Transcript: Nightly Business Report – September 19, 2016

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

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Choppy start. Stocks continue their recent volatile ways to start the week and appear unfazed by this weekend`s bombings.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Confidence surges. Home
builders are feeling better than they have in almost a year — as home
buyers appear more eager than ever to sign on that dotted line.

MATHISEN: Talking a big game. Why Oracle`s Larry Ellison is making a
brash prediction, and attacking Amazon (NASDAQ:AMZN) in the process.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Monday,
September 19th.

HERERA: Good evening, everyone, and welcome.

A major breakthrough in the New York and New Jersey bombings. We`ll have
more on that a bit later in the program. But we begin with the volatile
start for the week for stocks. Early on, the blue chip Dow index rose
triple digits but the gains were cut in half by midday only to rise again
and then drift downwards into the close.

On the day, the Dow Jones Industrial Average lost three points to 18,120.
The NASDAQ was down nine. The S&P 500 fell just a fraction. The initial
gains were driven by a jump in the price of oil and a strong report on the
housing market. But when oil turned, so did stocks, making it quite clear
that the price of crude matters now more than usual. And oil prices
settled slightly higher as traders hold out hope for a deal that would
freeze production.

MATHISEN: That strong housing market that Sue just mentioned saw
confidence among home builders rise to its highest level in almost a year.
That helped home building shares like those of Lennar (NYSE:LEN), D.R.
Horton (NYSE:DHI) and Pulte rise during trading day.

Diana Olick takes a look at what`s driving the surge in one of the
economy`s most important sectors.

(BEGIN VIDEOTAPE)

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: The sales offices at
EYA, a developer in the D.C. metro area, were very busy this summer —
busier, in fact, than usual.

BOB YOUNGENTOB, EYA PRESIDENT: They started in July and carried into
August. It was surprising relative to what we have seen in the past.

OLICK: As both jobs and incomes improve buyers are enthusiastic and more
serious about signing on the dotted line. But there may be something else
behind the rush to buy.

YOUNGENTOB: I think people have felt interest rates have been low for a
long time. And there is fear that eventually interest rates will rise.

OLICK: Home builders are seeing it across the nation. A monthly index of
builder sentiment jumped by a far wider than expected margin in September
with builders citing big gains in current sales and sales expectations over
the next six months. Builders may also be benefitting from a lack of
supply of existing homes.

NELA RICHARDSON, REDFIN CHIEF ECONOMIST: It`s not that people aren`t
listing so much, is that there are new buyers and more buyers on the scene
now than there were a year ago. Every well-priced home gets snatched up.
There`s multiple beds.

OLICK: Builders say they are confident of demand but struggling to keep up
with it. A shortage of land and labor are increasing costs for the
builders and regulation is slowing construction.

Some of the nation`s largest housing markets are in most dire need of new
construction, according a new report from the realtors, which shows the top
ten cities where supply is tightest. The West is worst, accounting for
half the list.

YOUNGENTOB: Traffic was way up. So we saw people, you know, coming in
multiple times, spending more time in the model homes.

OLICK: And he`s hoping that enthusiasm keeps going right into the fall.

For NIGHTY BUSINESS REPORT, I`m Diana Olick in Chevy Chase, Maryland.

(END VIDEOTAPE)

HERERA: Today kicked off several readings on the housing market.
Tomorrow, we`ll get housing starts and later in the week, we`ll get
existing home sales. But will it continue to be good news for the housing
industry?

Svenja Gudell, chief economist at Zillow, joins us now to talk about that.

Svenja, welcome. Nice to have you here.

SVENJA GUDELL, ZILLOW CHIEF ECONOMIST: Thank you very much.

HERERA: Let`s start, first of all, with that basic question. I mean,
things seem to be not only improving but going pretty darn well. Do you
expect that to continue?

GUDELL: I do expect that to continue. And I think, you know, the
sentiment numbers that we saw come out this morning really underlying what
we have been seeing in the market. And that`s new home sales have been
doing really well. Existing home sales have been stepping aside. And so,
new home sales have been filling the void as inventory has been relatively
tight across the nation. And so, builders have been trying to keep up and
fill demand that`s quite strong.

MATHISEN: Is there any bad news in the housing market in terms of pricing?

GUDELL: Well, you know, depends on which chair you`re sitting in, I guess.
As a buyer, it is a fairly competitive environment out there and it`s hard
to actually find a home. It is hard saving for that down payment.

And we are seeing home values continue to creep up. We have home values up
roughly 5 percent annually right now with Zillow. So, it`s fairly steep
home value appreciation. And so, for some buyers, it`s actually fairly
tough to break into the home ownership space because they are paying
relatively high rents or having a hard time saving for a down payment and
actually being able to find that affordable home.

HERERA: Now, they`ve also been helped a little bit by lower interest
rates, historically low interest rates. The expectation is before the end
of the year. One way or another, we`ll see the Fed hike rates perhaps a
quarter point or so.

Will that have a meaningful impact on the housing market or is it not as
significant point increase?

GUDELL: You know, I think in general, it`s not going to have a significant
impact. If you can`t afford a mortgage payment today, you probably won`t
be able to afford mortgage payments, you know, after that rate hike either.
So, that doesn`t change the situation much.

However, I do think as we start to see more of these rate hikes and rates
will essentially come back up again, we will start to see markets like San
Francisco, Denver, even Seattle that are more expensive markets. They will
see a little bit of a dampening effect on demand. Housing will be more
expensive.

HERERA: All right. We`ll leave it there, Svenja. Thank you very much.

GUDELL: Thank you.

HERERA: Svenja Gudell with Zillow.

MATHISEN: Well, a rare change is happening to the S&P 500. The index is
getting its first new sector since roughly the dawn of the dotcom era.
Real estate investment trusts, REITs, one of the hottest investments of the
past decade, now will have their own classification, how nice.

Bob Pisani walks us through the change and what it means to investors like
you.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: The S&P 500 is getting
a facelift for the first time in almost 20 years. Since 1999 the S&P has
been divided into ten sectors including technology, financials, health
care, and energy, among others.

But starting today, there is an 11th sector, REITs or real estate
investment trust. REITs are stock companies that own and operate real
estate on behalf of their investors — everything from shopping malls to
office buildings to personal storage units. There`s been growing interest
in investing in real estate as a separate asset group particularly since
REITs throw up high dividends that are very attractive in a low interest
rate environment. The 27 REITs in the S&P 500 have outperformed the
broader market this year.

REITs were part of the financial sector but it never made sense to include
them in that group. Real estate is different. Investment characteristics
and bank stocks for example.

So, for all the above reasons, Standard & Poor`s has created an 11th sector
for REITs. REITs are now 3 percent of the waiting in the S&P 500. That
doesn`t sound kike much but materials, telecom and utilities are also 3
percent. Of course, real estate investors are hopeful that this will spark
even more interest in investing in this asset class.

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

(END VIDEOTAPE)

HERERA: The commercial real estate market is one reason why the president
of the Boston Fed wants the Central Bank to act. According to “The Wall
Street Journal”, Eric Rosengren says that the soaring market for office and
apartment buildings is being driven in part by a scramble for returns.
Rosengren, who had been an advocate for easing money policies, reversed
course recently and said it`s those policies that could allow the markets
to get out of hand.

The Fed`s two-day policy meeting starts tomorrow.

MATHISEN: Investors will also watch Japan`s central bank. It meets this
week. And policy makers there are likely to boost economic stimulus.
Ahead of the meeting, Prime Minister Shinzo Abe addressed investors in New
York City and talk about the economic advantages of trade deals like the
Trans Pacific Partnership or TPP.

(BEGIN VIDEO CLIP)

SHINZO ABE, JAPANESE PRIME MINISTER: Japan and the U.S. must each obtain
domestic approval of the TPP as soon as possible for its early entry into
force. Success or failure will sway the direction of the global free trade
system.

(END VIDEO CLIP)

MATHISEN: The TPP is a major part, of course, of President Obama`s
strategy in the Asia-Pacific Region. But its passage faces an uphill
battle in Congress.

HERERA: And now to the story that`s on almost everybody`s mind — the
bombings in New York City and New Jersey. This evening authorities have a
man in custody.

Morgan Brennan has more from the Chelsea neighborhood in Manhattan.

(BEGIN VIDEOTAPE)

MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: The suspect of this
past weekend`s bombings in New York and New Jersey, Ahmad Rahami, has been
apprehended. He was taken into custody after engaging in a shootout with
police in Linden, New Jersey. He was shot several times but was conscious
at the time of arrest.

Still, the investigation continues despite no other individuals they are
looking for at this time. And here on 23rd Street where a bomb exploded
Saturday night, injuring 29, the FBI swept the street for clues this
afternoon and carted away the green dumpster in which a pressure cooker
device detonated.

New York`s mayor, Bill de Blasio, officially labeling the incidents in New
York as acts of terror at a press conference this afternoon. And FBI
special agent William Sweeney linking the incidents here in New York to the
Saturday morning bombing in Seaside Park, New Jersey.

WILLIAM SWEENEY, FBI SPECIAL AGENT: The work of the first responders, law
enforcement personnel and the contributions an engaged public have been
exceptional.

BRENNAN: President Obama who spoke earlier today, offered federal support
to New York and New Jersey in their ongoing investigation.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: By showing those who want to
do us harm that they will never beat us, by showing the world that as
Americans we do not and never will give in to fear, that`s going to be the
most important ingredient in us defeating those who would carry out
terrorist acts against us.

BRENNAN: The president is in New York for the United Nations General
Assembly, which kicked off today. Security in the city which is already
stronger than usual has been dramatically boosted in the wake of this
weekend`s events.

For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan, in New York City.

(END VIDEOTAPE)

MATHISEN: The market`s reaction to the Manhattan bombing just blocks from
the NYSE and NASDAQ was remarkably restrained today. Here to explain why
and look ahead to this week`s market moving events is Stephen Wood, chief
market strategist at Russell Investments in Seattle.

Stephen, welcome. Good to have you with us.

Can we say that the market`s relatively restrained response today is
because the market has become inured to these kinds of terror attacks? It
priced them in?

STEPHEN WOOD, RUSSELL INVESTMENTS CHIEF MARKET STRATEGIST: I think that`s
a reasonable assessment. I mean, these acts are nerve wracking, they`re
terrible, they`re unspeakable acts. But we`ve also seen many of these, you
know, whether that`s San Bernardino, London in 2007. So for the better
part of a decade and a half, this is something of a new reality.

And markets tend to respond very quickly, not only to these kinds of
headlines but political headlines. So, the headline risk that drives
markets tends not to stick around for very long. I think that the market
is probably appropriately looking more towards the fundamentals of the
Federal Reserve, the economy, the earnings season.

So, while these are terrible, awful acts the market has priced it in as
part of the environment.

HERERA: So, let`s turn to the Fed. What do you expect from the Fed? And,
you know, we have seen a lot of volatility every time we hear a Fed
president speak. Do you expect that volatility to continue?

WOOD: I think what the Fed is going to do this week is firm up their
perspective. You know, the Fed has been debating whether to raise rates,
when to raise rates because we have come through a very traumatic time.
But the data in the U.S. have been improving for a while. So, they have
gone from this dovish or accommodative or easy stance, and they want to
leave open their flexibility.

So, we think that this week, they`re going to tighten up the language, not
raise rates this week in September. What they`re going to do is probably
look towards December. We expect a raise coming from the Federal Reserve
at the end of this year. Not this week, but the end of this year. So,
they`re going to tighten up their language a bit as the data improves in
the U.S.

MATHISEN: What does 2017 look like to you with respect to interest rates?
More hikes or just one in next year?

WOOD: The expectation is for one, maybe two in 2017. I think two rate
hikes in 2017 would be coming from very good data coming out of the U.S.,
but also good data coming out of Europe and the Bank of Japan. And one of
the things we see now is as the data improve and monetary policy tightens
up a little bit in the U.S., the European Central Bank, the Bank of Japan,
they are running the opposite direction as fast as they can.

So, it`s more of the international data that are kind of holding the Fed a
little bit lower. But it could be two rate hikes. But we think one is
priced into the market for 2017 as well.

HERERA: How do you feel the market will perform for the rest of 2017, if
indeed that rate hike, one or two, is priced in?

WOOD: Yes, we don`t have a formal forecast for 2017 just yet for the U.S.
market. But what we do see in the U.S. is a choppy sideways-ish market for
2016. The valuations in the U.S. market look rather rich.

So, what we`re telling clients is that, you know, we are not calling for a
recession. We don`t think it is a look out below situation. But
valuations ultimately matter. A more global, multi-asset, diversified
perspective we think makes sense. Look at Europe, look at Japan. But
multi-asset, global and we think an active environment is call for
investors as, you know, return is more and more hard to find.

MATHISEN: Right.

All right. Stephen, thank you very much. Stephen Wood of Russell
Investments.

WOOD: Thank you.

HERERA: And still ahead, big prediction. Why Oracle (NASDAQ:ORCL) thinks
it can win and crush the competition in one of tech`s hottest businesses?

(MUSIC)

HERERA: Donald Trump`s tax plan would reduce taxes and help the wealthy.
According analysis by the conservative-leaning Tax Foundation, the
Republican nominee`s new plan would reduce federal taxes by between $4.4
trillion and $5.9 trillion over a decade. The range there is due to
conflicting statements on business taxation. The wealthiest 1 percent
would see their after-tax income increase by about 10 percent. The total
cost of the latest plan is less than the $10 trillion price tag on the
original one.

MATHISEN: An update now to the shipping story we have been following.
Nearly a third of the Hanjin`s container ships have unloaded cargo. That
eases concerns among retailers most especially that they now expect to get
a portion of their products in time for the holiday season. According to
the company, 28 vessels have unloaded goods at ports around the world,
including in California. Hanjin, the world`s seventh largest shipping
company, filed bankruptcy last month.

HERERA: Gas prices started to spike in parts of the country as we told you
they likely would. According to AAA, gas prices were up 21 cents in
Georgia, 16 cents in North Carolina, and 13 cents in Tennessee since last
weekend. A portion of the Colonial Pipeline that carries gas to much of
the Southeast and East Coast has been shut down because of a leak,
preventing gas from getting to where it needs to go. Construction on a
bypass is expected to be finished this week.

MATHISEN: Thousands are gathering in San Francisco for the world`s largest
enterprise technology conference. And some of the biggest players in the
industry were talking about one topic in particular.

Jon Fortt has the big buzz from Oracle (NASDAQ:ORCL) world.

(BEGIN VIDEOTAPE)

JON FORTT, NIGHTLY BUSINESS REPORT CORRESPONDENT: A decade from now, 80
cents out of every dollar businesses spend on technology will be spent on
cloud computing.

That`s the latest prediction from executives at Oracle (NASDAQ:ORCL) who
gathered business customers from around the world to San Francisco this
week. So, naturally, high on the cofounder`s Larry Ellison`s agenda,
making the argument that Oracle (NASDAQ:ORCL) will have one of the best
clouds to buy. Oracle (NASDAQ:ORCL) announced new versions of its database
software and infrastructure and promised to start releasing new software
features first in the cloud, then in traditional channels.

LARRY ELLISON, ORACLE EXECUTIVE CHAIRMAN AND CTO: Amazon`s lead is over.
Amazon (NASDAQ:AMZN) is going to have serious competition going forward.

FORTT: The cloud can be tough to understand, but it comes down to this:
businesses aren`t paying for technology the way they used to. They`re not
just buying big servers, databases and apps every few years and playing an
army of workers to keep it running. Instead, they are increasingly paying
Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT), Oracle (NASDAQ:ORCL), SAP
and others a steady subscription fee to own and update the expensive data
centers and simply deliver the needed services.

As a result, there is a massive gold rush happening in the technology
world. It`s not yet clear how things will end up, but it`s possible that a
few companies who once dominated small yet profitable bits of tech spending
will use the cloud to suck in bigger, equally profitable chunks and crush
competitors along the way.

MARK HURD, ORACLE CEO: Several years ago we made the decision as part of
the overall strategy to go all in on the cloud. We changed the
organization to do that. We changed our incentives to do that, in addition
to seeing a lot of great products.

In Q1, our cloud growth in dollars, combined with the new software license
dollars, grew 16 percent. So, really, to us, it`s the combination of those
two that are important and the fact that cloud growth was so — I mean, we
grew the cloud in Q1 82 percent.

FORTT: It`s by no means a clear path for companies like Oracle
(NASDAQ:ORCL). Besides the other tech giants, they are also looking out
for other companies like Salesforce, Box and Workday, that are forming for
own alliances and fighting for their piece of a cloud pie that Gartner
(NYSE:IT) Group says is going to be worth more than $200 billion in 2016
alone.

For NIGHTLY BUSINESS REPORT, I`m Jon Fortt in San Francisco.

(END VIDEOTAPE)

HERERA: Sarepta Therapeutics` treatment for Duchenne muscular dystrophy
gets the green light and that`s where we begin tonight`s “Market Focus”.

The Food and Drug Administration granted the biotech company`s drug
accelerator approval status, making it the first approved treatment for the
fatal disease. As we recently told you, a vocal critic of the medication
left the Food & Drug Administration last week. Shares soared nearly 74
percent to $48.94.

Casino operator El Dorado will buy rival Isle of Capri Casinos
(NASDAQ:ISLE) for about $950 million. El Dorado said the merger will allow
the company to expand its geographic presence. Isle of Capri shares popped
30 percent to $22.04, while shares of El Dorado fell nearly 3 percent.

Tech Data (NASDAQ:TECD) will buy Avnet`s technology solutions division for
about $2.5 billion. That deal is expected to create a one-stop shop
distributor for consumer technology and data center hardware. Tech Data
(NASDAQ:TECD) also said the transaction will help its earnings and result
in significant cost savings. Shares of Tech Data (NASDAQ:TECD) popped to
22 percent $84.80. Avnet (NYSE:AVT) rose nearly 7 percent to $41.89.

And another technology deal as well. Network security company Infoblox
will be acquired and taken private by Vista equity partners for more than
$1.5 billion. The private equity firm will pay $26.50 a share for the
company and that is about a 16 percent premium to Infoblox`s closing price
on Friday. Today, Infoblox was up nearly that much closing at $26.35.

MATHISEN: And GoPro launched the latest two versions of its signature
camera line and unveiled its first drone. It is called Karma.

CEO Nick Woodman thinks Karma could be a game changer for the company.

(BEGIN VIDEO CLIP)

NICK WOODMAN, GOPRO FOUNDER & CEO: I think that Karma is the most exciting
addition to GoPro`s product lineup. I think it`s the most exciting product
we`ve ever made. It`s certainly the most enabling product in terms of
helping people capture incredible professional quality footage of their
lives and share stories like they are used to seeing on the big screen at
the movies.

So, given that it`s what GoPro`s brand has been built on, I think Karma has
got a really good shot at being very successful.

(END VIDEO CLIP)

MATHISEN: And GoPro edged up a little more than 2 percent to $15.31.

SeaWorld will cut its quarterly dividend by more than half. The dividend
was cut from 21 cents a share to a dime, ten cents. The theme park
operator said that once the dividend is paid to shareholders in October —
done. All quarterly dividends thereafter suspended indefinitely. SeaWorld
was up seven cents on the day to $12.69, but got hit once that news came
out after the bell.

And the women`s specialty retailer Athena got hammered following
disappointing guidance for 2017. The company also reported weaker than
expected earnings for the current quarter but did manage to top analyst
sales expectations. Shares initially fell more than 20 percent. Look at
that one after the news hit, wiping out a 2 percent gain in the regular day
session during which it closed at $8.12.

HERERA: The opioid industry ramped up political spending over a nine-year
period. According to analysis by “The Associated Press”, between 2006 and
2015, members of a little known group called the Pain Care Forum spent more
than $880 million on campaign contributions and lobbying at the state and
federal levels.

According to the report, that`s more than what the powerful gun lobby spent
on similar political spending. The goal was to fight laws that would limit
the availability of opioids. The Pain Care Forum is described as a loose
network of pharmaceutical companies and allied groups. Sales of opioids
quadrupled from 1999 to 2010. Overdose deaths rose about the same rate.

MATHISEN: And still ahead, misfit stock? Why does the most valuable
publically traded company in the world have a hard time fitting in?

(MUSIC)

HERERA: Here is a look at what to watch for tomorrow. Wells Fargo`s
chairman and CEO will testify before the Senate Banking Committee on the
fake accounts scandal. The Federal Reserve begins its two-day policy
meeting to determine the direction of interest rates. FedEx (NYSE:FDX)
often viewed as a barometer of the global economy reports its earnings.
And that`s what to watch for on Tuesday.

MATHISEN: Apple (NASDAQ:AAPL), it`s the world`s most valuable publically
traded stock, its iPhones and iPads are high ticket goods that many view as
necessities. And Apple (NASDAQ:AAPL) is owned by millions, if not
directly, then as part of a mutual fund or ETF.

So, why does a stock everybody seems to know defy easy categorization by
investment pros and individual investors alike.

Mike Santoli explains.

(BEGIN VIDEOTAPE)

MIKE SANTOLI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Apple (NASDAQ:AAPL)
is the world`s most valuable company, but its stock might just be the
ultimate misfit. Apple`s market value exceeds $600 billion and it makes up
more than 3 percent of the S&P index, the stock doesn`t behave much like a
market bellwether. Apple (NASDAQ:AAPL) stock moves tend to be independent
of economic data for broad market trends. While the stock has been
virtually flat the past four years, the S&P 500 is up 50 percent. In a
soft patch for the major indexes last week, Apple (NASDAQ:AAPL) shares
gained a quick 9 percent.

Another indication of Apple`s misfit status is the cheap value stock
attached to a business that still plays by growth company rules. Many
investors take comfort in Apple`s modest valuation compared to the overall
market. Very few campaigns of Apple`s size have ever been so dependent on
next hit products rolled out over a punishing two or three-year cycle, the
way Apple (NASDAQ:AAPL) rises and falls with the latest iPhone launch.
Investors seem unwilling to put a higher price on each dollar of Apple`s
earnings without the confidence that its profitability can be maintained.

Finally, Apple (NASDAQ:AAPL) shares manage to be both excessively loved and
somewhat neglected by Wall Street. Among the 40 plus analysts who cover
the stock, more than 80 percent rate it a buy. Yet, professional stock
pickers as a group seem to have sold the stock heavily in the first half of
this year, saving more of the shares in the hands of index funds. This
might help explain the stock`s recent strength on better than expected
sales of the iPhone 7. As the shares begin to perk up, many fund managers
felt the need to get more exposure to the biggest name.

None of this offers a clear outlook for the stock. If Apple (NASDAQ:AAPL)
were to approach the end of the five-yean range based on forecast earnings
for the next year, the stock would rise from $114 toward its former peak
around $130 a share. The best bet might be for Apple`s performance to
remain streaky. That could mean its recent rally was just a passing phase
of popularity for a widely watched stock that can`t seem to fit in.

For NIGHTLY BUSIENSS REPORT, I`m Mike Santoli at the New York Stock
Exchange.

(END VIDEOTAPE)

HERERA: And does it for NIGHTLY BUSINESS REPORT tonight. I`m Sue Herrera.
Thanks for watching.

MATHISEN: And thanks from me as well. I`m Tyler Mathisen. Have a great
evening, everybody. We`ll 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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