Transcript: Tuesday, September 10, 2013

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


SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: Triple digit gain. Stock is up, oil is down as the risk of a U.S.-led attack on Syria fades. And President Obama prepares to deliver a speech to the nation.

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: The Dow`s big facelift. Goldman Sachs (NYSE:GS), Nike (NYSE:NKE) and Visa (NYSE:V) are in the world`s most famous stock market index. Alcoa (NYSE:AA), Hewlett-Packard (NYSE:HPQ), and Bank of America (NYSE:BAC) out. What the moves mean if you own the shares or might want to some day.

GHARIB: And new phones, new price, new colors. Apple (NASDAQ:AAPL) introduces two new smartphones designed to expand its reach into new markets. But shares fell, leading investors to wonder what it will take to juice up the stock.

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

MATHISEN: Good evening, everyone. And welcome.

I`m Tyler Mathisen, alongside Susie Gharib.

Rally on — another triple digit for the Dow today, capping the biggest two-day rally for the industrial index since the end of June. The S&P 500 scored its sixth straight up-day, and that is the best such streak for it in nearly two months. And NASDAQ closed at a fresh 13-year high for good measure.

The main reason for those gains: Syria — specifically the prospect that diplomatic overtures by Russia and Damascus may delay a U.S. military strike to retaliate for the Assad regime`s alleged use of chemical weapons.

Also drawing investor interests today, big changes announced this morning in the composition of the Dow Jones Industrial Average and we`ll take a deeper look at that in just a few minutes time. Meanwhile, the numbers on Wall Street today, the Dow soared 128 points, ending solidly back above 15,000. The NASDAQ was up 23 and S&P added 12.

While stocks climbed, selected commodities swooned as some of the fear premium got sweated out of prices as the march to military action against Syria slowed. Oil prices dropped nearly 2 percent today. That`s the biggest one-day decline in three weeks there, while gold tumbled nearly $23 an ounce.

GHARIB: More on the developments in that Syria crisis. President Obama is preparing to deliver a primetime speech tonight at 9:00 Eastern Time. He`ll be making a case for both the threat of U.S. military action and signs of hope for a diplomatic action.

John Harwood joins us now from Washington with the latest.

So, John, what can we expect to hear from the president tonight?

JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, Susie, I think we`re going to hear a different message than we would have before this Russian-Syrian initiative and that is instead of having to plead for support in the country, which was plainly reluctant to approved military force and pleading with members of Congress to support him, he`s able to go to them now and say, my policy has produced this diplomatic breakthrough, keep supporting me.

But there`s not the same urgency and that`s a relief to the administration, to Congress and maybe some Americans, as well.

MATHISEN: So, how has this diplomatic track now changed President Obama`s task tonight? You just sort of bleakly referred to it. What`s different now?

HARWOOD: Here`s what`s the same. What`s not different is this very strong opposition within the public to go ahead with this. We — there was an NBC/”Wall Street Journal” poll that was released today that showed six in 10 Americans oppose the idea of going ahead. We saw those reflected — those numbers reflected in the attitudes of members in Congress, members of the Senate.

And so, the president has got to try to encourage people to help him keep the pressure on. He`s making the argument and he will tonight that the credible threat of U.S. military forces, what produced this diplomatic initiative but he`s going to make the urging Americans and the members of Congress not to under cut him by denying him the ability to threaten force if the diplomatic track fails.

GHARIB: So, President Obama makes his case tonight, John, and then what happens?

HARWOOD: What happens is, first of all, there will be a process of some sort in the United Nations. There was some fits and starts with that today.

But the president consulted with President Hollande of France, Prime Minister Cameron of Britain and they`re trying to move ahead with international opinion and trying to rally an international coalition in the United Nations, NATO and other people to try to advance this initiative.

The votes in Congress are delayed. They were going to happen both in the House and Senate this week and next. Now, that`s not going to happen.

But you do have the president making this case and then giving it probably a week or two to show that there`s credibility and sincerity behind the effort. You did have the Syrian foreign minister saying today that Syria will acknowledge the existence of its chemical weapons and sign the Chemical Weapons Convention. That`s only a first step, though.

MATHISEN: John Harwood, thank you very much. We`ll all be watching tonight.

Well, as we mentioned earlier, a big shakeup for the Dow Jones Industrial Average. Starting September 23rd, the Dow will drop three of its 30-member companies and replace with three new ones. Alcoa (NYSE:AA), Bank of America (NYSE:BAC), Hewlett-Packard (NYSE:HPQ) — out. Goldman Sachs (NYSE:GS), Visa (NYSE:V), Nike (NYSE:NKE) — in.

Dominic Chu tells us why and what it might mean for the stocks involved.


DOMINIC CHU, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): The Dow determines how important a stock is to the index by looking at share price. So, with Alcoa (NYSE:AA), Bank of America (NYSE:BAC) and HP all trading between $8 and $23 per share, while companies like IBM and Chevron (NYSE:CVX) boast triple digit price tags, the Dow Jones saw an opportunity to shake things up, shedding the lower priced value stocks in favor of adding some more diverse names.

Case in point: Visa (NYSE:V) — adding the credit card giant gives a little color to the index, both on the new age payment technology industry and consumer habits. Meanwhile, Nike (NYSE:NKE), which does much of its business overseas, is seen as a barometer for economic growth in emerging markets. And by adding Goldman Sachs (NYSE:GS), the Dow gets some insight into traditional mergers, acquisitions and corporate deal making.

(on camera): With these being added to the Dow mean the stock is a buy for investors. Let`s take a look.

(voice-over): The last time the index added a new ticker was last September when UnitedHealthcare replaced Kraft (NYSE:KFT) Foods. A year later, shares of UnitedHealth were up 33 percent. It`s a similar story for Travelers and Cisco (NASDAQ:CSCO) Systems which posted 19 percent and 15 percent gains respectively after being added to the Dow in 2009.

But that kind of performance isn`t always the norm. In 2008, Chevron (NYSE:CVX), Bank of America (NYSE:BAC) and Kraft (NYSE:KFT) all saw their stock plummet the first year after being included in the Dow. That move did coincide with the market lows after the U.S. entered recession, so it`s tricky to make any inferences there.

But back in 2004, the last time we saw the Dow pick up three new names in the same day, it was AIG, Pfizer (NYSE:PFE) and Verizon (NYSE:VZ), they all finished lower a year after index inclusion.

Bottom line, today`s move in the Dow might be noteworthy but many expert say it`s not the only thing to consider when picking a stock to buy or sell.



MATHISEN: And here is how the stocks involved in the changes performed today. All the ones being added to the Dow, Goldman Sachs (NYSE:GS), Nike (NYSE:NKE), Visa (NYSE:V), they were higher. And the ones being taken out, both Hewlett-Packard (NYSE:HPQ) and Alcoa (NYSE:AA) finished lower. Bank of America (NYSE:BAC), meantime, moved up by 13 cents.

GHARIB: Joining us now to talk more about the changes made to the Dow Jones Industrial Average is David Blitzer. He`s chairman of the S&P 500 Index Committee.

David, great to have you with us.

You have been presiding over these changes for a long, long time. So, put it in perspective for us. What does this mean for investors, if they own the stocks of Visa (NYSE:V), Goldman Sachs (NYSE:GS) or Nike (NYSE:NKE), or if they`re thinking of buying it, what does all this mean?

DAVID BLITZER, S&P 500 INDEX COMMITTEE CHAIRMAN: Well, the stock, the fact they reacted today is no surprise. This kind of news puts stocks in the news and people respond to it.

But the reaction is typically very short-term. My guess is by the end of this week, if not by this time next week, those reactions all will be out and there won`t be any permanent changes. And I think the ones that were mentioned earlier, the permanent changes were the general movement to the market, much more than the stocks.

What it really means to investors is that the Dow is a slightly different index, and I believe and we all believe here at S&P Dow Jones a much better index. It`s price weighted, the three stocks that came out together were only 3 percent of the index in terms of their weight.

The top stock, IBM, was 9.5 percent. IBM is going to squeeze down to 8 percent. It won`t be so dominant. The smallest stock, instead of being 4/10 of 1 percent, will be about 1 percent.

So, we have a much better balance in the index than we did before. It will be a more revival indicator of what`s happening in the market.

MATHISEN: You have replaced, David, three lower priced stocks. In fact, the three lowest priced stocks of the Dow —

BLITZER: That`s right.

MATHISEN: — with three higher priced stocks.

In this price-weighted index, which is a really critical concept to appreciate here, does this change make the Dow more volatile, less volatile, no change at all?

BLITZER: If anything, I think it might make it a touch less volatile. You know, one point in the stock, whether it`s on an $8 stock like Alcoa (NYSE:AA), or $185 stock on IBM, one point does the same amount in that kind of thing. But when you have an $8 stock, you know, it just tends to bounce around a lot more than $185 stock — if anything, maybe a touch less volatile.

But that — the volatility wasn`t really a concern. These are all big, well-known liquid stocks. This is not like emerging market stock where they bounce like crazy or something.

GHARIB: Right.

BLITZER: So, we`re not worried about that.

GHARIB: You know, David, when investors hear about changes like this, they start thinking like, well, why didn`t this company or that company get invited to the index. And the two names that came up a lot today, Google (NASDAQ:GOOG) and Apple (NASDAQ:AAPL), they have a huge influence on the economy and they are widely traded stocks. What`s the story there?

BLITZER: Right. Well, first, we should say about Google (NASDAQ:GOOG), Apple (NASDAQ:AAPL) and all the other stocks mentioned, changing an index is not an investment recommendation by any means, neither positive nor negative. Google (NASDAQ:GOOG) is about $885 a share. Apple (NASDAQ:AAPL), I don`t know the number off-hand, but it`s well north of $200 or $300.

We put Google (NASDAQ:GOOG) in the index and peg it out of stock with a price of 100 bucks, Google (NASDAQ:GOOG) weight would be about 28 percent. And if we put apple into it, it would be the Google (NASDAQ:GOOG)-Apple (NASDAQ:AAPL) index, and nothing else.


BLITZER: And that`s not what we`re doing. We want 30 stocks to do a nice balanced job of representing the large cap blue chip part of the market, and I think that`s what we`re getting this time.

GHARIB: By the way, David, Apple (NASDAQ:AAPL) stock is around $500 and we`re going to be talking about that a little bit later in the program.

But thanks a lot, David. David Blitzer, chairman of the S&P 500 Index Committee.

BLITZER: Thank you.

MATHISEN: Dow Industrials weren`t the only thing that got a facelift today, so did the Apple (NASDAQ:AAPL) iPhone. Two new models, eight fresh colors, one new operating system and plastic, yes, plastic cases. All announced today with typical Apple (NASDAQ:AAPL) fanfare, in an event at company headquarters in Cupertino.

Our Jon Fortt was there.


JON FORTT, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, we got the annual iPhone announcement and we didn`t just get the 5S, we also got the 5C, but it wasn`t priced quite as low as some people expected.

(voice-over): The iPhone 5C, widely expected, did arrive and it`s plastic on the back, five colors, but it`s expected to retail for $549 unsubsidized, a lot more expensive than a number of analysts were hoping hoped.

The announcement comes at a time when Apple (NASDAQ:AAPL) is facing increasing competition, especially in emerging markets, where brands like Samsung have challenged the iPhone`s dominance. A number of people were hoping that the 5C would open up new opportunities for Apple (NASDAQ:AAPL).

GENE MUNSTER, PIPER JAFFRAY: It was different than what we expected. The real frame work was consistent, which is the 5S and the 5C. The big difference is on the price of 5C. We had expected Apple (NASDAQ:AAPL) to be more aggressive with that. I believe is that they`re far going to be more aggressive with the prices of the 4S and actually keep the 4 around for longer. That`s different than what we have thought about.

FORTT: There weren`t a lot of surprises in the announcement, but some interesting new features on the 5S — an improved camera, as usual, also, improved wireless capabilities, all of which ties into iOS` new features in its software, that allow a camera that shoots in verse mode and also with slow motion.

(on camera): Of course, the proof of the pudding, as they say is in the eating and the buyers will get to do that eating in just about three days when preorders start for the 5C. Both the 5C and the 5S go on sale on September 20th. So, there`ll be two full weekends of sales. And once we get to see how China responds, China`s launch country for the first time, we`ll have a better read on whether Apple (NASDAQ:AAPL) has made a good decision or a bad one with pricing at these levels.



GHARIB: And when we come back, what will it take to boost Apple (NASDAQ:AAPL) stock? We`ll have that answer coming up.

But first, here are 54 companies that hit 52-week highs today. That`s the largest number since early August, and here is a look at some of them.


MATHISEN: Investors are getting excited bonds that Verizon (NYSE:VZ) is about to sell. People familiar with the offering set to price tomorrow say orders for the bonds are running at more than $90 billion. Verizon (NYSE:VZ) had expected to sell $30 billion to $40 billion of bonds to finance its $130 billion buyout of Vodafone`s stake in Verizon (NYSE:VZ) Wireless. Ten-year bonds are expected to yield 2.25 percentage points more than comparable U.S. treasuries.

GHARIB: Trouble is brewing between upscale coffee press maker Bodum Group and JCPenney. Bodum and Penney reached a deal nearly a year ago to open up store within a store boutique featuring Bodum kitchen, house ware and stationary products. But the struggling retailer never delivered and is being sued for breach of contract.

MATHISEN: We begin “Market Focus” tonight with a slide in another teen retailer. Urban outfitters warning sales for the current quarter aren`t growing as fast as Wall Street expects. It`s the latest in a string of weak reports for retailers that cater to that age group. Investors punished the stock. It fell more than 10 percent to $38.35 and that made it the worst-performing stock in the S&P 500 today.

PVH, which includes brands like Calvin Klein, Tommy Hilfiger also dropping on a weak outlook for the year. The apparel company says consumer spending has been weak and recovery slow. On an investor conference call, the company CEO said that the larger economy is still volatile, leading to erratic sales trends.

PVH shares fell more than 5 percent to $124.66.

And things aren`t much different for Crocs (NASDAQ:CROX). The footwear maker cutting its third quarter outlook, citing weaker sales in the U.S. But the company expects weakness here to be offset somewhat by stronger results in Asia and Europe.

The stock did fall more than 2 percent, $13.31, the close there.

GHARIB: McDonald`s reporting a bigger than expected rise in global sales last month. That`s thanks to strong result out of Europe. The world`s biggest fast food chain said sales rose slightly in the U.S. helped by the company`s monopoly promotion. McDonald`s also said that it has plans to add more value items to its menu.

Shares rose a fraction to $96.89.

A strong earning report from Five Below helped boost its shares today. The retailer beat estimates, reported a rise in sales, and raised it`s full year earnings and revenue forecast. The store sells games, candy and other goods for $5 or less. Shares soared more than 17 percent to $48 and change.

And Cisco (NASDAQ:CSCO), the world`s largest supplier of Internet routers and switches is acquiring a privately-held firm to help speed up its servers. It`s paying more than $400 million for whip tail. This is the first time Cisco (NASDAQ:CSCO) is getting into the data storage market. Cisco (NASDAQ:CSCO) shares closed at $24 and change, a gain of 1 percent.

MATHISEN: Amazon (NASDAQ:AMZN).com getting into the flower business. The world`s largest online retailer has sold flowers for years but always through third party suppliers. Now, Amazon (NASDAQ:AMZN) is selling and shipping its own flowers through what it is calling the Amazon (NASDAQ:AMZN) Curated Flower Collection.

GHARIB: Sandy Weill, the former chairman and CEO of Citigroup (NYSE:C), who`s credited with inventing the concept of the supermarket-style bank is doing a 180. While stunned Wall Street last year by calling for a breakup of the nation`s biggest banks, separating their investment banking from the commercial banking operation. Well, now, they say the big banks don`t have to split up. If the right regulation is in place but he says firms should be able to decide on their own what works best.


SANFORD WEILL, FORMER CITIGROUP CEO: We have regulation that precludes investment banking operating in a way that it can be constructed, then I think we should do something different and let them split up as they figure that`s the best way that they can provide their services.


MATHISEN: And back now to Apple (NASDAQ:AAPL), more now on the colorful new iPhones and that new pricing that the company hopes will help it, most especially over in China. Will the moves put some color back into Apple`s stock?

Tom Forte is an Internet analyst with Telsey Advisory Group and he joins us on the phone because of some audio difficulties.

Tom, welcome. Is that an iPhone you`re holding there or not?

TOM FORTE, TELSEY ADVISORY GROUP INTERNET ANALYST: It`s an iPhone 5 and I look forward to purchasing the 5S.

MATHISEN: All right. Is the 5S, which is the sort of higher-end version announced today, is that and is the iPhone 5C, the color version, lower price, is that enough to juice the stock and get it moving higher?

FORTE: I do believe it is. So, if the you look at the $60 billion repurchase program they announced in April, I think that can provide a floor and support for the stock but it`s really going to be new innovation such as the updated lineup and expanded lineup of smartphones and then potentially televisions, watches, and then the next generation lineup of iPads that`s going to drive the stock further from here.

GHARIB: You know, people are waiting for a big hit, the big invasion you talk about the TV or watch. Were you wowed by anything that was announced today?

FORTE: I think from a technological standpoint, the most impressive portion of the announcement related to the finger point authentication. I think that could be a catalyst for smartphone enabled commerce, both within a store and online. I thought from a technology standpoint, that was the best announcement.

MATHISEN: And that would — as you suggest — make it much more easy and secure presumably to do a mobile payment. Am I getting that right, Tom?

FORTE: Yes, I think you can`t over state the easy part. So pushing your smart phone, using your fingerprint to make purchase at the momentum to buy music at the iTunes, at the maximum, perhaps to make a purchase on Amazon (NASDAQ:AMZN).com, I think that`s very important.

GHARIB: So, tell us a little bit about how these phones stack up against the competition. We know that Samsung has been really winning over a lot of iPhone fans from the past. What about now?

FORTE: I really think that when the iPhone came out with the 5 and Samsung did that brilliant advertising campaign where they basically showed point for point how they had Apple (NASDAQ:AAPL) met or exceeded from a technological standpoint, I think that was really a starting point in the smartphone category. I look at what Apple (NASDAQ:AAPL) is doing with the 5S, that`s kind of higher end and 5C at the lower ending, and it reminds me a little what`s going on with Google (NASDAQ:GOOG) and Motorola where the Android is the most technologically proficient device and Moto X is more of their broad mainstream device.

So, I think that Apple (NASDAQ:AAPL) has enough here to keep the Apple (NASDAQ:AAPL) enthusiasts happy.

MATHISEN: All right. Tom Forte on the iPhone for us tonight, we appreciate you being with us. He`s an Internet at the Telsey Advisory Group.

And coming up, the wireless war is heating up. Walmart is getting in on the action launching one of the biggest smartphone trade-in programs ever. We`ll have details next.

But, first, let`s take a look at how commodities, currencies and treasuries performed today.


MATHISEN: Some of the nation`s best known and costliest colleges may actually be among the most affordable for students. According to “U.S. News and World Report”, the average student receiving financial aid at universities like Harvard or Yale only paid about a quarter of the listed or sticker tuition price. And most of the graduates at those top tier Ivy League schools leave with smaller debt loads than students who attend less prestigious schools.

GHARIB: U.S. employers advertised fewer job openings in July, but they still managed to hire more new workers that same month. The Labor Department reports that company`s advertised 3.7 million open jobs in July. But that was 200,000 less from June.

MATHISEN: More good news about the turnaround of the nation`s housing market. The real estate Web site CoreLogic (NYSE:CLGX) reports that rising home prices has significantly lowered the number of homeowners who were currently under water, meaning those who owe more on mortgages than their homes are worth.

GHARIB: Earlier in the program, we told you about Apple (NASDAQ:AAPL) unveiling two new iPhones today. Now, if you`re looking to trade in an older smart phone model in order to trade up to a newer one, Walmart is about to make that a whole lot easier.

Courtney Reagan has our story.


COURTNEY REAGAN, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): Apple (NASDAQ:AAPL) isn`t the only big company making a smartphone announcement today. Walmart is announcing the largest brick and mortar smartphone trade in program in the country. Just in time for consumers to trade up to the new iPhone 5S.

Starting September 21st, in 3,600 Walmart and Sam`s Club locations, consumers can trade in old smartphones to receive an instant credit, ranging from $50 to $300 that`s immediately applied to the purchase of a new smartphone.

STEVE BRATSPIES, WAL-MART U.S. EVP OF GENERAL MERCHANDISER: What is great about the program is the simplicity of it. When a customer comes in and brings the smartphone, they`re going to be asked some really basic questions. We`re not going to be nitpicking the customer on, is it scratched or does it have stickers? We`re going to ask five really simple questions.

UNIDENTIFIED FEMALE: The trade-in program will make it likely for me to get a new phone because I can get it sooner.

UNIDENTIFIED FEMALE: If they offered more money back for my phone, I would definitely go there.

UNIDENTIFIED FEMALE: Definitely, I would be more likely to shop at a store that would trade it.

REAGAN (on camera): The smartphone consumer is a valuable one to many retailers and right now, a great spot for Walmart. While the overall entertainment category has been an underperformer for the retailer, Bratspies says Walmart has continuously grown its wireless market share over the past 18 months.

Walmart certainly isn`t the only one offering a trade-in program. Best Buy (NYSE:BBY), Apple (NASDAQ:AAPL), Verizon (NYSE:VZ), AT&T (NYSE:T) others also offer store credit for used smartphones. EBay doesn`t off the trade-in program, but its my gadget tool allows sellers to upload the specifications of electronics and then post devices for sale when prices peak.

JEFF SOMERS, EBAY NORTH AMERICA MARKETPLACES V.P.: When we compare this day to a month ago, we`ve seen a 44 percent increase in iPhone 5 listings on the platform. On eBay (NASDAQ:EBAY) the average selling price for an iPhone 5 is $430, which is significantly more than customers can realize with most other channels out there.

REAGAN: EBay sellers can do whatever they want with the cash. It`s not tied to the purchase of a new smartphone or a specific retailer like other trade-in programs.

Since smartphone models are identical no matter where bought, trade-in programs need to be as competitive for the prices and new devices. May the best trade in value win.



MATHISEN: And, finally tonight, a new survey of the nation`s best cities to which to retire and if you`re thinking they`re all in Florida, you`re wrong. The Web site says many retiring baby boomers are moving into cities in communities where they can ditch the car, walk to stores, restaurants and social events.

The number five spot, Ocean County, New Jersey. You can`t do a lot of walking there, frankly. Number four: Portland, Oregon. Number three: Music City, Nashville. Second place: Austin, Texas.

And the best city to retire —

GHARIB: Drum roll.

MATHISEN: Phoenix, Arizona.

Where would you retire?

GHARIB: I`m a big apple girl. It has everything, you can walk, transportation, theater, ballet.

MATHISEN: And get deliveries.

GHARIB: And get deliveries and it`s hip and cool and when you get to a certain age, you want to be hip and cool.

MATHISEN: You want to be hip and cool. I`ve got a sweet spot for Charlotte, Virginia, but I like New York City. I think it`s a great place and a healthy place because you`re working all the time.

GHARIB: You got to advertise (ph), I heart New York.


GHARIB: That`s NIGHTLY BUSINESS REPORT for tonight. I`m Susie Gharib.

And for more on all the stories we covered tonight, go to our Web site,

MATHISEN: And I`m Tyler Mathisen, thanks for me as well. Have a great evening, everybody. We hope to see you back here tomorrow night.


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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