Transcript: Thursday, November 7, 2013

ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and
Susie Gharib.


markets. Stocks sell off sharply after a stronger than expected growth on
U.S. economic growth. Could an expanding economy prompt the Fed to cut
back on stimulus sooner?

Shares jumped 73 percent in the company`s Wall Street debut. But does
money-losing Twitter deserve a market value greater than three quarters of
the S&P 500?

MATHISEN: And House of the mouse. Disney`s profits beat forecast on
strong theme park results. Can the entertainment giant keep it up?

All that and more tonight on NIGHTLY BUSINESS REPORT for Thursday,
November 7th, 2013.

Good evening, everyone, on this very busy day. I`m Tyler Mathisen.

HERERA: And I`m Sue Herrera in this week for Susie Gharib.

Well, Wall Street was all atwitter over Twitter today. We`ll get to
that in just a second.

But, first, stocks sold off following a stronger than expected report
on economic growth that stokes fears that the Federal Reserve may start to
pull back on its bond buying program. Third quarter GDP rose 2.8 percent,
expectations were for 2 percent. Coupled that with a drop in weekly
unemployment as everybody waits for tomorrow`s October jobs report and you
have the recipe for a sell off. And that`s exactly what happened.

The Dow falling 1 percent or about 153 points, to 15,593, a weak tech
sector on the NASDAQ, dragging that index down 74 points and the S&P slid

MATHISEN: Well, that stronger than expected GDP number surprised
economist on Wall Street. But analysts are warning that hang over effects
from the government shutdown last month were likely tempered growth in the
fourth quarter.

Steve Liesman has more.


was hotter in the third quarter than investor expected but that could be
cold comfort in the months ahead. The government gross domestic product
rose 2.8 percent in the third quarter, the one we just finished, well ahead
of the 2 percent consensus, and the best quarterly number in a year. But
the data accounts for growth before the government shutdown and the
controversial debt ceiling debate that many economist believe weaken growth
in the current quarter.

Still, it`s better to have more momentum ahead of a slowdown than

Here`s where the growth was: housing surged ahead by 14.6 percent at
annual rate; durable purchases by consumers was up nearly 8 percent;
exports were up 4.5 percent; and inventories, there was a big inventory
build up, $86 billion.

Consumer spending though overall is pretty weak at 1 1/2 percent.
Business equipment purchases fell and federal government fell by 1.7
percent. It`s the strong growth in inventories, along with concerns about
the shutdown that makes economists concerned about the current quarters`

If businesses put too much on the shelves in the last quarter, they`ll
spend this quarter working it off, which means fewer new orders. Together
with the expected effects of the shutdown, fourth quarter growth is seen at
1.6 percent.

One shot in the arm for global growth could be from Europe. The
European Central Bank cut its overnight lending rates today amid concern
about declining inflation. ECB president Mario Draghi signaled more
measures could be on the way.

There will be far more attention to tomorrow`s morning delayed
October`s jobs report for closer outlook for growth and for Fed policy.



MATHISEN: And joining us now to talk more about the U.S. economy and
her outlook for growth is Lindsey Piegza. She`s chief economist at Sterne

Lindsey, welcome. Good to have you with us.


MATHISEN: You heard Steve`s report there. How strong was this
economic report really? He suggests that once you scratch the surface a
little bit, there`s a little less than meets the eye.

PIEGZA: Well, that`s right. On the surface, the headline growth was
quite impressive at 2.8 percent. This was the second consecutive quarter
with above 2 percent growth. But when we look in the details, it paints a
very different picture of the economy, especially when we look at the
consumer, the key variable in the economy.

Now, the consumer was already pulling back in the second quarter,
falling down to 1.8 percent from 2.1, but the consumer pulled back even
further in the third quarter, falling to just 1 1/2 percent.

When we look at businesses, too, they are very much sidelined,
hesitant to invest in equipment, structures and employees. So, this is a
report where certainly the devil was in the details.

HERERA: So, Lindsey, did the market get it wrong then? The market
sold off on the idea that the report was strong enough to perhaps change
the Fed`s bond buying program. It sounds like you would disagree with

PIEGZA: Well, I think the market was a little jittered by the
juxtaposition of headline strength and component weakness. So, there`s a
fear that the Fed will look at that headline number and say you know what?
The economy is actually improving enough that we can begin to rollback

I do not believe this is enough to suggest that the Fed will move away
from their accommodative past. The Fed is very much focused on the labor
market data rather than one quarter`s growth data point. And so, I think
the market will eventually shrug this off and realize the Fed and their
accommodative policies are here to stay for quite sometime.

MATHISEN: And labor market you mentioned leads us to tomorrow and the
jobs report, a lot of people thinking that that jobs report is going to be
soggier than some of the more recent ones. What is your prediction here on
the high end and the low end?

PIEGZA: You know, I`m looking for about 135,000, 140,000 in terms of
headline non-farm payroll growth. Remember that jobs have been slow — job
creation I should say — has been slowing since the start of the year. At
the beginning of the year, we were seeing plus 200,000 numbers. Now, we
slow to a pace of about 140,000 and I suspect that pace will continue to
lose momentum as we go to the end of the year, maybe even slowing to a pace
of 125,000.

So, clearly, at this point, the current level of production is meeting
the current level of demand and with productivity outpacing growth, there
is no incentive for businesses to hire at this point, especially against
the backdrop of added uncertainty giving the shenanigans in Washington.

HERERA: Yes, that doesn`t sound good going forward, though, then,
Lindsey. I mean, it sounds as though even the headline today looked like
the economy was doing better and recovery was on firmer footing, if you
look underneath that, and what you just mentioned about job creation, it
sounds like maybe this recovery is just lukewarm.

PIEGZA: I think you`re very much right. I think we`re going to see
this 2 percent, 2 1/2 percent range for quite sometime, even carrying over
through 2014.

Now, one of the variables, too, that affected third quarter growth was
inventories. If we strip out inventories for growth, we saw just 2.1
percent or a tenth higher than what we saw at the end of the second
quarter. So very much unchanged, and unchanged is not enough strength to
suggest that the Fed is ready to rollback the monthly bond purchases.

HERERA: All right. Lindsey, thank you very much. Lindsey Piegza,
chief economist at Sterne Agee.

Well, after all the hype, Twitter made its debut on the New York Stock
Exchange and it was a strong one. Shares rose 73 percent in its first day
of trading, exceeding the expectations of many.

Kelly Evans takes a look at what turned out to be an eventful day.


much is 140 characters worth? The answer, in turns out, is billions.
Twitter, the upstart social networking site that lets users exchange brief
messages, photos and videos, went public and immediately became one of the
world`s most valuable companies.

The shares were priced at $26 a piece, but jumped to $50 within the
first few moments of trade at the New York Stock Exchange. While they
settled below that level, it still leaves Twitter valued in the rage of $30
billion, bigger than most of the companies currently listed on the S&P 500.

DICK COSTOLO, TWITTER CEO: We`ve had consistent tremendous growth
across the world, frankly, for the last several years, over 230 million
monthly active users. Now, I think we`ve got a tremendous set of thoughts
and strategies to increase the slope of the growth curve. I would consider
some of them tactics, some of them broader strategies, in service to doing
what I refer to as bridging the gap between the massive awareness of
Twitter and deep engagement on the platform.

EVANS: Today`s action makes Twitter not just one of the biggest, but
also one of the most successful IPOs in recent history.

That`s good news for Twitter and also for the New York Stock Exchange,
which has now surpassed rival NASDAQ after it famously botched Facebook`s
listings last year in terms of tech IPOs.

CEO Duncan Niederauer dismissed talk of another tech bubble and
expects the pipeline of IPOs in this already busy year to keep growing.

DUNCAN NIEDERAUER, NYSE CEO: The market is in a level where it makes
sense to take companies out. The investors are receiving them pretty well.
I don`t feel it`s wrong. I think people are being thoughtful about what
they want to own, what they don`t want to own and then the market is
conditioned, if it keeps working, I think the supply of IPOs will keep

EVANS (on camera): The challenge for Twitter now will be keeping
investors happy, because at these prices, it`s trading 75 times 2013
revenue to date, that compares to just 20 times for Facebook (NASDAQ:FB)
and four times for Amazon (NASDAQ:AMZN).

(voice-over): At least one analyst at Pivotal Research Group has
already downgraded the shares saying they are quote simply too expensive.

For NIGHTLY BUSINESS REPORT, I`m Kelly Evans at the New York Stock


MATHISEN: Well, IPOs like Twitter today are beautiful when they work,
that is when the stock opens smoothly and price goes up. But it doesn`t
always happen than way, and sometimes after the initial flurry of
enthusiastic buying, those shiny new shares sell off hard.

Dominic Chu now with a lesson and occasional madness of crowds.


Let`s face it, most of us weren`t in that select group of folks who got
that coveted $26 IPO price for Twitter shares. An elite group of
institutional viewers and wealthy individuals were part of that action.

So, should you rush in and buy shares of these hot IPOs whenever you
can? After all, a lot of gains happen on that first day of trading.

So, it turns out recent history gives examples of reasons you might
want to wait just a little while if you didn`t get that IPO price.

For instance, take Yelp. The online reviews company had an IPO price
of $15 back on March 2nd, 2012. Yelp shares soared and closed at $58.26.
That`s a gain of 54 percent. If you bought shares at the closing price,
your investment would have fallen in value by 6 percent just one year

Then, there is Internet radio company Pandora. It rose by 9 percent
on its debut back in June of 2011.

If you bought in the close of first day trading, you`d have lost 39
percent of your investment a year later.

Same goes for Groupon (NASDAQ:GRPN). The online daily deals and
coupon site rose 31 percent back on its first day in November of 2011. If
you rush to buy it at the close of the first day of trading, you`d have
lost 85 percent of your investment just one year later.

Professional networking site LinkedIn (NYSE:LNKD) is the only real
bright spot. Shares more than doubled on day one back in May of 2011, and
assuming you bought at the close, you`d actually have made money a year
later, a whopping 5 percent.

IPO trading is often filled with volatility and that`s why many
veteran investors tend to stay away from them.

until things settle out and, you know, people have figured out what it
really is and all — you know, once the emotions come out of it, that`s the
time I look to buy a stock like this.

CHU: And we all know what happened to Facebook (NASDAQ:FB). Shares
lost half their value in just the first three months of trading, but it`s
worth noting that if you held on to shares of Facebook (NASDAQ:FB), Yelp,
Pandora and LinkedIn (NYSE:LNKD), you`d currently be making money.

Groupon (NASDAQ:GRPN), on the other hand, is still trying to get back
to positive.



HERERA: Consumer credit rose more than expected in September, but the
Federal Reserve says Americans cut back on using their credit cards for the
fourth straight month. Borrowing for cars and student loans rose by $16
billion, while credit card debt fell $2 billion. Consumer spending which
accounts for more than 2/3 of economic activity grew at a slowest pace in
two years, in the third quarter.

MATHISEN: Fannie Mae and Freddie Mac are close to paying back nearly
the amount the government put in to rescue them during the financial
meltdown. America`s biggest providers of housing finance posted strong
earnings in the third quarter as the housing market continues to recover.
The gains will enable Fannie and Freddie to send the U.S. Treasury $39
billion in December, and that will finish repaying or come close to it the
government aid they got when they were rescued in 2008.

And it`s expected by early next year, the government will turn a
profit on the $187 billion bailout of the two mortgage giants which own or
guarantee about 2/3 of all U.S. home loans.

Well, the White House Budget Office says it will cost $2 billion to
cover the back pay of 850,000 government workers who were furloughed over
that 16-day government shutdown. That`s a cost that will be passed on to
taxpayers one way or another. Closing national parks during the shut down
cost communities about $500 million in lost spending by visitors.

And the Internal Revenue Service, of course, delayed $4 billion in tax
refunds. The IRS now will need to delay next year`s tax filing season by
up to two weeks. The Obama administration says the shutdown and
uncertainty over raising the government`s borrowing cap will additionally
curve economic growth in this, the current quarter.

HERERA: Well, while seventh focused on Twitter, there are still
budget talks going on which trying to avert another shut down. But today,
Senator Lindsey Graham says those talks are deadlocked. Graham was quoted
saying the negotiations were stuck, not irreconcilably but stuck, she`s
trying to say.

For more on the budget talks, let`s join John Harwood.

John, we`ve seen this movie before and, you know, the market was very
volatile during that period of time. Are we in for another round?

have seen this movie, not only before but continuously for two years, ever
since 2011 when the setup of the super committee trying to get a deal for
additional deficit reduction but they couldn`t get it because of this very
simple equation. Republicans said to get a deal, we need to cut
entitlements. Democrats said, OK, we`re going to cut entitlements, we need
to raise taxes. Republicans have not been willing to go there.

Now, the question is, is there some sort of a deal that can evade that
fundamental roadblock? And the way to do it is shrink the deal very small,
to make the entitlements not about Social Security and Medicare, the hut
buttons but subsidies where you can get bipartisan agreement and make the
revenue increases very that fundamental road block?

The way to do it is shrink the deal small to make the entitlements not
about Social Security and Medicare, the real hot buttons, but things like
farm subsidies where you can get some bipartisan agreement and make the
revenue increases very small, not general tax increases but some sort of
user fees on specific sets of consumers of government services. And that`s
where we are right now, and we`ve got to see if we can get some sort of
agreement to avoid a shutdown.

Nancy Pelosi says she wants to get it done by Thanksgiving. The
formal deadline that we`ve got for this round of budget talks is mid-
December. But, of course, there is nothing binds that occurs on that date.
The real issue is going to be in January and February, when government
spending runs out and we`ve got to raise the debt limit again. That`s when
we`re going to find out whether we, in fact, are headed for the other kind
of shutdown that OMB said today cost us jobs and government money.

MATHISEN: All right. John Harwood, thank you very much. John
Harwood reporting from D.C. for us.

Well, for several years, Trans fats have been disappearing from
grocery aisles and restaurant menus. Now, the Food and Drug Administration
is going to finish the job. The FDA announced today that it will require
the food industry to gradually phase out artificial Trans fats, saying they
are threat to people`s health.

Scientists say Trans fats can raise levels of so-called bad
cholesterol, increasing the risk of heart disease. The heart clogging
substance was once common in the American diet, showing up in baked goods,
fried foods, microwave popcorn.

HERERA: Coming up, a Dow component and a thousand dollar stock post
earnings after the bill. Could they set the tone for tomorrow?

But, first, a look at how international markets finished the day.


MATHISEN: A pair of big name earnings out after the bell, Priceline
and Disney (NYSE:DIS). Priceline earned $17.30 a share, beating estimates.
Revenue rose $2.27 billion, also beating estimates. Shares are up after
hours and are up — hold on to your hats here — 1,200 percent since the
market lows of 2009.

Sheila Dharmarajan joins us from the NASDAQ.

Sheila, what is the big take away on Priceline`s numbers?

Tyler, the big takeaway is the e-travel sector continues to show strength,
and Priceline is undoubtedly the big leader. The company posted strong
earnings and sales growth for the third quarter, with bookings growing 37
1/2 percent. They also projected double digit growth for the fourth
quarter, as well.

The companies continuing to diversify in a lot of different offerings,
whether it`s hotels or car rentals, also air travel. Also internationally
as well, with an emphasis on Asia Pacific region and Latin America.

There was a change at the C-Suite at the top. Jeffrey Boyd, who`s
been a long time CEO of the company, will be taking over the chairman role,
there in Houston now, taking over as CEO. But Priceline firmly in that
thousand dollar claim after the bell.

HERERA: Sheila, thanks so much.

Dow component Disney (NYSE:DIS) beating the street as well. Disney
(NYSE:DIS) earned 77 cents a share, beating by a penny. Revenue up 1 1/2
percent to $11.6 billion. But shares fell right after the news.

Julia Boorstin follows Disney (NYSE:DIS) and joins us now from San

So, what should investors focus on right now, Julia?

Disney`s results were better on growth the board record results. And the
studio shows strength, consumer products show strength, and even the
interactive divisions swung to profit, which was unusual for a division
that`s only been profitable one quarter in the past.

Now, the reason the stock is trading lower seems to be on expectations
about the media network division, Disney`s biggest division. The thing
here is that the studio had warned — the company had warned there would be
some issues with deferred revenue from the prior quarter, so it`s not
unexpected and Disney (NYSE:DIS) says without those issues of deferred, it
would have showed an increase in operating profit on higher affiliate feeds
and advertising. But that seems to be what is impacting the stock.

But, Sue and Tyler, I have to tell you — there was a lot of optimism,
especially about digital. Bob Iger weighed in on Marvel and said that with
the new Marvel Netflix (NASDAQ:NFLX) deal that was just announced today, it
would really be a win/win for the company producing original exclusive
content for Netflix (NASDAQ:NFLX), calling it a breakthrough.

And on the heels of Twitter`s IPO, he said he`s very bullish on both
mobile and social, saying both things are great for Disney (NYSE:DIS).

MATHISEN: Very quick thought, if you would, Julia, on Twitter, which
you covered today. You were outside their headquarters, what`s the buzz
out there?

BOORSTIN: Well, the buzz here in California seems to be very
positive. There were a thousand employees gathered really early this
morning to watch CNBC and watch Costolo`s interview on our air, and people
have gone back to work but they will be celebrating again when CEO Dick
Costolo arrives for a big meeting at their headquarters.

MATHISEN: All right. Julia, thank you very much. Julia Boorstin,
reporting from San Francisco for us.

Well, there is some good news for J.C. Penney for a change, and that`s
where we begin tonight`s “Market Focus”. The retailer sales rose nearly 1
percent in October for the first time in close to two years. Penny credits
the return of deep discounts and popular in-house brands, including St.
John`s Bay and Stafford home goods. Home good sales, by the way, rose more
than 50 percent from a year ago.

The stock surged 5 1/2 percent to $8.13. Good day for Penny`s.

Wendy`s narrowed its third quarter loss to $2 million from $26 million
a year ago. More customers snapped up its new pretzel bacon cheese burger
and pretzel pub chicken sandwiches, driving sales higher at restaurants
opened at least a year.


MATHISEN: But low — mm, but lower than expected quarterly revenue
worried investors.

Shares down, though, today about 11 1/2 percent to $8.05.

And moving on, Toll Brothers (NYSE:TOL) strengthening its holdings in
California, buying the home building business of Chapel Industries for
about $1.6 billion. The move gets Toll access to some wealthy high growth
markets such as Metro Los Angeles, Orange County and the Bay Area of San
Francisco. Shares up a fraction to $32.68.

HERERA: Qualcomm (NASDAQ:QCOM) was one of the biggest drags on both
the S&P 500 and the NASDAQ 100 indices today. Increasing competition
overseas cost the leading mobile chip maker to post earnings short to Wall
Street`s estimates. The company also gave a weak outlook for the current
period. The stock tumbled almost 4 percent to finish at $67.09.

Tempur Sealy (NYSE:ZZ) was one of today`s a big stock winners. The
mattress maker`s third quarter results comfortably beat Wall Street
estimates, boosted by a bounce back in North American sales. The stock
jumped 12 percent, finished at $44.96.

MATHISEN: And some more bad news drove down shares of Tesla today.
Its Model S electric car caught fire today for the third time in six weeks.
There had been no injuries in any of the fires unless you count the
injuries suffered by Tesla`s once high-flying stock. It fell for the third
day in a row today after rising by more than 400 percent earlier in the
year. But now, in addition to those fires, there are concerns about a
battery shortage as well as the cost. Tesla will encourage it builds more

The automaker has become lately a favorite among short sellers who
believe the stock is still overvalued. Shares continue to fall since its
earnings report Tuesday, down another 7 1/2 percent today to $139.77.

And shares of Men`s Warehouse took off today after an activist
investor took a roughly 10 percent stake in the company. Eminence Capital,
large hedge fund, is encouraging Men`s Warehouse to solicit bids and
increase its shareholder value. The clothier Joseph A. Bank, along with
the private equity fund of Golden Gate, have offered $48 a share to acquire
Men`s Warehouse, but the company rejected the bid calling it too low. The
stock up 7 percent today to $45.43.

HERERA: Up next, in the hunt for yield, commercial real estate
investors change their way of thinking. You may want to take some notes.
That straight ahead.

But, first, a look at commodities, treasuries and currencies.


HERERA: Since the recession, commercial real estate investors have
largely stuck to the safety of major U.S. markets. But, a new report shows
that that`s all changing, thanks to new cash and new opportunities.

Diana Olick reports.


York, San Francisco, Boston, these top tier markets have all been safe
havens for commercial real estate cash, as investors licked their
recessionary wounds.

That is now turning around.

MITCH ROSCHELLE: The tailwinds are the new headwinds. I think there
is more positive momentum to help than what we`ve had in the last few

OLICK: That momentum comes in the form of cash, foreign and
institutional investors, private equity and REITs, not to mention that
banks are lending again and the commercial mortgage-backed securities
market is on the rise. Market-wide, while San Francisco still sits at the
top of PWC`s hot list, Houston moved up to second, and Dallas jumped four
spots into the top five. Denver, Nashville and Austin are also seeing much
more investor demand.

A noticeable dropout: Washington D.C. It fell from 8th to 22nd place
in investor interest. You can thank its local employer for that.

ROSCHELLE: It`s been 18 months of noise regarding the budget debate,
and the shutdown and sequestration, all of those are symptoms. But the
bigger story, I think, in the eyes of investors is just that massive

OLICK (on camera): So, why is the “oh, so unglamorous” warehouse
sector so unpopular now? You`re looking at it — e-commerce, as shopping
moves online, retailers need distribution centers near big cities
especially as more consumers demand their goods overnight.

(voice-over): And from cities to sectors, industrial is number one,
surpassing the apartment sector for development and investment prospects.
Its warehouse subsector is driving the game.

JACK CUNEO, CHAMBERS STREET: It`s had a major impact on the warehouse

Thank you.

OLICK: Chambers Street, a New Jersey based REIT went public this
year. It focuses on the warehouse space.

CUNEO: We see now that other companies are adding more and more of a
direct to the customer component to their warehouse operations.

OLICK: As competition for the space grows, vacancies are dropping,
rents are rising and yield is looking very attractive — all the more
reason for commercial cash to store itself in the sector.

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


MATHISEN: And, finally tonight, with Twitter going public, we thought
we`d look at the first ever tweet by founder Jack Dorsey back in 2006. It
read, “Just setting up my twttr.” Wow.

HERERA: Pretty historic day, right?

MATHISEN: And lots of other famous tweets including the way we sort
of got first hint that Osama bin Laden`s compound had been attacked.

HERERA: Yes, absolutely.

That does it tonight for the NIGHTLY BUSINESS REPORT. I`m Sue
Herrera. Thanks for joining us.

MATHISEN: And I`m Tyler Mathisen. Have a great evening, everybody.
We`ll 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.

Roll Call, Inc. All materials herein are protected by United States
copyright law and may not be reproduced, distributed, transmitted,
displayed, published or broadcast without the prior written permission of
CQ-Roll Call. You may not alter or remove any trademark, copyright or other
notice from copies of the content.>

This entry was posted in Transcripts. Bookmark the permalink.

Leave a Reply