Transcript: Nightly Business Report- January 4, 2016

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

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Rough start. The Dow
dives, marking the blue chip index`s worst first day of trading in eight
years. What happens next and what should you do with your money?

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Global shock. China
shares plunge nearly 7 percent as concerns about that country`s economic
slowdown fuel a sell-off here and worldwide.

HERERA: Escalating tension. Oil roils as the divide between Saudi
Arabia and Iran deepens.

All that and more tonight on NIGHTLY BUSINESS REPORT for Monday,
January 4th.

MATHISEN: Good evening, everyone, and welcome.

2016 picked up right where 2015 left off, with a sell-off. This was
the worst opening day for stocks since 2008, though equities did end off
their lows.

Let`s get right to the closing numbers on this, the first trading day
of the New Year. The Dow industrials dropped 276 points to 17,147. It had
been off as much as 467 points earlier in the day. The NASDAQ declined 104
points. That`s 2 percent. And the S&P 500 lost 31.

The trigger, China, and more evidence of slowing growth in the world`s
second largest economy. A new report out of that country showed the
manufacturing sector contracted at the end of 2015. The Shanghai stock
market plunged almost 7 percent and then circuit breakers kicked in and
trading was halted.

From Asia, the selling spread around the world to Europe first and
then here to Wall Street. But China wasn`t the only cause for the drop
today.

Bob Pisani has more on today`s rout from the New York Stock Exchange.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Ugh. What a lousy
open for the year. Most of the market was down 2 percent the whole day
except for a very brief rally at the close.

There were several reasons that stocks traded down.

First, we had a poor close to 2015 at a time when the markets normally
rally.

Second, China was a major factor in the drop today, with disappointing
manufacturer numbers, a new circuit breaker that halted trading when the
market dropped 7 percent and probably caused more panic than anyone
expected, and as traders sold ahead of news that large shareholders
previously banned from selling would be able to do so at the end of the
week.

Now, third, the Saudi-Iran conflict was a major geopolitical event,
and oil couldn`t even hold a rally, though energy stocks were down less
than the overall market.

Finally, the U.S.`s own December manufacturing data was weaker than
expected.

You add it all up, and it collectively sends a message to the markets.
There is not a lot of reasons to be long stocks at the moment.

Now, is there any hope for 2016? Well, of course, there`s hope.
Remember, stocks aren`t cheap. But for the most part they`re not really
expensive. They may have to drop to levels that attract buyers to
compensate for the risks.

Now, we saw this earlier today when some beaten-up retailers like
Kohl`s (NYSE:KSS) and JCPenney were up on a big down day, and at the close
when very large buy orders materialized as at least some buyers tried to
pick up bargains.

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

(END VIDEOTAPE)

HERERA: And as Bob just mentioned, rising tensions in the Middle East
— one of the most volatile regions in the world exacerbated today`s sell-
off. Relations between Saudi Arabia and Iran, two of the most powerful
nations in that region, and two of the biggest oil producers, deteriorated
following Riyadh`s execution of a Shiite cleric.

Now, that sent oil prices higher earlier in the day, only to end lower
on continuing supply concerns. And gold prices rallied when diplomatic
ties between Saudi Arabia and Iran were severed as investors sought safety.

Michelle Caruso-Cabrera has more on the troubled relations and why
investors are paying attention.

(BEGIN VIDEOTAPE)

MICHELLE CARUSO-CABRERA, NIGHTLY BUSINESS REPORT CORRESPONDENT:
Bahrain, the UAE, Sudan, all led by Sunni governments, siding with Saudi
Arabia, also led by a Sunni government. Those countries either severing or
reducing diplomatic ties with Shia-led Iran.

This comes after Iranians ransacked the Saudi embassy in Tehran, the
capital of Iran, in retaliation for the execution of a Shiite cleric in
Saudi Arabia. The Saudi government said that cleric has helped lead
protests against the government and the Saudi government does not tolerate
dissent.

The situation raising tensions between the two regional powers which
are already fighting military proxy wars in Syria and Yemen. In Syria Iran
is backing Syrian leader Bashar al Assad while Saudi Arabia is backing
Sunni rebels on the ground. In Yemen, Iran is supporting Shia rebels while
Saudi Arabia is defending the Sunni government.

Both Iran and Saudi Arabia are oil producers. Saudi Arabia, one of
the biggest in the world, while Iran is anticipating being able to sell oil
once again if and when U.S. sanctions against the country are lifted.

While oil prices initially rose on the escalating conflict, Middle
East watchers say counter-intuitively, the situation could keep oil prices
lower. It may Saudi Arabia yet another reason to keep producing oil at
full tilt, knowing that it hurts Iran to keep oil prices low.

For NIGHTLY BUSINESS REPORT, Michelle Caruso-Cabrera.

(END VIDEOTAPE)

HERERA: The White House urged Iran and Saudi Arabia to deescalate
tensions. At a news briefing today, Press Secretary Josh Earnest said the
U.S. warned Saudi officials about the potential consequences of executing a
prominent Shiite cleric.

(BEGIN VIDEO CLIP)

JOSH EARNEST, WHITE HOUSE PRESS SECRETARY: We`re urging all sides to
show some restraint and to not further inflame tensions that are on quite
vivid display in the region. And Secretary Kerry has been in touch with
his Iranian counterpart. U.S. diplomatic officials in Saudi Arabia have
been in touch with their counterparts to convey this message.

(END VIDEO CLIP)

HERERA: President Obama has not contacted leaders of either country,
but the White House says that he is aware the situation.

MATHISEN: Patty Edwards joins us now to talk more about today`s
dramatic sell-off. She`s managing director of investments for U.S. Bank
Wealth Management.

Patty, good to see you and happy New Year.

PATRICIA EDWARDS, U.S. BANK WEALTH MANAGEMENT MANAGING DIRECTOR: You
know, no one ever wants to make too much of a single day`s trading. It`s
really a fool`s errand to try and do that. But it did occur to me that in
this single day, three of the major influences that are likely to be keys
to trading for the entire year were on display. The health of China`s
economy, geopolitical tensions in the Middle East, and concerns about the
U.S. economy, particularly in light of the fact that the Fed`s financial
stimulus is being pulled out.

Do I have that right?

EDWARDS: I think you do. There are a couple of things that are a
little bit of a back story, though, that I think we should really
highlight. So, manufacturing data out of China, as you`ve already said,
really not that good. It`s below the level where we need it to be for
growth.

That being said, if you look at the same PMI data for non-
manufacturing, looking at where the consumer is spending, that actually
looked pretty good and is continuing to look stronger over in China. When
you look at Middle East tensions — yes, absolutely, that`s going to
distract investors. On the other hand, the price of oil is now being set
by the markets, not being set by one single producer moving their
production up. You`re not going to see the price of oil go up until
someone shutters production however they do it, voluntarily or
involuntarily.

HERERA: So —

EDWARDS: And then, finally, when you start looking at the U.S., you
know, the U.S. manufacturing being a little bit slower than expected. Not
such a big deal. Now, if we start to see that in the U.S. consumer, much
bigger deal.

HERERA: I was just going to say the consumer is what I`d like to
focus on a little bit here, Patty, because you`ve pointed out to us before
on this program that you consider the consumer key to the continued
economic recovery or expansion here in the United States.

EDWARDS: Right. So the U.S. consumer is looking pretty good. And
that`s one of the things that gives us hope for this market going forward,
that they`ll continue to spend. If you look at the health of the
consumer`s balance sheet, they`ve used the savings from gas to pay down
debt and now that I starting to turn around and use that money for other
experiences.

So, we`re seeing the numbers for dining establishments go up. They`re
having better sales. Auto sales continue to be strong, because the
consumer does start — has started to feel better from that gas price
increase. And it is about 75 percent of the U.S. economy is based on what
the consumer does, not what our manufacturing does.

MATHISEN: Better year for stocks or for bonds? Better year for U.S.
equities or for overseas markets?

EDWARDS: So, we have a tactical tilt right now. We`ve been actually
fairly conservative for the last six months. But our tactical tilt is to
be a little bit heavier in equities than fixed income. We don`t think that
there`s going to be a huge increase in rates during 2016, but we do expect
some. And we favor equities for that reason.

On top of that, within the equity sector, we not only favor U.S.
equities, but we favor developed markets over emerging markets, and we like
to have a position in hedged equity because we think that will help offset
some of the volatility we may see during this year.

MATHISEN: All right, Patty, thank you very much. Patty Edwards with
U.S. Bank Wealth Management.

Well, the global sell-off and the health of the world economy was a
major focus at the American economic association`s annual meeting in San
Francisco.

And as Steve Liesman reports, the question on the minds of economists
is how might events abroad impact the economy here at home?

(BEGIN VIDEOTAPE)

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: The stock
market rout that rang in the New Year with a sour tone served to highlight
the biggest risk facing the U.S. economy in 2016. Not from homegrown
problems but from abroad.

Precipitating the plunge: weak manufacturing data from China. Chinese
stocks fell 7 percent, and chip circuit breakers that suspended trading
nationwide for the first time. The sell-off ricocheted to Europe and then
to U.S. markets.

Over the weekend, thousands of academic economists gathered in San
Francisco at the American Economic Association Annual Conference. The
general opinion — the U.S. economy is holding up well despite the
challenges from overseas.

MARTIN FELDSTEIN, FORMER CHAIRMAN OF COUNCIL OF ECONOMIC ADVISER: The
U.S. economy is now in very good shape. We`re essentially at full
employment with the overall unemployment rate at 5 percent. And the
unemployment rate among college graduates a remarkably low 2 1/2 percent.

LIESMAN: The troubles facing the U.S. economy are seen as less
immediate than elsewhere in the world. Feldstein points to the need for
serious reform of U.S. Medicare and Social Security, and to revamp the tax
system in order to break out of the 2 percent group doldrums. But that 2
percent looks impressive compared to other developed economies.

JOHN WILLIAMS, SAN FRANCISCO FED PRESIDENT: I think we`re on pace to
enter this economy with still a very good job market and continued job
gains. So, you know, it may be a yawn in terms of one more year of 2
percent, 2 1/4 percent growth, but I think that`s actually quite good,
we`re adding a lot of jobs, we`re keeping unemployment — we`re getting
unemployment even lower.

LIESMAN: Williams thinks the U.S. economy will be strong enough for
the Federal Reserve to raise interest rates three to five times this year.
But that forecast depends in part on whether foreign troubles wash up on
America`s shores. The conclusion from today`s market trade is that the
U.S. economy can`t go it alone.

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

(END VIDEOTAPE)

HERERA: U.S. manufacturers continue to feel the heat. Activity in
that sector contracted at the fastest pace in more than six years in
December. The nation`s factories saw new orders shrink. As a result, they
cut some jobs.

The report from the Institute for Supply Management shows many of the
challenges from last year, such as slow growth, the strong dollar and low
oil prices, will likely continue to weigh this year.

MATHISEN: Construction spending fell in November for the first time
in 17 months. The Commerce Department reports a dip of 0.4 percent
following a slight rise back in October. This reflects weakness in
spending on hotel and other private non-residential construction.

Still ahead, blue chip blues. Why one of the worst-performing Dow
components of last year is now off to a shaky start in 2016.

(MUSIC)

MATHISEN: The Department of Justice and the Environmental Protection
Agency are suing Volkswagen over emissions cheating software. The lawsuit
is the latest step in the government`s case against the automaker and
alleges that the company installed illegal defeat devices that tricked
emissions testing equipment to show pollution levels at or below EPA
standards. The software was found in about 600,000 vehicles sold in the
U.S.

HERERA: Tesla delivered more than 17,000 vehicles in the last three
months of 2015. But that was at the low end of its target, and it brings
the sales for the whole year to more than 50,000. The maker of electric
luxury cars said it`s on track to scale up production in the year ahead.
Shares of Tesla, though, fell almost 7 percent.

MATHISEN: Ferrari made its trading debut over in Milan today, and it
sputtered. Shares were relatively flat after the luxury sports car maker
completed its separation from its parent, Fiat Chrysler. The listing in
Milan comes after Ferrari made its public debut on the New York Stock
Exchange back in October. The chairman of Ferrari and the CEO of Fiat
Chrysler, Sergio Marchionne, said this will be a generous payout for
Ferrari but the details are still being decided.

HERERA: General Motors (NYSE:GM) is making an investment in ride-
sharing company Lyft. Audi is making a big bet on a small rental car
business. Both automakers want a piece of startup companies that are
changing the way that people get around. Their investments and the new
partnerships mean the auto world is quickly shifting gears to try new
business plans few could have imagined just a couple of years ago.

Phil LeBeau has the details.

(BEGIN VIDEOTAPE)

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: After more than a
century of selling millions of cars and trucks, General Motors (NYSE:GM) is
getting into the car-sharing business. It`s investing a half billion
dollars in the ride share company Lyft. As the two companies develop
autonomous drive car share programs and new ways for people to rent GM
vehicles to do part-time driving for Lyft.

JOHN ZIMMER, LFYT CO-FOUNDER AND PRESIDENT: We can now market to
those individuals that have already applied but didn`t have the right car,
as well as let people know that this is a really great income-earning
opportunity, whether or not you have a car.

LEBEAU: In the world of car-sharing, Lyft is much smaller than Uber,
which has grown so much it now has a valuation greater than General Motors
(NYSE:GM). So, why is GM investing in Lyft? Because the way millions use
cars and trucks is rapidly changing. In fact, a new study projects a
slight drop in the growth of global car sales over the next 15 years as
more people look to share, not buy a vehicle.

DANIEL AMMANN, GENERAL MOTORS PRESIDENT: We talked through that. We
found more opportunity around the autonomous on-demand network and really
around defining and redefining the future of our ability, particularly in
the open-end environment. And we at General Motors (NYSE:GM) really want
to be at the forefront of that change.

LEBEAU: GM`s not alone investing in start-ups. Audi has led the
latest round of fund-raising for Silver Car, the fledgling rental car
company that rents only silver Audi A4s. Add to that, Ford talking with
Google (NASDAQ:GOOG) about developing autonomous drive vehicles and it`s
clear traditional automakers are rethinking how they do business and how we
will likely drive in the future.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Las Vegas.

(END VIDEOTAPE)

MATHISEN: General Motors (NYSE:GM) also making an executive change
today. The CEO of the nation`s largest automaker, Mary Barra, will take on
the additional role of board chairman. The change is effective
immediately. The move considered a vote of confidence in her leadership of
the company.

HERERA: And good news for drivers. Gas prices will remain low this
year. In fact, AAA is predicting that the price you pay at the pump may be
even lower than last year. The organization says the average price of a
gallon of regular unleaded will cost between $2.25 and $2.45. That
compares to an average of $2.40 in 2015.

MATHISEN: The New Year kicks off with a reported health care deal,
and that is where we begin tonight`s “Market Focus”.

According to “Bloomberg”, Shire (NASDAQ:SHPGY) is in advance talks to
acquire Baxalta for about $32 billion in cash and stock. Reports say the
two companies could announce a deal as soon as this week, though final
details are still being discussed. Shares of Baxalta rose more than 5
percent to $41.17. Shire (NASDAQ:SHPGY) down 3 percent, as you see there.

Shares of two gun makers rose today as President Obama considers an
executive action on gun control. The president met today with Attorney
General Loretta Lynch to discuss what measures can be taken on his own
authority. He`s scheduled to deliver remarks on reducing gun violence
tomorrow morning. An executive order would not require congressional
approval.

Smith & Wesson ending the day up more than 5 percent to $23.28. Sturm
Ruger (NYSE:RGR) up for the day at $61.39.

Well, data storage firm EMC (NYSE:EMC) mc plans a round of layoffs as
it aims to cut annual costs by $850 million. The layoffs come as the
company prepares to be taken over by the computer maker dell. Shares of
EMC (NYSE:EMC) down slightly for the day to $25.59.

HERERA: A pair of analysts giving Lululemon an upgrade today citing
strong company fundamentals as well as improving profit margins that will
ultimately meet the company`s goals. Shares of the athletic ware company
rose nearly 6 1/2 percent in a down day to $55.86.

Valeant pharmaceuticals on the down side today after activist investor
Bill Ackman cut his firm`s stake in the company to 8 1/2 percent. In a
filing, the firm reasoned it was selling the shares to generate a tax loss
for investors in the company. Shares of Valeant fell 3 percent to $98.50.

And investors got the first chance to react to a weak report on
gambling revenue in Macau that was out on Friday which showed a decline of
34 percent, making 2015 the second year in a row that revenue declined.
And that hurt shares of Wynn Resorts (NASDAQ:WYNN), Las Vegas Sands
(NYSE:LVS), and MGM Resorts (NYSE:MGM).

MATHISEN: American Express (NYSE:EXPR) (NYSE:AXP) was one of the
worst-performing stocks in the Dow last year, and it got off to a shaky
start today in 2016. Shares of AmEx fell almost 3 percent after Fidelity
ended its relationship with the firm.

Mary Thompson has more now on the latest piece of business lost by
American Express (NYSE:EXPR) (NYSE:AXP).

(BEGIN VIDEOTAPE)

MARY THOMPSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: After a tough
2015, American Express (NYSE:EXPR) (NYSE:AXP) stumbles out of the New
Year`s gates. Fidelity investments ending a 12-year relationship with AmEx
and Bank of America (NYSE:BAC) in favor of a co-branded card from Visa
(NYSE:V) and U.S. Bancorp (NYSE:USB).

CHRIS DONAT, SANDLER O`NEILL: This is part of a long list of losses
for them.

THOMPSON: The loss of the Fidelity business wasn`t unexpected and not
a big hit to the payment giant`s top or bottom line. Amex says the
Fidelity cards accounted for less than 1 percent of its total billings, and
analysts speculate it could be offset by a pending card deal with Fidelity
rival Charles Schwab.

Still, it comes after last year`s loss of co-branded business from
Costco (NASDAQ:COST) and JetBlue. The Costco (NASDAQ:COST) loss especially
painful as cards linked to the discount retailer accounted for about 8
percent of the AmEx cardholders` total spending.

The co-branding space is increasingly competitive with partner firms
demanding steep cuts in the price AmEx charges for processing transactions
or managing rewards programs, making many of these relationships
economically unattractive for the 165-year-old firm.

So, expect the spotlight on CEO Ken Chenault to grow harsher. After
14 years at the helm he`s recently lost key managers and potential
successors to either death or departure. His growth strategy for the firm
hasn`t been heartily embraced by shareholders, and because of this analyst
Chris Donat says he expects Chenault and his troops will continue to rely
on expense reductions to appease investors.

DONAT: I think you might see more pressure on American Express
(NYSE:EXPR) (NYSE:AXP) to do things around their cost base. They do a lot
of things around the world in a lot of different geographies, but it seems
to me that with that large cost base, there should be opportunities to
reduce that.

THOMPSON: Off 27 percent in the last year, AmEx`s stock was the Dow`s
third worst performer in 2015. Trading at levels today that analysts say
make the company considered by “Forbes” to be one of the world`s most
valuable brands looking more and more like a value play.

For NIGHTLY BUSINESS REPORT, I`m Mary Thompson.

(END VIDEOTAPE)

HERERA: Coming up, the sell-off and your money. The changes one
financial adviser is telling his clients to consider following today`s
decline.

(MUSIC)

MATHISEN: Here is a look at what to watch tomorrow. Auto sales for
December are due out. Numbers for the full year are expected to set
records. Treasury Secretary Jack Lew will host a town hall in Denver. It
focuses on saving for retirement. And we`ll head to Houston, Texas, to see
how that state`s economy is holding up with oil prices now below $40 a
barrel. And that is what to watch Tuesday.

HERERA: Approvals for first-of-a-kind drugs climbed last year to the
highest level in 19 years. The Food and Drug Administration approved 45
drugs in 2015, edging past the previous year`s total. The FDA also gave
the OK to the first 3D printed drug, which treats certain types of
epileptic seizures. Approvals from the agency are considered a barometer
of innovation in the pharmaceutical industry.

MATHISEN: The New York attorney general wants DraftKings and FanDuel
to give back all the money they made in the state. In an amended lawsuit,
Eric Schneiderman also seeks a civil penalty of up to $5,000 per case.
This lawsuit adds to the original one that asserted that DraftKings and
FanDuel are running illegal sports betting operations.

HERERA: Our next guest manages money for individual investors and
fielded some calls from newer, a little bit nervous clients today. He is
Kelly Campbell, principal and CEO of his own wealth management firm,
Campbell Wealth Management. And he joins us now.

Good to have you back here, Kelly.

: Great. Thank you. Hi, Sue.

HERERA: So, what questions did you get from some of those newer and
more nervous investors?

KELLY CAMPBELL, CAMPBELL WEALTH MANAGEMENT PRINCIPAL & CEO: Well, you
know, it was interesting. We didn`t get a huge amount of questions now,
and the reason being is that we really do a financial plan for every
client. And I think the big issue is that a lot of people that don`t have
a financial plan or haven`t had a financial plan, they don`t know how to
react to this.

In other words, they`re looking at it saying, “oh, my gosh, I`m taking
money out of my portfolio to live off of and I`m seeing my portfolio get
down”, or worse yet, they`re not seeing their portfolio go down, they`re
listening to the news, they`re reading the newspaper and they`re seeing
significant decreases in the market. They`re worried.

So, the questions are, what do we do? Should we make a move? That`s
probably the biggest question I had, was, should we make a move today?

MATHISEN: And what did you tell them?

CAMPBELL: Well, I told them that make a move today was probably one
of the worst things to do because if we made a move today, then the issue
would have been that you`re making a knee-jerk reaction. A knee-jerk
reaction is never good because oftentimes, you know, it could be that
today`s a down day, tomorrow`s an up day.

So, if you made that move when it was going down, then it creates a
problem for tomorrow. Now, I`m not necessarily sure exactly what`s going
to go on, as nobody is. But the knee jerk reaction is one of the worst up-
front moves you can make. You`ve got to look at it and see what you think
is going to happen over the next few days. I think that`s the bigger move.

HERERA: All right. Sell-offs like today can also provide
opportunities. Say, we get another down leg tomorrow.

What sectors of the market have you been watching and that you like
and maybe would be able to add to or go in and beef up the portfolio a
little bit because of all the carnage on the street?

CAMPBELL: Well, the problem that you have with looking at the sectors
in the market right now is that nothing can look good when the market — if
it`s really precipitously going down, everything could go down. So, before
I look at saying I want to, you know, jump in or I want to take that
opportunity, I want to hold off and I want to wait for something good to
happen. In other words, before just jumping on the bandwagon while it`s
going down I`d rather see it come up a little bit before I make that move.

Now, there could be some great things that happen from this. You
know, there could be some great opportunities. But before we make that
move, we`re going to wait for it to come up. You know, areas like growth
stocks could be a great place to go because they haven`t done as well in
the last few years.

Looking at the U.S., we`re definitely favoring the U.S. over
international. And even in international, there could be some great plays
there, but more developed markets.

MATHISEN: Very quickly, do you think the bull market`s in trouble?

CAMPBELL: I think it`s in trouble if you`re looking for double-digit
returns. I don`t think it`s in trouble, especially if we can do something
with energy prices and really stabilize that. I think we could have a good
year this year. But again, we`re still looking at China cautiously.

HERERA: All right, Kelly. Thank you so much. Happy New Year. Kelly
Campbell with Campbell Wealth Management.

CAMPBELL: Thank you.

HERERA: And on that note, that is NIGHTLY BUSINESS REPORT for
tonight. I`m Sue Herera. Thanks for watching.

MATHISEN: And thanks from me as well. I`m Tyler Mathisen. Have a
great evening, everybody. We`ll see you back here tomorrow.

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