Transcript: Tuesday, March 4, 2014

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

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TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Bounce back. Easing tensions in Ukraine ignite a rally on Wall Street. The S&P 500, a record. The Dow, its best day this year. The NASDAQ, a 14-year high. But will the optimism last?

SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: Fiscal priorities. President Obama unveils his $4 trillion budget. What’s his plan for spending and new taxes in the coming year?

MATHISEN: Tough turnaround. RadioShack will close over 1,000 stores as it tries to stem a sharp slide in sales. But can the troubled neighborhood electronics retailer reverse the trend in this ultracompetitive environment?

All that and more tonight on NIGHTLY BUSINESS REPORT for Tuesday, March 4th.

GHARIB: Good evening, everyone.

Russia retreats and Wall Street gets a massive relief rally. Investors bought up stocks after Russian President Putin pulled troops back from the border of Ukraine, allaying worries about an imminent military showdown. The major averages surged 1 1/2 percent or more, posting their biggest gains so far this year, even setting a new record close for the S&P 500.

Now, those sky-high gains wiped out all of yesterday’s losses and even Russia’s stock market which lost 12 percent on Monday rose more than 6 percent today.

Here’s a look at the closing numbers. The Dow soared 227 points, the NASDAQ ended at a fresh 14-year high, adding almost 75 points and the S&P jumped 28 points to 1,873. That’s a record high.

Over the commodities markets, what was up yesterday was down today. Oil prices fell $1.59 a barrel to $103. And gold lost $12 an ounce to 1,337.

MATHISEN: Susie, even as Russian President Vladimir Putin said today his country has no intention of fighting the Ukrainian people. International support for Kiev is growing. U.S. Secretary of State John Kerry was there today expressing moral support, along with a massive aid package, and he spiced in some tough words for Russia.

(BEGIN VIDEO CLIP)

JOHN KERRY, SECRETARY OF STATE: If Russia does not choose to deescalate, if it is not willing to work directly with the government of Ukraine as we hope they will be, then our partners will have absolutely no choice but to join us to continue to expand upon steps we have taken in recent days in order to isolate Russia politically, diplomatically and economically.

(END VIDEO CLIP)

MATHISEN: Steve Sedgwick is in Kiev with the latest developments and the challenges Ukraine’s interim government still faces.

(BEGIN VIDEOTAPE)

STEVE SEDGWICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Here in Kiev on Tuesday a slight lessening of tensions. For the first time since the start of the crisis, we heard from Russian President Putin who appeared to say there will be no Russian military activity across Ukraine. He failed to answer the questions about whether there were 16,000 Russian troops on the Crimean Peninsula and what their activities were in that region.

Elsewhere, we’ve seen U.S. Secretary of State John Kerry offering support to the fledgling pro-Western government. He offered $1 billion in loan guarantees plus technical assistance to the government as we run up towards those May 25th presidential elections.

Elsewhere, no word yet from the IMF. The IMF is in town talk together finance ministry about both short term and long term financial support, which is much needed for this young government here in Kiev.

Steve Sedgwick for NIGHTLY BUSINESS REPORT in Kiev.

(END VIDEOTAPE)

GHARIB: Our guest tonight says Wall Street is in a long-term bull market, a belief that she’s held before, during and after the Ukraine crisis.

Liz Ann Sonders is chief investment strategy at Charles Schwab.

Hi, Liz Ann. Nice to have you with us.

LIZ ANN SONDERS, CHARLES SCHWAB CHIEF INVESTMENT STRATEGIST: Hi, Susie. Thanks for having me.

GHARIB: All right. So, investors seem to be behaving today like this crisis is all over. Is the worst over, or could there be another round or two?

SONDERS: I think even if I pretended to be a geopolitical strategist, I couldn’t answer that for sure. I think perhaps what Russia was feeling or what Putin was feeling was the effect on the economy with the kind of draw down we saw in the market, the weakness in the currency, the implications that that had for inflation, the sanctions particularly on the elite, you know, there may be some second guessing. But to assume that because the market rallied 227 points today that the market is telling us this crisis is fully over, that may be a stretch.

MATHISEN: You know, Liz Ann, we heard last night from Warren Buffett who said if you own a business tonight, are you going to sell it because of what’s going on in the Ukraine? If you own an apartment building, you own a farm, are you going to sell it because of what’s going on in Ukraine? He said of course you wouldn’t.

SONDERS: Of course, you wouldn’t.

MATHISEN: I assume you agree with that.

SONDERS: I do. I truly believe the chances we look back whatever this point this bull market ends, I think it has ways to go, we’re unlikely to say what do you know it ended because of the Ukraine.

So, you know, geopolitics can cause short-term gyrations in the market, particularly if it impacts commodity prices, energy prices. There are those transmission mechanisms. There’s a confidence hit, too. But they don’t tend to mark the end of bull markets. In fact, more often than not, they tend to be buying opportunities.

GHARIB: Liz Ann, you’ve told us the U.S. stock market is your favorite one. But as investors look around the world for where they can get some really good rewards, even in the face of some risks, you know, why do you like the U.S. and how does it fit in with the rest of the world?

SONDERS: I do think, not only is the United States in a secular bull market in its own right, but I think it’s in the secular bull market relative to emerging markets. Now, we’re not negative on emerging markets. We have a neutral rating, but do like the developed markets more than the emerging markets.

So, I would say ranking them, we don’t tend to do that. I would put up the U.S. — Europe we think is attractive. And then down from that would be the emerging markets. We’re a bit on the fence as it relates to Japan because of the near-term risks they go back into a recession.

MATHISEN: Let’s drill down a little bit more. I was going to ask you of your view of emerging markets. Are they more vulnerable in the short term to the geopolitical developments in the Ukraine or elsewhere? Could other emerging markets be tarred or drawn down because of fear about what people see in Ukraine?

SONDERS: Well, certainly the economic connections, the import-export relationships, whether it’s between the Ukraine and Russia, the Ukraine and Europe, Europe and Russia, is certainly much tight and much more meaningful than what we see in the United States.

What I would say within the emerging markets is that differentiation is becoming much more important. The tide is not lifting all boats or taking out all boats.

I think there are several factors that will define whether you’re on the sort of winning end of emerging markets or on the losing end. It’s a function of whether you’re got an inflation problem that might prevent your central bank from easing policy, whether you’ve got a current account deficit, whether you are on the production side of commodities or on the consumption side of commodities. Clearly, there are some particularly hard-hit emerging markets leaving the Ukraine aside for a moment.

You’ve got the now so-called fragile five, which would be Brazil, India, Indonesia, South Africa and Turkey. And those are some of the most beleaguered areas.

But there are also going to be some winners. We have a fairly optimistic view on China, which is by far the biggest within the emerging markets sphere.

GHARIB: Wish we had more time to explore that with you. Liz Ann, always a pleasure talking to you. Thank you so much.

SONDERS: Thanks very much for having me.

GHARIB: Liz Ann Sonders, chief investment strategist at Charles Schwab.

MATHISEN: Now, if you’re wondering which well-known U.S. companies have some of the biggest exposure in Russia, we’ve got some names for you.

Among them are General Motors (NYSE:GM). It makes about 100,000 cars a year at a plant near St. Petersburg and it’s hoping to expand operations next year. Ford operates three plants in a giant venture with a Russian automaker. ExxonMobil (NYSE:XOM) formed an alliance with Russia’s state-owned oil giant Rosneft back in 2011 exploring for oil in Siberia, the arctic and the Black Sea.

And banking is big over there. Citigroup (NYSE:C) holds more than $10 billion in assets in Russia. That’s the tenth largest emerging markets. JPMorgan (NYSE:JPM) Chase exposure there is nearly $5 billion.

GHARIB: Well, RadioShack has no stores in Russia. And that might be a good thing, since the struggling retailer is having a hard enough time attracting shoppers right here in the U.S. After a terrible fourth quarter which included the holiday season, shares of RadioShack tumbled 17 percent today, forcing the company to announce some major changes.

Courtney Reagan has more on the massive number of store closings to come and whether RadioShack can even survive.

(BEGIN VIDEOTAPE)

COURTNEY REAGAN, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): For decades, RadioShack has been the answer for folks in an electronics pinch, needing that cable or connector. But some believe RadioShack may be entering the beginning of the end of its lifetime as the neighborhood electronics solution.

Today, the retailer announced a big drop in holiday sales, a larger loss than a year ago, and said it will be closing 1,100 underperforming locations. That’s 20 percent of its existing stores.

UNIDENTIFIED MALE: The ’80s called. They want their store back.

REAGAN: The retailer did have a well-received Super Bowl commercial, poking fun at its stale store appearance and brand, though it seems consumers were more entertained than moved to head to the nearest RadioShack to check out the changes.

While acknowledged the handful of remodeled RadioShack stores are more attractive and say the CEO Joe Magnacca deserves credit for the changes, it’s likely just not enough.

JAN KNIFFEN, CNBC RETAIL ANALYST: They’re going to go to zero. They’re going to go into reorganization. They’re going to close a whole lot of stores which they’ve already started. They’re going to try to find financing so they can remodel the ones that are left. They’re going to try to partner with somebody and get an online business going and try to come back.

REAGAN: Competition both online and offline, coupled with the slowing wireless industry are just part of the reasons RadioShack’s losses are expected to exacerbate — though perhaps more damaging has been the retailer’s failure to attract younger shoppers.

(on camera): Today’s report marks more than two years since RadioShack has made a profit. Janney capital markets analyst David Strasser says RadioShack’s release today, quote, “read somewhat like the Circuit City press release of 2008,” before it filed for bankruptcy later that year.”

For NIGHTLY BUSINESS REPORT, I’m Courtney Reagan.

(END VIDEOTAPE)

MATHISEN: Still ahead, from Ukraine to natural gas and crude oil exports, what some of the biggest names in the energy business are saying about the major issues facing the industry.

(MUSIC)

GHARIB: Encouraging words about the U.S. economy today from Ben Bernanke. In his first public speech since stepping down as chairman of the Federal Reserve at the end of January, Bernanke spoke at a financial conference in the United Arab Emirates, saying the outlook for the U.S. is positive compared to the rest of the industrialized world.

And he believes the U.S. economy will continue growing at a rate of around 3 percent this year.

MATHISEN: President Obama may be counting on that kind of growth or even more for the year ahead as he unveiled a proposed $3.9 trillion federal budget for the year 2015. Fiscal year, that is. It focuses on ending tax breaks for the wealthy in order to pay for massive improvement projects for the nation’s crumbling infrastructure.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Our budget is about choices. It’s about our values. As a country, we’ve got to make a decision if we’re going to protect tax breaks for the wealthiest Americans or if we’re going to make smart investments necessary to create jobs and grow our economy and expand opportunity for every American.

(END VIDEO CLIP)

MATHISEN: But the president’s proposed budget is not likely to get through Congress anytime soon.

John Harwood joins us now from the White House with more.

John, what is in the president’s budget and how much of it’s new?

JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, what’s in the president’s budget, Tyler, reflects the parameters specified in the budget deal, specifically domestic spending, or so-called discretionary spending, both defense and on programs for ordinary Americans at about $1.2 trillion.

But the president also is putting in some proposals that aim higher toward whenever it is that Congress decides Democrats and Republicans that they can make a larger budget deal that would curb entitlement spending, raise some tax. But for now, he’s looking for a little bit more in his priority areas, and looking to do some business with Republicans.

GHARIB: John, it sounds like many of the elements of the budget have been proposed before I’m sure though the Republicans have a lot to say about those proposals. What was the Republican reaction?

HARWOOD: Republican reaction is essentially that this is a status quo budget that doesn’t change anything. A lot of that’s true, because many of the proposals, raising taxes of different kinds on the wealthy, whether it’s closing the carried interest loophole or limiting deductions for wealthy people, are things that are familiar that have been proposed and ignored by Congress in the past.

But what both sides have agreed right now, they’re really not going to have a big budget fight. So the president’s budget lays out sort of a campaign manifesto for Democrats. This is what we would do if we were in charge. Republicans are going to do the same with their own budget.

MATHISEN: So, there’s not going to be a big budget fight here. So, what’s important about this budget then in the last analysis?

HARWOOD: Well, two things. First of all, you may get some modest increases, Tyler, in spending on early childhood education, on tax credits for the working poor, perhaps for infrastructure as well.

But longer term what’s important is that this budget, like the one Republicans will lay out, will establish markers for those future negotiations. It’s just like Dave Camp’s tax reform proposal that he put out last week.

It’s not going to become law this year, but some of those things eventually will become law. It’s just that as we’ve come to learn, things take a pretty long time in a gridlocked Washington.

MATHISEN: All right. And spring doesn’t look like it’s ever going to come to Washington on the North Lawn. John Harwood —

HARWOOD: It doesn’t feel that way today.

MATHISEN: I’m sure it doesn’t. Thanks very much, John.

GHARIB: Shares of JCPenney climbed on a positive report from Standard & Poor’s. And that’s where we begin tonight’s “Market Focus.”

The rating service upped its credit outlook to stable from negative, saying the department store sales have turned a corner. The company’s fourth quarter results which were released last week came in better than analysts’ estimates. JCPenney surged more than 4 percent to $8.29.

Facebook (NASDAQ:FB) is reportedly buying privately held Titan Aerospace for around $60 million. Titan makes solar-powered drones that could be airborne for up to five years without having to land. Now, the deal is thought to be part of Facebook’s ambition to provide Internet access worldwide. Facebook (NASDAQ:FB) rose 2 percent to $68.80.

And Disney (NYSE:DIS) and Dish Network have reached a new long-term carriage deal. It lets the satellite TV provider carry Disney (NYSE:DIS)-owned networks in some new ways. The agreement paves the way for Dish to offer live programming from some of Disney’s networks like ESPN and ABC over the web on mobile devices without a Dish video subscription.

As part of the deal, Dish agreed to disable its ad-skipping feature in its digital recorder on certain Disney (NYSE:DIS) programs for a limited period of time.

Shares of both companies rose today. Disney (NYSE:DIS) was up almost 3 percent to $81.71. Dish Network rose 1 percent to $59.56.

MATHISEN: General Electric (NYSE:GE) CEO Jeff Immelt invested his entire 2013 bonus, that’s about $2.6 million, in G.E. stock. Immelt has bought more company stock this year than any other CEO of any S&P 500 company. He’s also the largest inside stakeholder at G.E.

Immelt’s vote of confidence lifted shares 2 percent to $25.65 on this up day.

Delta canceled 8,000 flights in February. But that actually helped the airline increase passenger unit revenue. That is a key measure of performance. The company was able to fill more seats on fewer flights, which is more cost effective. And that helped send shares to an all-time high up almost 6 percent to $34.45.

And Qualcomm’s board approved a $5 billion increase to its stock buyback program. The world’s largest cell phone chipmaker also hiked its quarterly dividend by 20 percent to 42 cents a share. And that sent the stock up more than 3 percent to finish at $76.11.

GHARIB: Oil and the global energy market were front and center at the annual CERA Week gathering of energy industry leaders from around the world today, discussing everything from the Russia-Ukraine conflict, the controversial Keystone Pipeline, U.S. oil and gas exports and more.

Sharon Epperson has more on the big themes at this year’s conference in Houston.

(BEGIN VIDEOTAPE)

SHARON EPPERSON, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): This geopolitical uncertainty is fuelling the case for North American energy independence. Even from foreign investors.

ANDREW MACKENZIE, BHP BILLITON CEO: We like everybody else just have to wait and see what happens over the next few weeks and what that means for the global economy and the trade in our goods and services.

EPPERSON: BHP Billiton (NYSE:BHP), the world’s largest mining company based in Australia with no business operations in Russia, has made a big bet on the United States. It is one of the largest investors in shale gas in the U.S., making a $20 billion investment in 2011. And it applauds U.S. efforts to export natural gas overseas.

But while the fight to export U.S. natural gas has largely been won, another battle continues.

(on camera): Advocates of exporting energy from the U.S. say the time has come to lift a 39-year-old ban on U.S. crude oil exports, allowing oil to be exported to not only just Canada but more widely would be a strategic move as well as one that would enhance the U.S. economy. They say this is a move that could help to protect the U.S. and its allies.

SEN. LISA MURKOWSKI (R), ALASKA: When you see the situation unfolding in Ukraine right now, the fact that Russia uses their energy as leverage, political leverage, we’ve not been in a position as a nation to really kind of be a player there.

EPPERSON (voice-over): Alaska Senator Lisa Murkowski, the highest-ranking Republican on the Senate Energy Committee, has called on President Obama to waive the prohibition on the export of oil, saying that past presidents have done so when it’s a matter of quote national interests.

The focus of this major energy conference continues to be on how to capitalize on growing oil and gas production, hastening approval of a key pipeline to bring crude oil from Canada to Texas is also being widely discussed. Canada’s national resources minister expressed his confidence that the keystone excel pipeline was another sure path to North American energy independence.

JOE OLIVER, CANADIAN NATURAL RESOURCES MINISTER: Canadian oil will displace Venezuelan oil, with the same level of gas emission.

EPPERSON: Providing a strategic advantage for the U.S. and North America at a time when geopolitical tensions between Russia and the West are rising.

For NIGHTLY BUSINESS REPORT, I’m Sharon Epperson in Houston.

(END VIDEOTAPE)

GHARIB: Coming up, what sales of bulldozer, backhoes and other big machines are saying about the global economy? That’s next.

(MUSIC)

MATHISEN: Americans love getting new cars, but we are borrowing more now than ever just to own one. Experian automotive reports that in the final quarter of 2013, the average amount borrowed by new car buyers — get this — topped $27,000 for the first time. That’s the average loan. The reason is the combination of higher sticker prices for new cars. They now average around 32 grand. (INAUDIBLE) rising rates for loans and people stretching out the loans to five or six, in some cases even seven years.

GHARIB: You won’t find any cars at this year’s ConExpo but you will see all the newest and largest constructions vehicles, farm gear and earth-moving equipment on the market. This comes as some heavy equipment makers like Caterpillar (NYSE:CAT), Manitowoc (NYSE:MTW), and Terex (NYSE:TEX) see their shares close up on 52-week highs.

Jane Wells was at the ConExpo in Las Vegas and has more on the outlook for sales of construction equipment and which markets are the hottest.

(BEGIN VIDEOTAPE)

JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): Big machines can tell you a lot about the big economic picture. So how’s the global market?

UNIDENTIFIED MALE: It’s OK.

WELLS: That’s the general feeling at the massive ConExpo, Con/Agg show in Las Vegas. Sales here signal what the year may look like.

ANN DUIGNAN, JPMORGAN: What we’re looking for the nonresidential cycle to start to pick up.

WELLS (on camera): This is the $1.6 million excavator from Hitachi (NYSE:HIT). And while this sort of construction equipment is showing strength, sales of large farming equipment are not, as the American farmers’ buying binge has come to an end.

(voice-over): Not good for John Deere.

SAM ALLEN: We would argue that we’re only one bad weather pattern somewhere in one of the major farm producing areas of the world away from again running into a situation where the world’s supply can’t keep up with demand.

WELLS: More Chinese manufacturers are at the show this year, hoping that as their own economy slows they can export machinery abroad.

But much of the talk is about tensions between Russia and Ukraine.

GLEN TELLOCK, MANITOWOC CEO: We’re going to watch it very closely. Russia has historically for us been a very good market.

WELLS: Glen Tellock runs Manitowoc (NYSE:MTW), which builds large cranes. He fears any military campaign by Russia will divert resources away from construction projects.

Deere sells equipment to Ukraine, a major wheat producer, and it has factories in Russia, where it’s also involved in forestry. The CEO experts some short term problems but —

ALLEN: Russia in the long term is going to have to be a part of a positive solution for helping feed the world. So we need to figure out a way to peer through all these global crises and continue to stay there.

WELLS: For the moment, Sam Allen says he’s checking on the safety of his employees and dealers and waiting to see what happens next, noting the world is a volatile place whether due to politics or weather.

For NIGHTLY BUSINESS REPORT, Jane Wells, Las Vegas.

(END VIDEOTAPE)

MATHISEN: Finally tonight, we at NIGHTLY BUSINESS REPORT would like to extend our thanks to you, our viewers, as we mark one year since this broadcast has been produced by CNBC. We hope you agree it’s been a great year, and we’ve picked up a few new fans along the way.

Here is one of them.

(VIDEO CLIP PLAYS)

MATHISEN: Stella watches the program with her granddaddy. Just like Susie and me, she especially enjoys dancing with the currency boards. Right, Susie?

GHARIB: Absolutely.

MATHISEN: Absolutely. Stella, thank you for watching. And to all our viewers, thank you as well on our first anniversary.

GHARIB: I want to thank all our viewers, too, for sticking through with us. We’ve had a great year, Tyler and I.

And stick around with us. Because more good things to come in the year ahead.

MATHISEN: All righty. And that is NIGHTLY BUSINESS REPORT for tonight.

GHARIB: I’m Susie Gharib. We want to remind you this is the time of year your public television station seeks your support to make programs like this one possible.

MATHISEN: And I’m dancing Tyler Mathisen, on behalf of your public TV station. Thank you for your support. Have a good night, everybody. We’ll see you back here tomorrow night.

END

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