Transcript: Wednesday, November 19, 2014

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

(COMMERCIAL AD)

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Land of confusion,
over the outlook for interest rates. And the Federal Reserve may have
further muddied the path ahead when it released the minutes from its latest
meeting.

SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: In the bullseye.
Shares of Target (NYSE:TGT) rally on upbeat earnings just ahead of the
holiday season. Can the new CEO bring back the “Tarjay” of years past?

MATHISEN: The next battle in Washington: immigration. What the
president will tell the nation tomorrow and what it could all mean for
business.

All that and more tonight on NIGHTLY BUSINESS REPORT for Wednesday,
November 19th.

GHARIB: Good evening, everyone.

Confusion and uncertainty, that was the mood of investors after newly
released minutes from the Federal Reserve revealed anxiety among
policymakers on inflation targets, concerns about weakness in the global
economy, impacting the U.S., and about how to communicate and inevitable
interest rate hikes without rattling the market.

So, you add it all up and stocks barely budged today. The Dow slipped
two points, the NASDAQ was down 26, and the S&P lost three points.

Steve Liesman has more on those Fed minutes.

(BEGIN VIDEOTAPE)

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
Within minutes of the release of the minutes of the Fed`s October meeting,
stocks shot higher. Minutes later, they shot lower. That kind of
volatility is perhaps emblematic over increasing confusion over the outlook
for interest rates, the economy and Fed policy. Showing that the Central
Bank has much work to do to figure out how to talk with markets about the
path ahead.

According to the minutes the Fed discussed, the path of future rate
hikes and how to communicate those rate hikes to markets. But it also
discussed inflation being too low. And concern that it won`t hit its 2
percent inflation target, quote, “for quite some time”, and worried about
global economic weakness, factors that will lead markets to put off the
timing of rate hikes.

KATE WARNE, EDWARD JONES INVESTMENT STRATEGIST: I think they`re
struggling with the gap between what the market expects and what they
expect. But also wit the fact that no one knows between now and then, and
that`s something that they won`t be able to address because clearly,
they`re saying it depends on the data and the more they say that, the more
the market expects a different thing.

LIESMAN: That gap is between where the market believes interest rates
will be in the coming years and where the Fed thinks it will be. The
market continues to believe in lower rates than the central bankers, a gap
that puzzles market participants, as well as Fed officials.

MARGIE PATEL, WELLS FARGO FUNDS MANAGEMENT: I think it`s going to be
very hard for the Fed to raise interest rates much as they`d like to find a
reason and the ability to do so. I think the rates are going to stay in
the same very, very low levels, I would say for at least the balance of
`15, and I don`t see a way how their predicament, where they can actually
raise short rates.

LIESMAN (on camera): Most economists disagree with Patel, and see a
rate hike in the summer of next year. But judged by these minutes, you`d
be forgiven for being confused over the outlook for interest rates and
Central Bank policy. The experts are only sure the rates will be low, but
they can`t say how long or for how long.

For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.

(END VIDEOTAPE)

MATHISEN: The Fed isn`t the only Central Bank concerned about
inflation or maybe the lack of it and monetary policy that may be too
loose. A warning today from the Bank of Japan just days after that economy
enter recession is raising questions now about Prime Minister Shinzo Abe`s
fiscal policies and whether Japan`s economy can turn around.

Kaori Enjoji has more now from Tokyo.

(BEGIN VIDEOTAPE)

KAORI ENJOJI, NIGHTLY BUSINESS REPORT CORRESPONDENT: The Central Bank
Governor Haruhiko Kuroda of the Bank of Japan said today that the Central
Bank will continue on its easing monetary policy until Japan reaches that
ultimately glow of 2 percent inflation.

The Bank of Japan governor also said inflation right now is about 1
percent and it could slip below the figure in the near term. However, he
is under pressure for the moves he`s made, most recently, the additional
stimulus he`s added into the system last month, particularly a day after
the Japanese government delayed a sales tax hike.

And the reason for this is because when this grand experiment to try
the rev up the Japanese economy was launched in January of last year, it
was supposed to take to a three-pronged approach. One was the structural
reforms, the second element was monetary easing, which the Bank of Japan
delivered, and the third was supposed to be fiscal reform for the Japanese
government.

But since the tax hike is delayed, the Japanese government has
effectively put that fiscal reform process on the back-burner. So, it does
raise the specter of criticism facing the Bank of Japan that it might be
monetizing the debt.

A lot of the economists we`ve spoken to throughout the day suggests
that if the Japanese government needs to continue to issue more debt to
finance the economic recovery, there could be pressure on Japan`s credit
rating, its sovereign debt rating, possibly even to the single “A” range,
according to RBS. That will make it increasingly difficult for the
Japanese government to finance its debts which is already extremely large.

That`s the latest from Tokyo.

For NIGHTLY BUSINESS REPORT, I`m Kaori Enjoji in Tokyo.

(END VIDEOTAPE)

GHARIB: For more analysis on all of this, we turn now to John Silvia.
He`s chief economist at Wells Fargo (NYSE:WFC) Securities.

Hi, John.

So, as you can tell from our reports here —

JOHN SILVIA, WELLS FARGO SECURITIES CHIEF ECONOMIST: Hi.

GHARIB: — the debate continues on what`s next for interest rates.

As you read between the lines of this latest Fed report, as well as
new developments since then with Japan, for example, what`s your take on
what`s next for interest rates?

SILVIA: Well, I think you`re right to focus on confusion, because
clearly, when the Fed was talking about deflation being less than what they
had expected, that was a surprise to the market. And then second element,
of course, is that the recent Japanese GDP data came in after the Fed
minutes or the Fed meeting was held. In both cases, it suggested that
interest rates will in fact be lower for a longer period of time than what
the market had initially expected. And once again, suggesting that there`s
a difference between what the market is and where the Fed is right now on
interest rate outlook.

MATHISEN: So, John, if you have inflation that is running below where
the Fed would like it, it would seem an odd time at all to raise interest
rates at all. Usually interest rates to fight inflation. So, are you in a
camp, as one of the prior sources in one of our stories said that — who
thinks that there won`t be an interest rate next year at all?

SILVIA: I agree with you, Tyler. I think when the Fed emphasized the
inflation expectations number, it did tell me, and I think it told a lot of
people that if the Fed were to hike rates, it`s going to be much later than
what most had expected. So, what we`re looking at now is again this
situation where Fed is giving us new information, it`s creating some
confusion in the marketplace. But it certainly does delay any interest
rate increase.

GHARIB: Let`s just step aside from interest rates for a moment. How
would you describe the health of the economy? We see the unemployment rate
is coming down. Sure, there`s this inflation issue. But how would you
describe how the economy doing right now?

SILVIA: The domestic economy doing OK, running a little bit less than
long going trend, but doing OK.

The challenge for as you might suspect is when we look at overall
growth, there`s going to be a big trade negative. Our exports are going to
be much weaker than generally expected, and that will take overall economic
growth below trend, once again emphasizing that the Fed is unlikely, as
Tyler has suggested — the Fed was unlikely to be raising rates any time
soon.

MATHISEN: Are you worried as some are about falling oil prices or as
a net effect on the U.S. economy, is it a positive?

SILVIA: Well, unfortunately, Tyler, in this short run historically,
falling oil prices have been a negative to the economy, because they really
shut down what has been a very strong energy engine in terms of
construction, building, drilling activity in the United States for the last
three years.

Over the long run, it`s better for the American consumer by the short
run. It`s a big shock to the energy sector, and that tends to be a
negative, Tyler, for the overall U.S. economy.

GHARIB: John, I know you`re an economist and not a market strategist,
but you guys have views on the stock market. What do you think is the
outlook for the stock market given this confusion about the economy?

SILVIA: Well, the confusion obviously is that when the Fed is talking
about perhaps below trend economic growth, less than expected inflation,
that`s telling us that the pace of economic growth is overall weaker than
what we had generally expected. Generally, that`s going to be a little
tougher for the market going forward, the equity market going forward.

GHARIB: All right, John, thanks so much for joining us. We really
appreciate it.

SILVIA: Thank you, Susie.

GHARIB: John Silvia with Wells Fargo (NYSE:WFC).

MATHISEN: Well, attention shoppers, Target (NYSE:TGT) is back a year
after a troubling credit card data breach sent shoppers and investors
scurrying. A new CEO appears to have really turned the retailer around,
with sales and profits both rising in the last quarter. Target (NYSE:TGT)
shares today surging nearly 7.5 percent.

And Courtney Reagan spoke with Target`s new chief executive about last
quarter`s incursion to encouraging earnings, and the all-important holiday
shopping season.

(BEGIN VIDEOTAPE)

COURTNEY REAGAN, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
So far so good for Target (NYSE:TGT) under first 99 days with new CEO Brian
Cornell. The big box retailer reporting third quarter earnings and sales
that beat both the retailers` and Wall Street`s estimates, with November
sales so far trending above expectations.

But with Black Friday next week, Cornell is staying conservative when
it comes to his outlook for the all-important holiday season.

BRIAN CORNELL, TARGET CHAIRMAN & CEO: We are eight days away from the
big day, that really starts the holiday season. We`re going to have to see
how the consumer, the shopper, and our guest reacts. So, we`re optimistic.
Our team`s fired up about the holidays, but I think we`ve got to be
cautious right now. It`s still really early.

REAGAN: The holiday season will be critically important for Target`s
struggling Canadian business. The retailer classifies performance so far
as unacceptable.

CORNELL: Right now, we`re very focused on improving performance in
Canada. But I will tell you, we`re not happy with performance. We`re not
happy as we sit here today. We weren`t happy with the third quarter.

We have to improve our performance store by store.

REAGAN (on camera): While Target (NYSE:TGT) says surveys indicate
consumers have moved on from the massive data breach announced 11 months
ago, the retailer is still tallying the cost, which is now at $158 million.

(voice-over): Analysts say the key to Target`s success is bringing
back the “Tarjay” cachet of years past. For Cornell, that means meeting
the customer both in store and online, diligence about data security and
delivering great products at price points cautious consumers want.

For NIGHTLY BUSINESS REPORT, I`m Courtney Reagan in Minneapolis.

(END VIDEOTAPE)

GHARIB: Another major retailer also posting better than expected
earnings today, Lowe`s. The nation`s number two home improvement chain
reported a 17 percent jump in quarterly profits with sales up 5 percent,
thanks to a modest rebound in the housing market. Shares rose more than 6
percent today, closing at an all-time high.

MATHISEN: But also out today, a minor setback in the aforementioned
housing market. In October, new home construction fell nearly 3 percent
last month on lower demand for new apartment buildings. But there was good
news, too — demand for single family homes was higher and permits for
future construction jumped up as well.

Susie?

GHARIB: A new ticker trading on the New York Stock Exchange, PGRE,
for the Paramount Group. This is the office building owner. It`s the
biggest initial public stock offering ever for a U.S. real estate
investment trust. And even though it was a ho-hum day on the stock market,
Paramount had a strong trading debut. Shares rose 4 percent to $18.18, a
solid gain after pricing shares last night at $17.50 each.

MATHISEN: Barely six years after the financial crisis and just two
years after Superstorm Sandy, Manhattan real estate and commercial and
residential is booming again. It seems sky high and sky high prices have
no limit in New York City. But is it too much, too fast?

Diana Olick spoke with some of the city`s top developers and has some
unexpected answers.

(BEGIN VIDEOTAPE)

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): The
Manhattan skyline is morphing by the minute. Both commercial and
residential towers, sliding like needles through the island`s historic
tapestry and prices are rising in tandem.

HARRY MACKLOWE, MACKLOWE PROPERTIES CHAIRMAN: Pricing is always a
question of supply and demand.

OLICK: And Macklowe, the storied developer, now focused on 432 Park
Avenue, the tallest residential tower in the Western Hemisphere, says there
is plenty of demand.

MACKLOWE: The location, the architecture and interior finishes of the
building are found by the market to be extremely attractive.

OLICK: 432 joins 157 and soon 520 Park Avenue luxury condo towers
with huge price tags. 520 developed by the Zeckendorf brothers will list
its triplex penthouse for a record $130 million. Contrary to popular
belief, international buyers are not the main target.

WILLIAM ZECKENDORF, ZECKENDORF DEVELOPMENT CO-CHAIRMAN: Based on our
past success, with buildings like 15 Central Park West, roughly three-
quarters of our buyers are domestic, 25 percent overseas. So, I`m hoping
one of those two groups will be buying 520 Park Avenue next year.

OLICK (on camera): Major developers gathered here in midtown
Manhattan at a conference by NYU. The goal? To help students navigate New
York real estate. The lesson, this city is incredibly resilient.

STEPHEN ROSS, RELATED COMPANIES CHAIRMAN: There`s so much money out
there that`s chasing real estate. Their prices are probably at an all-time
high, and the decision is what does the future look like? Or should I take
the money now and run?

OLICK: And the answer?

ROSS: It depends where you are, what your tax situation is, and what
your long term plans are.

OLICK (voice-over): Ross, the mega developer behind Hudson Yard, the
largest new project in Manhattan`s history, is not concerned about
oversupply for his office or residential space. The project may be new,
but the driver is not. It`s the economy, new tech adding to the improving
financial industry and the migration back to the city by both older boomers
and younger millennials. Supply and demand it`s as simple as that.

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

(END VIDEOTAPE)

GHARIB: Still ahead, why the business community will be paying close
attention to the president`s address on immigration tomorrow.

(MUSIC)

MATHISEN: A Senate panel report finds three major banks exploited the
commodity markets. A two-year into Wall Street`s physical commodities
business found that Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS), and
JPMorgan (NYSE:JPM) manipulated prices and gained trading advantages by
building up inventories of various metals. The report also says that at
times, the Federal Reserve was unaware of just how much the banks were
stockpiling.

GHARIB: Wells Fargo (NYSE:WFC) Bank is looking to help out certain
customers who are feeling crushed under the weight of too much student loan
debt. The nation`s largest private student lender has agreed to review
individual cases and, if appropriate, will modify the loan terms of some
financially troubled borrowers, even lowering the interest rates based on
the customers` income.

MATHISEN: President Obama will speak to the nation in a primetime
address Thursday night, announcing a plan to use his executive power to fix
the nation`s immigration issues. And setting up a big fight with
Republicans about the limits of his authority.

John Harwood joins us now from Washington.

What a busy week it has been, John. What exactly is the executive
action the president contemplates?

JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT: We don`t know
all the details, Tyler, but we believe what the president is going to do is
build upon the order he signed a couple of years ago for so-called DREAMer
kids, that people meeting certain criteria would have their deportation
defer and would be able to work in the meantime. They get a legal status
for a temporary period of time. He`s going to extend that to probably
family members of people now who are either citizens, or green card holders
who are not — if the family members are not now citizens, they would get
that protection for some period of time, depending on how you define it.
It could be up to 5 million people.

GHARIB: So, John, how is this going to go over in Congress?

HARWOOD: Well, the president — excuse me, House Speaker John Boehner
came out today and call him “Emperor Obama”, criticized him. Republicans
agree that they believe this is beyond his presidential authority and, in
fact, President Obama himself has said in the past that this beyond the
ability of the president to do this. He has been considering this and
evidently has a new legal opinion, which is going to outline tomorrow in a
speech and also on Friday when he`s going to travel to Las Vegas.

MATHISEN: What does the public think, John?

HARWOOD: Well, the public does not like this. We have a new NBC
News/”Wall Street Journal” out just tonight showing a 48 percent plurality
of the American people say they don`t want President Obama to act
unilaterally even though they broadly a pathway to citizenship for those
people in the long term if Congress acts. You`ve got a 55 percent majority
of whites and Hispanics are even split. Only 43 percent say they favor
this executive action, while 55 percent of whites say they oppose it.

MATHISEN: All right, John Harwood, we`ll be watching tomorrow night.
John in Washington.

GHARIB: Demand for office supplies picked up, helping Staples
(NASDAQ:SPLS) post results that beat analyst estimates. And that`s where
we begin tonight`s “Market Focus”.

Now, even though the results topped Wall Street`s consensus, third-
quarter sales at Staples (NASDAQ:SPLS) did fall as it accelerates plans to
close under-performing stores and spark sales growth online. Despite the
sales drop, investors focused on the positive. Shares rose 9 percent to
$13.92.

J.M. Smucker`s sales were hurt by its weak coffee business. The food
company said it made a misstep by increasing its coffee prices, which
caused consumers to buy other brands. But its profit rose from the same
quarter last year as margins widened and as it lowered overall costs and
expenses. Still, shares were off slightly to $101.66.

A cloudy forecast sent shares of Salesforce.com (NYSE:CRM) down right
after the close. The Cloud software company predicted revenue for the
current quarter would come in below analyst expectations. That forecast
overshadowed results that beat estimates. You can see the shares tumbled
after-hours. During regular trading, though, shares were off more that 2
percent to $61 and change.

MATHISEN: Well, William Sonoma initially moved higher in post-market
trading after the specialty retailer logged better than expected third
quarter results. Its fourth quarter outlook was a little bit below
street`s forecasts, though. Still, shares of William Sonoma spiked right
after the announcement, as you see on that graphic. Before the close for
the regular sessions, shares were down a little to finish at $69.42.

Shares of Cliffs Natural took a hit on news that it may have to close
its Bloom Lake iron ore mine in Quebec. This, coming weeks after it
revealed that three big steel makers were in talks to invest in the
project. The company is looking to narrow its focus to five iron ore mines
in Michigan and Minnesota, this as prices fall. Shares down about 20
percent for Cliffs today to $8.17. Big fall there.

JetBlue shares got a lift after the carrier announced it is adding bag
fees and cutting passenger leg room, as it looks to improve its financial
performance. This leaves Southwest as the only big U.S. airline that
offers at least one free checked bag. Shares rose 4 percent to $13.24.

GHARIB: The first of the big auto shows opened today in Los Angeles.
Automakers showing off all their latest high-tech, fuel efficient, and
ultra luxurious 2015 models.

Phil LeBeau has more from L.A.

(BEGIN VIDEOTAPE)

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): In a
city where stars and luxury cars go hand in hand, the newest high end
models are fighting to turn heads.

MARK REUSS, GENERAL MOTORS: Very important to have that kind of draw,
glitz, excitement, call it what ever you want. But it`s really important.

LEBEAU: The Los Angeles Auto Show has long been the place that ultra
luxury cars like the Bentley grand convertible make their worldwide debuts.
But this year, led by a redesigned Ford Explorer, there are a slew of new
crossovers and SUVs promising versatility and greater fuel economy.

SCOTT OLDHAM, EDMUNDS.COM: I think that`s what buyers want right now,
because they are fuel efficient, yet there`s room for the family. We still
get that high seating position. And there`s a little sex appeal on those
body styles.

LEBEAU: With industry sales at their highest pace in eight years, car
buyers are increasingly looking for the latest technology like Toyota`s
Mirai, the first mass market hydrogen fuel cell vehicle, promising to emit
only water vapor.

Meanwhile, BMW believes incorporating the music streaming service
Spotify into its newest models will give drivers more options behind the
wheel.

IAN ROBERTSON, BMW: It`s a logical step to put certain apps that the
customer wants into the car. And Spotify is one of them, because they can
download any of the music they want. They can stream it live.

LEBEAU (on camera): In all, more than 60 new models will make either
their worldwide or North American debuts here in Los Angeles. And many
will be in showrooms next year.

That`s when we`ll find out if they live up to the promise of their red
carpet rollouts here in Tinsel Town.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Los Angeles.

(END VIDEOTAPE)

MATHISEN: Coming up: forget spreadsheets, number-crunching, Fidelity
wants to bring your portfolio to life by bringing virtual reality to
investing.

(MUSIC)

MATHISEN: A lot of push back coming over a massive pay and stock
package proposed for the Microsoft (NASDAQ:MSFT) CEO Satya Nadella. ISS,
an influential adviser to institutional investors, recommends shareholders
vote no on the $60 million compensation plan, calling it a mega grant of
restrictive stock. None of those shares, Nadella shares that is, vest
until 2019, and some won`t vest until 2021.

GHARIB: And finally tonight, what if you could see your investments
as a virtual city, using 3D technology to construct and build a simulated
city that mirrors a real portfolio.

Kayla Tausche shows us how one investment is trying to make it a
reality.

(BEGIN VIDEOTAPE)

KAYLA TAUSCHE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Can you manage
your real money better in a virtual world? Fidelity Investments thinks so.
The company has been building stock city to bring your portfolio to life in
a city skyline. Health care stocks in one neighborhood, banks in another,
the building size measured by stock price, shares outstanding and volume.
The result: Bank of America (NYSE:BAC), a low-lying office park, while
Tesla looks like a soaring skyscraper.

Fidelity Lab used the Oculus platform to build the software which is
still in beta form, but Vice President Hadley Stern says it could be common
place in the coming years.

HADLEY STERN, FIDELITY LABS VICE PRESIDENT: Five years from now,
there could be a technology much more smaller and mainstream that, yes, it
will be to our customers` benefit, all of our benefit. Competing and
playing may be an option. But maybe even visualizing in and of itself is
the answer.

TAUSCHE: So far, customers have raved about that visualization.
Compared to a simple spreadsheet, Stern says his team will continue
collecting feedback as they keep building the project which is already been
in the works for more than a year.

Since then, Facebook (NASDAQ:FB) has acquired Oculus for $2 billion,
providing an infusion of capital to get the virtual reality products closer
to the shelves.

CEO Brendan Iribe said in an earlier interview, a forthcoming headset
from Samsung will be a major step forward in building out the virtual
reality infrastructure.

BRENDAN IRIBE, OCULUS CEO: As we move forward, you`ll see a whole new
set of technologies, companies getting into it, Google (NASDAQ:GOOG), I
hope, Microsoft (NASDAQ:MSFT), other companies will kind of charge in
together.

TAUSCHE: A spokesperson said more than 180,000 have bought access to
Oculus developer`s platform since it was released. Fidelity is just one of
them and it`s beating on other technologies too. Google (NASDAQ:GOOG)
Glass, the Pebble and now the Apple (NASDAQ:AAPL) Watch, where Wall Street
and tech meet, Fidelity wants to be on the front lines.

STERN: As the technology improves, as it gets smaller, as it maybe
morphs into something else, we think it`s worth investing a little bit of
our time to understand for our customer`s benefit how this could help them.

TAUSCHE: A virtual portfolio, it`s Fidelity`s first step.

For NIGHTLY BUSINESS REPORT, I`m Kayla Tausche in New York.

(END VIDEOTAPE)

GHARIB: To read more about Fidelity`s venture into virtual reality
investing, go to our Web site at NBR.

And that is NIGHTLY BUSINESS REPORT for tonight. I`m Susie Gharib.
Thanks so much for watching.

MATHISEN: I`m going to wear one of those headsets tomorrow.

I`m Tyler Mathisen. Have a great evening, everybody. We expect you
back here tomorrow night.

END

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