Transcript: Nightly Business Report, September 15, 2016

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

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Triple-digit gains. Stocks rally as the odds of an interest rate hike fall and the world`s most valuable publicly traded company stages a big run.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Lagging behind. Why
Washington may be America`s greatest economic weakness and hampering its
ability to compete globally.

MATHISEN: Luxury living. It`s not your grandma`s retirement home that
more affluent Americans are moving into these days.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Thursday,
September 15th.

HERERA: Good evening, everyone. Welcome.

A triple-digit gain for the Dow as investors focused on a series of tepid
economic reports, just one week before Federal Reserve policymakers meet to
decide on interest rates. All of the major indexes rose about 1 percent or
more. The Dow Jones Industrial Average 177 points to 18,212. NASDAQ added
75. S&P 500 was up 21.

But the rally may have been sparked in part by today`s soft economic data
which lowered the possibility of a rate hike next week. Today, we learned
consumers did not spend as much as they were expected to last month.
That`s important because consumer spending makes up 70 percent of economic
activity.

Inflation was flat. The central bank wants to see that pick up.
Industrial production contracted as did a read on manufacturing activity in
the New York area.

So, we have two reports tonight. Bob Pisani on a rally in stocks. But,
first, Steve Liesman on what`s going on with the economy.

(BEGIN VIDEOTAPE)

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: A massive amount of
data released today that investors hoped would clarify the economic
situation. Instead, the outlook is just as murky as it was before. Retail
sales came in worse than expected as consumers took an August spending off,
where their purchases in the current quarter remain strong.

Factories seemed to pause with the consumer as industrial production
registered a 0.4 percent decline. And two closely watched regional
manufacturing indices split, one up, one down. And jobless claims came in
better than expected. That suggests the jobs market remains strong and
consumers should have the wherewithal to spend in the future.

Add it all up, and GDP forecasts for the third quarter, they still look
fairly robust at 2.8 percent growth but down just a little bit. Hopes for
clarity were high, though, as investors are still on edge about what the
Federal Reserve will do with its meeting next week, hike rates or not.
After the data, Fed fund futures, they suggested an 11 percent chance of a
hike next week. December seems the more likely bet.

ART HOGAN, WUNDERLICH SECURITIES: In the face of lackluster data we`ve
seen in the last two weeks, the Fed rhetoric hasn`t changed. And I think
we`re paying too much attention to the fact that we have a Fed that wants
to get away from emergency levels of monetary policy, agnostic of data.
We`re probably going to see an increase in rates and it probably happens in
December.

And the market, you know, has got a mixed message here. That`s not data
dependency. It`s clearly a Fed that`s waited too long and wants to get a
rate hike in 2016.

LIESMAN: One more data point tomorrow, the consumer price index but only
an outsize increase in inflation would be seen as strong enough to tip the
scales to a September hike.

For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.

(END VIDEOTAPE)

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Stocks faced a rally
today. A lot of it had to do with Apple (NASDAQ:AAPL) and tech stocks that
supply Apple (NASDAQ:AAPL). Apple`s huge 11 percent rally this week is the
main contributor in the gains in the indexes. Remember, S&P is market cap
weighted. So, the bigger stocks have an outsize influence on how the index
moves.

Apple (NASDAQ:AAPL) is the biggest stock in the index has the biggest
influence. I`ll give you an example. The S&P was up a little more than 20
points today, but Apple (NASDAQ:AAPL) has such a big weighting that the
nearly $4 in that stock moved the index up about 20 points. In other
words, you could say that Apple (NASDAQ:AAPL) was the main reason the S&P
moved up, all other things being equal.

The companies that supply hardware and software to Apple (NASDAQ:AAPL) have
also had a huge week. So, companies like Cirrus Logic (NASDAQ:CRUS) and
Broadcom (NASDAQ:BRCM) and Analog Devices (NYSE:ADI) are also up big. They
helped drag indexes higher as well. That`s why tech heavy indexes like the
NASDAQ 100 are strong as well.

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

(END VIDEOTAPE)

MATHISEN: U.S. stock market performance may be OK, but when it comes to
competiveness in the overall U.S. economy, we`re lagging. A new Harvard
Business School study blames Washington for hampering America`s ability to
compete globally.

Michael Porter, one of the authors of that study and professor at Harvard
Business School, joins us now to discuss the findings.

Professor Porter, always good to see you. Thank you for joining us
tonight.

One of the things the study points to very pointedly is the need for tax
reform, particularly corporate tax reform. I wonder if you would address
that, particularly in light of what Mr. Trump said today. He says cut the
rate to 15 percent.

MICHAEL PORTER, HARVARD BUSINESS SCHOOL: Well, Tyler, it`s very good to be
with you today.

And I think — what I think our viewers need to understand is the U.S. has
become very much of an outlier on corporate taxes. And in a global
economy, that`s a very dangerous place to be. We have the highest
statutory tax rate in the world of any other major nation.

And the way we deal with taxes of foreign income is also unique. All the
other countries have what`s called a territorial system. We have a system
where you pay twice, once where you made the profit in Germany or wherever,
and then you have to pay more to bring the money back to the U.S. So, we
have trillions of dollars sitting offshore. And this is really punishing
investment.

And one of our most central priorities right now is to reform the corporate
tax rate. And we know what to do. The solution — the consensus solution
is we need to bring down the rate, down to the mid-20s, say, and we need to
eliminate most if not all of the loopholes and deductions. That could be
done in a revenue-neutral way.

But Washington has been dithering about this issue, trading accusations for
years. And we haven`t made any progress.

HERERA: That brings me to some of the key findings. And you say basically
America`s economic challenges are structural, not cyclical, and we`re
dealing with a flawed U.S. political system that has led to an absence of
progress in government, especially in Washington. I mean, it`s a pretty
stunning report and you really do lay the blame on the lack of
competitiveness, or progress, perhaps better said in the economy, squarely
at the foot of Congress and Capitol Hill.

PORTER: Well, you know, we`ve been at this for five years. And we`ve
looked very deeply across the whole economy. To make competiveness improve
in the U.S., we need business to do things.

We need state and local governments to do things. And we need the federal
government to do things. And what we find is that business has really in
the process of quite a, you know, turnaround in terms its commitment and
work to enhance the productivity of the American economy and American
communities.

State and local governments are doing their best. You know, they can
improve, but we see a lot of progress. But when we look at the federal
government, we know two things that are very important.

First of all, in our survey work, where we`ve looked at the kind of
strengths and weaknesses of America in terms of competitiveness, we find
that we have a lot of great strengths and — which should give us long term
optimism about the potential of America. But we`ve allowed a bunch of
weaknesses to crop up. Areas like the tax code that we discussed, areas
like infrastructure, areas like declining skills, areas like high cost
health care, areas like a regulatory burden that is by all measures going
on up.

So, it turns out that most of the areas that are our greatest weaknesses
actually are areas that are heavily the responsibility of Washington.

And we — there`s a lot of consensus, again, on what we need to do. We
need to deal with the corporate tax code. We need to build infrastructure
to get ourselves back into the 21st century. We need to deal with
regulation. We need to do some relatively well-understood and well-
accepted things and yet nothing has happened.

MATHISEN: Nothing seems to happen.

PORTER: And this is now a Republican administration and a Democratic
administration. It`s not the administration. It`s not the parties per se.

HERERA: Right.

PORTER: It`s the system.

MATHISEN: Yes.

PORTER: The system is not designed today and it`s not working today to
actually solve problems, to make things happen.

MATHISEN: We would love to have you back to talk about some of the whys
and what needs to happen to break the knot that seems to have strangled
Washington on this. I hope you`ll agree to do that, Michael Porter.

PORTER: I would be honored to. Thank you.

MATHISEN: We would love to have you back. Michael Porter with Harvard
Business School.

HERERA: Speaking of politics, Republican presidential candidate Donald
Trump said he can get the economy growing 4 percent. Speaking at the
Economic Club of New York, he outlined his plan for the economy, which he
says will create 25 million jobs.

(BEGIN VIDEO CLIP)

DONALD TRUMP (R), PRESIDENTIAL NOMINEE: If we reach 4 percent growth, it
will reduce the deficit. It will be accomplished through a complete
overhaul of our tax, regulatory, energy, and trade policies. One of our
greatest job creation measures is going to be our 15 percent business tax
rate, down from the current 35 percent rate, a reduction of more than 40
percent.

(END VIDEO CLIP)

HERERA: John Harwood has been covering the story for us from New York.

Good to see you as always, John.

Was there anything different in Mr. Trump`s plan today, in this address?

JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT: In fact there was,
Sue. It was in that clip you just played from Donald Trump where he talks
about the 15 percent tax rate.

In the old Trump tax plan, the 15 percent rate would apply both to
corporations but also to small businesses that are not incorporated but are
— pay taxes through the so-called pass through provisions in the
individual tax code. That`s no longer in his plan. So, those
unincorporated small businesses would pay, under the existing system, not
at the lower 15 percent rate. And the reason he made that change is that
it costs the federal government less money.

One of the things Donald Trump was trying to do was narrow the deficit
impact of his plan.

MATHISEN: You know, how was he received in the room today, John? I sensed
a Mr. Trump who was still Mr. Trump but he was not the angry, snarling
fellow. He was on a teleprompter for most of the time.

HARWOOD: He was. And he was presenting a measured demeanor, which I think
the demeanor went over well in the room.

You had people trying to press him for specifics, how exactly are you going
to create 3.5 to 4 percent growth? How are you going to renegotiate those
trade deals that you say you want to scrap?

He wasn`t big on the details other than some of the familiar answers he`s
been saying, which is, you know, put all my good policies together and
they`re going to produce a great result, or I`ll hire better people to do
what existing government officials haven`t been doing successfully.

But at least by his presentation, he was more effective.

HERERA: And Ms. Clinton was back on the campaign trail. What was her
message?

HARWOOD: Her message was: I`m back on the campaign trail. She even took
questions from the press to try to put a punctuation point, Sue, on the
issues about disclosure, why she didn`t tell people she had pneumonia, and
that sort of thing. She said, as her aides previously said, I didn`t think
it was going to that big a deal, I wanted to power through, but now I`m
back.

HERERA: All right, John. On that note, thank you. John Harwood in New
York.

HARWOOD: You bet.

MATHISEN: The hospitality business, restaurants, hotels, and the like, has
been a huge job creator over the past decade. But what happens to job
growth when more and more restaurants automate?

Susan Li reports from the world`s largest fast food, a McDonald`s
(NYSE:MCD) in Bergenfield, New Jersey.

(BEGIN VIDEOTAPE)

SUSAN LI, NIGHTLY BUSINESS REPORT CORRESPONDENT: The brand may be
familiar, but the way they`re serving customers is changing.

This is one of the first McDonald`s (NYSE:MCD) to start using automated
kiosks to take orders. How it works is that instead of walking up to a
traditional cash register and giving your order to human, you walk up to a
computer screen, swipe, and press on a long list of options to make your
sandwich and your salad. Then grab a table and wait for your meal to be
delivered.

But it`s not just McDonald`s (NYSE:MCD) getting more automated.
Competitors Panera Bread (NASDAQ:PNRA) has already moved towards taking
orders via kiosk. Domino`s Pizza (NYSE:DPZ) has a mobile app and you can
place orders by the website. Starbucks (NASDAQ:SBUX) is doing the same.

Analysts say that in addition to improving the customer experience,
technology is also helping restaurants cut costs.

DAVID HENKES, TECHNOMIC: Some of the rise in automation, kiosks, automatic
payments, things like that, to some degree is a direct result of what`s
going on with labor costs and other profitability challenges they`ve had.

LI: McDonald`s (NYSE:MCD) argues it`s more about the redistribution of
labor.

BRIAN HAIRSTON, MCDONALD`S OWNER/OPERATOR: We now have concierges out in
the lobby helping people place their orders on the screen. We also have
food runners to bring people their food so they can sit down and wait on
their food. So, basically, what we`re doing is more of a repositioning,
not cutting any jobs.

LI: Analysts say that might be true in the short term, but in the long run
it comes down to profits, especially as groups like Fight for 15 push for a
higher minimum wage.

MATT DIFRISCO, GUGGENHEIM SECURITIES: The labor environment has
accelerated the rate of investment or the likelihood to adopt technology
and invest in technology by franchisees and brands.

LI: All this technology is offering the customization that diners want.
At the same time, it`s offering the cost savings that restaurants need.
It`s changing the industry as a whole and maybe the way we eat.

For NIGHTLY BUSINESS REPORT, I`m Susan Li lee in Bergenfield, New Jersey.

(END VIDEOTAPE)

HERERA: Still ahead, hiring for the holidays, but this year, it may be
more difficult for companies to find the workers they need.

(MUSIC)

HERERA: The Consumer Product Safety Commission is formally recalling
Samsung`s Galaxy Note 7 smartphone, this after the reports of overheating
and exploding batteries in its new phone. Samsung has already issued a
voluntary recall of the device. But that recall has been plagued with
problems, including conflicting information. The Note series is one of
Samsung`s most expensive phones and the demand has been strong.

MATHISEN: An activist investor is calling on Wells Fargo (NYSE:WFC) to
split the roles of chairman and chief executive. The Needmore Fund of
Toledo filed a shareholder resolution saying management needs strong
oversight from the board, following the recent fake account scandal. Both
positions are currently held by John Stumpf.

Shares of Wells Fargo (NYSE:WFC) fell as the broader market rose today.

Earlier today, I spoke with Senator Elizabeth Warren of Massachusetts, a
vocal critic of the bank who said senior managers at Wells Fargo (NYSE:WFC)
need to be held accountable.

(BEGIN VIDEOTAPE)

SEN. ELIZABETH WARREN (D), MASSACHUSETTS: There is a serious problem with
senior management at Wells Fargo (NYSE:WFC). Look, we`re talking about a
scandal here that involves thousands of their employees cheating tens of
thousands of customers out of money and making millions of dollars doing it
for the bank. And so, the question is about senior management, is it the
case that they really didn`t know what was going on? Because if they
didn`t, then this is a bank that`s just too big to manage.

(END VIDEO CLIP)

MATHISEN: Senator Warren and the rest of the banking committee will host a
hearing on the issue next week.

HERERA: It may be September, but some companies are already hiring for the
holidays. As we`ve been reporting, UPS and Target (NYSE:TGT) say they`re
adding about the same number to their payrolls this year as last. But
that`s where the similarities end. This time around, there is a clear
shift towards e-commerce.

Morgan Brennan has more.

(BEGIN VIDEOTAPE)

MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: The holiday hiring
has started, heading into what`s expected to be the busiest peak season on
record. Retailers and transportation companies from Target (NYSE:TGT) to
Amazon (NASDAQ:AMZN) to FedEx (NYSE:FDX) are poised to ramp up recruitment.
UPS expects to hire 95,000 workers, the same as last year for the November
to January holiday season.

But hiring those workers could be much harder this year. With e-commerce
sales projected to surge more than 20 percent by some estimates, and the
U.S. unemployment rate just under 5 percent, not to mention competition
from Uber and the share economy, good workers may be hard to find.

UPS has launched a redesigned hiring website. It`s recruiting on college
campuses, at NCAA games, and is offering shorter, more flexible work hours.

Steve Osburn, a retail strategist at Kurt Salmon, thinks it`s going to get
ugly.

STEVE OSBURN, KURT SALMON: Online volume is growing, which means the
demand for those jobs is growing. So, last year, it was a little bit of a
struggle. This year, it`s going to be even more of a struggle for
retailers to find the people they need to get the orders out the door on
time.

BRENNAN: Even if sales remain sluggish for traditional brick and mortar
retailers, demand for e-commerce continues to soar. Factor in a tight
labor market in some regions, and pay is likely to push higher. Logistic
staffing firm ProLogistix says wages could rise by as much as $3 an hour,
from an hourly rate of $10 to $12. The dynamic requires companies to
strike a difficult balance. On the one hand, having enough people to
handle volumes smoothly, on the other maintaining profit margins.

Training workers to handle the holiday rush can take six weeks, and then
companies need to hang on to them at least until January, when the holiday
rush comes to an end.

For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan.

(END VIDEOTAPE)

MATHISEN: Oracle (NASDAQ:ORCL) sees its quarterly results come up short.
And that`s where we begin tonight`s “Market Focus”.

Despite reporting a rise in profit and revenue, the company missed analysts
estimates on both. Oracle (NASDAQ:ORCL) attributed the results to lower
than expected software licenses. Shares initially fell in after-hours
trading, but they ended the regular session up 1.5 percent at $40.86.

Goodyear is hiking its dividends, plans to return as much as $4 billion in
capital to shareholders. The tire maker raised quarterly dividend by 3
cents to a dime a share. The company also reaffirmed its earnings guidance
for the year. Shares on the day up 5 percent at $32.39.

HERERA: Supermarket chain Kroger (NYSE:KR) declared a dividend of 12 cents
a share and said its board of directors approved $500 million share
buyback. That news sent the shares up by nearly 2 percent to $31.25.

Berkshire Hathaway (NYSE:BRK.A) raised its position in energy company
Phillip 66 by 1 million shares. That`s according to a regulatory filing.
The latest investment brings the conglomerate stake in the company to more
than 15 percent. Phillip 66 shares rose nearly 2 percent to $79.10.

Novavax (NASDAQ:NVAX) shares plunged after the bell when the biotech
company said its drug for a treating a respiratory virus did poorly during
a trial. The news sent shares plummeting more than 80 percent after hours.
The stock finished the regular day up just a fraction, to $8.34.

MATHISEN: Fiat Chrysler will recall nearly 2 million vehicles worldwide
for an airbag defect that`s been linked to three deaths and five injuries.
Airbags in the recalled cars just may not deploy. The models impacted were
sold between 2010 and 2014 and include the Chrysler Sebring, the Chrysler
200, the Dodge Caliber, Avenger, the Jeep Patriot, and Compass SUVs.

HERERA: As car sharing continues to grow around the country, at least one
city is taking a rather unique approach and has started its own car sharing
program. It`s called Blue Indy. And in Indianapolis, it`s changing the
way some people get around.

Phil LeBeau has more.

(BEGIN VIDEOTAPE)

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: Cassie Stockcamp is a
car share believer. A year ago, the Indianapolis mother of two sold her
car and got behind the wheel of a Blue Indy electric car whenever she need
to get around town.

CASSIE STOCKCAMP, BLUE INDY MEMBER: It doesn`t serve all of my needs, but
it does a large portion of it, especially when I`m downtown area.

LEBEAU: The Blue Indy car share program started last year. French
automaker Bollore Group and the city of Indianapolis are investing a
combined $47 million to build a network of 278 electric cars that charge at
79 parking stations throughout the city.

SCOTT PRINCE, BLUE INDY GENERAL MANAGER: We`ve already been able to show
really positive early growth. So, we`re off and running. I mean, this is
about a year old now and it`s overachieving our expectations on every
category you can imagine.

LEBEAU: So far, Blue Indy has just over 2,000 annual members, spending
$9.99 a month and 20 cents per minute to drive around in one of the
program`s small electric cars.

But Blue Indy is still in the red and is unlikely to turn a profit until
thousands more join the program, which could take several years, which is
why people like Joe Vuskovic are not sold on Indy`s car sharing program.
He says Blue Indy cars are taking up valuable parking spots in front of his
restaurant, and he wonders how many people actually use the cars.

JOSEPH VUSKOVIC, RESTAURANT OWNER: I really can`t believe that it`s
meeting their expectations as far as their subscribers` usage. Again, you
don`t see them driving around. I`m around the city a lot.

LEBEAU: That`s the challenge for car share companies. Whether it`s Zipcar
or General Motors` new Maven program, the question is whether they can get
enough users to become major players in how America gets around.

Cassie Stockcamp knows there are skeptics but for her and others in Indy,
these little blue cars are a big step towards a life without the hassles
and costs of owning a car.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Indianapolis.

(END VIDEOTAPE)

MATHISEN: Coming up, living large. A growing number of older Americans
are moving into active adult communities. And they want them plush and
posh.

(MUSIC)

HERERA: As the baby boomer generation moves into its golden years,
homebuilders are ramping up so-called active adult communities. One big
name in luxury living is leading the pack.

Toll Brothers (NYSE:TOL) is looking to service boomers who don`t want to
cut any corners. Diana Olick reports tonight from Broomfield, Colorado.

(BEGIN VIDEOTAPE)

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Jeff and Sharon Kay
Brown are not retired yet, but they moved into this active adult community
outside of Denver less than a year ago.

SHARON KAY BROWN, HOMEOWNER: It was a good way to get involved in things.

OLICK: But they didn`t want to skip on any amenities, so they chose a new
home built by Toll Brothers (NYSE:TOL), a national luxury brand.

KAY BROWN: Because t it, you know, the last house you`re going to have.

OLICK: That`s what Toll is playing to in this community, and in one going
up in nearby Aurora, Colorado. Gourmet kitchens, open floor plans.

How about when your exercise room walls open up to the great outdoors?

MARK BAILEY, TOLL BROTHERS DIVISION PRESIDENT: They don`t want to
simplify. They want to right size. A lot of them are coming from 3,000
and 4,000 square feet family houses and they`re downsizing in square
footage but they still want the luxury, they still want the house to live
big and fit their needs.

OLICK: Home prices here can run over a million dollars. But demand,
according to Toll, is only growing. The company has had strong sales in
active adult in the Northeast and Midwest and on a recent earnings call,
the CEO said Toll is now expanding the adult brand out west, quote, “in a
big way”.

Which means going even bigger on the lifestyle options, bigger and better
clubhouses. A full staff coordinates everything from lectures to
entertainment, games and competitions, full gyms, indoor and outdoor pools,
even line dancing if you like. But it doesn`t come cheap.

JEFF BROWN, HOMEOWNER: We`ve been fortunate. We`ve both worked for 30-
plus years and been able to save and invest and all that stuff. We have
funds accumulated to get here.

OLICK: And for as long as they`re active, they intend to stay here.

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

(END VIDEOTAPE)

HERERA: And you can read more about luxury active adult communities by
logging onto our website, NBR.com.

MATHISEN: And finally tonight, Cantor Fitzgerald raised $12 million at its
annual September 11th charity day. Every year, celebrities, sports stars,
help the firm make trades. All the day`s global revenues, there`s Joe
Girardi of the Yankees, Eli Manning, the revenues get distributed to
charities around the globe.

The $12 million raised this year matches last year`s total. The company
has more than $135 million since the World Trade Center attacks in 2001,
658 Cantor employees perished that day.

HERERA: And before we go, here is another look at the rally on Wall Street
today. All of the major indexes rose 1 percent or more. The Dow gained
177 points to 18,212. The NASDAQ added 75. The S&P 500 was up 21.

That`s it for NIGHTLY BUSINESS REPORT tonight. I`m Sue Herera. Thanks for
watching.

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

END

Nightly Business Report transcripts and video are available on-line post
broadcast at http://nbr.com. 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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