend outside the commodity related sectors just a

Looking past December, investors worry about the maturity cliff of
bonds set to come due beginning in 2017. And the market is starting to
sort out how much debt won`t be paid back.

The stress issuers have about $145 billion in bonds scheduled to
mature between 2017 and 2021.

Plenty of issuers have bonds already trading at levels that imply
high risk of default. In addition to petroleum and coal producers such as
Chesapeake Energy (NYSE:CHK), ArchCoal and Peabody, some struggling
consumer and industrial companies like Avon and Titan International
(NYSE:TWI) have bonds priced at distressed levels as well.

Note that some market handicappers think the junk market is
overstating the threat to the stock market. Goldman Sachs (NYSE:GS) last
week said high yields was sending, quote, “a false recession signal” and
the stock market might not be as oblivious as it seems when it comes to
hitting the message of the bond market.

Energy and industrial stocks, after all, have lagged badly, and the
small number of stocks leaving the S&P higher have been fast growing tech
and consumer stocks that aren`t reliant on easy credit.



HERERA: So let`s turn to Rick Rieder for more perspective on this
and what it may mean for the economy, the financial markets and your money.

It`s great to see you.

you. Thanks for having me.

HERERA: Thanks for coming by.

RIEDER: Yes, ma`am.

HERERA: You are not one who thinks that this is a doom and gloom
kind of scenario for the markets.

RIEDER: No way. Sue, I think you have to put in perspective why
this is happening, why is oil falling.

It`s not because of demand. Normally when this orders for a tougher
economic condition, it`s because demand is falling off. This as we`ve
changed the supply paradigm in the world, there are more producers and
there`s new technology, horizontal fracking at all, that allows you to
produce more. So, what happens is — and we`re talking about the high
yield market — you are seeing an amazing bifurcation of energy is not
doing well, commodities are not doing well.

But when you look at things like transportation, airlines, when you
look at retail, restaurants, the beneficiaries of lower field pressure (ph)
are doing quite well. What`s happening as you`re getting like in the
equity market, in high yield, a very bifurcated market. The winners? Who
is on the right side of technology versus the other side.

MATHISEN: Defaults are up a little bit this year and may go up a
little bit. But I hear you saying that it is a largely containable or
contained to energy and commodity sectors, right?

RIEDER: Yes. So, I`d say there are couple of things. One, I do
think that the economy — U.S. economy is cresting and I don`t think we are
heading to recession. But we`ve had, when you look at auto sales, home
sales, hiring and the comps, it`s been pretty good.

I think actually you are coming off the boil a bit now the Fed is
starting to normalize very slowly, starting to normalize. But if you look
at what`s happening in terms — you are talking about complete bifurcation
of the market place, winners and losers, who`s on the right side of
technology versus who`s not, and the names — we are talking about where
you are seeing distress, energy commodities, where you change the cash flow
for these companies so rapidly, so quickly. And they — when you think
about the last three or four years, with low cost of death, they levered up

HERERA: Does it matter to those companies that are in those
distressed areas whether or not the Fed moves on rates and how quickly they
move on rates?

RIEDER: No. You know, we have expected the fed to move for a year
and the Feds are going to move 25 basis points probably in December and be
very, very gradual. The transmission of that into the economy is going to
be largely de minimis, the real issue about these companies is when do you
stop — when does the price of fuel and when do the prices on these
commodities stop falling? And it`s literally supply/demand driven, weather
is having an impact on it as well this time.

MATHISEN: I guess that, I`m guessing that most people who are
exposed to high yield or junk bonds are in a fund, Blackrock or an ATF like
what you guys and others run. If that is the case, can I trust that my
portfolio manager is going through and plucking out the bad guys and
snazzing up my portfolio so I`m not as exposed when the bad news comes?

RIEDER: So, listen. Yes, I mean, I think we`re entering an
environment — whenever economies — you`re talking about global growth is
slowing or/is moderate and U.S. growth is slowing, but it`s very important
to think about how cash flow is changing and you think about the portfolio
and using incredible amount of research and analysis to determine where
you`re supposed to be, where you`re not.

And by the way, some of the companies that have come under pressure
are going to — are actually good value in providing some pretty decent
opportunities today. So, we start to wade into some of `em. I think
energy has a bit more to go. I would agree the price pressure probably
sends it down before up (ph).

HERERA: OK. Rick, nice to have you with us. Thanks so much for
joining us.

RIEDER: Thanks, Sue. Thanks, Tyler.

HERERA: Rick Rieder of Blackrock.

MATHISEN: And new developments today out of San Bernardino where the
FBI said the assailants in the deadly San Bernardino attack have been
radicalized for a long time.

Jane Wells is there with more on the investigation.


five guns, 380 pieces of evidence over 400 people interviewed so far, the
FBI is trying to build a picture and a timeline of Syed Farook and Tashfeen
Malik seen here entering the U.S. in July 2014. It`s going to take a

us is, how and by whom and where were they radicalized. Maybe there`s not
a by whom. Remember, often times, it`s on the Internet. We just don`t
know. I don`t want to speculate it.

WELLS: The FBI would not comment on the status of Enrique Marquez,
the man who legally bought the two assault rifles and whose home they
raided. NBC News says Marquez has been detained but he`s not a suspect,
and they don`t know how the guns were transferred to Farook and Malik.

BOWDICH: We do have evidence that both of these subjects did some
target — participated in target practice in some ranges within the metro
area or within the Los Angeles area. That target practice in one occasion
was done within days of this event.

WELLS: Also today, Farook`s sister came to a custody hearing for his
6-month-old daughter. No word on whether the family will be given custody
of the little girl.

Farook`s father told an Italian newspaper that his son liked ISIS and
was, quote, “obsessed with Israel” and those that knew Malik at school in
Pakistan can`t believe the studious conservative but, quote, “normal” woman
they knew could be behind this.

And here in San Bernardino, we heard from the first doctor on scene
last Wednesday, an immigrant from Iran.

DR. MICHAEL NEEKI: I`m here because I came for democracy. And it`s
sad to see that you come miles from across the world and see something like
that happen here.

WELLS: Government offices reopened here today but with armed
security. However, the Inland Regional Center where the massacre happened
remains closed, as the FBI recreates what happened last Wednesday.

For NIGHTLY BUSINESS REPORT, I`m Jane Wells, San Bernardino.


HERERA: And still ahead, a caffeine-fuelled $14 billion deal that
sent one stock up more than 70 percent. Details coming up.


MATHISEN: General Electric (NYSE:GE) has terminated its agreement to
sell its appliance business to Sweden`s Electrolux. The deal had been
valued at more than $13 billion. The Department of Justice filed a lawsuit
to block it this past summer, saying the combination would cut competition
and raise prices for kitchen appliances. Shares of GE were off a fraction

HERERA: And another deal is being challenged as well. The Federal
Trade Commission filing a lawsuit to block Staples (NASDAQ:SPLS) $6 billion
deal to acquire its rival chain Office Depot (NYSE:ODP). Regulators say a
combination of these two companies could result in increased prices for
consumers. Shares of the two biggest office supply stores fell by more
than 13 percent.

MATHISEN: Keurig Green Mountain is going private. The company known
for its K Cup single serve coffee pods is being built for $14 billion by
Germany`s JAB Holding. That sent shares of Keurig Green Mountain soaring
72 percent. The deal comes as Keurig faces a number of challenges.

But as Morgan Brennan tells us, the acquirer has plans to dominate
the global coffee industry.


caffeine jolt for Keurig Green Mountain, a stock that before today was down
over 60 percent this year after a 75 percent run up in 2014. The company
known for its single pod coffees has suffered from slumping sales and a
disappointing rollout of its cold brewer.

But analysts say the surprise deal makes sense.

CAROLINE LEVY, CLSA ANALYST: The price tag looks absolutely shocking
if you are looking at Green Mountain Coffee Roasters (NASDAQ:GMCR) as an
ongoing concern, operating just as it was before going private. However,
my sense is that there will be a massive cost reduction in the investment
in cold, which is their, you know, carbonated soft drink venture into cold
beverages so that that could really eliminate $125 million of losses in
fiscal `16 overnight.

BRENNAN: An investor group led by closely held JAB Holding Company is
behind the takeover. JAB manages the multibillion dollar fortune of
Austria`s Reimann family, and counts Mondelez International, an affiliate
to BDT Capital Partners among its minority investors. JAB already controls
roughly 10 percent of the global coffee business with brands like Caribou
Coffee (NASDAQ:CBOU), Peets Coffee & Tea, and a global joint venture
involving Mondelez`s coffee portfolio.

Analysts say this is about distribution and potentially accelerating
an international rollout of Keurig`s products. And it comes at a time when
consumers are becoming increasingly discerning about their java.

LEVY: The coffee category has been a lot like other consumer
categories, where there is premiumization taking place. People are willing
to pay a very large amount for a great Starbucks (NASDAQ:SBUX) beverage and
even a pretty big amount for an espresso. For Middle America and less
wealthy people, the Keurig coffee machine really was an upgrade off the
kind of coffee that they were drinking at home.

BRENNAN: The deal is also good news for Keurig`s top shareholder,
Coca-Cola (NYSE:KO). Coke invested nearly $2.5 billion on 17 percent stake
in the company between 2014 and February of this year, only to watch the
stock sink. The deal values Coke`s stake at roughly the same price,
allowing that company to break even.



HERERA: Outerwall slashes its forecast, and that`s where we begin
tonight`s “Market Focus”.

The company that owns the Redbox movie rental kiosks says its
profitability would be hurt by increased spending on marketing and
additional content. Shares plunged in initial after-hours trading. During
regular session, the stock fell about 2 percent to $58.06.

A Boston Chipotle restaurant has been shut down because of what could
be another E. coli outbreak. This comes after the restaurant said that
their quarterly results would be impacted by the outbreak, which has
affected restaurants in multiple states. Shares were volatile after the
close. During the regular session, the stock was off more than 1 1/2
percent to $551.75.

Vail Resorts (NYSE:MTN) posted better than expected earnings. The
ski resort operator saw revenue rise on strong season pass sales for the
coming season. The stock was nearly 3 percent higher to $125.59.

Newell Rubbermaid (NYSE:NWL) and Jarden (NYSE:JAH) are in talks to
combine, and that`s according to reports. Rubbermaid has a market cap of
about $12 billion. Jarden (NYSE:JAH) has about $10.5 billion. Newell
surged about 7 1/2 percent to $48.16. Jarden (NYSE:JAH) was nearly 4
percent higher to $50.09.

MATHISEN: Nike (NYSE:NKE) has signed LeBron James to a lifetime deal
in the largest single athlete deal in Nike`s 44-year history. Terms of the
deal not disclosed just yet. Shares of the Dow component surged in initial
after-hours trading on that news. During the regular session, the stock
was off a fraction to $131.60.

The Supreme Court refused to hear a challenge to an assault weapons
ban in a Chicago suburb, that along with President Obama`s call on Congress
to pass new gun control last night lifted shares of gun-makers today. Both
Smith and Wesson and Stern Ruger rallied because of the possibility that
guns might be harder to buy in the future. The stock was more than 7.5
percent higher today. It finished at 20.44.

H&R Block (NYSE:HRB) reported weak quarterly results late today. The
company said lower revenue and added expenses weighed on its results.
Shares tumbled initially after the close, before surging. During the
regular session, the stock was off a fraction to $36.89.

Breakthroughs in blood diseases. Many of the latest treatments were
presented at the American Society of Hematology. But a number of biotech
stocks that develop drugs in that space like Bluebird, Global Blood
Therapeutics and Agios Pharma fell sharply today.

Meg Tirrell reports on the advancements being made and the setbacks.


doctors, researchers, investors and analysts came to Orlando this weekend
for the American Society of Hematology meeting. We have been hearing
updates on new approaches to blood cancers as well as blood diseases like
sickle cell and beta thalassemia.

DR. DAVID SCHENKEIN, AGIOS CEO: The mechanism by which this drug
works is a whole new biology. So, instead of chemotherapy which kills
everything, our drugs are actually repairing the leukemia cells.

TIRRELL: Despite optimism from CEO sharing data here at the
conference, many bio tech stocks took a beating.

Analyst Brian Skorney of Robert W. Baird says that`s because many bio
tech investors are exhausted after a volatile year.

summer when it peaked, you have pretty significant downswings and pretty
significant upswings. And I think there is a lot of questions as to where
the sector overall is going.

TIRRELL: Stocks were hit particularly hard among companies
developing drugs for sickle cell disease. Bluebird Bio is a company
developing a potential cure through gene therapy for sickle cell, while
Global Blood Therapeutics developing a once daily pill for the disease.
Both companies presented data here at the conference that appeared to
disappoint investors. But the CEOs took a different view.

NICK LESCHLY, BLUEBIRD BIO CEO: If you think about from a patient
perspective, which is the angle that we come from, and you look at the data
and the ability to take the patients from a situation where they have a
dramatically shortened life span to potentially having a normal life span,
I`m not sure I call those results mixed.

TIRRELL: There`s also a lot of competition brewing in an area known
as CAR T immunotherapy. This is a new of fighting cancer, where a patient
cells are actually taken out of their bodies, medically modified to better
find and fight cancer, and then re-infuse.

Juno Therapeutics is one company pursuing that route.

There`s another competitor on the scene, Cellectis, which is pursuing
a similar strategy, but genetically modifying cells so that a donor cells
could be used instead of the patient`s own cells. That`s known as off the
shelf CAR T.

huge advancement for medicine in general. There is a long time to invest
in this product but it`s definitely very promising advance in cancer.

TIRRELL: Despite a hard showing for stocks coming out of the
conference, analysts say a resetting of expectations may be a good thing
for 2016.

For NIGHTLY BUSINESS REPORT, I`m Meg Tirrell in Orlando.


MATHISEN: Coming up, double the pay. How technology is redefining
the retail work place and hiking the wages that are being paid.


MATHISEN: Here`s what to watch tomorrow. On the data front, the job
openings and labor turnover or JOLT survey is out. We also have small
business optimism index and Anheuser Busch-InBev and Molson Coors
testifying on Capitol Hill about their proposed merger. And that`s what to
watch Tuesday.

HERERA: Call them upwardly mobile jobs. As more consumers shop on
their phones, there is growing demand for workers in the digital retail
space. In fact, Forrester Research (NASDAQ:FORR) forecasts 100,000 digital
retailing jobs will be added to the economy between 2013 and 2017.

MATHISEN: And as with so many new jobs being created, technology is
at the core of what these workers. And for now, that means greater
opportunity and higher pay for those with the right skills.

Following Friday`s strong employment report, Mary Thompson looks at
where the jobs are from the online retailer Wayfair`s offices in
Westborough, Massachusetts.


promises clients to find a zillion things for their home. Meanwhile, the
online retailer is looking for a couple of hundred new employees.

NIRAJ SHAH, WAYFAIR CEO AND CO-FOUNDER: We right now have over 500
open roles.

THOMPSON: Wayfair isn`t alone. Forrester Research (NASDAQ:FORR)
says with e-commerce growing 10 percent a year at least through 2017, there
is strong demand for a new breed of retail worker.

SHAH: We care about folks who are hard working, bright, team-
oriented or collaborative, and have the ability to use analytical insights
or quantitative data.

THOMPSON: Wayfair CEO Niraj Shah is looking for programmers,
designers and customer service reps, all at ease with the technology online
retailers use to create and enhance their customer`s experience, which at
Wayfair includes phone calls with design consultant Sara Nunberg.

they are calling their own interior designer.

THOMPSON: Shah says it`s hard to find the ideal candidate, so
Wayfair hires a lot of recent college graduates and then teaches some
retailing on the job.

But there are places that teach the needed skills, knowing more
shopping would move online, North Texas University launched a degree in
digital retailing a few years ago.

the future. It`s pretty much the present right now.

THOMPSON: Students like Anakarin Petersen take courses in
merchandising and Web site development where analytics and collaboration
are emphasized.

digital world, you work side by side with marketing, merchandising, IT, e-
commerce, operations, and everything happens in such real time that you
have to be really able to work in a team environment.

THOMPSON: Program director Richard Last says 82 percent of his
students graduate with jobs — jobs with good salaries, according to
Forrester analyst Sucharita Mulpuru.

at — across the board at digital retail, they are generally well-paying

THOMPSON: How good? The government estimates e-commerce jobs pay
close to double traditional retail jobs. And Forrester says salaries range
from $40,000 for creative, like designers, to up to $80,000 for
programmers, a new era in retailing with a good pay off for those with the
skills to sell online.

In Westborough, Massachusetts, I`m Mary Thompson for NIGHTLY BUSINESS


HERERA: And to find out more about the digital retail hiring boom,
head to our Web site,

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

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