Transcript: Nightly Business Report – January 19, 2016

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

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR:  In transition.  Growth in
China, the world`s second largest economy, may be slowing now, but does the pause pave the way for                                                                           future expansion?

SHARON EPPERSON, NIGHTLY BUSINESS REPORT ANCHOR:  Silver lining.  Why it`s
the best time in a long time to be in an American consumer.

MATHISEN:  And don`t get duped.  The IRS warns of an age old tax scheme
finding new victims.

All that and more tonight on NIGHTLY BUSINESS REPORT for Tuesday, January
19th.

EPPERSON:  Good evening, everyone.  I`m Sharon Epperson, in tonight for Sue
Herera.

MATHISEN:  And good evening from me as well.  I`m Tyler Mathisen.

Well, it was the rally that wasn`t.  Just when it looked like the market
might have a chance for a triple digit gain, things reversed.  The reason?
Oil prices.  And just like that, the air came out of stocks.

After being up more than 180 points, the Dow Jones Industrial Average
closed with a modest 28 point rise to finish at 16,016.  The NASDAQ fell 11
and the S&P 500 gained a single point.  As for oil, domestic crude settled
down more than 3 percent today to $28.46.

Bob Pisani has more on today`s vanishing rally.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT:  It was another up and
down day.  But overall, it was disappointing for the market.  Now, on the
surface, it`s simple.  There`s no peace in the stock market without oil
coming down.  Oil broke down twice today, right after the open and then
again in the middle of the afternoon.  Both times, the stock market
followed down.

Today was a little more important for technical reasons, as well.  The
minute the S&P 500 broke through 1,880 in the afternoon, that was the
closing low on Friday.  The market took a leg lower on heavier volume.

The market took another leg lower when it broke through 1,867.  That was
the low for the S&P 500 in August of last year.  Stocks rose after oil
stabilized late in the day, but not after a lot of damage was done.

Big oil names like ConocoPhillips (NYSE:COP) was down 7 percent.  Hess
(NYSE:HES) was down 6 percent.  Murphy was down almost 5 percent.  But
Exxon was only down 1.5 percent.  It seems almost the news from the big
drops its fellow oil companies have been seeing.

You may also be wondering, why are the technicals suddenly so important?
When traders don`t understand what the fundamentals are doing and they`re
confused right now, they turn to technicals because it gives them some
signal on what to do.  Traders after all trade for a living.

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

(END VIDEOTAPE)

EPPERSON:  As Bob just reported, stocks followed oil prices lower,
pressured in part by a report from the International Energy Agency that
said the market could, quote, “drown in oversupply.”

And as Jackie DeAngelis reports, supply is only expected to grow now that
sanctions on Iran are being lifted.

(BEGIN VIDEOTAPE)

JACKIE DEANGELIS, NIGHTLY BUSINESS REPORT CORRESPONDENT:  After a 40
percent drop in oil prices over the last 12 months, investors were starting
to think that a bottom was in sight.  But opinions have changed after it
was announced that sanctions against Iran would be lifted and that Iranian
oil would come to market.  Consensus estimates are calling for the Iranians
to add about 500,000 barrels of capacity per day fairly soon in an
environment where OPEC is already producing at record highs.

ANTHONY GRISANTI, GRZ ENERGY FOUNDER AND PRESIDENT:  Bottom line is there`s
too much oil out in the world as it is.  And the Iranian supply will just
add to the price pressure.

The world just can`t absorb it.  It`s that simple.  Unless the U.S.
production drops by the same amount the Iranian production is increasing,
then we will see prices pressured.

DEANGELIS:  And it`s not just about the capacity.  It`s about market share.
Remember, Saudi Arabia`s strategy has been to keep producing oil and roll
with falling prices.  The Saudis even discounting their oil in the past as
part of their strategy.

But today, reports that Iran will discount as well, triggering fears of a
price war.

GRISANTI:  I can definitely see a price war between the Saudis and
Iranians, number one, because the Iranians by having their oil off the
markets over the last few years have lost a lot of market share.  They need
to regain that back.  The way they can is by reducing prices.  They`re
going to do that.

The Saudis have plenty of oil they`re producing that they can`t get rid of.
They`re going to reduce prices.  We know some grades or blends in the U.S.
are actually trading below the screen too.  So, there`s an all-out price
war.

DEANGELIS:  The supply side of the story continues to be one of a global
oil glut.  Now, there are concerns about the demand side, as well.  The
International Energy Agency saying today it`s keeping its demand forecast
flat, couple that with volatility and concerns about what`s happening in
China and the demand picture is bleak.  Supply and demand continue to
diverge.

What will happen to oil short term?  If it holds under $30, it could skid
to $27 pretty fast.

For NIGHTLY BUSINESS REPORT, I`m Jackie DeAngelis.

(END VIDEOTAPE)

MATHISEN:  The Chinese economy grew at its slowest pace in a quarter
century, though at a rate many countries would envoy.  China reported GDP
of it 6.9 percent, that growth last year.  That was just below the
government`s target of 7 percent.  It was down from a year earlier.

But the report also revealed something new.  For the first time, services
accounted for more than half of China`s economy while manufacturing`s share
fell.

As Eunice Yoon reports from Beijing, the consumer-based shift could lead to
greater growth in the future.

(BEGIN VIDEOTAPE)

EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT:  Xu Teling is a new
face in China`s new economy.  The 22-year-old used to work at a factory.
But today at the Beijing headquarters of this Internet company, Xu waits to
the deliver food for customers who place orders through an app on their
mobile phone.

“I worked in a factor for many years.  It was so boring,” he says.  “I
found I really like this.”

Xu has joined a part of the economy that the government hopes will drive
China`s growth — services like logistics, travel agencies, retail shops,
restaurants, hotels and IT.

As Chinese people become wealthier and get busier at work, they don`t have
the time to do everything that they might have on their own — cook food,
for example.  So, that spawned a massive need for services like food
delivery.

Meituan is an online booking site offering group discounts like Groupon
(NASDAQ:GRPN) in the U.S. and food delivery.  Manager Wang Huiwen expects
that by 2020, Chinese consumers will place 30 million orders for meals a
day, via companies like his, almost four times what they do today.

“Delivery services in the U.S. started from a phone call.  In China, it`s
begun with an app.  Mobile apps are a relatively new area so there`s room
to grow,” he says.

Wang says history is attracting heavy investment and hiring fast.  Services
now account for a larger part of China`s growth, 48.28 percent compared to
42.6 percent in 2014 from traditional drivers like manufacturing and
construction.

But the question is whether these new types of businesses can develop fast
enough to drive the economy forward as old industries fade away.  Xu isn`t
concerned.

“This business is going very well,” he says.  I think delivery services
have a bright future.”

If Xu is right — so could China.

For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon in Beijing.

(END VIDEOTAPE)

EPPERSON:  Well, consumers here at home have a number of things working in
their favor.  Gas prices are low, the job market is strong and home values
are rising.

Steve Liesman has more on the silver lining over Main Street`s economy.

(BEGIN VIDEOTAPE)

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT:  The International
Monetary Fund marked down the global economy Tuesday, mostly a result of
lower oil prices hitting growth in emerging markets.  But what it didn`t do
was mark up the advanced economies or growth among consumers of those
cheaper commodities.

For the U.S. consumer, cheaper oil prices have meant lower inflation and
increased buying power.  Data to be released tomorrow should show that real
or inflation adjusted wages for average workers in 2015 had their best year
since the recession ended.  The consumers also benefited from strong job
growth and decent home price appreciation, leading to brighter views on the
economy among the public.

While the IMF slashed its 2016 forecast for oil soaked economies like
Russia and Saudi Arabia, it also downgraded the U.S. to 2.6 percent from
2.8 percent.  And the IMF chief economist even said that he thinks markets
are overlooking the silver lining from the decline in oil prices.

MAURICE OBSTFELD, IMF CHIEF ECONOMIST:  There are still positive effects on
consumers and on companies that rely on energy for their production
processes and are benefitting from lower production costs.

LIESMAN:  Market pros caution against mixing up the U.S. economy and U.S.
financial markets.  They`re separate, they say.

JEFF ROSENBERG, BLACKROCK CHIEF INVESTMENT STRATEGIST:  The U.S. economy in
a global setting is unique.  It`s the most closed economy, meaning it`s the
least dependent on the rest of the world.  The rest of the world means less
for the U.S. economy than the U.S. economy means for the rest of the world.
But when it comes to financial markets, the financial market linkages are
much greater — the U.S. financial market sensitivity to external events.

LIESMAN:  That means worries about China and oil prices can and probably
should bring down U.S. stock prices and they have.  But it`s not entirely
clear that should be in a markdown in U.S. growth or worries about
recession.  At least since the Great Recession, these are some of the best
times for the U.S. consumer.

For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.

(END VIDEOTAPE)

MATHISEN:  As the Obama era comes to an end, there may indeed be reasons to
cheer the U.S. economy.  After all, it is by most measures in a better
place now than it was when the president took office.  Just how much better
or whether it`s better at all often depends on one`s politics.

John Harwood joins us from Washington.

John, if you listen to the candidates on the right, you`d think the economy
was in horrible or Trump`s favorite word “terrible shape”.  If you listen
to some people on the far left, you would think it was failing too or at
least failing big segments of the population but for different reasons.

Does anyone speak for a moderate mainstream?

JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT:  Well, the problem,
Tyler, is we`ve got two the different economies, of course.  We`ve got an
economy pretty good at delivering rising stock prices, corporate profits.
But people in the middle of the income spectrum have not been moving ahead.
So, a lot of people you see complaining on the extreme right and extreme
left are looking at those results rather than what`s happening in
boardrooms or on Wall Street.

EPPERSON:  John, is this different than the way we thought about economy in
the past?  Is the partisan view changed either for Republicans or Democrats
when it comes to their views of the economy?

HARWOOD:  You know, it is different now and here`s the reason.  Our
politics have gotten terrifically polarized now between left and right,
Republican and Democrat.  And what happens is when you ask people in polls
to assess the economy, that`s a bit of a proxy for how they feel about how
the country is going.  And if their side is leading or is in control of the
Congress or the presidency, that may color their response.

If you`re a Democrat and Barack Obama`s in the White House, you think the
country`s going pretty good and you`ll say that even about the economy.
The reverse for Republicans.  And this is something we`ve seen over and
over and it`s one of the reasons why pollsters tend to discount somewhat
people`s assessments of the economy itself because it`s simply another way
of asking about your partisanship.

MATHISEN:  All right.  John, thank you very much.  John Hardwood with
analysis from Washington.

EPPERSON:  So, how do you feel about your economy?  We took our cameras out
to see what you had to say.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE:  Gas is cheaper.  We`re able to go further on the
weekends, and buying my lunch as I always do.

UNIDENTIFIED MALE:  I`m an uber driver as well as a regular, you know, just
9:00 to 5:00 worker.  So, it kind of makes it easier, more people are
catching, you know, Ubers.  More people you know are out there.  So
therefore, I can, you know, drive around more people.  Gas prices are
lower.  So, therefore, I can drive around longer.

UNIDENTIFIED MALE:  We bought a new house or condo four years ago.  I think
that the lower house — the low interest rates and the lower housing prices
helped us a ton.

(END VIDEO CLIP)

MATHISEN:  I think they bought a new igloo.

All right.  As you`ve just heard, there are many different views on the
state of the economy from Wall Street to Washington to Main Street.
Everybody has an opinion.  Who`s got it right?

Craig Dismuke is chief economist at Vining Parks, an investment firm in
Memphis.

Craig, welcome.  Good to have you with us.  And welcome to NIGHTLY BUSINESS
REPORT.

CRAIG DISMUKE, VINING SPARKS CHIEF ECONOMIST:  Thanks, Tyler.

MATHISEN:  How do you think the economy is doing and how do you think the
average guy or woman is doing?

DISMUKE:  Well, I think you can look at it from either side.  And,
obviously, from a political perspective, it`s spun in different ways.  But
when you look at the economy just at the numbers, I think it`s an
underperforming economy.  We`re growing at a rate of 2 percent and it`s not
what it`s been historically.

But at the same time, we have certainly made a lot of progress since be
2008 when we were in the middle of the financial crisis.

EPPERSON:  When you`re looking at the job growth that we`re seeing, Craig,
or in some parts of the country, the lack of job growth, is it the fact
that jobs aren`t compelling?  We have seen, of course, an improvement in
the unemployment rate but a lot of folks say that really doesn`t apply to
me.

DISMUKE:  Sure.  Well, the types of jobs that we`re creating aren`t the
types of jobs that are the high-paying jobs.  So, you`ve got two factors in
play.  We`re creating more jobs that are part-time, the number of full-time
jobs haven`t come back all the way to where they were prior to the
recession.  And the second issue is that a lot of jobs are being created
are in low-paying industries.

So, for example, we`re getting jobs in retail and leisure, health care,
education.  We`re not getting jobs in the higher paying sectors like
utilities, finance, IT, et cetera.  So we`re creating more part-time jobs
rather than full-time jobs and we`re also creating jobs in lower-paying
sectors or industries than we are high-paying industries.

MATHISEN:  Why, Craig — you say the economy is underperforming.  Why do
you think that is the case, and is it reasonable to expect that our bigger
more mature economy would still grow at rates like we might have seen in
the `50s, `60s, even into the `90s?

DISMUKE:  Right.  So, the average rate of growth historically has been
between 3 percent and 3.5 percent.  We`re closer to 2 percent now.

I think it`s a great point that as a mature or economy — but more
importantly as an aging population.  So we have an aging demographic.  It`s
something that economists continue to discount and not factor in.  The
reality is, as the population ages, that they spend differently.  And as
they spend differently, you`re not going to get the type of consumption or
economic growth you`ve had historically.  So, I think that`s one of the
factors.

The other factor is we`ve come out of a very deep recession.  The national
response to that is to have a big onslaught of new regulations.  And so,
the business community is saying, you know, all these new regulations make
it harder to do business.  So, that`s another thing that`s weighing on
growth.

MATHISEN:  Interesting analysis.  Craig Dismuke with Vining Sparks, we`ll
have you back again soon.  Thanks very much.

DISMUKE:  Thanks, Tyler.

EPPERSON:  And still ahead, Big Blue bruised.  IBM may have topped
expectations but are shareholders questioning the CEO`s long-term strategy?

(MUSIC)

EPPERSON:  Netflix (NASDAQ:NFLX), the top performing stock in the S&P 500
last year, topped Wall Street earnings estimates and added more subscribers
than many thought.  The video streaming services earned 7 cents a share,
beating the 2 cent estimate, and revenues for the quarter are roughly in
line, up more than 22 percent from a year ago.  That helped send shares
higher initially in after-hours trading.

Julia Boorstin takes a closer look at the Netflix (NASDAQ:NFLX) report.

(BEGIN VIDEOTAPE)

JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT:  The most important
takeaway from Netflix`s better than expected earnings report, that the
company is growing far faster than expected overseas.  Netflix
(NASDAQ:NFLX) adding a record 5.59 million new members in the quarter, over
4 million of them coming from international markets.  This as the company
completes its global rollout faster than expected.  With the company
recently expanding its potential subscribers to another 190 million homes
with broadband all around the world.

Netflix (NASDAQ:NFLX) also raised expectations for how many overseas
subscribers it allowed this quarter, higher than expected.  But Netflix`s
new international growth will not come from China.  The company says it
still has work to do before it can launch there.

Back over to you.

(END VIDEOTAPE)

MATHISEN:  Julia Boorstin reporting.

IBM also reported better than expected earnings late today.  Big Blue
pulled down $4.84 a share.  That beat forecasts by three pennies.
Revenues, though, fell for the 15th straight quarter, despite coming in
just above expectations at roughly $22 billion.

The stock may just fractional moves initially in extended hours trading but
those moves were lower.  The big question for long-term shareholders who
have seen the stock slide more than 30 percent over the past three years
is, what`s the CEO`s strategy and is it working?

Josh Lipton tells us.

(BEGIN VIDEOTAPE)

JOSH LIPTON, NIGHTLY BUSINESS REPORT CORRESPONDENT:  IBM`s CEO Ginni
Rometty has staked her company`s future on fast growing areas such as cloud
technology, where she is dedicating a lot of time, resources and money.
She calls it strategic imperatives.

IBM now boasts a more than $107 billion cloud business.  Other strategic
imperatives include security as well as social and mobile technologies.
Together, IBM says 40 percent of its overall business will be in these
emerging growth areas by 2018.

AMIT DARYANANI, RBC SENIOR EQUITY ANALYST:  If you look at it, the tech
landscape is probably changing.  Customers want to use the tech products in
a different way than they used to.  They want to rent things than buying
them.  They want to have a subscription model versus owning the asset
outright.

And as that tech consumption is changing by the customers, IBM has to have
newer ways to sell the solutions to the customers.

LIPTON:  The dilemma, though, is these new areas of growth aren`t big
enough yet to offset the challenges facing the company`s traditional
businesses like packaged software, services, and hardware.

DARYANANI:  The challenge IBM has is its traditional legacy stuff is higher
margin, higher free cash low of IBM worse on the new strategic stuff.  And
as they go through the transition, you have headwinds on free cash low,
headwinds on the EPS numbers.

LIPTON:  That`s why the investors have been skeptical.  Since Rometty
became CEO in January 2012, IBM stock is down 30 percent versus a gain of
nearly 50 percent for the overall market.

But that is why bulls say IBM is now a buy.  They argue it`s a contrarian
play given how negative Wall Street is about the company`s prospects.  Only
some 30 percent of analysts are at telling their clients to invest in Big
Blue.  Bulls also argue that the stock is cheap and that company pays a
dividend.  In other words, investors are paid to wait.

Still, skeptics like Daryanani remain on the sidelines.  He says he`ll get
more optimistic about IBM when those strategic imperatives approach 50
percent of sales or Rometty does a big acquisition that boosts all those
new business lines.

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

(END VIDEOTAPE)

EPPERSON:  The nation`s largest health insurer sees a drop in profit but
still beats expectations.  And that`s where we begin tonight`s “Market
Focus”.

UnitedHealth Group (NYSE:UNH) says earnings in pits pharmacy benefit
management unit rose 50 percent in the quarter, but the company`s operating
earnings from its main UnitedHealthcare insurance business were cut nearly
in half.  Shares of UnitedHealth ended the day up 3 percent to $112.58.

Bank of America (NYSE:BAC) posted its best full year profit in nearly a
decade.  Thanks in part to a better than expected quarterly earnings
report.  The second largest bank in the country was helped by a drop in
legal costs.  Bank of America (NYSE:BAC) said that revenue growth remains
though challenging.  Shares of B & A were off about 1.5 percent to $14.24.

And shares of Morgan Stanley (NYSE:MS) rose after the bank beat analyst
targets.  The company said it cut 1,200 jobs in its fixed income and
commodity units last month as part of a plan to reduce a billion dollars in
costs by 2017.  Morgan Stanley (NYSE:MS) rose about 1 percent to $26.26.

MATHISEN:  And, Sharon, another activist has taken a stake in Macy`s
(NYSE:M).  Green Light Capital`s David Einhorn disclosed a position in the
company and said it could be a takeover target.  Green Light also wants the
retailer to unlock the value of its real estate.  Macy`s (NYSE:M) has been
under pressure from another activist firm Starboard Value to spin off its
real estate holdings.  The stock up 2 percent to $38.76.

Tiffany (NYSE:TIF), however, lowered earnings outlook for the year
following soft holiday sales.  The luxury jeweler says the strong dollar is
eating into strong tourist spending.  The company is also cutting jobs, but
declined to say how many.  Shares off 5 percent to $64.22.

The Dow component Johnson & Johnson (NYSE:JNJ) says it will cut about 3,000
jobs in its medical devices unit.  That amounts to about 2 percent of its
global workforce and would save roughly a billion dollars in annual costs.
Shares of J&J up fractionally to $97.50.

And Delta missed earnings and revenue estimates in if the fourth quarter in
part because of the strong dollar, but the airline did save more than $5
billion on fuel last year.  And it expects profit margins to improve in the
current quarter.  Shares were 3 percent higher at $45.95.

Coming up, don`t get scammed.  The Treasury Department issues a big warning
to taxpayers.

(MUSIC)

EPPERSON:  Here`s a look what to watch tomorrow.  Dow component Goldman
Sachs (NYSE:GS) reports earnings before the opening bell.  The consumer
price index a key measure of inflation is due out.  And we`ll have a report
from the 45th World Economic Forum in Davos, Switzerland, where business
and political leaders are discussing the global economy.  That`s what to
watch for Wednesday.

MATHISEN:  The Supreme Court has agreed to rule on President Obama`s new
immigration plan.  The proposal would shield more than 4 million people
from deportation.  But it was blocked by lower court rulings in a lawsuit
brought by Texas and 25 other states.  Oral arguments are set for this
spring.  A final decision could come at the end of June and just before
both political parties 2016 conventions.

The court also said it will review an insider trading case related to a
former Citigroup (NYSE:C) trader.  At issue is whether prosecutors must
show that the insider received a concrete benefit in exchange for passing
on the information.

EPPERSON:  OK.  Temper your excitement.  Today marks the first day of the
2016 tax season.  But now, before you file, the Treasury Department has a
warning for all taxpayers: beware of scammers.

Eamon Javers reports.

(BEGIN VIDEOTAPE)

UNIDENTIFIED FEMALE:  The IRS is calling me?  Is this for real?

UNIDENTIFIED MALE:  Fraud is real.

EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT:  A new series of
public service announcements is warning Americans of an age old tax scam
that`s taking more and more new victims to the cleaners.  In the scam,
criminals call American taxpayers pretending to be IRS agents and demand
phony back taxes.  Often, the criminals threaten to call the police if the
taxpayer hangs up the phone.

TIM CAMUS, U.S. TREASURY DEPUTY I.G.:  It makes me angry because I feel
first of all bad for the victims and then I feel angry that these criminals
are using the IRS as a means to scare people into paying them money.

JAVERS:  The inspector general for the IRS says as many as 5,000 victims
have paid as much as $26.5 million to the scam artists who can be located
inside the United States or around the world.

The scam began by targeting new immigrants to the United States and
threatening deportation and other penalties.  But the inspector general
says it has since mutated and now is targeting every demographic group.

CAMUS:  Early in the scam, the callers had some sort of information about
you.  They may have four digits of your Social Security number.  Now,
they`re just randomly making blanket calls.  They`ve also shifted now to
also calling cell phones.

JAVERS:  That`s why the agency has released five new videos in both English
and Spanish telling people that the IRS will not call you out of the blue
and threaten to arrest you.  And the government has one piece of advice for
anyone getting such a call.

UNIDENTIFIED MALE:  Hang up on fraud.

CAMUS:  You can`t be tricked into giving personal information if you hang
up the phone and you certainly can`t be tricked into paying them money,
harassed or intimidated into paying them something if you simply just hang
up the phone.

JAVERS:  Well, what if the caller was from the U.S. government?  The
inspector general says not to worry.  The IRS won`t be offended if you hang
up on them.

For NIGHTLY BUSINESS REPORT, I`m Eamon Javers in Washington.

(END VIDEOTAPE)

EPPERSON:  And it`s important to be wary of e-mails, too.  Make sure that
they`re really —

MATHISEN:  They`re phishing to find out stuff.

EPPERSON:  To find that information about you.  So, be very careful.

MATHISEN:  And prey on the elderly as often is the case.

EPPERSON:  Absolutely, absolutely.

That is it for NIGHTLY BUSINESS REPORT tonight.  I`m Sharon Epperson.
Thanks for watching.

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

END

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