Transcript: Tuesday, September 3, 2013

ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Susie Gharib, brought to you by —


Stocks surged on this first trading day of September but then reversed course as two top Republican lawmakers voiced their support for limited strikes on Syria. We have the latest from Washington. Plus, what it means for your investments.

SUE HERERA GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: A shot in the mobile arm. Microsoft (NASDAQ:MSFT) buys Nokia`s business to make it a major player in the phone industry. But is it enough to give Apple
(NASDAQ:AAPL) and Google (NASDAQ:GOOG) a run for their money?

GHARIB: And banking on fees. Want to bank the old fashioned way with a teller? It might cost you. But are consumers willing to pay for a service that was once for free?

We have all that and more tonight on NIGHTLY BUSINESS REPORT for Tuesday, September 3rd.

Good evening and welcome, everyone. I`m Susie Gharib.

Great to have you on the show, Sue.

HERERA: It`s great to be with you, Susie.

I`m Sue Herrera, in for Tyler Mathisen. He`s on vacation.

The long holiday weekend is over and it`s back to work on Wall Street for what promises to be a September to remember. These months, traders are preparing for a possible tapering of stimulus plans from the Federal Reserve, a battle over the debt ceiling, and the search for a new chairman at the Central Bank. And now, of course, the crisis in Syria.

Today, traders were able to put all of that aside, sending stocks higher, focusing instead on some major corporate acquisitions and encouraging manufacturing and construction spending data. But a triple gain in the Dow evaporated after top Republican leaders pledged support for President Obama`s plans for a military strike against Syria, sending a chill down the concrete canyons of lower Manhattan.

In the end, the major averages were able to hold on some modest gains, with the Dow up 23 points. The NASDAQ up 22 and the S&P added six.

GHARIB: The debate over whether the U.S. should take action against Syria over its alleged use of chemical weapons shifted to the halls of Congress today. At a Senate Foreign Relations hearing, the secretaries of state and defense laid out the reasons to authorize military force.

Eamon Javers joins us now from Washington on the latest efforts by the Obama administration to garner enough support from Congress.

So, Eamon, tell us about it. What happened at the hearing, and how much support do you think the president already has for his military plans?

EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, the entire day today was really a full court political press for military strikes in Syria. The Obama administration beginning the day at a White House with a briefing for lawyers and for leaders rather and a meeting with the president of the United States. At that meeting, the president said he himself has already made up his mind but he`s going to reach out to Congress nonetheless, take a listen.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I made a decision America should take action, but I also believe that we will be much more effective. We will be stronger if we take action together, as one nation.


JAVERS: Now the president got much of what he wanted coming out of that meeting, including the Speaker of the House John Boehner who said that he`s throwing his support behind the president`s position on Syria.


REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: I`m going to support the president`s call for action. I believe that my colleagues should support this call for action. We have enemies around the world that need to understand that we`re not going to tolerate this type of behavior.


JAVERS : And then, later in the day, as you say, John Kerry, the secretary of state, was testifying before his old committee, the committee he used to be the chair of up on Capitol Hill, Foreign Relations. There, his remarks were interrupted by some protesters who showed up, saying that they didn`t want to see war on Syria. Kerry responded saying that he himself he had once been a protester.

Take a listen.


JOHN KERRY, SECRETARY OF STATE: I have feelings similar to that protester. I would say that`s why we`re important that we`re all here, having this debate, talking about these things before the country, and that the Congress itself will act representing the American people, and I think we all can respect those who have a different point of view.


JAVERS: So, Sue, some clear momentum today in Washington for military strikes but definitely some skepticism as Secretary Kerry and Secretary Hagel testified before senators up on Capitol Hill. So, some questions still unanswered on Capitol Hill and the time frame is in the air, Sue.

HERERA: Yes, exactly. That is kind of the question, what does happen next, Eamon? And what is the timeline? Do we have an idea?

JAVERS: Well, Senator Menendez who chairs the Foreign Affairs Committee up on Capitol Hill that they could vote as early as tomorrow potentially on a resolution to authorize the use of force. But that would be on the senate side, unclear whether that could happen just as quickly over in the House of Representatives.

GHARIB: So, Eamon, you`ve been talking about the conversation in Washington. What about world reaction? I mean, what have you been hearing about the reaction from other heads of state and how might their opinions sway President Obama when they all meet with him in Russia later this week?
As you know, it`s the G-20 Summit meeting.

JAVERS: That`s right. The president is leaving tonight for the meeting. So, he had the meeting in Washington with political leaders.
Here, he`s going to talk to world leaders tomorrow and throughout the rest of the week.

And that was one of the big questions that was on the mind of senators up on Capitol Hill today. They said if this is such a must-do, if this is such a moral outrage, where is the rest of the world? Where are the other supporters of our actions here?

Secretary Kerry really put in a tough spot in a couple of occasions, by trying to justify a lack really of a broad and diverse coalition of support here.

HERERA: Indeed. Eamon Javers — Eamon, thank you.

JAVERS: You bet.

HERERA: To corporate news now, Microsoft (NASDAQ:MSFT) is making a big bet on the future of cell phones amid tough competition from Apple

The software giant is paying $7.2 billion for the Finnish handset maker Nokia (NYSE:NOK), along with a long list of technology patents.
Nokia (NYSE:NOK) already uses the Windows Operating System in most of its phones. So, it looks like a good fit but Microsoft (NASDAQ:MSFT) was the biggest decliner in the Dow today, with many investors feeling it may be too little too late.

With more on the deal and what Microsoft (NASDAQ:MSFT) hopes to gain, here is Jon Fortt.


JON FORTT, NIGHTLY BUSINESS REPORT CORRESPONDENT: It`s been almost a year since Microsoft (NASDAQ:MSFT) launched Windows 8, hoping to reinvigorate P.C. sales, gain ground in tablets and maybe give a lift to its struggling business in phone software. It didn`t work and over the past three months the company has announced a massive reorganization, the coming resignation of CEO Steve Ballmer and now, the planned acquisition of Nokia`s phone business, along with access to key patents.

TIMO IHAMUOTILA, NOKIA CFO & INTERIM PRESIDENT: We feel that this transaction is very likely to close and we expect the closing to happen during the first quarter of 2014.

FORTT: It`s not the priciest acquisition Microsoft (NASDAQ:MSFT) has ever made but it`s without question the most disruptive. With Nokia`s devices and services business, Microsoft (NASDAQ:MSFT) expands its employee count by 32,000, about a third. That`s big on hardware and brings back a Microsoft (NASDAQ:MSFT) veteran Stephen Elop who suddenly the front runner to be the software giant`s next CEO.

STEVE BALLMER, MICROSOFT CEO & DIRECTOR: We know how to work together through our partnership. We are glad to have Steven come to Microsoft (NASDAQ:MSFT), back to Microsoft (NASDAQ:MSFT). Much of the Nokia
(NYSE:NOK) executive team, most of the executive team on devices and services, will join us, and that will form the core of a variety of things that we`re going to do in devices.

FORTT: Elop made a controversial call three years ago to bet Nokia`s future on Microsoft (NASDAQ:MSFT).

STEPHEN ELOP, FORMER NOKIA CEO: So, being the player with Windows phone and partnership with Microsoft (NASDAQ:MSFT), to combat Samsung, to combat Apple (NASDAQ:AAPL), feels like a good place. If you take a look at the Android market right now and the other players in the Android market environment, it`s a tough slog.

FORTT: It`s sure to be a tough slog anyway. Apple (NASDAQ:AAPL) is outselling Nokia (NYSE:NOK) smartphones about 6-1. But if this deal goes through before spring as Microsoft (NASDAQ:MSFT) hopes, it will at least have more firepower.



GHARIB: Investors were talking today about that massive Verizon
(NYSE:VZ) acquisition announced over the weekend. It`s paying $130 billion to Britain`s Vodafone to buy the 45 percent of their Wireless joint venture that Verizon (NYSE:VZ) didn`t already own. The news didn`t go down well with Verizon (NYSE:VZ) investors. Shares tumbled nearly 3 percent.

But Verizon`s CEO Lowell McAdam told U.S. customers that they won`t see changes to the cell phone service and reassured wary investors that the deal will pay off in the long run.


LOWELL MCADAM, VERIZON CHAIRMAN & CEO: Where can you buy a business that has 100 million loyal customers, that has 50 percent margins, that has no integration risk, and has a great feel in front of it to grow the business even further? So, we feel very good about where we`ve landed and it`s going to create a lot of shareholder value.


HERERA: And another deal to tell you, this one of a slightly different kind. CBS (NYSE:CBS) and Time Warner (NYSE:TWX) Cable reached a new broadcasting rights agreement Monday, ending a month-long blackout of the network shows in New York, Los Angeles, Dallas and other big cities.
CBS (NYSE:CBS) is being viewed as the big winner in the protractive site, gaining a large increase in the fees that it will receive from Time Warner
(NYSE:TWX) Cable.

CBS (NYSE:CBS) rose on the news, up nearly 5 percent on the trading session. Time Warner (NYSE:TWX) Cable up almost 2 percent.

So, if content providers have the upper hand in the ever-changing media world, who are the long-term winners? We`ll explain that part of the story a bit later in the program.

GHARIB: And here is a sweet smelling takeover deal today. Consumer products giant Jarden (NYSE:JAH), this is the company that owns a host of brands like Mr. Coffee, Crock-Pot, Rawlings baseball gloves, is buying Yankee Candle for $1.75 billion.

Jarden (NYSE:JAH) CEO Martin Franklin says that adding the nation`s largest maker of scented candles, along with hundreds of retail stores in the U.S. and Canada is a good fit for the diversified company. Shares of Jarden (NYSE:JAH) soared more than 10 percent.

HERERA: Joining us now to talk about all of the issues impacting the market is John Manley. He`s chief equity strategist at Wells Fargo
(NYSE:WFC) Funds Management.

Good to see you again, John.


HERERA: All right. Let`s start first of all with all the headwinds that we talked about. You have the situation in Syria. You have the Fed tapering or not tapering, as the case maybe. And you have the economic data out there.

What is top of mind for you as you put your capital to work these days?

MANLEY: Well, I think Syria is the short-term concern. I mean, it — we never really know what is going to happen but it`s made perfectly clear at times and this is one of those. So, I think until we actually see some action one way or the other, the market is going to be probably a little trendless. But I think also beyond that is concerns about tapering, which has affected the bond market adversely. Again, I think this is just a phase we`re going through. But those are the two things on top right now.

GHARIB: You know, John, from what we just heard from Eamon Javers on the timeline of this possible military action, it could coincide with the Federal Reserve meeting coming up in a few days. If that happens, how might that impact decision making on tapering or not tapering, and just invest — what investors should be doing?

MANLEY: Well, I think the way I read it, Chairman Bernanke will not taper if it has a negative impact on the economy, or perceives it to have a negative impact on the economy.

So there is a whole mish-mash of factors that go into this, and trying to read his mind is again all that impossible.

I can suspect that once it`s done, once we`ve seen the strike, once we hear what the Fed is going to do and I suspect it`s nothing taper-like, I think that the market can move on.

You know, fundamentals are improving underneath the surface, and at some point in time, they start to matter again.

HERERA: So, given that, where are you deploying capital? What areas do you like? Have you changed the year-end targets for the market at all?

MANLEY: No, the year-end target is about where we are now, maybe a little bit higher. Maybe we set those back in October. The idea we thought it would be a good year. It`s been a good year. I don`t see any reason to change it.

The real big numbers for next year, we have a 2,000 target for S&P for year-end 2014, which doesn`t require a lot of dramatic input. Just get 4 percent or 5 percent growth for the next year or so, just put an average market multiple of 16 times for the last 35 years and you`re there.

So, I think — I do think people should be buying stocks. I`d focus on three sectors. I`d focus on technology, the double weight we have, it`s great value. You`re seeing acquisitions there, I think tech is still adding value. I like healthcare and I also like the industrial side of the market.

GHARIB: You know, all of that makes sense, John, but what do you say to investors? This is kind of an inflection point, with all of these headwinds hanging over the market. What should they do, really sit tight, and just wait and see what happens over the next couple of days or jump ahead and make some moves?

MANLEY: You know, it depends where they are situated now. I think — it sounds sort of strange but the next month or two, the market may not do very much of anything great or bad, but I think it`s going to be a great buying opportunity. I still think fundamentals matter over the long run.
I think these problems do get themselves resolved at some point in time.

Evaluation is good. The Fed is still going to be positive. I think people have to go somewhere at some point in time. I think that says take your time, pick your points and buy the stocks with the funds you want to buy.

HERERA: All right. On that note, we`ll leave it there. Thanks, John. Good to see you again.

MANLEY: Thanks, Sue.

HERERA: John Manley, chief equity strategist at Wells Fargo
(NYSE:WFC) Funds Management.

GHARIB: And still ahead on the program, the battle for your living room. It`s the agreement between CBS (NYSE:CBS) and Time Warner (NYSE:TWX) Cable proves that content is still king, which companies are the potential long-term winners. That`s coming up.

But first, here`s a check on how the international markets closed today.


HERERA: A global economic recovery is not a sure thing. That`s the rather gloomy outlook from the Organization for Economic Cooperation and Development, commonly known at the OECD. In its latest report, the group raised its forecast for growth in many developed markets but said several banks need to continue their easy money stimulus policies to help weaker emerging markets and keep the global economy on track. The OECD actually lowered its growth predictions for the U.S. from an earlier forecast of 1.9 percent, down to 1.7 percent growth.

GHARIB: Well, at least the U.S. housing market got some good news today, along with a warning. Core Logic, this is the real estate Web site, reports that home prices in July rose 12 percent from the same month a year ago. But it also said that the red hot pace of growth in home prices may start to ease.

HERERA: We begin today`s “Market Focus” with a late-day mover.
Shares of LinkedIn (NYSE:LNKD) coming under pressure after the bell when the company announced it will offer up to $1 billion worth of shares in a public offering. The company says those proceeds will be used to strengthen its balance sheet and build up its international operations.

In the regular session, the stock rose more than 2 percent to close at
$246.13 but it fell after hours.

H&R Block (NYSE:HRB) also fell after hours. That company reported a wider than expected loss for its fiscal first quarter. The tax service provider also said its plans to shed its banking operations will be delayed due to a regulatory holdup. And that pressured the stock late in the day after falling fractionally in the regular session to $27.88.

GHARIB: Also under pressure, Cytokinetics (NASDAQ:CYTK) shares plunged today after the company`s heart failure drug did not meet its main goal in a clinical trial. The company and its partner Amgen (NASDAQ:AMGN) said the drug didn`t work better than a placebo in treating shortness of breath in patients. Cytokinetics (NASDAQ:CYTK) does not have any approved drugs. So, the drug fell almost 27 percent to $7.65. Meanwhile, Amgen
(NASDAQ:AMGN) shares rose about 2 percent to $111 and change.

Shares of Smithfield Foods (NYSE:SFD) rose today on word that activist hedge fund Starboard is trying to line up rival bidders to buy the company.
The world`s largest pork producer has agreed to be acquired by a large Chinese company. Starboard, which holds a 5.7 percent stake in the company says its working with investors but a counterproposal has not yet been completed. A shareholder vote is scheduled for later this month.

Smithfield rose about half a percent to $33 and change.

And shares of Coca-Cola (NYSE:KO) fizzling out today. An analyst at CLSA cutting the reading on the stock to a sell and slashing her price target to $40 on concerns about declining sales and Coke`s exposure to some emerging markets. The analyst also says Coke`s current defense of the artificial sweetener aspartame could have an adverse effect on the economy.

Coca-Cola (NYSE:KO) shares fell almost 1 percent to $37.90.

HERERA: Well, the founder of another tech giant, Jeff Bezos of Amazon (NASDAQ:AMZN).com, is focusing his energy on a decidedly old-school technology. The new owner of “The Washington Post (NYSE:WPO)” newspaper is on the quest for what he calls a golden era at the daily paper, for which he recently paid $250 million. Bezos credits three big ideas that helps Amazon (NASDAQ:AMZN) grow from a modest startup back in 1995 to an Internet titan with $61 billion in sales last year.

Number one: put the customer first. Number two: invent. And three:
be patient. Bezos says that if you replace the word “customer” with the word “reader”, “The Post” will be a success, too.

GHARIB: We have more on that retransmission deal reach by CBS
(NYSE:CBS) and Time Warner (NYSE:TWX) Cable that we told you about at the top of the program. That long blackout and final agreement raised questions about the future of television. With cable, satellite, streaming video services and a lot more, consumers have many choices in choosing how to get the shows they want to watch into their living room. So what does that mean for the content providers, programmers and what you may have to pay for all that entertainment?

Julia Boorstin has our story.


CBS (NYSE:CBS) and Time Warner (NYSE:TWX) Cable struck a deal just in the nick of time, ahead of the NFL season starting this weekend, the fall TV season two weeks after that.

CBS (NYSE:CBS) had the upper hand all along as the risk of losing premium content would send Time Warner (NYSE:TWX) Cable subscribers running to alternative.

CRAIG MOFFETT, MOFFETT NATHANSON RESEARCH: It doesn`t take much to push a consumer to say I don`t want to miss the football game, and frankly, I`d be just as happy or happier if I had Verizon (NYSE:VZ) FiOS anyway.
And that put Time Warner (NYSE:TWX) Cable in a very vulnerable position.

BOORSTIN: The companies didn`t reveal terms of the deal but it appears a clear win for CBS (NYSE:CBS). Time Warner (NYSE:TWX) Cable agreeing to a rate increase and the cable giant did not get all the access it wanted to the online content CBS (NYSE:CBS) sells to digital distributors.

(on camera): So why is content king? Because Sunday night football and CBS` television shows are irreplaceable. Whereas with distribution, consumers have so many options for both live and on demand programming.

(voice-over): It`s not just CBS (NYSE:CBS). Original content is valuable across the board. Sure to give Disney (NYSE:DIS)/ABC the upper negotiations with Dish before their contract expires at month end. Paid TV alternatives included satellite TV giant DirecTV. Telecom offerings like Verizon (NYSE:VZ) FiOS. Even tech giant Intel (NASDAQ:INTC) is working on a streaming offering. And for those willing to cut the cord, there`s Aereo, which streams TV to mobile devices, but plus all the on-demand content on Netflix (NASDAQ:NFLX) and Hulu.

UNIDENTIFIED MALE: This is a funny example where more competition, at least among distributors, is driving prices up instead of down. Any programmer really that can now play one distributor off against the other.

BOORSTIN: Time Warner (NYSE:TWX) Cable CEO Glenn Britt calling for reform of retransmission rules, blaming them for rising cable bills.

But the FTC is pushing all the media companies to, quote, “accept shared responsibility.”

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


HERERA: Just ahead, if you want to bank the old fashioned way? Well, if so, and you want to use a teller, it may cost you.

We`ll look at the latest fee to hit some consumers.

But, first, how commodities, treasuries and currencies performed today.


HERERA: Kodak is back. The photography pioneer emerged from Chapter
11 bankruptcy today, coming back as a leaner, more focused company. After selling off its personal photography and documented imaging units, the new Kodak bills itself as a commercial imaging company, serving businesses in graphic design and packaging.

GHARIB: Ford is recalling 370,000 cars from the years 2005 through 2011. The reason: to fix a steering shaft that could corrode and cause a loss of control of the car. The affected models, Ford Crown Victoria, the Mercury Grand Marquis and the Lincoln Town Car.

HERERA: Well, there`s no recall yet over at Nissan, but U.S. safety regulators have opened an investigation into the Nissan Pathfinder and Infinity JX 35 after complaints about a failure in some transmission cooler lines that could cause the sudden loss of power in the transmission. If the probe leads to a former recall, about 110,000 vehicles could be affected.

GHARIB: Buy or lease? This has been a toss up question for many car buyers for years. But now, a new survey shows that automakers are leasing new cars at a record-breaking rate. Experian Automotive says that nearly
28 percent of all new cars were leased, not bought, in the second quarter of this year. That`s the most ever.

Leasing has become more popular. That`s thanks to more aggressive and attractive offers from carmakers and buyers looking for the cheapest monthly payment on a new car or truck, especially now that the average sticker price has soared above $31,000.

HERERA: And as for people buying a new car, another report shows that more and more of them are subprime borrowers. A separate report from Experian, the credit report company, says that banks made 36 percent of the new car loans last quarter to subprime customers, many of whom may not have qualified for a loan just a few years ago. The reason: because loan delinquencies have fallen, allowing banks to extend credits to riskier clients. And automakers finance units have been attracting more reliable auto loan customers.

GHARIB: With so many of those borrowers and other bank customers doing more business on their smartphones, the days of interacting with a teller at your neighborhood bank may be coming to an end, unless you`re willing to pay for it.

Kayla Tausche has more on a big push by some big banks to charge for the privilege of speaking with a teller.


KAYLA TAUSCHE, NIGHTLY BUSINESS REPORT (voice-over): Talk ain`t cheap. That`s news to some bank customers in search of a no-fee checking account, as deposits go digital and bill pay means point and click, some banks say talking to a real live person comes at a premium.

Customers with a virtual account at Pittsburgh-based PNC could be surprised in December when five years after the account launched, a new monthly fee of $7 will be tacked on. To avoid it, keep a minimum balance, be a student or do everything online.

Only a few banks are experimenting with this approach, meaning customers, for now, have a choice.

UNIDENTIFIED FEMALE: I don`t mind doing some things online but sometimes it`s better in person to discuss, you know, issues or situations.
I guess it depends on the other banks charging the same, I would stick with mine. But if this was the only bank charging, yes, I probably would switch.

TAUSCHE: But Neil Weinberg, editor of the American banker, says it`s one way banks are searching for revenue in an environment with low rates and heavy regulation.

NEIL WEINBERG, AMERICAN BANKER EDITOR-IN-CHIEF: The question for the banks are what are consumers going to be willing to pay for and think is enough of a premium service or creates enough new value for them that they are willing to actually pay money or see fees detected from the monthly statements? That`s the sort of experimentation that you`re seeing now.

TAUSCHE: College sophomore Alex Walockets (ph) says he`d sign up for any account since he never goes to a branch.

UNIDENTIFIED MALE: Maybe once or twice ever, actually.

TAUSCHE (on camera): Ever.

UNIDENTIFIED MALE: IPad apps, we can do everything online and at home.

TAUSCHE (voice-over): For Walockets, an e-banking account might fit the bill.

UNIDENTIFIED MALE: Sounds a lot easier than actually going to the bank. If I don`t have to talk to someone, then, you know, whatever.

TAUSCHE (on camera): Bank executives say e-accounts won`t replace traditional accounts, they just for a different type of customer. One like Walockets that feels more comfortable doing everything online.

(voice-over): But not all banks are seeing enough customers take the bait. At bank of America, only 10 percent of new checking customers signed up for e-banking. The account which carries an $8.95 for customers using the branch was discontinued after only three years.

WEINBERG: There is a tremendous amount of resistance among consumers starting to pay for something that was previously free.



HERERA: And finally tonight, here is something you won`t see too many chief executives do: share their annual bonus with staffers, all of them.
But that`s exactly what the CEO of Lenovo is doing with his $3.25 million bonus. He`s going to split the money with 10,000 fellow employees in China, along with the U.S. and 19 other countries. All workers will get about $300, including every hourly manufacturing worker.

That`s a nice to do.

GHARIB: This is the second year he`s doing it. Somehow this idea hasn`t spread to IBM or JPMorgan (NYSE:JPM).

HERERA: Not yet. We`ll see. We`ll see.

GHARIB: That`s NIGHTLY BUSINESS REPORT for tonight. I`m Susie Gharib. Thanks so much for watching.

HERERA: And I`m Sue Herrera, have a lovely evening. And 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) 2013 CNBC, Inc.

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