Transcript: Nightly Business Report — June 23, 2015

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

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Flag flap. Major retailers pull items with the Confederate flag from their shelves in the wake of the shooting South Carolina. Do businesses have a social responsibility when it comes to lightning rod issues?

Boomerang buyers. The housing crash took their homes, but now, they`re back. Could this wave of buyers help the housing market?

And, beneficial bacteria. How one company is using germs to help you replace your bath products?

All that and more tonight on NIGHTLY BUSINESS REPORT for Tuesday, June 23rd.

Good evening, everyone, and welcome. I`m Sue Herera. Tyler is on assignment, but we`ll be hearing from him just a little bit later in the program.

We begin tonight with a political potato that is spilling over into the business world. In the aftermath of the South Carolina church shooting last week, an intensifying national debate over the Confederate flag, some of the nation`s biggest retailers have removed items containing that flag`s image.

Courtney Reagan has more.

(BEGIN VIDEOTAPE)

COURTNEY REAGAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Many in southern U.S. states still point to the confederate flag as a symbol of the South. It`s on government-issued license plates, flown overstate capitals and emblazoned on t-shirts and belt buckles. But after the racially targeted tragedy in Charleston, South Carolina, the controversy over the flag has been reignited and retailers are among those responding.

It`s not always so easy for retailers to pull one lever to change merchandise quickly, particularly as more retailers tailor assortments to cater to different communities — meaning inventory can vary from store to store. Still, Walmart, Sears (NASDAQ:SHLD), eBay (NASDAQ:EBAY), Amazon (NASDAQ:AMZN).com and Etsy.com have decided to stop selling and prohibit marketplace sellers from offering Confederate flag merchandise.

Ahead of Amazon`s decision, more than 29,000esults came up when searching Confederate flag on the site and sales had been spiking.
According to Amazon`s movers and shakers page, one Confederate flag sale had increased more than 3,600 percent in 24 hours. No Target (NYSE:TGT), Dollar General (NYSE:DG), Family Dollar or JCPenney stores sell any Confederate flag-related products.

For NIGHTLY BUSINESS REPORT, I`m Courtney Reagan.

(END VIDEOTAPE)

HERERA: So, businesses and organizations have a social responsibility when it comes to the goods and services they offer to the public?

Karen Brenner joins us, clinical professor of business at the New York University`s Stern School of Business.

Karen, thank you very much for joining us tonight.

And I guess that is the heart of the issue. Do these businesses have a social responsibility?

KAREN BRENNER, NYU STERN SCHOOL OF BUSINESS: Yes. Businesses don`t operate in isolation. Operate in civil society. Society gives them a license to operate by making certain concessions and accommodations to businesses. And they employ large numbers of people, affect large numbers of communities all across the globe.

So, they are a part of civil society and how they go about doing their business, how they create goods and services and how they market those services have a huge impact on society. So, it`s not at all surprising that in the wake of this tragedy, the politicians have rallied very swiftly and the retailers have rallied to make changes that probably should have been made quite a long time ago.

HERERA: A number of the companies, as a matter of fact, all of the companies that Courtney mentioned in her report are publicly traded companies. Does that have anything to do with their decision, do you think? Are they held to a different standard because they sold their shares to the public, to shareholders?

BRENNER: Not necessarily, but I think that makes them more visible, and so the actions that consumers take and consumers can be a very powerful force, as we saw today as retailers — certain retailers started the day with this decision and other retailers were a little bit more reluctant and emerged over the course of the day to support the decision to eliminate sales of products with Confederate flags.

So, the pressure that can be brought to bear by consumers through social media, as well as by the media and non-governmental organizations beyond regulators or even investors is great and certainly, it is particularly acute for public company.

HERERA: You know, the other issue that has been talked about extensively for the past few years is the use of the Redskins trademark and logo. Does that fall into this same particular category or is that discussion different?

BRENNER: Well, it may get some — create some momentum in that conversation because of what`s happened frankly so swiftly with respect to the Confederate flag.

Unfortunately, in the heels of a tragedy, this is what`s emerged.
It`s a positive thing that`s emerged. It`s unfortunate that it`s through a crisis, but these are opportunities to seize moments, to eliminate symbols that are divisive or offensive, and I think the decision in the case of the flag and the Confederate flag is a good one, and it may provide some momentum to these other conversations where we have symbols that are offensive to certain groups.

HERERA: It also comes on the heels, does it not, of that Supreme Court decision talking about states having leeway in terms of what are put on license plates.

BRENNER: Exactly right. Exactly right.

HERERA: All right. Karen, thank you very much. Appreciate it.
Karen Brenner, with New York University Stern School of Business.

BRENNER: Thank you.

HERERA: On to Greece now where the government sits down with creditors tomorrow to try and finalize a bailout agreement that will unlock
$7 billion euros in aid, so that country can pay its debt over the summer.
Details of the possible agreement are leaking out and many in Greece are unhappy.

Michelle Caruso-Cabrera is in Athens with more.

(BEGIN VIDEOTAPE)

MICHELLE CARUSO-CABRERA, NIGHTLY BUSINESS REPORT CORRESPONDENT:
Another round of protests in Athens today. This time, retirees who fear they will face cuts to their monthly pension. The government`s offer to creditors isn`t public yet, but leaked copies show that it includes higher taxes on business, the wealthy, the middle class, and hiking the sales tax to 23 percent on many more products and services.

Harry Theoharis is a member of parliament.

HARRY THEOHARIS, MEMBER OF PARLIAMENT: Unfortunately, any deal done under this pressure is not going to be a good deal for Greece. It`s only going to kick the can down the road for a few months, until we actually have a deal that solves the problems that Greece has, which are structural.
It`s not about fiscal austerity, which is going to be where this deal is going to put that a weight on.

CARUSO-CABRERA: Economists argued Greece doesn`t need more taxes, but rather major changes in the way the economy functions, such as eliminating the mountainous red tape that makes it much harder to operate a business, collecting the taxes that are already owed and shrinking the massive public sector.

But changes like that take time. Something Greece doesn`t have. It needs bailout money and soon so it can pay back the International Monetary Fund and the European Central Bank this summer.

As details of the proposal emerge, the country`s prime minister, Alexis Tsipras, faces criticism for failing to deliver on his election promise, an end to austerity.

Yale political science professor Stathis Kalyvas says there is a silver lining, though, after going through four governments in five years, there are no parties left that can make that same, undeliverable promise.

STATHIS N. KALYVAS, YALE POLITICAL SCIENCE PROFESSOR: Everyone, with the exception of the fringe parties, the neo-Nazis and others, everyone would have been tried at the government helm. And so, they won`t have the opportunity as opposition to claim they are going to do things that they cannot possibly do. They`re not going to have the excuse anymore.

CARUSO-CABRERA: Don`t tell that to these pensioners, who defend the fact that the retirement age of a government worker is currently 56, private sector workers, 60. Something that is likely to change in an effort to lower the cost of the pension system.

This former bank worker says many of his colleagues retired at the age of 55.

Fifty-five sounds very young to retire.

UNIDENTIFIED MALE: For women, I cannot say. Most of the women in Greece work in a very hard environment.

UNIDENTIFIED MALE: Which boss can keep somebody to work 65 years old?
Everybody was — everybody are looking for new people.

CARUSO-CABRERA: The next 48 hours could be decisive. There a whole series of meetings where the leaders of the other European countries and Greece`s creditors look over the plans submitted by the Greeks and decide whether or they`ve made enough concession to get the bailout money they need to keep paying their bills this summer.

Just as this government is being criticized for the concessions that it`s making, those leaders, as well, face criticism back in their home countries. Why do their taxpayers have to foot the bill for the Greeks once again?

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

(END VIDEOTAPE)

HERERA: Sales of newly built homes rose to the highest level since the recession last month, a sign that the market is building steam. The Commerce Department says new home sales rose by 2.2 percent, the biggest increase in seven years. This as April sales also surged showing continuous progress.

And since the housing boom and bust of the last decade, nearly 8 million Americans have lost their homes to foreclosure. For some, enough time has now passed to become homeowner again. And these so-called “boomerang buyers” could help drive demand over the next few years.

Diana Olick has the story.

(BEGIN VIDEOTAPE)

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: The Cano family lost their Florida home to foreclosure in 2007.

WIDMARK CANO, BOOMERANG BUYER: Back in 2007, when the credit market crashed, I basically ended up jobless and, you know, things changed.

OLICK: So they relocated to Atlanta and to a rental home.

Now, seven years later, their credit repaired, they are shopping for a home once again. Not because they love home ownership, but because the math works.

W. CANO: I`m better off owning because it`s much cheaper than actually going out and renting a comparable place based on the space that we need.

OLICK: Lenders require seven years after a foreclosure and four years after a short sale for buyers to be potentially eligible for credit again.
So, now, about 700,000 borrowers are eligible for credit this year and up to 2.2 million will be over the next five years according to TransUnion.

From a credit perspective, they`re good to go. That is, if they want to.

STEVE CHAOUKI, TRANSUNION: Once you`ve had a bad experience with something or you`ve had difficulty with something, it may make you reluctant to want to do it, or maybe they`ve found a different way of living somewhere, whether it`d be renting or something else that makes it more comfortable.

OLICK: Of the 1.3 million consumers who have now repaired their credit, less than half have purchased another home according to TransUnion.

There are a multitude of reasons for that — high rent or keeping potential buyers for saving for that down payment. Some have other credit issues beyond the foreclosure, and some just don`t like the idea of home ownership anymore. Even the Canos aren`t exactly loving the idea.

JENNY CANO, BOOMERANG BUYER: It was definitely a life-changing experience to lose your house, but like you said, when you go back to saying about most people wanted to own a home because that was always the American dream kind of thing and then, now, you know, it`s more of a financial decision.

OLICK: It remains to be seen how much these potential buyers will add to the housing market. That is, whether the math outweighs the fear of jumping into home ownership again.

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

(END VIDEOTAPE)

HERERA: That housing data and optimism over a possible Greek deal initially lifted stocks, but the gains faded a bit, ending in slight gains.
In the end, the Dow gained 24 points, the NASDAQ added six but that was enough for another close. The S&P 500 tacked on a point.

An update on President Obama`s trade push. In a procedural vote, the Senate okayed the move to limit the debate on the president`s fast track negotiating authority, pushing the package very close to completion. The deal, which is an effort to strengthen ties with Asia, still faces hurdles.
A separate key bills displacing workers displaced by any trade accord faces a critical procedural vote as well tomorrow.

Also in Washington, while the White House is set to release new rules tomorrow which will no longer stop families of American hostages from paying ransoms. The Obama administration plans to sign an executive order and create a new office that will work with these families. However, the country`s policy against making concessions to terrorists will remain the same.

Boeing (NYSE:BA) has a new chief. The Dow component announcing late today that its board has elected Dennis Muilenburg to succeed current CEO Jim McNerney, Jr., beginning July 1st. McNerney has held that position for the past ten years, while Muilenburg has served as chief operation officer since 2013, but has been with the aircraft maker for some 30 years.

A lawsuit filed in Illinois accuses Boeing (NYSE:BA) of building airplanes that ventilated the cabin with toxic fumes and now some of those who claimed the fumes cause them to pass out want Boeing (NYSE:BA) to fix thousands of planes to ensure the air is clean.

Phil LeBeau has more.

(BEGIN VIDEOTAPE)

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: The lawsuit accusing Boeing (NYSE:BA) of having faulty ventilation in its airplanes stems from a 2013 Alaska Air flight where four flight attendants got sick, including three who passed out.

VANESSA WOODS, FLIGHT ATTENDANT: The next thing I knew I was on the galley floor, and the other flight attendant was on the P.A. system just mumbling incoherently. I got on that flight, I was healthy and I got off that flight and I have never been the same since.

LEBEAU: Woods and the other flight attendants say they were breathing toxic fumes because of the way Boeing (NYSE:BA) has ventilated thousands of airplanes for decades. At issue is the bleed air system, which pulls outside air into the cabin through the plane`s engines. That air goes through mixers and filters to ensure it`s suitable to breathe, but attorneys for the flight attendants say the bleed air can become toxic if the seal inside the engine leaks, and burning oil and other chemicals mix with the cabin air.

RAINEY BOOTH, ATTORNEY: We`ve known that Boeing (NYSE:BA) has known this problem exists since the early 1950s. They`ve known there`s a problem. They know there`s fume events, and they know that contaminants come in through the bleed air.

LEBEAU: Boeing (NYSE:BA) is not commenting on the lawsuit, but it`s heard complaint about the safety of cabin air for years. In the past, the company has said, “Cabin air is safe to breathe. Research has consistently shown that cabin air meets health and safety standards and contaminant levels are generally low.

The flight attendants are asking Boeing (NYSE:BA) to reimburse them for their medical expenses. They also want the company to put air quality sensors in thousands of airplanes to warn crews if toxic fumes are bleeding into the cabin. And they want Boeing (NYSE:BA) to stop using the bleed air system in future airplanes.

Right now, just one Boeing (NYSE:BA) model, the 787 Dreamliner, does not use the bleed air system for ventilating cabins.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago.

(END VIDEOTAPE)

HERERA: Health care is one of the best performing sectors so far this year. So, when we come back, we`ll take a deep dive into whether that run can continue.

(MUSIC)

HERERA: Health care stocks have been leading the market this year, leaving some to wonder if that trend can continue.

Morgan Brennan checks up on the sector to see if the rally has run its course.

(BEGIN VIDEOTAPE)

MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Health care stocks are outperforming the broader market, up 11 percent this year versus a 3 percent gain for the S&P 500.

Earnings growth, increased R&D productivity, merges and strong demand for care are driving the heady returns. And if history is any indicator, that will continue this summer.

Data firm Kensho says over the past decade, from June through August, health care averaged a 3 percent increase far outpacing the quarter percent rise launched by the S&P. Biotech has been a bright spot and despite talk of a bubble brewing, market analysts expect that to continue.

RICH ROSS, EVERCORE: We definitely see upside here. We have a very strong, long-term trend in biotech, and there`s nothing in the technicals to suggest that that trend is exhausted in any way. In fact, it`s actually accelerated as we move forward.

BRENNAN: Morningstar (NASDAQ:MORN) health care analyst Damien Conover says several factors are boosting drug makers.

DAMIEN CONOVER, MORNINGSTAR HEALTH CARE ANALYST: A lot of these firms really hit a nice inflexion point in their pipelines, looking at areas of unmet medical need, areas where there`s really no medicine out there so any sort of drug that the biotechs bring into that space is one, received very favorably by the regulatory agency and two, has very song pricing power.

BRENNAN: M&A activity has become a huge driver, as well. According Dialogic (NASDAQ:DLGC), in 2015, healthcare in general has for the third year running racked up the most deals value wise. That`s helped biotech, but also managed care stocks, which are soaring as Anthem tries to buy Cigna and Aetna (NYSE:AET) reportedly makes a bid for Humana (NYSE:HUM).

CONOVER: A lot of these firms need increase scale to deal with the new health care reform and some of the lasting impacts that that is having on that sector. So, as these firms need to negotiate with other players within the health care supply chain, the scale really helps them to do that effectively.

BRENNAN: But health care also faces some headwinds, most notably from the Supreme Court, which will soon rule on whether to eliminate federal insurance subsidies, a move that could triple premiums for millions of Americans. Analysts say if that happens, healthcare stocks could sell off, but they don`t expect that to last long.

For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan.

Netflix (NASDAQ:NFLX) announces a 7-for-1 stock split, and that`s where we begin tonight`s “Market Focus”.

The video-streaming company says the split will come in the form of a dividend of six additional shares for each outstanding share. The dividend is payable on July 14th to stock owners of record at the July 2nd close.
Shares shot up initially in after-hours trading. Before the close the stock was up a fraction to $681.19.

Facebook (NASDAQ:FB) is now worth more than Walmart, one of the world`s largest retailers. The social media giant is valued at nearly $240 billion, pushing Walmart out of the top 10 largest companies by market cap in the S&P 500. The retailer has not finished a year outside of the top ten S&P 500 companies by market cap since 1997. Shares of Facebook
(NASDAQ:FB) popped almost 4 percent to $87.88. Walmart closed a fraction lower to $72.57.

Blackberry`s results missed on both the top and bottom lines. Its technology and software licensing revenue however jumped from a year earlier and profit margins were also better than expected. CEO John Chen is optimistic about growth.

(BEGIN VIDEO CLIP)

JOHN CHEN, BLACKBERRY CEO: I think this is a business. We think we can make money on the phone — and we have a couple of new phones coming out towards the end of this calendar year, and we`ll see. We`re bullish on it.

(END VIDEO CLIP)

MATHISEN: Well, nonetheless, shares of the smartphone maker tumbled more than 4 percent to $8.81.

It was the opposite story for Darden. The parent of the Olive Garden and other restaurant chains beat analyst estimates and also says it`s planning on spinning off its real estate assets into a real estate investment trust or a REIT. It will then lease back most of the properties involved. Shares were up a penny to $69.39.

Syngenta has once again rejected Monsanto`s $45 billion takeover offer. The pesticide maker saying the bid undervalues its business and cited regulatory concerns among other things. Monsanto (NYSE:MON) fell more than 1 percent to $112.78. Syngenta was off a fraction to $86.19.

Entrepreneurs from all over have descended on Los Angeles to attend the second CNBC and “Inc.” Magazine iCONIC Conference.

Tyler Mathisen is there and he tells us, this time it`s all about company branding.

(BEGIN VIDEOTAPE)

TYLER MATHISEN, NIGHTLY BUSINESS REPORT: Thanks very much.

I`ve spent the day at iCONIC 15, which is the second stop on our iCONIC tour where we celebrate and teach entrepreneurs and financiers about the entrepreneurial ecosystem in the country. Today`s discussion is largely about the power of branding and what brands mean and stand for.

Out of all of the brands out there, one really does stand out in the domain registry area and that is one you probably know. GoDaddy, known for its advertising that from time to time pushes the envelope.

We asked the founder of GoDaddy, Bob Parsons about his advertising, and what he thinks of it.

BOB PARSONS, GODADDY FOUNDER: Advertising, it`s like the fact I had a party, you know? It doesn`t offend anybody, it`s always smiling, but it doesn`t get any action.

MATHISEN: Right.

PARSONS: Right? Good advertising is —

MATHISEN: Get some action.

PARSONS: — always talks to person.

MATHISEN: So, the advertising for GoDaddy, if anything, too mild, says founder Bob Parsons, a colorful character who pushed the envelope with his branding message.

Back to you.

(END VIDEOTAPE)

HERERA: Thank you so much, Ty.

Coming up, replacing soap with bacteria? We`re going to show you one company trying to do just that, coming up next.

(MUSIC)

HERERA: Here`s what to watch for tomorrow. The final read on first quarter gross do product, the broadest measure of economic activity, is out. Progress at tomorrow`s euro group meeting on the Greek debt crisis could be a market-moving event, and more housing data with weekly mortgage applications and earnings from home builder Lennar (NYSE:LEN) and that is what to watch tomorrow.

New York has fined four makers of liquid nicotine used in the electronic cigarettes over packaging that is easy for children to open.
The firms must pay a combined $95,000 an show proof that position proof packaging is in development. It`s all part of a law enacted last year requiring these child-resistant containers.

And finally tonight, just imagine ditching your deodorant for a can of spray-on bacteria. Well, now, scientists and companies are using the trillions of organisms that live on us to help deal with what`s going on inside us.

Meg Tirrell has more.

(BEGIN VIDEOTAPE)

MEG TIRRELL, NIGHTLY BUSINESS REPORT CORRESPONDENT: Therese Lichtle is a self-proclaimed germaphobe. But the 50-year-old San Francisco area resident says three months ago, that all changed.

THERESE LICHTLE, SAN FRANCISCO AREA RESIDENT: I just like the idea of something that`s natural and you`re not using artificial chemicals. I`m a really big fan of that. I just really want to use natural products.

TIRRELL: Every day for the last three months, Therese has sprayed herself with live bacteria, made by Cambridge, Massachusetts startup AOBiome. The mist contains ammonia-oxidizing bacteria, what the company calls AOBs. AOBiome says this can help users cut back on soaps, deodorants and shampoos.

SPIROS JAMAS, CEO OF AOBIOME: The company`s hypothesis is that humans evolve with AOBs as a natural component of our skin. And really for the last 50 years, with advent of cleaning and hygiene routines and anti- bacterial products, we`ve lost AOBs from our skin and also lost a key through a regulatory element from our skin microbiome.

TIRRELL: AOBiome is one of many companies targeting the microbiome, the trillions of microorganisms that live in and on us. Research has shown those many bugs have huge implications for our health, from regulating our immune system to affecting our metabolism.

Sunny Bates uses the AOBiome spray. She says it`s helped her cut out deodorant.

SUNNY BATES: When people hear the word “bacteria”, it`s not necessarily a good thing. You know, they`re like, “Oh, good bacteria. How can bacteria be good?” In fact, it can be great.

TIRRELL: AOBiome says it has thousands of customers using its spray, which costs $99 for a one-month supply and it was back ordered for several months after it was featured in “The New York Times (NYSE:NYT)” magazine last year.

JASMINA AGANOVIC, AOBIOME: I think in general, people are looking at the world around us and wondering why we`ve had more and more lotions and potions, and we have continued to have more and more health problems, whether it`s skin or other things that are related.

TIRRELL: AOBiome is testing for acne and other skin problems, as well. Its motto, “Bacteria is the new black. Wear it every day.”

For NIGHTLY BUSINESS REPORT, I`m Meg Tirrell.

(END VIDEOTAPE)

HERERA: And that does it for NIGHTLY BUSINESS REPORT for tonight.
I`m Sue Herera. Thanks for watching. And we will see you right 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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