Transcript: Wednesday,September 4, 2013

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


SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: In the fast lane. Auto sales sizzled. Demand for tracks and crossovers sore as buyers rush into showrooms. But prices are rising as well to record levels. Will that slam the brakes on the buying frenzy?

SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: Power house. America`s oil boom is so powerful that a new study out today says it will actually boost the income of American households and create millions of jobs. But how and by how much?

HERERA: Get smart. The battle over your wrist has begun. Samsung and Qualcomm (NASDAQ:QCOM) taking the first swing, beating Apple
(NASDAQ:AAPL) to the punch. But with big firms investing big money in smart watches, what`s at stake if consumers just don`t buy in?

All that and more tonight on NIGHTLY BUSINESS REPORT for Wednesday, September 4th.

Good evening, everybody. I`m Sue Herrera, in for Tyler Mathisen.

GHARIB: And I`m Susie Gharib. Good evening, everyone.

On Wall Street today, a red hot rally for the blue chips. The Dow posted its biggest gain in more than a month, even though investors are on edge about a possible military strike against Syria. They were encouraged to buy stocks, thanks to robust sales of cars and trucks in August. The major stock averages rallied as auto makers posted their strongest month since the government`s cash-for-clunkers incentive program back at the height of the financial crisis.

Here are the closing digits. The Dow jumped about 97 points, the NASDAQ rose 36. That was on the strength of tech stocks. And S&P added 13 points.

HERERA: And now to break down those August sales figures for Detroit`s big three.

General Motor sales rose nearly 15 percent. That easily beat expectations.

Ford sales rose more than 12 percent from the same month last year.
It`s best August in seven years.

And Chrysler had the best August in six years with sales up by 11.5 percent led by strong demand for its Ram pickup trucks.

With a closer look behind those numbers, we turn to Phil LeBeau in Chicago with more.

Hi, Phil.


Three things were driving better than expected sales last month.
Let`s start first off by — in the official number for August, $16.09 million. That was the sales pace for the month of august. That is the strongest monthly auto sales since November of 2007. So we are in a territory that we haven`t seen in six years.

And one reason why is that auto sales last month were helped by a strong Labor Day weekend. Those were actually lumped in with all of August, so that`s why you had stronger than expected numbers in part.
Another reason, the people going into dealerships, they were buying in part because of low interest loans, leases, those are attracting buyers. Right now, it`s not uncommon to get zero percent financing for loans and leases.

The average transaction price tops $31,000. That is close to an all- time record high. And when you look at that, you might be saying, well, who is buying right now? In part, when you look at the pickup truck market, it`s the contractors, small business owners. They continue to replenish their fleets by buying new trucks. Large pickup sales up 19.3 percent in August, better than the overall sales pace for the industry.

And here`s a stat I love — Ford sold one F-series pickup every 42 seconds last month. Not surprisingly, as it is almost every month. The F- series was the top-selling vehicle followed by the Camry, the Silverado, and the Civic.

And, Susie and Sue, one last statistic for you. Last month, the big three sold 44.1 percent of the vehicles in the United States. Asian auto makers sold 47.8. So, the Asian automakers had passed the big three at least in the month of August.

HERERA: You know, Phil, you mentioned those interest rates that are so attractive right, but rates are starting to rise. Do you expect that that is going to slow the pace of sales?

LEBEAU: Not for a while. They`re going to have to go up dramatically, Sue, because the cap of finance organizations for all of the auto makers, they are intent on keeping those rates as low as possible.
Now, inevitably, as rates move higher, that`s going to have some impact on auto loan rates, as well as lease rates. But for the foreseeable future, they are expected to stay low.

GHARIB: Phil, you mentioned in your report that the average car price is now $31,000. So, given all the demand going on, will the prices go up even higher?

LEBEAU: I think so. I think you`re going to see it go up for two reasons. One, people are putting more content in their vehicles. So, they`re willing to say, you know what, if I`m going to pay for this over the next six or seven years, I`m going to put more content in it, and that`s pushing the price higher.

And at the same time, the auto makers are in the sweet spot right now, Susie. They can increase production as they want to. They are not forced to increase production and as a result, you got a tight supply and that`s allowing dealers to push prices higher.

GHARIB: Well, at least it`s a good sign that we have such robust sales going on. Phil, thank you so much.

LEBEAU: You bet.

GHARIB: That`s Phil LeBeau, reporting from Chicago.

To Washington now, the Senate Foreign Relations Committee voted today to approve a resolution authorizing a limited military strike against Syria. The resolution which passed by a 10-7 vote sets a 60-day limit on any U.S. military engagement in Syria and bars the deployment of any troops on the ground for combat duty. This also sets the stage for a debate and another vote by the full Senate next week. That`s when lawmakers return from their five-week summer break.

HERERA: President Obama was in Sweden today meeting with Scandinavian leaders ahead of the G-20 economic summit that starts Thursday in St.
Petersburg, Russia. As Secretary of State John Kerry continued to make the case to U.S. lawmakers to back U.S.-led strike against Syria, the president tried to shift the onus for military action away from the U.S. and on to world leaders everywhere.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: In the face of such barbarism, the international community cannot be silent and that failing to respond to this attack would only increase the risk for more attacks, and that possibility that other countries would use these weapons, as well.


GHARIB: As the president tries to drum up support from the international community and Congress debates authorizing military action, Americans in the nation`s heartland have their own opinions about U.S.
involvement in Syria.

In Oklahoma, many people expressed strong views about the U.S. getting involved in Syria civil war.

John Harwood joins us now from Midwest City, Oklahoma where he asked residents there how they feel about the Syrian crisis.

I know you have a lot of good stories to tell us, John.

JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT: Susie, lots of conflicting pressures on lawmakers as they return next week on Syria and on budget and financial issues, as well. We got a taste of them here in Oklahoma`s fourth district. Congressman Tom Cole, the Republican representative, went to Tinker Air Force Base, a massive facility here, and heard that the base had been hurt but budget sequester and furloughs. They simply can`t afford the shut down that some Republicans have threatened.


GEN. BRUCE LITCHFIELD, TINKER AIR FORCE BASE: I don`t know what you would do on the flying operations and how that would operate, especially if, you know, with a mission if they have to do the nuclear mission that the Navy is responsible for on a day-to-day basis, the counter-drug counter-operations that you have along with the North American defense.
I`m not sure how you do that in a total shut down.

REP. TOM COLE (R), OKLAHOMA: Come to my town hall tonight.


HARWOOD: And indeed, at that town hall tonight, very feisty conservatives said a shut down is exactly what we need as a tool to get rid of Obamacare.


UNIDENTIFIED MALE: The Republicans have got to wake up and get — you say, well, I think this will fly, that won`t fly and we can`t shut the government down. Let the government shut down, if that`s what they want to do. Let Obama be guilty.


LEBEAU: And, of course, on Syria, you had speaker after speaker questioning the president`s constitutional authority to act on his own and demanding that Congress not give him that authority.


UNIDENTIFIED MALE: Where did he get this? You know, out of a Cracker Jack box or what? It`s n out of the Constitution. Just because the president made a statement that he should not have made should not bind Congress to go ahead and approve it.



HARWOOD: Now on that issue, Syria, Congressman Cole sides with the right in his district and he is leaning against voting to give authority, but he does want to see a deal on budget and financial issues to spare Tinker Air Force Base and avoid a financial crisis this fall, guys.

GHARIB: So, John, what exactly did the congressman say about how he`s going to vote on Syria, and also, what did he say about President Obama?
Is he going to win support for military action?

HARWOOD: He`s leaning strongly against. He said he`ll listen to arguments over the next week, but he`s going to be a very, very hard sale for administration. He says he does think the president has a good chance of winning this vote.

House Speaker Boehner, House Majority Leader Eric Cantor, both influential among Republicans, have come out in support of the president.
That is a sign that he may be building some momentum in the House, but it`s not a sure thing.

HERERA: Yes, John, how close is this going to vote be? Because we heard from both sides of the isle and a number of Democrats are saying they`re going to vote no. And a couple of Republicans say they`re going to vote yes. So, how tight is it going to be?

HARWOOD: I think it will be very tight in the House, less so in the Senate, Democratic-controlled Senate. It moved out of the Foreign Relations Committee today, but I do think in the House, it`s going to be a nail biter that will require a very large Democratic vote to go with a minority of Republican votes.

Congressman Cole predicted that most Republicans would not vote with the speaker and with the president.

HERERA: John Harwood — John, thank you so much.

And while Syria remains the biggest worry for Washington and, of course, for Wall Street the debate rages on about whether it`s time for the nation central bank to begin easing back on its stimulus plans. One top Fed official thinks that time is very near. John Williams, the president of the Federal Reserve Bank of San Francisco says the U.S. economy has nearly enough momentum right now without the need for any additional monetary stimulus from the Fed.

In a speech today in Oregon, Williams said he has an open mind about tapering but did not offer specific timetable for a possible pull back by the central bank.

GHARIB: And more from the Central Bank. Meanwhile, the latest Federal Reserve Beige Book survey of economic conditions around the nation lived up to its name today. There wasn`t a whole lot that was new or unexpected in the Fed`s latest region by region break down on the economy.

The Fed reports, quote, “modest and moderate growth across most regions of the U.S. over the past six weeks or so as consumer spending, manufacturing and real estate activity all increased. But some Wall Street observers think this may be just enough for the central bank to again consider when to begin tapering back its bond-buying stimulus measures.

HERERA: Mortgage applications rose last week for the first time in a month, rising more than 1 percent. That`s after a slight dip in lending rates falling from the highest level so far this year for the week before and a pickup in refinancing. The Mortgage Bankers Association said borrowing costs climbed by more than a full percentage point since late May.

GHARIB: The U.S. is getting more competitive. The World Economic Forum says that U.S. competitiveness among global economies is rising again after four years of decline. The U.S., still the world`s largest economy, is now ranked in fifth place for overall competitiveness. That`s up from seventh last year.

HERERA: Well, the NASDAQ may not have felt very competitive for a short time today. The all-electronic exchange suffered a six-minute outage today in processing quotes and orders, but just for a small number of stocks. But the NASDAQ says trading was not interrupted and in a note sent to traders, they blamed a computer failure. A backup system successfully kicked in and the problem was resolved.

Today`s issue was not related to that massive outage on August 22nd when trading on all stocks was halted for three hours due to a trading software glitch.

GHARIB: Still ahead on the program, America is awash in energy, but does the oil and gas boom help your finances? A new study says yes.
That`s coming up.

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


GHARIB: Did the S&P really commit fraud, or is a new $5 billion lawsuit that it`s facing retaliation?

Standard & Poor`s, the ratings agency owned by McGraw-Hill, is facing a fraud filed by the Justice Department. The suit alleges that S&P misled banks and credit unions about the credibility of its ratings on mortgage backed securities, just ahead of the 2008 financial crisis. S&P says the suit is just, quote, “retaliation” for being the only major credit rating agency to take away the U.S.` AAA rating during the recession. That`s when the Treasury hit its debt ceiling and Congress failed to reach a federal budget.

HERERA: Another fine for America`s largest bank. JPMorgan (NYSE:JPM) Chase has agreed to pay $18.3 million to settle a class-action lawsuit claiming it made inadequate disclosure about the resetting of interest rates on adjustable rate mortgages that it was currently selling.

GHARIB: A big blow for Boeing (NYSE:BA) today. Delta Airlines
(NYSE:DAL) announced plans to buy 40 new passenger jets worth about $5.5 billion from Airbus. It`s European`s plane maker`s first order from Delta in two decades. The first batch of brand-new A330s will arrive in 2015.
The rest of Delta`s order, the smaller A321 jets, which are being phased out, are due in 2016.

HERERA: Toyota (NYSE:TM) is recalling 369,000 vehicles worldwide.
Its high-end hybrid SUVs may stop running if a hybrid engine system alarm goes off and its luxury Lexus sedans could stall out because of a loose engine bolt. A company spokesman says no accidents related to either problem have been reported.

GHARIB: We begin our “Market Focus” tonight with a retailer that`s having a rough day. Shares of Francesca`s, which sells women`s apparel and accessories, fell sharply after the company reported weaker than expected earnings and said sales would continue to decline. It`s the latest retailer to take a hit from cautious spending as more consumers forgo impulse items like shoes and dresses and focus instead on buying houses and cars. The stock fell almost 26 percent to $17.79.

A different story, though, for Ciena. This network equipment-maker reporting a narrower-than-expected loss and forecasting strong revenue growth for the current quarter. The company is benefitting from a recovery and spending by telecom carriers which are upgrading their wireless and wire line network, that`s creating big demand for network here. The stock soaring almost 14 percent to $23.54, and that`s also a good trend news for Ciena`s rivals Juniper and JDS Uniphase (NASDAQ:JDSU) rose today.

Shares of Navistar sputtering today. The engine maker reported its fourth straight quarterly loss and says it will cut 500 jobs. Navistar says its core truck business was hurt by a failed redesign and lower industry demand. The stock fell more than 2 percent to $33 and change.

HERERA: Dollar General`s earnings beat expectations. The value retailer attracted customers into the stores by selling more groceries and brand name products. The company also reported sales growth that exceeded its competitors. The results warned that frugal shoppers, however, are making it difficult to raise prices.

At the close, the stock was up almost 5 percent to $56.39.

And shares of data storage makers Micron Tech and SanDisk
(NASDAQ:SNDK) rallied on heavy volume following news of a fire at a rival chipmaker`s plant. That rival, Hynix, was forced to suspend operations at its factory in China. But after an initial assessment, Hynix said it expects to resume production shortly.

Shares of Micron Tech rose 5 percent to $14.75. And SanDisk
(NASDAQ:SNDK) gained 3 percent to $57.14.

And Green Mountain isn`t just about brewing coffee anymore. It`s also getting into soup. Campbell`s Soup will sell K-cups for Green Mountain`s Keurig machines that will brew a cup of chicken broth. The K-cups will come with pockets of dried noodles and vegetables that you can mix right in. The partnership marks Green Mountain`s first attempt to expand beyond beverages. The stock rose about 1 percent to $86.30, while Campbell saw a fractional gain of $42.92.

American family piggy banks are bulging a little bit more these days.
A new study out today says that thanks to the oil and gas boom and lower energy prices, household incomes are up by $1,200 and according to IHS
(NYSE:IHS) that conducted the study for the energy industry, the fracking boom, rather, will boost household incomes by as much as $2,000 by the year 2015, and create more than 3 million jobs throughout the economy over the next five years.

Joining us now to talk more about this is John Larson. He`s co-author of the study and vice president of the economics at IHS (NYSE:IHS).

John, thanks for joining us and, you know, this is great news to hear.
We all benefitted from lower prices.

But as you look out and you`re making your forecast out to the year 2020, how much of your assumptions are based on lower energy prices? It might not work out that way, right?

JOHN LARSON, IHS (NYSE:IHS) VICE PRESIDENT OF ECONOMICS: Well, I think you`re right. There is an important story that has to be told about where the energy prices will go. And when you look at the supply side of the equation, the rapid growth in this unconventional technology has really unlocked a tremendous amount of resource space and you`ve seen tremendous growth in both oil and natural gas production. And so, we feel very confident about that underlying assessment of where that supply will go and where the corresponding price paths will be.

There is a tremendous wealth of availability of natural gas in this country of around at a dollar price of $4 to $5 MMBtu.

So, I think when you look at relative to the global prices, and that`s the key, that`s what determines the break-even economics for the underlying plays allowing us to enjoy this energy renaissance and corresponding economic growth, you do see an opportunity for it to continue into 2025 and beyond actually.

HERERA: You know, John, as Susie mentioned, that`s good news for all of America certainly. But your numbers seem a little bit higher than some of the other studies that are out there. Is that because you base it on something different or your metrics were different than other numbers, why?

LARSON: Well, it`s important when you look at this industry, you have to understand the full breath of the industry, to supply chain from the wellhead, all the way down to the consumer and the supply network that supports and enables this activity to take place. And so, we`re looking at not just the roughneck that`s working the wellhead, we`re looking at the steel furnace in Pittsburgh that`s fabricating the steel and the pipe fitters and drill bit manufacturers in Ohio.

And so, we`re trying to capture that full supply chain and then look at the broader macro economic effects that are leading as you said to this income effect for consumers. I think that`s the real highlight is how profound this income effect is for all consumers. And, obviously, when more consumers have more hundred in their wallets they step back into the economy and purchase more goods and services, which in turn spurs greater economic growth.

So, I don`t think we`re over stating it at all. I think it`s been a profound effect and it`s going to continue to have a profound effect going forward as that income grows for all individuals in this economy.

GHARIB: And part of this whole energy boom is because of fracking and you mentioned the word “fracking” and people right away say about what the environment. I mean, to what extent will environmental concerns or restrictions going forward impact a savings, household savings?

LARSON: Well, obviously, look at the current set of rules and regulations. Our study was based on a status quo of those current regulatory frameworks that are conducted at the state level, and there is a whole host of permanent (ph) and other regulatory procedures in place.
This is an industry that requires a significant amount of activity. You have to go out and explore to identify new places and then conduct all the underlying drilling.

So, if that activity was curtailed, it does fairly quickly have knock on effects down through the economy and could risk pulling that money out of the pocketbooks of Americans.

GHARIB: And, John, real quickly, who funded this study?

LARSON: This study was founded by a coalition of organizations from the American Chemistry Council, the National Association of Manufacturers, the Fertilizer Institute, organizations along those types of natures have helped contribute to analysis we conducted.

GHARIB: Well, it`s a fascinating study. Thanks so much for coming on the program to tell us about it. John Larson with IHS (NYSE:IHS).


HERERA: Coming up, two major companies are kick-starting a whole new category of electronics, smart watches — and some are calling it the most important new product since the launch of the iPad.

But first, a look at how commodities, treasuries and currencies performed today.


GHARIB: It`s one of the biggest gifts ever given to a college. New York real estate mogul Stephen Ross who is also the owner of the Miami Dolphins is donating $200 million to his alma mater. It`s the University of Michigan in Ann Arbor. The money will be splint between the Stephen M.
Ross School of Business and the school`s athletic department.

This latest gift`s raises total donations to the university to more than $300 million.

HERERA: Well, this sounds like something out of those old Dick Tracey comics. But the smartwatch from Samsung is a wearable tech device and it`s now a reality.

Seema Mody was there for the unveiling in New York City today and she has more on the latest gadget you thought you didn`t need.


UNIDENTIFIED MALE: Ladies and gentlemen, I present to you Samsung Galaxy Gear.

SEEMA MODY, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): The battle for your wrist has begun.

UNIDENTIFIED MALE: Welcome to the future.

MODY: Samsung and Qualcomm (NASDAQ:QCOM) both announcing to the world the smartwatch has arrived. They are the first serious entrance into what`s expected to be a huge market for the tech industry.

(on camera): Analysts write that the smart watch is the most important product category to watch in a consumer electronics space. And some of the big tech names are taking notice — Sony (NYSE:SNE), Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG) all are said to be working on their own version of a smart watch device.

Gardner (ph) expects that 5 million to 10 million smart watches may ship this year as Samsung and others get it right. And the trend towards wearable tech looks to be here to stay.

UNIDENTIFIED MALE: I think it`s a great idea.

UNIDENTIFIED FEMALE: You can carry it around wherever you go, with every outfit you can go, as long as it looks cute.

MODY: Google (NASDAQ:GOOG) made shock waves when it introduced Google
(NASDAQ:GOOG) Glass last year.

UNIDENTIFIED MALE: Once they get a little more slim, I think a lot of people — more people will be interested in it. But right now, it stands out and device some people love it, some people are like I`m not ever wearing that thing.

MODY: For some reason, data suggests the time for wearable devices to really take off the consumers could be closer at hand, literally. A survey conducted by Forester found that when consumers were asked where they would want to wear a device, 29 percent said clipped to clothing, 28 percent opted for wrist, and while only 12 percent said glass.

But with today`s announcement, Samsung delivered a clear message to its biggest rival. The battle of consumers is going to get a lot more fierce in the months to come.

For NIGHTLY BUSINESS REPORT, I`m Seema Mody in New York.


GHARIB: And Samsung might have more invasions to talk about in a few weeks. It`s scheduled a conference in Seoul, South Korea, for November 6th, for investors and analysts and the topic, the future of smart phones.
Also on the agenda, Samsung`s long-term growth strategy.

HERERA: But not to be undone, Apple (NASDAQ:AAPL), Samsung`s biggest rival, of course, for phone sales, it has a big week ahead of it. The company announced an event next Tuesday, September 10th, at its Cupertino, California headquarters. The next day, September 11th, Apple (NASDAQ:AAPL) will host an event in Beijing where it`s expected to announce a deal with China Mobile (NYSE:CHL), that nation`s biggest carrier to finally begin selling the iPhone there.

GHARIB: And finally tonight, a new building going up in London`s financial district is being called a fry-scaper, and with good reason. The 37-story glass enclosed structure is reflecting so much sunlight that it`s literally melting cars. It actually melted parts of a Jaguar parked outside the building last week. The build`s developer has apologized and has offered to pay for the repairs.

And, Sue, people in Las Vegas should pay attention. Apparently, the same architect is building a building there and it`s a lot sunnier —

HERERA: Oh, yes.

GHARIB: — and it`s a lot hotter.

HERERA: Can you imagine calling home, honey, the car is melted? Can you imagine that?

GHARIB: Especially a Jaguar.

HERERA: Especially a Jag, exactly. Wow.

GHARIB: That`s NIGHTLY BUSINESS REPORT for tonight. I`m Susie Gharib. For more business stories, log on to our Web site,

HERERA: And I`m Sue Herera. Have a great evening, everyone. 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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