Transcript: Nightly Business Report – March 31, 2016

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

is expected to be ugly.  But even if the results are lousy, is it possible the stock market could still rise?

on the exchanges need more care than others, raising concerns that insurers
may not participate for the long haul.

HERERA:  Detroit`s comeback.  How small business owners are helping that
city get back on its feet.

All that and more tonight on NIGHTLY BUSINESS REPORT for Wednesday, March

MATHISEN:  Good evening, everyone, and welcome.

Day two, stocks extend their gains as global markets rally, thanks to the
market-friendly speech by the fed chair yesterday.  As we reported then,
Janet Yellen said that the central bank is in no rush to raise interest
rates.  And that powered a stock market rally around the globe, continuing
today, and resulted in the Dow Industrials gaining 83 points to 17,716, the
NASDAQ added 22 and the S&P 500 rose nearly 9.

HERERA:  The president of the Chicago Fed agrees with the Fed chair.  In an
interview today, Charles Evans said a rate hike in April would be


Yellen laid out all the right issues, you know, coming out of December
going into the March FOMC, it seemed like, you know, some of the risk
factors increased a bit, there`s more financial volatility, things settled
down a little bit.  But I think global risk is higher.

The median is for two hikes this year.  If the data come in the way we`re
expecting.  If they come in stronger, then I think everybody would adjust


HERERA:  Evans added that potentially moving in June, well, that decision
would be made on the basis of further improvement in the labor market but
he emphasized he didn`t want to get ahead of himself.

MATHISEN:  And there was more evidence today the job market is
strengthening.  Private companies in the United States added 200,000 jobs
in March.  This according to the payroll processer, ADP.  The construction,
the retail and shipping industries all had solid gains, but manufacturing
employment barely budged.

HERERA:  So while the labor market is humming along the same cannot be said
for corporate profits.  Overall, earnings for companies in the S&P 500 are
forecast to fall, continuing a trend of the past few quarters.

Dominic Chu tells us just how ugly it might get.


weeks, a lot of focus for traders and investors will turn back toward
company-specific stories.  Specifically because in a couple of weeks, we
start large cap earnings season yet again.  And this time the estimates,
they`re not very good at least to start.

Here`s what we`re talking about.  If you take a look at S&P 500 companies,
the analysts over at Thomson Reuters (NYSE:TRI) IBUS compiled all of these
analysts` estimates, and right now, they`re showing what could be a
forecasted 7 percent decline in S&P 500 profits over the same time last

And it`s not just bottom line profits.  It`s also what`s happening with
sales as well.  They`re forecasted to fall by about 1 percent.  It would be
the third consecutive drop in quarter by profits and the fifth consecutive
quarterly drop in terms of sale if it comes to fruition.

Now, it`s going to be a big deal to talk about energy.  It has been for
quite some time.  But if you strip out the negative effects of falling oil
prices, you get a different story, a significantly better one but still

Earnings would drop by 2 percent at that point if you stripped out energy
and revenues would actually rise by about 2 percent.

So, why is energy such a big focus this time around?  It always has been
for earnings season ever since oil prices have fallen, but take a look at
how bad it`s going to get.  The only positive stories we can really talk
about right now are in consumer discretionary, up about 14 percent in terms
of profit.  Telecommunications stocks up by about 5.5 percent.

Here`s where it gets a little tough.  Material stocks are forecasted to
drop by 19 percent in terms of profits.  Energy stocks by a shocking 99
percent.  So, that`s the reason why energy will be a big focus and some of
those earnings estimates for S&P 500 companies are not quite as robust as
some would like.



MATHISEN:  So, what could a weak earnings season mean for the market?

David Lefkowitz is senior equity strategist at UBS Wealth Management
Research.  He joins us now to discuss that.

David, welcome, good to have you with us.  The market has had a tremendous
month of March since February 11th.  It`s up double digits, done very, very

Is the market looking past what everybody seems to say is going to be one
of the worst earnings quarters that we will have seen in many, many years?
What`s going on?

have to take things in context.  When we started the year, there was a lot
of concern about a slowdown in China, becoming a hard landing.  There were
concerns about the U.S. economy, itself, whether it would continue to grow
or not.

And now, we`ve seen some signs of stabilization in the Chinese economy,
seen some signs of stabilization in the U.S. manufacturing sector as well.
And I think that`s what`s powered the rebound on top of the fact that the
Fed has been a little bit more accommodative.

So, now, we can get back to I think where we were at the end of last year
and the earnings picture still is a bit sluggish, but I think your previous
segment nailed it on the head.  A lot of this is energy.  Some of it is the
strong dollar.

Those headwinds begin to go away as we go into the second half of this year
and 2017.  They shouldn`t really affect us at all.  So, I think the market
is going to be somewhat range bound but looks brighter as you look further
out in time.

HERERA:  So, does the green light further action in the market to the
upside, David?

LEFKOWITZ:  I do think over time.  I do think, though, we need to see some
— we have to get some confidence that the weakness in the manufacturing
and the industrial and energy sectors is not spreading more broadly.  It
has spread a little bit.  Financials are seeing the impact from higher loan
costs in the energy loans.

But consumer discretionary looks good.  Health care looks decent.  Tech is
still good.  So, as long as those sectors continue to do well, we should
see higher prices and I think ultimately, we will, but I still think we`re
going to be in a bit of a volatile period.

We didn`t talk about politics but certainly the political season could have
an impact as well.

MATHISEN:  Oh, that.


MATHISEN:  But, David, let me come back to what I think I hear you saying
an that is that, yeah, the rest of the year is likely to be better in terms
of earnings than this first quarter is likely to turn out to be, but the
market may be vulnerable in the short term to some volatility because it`s
gone up quite a bit.  The Fed has been a tailwind there, but now, the
rubber meets the road with profits.

Am I hearing you correctly?

LEFKOWITZ:  I think that`s right, Tyler.  Yes.  We`ve had a very strong
rebound.  I wouldn`t be surprised to see a more of a range-bound market in
the near term.  And, again, we still need to get more confidence that — or
I think investors more broadly need to get more confident that we will see
an earnings recovery in the second half of this year and I think that`s
what`s going to be kind of in the backdrop of people`s minds.

I — you know, if you want to spin it positively, this could be the worst
quarter for earnings of this — of the last several, and then it`s going to
get better going forward.  I think it`s going to take some time, though,
for investors to get comfortable that we have seen the worst.

MATHISEN:  All right, David.  Thank you very much.  David Lefkowitz with
UBS Wealth Management Research.

HERERA:  MetLife (NYSE:MET) is not too big to fail, so ruled a federal
judge.  The decision means the company should not be subjected to stricter
regulations that emerge following the financial crisis.  The reason for the
judge`s ruling remains sealed and the government may still appeal.  But
MetLife (NYSE:MET) shareholders were happy, sending shares higher along
with the other insurance companies that have been labeled systemically

MATHISEN:  Patients who obtained health care through the exchanges under
the Affordable Care Act, well, they`re in need of more medical care than
those who already had insurance.  According to a new study by
Bluecross/Blueshield, that increases cost for insurers.  The study based on
claims of more than 4.5 million people and the finding may help explain why
higher premiums have been sought by insurers in many states, and some say
it also raises concerns about insurers potentially leaving the exchange.

HERERA:  Dan Mendelson joins us more to talk about more the rising cost of
health coverage will ultimately mean for the insurers and of course the
futures for the exchanges.  He`s CEO and founder of Avalere Health, a
health care consulting firm.

Welcome, Dan.  Nice to have you here.

Were you surprised by the results of the study —


HERERA:  — and the fact those who were surveyed their health was worse
than we originally thought?

MENDELSON:  No, I wasn`t surprised.  I mean, we`ve essentially reproduced
very similar results and what`s happening here is that those people who
really need the insurance the most are the ones who are most likely to sign
up for it, and as a result, the market is essentially creating a risk pool
that is somewhat adverse for the insurers who are participating in it.

I think it is really important, though, to keep it in context and the fact
that there are 10 million people who have insurance, they`re generally low-
income individuals and individuals who really need the care, and I don`t
think this market is going away any time soon.

HERERA:  Often, my guess is people who got into the health insurance
marketplace who hadn`t had it before, maybe because they had pre-existing
conditions and couldn`t get health care coverage or because they just
didn`t want to pay for it, it wasn`t as available to them as it is under
the Affordable Care Act, now they`re catching up on treatment that maybe
they postponed.

Would you expect to see the demand for these health care services even out
over time as these new comers then get integrated into the health care
system and maybe their health turns a little bit better as they get the
care they now can afford to pay for?

MENDELSON:  There definitely has been some catch-up and see that in the
data.  But I think really what`s going on here is that the solutions are
really around getting a broader group of people enrolled in this program.
So, you have about 10 million people in this program but really the
projections we and others made initially is about 20 million should be in
this program right now.

So, really, the solutions are around broader enrollment and making sure
that the healthy people in addition to those who currently are bearing the
burden of illness are enrolled in the program.

HERERA:  But, Dan, do you expect as the study indicated might happen that
we would see the major insurers decide to exit until we see that evening
out or do you think that won`t happen?

MENDELSON:  Look, it`s possible that you`ll see one or another insurers
exit from this program.  Health care is a very locally market-specific
enterprise and that`s always been true.  However, it`s really important to
remember that this is very strategically important.

This is a very strategically important program for the insurers who are
participating in it.  There always will be a market for individual
insurance in this country, and the larger insurers in particular will need
to participate in this market.  So, I think that in the long run, it will
be healthy.

HERERA:  All right.  Dan, thank you for joining us.

MENDELSON:  My pleasure.

HERERA:  We appreciate it.

Dan Mendelson with Avalere Health.

MATHISEN:  Still ahead: Hoop dreams.  Why this weekend`s college basketball
championship game puts Time Warner (NYSE:TWX) to the test.


HERERA:  A jury today found General Motors` ignition switch was defective
but it was not the cause of a 2014 accident.  No damages were awarded to
the two people who were injured.  Lawyers for the automaker argued that the
accident was caused by ice on a bridge.  The verdict was the first
involving GM`s ignition switch and there are more than 200 pending cases
that allege injury or death was caused by GM vehicle defects.

MATHISEN:  Detroit, of course home to General Motors (NYSE:GM) and other
automakers.  While sales are now near records, that wasn`t the case just a
few years ago.  The business, of course, being bail out, housing had
collapsed in the city and many who lived in Detroit just up and left.

The long road back for the motor town and as Kate Rogers (NYSE:ROG)
reports, small business played a key role.


the largest municipal bankruptcy in history, Detroit is undergoing a
revitalization driven by small businesses that believe in the city`s

April Anderson launched her bakery, Good Cakes and Bakes, in 2013, serving
up organic products made from locally sourced ingredients.  Her goal is to
see underserved areas of the community come back from the brink.

APRIL ANDERSON, GOOD CAKES AND BAKES OWNER:  People are starting to realize
you need to move up to the neighborhoods, because the neighborhood is
really what keeps the business going.

ROGERS:  And April`s in good company.  Data from the Kauffman Foundation
show there are about 1,000 small businesses for every 100,000 residents in
the Detroit metro.  And while a dwindling population had been an issue,
that exodus slowed in recent years.

Another small business making its way in Motor City is Detroit Denim
Company, started in 2010 by Eric Yelsma, a former chemical salesman who
lost his job in 2009.  He loved jeans and decided to turn his hobby into a

ERIC YELSMA, DETROIT DENIM FOUNDER:  I could not have done it anywhere
else.  I could not have done it in Chicago, New York, any other city.  I
wouldn`t have, I think, the ability to go find a place and start making

ROGERS:  Today, they employ seven people and are on track to open up a new
retail store in a few weeks.  The most rewarding part, employing locals and
teaching them new skills, something they say was badly needed after the
auto industry collapse.

BRENNA LANE, DETROIT DENIM CO-OWNER:  Making things is — we`ve done that
in Detroit for hundreds of years.  It`s really, really rewarding to kind of
revive some of those old skill sets and be able to employ people.  That`s a
real, real gift.

ROGERS:  Both Good Cakes and Bakes, and Detroit Denim Company worked with
several incentive and grant programs in the city including TechTown, a non-
profit incubator and accelerator that mentors entrepreneurs.  They`ve
helped 1,600 companies create 1,200 jobs in the past eight years, raising
more than $120 million.  More broadly, the metro has seen 227,000 private
sector jobs added from 2009 through the end of 2015, according to the
Detroit Regional Chamber.

Anderson is now employing four part-timers at her bakery.  She`s had big
successes even baking for Oprah, but she takes the most pride in serving
her community.

ANDERSON:  It`s more validating when the community supports me because
Oprah comes in town, she leaves, people come in town, they leave.  But to
have the community by you, it`s way more important to me than that.

ROGERS:  A community of Detroiters that`s been through so much ready to
forge ahead.

For NIGHTLY BUSINESS REPORT, in Detroit, I`m Kate Rogers (NYSE:ROG).


MATHISEN:  To read more about small businesses in Detroit, head to our

HERERA:  Boeing (NYSE:BA) plans to cut thousands of jobs and that is where
we begin tonight`s “Market Focus.”

The company will eliminate more than 4,000 jobs in its commercial airlines
unit by June in an effort to reduce costs to stay ahead of competition from
European rival, Airbus.  Boeing (NYSE:BA) expects most of those cuts to
come from attrition and voluntary layoff.  Shares dropped nearly 2 percent
to $128.58.

Lower fuel costs and an increase in bookings helped lift profit at Carnival
(NYSE:CCL) with results topping expectations.  Revenue also came in above
analysts` estimates.  The cruise line also increased its earnings outlook
for the year but still expects sales to miss targets.  Shares of Carnival
(NYSE:CCL) rose more than 5 percent to $52.37.

MATHISEN:  The athletic apparel maker Lululemon Athletica (NASDAQ:LULU)
posted better than expected quarterly profit, thanks to strong sales during
the holidays.  The company also laid out an ambitious goal, saying it
expects to double sales to $4 billion by 2020.  Shares spiked more than 10
percent today to $67.80.

The Food and Drug Administration has rejected the application for a new
kidney cancer drug from the pharmaceutical company, Opko Health.  The FDA
cited issues unrelated to the drug with Opko`s third-party manufacturer.
Opko`s CEO said the company will work with the FDA and manufacturer to
resolve the matter.  Shares plunged more 10.5 percent on the news to $9.90.

HERERA:  Big money is being thrown at the big dance.  Advertisers are going
all in on March Madness spending which is at record levels.  But as the
cable television industry changes, there`s one company in particular that
has a lot at stake.

Julia Boorstin has that story.


turned into advertising madness.  The annual NCAA Division 1 men`s
basketball championship sold a record $1.2 billion of advertising last year
for CBS (NYSE:CBS) and Turners Networks, and this year, it`s on track to
grow by at least 5 percent.  As advertisers turn to live events, the
viewers want to watch in real time, along with ads.

JON SWALLEN, KANTAR MEDIA:  Live sports programming has been steadily
increasing, ad rates across March Madness, across other professional
sports, college sports as well.  As audience ratings have shrunk for other
types of programming, audience ratings for sports programming have held up
fairly well.  That also adds to the attractiveness of the investment for

UNIDENTIFIED MALE:  Are you guys ready for our March Madness road trip?

BOORSTIN:  Analysts say broadcasting the tournament has been increasingly
profitable for Time Warmer and CBS (NYSE:CBS) because advertising has been
growing faster than the cost of TV rights.

This year`s tournament is particularly important for Time Warner
(NYSE:TWX).  Its stock dropped on concerns of the future of the TV bundle.
This is the first time a championship will be shown on a cable network.
Monday`s game is airing on TBS.

Time Warner (NYSE:TWX) has been doubling down on sports.  More than a third
of Turner`s $4 billion in programming costs this year will go toward sports
rights.  Paying $7.3 billion to the NCAA over the next nine years.

SWALLEN:  For Turner, it`s a continuation of their increasing involvement
and increasing participation in the sports marketplace.  They`ve had an NBA
contract for — an NBA presence for a number of years.

BOORSTIN:  Now the question is how sports will help Time Warner (NYSE:TWX)
hold on to subscribers and battle the cord-cutting trend.  TBS and TNT each
lost more than $2 million subscribers last year according to Nielsen.

For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Los Angeles.


MATHISEN:  NCAA also recently announced this weekend`s Final Four and
championship game will be live streamed in virtual reality.  If you own a
Samsung Gear VR — it`s a sexy look — you can download the NCAA March
Madness live app in the oculus store and watch the game as if you were
courtside.  I suggest you do it in your own home.

HERERA:  Yes.  I`d be a mess.

All right.  Coming up, the value of a dollar.  What parents are and are not
teaching their kids about managing money.


MATHISEN:  All right.  Headlights on roughly a third of mid-sized cars do a
poor job.  In its first ever study of headlights, the Insurance Institute
for Highway Safety said only, only that Toyota (NYSE:TM) Prius-V earned a
good rating.  While most headlights currently meet government standards,
the institute said better headlights could reduce accidents and improve

HERERA:  Lockheed Martin (NYSE:LMT) has landed its first contract for its
hybrid airspace — airship, I should say.  Straightline Aviation has signed
a letter of intent to purchase a dozen of them for roughly $480 million.

The airships are nearly the length of a football field.  As we reported
earlier this month, they will be able to carry 20 tons of cargo to remote
places.  Lockheed says they`re a cheaper, more environmentally friendly way
to deliver supplies and equipment.  You can read more about that deal on
our website,

MATHISEN:  More money is something many parents would welcome, especially
with the cost of raising a child from birth to age 18, topping a quarter
million dollars now.

New study by T. Rowe Price provides some insight on just how many parents
are sacrificing to provide for their children and Sharon Epperson is here
with more on that study.

What could do the spending patterns reveal, Sharon?

kids basically.

MATHISEN:  Oh, shocking.

HERERA:  Really.

EPPERSON:  That`s what we`re doing.  About half of the parents in the
survey said that they spend money on items the kids really don`t need, and
many of them are going into debt to do it, nearly half of them.  And over
half of them admit they`re spoiling their kids.

But what`s really interesting is kids were surveyed in this report as well
and they`re also saying that they expect their parents to buy them certain
things and they`re getting them.

HERERA:  Yikes.  OK.  Note to self.

On the flip side, though, are parents really talking to their kids about
money?  For instance, I said to my kids one day, you know, this month we`re
trying to save extra money for, you know, the family vacation so we`re on a


HERERA:  Do many people do that or not?

EPPERSON:  The majority do not, and they`re uncomfortable doing it.


EPPERSON:  About 58 percent of parents say that they`re uncomfortable
talking about family finances with their kids.  That`s about the same
amount that say they`re uncomfortable talking about death with their kids.
So that`s the way they`re equating it.

It`s a scary subject to the parents and don`t forget, the kids are learning
the most about money from us.

HERERA:  Right.

EPPERSON:  So if we`re afraid to talk to them about it, they get that.
Many of them understand we`re uncomfortable.  It makes them uncomfortable,

MATHISEN:  Yes, I wondered whether that was the reason parents are evade of
creating insecurity.  If they — if the child picks up on their anxiety
about —

HERERA:  Right.

EPPERSON:  Exactly.  I think that is a big part of it so one of the things
parents need to do is keep it simple, keep it age appropriate.  When you`re
talking about money, vacations, the kids can understand that.

HERERA:  Right.

EPPERSON:  For my kids, I talk to them about buying a new refrigerator.
They know where they go to get the food, they know how much it costs when
you have to buy a new one, which is use anecdotes from real-life

And then don`t be negative about it.  Even if you are anxious about money,
don`t let the kids know that, don`t express your anger or your anxiety with
your spouse in front of the children.  Try to keep that private.  And
explain to them, have a strategy out there.  If you don`t have one yet,
come up with a way to make them feel comfortable, like we have this
control, trying to get this under control.

HERERA:  Yes, don`t be worried about it, we`re going to try to handle it.

And there`s a great website that I really want to urge parents to go, it`s  It was started by President Obama`s financial
capability counsel.  It`s now on the website and really
great way to figure out how to start that conversation with kids at various
age groups.

MATHISEN:  Sharon, thanks.  Sharon Epperson.

HERERA:  All right.  Are you looking for something to celebrate?  Well,
just look at your calendar, because according to one company, every day has
a story and today is National Little Red Wagon Day.  Yesterday was National
Lemon —

MATHISEN:  You didn`t know that?

HERERA:  No, I did not.

And as Jane Wells — but now I do — tells us, there is big money behind
these unofficial offbeat holidays.


Day.  Yes, an object we no longer use is commemorated with its own day in
America.  Not only that, Wednesday was also National I Am in Control Day,
Turkey Neck Soup Day, Take a Walk in the Park Day, Little Red Wagon Day,
National Doctors` Day, and Manatee Appreciation Day.

What is going on?  Blame, or thank, this guy.

this authority with national days, people started asking to see if they
could register for a national day.

WELLS:  Marlo Anderson founded National Day Calendar as a hobby because he
likes fun silly days.  But then people started asking him to make days
official and offered to pay him, including this year for the first time,
the people behind National Prom Day.

KIMBERLY COLLINS, PROMGIRL.COM:  It was somewhere between $3,000 and

WELLS:  Kimberly Collins of paid that to National Day Calendar
hoping Prom Day will drive sales and raise money for charity.  So,
Thursday, Prom Day will have its own official hashtag.

There are now about 1,200 days on Anderson`s National Day Calendar but most
requests are denied.  There is a vetting process.

COLLINS:  They wanted to know more about us, who we are, why we should be
declaring Prom Day and why it`s so important to girls.  So, yes, they
definitely, there`s a process around it.

ANDERSON:  We have a committee of four people.  They have to go through
these and it has to be a unanimous vote between these four people for that
day to become a national day.

COLLINS:  Of course, these officials days aren`t really official.  They
haven`t been passed by Congress or by presidential proclamation.  There are
only about 60 of those days.  So, while social media celebrates National
Prom Day Thursday, the nation will officially celebrate National Cesar
Chavez Day named after the pioneer for farm workers` rights.

For NIGHTLY BUSINESS REPORT, Jane Wells, Los Angeles.


HERERA:  And on that note, that does it for NIGHTLY BUSINESS REPORT.  I`m
Sue Herera.  Thanks for joining us.

MATHISEN:  And I`m Tyler Mathisen.  My thanks as well.  Have a great
evening, everybody.  And we will see you back here tomorrow on whatever day

HERERA:  We should have NBR day.  National NBR Day.


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) 2016 CNBC, Inc.

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