Transcript: Monday, January 26, 2015

NBR ThumANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Sue Herera.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: East Coast paralysis. An historic snowstorm slams one of the country`s major economic arteries, disrupting business, and travel along the East Coast. But it may not be a record breaker for the economy.

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Major shift.
Greece`s austerity candidate sworn in as the country`s next prime minister, setting up a showdown with the country`s biggest lenders. Why Greece`s future matters to you.

HERERA: Looking for clues. The Federal Reserve two-day meeting begins tomorrow and investors will be looking for any hints of when rates may start to rise.

All that and more tonight on NIGHTLY BUSINESS REPORT for Monday, January 26th.

MATHISEN: And good evening, everyone.

From the mid-Atlantic to New England, 13 million Americans brace for the first blizzard, the first big one of 2015. It will bring frigid temperatures, near hurricane-force winds and snow that could top three feet in the hardest hit places. Millions of school children already sent home early today, be home again tomorrow, maybe throughout much of the week.
Five thousand airline flights already canceled, stranding travelers from D.C. to Boston and beyond. Seven thousand New York state National Guard troops have been up. Home games tonight for the New York Knicks and the Brooklyn Nets already postponed. But given the seasons they`re having, it may not be all bad.

And just outside our study, the snow is already piling up outside our studio doors. And with worries growing about the size of the storm, and its disruptions along with downed power lines, shuttered commuter railways and impassable roads, how much damage could a major storm like this do to the U.S. economy.

Steve Liesman has the details.

(BEGIN VIDEOTAPE)

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): If it`s as massive a snowstorm as being predicted, there will be some negative economic impact — measured in work not completed, lost hours, and lost pay. Much depends not so much on the amount of snow that falls, but over how wide an area, how quickly it`s cleared, and how soon people can get back to work.

PAUL WALSH, THE WEATHER CHANNEL: What`s really important from an economic perspective as it relates to metro areas, and the costs to cleaning up snow, it`s more important the number of storms, not the amount of the storms. If you`ve got ten storms where you`ve got five inches, that has a bigger impact than if you`ve got one storm with 50 inches.

LIESMAN: Some work can be made up, some is lost forever, and yet in the Internet age, if the power lines don`t go down, a lot of work gets done from home.

But a single massive snowstorm, if that`s all it is, and here`s hoping that`s the case, won`t rise to the level of last year which had both unusually cold temperatures and lots of snow that was widespread, leading to a surprise 2.1 percent decline of growth in the first quarter. It was so big, many doubted it could be weather-related.

But growth bounced back as did jobs. And some of the GDP in the next two quarters averaging a whooping 4.8 percent was a weather-induced snap back. A big part of last year`s decline was the cold and snow in places that don`t usually have it, like the South. But this storm, although dangerous and massive is hitting in a place that`s comes to expect hard storms.

In fact, data for the New York City area showed there have been more big storms of 15 inches or more in the current 25-year period than any quarter century since 1790. And most of those storms have happened in the past 11 years, for a major storm about once every two years. So, it`s almost the rule rather than the exception.

(on camera): It`s not a storm to be taken lightly, but as far as the economics go, New York City is tough. And so is the nation`s economy. It will take a lot more than a blizzard to cause growth to skid off the tracks.

For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.

(END VIDEOTAPE)

MATHISEN: And according to the Insurance Information Institute, between 1994 and 2013, winter storms resulted in about $27 billion worth of insured losses. That`s more than $1 billion a year on average.

HERERA: Despite the blizzard, stocks will continue to trade on Tuesday. The owners of the New York Stock Exchange and the NASDAQ both say their exchanges will be open for regular business hours tomorrow.

MATHISEN: It may be business as usual on the exchanges, but it won`t be for the operators of trains, planes and automobile and bus services.
Rail systems are shutting down, thousands of flights already canceled, as we mentioned, and the ripple effects will be felt for most of the week, and all across the country.

Kate Rogers (NYSE:ROG) has more now from New York City`s LaGuardia Airport.

(BEGIN VIDEOTAPE)

KATE ROGERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, snow is falling all around us at LaGuardia airport this evening, and both airlines and airports are taking winter storm threats very seriously.
FlightAware.com reports that as of this evening, more than 6,300 flights have been completely canceled between today and tomorrow. Boston Logan airport also, the only one so far to completely suspend service as of 7:00 p.m. tonight, continuing into tomorrow, Tuesday, and hoping to have things back up and running on Wednesday.

Also, United and American Airlines completely suspending service tomorrow, to northeast area airports, including LaGuardia where we are, JFK, Boston, Philadelphia, and Newark Airports. But the passengers and travelers we caught up with here today arrived hours early, hoping to beat the storm.

UNIDENTIFIED FEMALE: We changed to an earlier flight.

UNIDENTIFIED MALE: I`m a little concerned that, you know, if this does live up to the hype, that things won`t be clear in time, and I`ll get stuck in Columbus for the weekend.

ROGERS: Now, we`ve been watching the boards behind me redder and redder throughout the day with those cancellations. So, the natural question here is what does this mean for the airlines. You can expect revenues to take somewhat of a hit other the next several days, but don`t expect earnings to be that greatly impacted. Now, that`s because airlines, they do plan and budget for these types of major storms, in their first quarters and fourth quarters of each year.

And so far, this season, Winter Storm Juno has been a major storm to hit.

At LaGuardia Airport, for NIGHTLY BUSINESS REPORT, I`m Kate Rogers (NYSE:ROG).

(END VIDEOTAPE)

HERERA: The blizzard is also having a big impact on bond sales. The U.S. Treasury rescheduled some government debt auctions slated for today, while postponing the sale of nearly $300 million worth of municipal bonds.
The bond markets are expected to be open on the usual schedule tomorrow.

MATHISEN: A few feet of snow is expected to have a big impact on retail and restaurant sales. Citigroup (NYSE:C) estimates that the blizzard could cause total U.S. retail traffic to fall between 2 percent and 4 percent this week. Individual retailers like Home Depot (NYSE:HD), Lowe`s, Tractor Supply, they`re expected to see big sales gains. Fast-food chains, casual dining outfits, they should see comp sales fall.

HERERA: On Wall Street today, stocks hovered between small gains and losses. Getting a lift from a handful of corporate mergers, despite worries about election results in Greece. And we`ll talk more about that in just a moment.

At the close, the Dow was up six points, the NASDAQ was up 13, and S&P
500 added five points. In the energy markets, both domestic crude and Brent ended lower after an OPEC official said the market may have bottomed out.

MATHISEN: Some encouraging economic news from Washington. The congressional budget office now predicts the 2015 federal budget will be
$68 billion, which would be the lowest since President Obama took office.
The CBO is also forecasting U.S. economic growth of 2.9 percent, in fiscal 2015, and low inflation for the next few years.

HERERA: And, Ty, some good news from business owners today. A new survey from the National Association for Business Economics found that many companies are optimistic that continued improvements in business conditions will result in more hiring and higher wages. And more than half of owners say their businesses or industries will benefit from the sharp drop in energy prices.

MATHISEN: Moving overseas now with economic reverberations coming out of Russia and Greece, ratings agency S&P has cut the credit rating to junk status. That sent the ruble tumbling another 5 percent today, against the U.S. dollar. And with the election of a far left anti-austerity party in Greece, that nation`s credit rating could be in the crosshairs ahead of a scheduled reassessment in March.

HERERA: With a radical leftist elected as the new prime minister of Greece, it`s setting the stage for a showdown with that nation`s biggest lenders who have lent the struggling economy hundreds of billions of dollar that`s got investors worried about the stability of the entire European economy and the future of the euro currency.

Michelle Caruso-Cabrera has more now from Athens.

(BEGIN VIDEOTAPE)

MICHELLE CARUSO-CABRERA, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-
over): In his acceptance speech last night, Alexis Tsipras, leader of the Syriza Party told his followers the painful austerity measures of the last five years, the severe budget cuts and much higher taxes are over.

ALEXIS TSIPRAS, GREEK PRIME MINISTER-ELECT: We will regain social cohesion and dignity. And the message is that our common future in Europe is not the future of austerity. It is the future of democracy, solidarity and cooperation.

CARUSO-CABRERA: But Greece`s international creditors, the International Monetary Fund, the European Union and European Central Bank, which have lent the country more than $200 million don`t necessarily agree with Tsipras` prescription for Greece.

Dr. Alexander Kritikos is with a German think tank.

ALEXANDER KRITIKOS, GERMAN INSTITUTE FOR ECONOMIC RESEARCH: More or less everything is bad for the economy, either increasing public spending, either making public investments, either saying we increase the number of public servants, or increasing the minimum wage.

CARUSO-CABRERA (on camera): This country is still dependent on billions of dollars of bailout money this year. And if Tsipras tries to enact those policies, it`s possible that his lenders could cut the country off. That would lead to a collapse of the banks and the likely exit from the common currency, the euro.

(voice-over): Tsipras` economic adviser, Dr. John Milos, a Marxist economist and professor, doesn`t believe they would risk it.

JOHN MILOS, ECONOMIC ADVISOR TO SYRIZA: No one wants a collapse of banks in the eurozone. This is going to be Lehman Brothers to the square or to the temple. No one wants to destroy or to jeopardize the future of the eurozone.

CARUSO-CABRERA: Tsipras` election comes just as Greece is finally emerging from a five-year depression, in which the economy plummeted more than 25 percent.

The business community is desperate for improvement.

ARETI GEORGILI: One thing I expect from the new government is to leave alone and do my job.

CARUSO-CABRERA: Areti Georgili says the government`s regulations are punishing. And even worse, they change all the time.

GEORGILI: Nobody can foresee, nobody can do a business plan, nobody can budget. And nobody can invest or operate.

CARUSO-CABRERA: It`s an environment that needs to improve if the country is ever going to recover economically.

NIGHTLY BUSINESS REPORT, Michelle Caruso-Cabrera, Athens, Greece.

(END VIDEOTAPE)

MATHISEN: So, how will the future of Europe affect U.S. monetary policy when the Federal Reserve begins its two-day policy meeting tomorrow?

Let`s find out from a guy who`s been there, Robert McTeer, former president of the Dallas Federal Reserve.

But, welcome back to NIGHTLY BUSINESS REPORT. How is the weather in Dallas? Is it good?

ROBERT MCTEER, FORMER DALLAS FEDERAL RESERVE PRESIDENT: Seventy degrees and sunny.

MATHISEN: All right. Well, you know, in New York, it`s all about New Yorkers.

MCTEER: Come on down.

MATHISEN: I`d love to be there.

Why, in a phrase or two, does Europe, Greece and the euro matter to individual U.S. investors? Why should we care?

MCTEER: Well, in a way, we shouldn`t. Greece is a very small part of the eurozone, and we`re not as dependent on international trade as a lot of countries. On the other hand, to the extent that their problems affect the price of the euro, in terms of dollars, it would continue to cause an unhelpful increase in the strength of the dollar. Strong dollar is very good for a country that`s not fighting recession, and low — and high unemployment. But everybody has devalued against the dollar. And it`s time for it to come to an end, I think.

HERERA: So, Bob, does that — does the situation in Greece, the strength of the U.S. dollar, affect our monetary policy here at home? With the Fed meeting this week, do you expect any changes due to the situation in Europe, in Greece?

MCTEER: Well, to begin with, they weren`t going to contemplate changing policy until the middle of the year anyway, so they won`t — it won`t affect anything now. If similar things are going on, though, in the middle of the year, I suspect it will delay the Feds` beginning of normalization of interest rates. Already, what`s been going on over there has pushed our rates down, instead of up.

And our rates are still considerably higher than European rates, which are negative in many cases on the short end of the yield curve. So we`re getting headwinds from a weaker euro, and tailwinds, unwanted tailwinds probably from interest rate arbitrage.

MATHISEN: The stronger dollar means that American companies might not export as much as they otherwise would to Europe, and a weaker euro means that European imported goods cost less. So, that`s exactly what the Fed doesn`t want, low, low, low inflation, an economic situation whether that`s in the headwinds, right on the bow.

MCTEER: You`re exactly right. In normal times, those things would be good things. Lower inflation, cheaper import prices. But in normal times, lower oil prices is good, too. But we`ve got a little too much of that too fast. This feels similar. They`re happening at the same time. It`s a little bit scary.

MATHISEN: All right. Bob, thank you so much for helping us through it tonight. We appreciate.

MCTEER: Thank you.

MATHISEN: Robert McTeer, former president of the Dallas Federal Reserve.

HERERA: Coming up, as Microsoft (NASDAQ:MSFT) reports a drop in profits, there`s one business unit that is getting investors` attention.

(MUSIC)

HERERA: More earnings for you after the closing bell, we heard from software company Microsoft (NASDAQ:MSFT) which saw profits fall on a strong U.S. dollar, and weaker demand for personal computers, which hurt sales of its Windows software. Earnings of 71 cents a share, excluding certain items was right in line with Wall Street forecast. Revenues of more than
$26 billion were just a slight beat. Shares initially lower in after-hours trading.

Bertha Coombs joins us now from the NASDAQ Exchange with her one big takeaway from Mr. Softie`s results.

Hi, Bertha.

BERTHA COOMBS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Hi, Sue.

You know, for Satya Nadella, there`s been a bit of a romance. He`s coming off the one-year anniversary after having taken the helm as CEO of Microsoft (NASDAQ:MSFT). So, he still has the CEO smell.

There were good things in this report. You`ve got record sales of their Lumia phone, albeit at lower prices. You also have strong sales of the Surface Pro. They really hadn`t gotten much traction with that piece of hardware. That`s starting to improve. And the Cloud area, also once again showing doubling of revenue year over year.

The big question now is how can that translate to real momentum on the bottom line. That`s going to be critical for Mr. Nadella to maintain that romance of Wall Street.

HERERA: Bertha, thank you very much. Bertha Coombs at the NASDAQ market site.

MATHISEN: Well, Microsoft (NASDAQ:MSFT) is not just about computer software as you may well know, there`s the surface tablet that Bertha just mentioned, the hand-set business it bought from Nokia (NYSE:NOK), its Bing Internet search engine, and the growing popularity of its Xbox video game systems. Big in my house, I can tell you.

So, how much does gaming mean to Microsoft (NASDAQ:MSFT)?

Josh Lipton takes a look.

(BEGIN VIDEOTAPE)

SATYA NADELLA, MICROSOFT CEO: The experiences from productivity to gaming, how Spartan and browser comes together, how Xbox Live comes together —

JOSH LIPTON, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
Microsoft`s CEO Satya Nadella is passionate about Cloud services and mobile technology. But he`s also very excited about video games. That commitment is easy to understand, given the size of this industry — which is now worth some $100 billion, according to analysts at Gartner (NYSE:IT).

So, Nadella is working hard to win over fans from Microsoft`s Xbox One. Microsoft (NASDAQ:MSFT) slashed the price of that video game console from $500 to $350, which had a big impact for both November and December.
Microsoft (NASDAQ:MSFT) says that the Xbox One was the best-selling console in the U.S.

The question for Microsoft (NASDAQ:MSFT) investors, though, is how exactly a video game console fits into Nadella`s broader strategy of what he calls a Cloud and mobile first world.

Analysts say Nadella is still trying to figure that out.

PATRICK MOORHEAD, MOOR INSIGHTS & STRATEGY PRESIDENT: What I think is going on right now is a reassessment of exactly where Xbox fits strategically. They just can`t pull a plug on it tomorrow, because they`ve got a huge base of people. And also, most of the Xbox folks have windows PCs as well.

LIPTON: But while the Xbox might be under strategic review, the product continues to offer the company a lot of benefits. Importantly, it`s a big hit among young consumers. Analysts researched firm IDC say Microsoft (NASDAQ:MSFT) is closing the gap with its rival Sony (NYSE:SNE), which says it sold nearly 19 million of its consoles through early January.
That means Microsoft (NASDAQ:MSFT) has a chance to cross-sell that many more of its products and services to millions of new fans.

Still, the Xbox business also faces real challenges. Analysts at Namura estimate that after accounting for sales and marketing, Microsoft
(NASDAQ:MSFT) is actually losing money on Xbox. Microsoft (NASDAQ:MSFT) declined to comment about that analysis.

(on camera): So, it`s now up to Nadella to prove to his investors that gaming isn`t just an important source of entertainment, but a business division that makes both strategic and financial sense for Microsoft`s future.

For NIGHTLY BUSINESS REPORT, I`m Josh Lipton, in Silicon Valley.

(END VIDEOTAPE)

HERERA: United Technologies (NYSE:UTX) moved its earnings report to today because of the storm and investors were not impressed. That`s where we begin tonight`s “Market Focus”.

The industrial conglomerate`s earnings were in line, but revenue missed estimates. It gave a down beat profit and sales outlook citing the negative effect of the stronger dollar and pension discount rate headwinds.
Shares initially dropped after the bell. Before the close stock fell 1 percent to $118.75.

Texas Instrument also failed to wow investors with its after-hours report. Fourth quarter results matched estimates and guidance for the current quarter was also in line. Shares were volatile after the release.
Before the close, shares were off by just a penny to close at $55.05.

And D.R. Horton (NYSE:DHI) saw its revenue jump as it delivered more homes in its first quarter. On that, the home builder`s results beat on both the top and bottom lines. Shares popped by 5.5 percent to $24.38.

Ty?

MATHISEN: The big railroad Norfolk Southern`s revenue fell on lower coal shipments. The rail operator`s profits did manage to top estimates and it expects the solid U.S. economy to help business in 2015, but it still doesn`t know what the overall impact of lower energy prices will be on its business. Shares were up 1 percent today to $106.11.

MeadWestvaco and RockTenn will combine in a deal that will combine in a deal that will create a company with about $16 billion in annual sales.
MeadWestvaco`s shareholders will receive stock in the new company and RockTenn will have a choice of either cash or stock. Shares of MeadWestvaco surged 14 percent to $51.35. Shares of RockTenn were six percent higher, it finished at $66.85.

And how about Mattel (NASDAQ:MAT)? Shares tumbling there after its CEO stepped down and the company warned that sales during the holiday season won`t measure up. Barbie ain`t what she used to be.

One of the toy maker`s longtime board members is going to step up as interim CEO. Shares of Mattel (NASDAQ:MAT) down 5 percent to $26.64.

HERERA: Well, there`s a new kind of space race heating up. This one is to be the first corporation to build a manned capsule to take NASA astronauts to the space station. But this competition has a bit of a twist.

Jane Wells has more.

(BEGIN VIDEOTAPE)

JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): The latest space race does not pit America against the world, it pits company against company. Both SpaceX and Boeing (NYSE:BA) are competing to build a capsule capable of carrying American astronauts to the space station, so NASA can stop paying the Russians $70 million a seat, and instead pay $58 million.

CHARLES BOLDEN, NASA ADMINISTRATOR: You heard me say it over and over, I don`t want everyone to have another write another check to Roscosmos.

WELLS: Boeing (NYSE:BA) and SpaceX frenemies, if you will, join NASA to unveil details of the progress on building this first human space taxi since the shuttle retired.

BOLDEN: You`ve heard both of them say they think they`ll be flying by 2017. If we make that date, I`m a happy camper.

WELLS: Boeing (NYSE:BA) has gotten its share of the money so far, for its capsule, over $4 billion. For the capsule developed by SpaceX, the company has received $2.6 billion.

(on camera): Having two options may serve NASA well, providing backup in case one company has problems. That`s exactly what`s happened with the cargo contract to the space station, split between SpaceX and Orbital Sciences (NYSE:ORB), until Orbital Sciences` rocket blew up last fall.

(voice-over): NASA has farmed out space station trips to the private sector so it can focus more of its money on getting to Mars, with the program like Orion. But SpaceX also wants to go to Mars.

GWYNNE SHOTWELL, SPACEX PRESIDENT & CEO: I think it`s going to take a village, frankly, to get to mars.

WELLS: A half century after Apollo, spending on space both public and private has gone into a higher orbit.

JOHN ELBON, BOEING SPACE EXPLORATION VP: Never before in the history of human space flight has there been so much going on all at once.

WELLS: And as much as these two companies are rivals, they`re also partners. Later this year, a new docking unit will be shipped to the space station, built by Boeing (NYSE:BA), delivered by SpaceX.

For NIGHTLY BUSINESS REPORT, I`m Jane Wells.

(END VIDEOTAPE)

MATHISEN: And coming up, the technology being developed that will help keep your eyes on the ropes.

(MUSIC)

HERERA: Some good news for drivers. Gas prices now have fallen to their lowest price since April of 2009. The Lundberg Survey says regular gas is averaging just $2.07 a gallon nationwide.

MATHISEN: And finally tonight, what if your car watched you drive and warned you when an accident was about to happen? Don`t laugh. The technology has been developed and will soon be found in many vehicles.

Phil LeBeau has an exclusive look now at the company that`s watching your eyes to make sure they`re watching what they ought to.

(BEGIN VIDEOTAPE)

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
Despite repeated warnings about the dangers of texting and driving, or being distracted behind the wheel, a lot of us are not paying attention.
Data from 2012 shows more than 3,300 people were killed in distracted driving accidents. Tech firms are looking to warn drivers as soon as they look away

NICK LANGDALE-SMTH, SEEINGMACHINES.COM: If your eyes are looking away from the road, the vehicle understands you`re paying attention somewhere else apart from the road ahead.

LEBEAU: Nick Langdale-Smith took us through a ride to show us how seeingmachines.com uses a camera in the dashboard to watch what drivers are watching. And when they`re not for even a few seconds, or if they start to doze off, the car will immediately warn the driver.

LANGDALE-SMITH: The vehicle then has an understanding of whether you`re paying attention or not, have I seen the stop light, have I seen the vehicles in front of me. And that`s something that the vehicle can then adjust itself to, to make better decisions on my behalf, safer decisions.

LEBEAU: Eye-monitoring is the next phase of driver assist technology, systems that will soon allow vehicles to steer themselves on the highway, or even in city traffic. Almost every automaker is developing this technology. But most expect regulators to approve autopilot systems if drivers agree to pay attention behind the wheel, even if they`re not holding the wheel.

JEREMY CARLSON, HIS AUTOMOTIVE: We still need the driver along this evolution of technology to really be in the loop and to be paying attention to what`s happening on the road.

LEBEAU: Watching drivers and recording their attention or in- attention could change accident investigations in the future.

(on camera): Seeingmachines.com is already working with several automakers. And we could see cameras in dashboards within the next couple of years, making sure you are truly keeping your eyes on the road.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago.

(END VIDEOTAPE)

MATHISEN: Phil LeBeau not keeping his eyes on the road right there.
The machine should make his eyes turn green.

HERERA: It should. And keep your eyes on the road, Phil.

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

MATHISEN: And I`m Tyler Mathisen. Have a great and warm evening tonight. We hope to see you tomorrow night, if we can get here.

HERERA: We will. We will.

END

Nightly Business Report transcripts and video are available on-line post broadcast at http://nbr.com. 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) 2015 CNBC, Inc.

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