Transcript: Nightly Business Report – May 11, 2016

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

Mouse House does something it hasn`t done in five years.  And investors don`t like it.

today`s bill market gains have some investors a little confused.

HERERA:  Trending topics.  Facebook (NASDAQ:FB) is being accused of
political bias.  And now, a top Republican senator wants answers.

All that and more tonight on NIGHTLY BUSINESS REPORT for Tuesday, May 10th.

MATHISEN:  Good evening, everyone.

It was a happy Tuesday on Wall Street.  The Dow rallied more than 200
points.  But we begin with a late-day sell-off at the happiest place on
Earth, Disney (NYSE:DIS).  Shares of Disney (NYSE:DIS) for the first time
in five years, the big blue chip company missed earnings estimates, revenue
from this widely held stock also fell short of expectations.  And this
comes despite big blockbusters at the box office like “The Force Awakens”
and “Zootopia.”

Here are the numbers: Disney (NYSE:DIS) earned $1.36 a share, that was
below the $1.40 that analysts expected.  Revenue of $13 billion was higher
than last year, but Wall Street was looking for even more.  And that along
with lower ad sales in Disney`s media business weighed on shares.

Julia Boorstin has more now on Disney`s disappointing quarter.


shares falling in after-hours trading on earnings that were short of Wall
Street estimates for the first time in years.  Still adjusted earnings per
share grew 11 percent on standout gross from the movie studio, growing its
revenue 22 percent and its operating income 27 percent from the year ago
quarter on blockbusters “The Force Awakens” and the surprise hit

Disney (NYSE:DIS) CEO Bob Iger kicking off the earnings call by talking
about those hit films.  There seem to be concerns about the media networks
division including ESPN, its revenue is flat in the quarter, that weighed
on Disney`s stocks.

Back over to you.


HERERA:  Thank you very much, Julia.

Robert Luna joins us now to talk about Disney`s disappointing earnings, at
least the street was disappointed with it, and the issues that are weighing
on the company.  He`s CEO and chief investment officer with Surevest
Capital Management and Disney (NYSE:DIS) is one of his top holdings.

Welcome, Robert.  Nice to have you here.

ROBERT LUNA:  Thanks for having me.

HERERA:  The street seems disappointed, but does the street have it right?
You seem to think the fundamentals are pretty strong.

point that Disney`s a company that just doesn`t miss, right?  They pretty
much do what they have to do quarter over quarter to meet earnings.  So,
seeing them slip 5 percent in after hours really isn`t that surprising.

But I think this is truly a gift for long-term investors out there because
it`s really more focused on what happened in the last quarter than what
we`re currently seeing in this quarter.  When you look at films like
“Captain America,” “The Jungle Book”, both of those only a few weeks old,
have already grossed global box office over $700 million.  Shanghai`s
opening next month.

So, if you`re looking to next quarter, I think that`s one of the quarters
where expectations were way too low and you could see a blockbuster beat.
So, picking this stock up around $100 a share could be a great opportunity
for long-term investors.

MATHISEN:  So, in this case, were the expectations just too high or was
there something that you see in this report where the business didn`t
perform as well as it might have.

LUNA:  Yes, Tyler, great question.  I mean, one of the things that
surprised me quite honestly was the write-off of the Infinity Games
division, the online gaming division they decided wasn`t working, they
pulled the plug on that.  So, there was $147 million there.

There`s also some foreign currency headwinds that came into play.  And, you
know, quite honestly we`re still, as low as the numbers we`re taking on the
media division with what`s going down the slimming bundles, people pulling
the plug on cable networks or ESPN, those numbers came in slightly worse
than expected also.

So, the few things in there that make sense why the stock`s down, but like
I said, looking out to the next quarter there`s a lot of things I think
gives upside to Disney (NYSE:DIS).

HERERA:  And, you know, we`ve heard this from apple but you say it`s also
true for Disney (NYSE:DIS), that India provides a great opportunity for
expansion of its products.

LUNA:  That`s true.  Very true, Sue.  There`s over 1.3 billion people in
India that really haven`t been exposed to Disney (NYSE:DIS), and quite
honestly, they haven`t done a great job making inroads there.  With the
latest “Jungle Book” film, that`s the biggest blockbuster ever from
Hollywood, grossed over $25 million the first weekend.

So, with inroads you`re seeing in China right now, now starting to get into
India.  I think that`s a whole other culture that`s going to be exposed to
Disney (NYSE:DIS) and a great growth opportunity for that company long-

HERERA:  All right.  Robert, we`ll leave it there, thank you.

LUNA:  Thank you.

HERERA:  Robert Luna with Surevest Capital Management.

MATHISEN:  On Wall Street, all the major indexes rose more than 1 percent,
helped by weakness in the yen and a gain in oil prices.  By the closing
bell, the Dow Jones Industrial Average was up 222 points to 17,928.  Best
day since March.  NASDAQ added 59.  The S&P 500 was up 25.

But today`s sharp rise is leaving some investors scratching their heads.

Dominic Chu explains why.


here at the New York Stock Exchange were hart-pressed to come up with an
answer for why we got the rally we did.  Some say it was oil, that was a
big part of the story.  Others points to a slightly better than expected
earnings season now that things are starting to settle down a bit.

And while the rally was broader based a handful of well-known and widely
held stocks got a lot of attention because they hit record highs at one
point in today`s trade.

Now, first up, you`ve got Mickey D`s, McDonald`s (NYSE:MCD) continues to
rise despite some concerns about future sales growth.  Also consumer and
health care products giant Johnson & Johnson (NYSE:JNJ) also hitting a
record high today.  Then there`s Home Depot (NYSE:HD).  That spring
gardening and home improvement season has given some investors optimism
about the stock perhaps.

Now in addition to all being at record high levels, each of these stocks is
also a member of the Dow Industrials and each of these stocks carries a
dividend yield above 2 percent or above the yield that ten-year treasury
notes will give you.  So that may be a big part of the investment story.

For NIGHTLY BUSINESS REPORT, I`m Dominic Chu at the New York Stock


HERERA:  The number of job openings hit an eight-month high in March and
were just shy of their all-time high.  The Labor Department says there were
around 5.75 million openings.  The high number is a sign that business
owners can`t find skilled workers qualified to fill the jobs they have.

MATHISEN:  President Obama`s record on jobs is the subject of bitter debate
from both sides of the political aisle.  Yes, a lot of jobs have been
created during the past eight years.  But is the labor market now
considered healthy?

As Steve Liesman explains, it depends whom you ask.


experts agree.  The number one issue in the campaign —




TRUMP:  Jobs.



LIESMAN:  Yet even before the critical debate over what policies the next
president should enact, both sides debate a more simple question — has the
job market recovered from the Great Recession?

The Democrats not surprisingly say yes, it`s mostly back.

ALAN KRUEGER, FORMER CEA CHAIRMAN (2011-2013):  I think you have to go back
and look at where things were in 2008, 2009.  We were losing 700,000 jobs a
month at that time.  The economy is now, for six years, straight added
private sector jobs, almost 15 million jobs added in that time period.  The
unemployment rate fell from 10 percent to 5 percent.  We are seeing wages
grow, a little over 3 percent so far this year.

LIESMAN:  Republicans respond, there`s more work to do in the job of
putting Americans back to work.

Stanford economics professor Ed Lazear, CEA chairman under President Bush,
looks at the percentage of the population that`s working and sees it`s fall
to know 60 percent, about where it was in 1985.  A record 94 million
Americans aren`t part of the labor force.  Lazear acknowledges a chunk of
that is from baby boomers that retired.  But he`s troubled by the many
prime working-age Americans, 25 to 54 years old, who aren`t working.

ED LAZEAR, FORMER CEA CHAIRMAN (2006-2009):  If anything you would expect
that the demographic effect would actually drive the employment rate up for
that group, not down, because when the older guys leave the market, there`s
more demand for the middle-aged guys.  We`re simply not back.  We are not
recovered.  And we still have a ways to go.

LIESMAN:  Republicans even take issue with the marquee data point from the
Democrats, that there have been millions of jobs created under Obama.  They
say the jobs created were low-quality, service jobs, and low-paying.

The reality?  Millions of Americans have found work.  The unemployment rate
is really down from its double-digit peak from the great recession.  But
the recovery has been slow and many Americans have jumped out of the
workforce.  And millions can only find part-time work.

Can America do better?  Are there policies that can bring about a real
turnaround in the jobs market?  Perhaps we`ll get answers to those
questions in a real substantive presidential debate this summer and fall.
You can hope, can`t you?



MATHISEN:  And to read more about the job market and whether it has truly
recovered or how much it has, head to our website,

HERERA:  With the job market on the minds of voters, Bernie Sanders is
hoping to notch out a win today in West Virginia`s primary, a state hard
hit by coal`s decline.  On the Republican side, for the first time, there`s
only one candidate.  But that doesn`t mean there`s consensus.

John Harwood is covering it all for us in Washington.

Good to see you as always, John.

Coal`s a very big industry in West Virginia and Ms. Clinton has been
criticized for her comments in March about putting coal miners and
companies out of business.  She has since said she misspoke, but how much
damage was ton by those earlier comments?

Look, she said, we`re going to put a lot of coal miners out of business.  I
think what she meant was, as she subsequently explained, that this was
happening because of trends in the economy, trends in environmental policy.

But nevertheless, that was heard cross West Virginia and across other coal-
sensitive communities in places like Pennsylvania and Virginia.  So, that
is something that she needed to dig out of.  The question is, can she dig
out of it enough to win West Virginia?  The polls going into Election Day
today indicated she wasn`t going to be able to.

Of course, Bernie Sanders has got a problem because he has extreme
difficulty catching her in delegates.

MATHISEN:  All right.  Let`s talk over on the GOP side.  What did House
Speaker Paul Ryan say today about unifying the somewhat fractured
Republican Party?

HARWOOD:  He said, Tyler, that he wants to bring it together, but he
acknowledged that it would take something more than a week.  They just
reached the presumptive nominee status for Donald Trump last week.  Paul
Ryan then subsequently came out and said he wasn`t ready to support him.
They`re going to meet on Thursday.

But he lowered expectations for this meeting saying this process of
unifying after a bitter divisive primary is going to take some time.  I
think they`re going to be discussing various issues as well as some of the
logistics of how the presidential campaign with Donald Trump in the lead
will relate to the House and Senate campaigns which are very important to

HERERA:  On that note, John Harwood, as always, thank you so much.

MATHISEN:  All right.  Still ahead, expectations low for this week`s retail
earnings, but there are some standout stocks in the sector that may be
worth your money.


HERERA:  Online lenders require more oversight.  That`s the conclusion of a
report from the Treasury Department which comes just one day after Lending
Club, the biggest online lender, pushed out its CEO for faulty lopes, as we
reported on last night.

There are growing concerns about the quality of loans issued by this
rapidly growing industry.  The report also said the business remains
untested through a complete credit cycle and it`s unclear how it might
handle rising interest rates and tighter credit.

MATHISEN:  A top Senate Republican is pressing Facebook (NASDAQ:FB) to
explain how it picks its trending topics.  This comes after a Gizmodo
report that conservative articles are routinely suppressed.  Facebook
(NASDAQ:FB) has denied those allegations.

Eamon Javers has been following the story from Washington for us.

What are some of the specifics here, Eamon?


That Gizmodo report was quoting a single anonymous source, who was a person
who said he or she had been an employee at Facebook (NASDAQ:FB) and had
worked on those trending topics and said that routinely, trending topics
dealing with conservative news or from conservative news sites were
suppressed in that algorithm that Facebook (NASDAQ:FB) puts in there, and
also said that Facebook (NASDAQ:FB) employees actually inject stories into
that algorithm so that they appear on users` newsfeeds even though they`re
not actually trending according to the algorithm.

So, they said there`s a human element here and that human element is
subject to bias.

HERERA:  Facebook (NASDAQ:FB), what have they said?

JAVERS:  Well, Facebook (NASDAQ:FB) put out a statement today, they put a
couple of statements on this today.  What they said was, “Facebook
(NASDAQ:FB) is deeply committed to being a platform for people and
perspectives of all viewpoints.”  They also say they`ve got a review here
that`s ongoing.  They`re looking into the situation to find out if any
employees at Facebook (NASDAQ:FB) did anything that was biased or just sort
of put their thumb on the scale of what all of us who use Facebook
(NASDAQ:FB) see in our newsfeeds.

MATHISEN:  What does the Senate want to know?

JAVERS:  The Senate`s got a letter in now to Facebook (NASDAQ:FB).  They`ve
got a lot of information that they want to know.  This is the Senate
Commerce Committee.  It`s Senator John Thune.

And I`ve got some of the highlights here.  They`re looking for, in fact,
the names of some of the people who were involved in selecting the trending
topics.  They want to know how Facebook (NASDAQ:FB) news curators
manipulated the content of trending topics, if they did.  They also want to
know exactly what steps Facebook (NASDAQ:FB) is taking to investigate all
of this.

So, whenever a Senate committee sends you a sternly worded letter as a
company, you`re always worried about that.  But Facebook (NASDAQ:FB) says
it will respond, it`s gotten this letter, it will respond in due course.

MATHISEN:  Eamon, thanks very much.  Eamon Javers in Washington.

HERERA:  The freefall at Lumber Liquidators continues and that`s where we
begin tonight`s “Market Focus.”

The hard wood flooring company`s net loss quadrupled from a year ago as it
posted a revenue decline for the fourth quarters, fourth consecutive
quarter at that.  Sales have been hurt over the past year by heightened
concerns over the safety of some of the company`s laminate products,
including a February report by the CDC saying some of the flooring carried
higher cancer risks than previously thought.  Shares fell by nearly 8
percent to $12.39.

White Wave Foods which makes plant-based beverage and food products saw its
shares surge today after that company posted solid revenue growth for the
quarter.  Profit also increased and came in above analyst expectations.  In
addition, the company raised its earnings forecast for the year.  Shares
rose 7 percent to $44.57.

Lower sales of mobile network equipment and costs associated with the
recent merger weighed on Nokia`s results.  The tech company also warned
that market headwinds and weakening demand in China would cause full-year
earnings to decline.  Shares of Nokia (NYSE:NOK) fell more than 6 percent
to $5.31.

MATHISEN:  Strong demand for Caribbean cruises helped drive profit 41
percent higher on Norwegian Cruise Line.  And the results fell in line with
estimates.  The cruise operator also reported an increase in overall
revenue but that failed to meet street targets.  The company issued weak
profit guidance for the current quarter as it expects sluggish demand in
its European market to continue.  Shares down more than 4.5 percent to

Meantime, Allergan (NYSE:AGN) reported a better than expected quarterly
number, thanks in part to strong sales in its branded drugs unit which
includes Botox and the eye drug Restasis.  The company plans to buy back up
to $10 billion in shares.  Shares were higher by 5 percent to $225 on the

And shares of Gap (NYSE:GPS) hammered after the retailer posted
disappointing earnings after the bell yesterday.  The company issued a
profit warning as well.  Gap (NYSE:GPS) has been hurt by weak demand at its
Banana Republic and Old Navy stores.  Shares down 11.5 percent today at

HERERA:  Well, department stores have seen better days.  Traffic is down,
so is revenue, and growth.  And this week, with a number of earnings
reports due, we may learn how big that sector`s obstacles are.

Courtney Reagan reports.


last several quarters have been great for previous standouts like Macy`s
(NYSE:M) and Nordstrom (NYSE:JWN).  But many retail watchers suspect
something further has been happening recently.  It doesn`t bode well for
department stores` results this week.

There`s a lot of chatter that starting around March, traffic began to slow.
Retailers started slashing prices but still clearance merchandise built up.
Weather wasn`t great in some places, Easter was early, gas prices increased
50 cents per gallon since mid-February, and Amazon (NASDAQ:AMZN) recently
launched its own private label clothing line.

RBC analyst Brian Tunic notes department stores have spent more than $4.5
billion in the last several years investing in their own online shopping
initiatives but the return on that investment is uncertain, if not
unfavorable so far.

There are other worrisome signals.  L Brands is one of the few retailers
left releasing monthly sales and April was a rare and wide miss.  Knowing
the parent of stronghold Victoria`s Secret and Bath & Body Works is
faltering adds to mounting concern ahead of Macy`s (NYSE:M), Kohl`s
(NYSE:KSS), Nordstrom (NYSE:JWN) and JCPenney`s report.  JCPenney doesn`t
report until Friday but try to give investors some comfort today, saying
it`s, quote, “pleased” with its first-quarter performance which is so far
exceeding expectations.

This in response to a report last week suggesting the retailer was
instituting wide cost cuts which caused shares to tumble.  Macy`s (NYSE:M),
once a favorite retail pick for investors, is the first of the department
to report and it`s not expected to be good.

MATTHEW BOSS, JPMORGAN:  I think the department stores have a tough week
ahead.  I think Macy`s (NYSE:M) on Wednesday will kick off with a really
tough top-line print.  We are modeling a negative 6 percent same-store
sales, which would be among the worst prints that Macy`s (NYSE:M) would put
up since the financial crisis.

REAGAN:  Boss isn`t the only analyst warning investors.  Analysts at Citi,
Stern Agee, MKM Partners have lowered estimates for Macy`s (NYSE:M), Kohl`s
(NYSE:KSS), Nordstrom (NYSE:JWN), JCPenney`s, in many cases for both the
first quarter and beyond.



MATHISEN:  Our next guest has names of department discount, off-price, and
online retailers that she says will be the winners in this new and
challenging retail landscape over the next decade.  She`s Jessica Bornn,
senior retail analyst at Merchant Forecast.

Jessica, welcome.

We gave you an assignment today.  We`re talking about all this carnage in
retail, that department stores are dying, the retailers are dying, and we
asked you to come up with your picks in those four categories — department
stores, off-price, discounters, and online.

Let`s start with your department store choice.  Who is it?

JESSICA BORNN, MERCHANT FORECAST:  Great.  I would like to nominate
Nordstrom (NYSE:JWN) as my pick.

If you look at Nordstrom (NYSE:JWN) compared to their peers, Nordstrom
(NYSE:JWN) is not overstored.  And what I mean by that is if you compare
them to a JCPenney or a Macy`s (NYSE:M), that have a really significant
store base, many times in malls that aren`t performing up to their recent
highs of the last five to ten years, Nordstrom (NYSE:JWN) has a very much
smaller store base.  And I think that helps mitigate some of the risk of
slow-down in traffic in the malls.

Number two, they have an off-price concept called Nordstrom (NYSE:JWN) Rack
and that has been a big driver of camps for them allowing an outlook
structure in a sense, to send some of their underperforming items to those

They also bought an online flash sale site called HauteLook.  So, they`re
definitely hitting their customer in all different areas in the mall, off-
mall, online.  That`s been their approach from the get-go compared to some
of their peers.

HERERA:  You also like T.J.Maxx, you say they`re doing multiple concepts
like Marshall`s and Home Goods.  That`s not necessarily a discounter but it
is more off-price.

BORNN:  Yes, T.J.Maxx has purchasing power.  They have an international
presence in Canada and U.K.  They have their domestic presence with Home,
Marshall`s and T.J.Maxx.  I think they`re able to snap up advantageous
goods probably quicker than some of their peers in the off-price channel
because they have the purchasing power.  They have the doors they can throw
that merchandise into.

MATHISEN:  My wife can spend a lot of time and money at Home Goods.  Let me
just tell you, Jessica.

All right.  Let`s move on to your third choice, not third, your discounter
choice, and that`s Target (NYSE:TGT).  Why?

BORNN:  That`s true.  Target`s taken a different approach.  They are going
after fashion.  And if you compare them to a Walmart, Walmart stands for a
bit more of a basic and commodity fashion selection.  Target (NYSE:TGT) is
really partnering with fashion bloggers.  They`re bringing in really avant-
garde merchandise that gets people in the stores that normally wouldn`t
shop there.

I think what`s important is they`re diversifying within their stores,
bringing in grocery which sets them apart from some of their peers.  They
also are paying attention to categories that matter to the shopper.  For
example, plus-sized shopping and a lot of retailers have abandoned their
plus-size programs, so that`s a positive for them.

HERERA:  Amazon (NASDAQ:AMZN) you say is bullet-proof.  It`s taking over
the world.

BORNN:  I think Jeff Bezos would like to take over the world.  I think
what`s interesting to see from them is they keep adding additional product
and category extensions, and we`ve seen them go into grocery, we`ve seen
them go into fashion.

They`re actually reversing course and now, they`re going to open brick and
mortar stores and they started with bookstores.  And so, you know, they`re
innovative in the ways they get goods to the customer.  You don`t have to
leave your home.  They`re taking market share from some of those big box
retailers like Costco (NASDAQ:COST), Sam`s, BJ`s.

And so, I think they`re unstoppable.

MATHISEN:  How ironic is that that they would open a bookstore, brick and

BORNN:  They`re going back to their core category.

MATHISEN:  Well, Jessica, we`ll see in a decade to see how these picks
worked out, OK?

BORNN:  Good.  I hope so.

MATHISEN:  All right.  Jessica Bornn with Merchant Forecast.

HERERA:  Coming up, A-listers head to Wall Street to make trades all for a
good cause.


MATHISEN:  The top hedge fund managers, don`t cry for them Argentina or
anywhere else, folks.  They made more than $1 billion each last year
according to the rich list compiled by “Institutional Investor`s Alpha

The top 25 took home a combined $13 billion last year and it wasn`t even a
good year for them.  The highest paid were Citadel`s Kenneth Griffin and
Renaissance Technology`s James Simons.  They both took home $1.7 billion.
Ray Dalio of Bridgewater and Appaloosa`s David Tepper each made $1.4
billion, and rounding out the top five was millennium management`s Izzy

HERERA:  And some of the big names in business, sports and politics made
their way to Wall Street today, to give back the A-listers worked the
phones on the BTIG trading floor, traded stocks, and donated all of the
day`s commissions to charity.

Bob Pisani was right in the middle of it all.



entertainment figures descended on midtown Manhattan to support BTIG`s
annual charity day.

quality of life.

MARK MESSIER, HOCKEY HALL OF FAMER:  I`m here for the first time
representing my own foundation I`ll be setting up called the Mark Messier

PISANI:  It`s all a brain child of CEO Steve Starker who sits every day in
the middle of the trading room directing large blocs of stock trades.

STEVE STARKER, BTIG CEO:  We`ve donated over $35 million over the last 14
years.  I think today may be our biggest day ever.

PISANI:  For a brief two-hour period, many of the most famous sports
celebrities in America, Reggie Jackson and Bobby Valentine, as well as Miss
Universe and Miss USA.  And entrepreneur and “Shark Tank” star Mark Cuban
rubbed elbows doing honorary trades on behalf of charities.

This is not a one-time event.  Most of these celebrities have established
charities that they are actively supporting.

ALEX RODRIGUEZ, NY YANKEES:  I`m indebted to the boys and girls club.  For
many reasons that`s why I`m in the big leagues today.  You know, ever since
I`ve been in the Major Leagues for 20, I`ve been giving back and hoping to
give the same opportunity for these kids of today.

PISANI:  Even former New York Mayor Mike Bloomberg stopped by to work the
crowd and to talk a little politics.

fooled isn`t the quite word.  He just surprised everybody.  Trump has tied
in to a feeling across this country that the future isn`t as good as they
had wanted to be.

PISANI:  Wall Street may not have a favorable image on Main Street but
BTIG, which is donating its entire day`s profits to charity, doing its best
to change that.

For NIGHTLY BUSINESS REPORT, I`m Bob Pisani in midtown Manhattan.


MATHISEN:  And finally tonight, an iconic American brand is making a
change, a big one, at least for a few months.  Budweiser is renaming its
beer “America” for the summer and through the November election.  With the
Olympics also on tap, the company says it is making the change in honor of
what may be the most American summer ever.  About one-third of all U.S.
beer sales occur between Memorial and Labor Day.

HERERA:  It will be interesting to see how that goes.

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

MATHISEN:  And I`m Tyler Mathisen.  Have a great evening, everybody.  We`ll
see you tomorrow.


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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