Transcript: Nightly Business Report – January 21, 2016

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

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Blue chip blues. American
Express (NYSE:EXPR) (NYSE:AXP) and Boeing (NYSE:BA) both say business isn`t
shaping up the way they thought it would.

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Markets rally, but do the
gains have staying power? Why there are reasons to be wary of today`s
surge after the purge.

HERERA: Blank canvas. Meet the artist who`s creating art out of her
investments.

All that and more tonight on NIGHTLY BUSINESS REPORT for Thursday January
21st.

MATHISEN: Good evening, everyone, and welcome.

Stocks rallied as oil posted one of its biggest gains in months. But we
begin tonight with earnings — late earnings news that could set the tone
for trading tomorrow. Boeing (NYSE:BA) and American Express (NYSE:EXPR)
(NYSE:AXP), two blue chips, both say 2016 is not shaping up the way they
thought it would.

First, American Express (NYSE:EXPR) (NYSE:AXP), the company cut its
guidance for this year and next, citing a tough operating environment. But
in its earnings release, AmEx did beat analysts` estimates with earnings of
$1.23 a share. Revenues also slightly better than expectations, though
they were lower, as you see there, than a year ago.

As for shares of AmEx, they dropped on the warning.

Our Mary Thompson has more on AmEx`s soggy report.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: It`s been a while since
the payments giant hit its long-term goal of revenue growth of 8 percent to
10 percent. And the last quarter was no different, as revenue declined,
though to better than expected levels. For some time, Wall Street`s waited
for the company to reset its outlook because of this and it did so today,
citing the lack of growth in revenue in what the firm called a market
marked by intense competition, a shift in the economics of the co-branded
card business and a changing regulatory environment.

To combat this, it`s cutting a billion dollars in costs by 2017 and
adjusting its earnings outlook.

AmEx forecasting profits this year that bracket analysts` estimates but
include what it says will be a substantial gain from the sale of its Costco
(NASDAQ:COST) co-branded loan portfolio. Its forecast for 2017 earnings of
5.50 a share, 49 cents shy of Wall Street`s forecast.

For NIGHTLY BUSINESS REPORT, I`m Mary Thompson.

(END VIDEOTAPE)

HERERA: And now to Boeing (NYSE:BA). The company says it will take a
charge in the fourth quarter and it will scale back production of its 747
plane. Boeing (NYSE:BA) says weak air freight demand drove that decision
but the plane maker stressed it does not see weakness in air passenger
travel. That pressured shares initially in after-hours trading.

MATHISEN: And now to today`s rally and the reprieve, I should say, from
the rout. What carried equities higher was the same thing that`s been
bringing them lower: oil prices. They posted their biggest percentage gain
in months. Add to the mix, comments from a very powerful central banker
and you have a recipe for rising stocks.

The Dow Jones Industrial Average gained 115 points to finish at 15,882.
NASDAQ rose just fractionally. The S&P 500 added 9.

As for oil, it settled up more than 4 percent, getting close to 30 bucks a
barrel.

But even though stocks rallied, Bob Pisani explains why there may be little
reason for celebration.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: We rallied today but it
was a crummy, unenthusiastic rally. Really, we should have done better.
First, Mario Draghi, head of the European Central Bank says down side risks
had increased. He said he was worried about the lack of any inflation and
he implied there was more stimulus coming.

Now, it was widely believed some of these comments were directed at the
Federal Reserve, a veiled request for them to sort of back off on this
perception that they`re going to be on an aggressive path to hiking rates.
So, what actually happened? Our markets opened up and they immediately
sold right into it. That`s not good.

The only thing that saved us from a humiliating plunge right after the open
was oil, which staged a dramatic turnaround right after the U.S. open and
it took the whole market up with it.

But here`s the worrisome part. The second oil stopped rallying around
noon, the market stopped going up and began to gently roll over. And for
the rest of the afternoon, mostly the markets meandered around in a very
narrow trading range.

Now, this after 40 percent of the stocks listed on the New York Stock
Exchange were at 52-week lows and after one of the worst Januarys ever,
this is all we can really do? Boy, this is one tough, nasty, skeptical
market.

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

(END VIDEOTAPE)

HERERA: And while the markets have been closely following oil and China,
as we mentioned, today they were also listening to central bankers. Those
comments from European Central Bank president Mario Draghi lifted the
equity markets early on after hinting that more economic stimulus may be
necessary as growth falters and downside risks increase.

(BEGIN VIDEO CLIP)

MARIO DRAGHI, ECB PRESIDENT: In this environment, euro area inflation
dynamics also continue to be weaker than expected. It will therefore be
necessary to review and possibly reconsider our monetary policy stance at
our next meeting in early March.

(END VIDEO CLIP)

HERERA: Mr. Draghi also made it clear there will be no limits on his
ability to reflate the euro zone.

MATHISEN: Al Blinder joins us now to talk a little more about the central
banks and why they may matter to investors even more than usual over the
next few weeks. He`s former vice chairman of the board of governors of the
Fed, now professor of economics and public affairs at Princeton.

We welcome him back.

Professor Blinder, always great to see you.

Did you interpret anything in what Mr. Draghi said as, A, putting any
pressure on our Fed to take a more sort of dovish tone with respect to
interest rates, or do you think anything he said would change in any way
the statement that the Fed will make after it meets next week?

ALAN BLINDER, FORMER FEDERAL RESERVE VICE CHAIRMAN: I`d say neither of
those. If Mario Draghi wants to suggest to Janet Yellen that she be easier
or tighter, for that matter, but different, he`ll pick up the phone and
call her. That itself would be a very rare event.

For him to speak to her through the media, it`s an absurd thought. That
was not aimed at the Federal Reserve. I think what it was, it was an echo
in a small way of his famous and incredibly successful “whatever it takes”
statement of 2012. He`s trying to talk up the market.

HERERA: So, Professor, what do you expect, then, from Ms. Yellen when she
next makes her comments? Do you expect her to reference the market
volatility? Do you expect her to try to reassure the markets?

BLINDER: I would say no, unless solidity reassures the market. I expect
that when the statement comes out next week, unless something — you know,
who knows what might happen next week, but if nothing wild happens, I
expect a statement from the FOMC to look a lot like the previous one, a
kind of a status quo statement.

She is no doubt scratching her head about what`s going on, wondering if the
Fed should adjust its policy. But it`s way, way too early to say anything
like that publicly. So, I don`t think she will.

MATHISEN: Let`s turn away a little bit from the Fed and toward the economy
more broadly. Today`s unemployment claims were higher than I think a lot
of people expected. Yesterday, inflation news basically zero inflation.
And earlier this week, China`s slowing.

Are you concerned about the pace of growth in the U.S. economy? Does this
look like a good or a healthy economy to you?

BLINDER: It looks like a mediocre economy, which unfortunately is what
it`s been looking like for a while. And probably in the fourth quarter
worse than mediocre. A number of things such as inventories are conspiring
to probably bring the fourth quarter lower than what`s been the average
over the last several years, 2 percent, 2 1/4 percent. That`s not great
but it`s OK. Certainly compared to Europe it`s looking terrific.

HERERA: Sure.

BLINDER: But among the things you mentioned, China`s a little bit of a
worry. But I wouldn`t make it a major worry unless China does a lot ors
than it appears.

HERERA: So, very quickly, Professor, then — should the Fed move again on
interest rates given the mediocre economy?

BLINDER: In January? No.

HERERA: Or in March?

BLINDER: You know, I think the books are still open on March. And there`s
a long time between now and March, especially since one of the major things
that`s got people worried is the stock market. And as you both know, the
stock market can zoom up and shoot down on short notice and frequently
does.

MATHISEN: Alan, we hope we`ll see you many times between now and March.
Hope so. Alan Blinder with Princeton University.

BLINDER: Thank you.

HERERA: Tyler just mentioned that surprising report on the labor market
suggests layoffs may have increased recently. The number of workers filing
applications for unemployment benefits rose by 10,000 to a seasonally
adjusted 293,000. That is the highest level in six months. Claims have
risen three of the last four weeks. But overall, they remain at levels
consistent with steady job creation.

MATHISEN: Meantime, a closely watched measure of manufacturing in the Mid-
Atlantic States is the weakest it`s been now in three years. The new
survey from the Philadelphia Federal Reserve shows that manufacturing was
lower in January though at a slower pace than anticipated. However, a
measure of future expectations for the sector.

This is the one that people really paid attention to, took a worrisome turn
for the worse. Energy companies cutting orders for new equipment. That
depresses manufacturing activity.

HERERA: Low oil and low commodity prices in general have hit the rails
quite hard. Cargo volumes have dropped and things aren`t looking much
better heading into the New Year. More evidence of that came today when
Union Pacific (NYSE:UNP) reported a decline in profit on weak freight
volume.

Morgan Brennan reports.

(BEGIN VIDEOTAPE)

MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: 2016 is shaping up
to be another tough year for transportation stocks. Some experts are even
referring to it as a freight recession — including CSX (NYSE:CSX) chief
Michael Ward, who on a recent earnings call used the term to describe the
headwinds pressuring so many of the railroad`s markets.

And CSX (NYSE:CSX) isn`t alone. Today, Union Pacific`s stock hit its
lowest level since February of 2013, after disappointing earnings and
downbeat commentary. After a, quote, “very challenging 2015,” that
railroad is not releasing earnings guidance for this year, due to a
certainty in its market.

LANCE FRITZ, UNION PACIFIC CEO: Our perspective is with the strong dollar
and with the energy recession in full bloom, it`s — there are some pretty
significant headwinds to our volumes right now.

BRENNAN: Union Pacific (NYSE:UNP) CEO Lance (NASDAQ:LNCE) Fritz adding
that many businesses tied to consumers have been weaker than expected as
well. Despite the windfall consumers have enjoyed from lower energy
prices.

That dynamic is emerging in other industries, too. Just earlier this week,
the American Trucking Association said truck freight volumes should be
negatively impacted over the coming months because businesses are overrun
with inventories and buying less, which means less shipping.

Analysts say that`s worrisome since companies catering to consumer goods
have been holding up better than those hauling industrial products and raw
materials.

CHRIS WETHERBEE, CITI RESEARCHER SR. TRANSPORTATION & SHIPPING ANALYST:
The concern we have and the bigger picture issue we`ve highlighted recently
is that in the fourth quarter we started to see some weakness in some of
the consumer-facing end markets. So, if we were to see some of that
industrial and commodity weakness spill over into the consumer end market,
that would look more like a mild, total U.S. economic recession. So,
there`s something we`re watching very closely.

BRENNAN: Still, the hope is that overall freight demand begins to
stabilize and recover later this year. But in the meantime, it`s a story
of weakening financials, plunging stock price, and in the case of
railroads, growing staff cuts.

For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan.

(END VIDEOTAPE)

MATHISEN: So, while some areas of the economy are suffering because of low
oil prices, others, of course, benefiting.

And at the World Economic Forum in Davos, Switzerland, some world and
business leaders focused on the positives.

(BEGIN VIDEO CLIP)

JACK LEW, TREASURY SECRETARY: Oil prices have gone up and down many times
in my lifetime. This is the first time that I`ve heard lower oil prices
described only as a bad thing. And I think you have to be careful because
both sides of the oil price equation, you look at the economic growth in
Europe, even economic growth in the United States where in spite of
headwinds internationally we`re maintaining steady good growth, good
consumer demand, lower oil prices are part of the reason for that.

GARY COHN, GOLDMAN SACHS COO: I don`t believe the sell-off for oil is
really reflective of an economic slowdown. In fact, if you look at the
fourth quarter year over year demand for oil, it was up 1.1 percent. So,
we`re not seeing a demand slowdown in oil. What we`re seeing is a massive
oversupply of oil.

MUHTAR KENT, COCA-COLA CHAIRMAN & CEO: It helps, particularly in a place
like the United States, it helps the consumer. Mobility goes up. The
amount of travel goes up. That helps our business. And we`ve seen that in
the last sort of six months or so.

(END VIDEO CLIP)

HERERA: And airlines, of course, have been saving billions of dollars
thanks to lower oil and fuel costs. And that has certainly helped
earnings. Today, Southwest, United, and Alaska Air all reported a rise in
profits. But low fuel costs have not necessarily helped their stock
prices.

Phil LeBeau explains why.

(BEGIN VIDEOTAPE)

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: Let`s be clear: lower
jet fuel prices helped airlines rack up record profits last year, and
demand remains strong. In fact, Southwest filled a record percentage of
seats on its planes in the fourth quarter.

GARY KELLY, SOUTHWEST AIRLINES CEO: Overall, I`d give a big thumbs-up to
the health of the air travel industry here in the U.S.

LEBEAU: So, why are airline stocks not soaring? One factor is airfares,
which are falling, partially because airlines are adding more flights and
more seats on the lower end. That`s in response to growing competition
from low-cost carriers like Spirit. So, airlines like United are seeing
lower passenger revenue for every seat mile available.

And that`s what Wall Street doesn`t like. The encouraging news is that
airlines expect passenger revenue per available seat mile to improve later
this year. On United`s earnings call, CEO Oscar Munoz, who has been on
leave following a heart attack and heart transplant, talked about boosting
his airline`s bottom line.

OSCAR MUNOZ, UNITED AIRLINES CEO: At the end of the day, over the long
term, we certainly believe our relative earnings profile will improve and
when and how and all that, that`s the work I`ve got to get done over the
next few months.

LEBEAU: In the meantime, airlines will continue enjoying the benefits of
paying less for jet fuel.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago.

(END VIDEOTAPE)

HERERA: United today also said that it is shifting flights from its
Houston hub because it`s seeing a drop in travel from energy industry
business flyers.

MATHISEN: Still ahead, feeding growth. The new surprising driver of
downtown real estate.

(MUSIC)

MATHISEN: Stock buybacks are one of the ways companies return capital to
shareholders. And last year, buybacks hit record highs. They also helped
support stock prices by reducing the number of outstanding shares.

But as Mike Santoli tells us, there`s some evidence that the buyback trend
may have peaked.

(BEGIN VIDEOTAPE)

MIKE SANTOLI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Companies have been
by far the biggest, most reliable buyers of stocks since the bull market
began in 2009. Corporate share buybacks have totaled nearly $500 billion a
year since 2013.

And companies have authorized another half trillion dollars of future
repurchases. Yet these purchases don`t happen automatically. January is
typically the slowest month for buybacks, only 3 percent of annual
repurchase volume since 2007 has occurred in the first month of the year
since Goldman Sachs (NYSE:GS). This could be a reason this market has had
little support as it sold off the past two weeks. And perhaps it`s a
reason we`ve had three weak Januarys in a row.

While plenty of buybacks could hit the market once companies report
earnings as the month goes on, it`s not clear that big companies will be as
aggressive with buyback plans in the current environment. Earnings growth
has stalled and the debt markets for many companies borrowed with finance
buybacks have grown for stingy.

Fact set notes, in the latest 12 months, some 130 companies in the S&P 500
spent more on buybacks than they earned in net income. Note too that the
shares of the heaviest stock repurchasers have begun to underperform the
broad market. Exchange-traded funds attract companies with big consistent
buyback program have lagged the S&P 500 by five percentage points or so
over the past six months. So, it could be the companies that were happy to
do buybacks at higher prices will be less eager to do so even though their
shares have become cheaper in the market`s setback.

For NIGHTLY BUSINESS REPORT, this is Mike Santoli at the New York Stock
Exchange.

(END VIDEOTAPE)

HERERA: The nation`s top wireless provider tops Wall Street targets, and
that`s where we begin tonight`s “Market Focus”.

Verizon (NYSE:VZ) beat the street on both earnings and revenue for the
fourth quarter as heavy promotions helped offset holiday discounts from its
rivals. The company also saw subscriber growth for its FiOS TV and
broadband services. Shares of Verizon (NYSE:VZ) rose more than 3 percent
to $45.87.

Fellow Dow component Travelers beat targets on an adjusted basis but the
insurance company saw its quarterly profit fall more than 16 percent.
Revenue was slightly below estimates on weaker financial markets but the
company did report a record profit for the full year. Travelers fell about
a percent to $102.70.

British publisher Pearson will cut 10 percent of its workforce, or about
4,000 jobs, as it continues to trim costs. The maker of education products
has been slimming its operations in recent months, including selling its
stake in “The Economist” magazine as well as the “Financial Times.” Shares
of Pearson jumped 16 percent on that news to $10.95.

MATHISEN: General Motors (NYSE:GM) once again branching out into the on-
demand car world. This time the auto maker launching a car sharing service
called Maven. The service will start in Ann Arbor, Michigan. It`s not the
first time they dabbled in this market. Earlier this month as you may
recall, the company invested in the ride share firm Lyft. It also bought
the assets of side car which just shut down last month. GM was up a
fraction today to $29.55.

How about a cup of coffee? Even Starbucks (NASDAQ:SBUX) it seems is
subject to slower growth in China. Starbucks (NASDAQ:SBUX) posted an
earnings beat but said sales in its China and Asia Pacific divisions were
up only 5 percent. That`s less than the 6.1 percent growth that analysts
figured on. Starbucks (NASDAQ:SBUX) lowered forecasts for the current
quarter by about a penny. And Starbucks (NASDAQ:SBUX) shares rose nearly 4
percent to $59.03 today. But when the earnings came out after the bell,
you see the red? That`s where the shares gave all of those gains back and
then some.

And Schlumberger (NYSE:SLB) announced it will spend $10 billion to buy back
shares of its stock. It also posted a fourth quarter earnings beat two
cents north of estimates. Revenues in line with expectations, even though
they did fall 9 percent from the year ago period. Schlumberger (NYSE:SLB)
shares up 39 cents on the day to $61.45. They initially moved up even more
in after-hours trading.

HERERA: The global turmoil has been good for mortgage rates as investors
look for safe haven instruments. They`ve been buying up treasuries, which
pushes the yield lower. According to Freddie Mac, the 30-year fixed rate
average fell for the third week in a row to 3.81 percent. The 15-year is
at 3.1 percent.

MATHISEN: While low mortgage rates may be good for the residential housing
market, there`s another trend that`s driving commercial real estate and
downtown development: restaurants.

And as Diana Olick reports from Cleveland, eateries and cafes are now
feeding a lot of growth.

(BEGIN VIDEOTAPE)

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: On a frigid Wednesday
afternoon at Cleveland`s L`Albatros Brasserie, chef Zack Bruell`s kitchen
is heating up and the fireside tables are filling with foodies.

ZACK BRUELL, RESTAURATEUR: What changed in Cleveland is people slowly
started moving back into the city. That`s what really changed. Now, were
restaurants part of that? Definitely.

OLICK: Restaurants and their celebrity chefs are driving growth in mid-
size cities across America, fueling jobs and pushing commercial property
prices.

BRUELL: I`m going to transform a neighborhood or help transform a
neighborhood. I`m part of that. The developers or the landlords come to
me.

OLICK: Bruell owns ten restaurants in Cleveland, spanning ethnic tastes
and catering to a new class of Clevelanders.

Restaurants may be the new retail when it comes to urban growth, but
there`s an equally powerful driver, millennials. Returning to smaller
cities like this one in search of cheaper housing and steady jobs.

CHRIS RONAYNE, UNIVERSITY CIRCLE PRESIDENT: I think the millennials with
the money that they have in discretionary spending, they are simple.
They`re not buying as many retail goods, but they`re always up for a good
night out. And I think the discretionary money is going to fine food.

OLICK: Neighborhoods are now becoming experience districts, where people
work, live, and play in a growing number of bars and restaurants.

RONAYNE: The restaurant as the anchor is really defining the center of
that urban experience. And the chefs are coming right along with it. You
know, you`re seeing now chefs as investor owners in their own real estate
and you`re seeing them really being this sort of marquee entertainment in
their own entertainment district.

BRUELL: It`s always been a very sophisticated town, and it still is. It
just is the U.S.`s best-kept secret.

OLICK: And its most delicious.

For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Cleveland.

(END VIDEOTAPE)

MATHISEN: And to read more about how restaurants fuel urban development,
head to our website, NBR.com.

HERERA: Coming up, performance art, literally. Meet the artist who trades
stocks and is using the recent market machinations as her medium.

(MUSIC)

HERERA: When you invest in a stock, of course, you track its performance.
Now, one artist is using her investments to generate art. You might call
it performance art.

Robert Frank introduces us to the woman who`s transforming her studio into
a kind of stock exchange.

(BEGIN VIDEOTAPE)

ROBERT FRANK, NIGHTLY BUSINESS REPORT CORRESPONDENT: For investors the
stock charts of the past two weeks have been painful to look at. But for
artist Sarah Meyohas, they are a thinking of beauty. Meyohas, a 24-year-
old rising star of the art world, has taken over a Manhattan gallery for an
unusual performance piece. Trading stocks and turning their movements into
paintings.

It`s a comment on what really drives stocks and how stocks drive our
economy and culture.

SARAH MEYOHAS, ARTIST & TRADER: The financial markets have just grown in
size and importance over the last 25 years in such a phenomenal almost
sublime way, that I`m just responding to the world.

FRANK: Meyohas used her own money to buy a dozen small thinly traded
stocks, move their price, and then paint the trade on canvas.

She picks stocks based largely on their quirky names. Like Paradise Inc.,
or Pope Resources (NASDAQ:POPE) rather than fundamental analysis.

MEYOHAS: The broker called me up and told me I was the only person on
Paradise. And that, you know, if I was sure what I was doing — which I
was.

FRANK: Yet her experiment came at a dramatic moment in the market.

When Sarah and the gallery planned this project several months ago, she had
no idea she would be painting one of the worst market downturns in recent
history.

On her first day of trading on January 8th, the market fell nearly 200
points and fell another 600 during the rest of her performance.

The falling market didn`t directly affect her trades, but it reminded
Meyohas, who has an economics degree at Wharton and interned at hedge
funds, just how volatile and emotional stock values can be.

MEYOHAS: When fundamentals don`t explain what`s going on, you are forced
to acknowledge the power sentiment. Like how is it that people think one
thing on a Monday and think something totally radically different on a
Thursday when nothing enormous has actually happened.

FRANK: She lost tens of thousands of dollars on her trades. And many may
wonder whether a black line on a white canvas is really art.

GREGORY VOLK, ART CRITIC: I think it`s fantastic, because it looks to me
like the forces of the market and the economy are essentially making
paintings.

MEYOHAS: She`s already sold most of them, priced at $10,000 each. So now
these portraits of a market crash will hang on some very expensive walls.

MEYOHAS: I`m happy that they`re selling and that they`re entering in
people`s homes. It`s essentially, you know, all markets are linked. And
here this is somewhat this like physical link between a financial market
and then now the art market.

FRANK: For NIGHTLY BUSINESS REPORT, Robert Frank, New York.

(END VIDEOTAPE)

MATHISEN: I like Pope Resources (NASDAQ:POPE). That kind of spoke to me.

All right. Before we go, here`s another look at the day on Wall Street.
Let`s see how she would have drawn that. Dow up nearly 116 points, NASDAQ
a fractional gain, the S&P 500 added nine.

HERERA: And that does it for us tonight on NIGHTLY BUSINESS REPORT. 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 tomorrow. Get ready for a winter storm
if you live in the East.

END

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