Transcript: Nightly Business Report — May 14, 2015

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

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Record territory.
The S&P finishes at a new all-time high. The Dow closes in on one — as the dollar remains on track for its longest weekly losing streak since 2013.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Who is calling Avon? An unbelievable takeover offer sends shares soaring. But the problem is, it wasn`t real.

MATHISEN: Food fight. Why your grocery bill could be on the rise.

All that and more tonight on NIGHTLY BUSINESS REPORT for Thursday, May, 14th.

HERERA: Good evening, everyone, and welcome.

Rally day on Wall Street. Stocks took off after the opening bell and really didn`t look back. The S&P 500 finished at a record. The Dow Jones Industrial Average is just a point away or so from one. The reason: well, bonds behave, the dollar index declined, and that calm sent investors back into stocks.

By the close, the Dow Jones Industrial Average soared 191 points to 18,252, the NASDAQ gained 69 and the S&P 500 rose 22 points to 2,121, which is a new high.

Now, much of the focus is on the dollar, which is now falling back a bit after climbing sharply. In fact, the greenback is headed for a fifth weekly decline.

Sara Eisen looks at the trend and what top strategist says could happen next.

(BEGIN VIDEOTAPE)

SARA EISEN, NIGHTLY BUSINESS REPORT CORRESPONDENT: From earnings to economy, the dollar moves are making waves. After a massive run-up, the dollar has now plunged to a four-month low. Overnight, it surged past 1.14 euro, getting whacked on weak U.S. economic data, most recently disappointing retail sales.

But the bulls are hanging in there. Strategists see one for two for euro-dollar for the end of the year, great news if you`re holding out for that European vacation.

BEN WILLIS, PRINCETON SECURITIES: The dollar had been depressed for so long purposely by the federal government that tried to lower the value of the dollar in order to compete on the global stage. But its move was very dramatic and had a significant impact on particularly $ S&P 500 companies.

EISEN: Strategists see a strong dollar against the Japanese yen, too. On average, they expect it to run up to 124 by the end of 2015 and get even stronger next year. That doesn`t mean it`s going to be a smooth ride. Most of the respondents expect current heighten volatility to continue for currency and 30 percent say the swings will get worse.

But when it comes to the dollar which is the center of trading action lately, don`t count it out just yet.

WILLIS: It`s huge rally back that we saw in the last few months has reawakened the idea of how important it is, particularly to the multi- national companies that do most of over 50 percent of the business outside of the United States. That`s why you are hearing so much about it.

EISEN: Ultimately, the Federal Reserve is preparing to raise interest rates. And that is bullish for the U.S. dollar. In the short- term here, the dollar correction may prove helpful for multinational companies like IBM, Apple (NASDAQ:AAPL) and McDonald`s (NYSE:MCD), who do a lot of business overseas. But in the longer term, strategists say they`re going to have to get used to a stronger U.S. dollar.

For NIGHTLY BUSINESS REPORT, I`m Sara Eisen.

(END VIDEOTAPE)

MATHISEN: As for the economy, the phase of layoffs remains at a 15- year low. The number of Americans filing new claims for unemployment benefits fell by 1,000 last week to a seasonally adjusted to 264,000.
Separately, the producer price index which measures prices that businesses receive for their goods and services fell 0.4 percent last month. It`s the latest sign of low inflation across the economy, something the Federal Reserve watches very closely.

HERERA: Our guest tonight says he`s not celebrating today`s market rally quite yet.

He is JJ Kinahan, chief market strategist at TD Ameritrade (NASDAQ:AMTD).

Good to see you, JJ. Welcome back.

JJ KINAHAN, TD AMERITRADE CHIEF MARKET STRATEGIST: Hello, sue.
Thank you. Glad to be here.

HERERA: Why aren`t you celebrating quite yet? I mean, I know you`re bullish longer term. But what is it that has you perhaps a little concerned?

KINAHAN: Well, if you think about it, Sue, we`ve been in a pretty tight range for a while. It was really between, you know, just about 2,120 on the upside and 2,080 on the downside. Actually, for all May, we`ve been in there on the S&P 500. And if you go back to mid-April, 2,060 on the downside. We did close above 2,120.

Don`t get wrong in this. Fantastic. But, you know, I think one of the mistakes perhaps some retail traders make is they hear we are at all time highs and kind of go rushing in, all I would say, let`s say if we can hold it a little bit, or get away from the 2,120 level, a little bit more convincingly.

The great thing about today`s action is we had some — you know, the Microsofts, the Apples of the world as one of the leading sectors or leading the stocks and the leading sector being IT, and all ten sectors up on the day. So, it was very positive from that point of view, but I think people have to take it with a grain of salt because there are things out there that could derail us and we`re just at the top end of the range.

MATHISEN: The economic numbers are a little bit wishy-washy, should I say. Some of the earning numbers in retail today were not particularly good. What do you see for stocks over the next four to six months.

KINAHAN: Well, Tyler, I do think we can continue higher. But it will be a very sort of herky-jerky action.

You know, the one thing I will say is that we are near all-time highs and people still are very, very cautious, which isn`t necessarily a bad thing and one of the reasons we can continue to go higher. I do think the dollar getting stronger is actually kind of a good thing because if you think back about the earnings season just ending right now, the strong dollar definitely affected top line.

And by that, I mean sales growth. We only had just under 50 percent of the S&P 500 companies beat on their sales and that is where you have to really grow things overall. You can only scrape the bone so deep and lay people off or whatever it may be, to cut expenses, to meet your earnings` reports.

So, a strong dollar will help these multinationals with sales. And I think that`s what will improve the economy overall.

HERERA: All right. Enjoy that beautiful Las Vegas weather out there, JJ. Thanks so much.

KINAHAN: Thanks, Sue. Always a pleasure.

HERERA: JJ Kinahan with TD Ameritrade (NASDAQ:AMTD).

MATHISEN: Well, drama on the floor of the New York Stock Exchange today when someone came calling for Avon for a takeover bid, only none of it was real.

Bob Pisani has the story.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: It was an odd day for Avon, which was a subject of a takeover hoax. Avon was having a perfectly normal day, trading around $6.60 in the 11:30 in the morning, when the stock shot up 5 percent in a matter of seconds, causing it to be halted at the New York Stock Exchange. Some firm calling itself PTG Capital had supposedly filed an offer to buy Avon for an exorbitant price.
It was at a 20-year low, so that attracted a lot of attention. The stock reopened and immediately shot up again, triggering another trading halt.

By then, traders on the floor were noticing that the filing contained numerous typos and nobody ever heard of this company. There were rumors they didn`t even exist. When it reopened, the stock went in the other direction. It dropped 5 percent, was halted for a third and final time.

CNBC reached out to Avon. They told us it`s not received any offer or any communication from this company. They can`t even confirm that it exists. So, in other words, it was a hoax.

It`s an issue for the SEC here. How on earth did a phony filing getting to their database? The trading community assumes filings made in a database like this is improved by the SEC and vetted by them. What happened?

Well, there is no comment from the SEC, at least not yet.

For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock Exchange.

(END VIDEOTAPE)

HERERA: The Pacific trade agreement cleared a key test in the Senate today, giving new life to one of President Obama`s top legislative priorities. The Senate voted 65-33 to move ahead with considering that measure. Some Democrats decided to support the bill after winning a separate vote on a bill which would punish countries that manipulate their currencies.

MATHISEN: Oil prices came under some pressure today but remain near
$60 a barrel, and that has Saudi Arabia saying its strategy to squeeze U.S.
shale producers is succeeding.

Jackie DeAngelis has more now on the victory lap being taken by the world`s largest exporter of crude.

(BEGIN VIDEOTAPE)

JACKIE DEANGELIS, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
When oil prices started collapsing just about a year ago, Saudi Arabia drew a line in the sand. It would not decrease oil production and would suffer through a period of low prices to maintain market share.

The strategy was to weather the storm, to weed out the smaller U.S.
shale producers, who would be less likely to make it. And now, the Saudis are considering their strategy a success.

In an interview with the “Financial Times” in Riyadh, a Saudi official said, quote, “There is no doubt about it. The price fall of the last several months has deterred investors away from expensive oil, including U.S. shale, deep offshore, and heavy oils.

But industry experts are cautioning. It may be too soon for a victory lap.

ANTHONY GRISANTI, GRZ ENERGY FOUNDER AND PRESIDENT: I think it is too soon. There are other factors on why crude bounced from the $42 level.
Number one, you have geopolitics are on the rise, the problems in the Middle East. Number two, you`ve had a weaker dollar. And number three, you have summer demand.

DEANGELIS (on camera): The numbers still indicate global oversupply.
According to OPEC`s latest monthly report, the Saudis are producing at record levels, 10.3 million barrels a day and Iraq`s production is increasing as well.

(voice-over): In the U.S., production is still robust and close to
9.4 million barrels a day. The most recent EIA and IEA reports show expectations for U.S. shale production will decline, but not by much.

GRISANTI: I`m not saying we`re not going to see volatility in the crude oil market and we definitely will. And once the summer has ended and those supply start to build again, we could a move back down to $40 a barrel level.

DEANGELIS: And earlier this week, Goldman Sachs (NYSE:GS) also warn that the recent rebound in prices might have been premature.

For NIGHTLY BUSINESS REPORT, I`m Jackie DeAngelis.

(END VIDEOTAPE)

MATHISEN: Still ahead, three things that could cause food prices and your grocery bill to rise.

(MUSIC)

MATHISEN: El Nino conditions are strengthening according to the National Oceanic and Atmospheric Administration. A strong El Nino system has the potential to change weather patterns and hurt global food production, from wheat in Australia to rice in Asia. Experts say the price of those commodities, plus sugar and coffee, could be most affected.

HERERA: More than 40 percent of U.S. honeybee colonies died over a recent 12-month period. The Agriculture Department`s annual survey reported that beekeepers are starting to lose large numbers of bees during both the summer and the winter. Historically, most are lost in cold months. Honeybees are used to pollinate plants that produce a quarter of the food consumed by Americans. California`s almond industry is the single largest user of honeybees.

MATHISEN: Also impacting food prices, the biggest outbreak of bird flu ever in the United States, the virus is ravaging poultry farms across Middle West and starting to affect major companies.

Morgan Brennan has more now from Ames, Iowa, the state at the center of this crisis.

(BEGIN VIDEOTAPE)

MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
It`s the worst outbreak of Avian influenza to ever hit the U.S., with more than 33 million birds now affected across 16 states, including Iowa, which has, by far, been hit the hardest.

BILL NORTHEY, IOWA`S SECRETARY OF AGRICULTURE: We haven`t seen anything like this, certainly on the poultry side.

BRENNAN: Bill Northey is Iowa`s secretary of agriculture, and with more than 25 million egg-laying hens set to be destroyed, he says the equivalent of one of every three eggs produced in the state is now offline and many from facilities that supplied major food companies.

NORTHEY: Over half of the business of egg processors is done in Iowa. So, certainly, we`re likely to see that ingredient market where eggs is an ingredient be even greater impacted than probably than the shell egg market.

BRENNAN: The egg market breaks down into two categories. Shell egg which consumers buy at the store, and breaker eggs processed and used by food manufacturers.

While the price of a dozen Midwest large shell eggs has increased 30 percent over the past three weeks, commodity analysis firm Urner Barry says it`s the breaker market that`s really feeling the pinch, with liquid whole egg prices are up 77 percent. As companies like Post Holdings which owns Michael Foods experienced deep interruptions to their supply chains, the ripple effects are still to come for food companies that make everything from fast food breakfast to mayonnaise. It`s a situation industry consultant Joe Kerns says may only get worse with so many facilities offline indefinitely.

JOE KERNS, KERNS & ASSOCIATES PRESIDENT: Once we eradicate the disease from a physical site, when it`s clean enough in order to safely repopulate. That is one very key component that myself as well as others in the monitoring and keeping an eye on.

BRENNAN (on camera): And in the cases keep coming. In Iowa, farmers send their sick birds here to Iowa State University`s Veterinary Medical Center, where preliminary bird flu tests are conducted. Scientists are working around the clock to get results within hours.

DR. KYOUNG JIN YOON, IOWA STATE UNIVERSITY VETERINARY MEDICINE DEPT:
In our normal laboratory operation is Monday through Friday. Right now, we are operating 24 hours, seven-day a week, with a multiple personnel shift.

BRENNAN (voice-over): Dr. Yoon hopes the worst may be over. But officials are already bracing for the fall, when the weather cools and wild ducks and geese once again fly South.

DR. BEVERLY SCHMITT, USDA DIAGNOSTIC VIROLOGY LAB DIRECTOR: We know that the virus was in wild birds. So, as they migrate back down through the fly ways, we mostly likely will see cases.

BRENNAN: In meantime, the roads surrounding infected farms have been closed off, as tighter security takes hold across the state and officials begin to destroy more than 25 million birds.

For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan, in Ames, Iowa.

(END VIDEOTAPE)

HERERA: While companies like Post Holdings are feeling the impact, shares of Cal Maine Foods, they are hitting new highs and that is because most of Cal Maine`s operations are in the South, and haven`t been impacted by the outbreak yet. The stock rose almost 3 percent in today`s trading.

MATHISEN: Matthew Roberts joins us now to discuss what all of these issues may mean for food prices. He is an agricultural economist at the Ohio State University.

Mr. Roberts, welcome. Good to have you with us.

Let`s start with eggs which Morgan just talked about. How much higher do you think egg prices could go, both for the eggshell and eggs that become cookies to mayonnaise?

MATTHEW ROBERTS, AGRICULTURAL ECONOMIST: We`re still trying to figure that out, but it`s not inconceivable that we could see another 50 percent increase in the shell egg — or I`m sorry in the liquid eggs. The shell eggs, we`re still waiting to see, but I don`t think it`s unreasonable to think that they could match that.

So, overall, really a double, even maybe a triple in price compared to what we saw four to six weeks ago.

HERERA: And what about the price of the meat itself, the chicken and turkey population? There were some talks that we were going to see shortages as we go in to key holiday seasons and the like. Do you agree with that?

ROBERTS: It`s certainly possible. What we are trying to figure out right now, it`s actually kind of an interesting dynamic, we haven`t seen bird flu really spread into the broilers yet, because they are typically in the East and the South. So, we haven`t seen much meat effect, but the weird thing that we`re trying to figure out in the economics profession is, at the same time we`d be seeing a lot of animals slaughtered, like we`re seeing on the layer side, we`ve already seen a number of countries put import bans on American poultry products.

So, right now we can`t exports to Canada, to Mexico, to the E.U., China or South Korea. So, we`re not yet sure how this increase and decrease supply is going to weigh out. I think there`s going to be enough Turkey for Thanksgiving, though. I`m not worried about that.

MATHISEN: So we can`t transport to those country you mentioned, even if the birds, the meat, comes from farms where the bird flu has not occurred in the South and East?

ROBERTS: In general. So, it`s a little country by country. Some of those states have actually placed the bans state by state, so you could export there, certain states. Others, it`s nationwide all poultry products, layers and birds.

HERERA: Talk to me about the honeybee population. The story that I read just a few minutes ago, you know, the numbers are pretty stunning.

ROBERTS: It is — it really is amazing. And we know for the last 10 years, we`ve been dealing with colony collapse disorder, but there is a lot of thought that this actually is a different cause that we`re seeing new things come in that are actually causing these bee populations to collapse and that`s scary. When we talk about the — just in the letter A, we`ve got almonds, avocados and apples that are pollinated by honeybees. We can through the alphabet and every beloved fruit or tree nut is pollinated and this threatens that crop pretty dramatically.

MATHISEN: Very quickly, what is killing the bees? If the colony collapse isn`t, what is? Quickly.

ROBERTS: We don`t quite know. We think it has a lot to do with stress. These hives are getting moved. After CCD, we`ve seen the number of populations decline, the number of hives declined. So, they are getting moved around to more and more farms more often and it seems like that`s becoming a self-reinforcing trend.

MATHISEN: All right. Matthew, thank you very much. Very helpful.
Matthew Roberts, agricultural economist at the Ohio State University.

ROBERTS: My pleasure.

HERERA: Kansas City Southern (NYSE:SO) (NYSE:KSU) withdraws its outlook, sending shares lower, and that is where we begin tonight`s “Market Focus”.

The railroad operator is taking back its 2015 revenue and volume guidance, citing uncertainty around the energy markets and currency impacts. The company established a new half billion dollar share repurchase plan to run through 2017. But nonetheless, shares fell more than 2 percent to $94.89.

Shares of Avago Technologies (NASDAQ:AVGO) spiked today on a “Reuters” report saying Avago has contacted Xilinx (NASDAQ:XLNX), Renesas Electronics and Maxim Integrated products about a potential takeover.
Avago rose 3 percent to $126.94, Xilinx (NASDAQ:XLNX) was almost 3 percent higher, Maxim rose about 5 percent. Renesas trades in Tokyo.

MATHISEN: Applied Materials (NASDAQ:AMAT), Sue, posted late earnings that beat on the top and bottom lines. The company reported its highest quarterly revenue in three years as chip makers spent more on technology used to make smartphones and memory chips. Profit was up almost 40 percent. Shares popped initially after the close. The stock ended the regular session off by a few cents at $19.86.

A disappointing outlook sent shares of King Digital sharply lower initially after hours. The maker of Candy Crush managed to post results that were well above estimates, but it expects softer growth. Shares were down as much as 11 percent after the bell. Before the close, the stock fell more than 4 percent to $14.99.

And Party City delivered its first report since going public. The party supply retailer announced a narrower first quarter loss than analysts anticipated. Shares were higher right after the close. In regular trading, the stock was off by a penny. It finished at $21.75.

HERERA: Well, believe it or not, here`s some good news for those of you who have racked up thousands of frequent flier miles. A new survey shows it`s becoming easier to book a flight using those miles.

Phil LeBeau has more.

(BEGIN VIDEOTAPE)

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
It`s a welcome change for frustrated fliers. Airlines are making more seats available for reward flights. Switchfly`s annual survey of future flights found 74 percent had seats available for reward bookings, slightly more than last year.

JAY SORENSEN, IDEAWORKS PRESIDENT: I think that reward value is improving for members. What I`m especially surprised by is the fact we`re seeing more and more reward availability closer to departure and that is something that popped up in the last five years.

LEBEAU: Why are airlines making more seats available, even as they limit flights to boost profits? One factor may be airlines working harder to compete with credit cards when it comes to reward travel. Otherwise, they risk losing frequent flyers and their steady bookings.

SORENSEN: American Express (NYSE:EXPR) (NYSE:AXP) launched a program called Plenty. And it`s not a credit card. It`s a loyalty program, with several major retailers. And I think that this is going to change the dynamics in the U.S. market because this is the first time that we really have the opportunity for a nationwide loyalty program to be in place and I think the airlines look at that as a potential threat.

LEBEAU: Among U.S. carriers, Southwest, JetBlue and Alaska have the most flights with seats open. While United, American and Delta have also increased their reward availability. Despite the good news, flyers remain skeptical.

UNIDENTIFIED MALE: Actually, a lot harder. A lot more difficult, there are less choices. A lot more blackout dates.

UNIDENTIFIED MALE: I think cashing your points in is easier on some airlines. Upgrades are harder to come by, without a doubt.

LEBEAU (on camera): One negative in the latest seat survey, finding a seat on a long haul international flight remains challenging, especially if you plan to fly during the upcoming and very busy summer travel season.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago.

(END VIDEOTAPE)

HERERA: Coming up, the world`s largest retailer takes on the king of online shopping. But how will that battle shake out?

(MUSIC)

HERERA: Nordstrom (NYSE:JWN) out with late earnings and the results were mixed. Earnings came in below estimates, while revenue was better than expected. Extra costs were related to an acquisition and store expansion, and that weighed on the results. Shares were volatile in after hours trading.

MATHISEN: Department store operator Kohl`s (NYSE:KSS) reported disappointing sales growth in the first quarter. Kohl`s blames the sales shortfall on a decline in shopper traffic. They tend to go hand in hand.
Profits for the quarter did rise and company executives said the changes that have been put in place are starting to pay off. Nonetheless, shares drop sharply in today`s session, as you can see there. They finished at $64.62, down 13 1/4 percent.

HERERA: The battle of the clicks. As we reported last night, Walmart is taking on Amazon (NASDAQ:AMZN). The world`s largest retailer will start testing an unlimited free shipping service this summer, jumping feet first into an area that Amazon (NASDAQ:AMZN) has long dominated.

Will it turn into an e-commerce battle for the ages?

Courtney Reagan has more.

(BEGIN VIDEOTAPE)

COURTNEY REAGAN, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
The world`s largest retailer is aiming for the king of the jungle. Walmart confirms it is testing a new $50 per year subscription program offering unlimited free shipping for 1 million of the 7 million products on its Web site. The retailer says the orders will arrive in three days or less and for now, it`s invitation only.

It`s another shot fired in the battle of bricks versus clicks, as retailers large and small try to compete with Amazon (NASDAQ:AMZN) and the strength of its prime membership program. In its 10th year, an Amazon
(NASDAQ:AMZN) prime membership is $99 per year for two-day shipping on 20 million items, as well as streaming video and TV shows, music, a Kindle lending book library and Cloud storage.

And it`s a valuable group. According to Consumer Intelligence Research, prime members spend $1,100 per year compared to $700 per year for other Amazon (NASDAQ:AMZN) shoppers.

(on camera): While Amazon (NASDAQ:AMZN) says its prime membership rates are growing, it won`t say how many total prime customers it has.
Analysts and consultancy groups estimate it`s likely between 40 and 50 million. But many analysts have long believe if any retailer could truly compete with the online behemoth, it would be Walmart.

(voice-over): The discount retailer`s logistics are among the world`s best, and along with its own distribution centers and already fulfilling online orders, it has 4,500 U.S. locations within 10 miles of 90 percent of all Americans, a built-in fulfillment network.

CHRIS HORVERS, JPMORGAN: If you look last year, the fastest growing category in terms of online growth was consumer product goods. So, it`s Downey, it`s Cheerios, it`s Tide. That`s the heart of Walmart and they need to do it to compete.

REAGAN: Discount retailer Target (NYSE:TGT) offers a 5 percent discount both in store and online, and unlimited free shipping for Web orders to its 15 million red card members. The big question is whether Walmart will be able to entice an Amazon (NASDAQ:AMZN) or Target (NYSE:TGT) shopper to its new service, or whether it will attract new shoppers.

Wells Fargo (NYSE:WFC) analyst Matt Nemer tells investors it`s better late than never for Walmart, but cautions there is heavy lifting ahead to catch up to the king of the jungle.

For NIGHTLY BUSINESS REPORT, I`m Court Reagan.

(END VIDEOTAPE)

MATHISEN: And finally tonight, Christie`s has done something never done before. It sold a billion dollars worth of art in just three days, and broke a number of records in the process. Christie`s will host another sale today and tomorrow.

HERERA: Wow.

MATHISEN: Wow.

HERERA: We`ll keep you posted.

That`s NIGHTLY BUSINESS REPORT for tonight. I`m Sue Herera. Thanks for joining us.

MATHISEN: And I`m Tyler Mathisen. Thanks for joining us as well.
Have a great evening, everybody. We`ll see you back here 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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