Transcript: Nightly Business Report — March 5, 2015

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

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Green shoots. The head of the European Central Bank more upbeat on the economy than quite a while and tells investors something they`ve been eager to hear.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Down beat forecast. The world`s second largest economy cut its growth target to the lowest level in more than 15 years. And now, the government has a plan to increase spending.

MATHISEN: Stress test. Banks once again under the microscope to see if they can withstand a severe market shock. We`ll tell how they fared.

All that and more tonight on NIGHTLY BUSINESS REPORT for Thursday, March 5th.

HERERA: Good evening, everyone and welcome.

Europe, it`s been one of the global economies weak spots. And today, the head of the European Central Bank took the next step in his battle against that sluggishness, rising unemployment and the risk of deflation in the Euro zone.

Mario Draghi signaled confidence in Europe, something investors haven`t heard from in quite a while and he said his massive bond buying program will begin in just a few days.

Today, reaction was felt in the currency market as the euro fell below the 110 level for the first time since in 2003.

Annette Weisbach now on details on Draghi`s plan from the European Central Bank`s meeting in Cyprus.

(BEGIN VIDEOTAPE)

ANNETTE WEISBACH, NIGHTLY BUSINESS REPORT CORRESPONDENT: Finally, we actually know when the ECB is going to start its quantitative easing program. It will be next Monday. And we also know now that the ECB is also going to buy sovereign debt with negative yield.

Apart from that, Mario Draghi left the doors open to perhaps even extending the QE program beyond this current planned date of 2016, or even scrap (ph) before. It will all depend on inflation development here in the Euro zone.

But one can say that Mario Draghi is very upbeat about the economic developments here in Europe, now predicting that GDP growth on average will reach almost 2 percent by next year and also inflation expectation will be back close to its target by 2017. So, bottom line, the ECB is actually kind of declaring victory without even having started the QE program here in the Eurozone.

For NIGHTLY BUSINESS REPORT, Annette Weisbach in Cyprus.

(END VIDEOTAPE)

MATHISEN: So, did ECB President Mario Draghi finally give the European economy the juice it needs?

Steve Liesman takes a look at whether Draghi got it right and the risks that still remain.

(BEGIN VIDEOTAPE)

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
The economy has been so tough in Europe that the only bulls you can find are like these — the ones in the running of the bulls in Spain. But now there are real economic bulls. People not running from a ton of angry feet but who are actually optimistic on the European economy.

JOE LAVORGNA, DEUTSCHE BANK CHIEF U.S. ECONOMIST: We think QE will work. It will help through the exchange rate as that exchange rate moves lower. It makes a lot of Europe more competitive. So, I think there`s some better news ahead for the continent in general.

LIESMAN: European Central Bank President Mario Draghi announced today that Europe would launch its much anticipated quantitative easing program on March 9th buying 60 billion euros of public and private bonds a month from now until at least September 2016.

Draghi insists this will turn around the sluggish European economy and ECB is now predicting 1 1/2 percent growth this year, up from 1 percent in the prior forecast. That would be the best year of European growth since 2011.

The 2016 outlook was also raised.

MARIO DRAGHI, ECB PRESIDENT: In an environment of improving business and consumer sentiment, the transmission of our measures to the real economy will strengthen, contributing to a further improvement in the outlook for economic growth and a reduction in economic slack.

LIESMAN (on camera): This is not the first run of the bulls in Europe. Other ECB programs before it prompted similar outbreaks of optimism, only to be trampled by the reality of anemic growth, rising unemployment and economic chaos in peripheral countries like Greece.

(voice-over): The troubles in Greece and possible exit from the Euro zone remain a major question mark, as does the concerns from the low rates from the ECB`s program can really help cure what ails Europe.

Draghi insisted today that ECB`s bond purchases were only part of the solution.

DRAGHI: It is crucial that structural reforms be implemented swiftly, credibly and effectively. If this will not only increase the future sustainable growth of the Euro area but also raise expectations of higher incomes and encourage firms to increase investments today.

LIESMAN: But European stocks have been on a bull run since January, up 14 percent compared with just 2 percent for the S&P 500 in the U.S.

Whether there`s more room to run may depend on if the ECB`s program will bring wealth, not just to the financial sector but also to the real economy.

For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.

(END VIDEOTAPE)

HERERA: And joining us now to talk more about the ECB meeting and the Euro zone is Sameer Samana. He is global strategist with Wells Fargo
(NYSE:WFC) Investment Institute.

Sameer, welcome. Nice to have you here.

SAMEER SAMANA, WELLS FARGO INVESTMENT INSTITUTE GLOBAL STRATEGIST:
Thanks for having me.

HERERA: I guess it`s a little too early to sound the all-clear, but this is an improvement in Europe overall that a lot of people thought would take a little bit longer to materialize.

SAMANA: Absolutely. You know, we all know the perils of declaring mission accomplished a little too soon, but, you know, for the first time in a while we`ve seen expectations have been really low and they`ve been exceeded. And so, you had space for the ECB to surprise, which they have, and you`ve seen some space for economic data to surprise, which it has.
You know, you`re seeing a lot of the positives that you saw in U.S. if you can maybe use that as a blueprint.

Unemployment starting to come down. Retail sales are starting to go up. Business and consumer confidence are starting to improve and most importantly, in the Euro area, inflation expectations are going up.

MATHISEN: So, do they need to do quantitative easing?

SAMANA: You know, they do. You know, because one of the things that Steve mentioned is how there have been some stops and starts over the last few years. And so, what you need is persistence, and even the Fed realized that here, with the last round of QE, is that they needed to have it be open-ended in order to make sure people weren`t running ahead of them toward some time-dependent date in the future.

And so, you know, Draghi having learned from that said time and again, you know, we`re going to do this through September 2016, but we will make it go beyond that if necessary.

HERERA: You know, Steve Liesman in his report just a few moments ago mentioned the fact that Europe has been outperforming in terms of its stock market`s performance compared to the U.S. and some other areas as well.

But are earnings strong enough to continue to propel that forward?

SAMANA: Last year was a bit of a disappointment. I think part of that has to do with, you know, obviously the dollar falling — or sorry, dollar rising as fast as it did. Some of the foreign currency falling as fast as it did, which reduced the amount of earnings in dollars, which is really what U.S. investors care most about.

Now, I think the pace of currency appreciation probably slows, I think, because a lot of the quantitative easing announcements are out of the way. And so, the company`s get to really get down to the business of, you know, trying to sell more stuff, and get better margins. So, yes, we think this year, we start to see is the positive earnings growth reassert itself.

MATHISEN: So, Sameer, if the idea of quantitative easing, because so far, it`s really only been an idea or a promise or the threat of, is what it took to take — to get the European economy back on its wheels, why didn`t they do it sooner? I don`t mean to be too critical of the political process over there because Lord knows it would be pot calling the kettle black with Americans criticizing European politics.

SAMANA: Sure. So, you know, I think some of it has to do with call it just tradition. There`s been a greater fear on the European side about inflation. I mean, they`ve dealt with their own bouts of hyperinflation that`s obviously left a mark because of how painful they can be to stamp inflation. I mean, the U.S. went through something very similar in the `70s and `80s. Obviously, we`re a little bit further along from that, so maybe the memories aren`t as painful.

So, I think that played into it. The Germans, obviously, you know, want to make sure the currency doesn`t weaken too much. Obviously, that`s something that`s in their best interest to have a currency somewhat strong.

So I think for all the different reasons, the political problems that you mentioned. I think they were a little bit slow to the party. Also, I think they wanted to see how it would work out in the U.S. and it`s had great results.

HERERA: Where would you put money to work in Europe? You like certain sectors. What countries?

SAMANA: We like countries that will benefit from the resurgence in overall economic economy but maybe aren`t the high flyers that we`ve seen, you know, call it over the past year.

So, Germany, kind of that steady eddy, you know, a very industrialized nation, has a lot of exports, of machinery around the world, benefitting very greatly from the lower euro. The U.K., which has one of the economies that, you know, if you talk about outside of the U.S., where might there be real areas of strength, the U.K. has done very well.

And then, Switzerland. I know there`s been a lot of talk how they let the Swiss franc come unpegged. But, you know, once again, a lot of large consumer staples and health care companies, you know, based in Switzerland, that are doing very well in the current economy.

HERERA: Sameer, thank you so much. Sameer Samana with Wells Fargo
(NYSE:WFC) Investment Institute.

Ty?

MATHISEN: To China now where the government has lowered the country`s growth forecast for 2015. China now says it expects the economy to grow about 7 percent this year, down from last year`s 7.5 percent. Lowest economic growth target in 15 years.

Susan Li now with more from Hong Kong.

(BEGIN VIDEOTAPE)

SUSAN LI, NIGHTLY BUSINESS REPORT CORRESPONDENT: This is a new normal in China. We had the Chinese Premier Li Keqiang at the National`s People Congress, the NPC, today, as expected by the market, saying that China`s GDP and the target will be set at 7 percent but then he added some vagueness and some uncertainty in the markets when he added the word “around”, because it has a lot of people thinking, OK, are we going to be gutted down further and could that rate have a 6 percent handle in 2015 instead?

Also, some surprises when it comes to spending. China is going to increase their spending this year, 10 percent more than last year, to $2.74 trillion, and going to spend it on railways. They`re going to spend it on water projects. And they`re going to spend it on agriculture.

But they don`t want this to be misconstrued as a big stimulus package.
But it does increase their budget deficit at 2.3 percent, which is the widest for China since 2009, when they had to guide the economy through the global financial crisis. Also, I guess, what`s on a cash flow. White House`s eye is the increase when it comes to military spending, up 10 percent in 2015. Really, that`s been the trend for the last few years and China is the second largest spender when it comes to defense.

For NIGHTLY BUSINESS REPORT, I`m Susan Li in Hong Kong.

(END VIDEOTAPE)

HERERA: Stocks edged higher, breaking two days of losses as investors focused on upbeat news out of Europe and in anticipation of tomorrow`s jobs report. The Dow Jones Industrial Average rose 38 points to close at 18,135, the NASDAQ, 15 points higher, and the S&P 500 was up just 2 points.

MATHISEN: In deal news, Abbvie will buy Pharmacyclics (NASDAQ:PCYC) for about $21 billion. The deal expands Abbvie`s reach into oncology and gives it access to what`s expected to be a blockbuster drug cancer therapy drug.

For Abbvie, the deal lessens its dependence on arthritis drug from Myra. Shares of Pharmacyclics (NASDAQ:PCYC) popped 10 percent, while shares of Abbvie fell more than 5 1/2 percent.

HERERA: And now to U.S. economy, which saw factory orders fall for the sixth straight month. The Commerce Department said new orders from manufactured goods slid 2/10 of a percent, below expectations, and it follows revised 3.5 percent drop in December. Manufacturing has been hurt by softening demand in Europe and Asia.

MATHISEN: The major economic data point of the week is due out tomorrow morning, when the Labor Department releases the February employment report. According to Dow Jones, non-foreign payrolls expected to increase 240,000, down a little bit from the previous month. Economists are looking for the unemployment rate to fall slightly to 5.6 percent, average hourly earnings expected to bump up 0.2 percent.

And there are a few things both Wall Street and Main Street will be watching for and Hampton Pearson knows what they are.

(BEGIN VIDEOTAPE)

HAMPTON PEARSON, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
Bitter winter weather in much of the country and job losses in the energy sector due to declining oil prices are key reasons why leading economists expect a job growth slowdown in February. Nearly 40,000 jobs have been lost in the energy sector in the first two months of 2015, according to a leading job placement firm.

JOHN CHALLENGER, CHALLENGER, GRAY & CHRISTMAS: Right now, we`re seeing in the midst of this expansion one sector that really is going through the change. That`s energy, 38 percent of all cuts right now for the first two months of the year have come from that sector.

PEARSON: Today, the Labor Department tells us first time unemployment claims topped 320,000 last week, pushing the moving average back above 300,000, the highest since mid-January. Earlier in the week, a closely watched forecast for private sector job growth showed a gain of just
212,000 jobs, down from 250,000 last month.

WARD MCCARTHY, JEFFERIES & CO.: We have to see the promise land which is spring I think before we finally start to see the economy revert to the gross trajectory we have for much of 2014 and I think will give us growth over 20 percent in 2015.

PEARSON (on camera): When the Federal Reserve meets in two weeks, sure sign of spring for monetary policymakers would be a wage growth and a rebound in consumer spending. But the recent economic data shows there`s still work to do in both categories.

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

(END VIDEOTAPE)

HERERA: And coming up, the country`s biggest banks undergo stress tests to see if they can withstand a severe recession. The results, next.

(MUSIC)

HERERA: The nation`s 31 biggest banks passed a test of how they would fare in an economic crisis. Those tests are conducted by the Federal Reserve and next week, we`ll be told whether or not they can go ahead with plan to dividend.

Kayla Tausche is with us and has more on results from the test.

I think it was encouraging that all of the banks passed but they all kind of got different grades.

KAYLA TAUSCHE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Yes, it`s encouraging that that`s, of course, going to lead critics to say that the test is too predictable, is it too easy for the banks to figure out exactly what they need to do with their balance sheet.

But for now, Sue, it is good news. All 31 banks representing 80 percent of global banking assets passing this test, which is quite a vote of confidence in the length that they have — the measures they`ve taken to build up the capital levels after the crisis. They`ve come a long way.

MATHISEN: Like the Common Core for bankers I supposed.

Dividends, a key issue, most especially for Citibank, or Citi. Does this make this more likely that they`ll be able to pay them?

TAUSCHE: This is only part one of the test. And while it is a vote of confidence, it`s pretty much just that, because they all cleared the Fed`s capital bar, but that is not including the calculus needed for buybacks, for dividends and, of course, that was the first thing the banks had to scrap when they realized that they needed that money, that cash in the financial crisis.

So, now, the Fed really wants to take a hard look at how they`re planning to pay out those dividends and those buybacks. They thought Citigroup (NYSE:C) last year had enough capital on hand. It wasn`t quantitative issue. It was what they call the qualitative issue.

They didn`t think that their risk control were strong enough. The bank has spent the entire last year to fix that, but, of course, it`s only up to the Federal Reserve at this point.

HERERA: Are there some banks out there that are viewed as — of course, none of us know because we`re not doing the test — but are there are some that are viewed as more vulnerable or perhaps less prepared, and might not get the OK to issue the dividends, and do the buybacks?

TAUSCHE: It`s an interesting question. Deutsche Bank is undergoing the stress test and CCAR, which is the capital processing for the first time. So, when the bank goes through it for the first time, of course, it`s an opaque process. Unfortunately, they usually learn things the hard way.

Santander and Allied Financial also have a lot of exposure to this new boom in subprime auto lending. It`s unclear what that will be treated like under these levels, and also, you have a lot of big banks — JPMorgan (NYSE:JPM), Citigroup (NYSE:C), Bank of America (NYSE:BAC), Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS), that have a lot of exposure to capital markets. There was a new test that put a new strain on the capital markets that brought some of those capital levels down.

So, it could see something where the banks wanted to give back more money to shareholders and they`re going to have to temper their expectations a little bit.

MATHISEN: They tweak the test every year?

TAUSCHE: They tweak it every single year. They don`t want it to be predictable.

MATHISEN: Of course.

TAUSCHE: They want banks to have — they want them to have a safe enough balance sheet that no matter what happens, their assets will be safe.

HERERA: All right. Kayla, thank you so much — Kayla Tausche.

Ty?

MATHSEN: Costco (NASDAQ:COST) announces a surge in profits in its latest quarterly results, and that`s where we begin tonight`s “Market Focus”.

The wholesale giant`s numbers were lifted by a tax benefit related to a special dividend, because of lower fuel prices. The revenue was slightly below estimates, but same-store sales rose more than expected. The stock was up almost 3 percent higher today. It finished at $151.17.

Kroger (NYSE:KR) also announcing a big pop in earnings. The grocery store chain`s quarterlies beat on both the top and bottom lines. It`s also helped by lower fuel costs. Its full-year outlook also topped views.
Shares rose up almost 7 percent to $74.31.

And comments from Boeing`s chief financial officer helped lift the Dow component today. He told investors that cash flow levels will rise in coming years, but investors should expect the gains in 2015 to come towards the end of the year. Not sooner. The stock rose slightly to close at $154.47.

HERERA: And Simon Property Group (NYSE:SPG) is mulling a bid for rival mall owner Macerich (NYSE:MAC). That`s according to a report in “The Wall Street Journal”. The mall owner hasn`t made any formal offers yet, although it did reveal a stake of about 3 1/2 percent in the company last year. Shares of Simon were down just slightly to $187.13. Macerich
(NYSE:MAC) popped about 5 percent to $88.07. Hopefully, I pronounced that correctly.

And shares of Kythera Biopharmaceuticals surged today after reassuring news from regulators. The Food and Drug Administration has backed its injection for double chin reduction, saying the benefits of the treatment outweigh the risks. Shares soared 25 percent to $50.

And after the bell, Gap (NYSE:GPS) reporting a surprise drop in sales.
The retailer`s namesake store and its Banana Republic divisions both saw declines. Shares were volatile after hours. At one point, they were down more than 2 percent. But before the close, the stock was down about 1.5 percent to $41.43.

MATHISEN: Still ahead, the retirement mistake you don`t want to make when planning for your golden years.

(MUSIC)

MATHISEN: If you`re thinking of retiring young, you`re not alone.
New research from Boston College`s Center for Retirement Research said the average age for women retiring is 62 and for men, it`s 64. But is retiring too young harmful to your financial health?

Let`s ask Shannon Eusey, president and cofounder of Beacon Pointe Advisors.

Shannon, welcome. Good to have you with us.

SHANNON EUSEY, BEACON POINTE ADVISORS PRESIDENT & CO-FOUNDER: Thank you.

MATHISEN: I was reading numbers the other day that a couples age 65 today has a better than two out of five chances that one or both will reach age 95. So, your money has got to last 30 years in retirement.

EUSEY: That`s absolutely true. So, we tell our clients that, gosh, if you want to retire at 62, you better have the nest egg in order to do so. And we want to know with 80 percent accuracy, that their portfolio is going to last until 95.

HERERA: So, if they do indeed put off retiring, what kind of percentage benefit can they see? How much better is it for them to quantify the advantages of working a little bit longer?

EUSEY: Absolutely. You know, if clients — we`ve got a client who wanted to retire at age 66. We told him, you know what, probably better off if you retire 70, he`s going to receive 25 percent more in Social Security benefits.

And you think about it. During that four-year period, he`s also able to contribute to his 401(k) plan as well and tax deferred assets able to grow in a tax-free way.

MATHISEN: And maybe biggest of all, Shannon, is that during those four years, he`s not relying on his portfolio. He`s leaving it alone.
He`s actually building it, so he`s not drawing money out.

EUSEY: Absolutely. So, you know what, we have a client that wants to retire at 62, 63, 64, wants to retire a little bit early, they`ve got two options. They can either retire early and really save their portfolio and spend quite a bit less. So, I would argue saving 30 percent over the next
30 years is better than taking two years and working longer.

HERERA: Also, if you stay employed and your company offers health benefits, then you don`t have to deal with the fact that a lot of times, when you retire, you have vastly diminished health benefits if any at all for some companies.

EUSEY: Yes, there`s no question. That is the single largest expense in retirement that folks often don`t take into consideration. So, we want to make sure that we model and plan for that for our clients.

MATHISEN: What, Shannon, is your — you know, the old rule of thumb, once someone does retire for their portfolio, not to outlive their portfolio, that they should aim to take out roughly 4 percent a year. Are you down with that or is that just — you know, a rule of thumb?

EUSEY: We agree with that rule of thumb, but obviously, it depends on what — you know, it`s a little bit cliche but what their happily ever after goals are. Do they want to pay for their grandchildren`s graduation, or do they want to take a trip around the world. So, all needs taken into consideration as we`re planning about spending rates.

HERERA: How do you feel about the overall savings rate for most Americans today? I think that`s one of the most worrisome things. As we see some of the figures and people are so underinvested and they have not saved hardly anything towards retirement.

EUSEY: I think that`s the biggest concern. So, we`ve got to make sure as we`re in our 20s, 30s, 40s, we really start to save early because the wealth in 20s and 30s allows you to save quite a bit less in 40s, 50s, and 60s.

MATHISEN: Shannon, what Sue and I are most concerned about is whether we can retire in Newport (NASDAQ:NEWP) Beach.

Thank you so much for joining us.

EUSEY: Yes, absolutely.

MATHISEN: Thank you so much for joining us tonight, Shannon Eusey, with Beacon Pointe Advisers.

EUSEY: Thanks for having me.

HERERA: Ahh, it looks so pretty out there. I`m sure it is.

Finally tonight, “Fortune” is out with its annual list of the best companies to work for. And for the first time, the ranking also includes the best companies for women to work at. The overall list is based on factors like trust and sense of mission.

And here are the top three firms: Acuity, a private insurer, landed the third spot. It offers perks like no limit on tuition reimbursement.
At number two, the Boston Consulting Group. And for the six-year in a row, Google (NASDAQ:GOOG) has clinched first place. The tech giant is famous for its benefits like free cafeteria and complimentary laundry service.

MATHISEN: Techies do laundry.

HERERA: No, Google (NASDAQ:GOOG) does their laundry.

MATHISEN: Google (NASDAQ:GOOG) does their laundry.

HERERA: All right. That does it for NIGHTLY BUSINESS REPORT for tonight. I`m Sue Herera.

We want to remind you, this is the time of year your public television station seeks your support. Take it over.

MATHISEN: All right. I`m Tyler Mathisen. On behalf of your public TV station, thanks for your support. And we`ll see you back here, jobs day, tomorrow.

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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