Transcript: Tuesday, February 11, 2014

NBR ThumANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Susie Gharib, brought to you in part by —


TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Surge on the street. Stocks have their best four-day streak in almost two years as the new Fed chief puts investors in a buying mood, pledging to continue her predecessor`s pump priming approach.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Moving forward. The House votes to extend the nation`s borrowing limit without the political drama of last year. Can investors breathe a sigh of relief?

MATHISEN: Food stocks fried. ConAgra and Dean Foods (NYSE:DF) warn of tough times ahead, sending shares tumbling. What`s behind the weak outlook and is it cause for concern?

All that and more tonight on NIGHTLY BUSINESS REPORT for Tuesday, February 11th.

And good evening, everybody. I`m Tyler Mathisen.

HERERA: And I`m Sue Herera, in tonight for Susie Gharib.

Well, the bulls were running on Wall Street today. Stocks rallied after Janet Yellen, the new chair of the Federal Reserve, assured lawmakers that as long as the economy continues to gain strength, the Central Bank will continue to taper down its bond-buying stimulus measures, while keeping the benchmark interest rates at record low levels, in order to boost the financial system.

Traders certainly liked that. All ten S&P sectors rose, sending the major averages to their fourth-day winning streak this year. The blue chip Dow stocks up 193 points, closing just shy of 16,000 again. The NASDAQ up 42 and turning positive for the year. And the S&P added nearly 20, closing back above the 1,800 level again.

We have two reports on today`s rally. First, Hampton Pearson with more on Janet Yellen`s testimony to lawmakers, and then, Courtney Reagan with reaction on Wall Street.

But we begin with Hampton.


HAMPTON PEARSON, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): In her first report to Congress as chairman of the Federal Reserve, Janet Yellen said the U.S. economy would have to take a sharp downturn before monetary policymakers would consider halting the reduction of bond purchases.

The last two months of disappointing job growth, she said, does not meet that standard.

JANET YELLEN, FEDERAL RESERVE CHAIR: I was surprised that the jobs reports in December and January, the pace of job creation was running under what I had anticipated, but we have to be very careful not to jump to conclusions in interpreting what those reports mean.

PEARSON: The bond-buying program now at $65 billion per month is not on a preset course says the new Fed chairman. And it is adverse events overseas, not just in Fed policy, that`s responsible for recent market volatile.

YELLEN: We have been watching closely the recent volatility in global financial markets. Our sense is that at this stage, these developments do not pose a substantial risk to the U.S. economic outlook.

PEARSON: As far as forward guidance on raising key short-term interest rates, the Fed`s targets of 6.5 percent unemployment and 2 percent inflation are not automatic triggers.

YELLEN: Crossing one of these thresholds will not automatically prompt an increase in the federal funds rate, but will instead indicate only that it had become appropriate for the committee to consider whether the broader economic outlook would justify such an increase.

PEARSON: During the marathon hearing, House Republicans repeatedly challenged the new Fed chairman on both the cost, $4 trillion Fed balance sheet, of quantitative easing, and what now looks like a moving target on interest rates.

REP. JEB HENSARLING (R), HOUSE FINANCIAL SERVICES CMTE CHAIRMAN: But, Madam Chair, if you reach a threshold and then you ignore the threshold, what good is the forward guidance?

YELLEN: I have always been in favor of a predictable monetary policy that responds in a systematic way to shifts in economic variables.

PEARSON (on camera): Time and again, the new leader of the Fed continued to stress her desire to support the policies of her predecessor, Ben Bernanke. Janet Yellen was the chief architect of the current game plan and continues to support that strategy.

For NIGHTLY BUSINESS REPORT, I`m Hampton Pearson in Washington.



COURTNEY REAGAN, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): Federal Reserve Chair Janet Yellen held the market`s attention for nearly all of Tuesday`s trading session. The more she answered questions in front of the House Services Committee on Capitol Hill, the higher stocks moved.

Traders liked almost all of what Yellen had to say, piling into stocks, pushing the major averages closing just below session highs with the Dow Jones Industrial Average falling just seven points shy of the 16,000 mark. All S&P large cap sectors closing higher led by energy, telecommunications and material stocks.

Only a handful of stocks in the S&P 500 posting losses for the session. Economically sensitive stocks made particularly strong moves as Yellen`s comments gave a bit of a safety net for riskier technology, energy and commodity stocks.

The market applauded nearly everything Yellen had to say, traders took particular interest about plans to taper the bond-buying stimulus program. Yellen said there`s no preset course and the Fed is closely monitoring the economy and financial markets, suggesting it`s possible the Fed could taper the taper.

ART CASHIN, UBS DIRECTOR OF FLOOR OPERATIONS: Back here, the market`s a sigh of relief. The Fed will be flexible about this. They are really data dependent, either way, not just to get more aggressive if things get strong, but to stay dovish if things go the other way.

REAGAN (on camera): While Yellen`s comments largely echo her predecessor, Ben Bernanke`s strategy, the market liked the continuity in the Federal Reserve`s message. It turns out, it`s a fairly powerful thing for equity markets.

I`m Courtney Reagan for NIGHTLY BUSINESS REPORT on the floor of the New York Stock Exchange.


MATHISEN: Well, it wasn`t just stocks getting a little Janet Yellen bump or maybe a fist pump today, after getting beaten down by economic uncertainty and jitters about emerging markets in recent weeks, gold prices rose 1.4 percent today and even closed at a three-month high following Yellen`s reassuring comments on the Fed stimulus plans.

While the rally was largely attributed to Yellen`s comments, another thing that helped investors breathe a bit of sigh of relief today was the vote on Capitol Hill tonight. The House did pass a clean debt limit extension after House Speaker Boehner agreed to bring the bill to the floor, without trying to get any concessions from the White House.

Now, the move could avert another knockdown drag-out fight in Washington and clearly has.

John Harwood joins us now from the nation`s capital with more.

How close was the vote, John, and at what cost to the speaker did it come?

JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT: The vote was 221-201. That is relatively close, narrow. You had the speaker, because dissidents within his party were not willing to go along with the terms that he was proposing, he had to do it with a vast majority of Democratic votes, 193 Democrats voted yes joined with 28 Republicans.

So, anytime the speaker of the House basically has to act and move forward with the other party rather than his own, that puts him in a weaker position vis-a-vis his caucus. On the other hand, it`s something investors are going to be relieved about and Senate expected to take this up and pass it tomorrow.

HERERA: So, what`s 9 next battle ground then, John? Because the speaker did give in. They did pass a clean bill. But in Washington, there`s always that next battle that`s looming. And since the speaker did give in a bit, what`s he facing next?

HARWOOD: Well, the next battle will be on immigration. Are we going to get a deal to overhaul the immigration system? We`ve got mixed signals from the speaker the last couple of days. The most recent signals were he doubted that that would happen that. That reflects the push back he`s getting from the right.

But I talked to a Republican member yesterday who said this story`s not over. We`re going to have to see how he tries to manage his caucus. He tried to manage it last night on the debt limit and get a vote arrangement that he liked and he didn`t get it. So it`s not clear that he can make what he wants to happen happen on immigration.

And then, of course, there`s the minimum wage where the Obama administration is pushing, has polls on its side, but Republicans are resisting that as well.

MATHISEN: Is the critical issue for the GOP moving into the fall, going to be the repeal of the Affordable Care Act or something beginning to dismantle it?

HARWOOD: I think it`s going to be attacks on Affordable Care Act, not repeal. They don`t have the clout to repeal the Affordable Care Act. President Obama would never sign it, of course. The Senate would never pass it.

So, they think that is the best political issue they have for the fall campaign. They`re trying to hold onto the House, which is likely, trying to retake the Senate which is difficult but possible. And they believe that`s one of the reasons why this debt limit moved on with minimal amount of rancor even though conservatives didn`t go along.

They want to concentrate on Obamacare and try to make their political play there.

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

HERERA: And joining us to talk more now about Wall Street`s relief rally is Russ Koesterich. He`s the global chief investment strategist at Blackrock.

Welcome back, Russ. Nice to see you again.


HERERA: Ms. Yellen seemed to really give the market exactly what it wanted it today. And it kind of reaffirms what you were saying to us the last time you were on, was that you expected the Fed to once they started to pull back on the stimulus plan, to continue to do so. Are you still as bullish on stocks as you were before?

KOESTERICH: Well, I think we`re bullish on stocks compared to the alternatives. It`s clearly not been an easy start to the year for stocks, as we`ve seen the last four days. There`s still a strong bid. When you look at the relative value of stocks, improvement in the economy and the fact that bond by most metrics are still expensive, while I don`t expect the same types of gains we had in 2013 — yes, I still think for this year stocks look like the better alternative.

MATHISEN: So, Russ, can we say correction smorrection, it`s over?

KOESTERICH: Well, here`s what I would say, I think the volatility is not over. While we expect gains this year, it`s not going to be as quiet and peaceful we had on 2013.

Now, part of the reason for that is not necessarily the market has become or likely to become so volatile, but last year was unusually quiet. Volatility was suppressed by all of the extraordinary liquidity we had in the market.

As the Fed begins to taper, what we`re seeing happen what`s likely to continue is a resumption of more normal volatility.

HERERA: So, where do you put money to work if indeed your projections of volatility are correct? What areas of the market look either safe or perhaps better bets than others?

KOESTERICH: I think it`s more the latter than the former. You`re going to get volatility no matter where you are. On a relative basis, we do see some opportunities.

In the U.S., larger companies look to be less expensive, particularly those with a cyclical bias. So, that`s where we`d like to be focused in the United States.

I also think that 2014, unlike 2013, is a year when you don`t want to just be in the United States. We see some good relative value in Europe, which has actually been outperforming year to date.

And while it has been a more volatile market, we still think that there`s more to be squeezed out of Japanese stocks in 2014. That`s another place you could consider putting new money to work.

MATHISEN: Where in Europe, I`ve heard several analysts that I spoke to today speaking favorably towards Europe. Where either by country or by sector are you seeing those compelling values?

KOESTERICH: I think there are a couple of places. We do see some good value in northern Europe, in places like Germany, some of the Nordics as well. What I would say in terms of the sectors is looking for companies particularly in the export sector that have been marked down because their domiciles in Europe, but really are global companies that are more geared to the global economy than the local European economy.

HERERA: And you also like municipals. Why?

KOESTERICH: We do like municipals. You know, fixed income, Sue, is a tough space right now. It`s very hard to find good value. Most parts of the bond market are expensive.

But in general, we found that the tax-exempt part of the market, municipals, which really got beat up quite a bit last year, look to offer better relative value. So I know that`s an area that some people are nervous about. There`s been some headline risks around Puerto Rico, around Detroit. That`s likely to continue.

But, by and large, at the national level we think credit quality is improved, and the taxi equivalent yield is very attractive relative to treasuries.

HERERA: All right. We`ll leave it there. Russ, thanks a million. Appreciate it.

KOESTERICH: All right. Thanks, Sue.

HERERA: Russ Koesterich, global chief vestment strategist at Blackrock.


MATHISEN: Well, mixed news, Sue, about jobs. The Labor Department says advertised jobs openings declined slightly in December, coming in as expected at just under 4 million positions. But that follows a five-year high during the prior month. And there were 4.4 million people hired that month.

HERERA: A new survey of small business owners shows there was a little more optimism in January, with 12 percent of respondents planning to add jobs in the next three months.

Bill Dunkelberg, chief economist at the National Federation for Independent Business, sees a lot of hope for the overall economy in these latest numbers.


BILL DUNKELBERG, NATIONAL FEDERATION FOR INDEPENDENT BUSINESS: Nice jump in hiring plans. The best numbers we`ve seen in the hiring plans component since 2007. So, you know, if this all kind of follows through and that the sales turn out to be as strong as these owners think they`re going to be — well, maybe we`ll finally get going.


HERERA: In addition, January`s increase in optimism was the third monthly gain in a row.

MATHISEN: Still ahead, Con-Agra warns and it`s not alone, Dean Foods (NYSE:DF), one of the largest dairy producers, also gives a weak outlook. What`s behind the soft guidance? And are food stocks turning sour?


HERERA: How much safer for your heart is the medication naproxen? It turns out, not much at all. An FDA panel says new research shows that naproxen, the main pain reliever in Alleve, Motrin and other over-the-counter and prescription medications is no safer for the heart than rival drugs like Ibuprofen, used by millions of Americans every day to prevent heart attack and stroke, or to threat arthritis.


MATHISEN: Well, some of the nation`s biggest food companies are warning investors about lower earnings in the year ahead, blaming weaker demand as Americans change the menu on what they`re serving at home.

Sara Eisen has more.


SARA EISEN, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): Dean Foods (NYSE:DF), the company behind Land O`Lakes and Mayfield Dairy, reported a loss for the quarter and predicted more trouble ahead. Con-Agra, which produces Hunts ketchup and Peter Pan peanut butter, slashing its earnings outlook for the year. And Annie`s, the organic company known for its packaged mac and cheese, also lowered its forecast for profits.

AKSHAY JAGDALE, KEYBANC CAPITAL MARKETS: All food companies are experiencing weak volumes owing to consumer spending that`s been very constrained.

EISEN: A sluggish consumer is just one problem food companies are dealing with. Higher commodities and raw materials costs are also a big headache. Dean Foods (NYSE:DF) cited higher milk prices, which it expects to climb even higher in 2014. Annie`s also complained of higher organic wheat prices.

But the fact is, without big gains in jobs and income, these companies are going to have to fight to get grocery shoppers to buy their food.

JAGDALE: Consumers are more focused on value rather than higher value added, premium natural products. But certainly, cleaner labels and more natural ingredients are something that the consumer`s looking for and manufacturers are increasingly providing more and more of those options.

EISEN: We`re seeing that strategy play out every day. Kraft (NYSE:KFT) Foods announcing it`s taking an artificial preservative out of its Kraft (NYSE:KFT) Cheese singles. Following Subway last week, saying it`s removing a key chemical from its bread known as dough conditioner, used to strengthen the Dow, ingredient the FDA says are safe but consumers are now demanding even more safe.

(on camera): It`s a trend. Big food getting increasingly aware of consumer demands for fresh, healthy ingredients. Just one sector taking to fight an overall sluggish environment when it comes to consumer spending on the basics.



HERERA: We begin tonight`s market focus with a warning from Proctor & Gamble after the closing bell. The world`s largest household products maker cut its sales and earnings outlook for the year because of unfavorable foreign exchange rates in emerging markets, including the devaluation of the Argentina peso, the Turkish lira and causing those to be less when they convert to dollars. P&G shares finished the day up 1 percent to $78.84.

CVS (NYSE:CVS) Caremark sticking by its 2014 sales forecast, even though just a week ago, it announced it will stop selling cigarettes. The company says it`s strengthened its core pharmacy business will help offset that $2 billion yearly tobacco sales loss that it will suffer.

CVS (NYSE:CVS) also beat fourth quarter earnings estimates helped by increased prescription sales. Shares rose nearly 3 percent to $68.77.

And Sprint lost money in the fourth quarter, but not as much as analysts had expected. The third largest U.S. wireless carrier helped narrow its loss by growing subscribers. That surprised investors because in past quarters, the company lost customers due to a massive overhaul of its network which weighed on the quality of its phone calls. Shares rose nearly 3 percent to finish at $7.90.

MATHISEN: Newell Rubbermaid (NYSE:NWL) is recalling 3.8 million of its Graco (NYSE:GGG) brand car seats that are defective and can trap children. The buckles on the problem products can jam. But Graco (NYSE:GGG) is not recalling all of the seats that the government believes it should. Regulators want the recall to include another 1.8 million seats designed for infants. We`ll see where this ends up. Shares were off a fraction to $30.57.

Charter Communications (NASDAQ:CHTR) is upping its efforts to buy out Time Warner (NYSE:TWX) Cable. Charter will nominate 13 directors to Time Warner`s board. The cable company CEO said Charter is trying to pressure the board into accepting a low-ball offer.

About a month ago, Charter bid $132.50 a share for Time Warner (NYSE:TWX) Cable, but that offer was rejected. Shares of Charter up a fraction to $137.90. TWC fell slightly to $134.90.

Well, Boeing`s ability to churn out 787 Dreamliners are being called into question by employees. According to Reuters, a huge backlog of orders is apparently making it difficult to build 10 aircraft a month. This production is crucial to Boeing`s performance this year as it`s relying on the commercial planes to offset weakness in its defense business.

Still, shares were up more than 2 percent today in a rising market to $130.16.

HERERA: With so many Americans already using Amazon (NASDAQ:AMZN) to do a lot of their shopping for the kitchen and for their wardrobe, the company is now aiming to be the newest competitor battling for control of your living room.

Josh Lipton has more.


JOSH LIPTON, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): Consumers spend a lot of time on their smart phones and tablets, but televisions still dominate the living room. Right now, consumers can stream entertainment from the web to their TVs, using a range of set-top boxes and consoles such as Apple (NASDAQ:AAPL) TV, Roku or Microsoft`s Xbox.

UNIDENTIFIED MALE: We decided to go big.

LIPTON: Now, another tech titan could be entering this market. Amazon (NASDAQ:AMZN) could soon roll out its own set-top box which analysts say could be available as soon as April.

MICHAEL PACHTER, WEDBUSH SECURITIES: I think Amazon (NASDAQ:AMZN) dominated in books, and I think they feel as though they missed out on music and movies. And they`re determined not to miss out on games. So I think that they hope to be the download source of choice for all entertainment.

LIPTON: Pachter says the set-top box could allow consumers to stream music, movies and games available on Android-based phones or tablets. But unlike the Roku box, it could also come with a hard drive so users could download content rather than just stream it. Another reason why Amazon (NASDAQ:AMZN) wants a set-top box in your living room, it could be a new which for the e-commerce giant to market goods.

JAMES MCQUIVEY, FORRESTER RESEARCH: Advertising is the big, big moneymaker in the world of television. And Amazon (NASDAQ:AMZN) has millions of products to advertise. It really is a big advertising platform. So, if it can get in front of you in your television and then advertise the products that it sells and its merchant partners sell, it`s a completely new advertising model for television. And Amazon (NASDAQ:AMZN) could create it.

LIPTON: Analysts say Amazon`s success could also mean bad news for some of its rivals. Amazon (NASDAQ:AMZN) could sell this content and e-commerce hub to users and then offer them free membership to their prime service which allows for free shipping and unlimited streaming. That could put pressure on Netflix (NASDAQ:NFLX).

There are risks for Amazon (NASDAQ:AMZN). The company will need to spend a lot of money acquiring and creating content as well as making and distributing the hardware.

(on camera): But the chance to control your living room and make more money from your entertainment is an opportunity that analysts say is a no-brainer for the online retailer, and they think it`s worth the risk.

Josh Lipton, NIGHTLY BUSINESS REPORT, Silicon Valley.


HERERA: Coming up, Americans lost pizza, of course, and the cheese on top of it. But did you know the federal government spends millions of dollars to get us to eat it? And help Domino`s increase sales in the process? That story is coming up next.


MATHISEN: It is hard to pinpoint exactly why but a record number of Americans are renouncing their U.S. citizenship and moving out of the country. The number is still really very small. There were just under 3,000 expats in all of 2013, giving up their U.S. passports and green cards. But the previous record was fewer than 1,800 back in 2011.

Now, some move out of the country for family reasons or to go back to their birth countries. And others are reportedly to avoid paying U.S. taxes.

HERERA: The Department of Transportation is out with its monthly report card on the nation`s biggest airlines. And those freezing temps, along with several snow and ice storms back in December forced airlines to cancel nearly 3 percent of all domestic flights. That`s up from 1.5 percent just a year earlier.

Ten flights that month were stuck on a tarmac for at least three hours, which is also a violation of federal rules. Nine of those flights were during a single snowstorm at Chicago`s O`Hare Airport.

MATHISEN: Making a phone call on board one of those airlines may have just gotten a lot tougher. House panel today approved a bill that would ban all in-flight cell phone calls with lawmakers who are frequent fliers, saying calls on planes would just be too noisy and would distract fellow passengers. Now, the bill has to be passed by the full House and then move on to the Senate.

HERERA: And finally tonight, a little-known government program is collecting a fee and spending millions to boost sales of something that Americans already love — pizza. So, why is the Department of Agriculture in the pizza business?

Eamon Javers explains.


EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): At We the Pizza on Capitol Hill, you don`t have to tell people how important cheese it to their pie, they already know.

UNIDENTIFIED MALE: Cheese makes or breaks the pizza. I mean, bad cheese, bad pizza.

JAVERS: But elsewhere in Washington, the U.S. government is collecting millions of dollars from the dairy industry and spending it on ads telling people just how great cheese pizza can be. It`s a little-known government effort called the Check Off Program run by the U.S. Department of Agriculture, which collects a mandatory fee of 15 cents for every 100 weight of milk sold for certain purposes. And $35 million of that milk fund money was used to run an ad campaign designed to boost pizza sales and in turn sell lots of cheese.

In recent years, the government has partnered with Domino`s Pizza (NYSE:DPZ) to promote pizzas like the chain`s Wisconsin Six Cheese Pizza, but the program is getting notice in the media and now some critics ask why the government should be in the pizza business at all.

ROMINA BOCCIA, HERITAGE FOUNDER FELLOW: There`s a term for it. It`s crony capitalism, it`s when the government and businesses work closely together and they exchange favors in the form of handouts or campaign contributions depending on which way the money flows.

JAVERS: The industry says there`s no taxpayer money involved here. The program is funded by fees on the industry itself.

BOB YOUNG, AMERICAN FARM BUREAU: The industry itself runs this program. Again, all USD does is provide oversight and they get reimbursed for the cost of that oversight.

JAVERS: The industry says the fees on the people who bought the cheese in this pizza help drive more demand for the product, $3.95 for every dollar spent on the program.

For NIGHTLY BUSINESS REPORT, I`m Eamon Javers in Washington.


HERERA: Wisconsin Six Cheese Pizza.

MATHISEN: For a girl from Wisconsin, you like that, right?

HERERA: I am. Not too much, though.


HERERA: All right. That`s it for NIGHTLY BUSINESS REPORT for tonight. I`m Sue Herera. Thanks for joining us.

MATHISEN: And I`m Tyler Mathisen. Thanks from me as well. Have a great evening, everybody. Maybe enjoy a pizza.


MATHISEN: 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) 2014 CNBC, Inc.

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