Transcript: Monday, July 28, 2014

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

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Jam-packed week, from
the jobs report to the first read on second quarter economic growth. The
data will flow fast and furious. But will it change anything for Janet
Yellen and the Feds?

Different directions. A new prognosis for two of the nation`s biggest
entitlement programs, Medicare and Social Security.

Merger Monday. Twelve billion dollars in deals helping to lift
spirits on Wall Street. We`ll tell you who is in a buying mood and why.

All that and more tonight on NIGHTLY BUSINESS REPORT for Monday, July
28th.

Good night, everyone. I`m Tyler Mathisen. Susie Gharib has the night
off.

Well, the week started with a hint of optimism, thanks to a dual of
deals. But there was greater caution as investors paused ahead of a number
of high profile economic reports this week — corporate earnings and
underlying concerns about geopolitical risks.

Today, the White House says it expects the European Union to impose
new sanctions this week against Russia, and that the U.S. will impose
additional measures as well.

And deal news which saw former rivals Zillow and Trulia and Dollar
Tree (NASDAQ:DLTR) and Family Dollar get together offset discouraging
pending home sales for June. More on that in just a moment.

At the close, the Dow Industrials were up 22 points to 16,982 and
change. The NASDAQ, though inched lower, falling 4 and the S&P 500 rose
fractionally to 1,978.

But attention now turns to some very important data this week,
including the July employment report. Our first read on second quarter
growth and a meeting of the Federal Reserve thrown in for good measure.

Steve Liesman has more.

(BEGIN VIDEOTAPE)

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: The Feds
meeting this week comes amid a slew of important economic data that could
influence Fed policy. So, for Fed chair Janet Yellen, the question is,
whether the numbers will throw a wrench into the current plans to exit
gradually from its easy monetary policy, or will inflation better growth
and more jobs force the Feds to move more quickly.

DREW MATUS, UBS CHIEF ECONOMIST: If the rest of this week, the Fed
continues its gradual tapering of policy, at the same time, the market
becomes ever increasingly worried that the Feds were behind the curve.

LIESMAN: Among the big data we get this week, on Wednesday, we`ll get
the ADP report. The private payroll company tries to estimate the
government jobs number, economists look toward 23,000 private sector jobs
to be created. Also, we`ll get the first read on second quarter GDP seen
near 3 percent, almost reversing the first quarter decline of 3 percent and
GDP prices seen rising about 2 percent.

Friday, we get the payroll report of 234,000. The employment rate
seems ticking down 1/10 of 6 percent, and wages seen rising 0.2 percent.

If the data are strong, UBS thinks they will not see a fed hike sooner
but hike faster once it starts.

MATUS: And the real reason is, they are going to be hitting all of
their targets with the Fed funds rated zero, and a balance sheet that`s $3
trillion too large. For us, that math doesn`t give up. Something`s got to
give, if you`re trying to tighten policy, and you have a balance sheet that
creates stimulus on its own, that`s going to be $3 trillion too high, the
only thing you can move is rates. Rates have to go up faster.

LIESMAN: But the consensus in the market is that Yellen won`t blink.
Only a slight tweak is expected to the Fed statement on Wednesday to take
note of the improving jobs market. But there are likely to be serious
behind the scenes discussion from some hawks, even a few centrists who want
to speed up the pace of tapering and even move up the timetable for hiking
interest rates.

Yellen is likely to resist calls for moving faster, especially because
of the big GDP decline in the first quarter and because of the housing
data, which she views as keys to the recovery, has been so mixed. But the
question is whether the data in the form or higher inflation or better jobs
growth forces her hand.

For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.

(END VIDEOTAPE)

MATHISEN: Here to give us some investing guidance for the reminder of
the year are Andres Garcia-Amaya, global market strategist with JPMorgan
(NYSE:JPM) Funds, and Barry Bannister, he`s a market strategist at Stifel
Nicolaus.

Welcome, gentlemen. Good to have you with us.

Andreas, let me begin with you let`s focus specifically on the
geopolitical tensions that are around the globe right now. Do they
fundamentally change your view of the global economies and markets, and
what I should do with my money or do they merely increase short term
volatility?

ANDRES GARCIA-AMAYA, J.P. MORGAN FUNDS GLOBAL MARKET STRATEGIST: I
think the second option you just provided, the fundamentals really come
down to how are corporate earnings doing, which rely on the economy of the
United States, we expect that they`re going to continue to accelerate
although at a slower pace than we`re accustomed. So, yes, the situation in
Ukraine could deteriorate. Yes, the situation in the Middle East could
spike once again and it could create short term volatility.

But to our viewers that are trying to retire one day, is that going to
change their asset location? The answer from me is probably not.

MATHISEN: All right. Thank you for clearing that up.

Barry, you have an interesting forecast here. It`s one you`ve stuck
with for the year. You think the S&P 500 will dip down this quarter to
what, the 1850 level?

BARRY BANNISTER, STIFEL NICOLAUS: Yes, that would be about right, the
number one rule since 2009 has been, do not fight the Fed, we were bullish
in 2013. But when you look at it — low inflation, low interest rates,
cheap wages and devalued dollar largely end the market. And so, what
you`re betting on now is continuity.

MATHISEN: So, what do you think could trigger it or do you think
we`re already beginning that slow grind lower over the next 60 days.

BANNISTER: Well, a post recession economy, and a little like a
patient in the hospital, you`ve got to have a handoff to policy life
support to sustainable GDP and credit growth that forestalls deflation. I
think it`s going to be a rocky handoff, and every time the Fed has let go
of the handlebars so to speak, with QE, we`ve had some disruption. We`ll
see how the third quarter goes.

MATHISEN: You know, Andres, you are not in Barry`s camp. In other
words, you`re not thinking of suggesting that the market may falter by 5
percent or 6 percent here. But you do say that you`re no longer in love
with equities, what`s changed?

GARCIA-AMAYA: Yes, so if you think about what the biggest drivers for
equities long term are is earnings growth and valuations. Last year, we
were pounding the table saying equities look cheap, and, by the way,
earnings growth should continue to move up higher. Now, valuations are no
longer as attractive. They`re not expensive, but they`re no longer as
attractive. So, we`re less with one driver, which is earnings growth. We
still like equities, but we don`t love them as much as we did before.

MATHISEN: So, really, what I hear you saying there, Andres, is watch
profit growth, because your capitol growth is probably going to be linked
very closely to that, the speculative park of your investment return, the
valuation isn`t going to help you that much about.

GARCIA-AMAYA: Exactly. Now, the last thing I would add is what are
your other options? So, cash is yielding you nothing. And, obviously,
fixed income could be affected negatively, if the Fed decides to raise
interest rates sooner than maybe the market expects, which leaves us again
with equity as our favorite asset.

MATHISEN: So, Barry, leave me with one idea between now and year end
that will either save me money or make me a little money.

BANNISTER: Well, it`s a long shot, but one of the big things that
I`ve noticed about the market, as we enter a period where everyone`s on one
side of the trade, the least expected thing happens. So, if real rates go
negative, and if growth is a little stronger than expected and overseas
rebounds and real rates go strongly negative, because the Fed is stuck at
zero, you could see the precious metals actually finish the year quite
strongly, and year to date, they`ve done just fine versus stocks.

MATHISEN: Andres, let me ask the same sort of question to you. If
there`s one idea that you`d like to leave the viewers with to either
protect their capital or grow it a little bit for the remainder of 2014,
what might it be?

GARCIA-AMAYA: I think European equities have had a tough run the last
couple weeks, but I expect that if the European economy picks up growth,
you could see significant earnings growth for this year and next year.

MATHISEN: All right. Gentlemen, thank you very much. We appreciate
your help and your insight. Andreas Garcia-Amaya with JPMorgan (NYSE:JPM)
Funds, and Barry Banister, Stifel Nicolaus, thanks again.

Well, adding to the economic and diplomatic pressure on Russia. A $50
billion judgment to pay former shareholders in the now defunct Yukos oil
company. Remember that one? The International Court has ruled on claims
that the Russian government illegally seized the company from the one of
countries most powerful oligarchs. Yukos became Russia`s largest investor
owned oil company after the collapse of the Soviet Union.

GML Limited Company, the holding company created by Yukos founder
Mikhail Khodorkovsky had asked Russia to pay $103 billion in compensation.
The dispute began way back in 2003.

Now to those mergers we told you about at the top of the broadcast,
where the fight for penny pinching shoppers is heating up. Dollar Tree
(NASDAQ:DLTR) announced today it is buying its rival discount store Family
Dollar for a lot of dollars, $8.5 billion to be precise. Shares of Family
Dollar soared almost 25 percent, while Dollar Tree (NASDAQ:DLTR) gained
about 1 percent.

So, why is this deal being done? Why now, and what can it mean for
the company that dominates the discount space, Walmart?

Courtney Reagan has our story.

(BEGIN VIDEOTAPE)

COURTNEY REAGAN, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
Some serious money is being spent in the dollar store space. In a surprise
move, Dollar Tree (NASDAQ:DLTR) is buying Family Dollar for 8.5 billion
bucks. The combination will rake in more than $18 billion in annual sales,
between 13,000 stores in 48 states and Canada.

Family Dollar stores will stay under their same banner with CEO Howard
Levine joining the Dollar Tree (NASDAQ:DLTR) board, and now reporting to
Bob Sasser, CEO of the now expanded Dollar Tree (NASDAQ:DLTR).

(on camera): Credit Suisse analyst Edward Kelly says Family Dollar
will increase Dollar Tree`s earnings by fittingly a dollar per share. But
he doesn`t think the deal is the best move for Dollar Tree (NASDAQ:DLTR)
shareholders, and is downgrading his recommendation on the stock.

REAGAN: I think Carl Icahn, who owns 10 percent of Family Dollar has
been pushing for change. So, while a new owner for Family Dollar wasn`t
unexpected, many are surprised the Dollar Tree (NASDAQ:DLTR) rather than
Dollar General (NYSE:DG) made the offer. Dollar General (NYSE:DG) and
Family Dollar`s businesses are much more similar. But the deal immediately
expands Dollar Tree`s reach, albeit with two very different types of dollar
stores.

JAN ROGERS KNIFFEN, J. ROGERS KNIFFEN WWE LLC CEO: But I do think
there`s more risks for them to buy Family Dollar than Dollar General
(NYSE:DG) had bought Family Dollar. After all, had it gone the other way,
one large competitor would have been removed from the game. Where with
Dollar Tree (NASDAQ:DLTR) coming in, now, we still have three serious
competitors, Family Dollar, Dollar General (NYSE:DG) and Walmart.

REAGAN (voice-over): But, for Walmart, not much changes competitively
with the merger, though the world`s largest retailer has acknowledged its
lost some market share to dollar stores over the last few years. As a
result, Walmart is rapidly expanding its network of smaller format stores
to better compete.

The changes shoppers may see, improved product selection at Family
Dollar, at comes under a better managed parent company, and possibly lower
prices down the road, once the scale helps lower overall costs.

For NIGHTLY BUSINESS REPORT, I`m Courtney Reagan.

(END VIDEOTAPE)

MATHISEN: Two of the most popular companies that help people find
homes are merging. The real estate Web site operator Zillow is buying the
smaller rival Trulia. The $3.5 billion deal would make the combined
company the biggest player in the online real estate marketplace. Shares
of Trulia up 15 percent on the news. Zillow also gained ground today by
about 1 percent.

Morgan Brennan takes a look at the potential risk and rewards in this
deal.

UNIDENTIFIED FEMALE: The foreign policy analyst who`s covered the
Israeli-Palestinian conflict for over two decades —

(BEGIN VIDEOTAPE)

MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
(AUDIO GAP) Mark scrolling listing on sites like Zillow and Trulia. The
two online real estate giants have been competing for nearly a decade.
Now, they planned to merge. The deal would create the biggest company by
far in the online listing space, trumping competitors like realtor.com and
to a lesser extent, online brokerage Redfin.

Under the Zillow umbrella, Trulia will continue to operate at its
brand, catering the home buyers and renters, while Zillow continues to
focus on transactions and markets.

SPENCER RASCOFF, ZILLOW CEO: It`s very helpful to have multiple
brands to appeal to a larger audience. And I think the Trulia brand
compliments the Zillow brand really well. The overlap stats that we put in
the press release just, for example, fewer than half of Trulia`s visitors
also visit Zillow and two thirds of Zillow visitors don`t visit Trulia.
So, it`s a pretty differentiated audience already.

BRENNAN: Zillow first approached Trulia about a merger six weeks ago.
Since then, both boards have approved the acquisition and experts widely
expect the deal to clear regulators. Analysts say it makes sense because
the companies have very similar business models. Both are essentially
housing focused media companies, generating the majority of revenue from
online advertising.

MICHAEL GRAHAM, CANACCORD GENUITY ANALYST: The combined company is
going to have a lot of advantages over the two companies operating
independently. There will be one platform.

BRENNAN: An estimated 90 percent of Americans now begin their home
searches online. Yet, Zillow and Trulia`s revenue is 4 percent of the
estimated $12 billion that realtors spent annually on marketing. So,
experts say there`s plenty of room for the company to grow. It could even
streamline the search process for consumers.

(on camera): But there are risks. And one of the largest will be
making sure a bigger Zillow can develop stronger relationships with real
estate brokers, the biggest advertisers, rather than alienate them.

Another issue? The deal could make it harder for smaller companies to
compete in this space.

For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan.

(END VIDEOTAPE)

MATHISEN: Still ahead, how long will funding for Medicare and Social
Security last? We have the details, coming up.

(MSUIC)

MATHISEN: The trustees who oversee the financial health of the
government`s two benefit programs have released their annual report. There
is some positive news from Medicare. And the report shows its funding
outlook has improved and that the program`s hospital trust fund now won`t
be exhausted until 2030, four years later than last year`s estimate.
Meantime, Social Security`s retirement program will remain solvent until
2034, although disability benefits are in more immediate danger.

(BEGIN VIDEO CLIP)

JACK LEW, TREASURY SECRETARY: As today`s reports make absolutely
clear. Social Security and Medicare are fundamentally secure. They will
remain fundamentally secure in the years ahead. The reports remind us of
something we must all understand. We must reform these programs if we want
to keep them sound for future generations.

(END VIDEO CLIP)

MATHISEN: Hampton Pearson is in Washington with more on the report.

Hampton, what exactly did we learn today about the state of Medicare
and Social Security?

HAMPTON PEARSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Hi, Tyler.
Three trust funds, three different headlines, first, Medicare. The
combination of a slowdown in spending on health care, some benefits from
the Affordable Care Act, and yes, tax hikes on high income earners, along
with beneficiaries paying more out of pocket all help brighten the picture
for Medicare finances.

The trustees say that trust fund as you mentioned won`t be exhausted
until 2030, four years later than last year`s estimate. Now, for the 58
million who are getting Social Security retirement checks, it looks like
full benefits are guaranteed until 2034. The only near term funding
problem has to do with the Social Security Disability Trust Fund, it`s
projected to run dry by 2016 at which point the program will only collect
enough payroll taxes to pay out about 81 percent of benefits.

So, that`s the latest sort of quick checkup if you will on the
financial health of the government`s two largest benefit programs.

MATHISEN: So, Hampt, what can be done short term to fix the
disability fund?

PEARSON: Well, Congress can do what it`s done in the past. That`s
basically shift some of the revenue from the big retirement program or
combine the two programs. But if you do that, you shorten the long term
finances by about a year. So, 2033 would be the retirement fund deadline
which was basically what the trustees told us was going to happen in the
report last year.

MATHISEN: Borrow Peter to pay Paul kind of solution there.

PEARSON: Yes.

MATTHEWS: Today`s report, a little breathing room, I guess. So, what
are the most compelling numbers for why we need a long term Social Security
and Medicare phase?

PEARSON: Well, here`s a couple that jumped off the page for me. So,
we`ve got Medicare adding 10,000 new beneficiaries every day, as baby
boomers turned 65 and become eligible.

And since 2010, Social Security has been paying out in benefits more
than it`s taking in. Last year, no exception, $823 billion going out the
door in benefits, but only $747 billion collected in taxes. And make no
mistake about it, Tyler, that trend is expected to accelerate.

MATHISEN: All right, Hampton. Hampton Pearson, thanks very much.

The House has just signed with the airline industry and approving a
bipartisan legislation that allows the base price of airline tickets to be
the most prominent part of an ad. Taxes and fees can be displayed
separately, such as in footnotes or pop up ads. The airlines argue that
including the taxes and fees in their advertising prices, it hurts
business.

A consumer group says advertising the pre-taxpayer is misleading,
because that`s not what consumers pay. The business travel coalition says
taxes make up about 20 percent of your average $300 total ticket price. So
far, there is no Senate version of the bill.

Virgin America has filed a flight plan for Wall Street. The small
California-based airline is planning an initial public offering of shares
that it says could raise as much as $115 million. But analysts say that
number is likely to change. There`s no word at this point on how many
shares will be sold or exactly when. The flamboyant Sir Richard Branson is
a part owner of Virgin America.

Southwest Airlines (NYSE:LUV) maybe facing a fine and that is where we
begin tonight`s “Market Focus”.

The Federal Aviation Administration has proposed a $12 million civil
penalty against the airline. The agency says Southwest failed to comply
with regulations related to repairs of 44 jets. Shares of Southwest off
fractionally to $29.21.

The engine maker Cummins (NYSE:CMI) said second quarter sales were
strong and the company raised its revenue forecast for the full year,
citing growing demand in North America as the company improves. But
international sales fell with weakness seen especially in Mexico, Brazil
and India. And that pressured shares, Cummins (NYSE:CMI) down 3 percent to
$145.35.

Tough day for shares of Horizon Pharma. The specialty pharmaceutical
company said two major pharmacy benefit managers, CVS (NYSE:CVS) Caremark
and Express (NYSE:EXPR) Scripts, will place two of its biggest selling
drugs on their exclusion list. The exclusion leaves a higher portion of
drug costs with patients who don`t switch to other less costly
alternatives. Both of the drugs in question treat arthritis. The stocks
was off 34 percent to $9.15.

Tyson Food is selling a big chunk of its international operations to a
rival to help pay for its acquisition of Hillshire Brands. The meat
processer will sell some Latin American chicken operations, leaving China
as its only major non-U.S. operation. The company also reports a rise in
profits and sales on higher prices and volumes. The stock up more than 2
percent to $40.56.

Smith & Wesson settles SEC bribery charges. The company will pay $2
million for making improper payments to foreign officials as a way to win
firearms contracts overseas. The violations occurred between 2007 and
2010. Shares of Smith & Wesson fell fractionally today to $13.57.

And Herbalife (NYSE:HLF), the company that`s been the target of
investor Bill Ackman, reported disappointing earnings after the closing
bill. The makers of weight loss and nutritional products reported a 17
percent drop in its quarterly profit as cost rose. Earnings and revenue
both missed analysts expectations. After the close, shares initially
dropped on the report, but they finished the regular session with a 2
percent gain at $67.48. A lot of that seemingly vaporizing after hours.

The chairman and CEO of Darden Restaurants (NYSE:DRI (NASDAQ:TBUS)) is
stepping down. Clarence Otis had come under fire from activist
shareholders criticized his turnover strategy. Otis will remain on the
board until the end of the year or until a successor is found, whichever
comes first. Investors did seem to like the news. Shares popping after
hours as you see right there. They close the regular session at $44.92.

Argentina will meet Tuesday with a U.S. mediator in its battle
withhold out investors, over talks to avert its second default this
century. The news came as the clock ticks down to a Wednesday deadline for
Latin America`s number three economy to either pay the New York hedge fund
investors who are suing the country in full or to cut a deal to prevent a
default. Failure to do so will mean that Argentina won`t be able to
exchange bonds accepted by most other creditors at a hefty discount
following its last default.

Chinese officials have a new target, Microsoft (NASDAQ:MSFT).
Officials in that country made an unexpected visit to the tech company`s
offices. That`s not stopping Microsoft (NASDAQ:MSFT) from pushing ahead
with its business plans in China.

Eunice Yoon has more from Beijing.

(BEGIN VIDEOTAPE)

EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Microsoft
(NASDAQ:MSFT) has confirmed that Chinese government officials have made
sudden visits to their offices and cities across China. Chinese media are
reporting that officers from the state administration for industry and
commerce visited the U.S. software giant in Beijing, Shanghai, Guangzhou
and Changzhou.

A Microsoft (NASDAQ:MSFT) spokesperson issued a statement saying that
the company is happy to answer the government`s questions. No word,
though, on the reasons for the inspections, but the visits come when
American tech companies have come under pressure here after the U.S.
accused Chinese military officers of cyber theft.

Microsoft (NASDAQ:MSFT) is still pushing into the China market. Its
Xbox game console goes on sale in September for the first time in China
this year, after the government lifted a decades long ban on consoles.
Chinese can now preorder their machines through NASDAQ listed e-commerce
site JD.com, as well as local social media company Tencent.

Microsoft (NASDAQ:MSFT) says that it will hold a product lunch in
Shanghai this Wednesday, and later in the week, Chinese gamers can get a
better feel for the Xbox when they test out the console at a gaming
conference in China on Thursday.

For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon in Beijing.

(END VIDEOTAPE)

MATHISEN: Coming up, ever try to change your cell phone carrier?
Only to run into unexpected snags? Why that may soon be a thing of the
past.

(MUSIC)

MATHISEN: There is some good news for people heading by car to their
summer vacation destination. Gasoline prices have fallen sharply over the
past two weeks. The Lundberg Survey shows they`re down by an average of 9
cents in that time, to $3.58 per gallon for regular.

And, finally tonight, President Obama says he`s looking forward to
signing into law a just approved bill that gives mobile phone users the
right to unlock their devices and then use them on competitor`s wireless
networks.

More from Josh Lipton on what this all means for consumers.

(BEGIN VIDEOTAPE)

UNIDENTIFIED FEMALE: You`re getting a quick overview of all the
activity.

JOSH LIPTON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Your phone is
free again. The House of Representatives passed a bill on Friday to let
consumers unlock their mobile devices in order to use them on competitor`s
wireless networks.

The president says he looks forward to signing the bill, which has
already cleared the senate and reverses the 2012 decision by the U.S.
Copyright Office.

So, why does it matter? Well, because right now, most mobile phones
in the U.S. are tied to a particular network, sold by carriers at big
discounts when consumers sign long term phone contracts. So, when those
contracts expire, consumers wanting to keep their phones or change networks
first have to get permission from their carrier or face legal
ramifications, the new bill eliminates that.

Also, unlocking phones gives them a second life, making them cheaper
options for customers who can`t afford new phones with expensive wireless
plans and potentially keeps phones from landing up in landfills.

In December, the SEC announced a voluntary agreement with the major
wireless carriers that may be easier for consumers to free up their phones.
But consumer rights groups say the current bill takes it a step further.

And while it`s unclear what the immediate impact will be on the
industry, a trade group hailed the move as a victory for smaller carriers
and consumers alike.

For NIGHTLY BUSINESS REPORT, I`m Josh Lipton in San Jose.

(END VIDEOTAPE)

MATHISEN: And that`s NIGHTLY BUSINESS REPORT for tonight. I`m Tyler
Mathisen, we`ll see you right back here tomorrow night.

END

Nightly Business Report transcripts and video are available on-line post
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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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