Transcript: Nightly Business Report — June 24, 2015

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

BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: Not yet. The Eurozone finance ministers call it quits without reaching a debt deal with Greece. With the June 30th deadline approaching, Wall Street is getting jittery.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Split decision. Netflix (NASDAQ:NFLX) is the latest to join the stock split club. But does the maneuver really matter for investors?

GRIFFETH: And, best in show. We’ll tell you which state claims this year’s title for best in business.

All that and more tonight on NIGHTLY BUSIENSS REPORT for this Wednesday, June the 24th.

Good evening, everybody. I’m Bill Griffeth. Tyler Mathisen is on assignment tonight.

HERERA: Good to have you here.

GRIFFETH: Thank you.

HERERA: I’m Sue Herera.

Well, no deal, at least not for right now. That is the word tonight as the meeting of Eurozone finance ministers broke up without an agreement over what to do about the Greek debt crisis. But talks between Athens and its creditors could continue later this evening, and the Euro group will reconvene tomorrow. With the deadline approaching to get a deal done, time is of the essence.

Julia Chatterley was in Brussels.

(BEGIN VIDEOTAPE)

JULIA CHATTERLEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: The sun may be setting here in Brussels but the talks with Eurozone finance ministers have only just begun. They were very reluctant to speak on the way into this meeting. A palpable concern, it seems, over what progress is made in the last few hours when the Greek Prime Minister Alexis Tsipras was locked in talks with the international creditors, the likes of the IMF, and the European Central Bank.

The Greek prime minister seemed to target the IMF earlier on today, suggesting that their demands were just too stringent. But it was very clear looking at some of the proposals earlier this week that things like pension reform was missing. Something that the IMF is really pushing for here. Also, a huge focus on tax rises in the Greek economy that’s struggling. And what we’ve learned in the past in this country is that you raise the taxes and actually less catch comes in.

What this deal is going to hinge on is whether or not the Greek prime minister believes he can compromise and still sell the deal back home amidst rising concerns in the last 24 hours about the content of this deal. The talks will continue. One finance minister saying he doesn’t like talking about the deadlines as far as these things are concerned.

ALEXANDER STUBB, FINNISH MINISTER OF FINANCE: I think the problem is that we probably need a proposal on the table before we can take a stand and I think what we’re trying to work on is the same framework that we had on the 20th of February. And we’ll see. We’ll get a proposal tomorrow morning.

CHATTERLEY: We just have to wait and see.

For NIGHTLY BUSINESS REPORT, I’m Julia Chatterley in Brussels.

(END VIDEOTAPE)

GRIFFETH: And that disappointment over a lack of a Greek deal did help to contribute to a down day for stocks but there were other catalysts as well. Wall Street shrugged off a revision in GDP, which showed the economy slowed less than previously thought in the first quarter. Transportation stocks which were closely looked at by market watchers, they were pulled into correction territory by a sell-off in rail stocks.

And billionaire investor Carl Icahn sounded the alarm bells as well.

(BEGIN AUDIO CLIP)

CARL ICAHN, CHAIRMAN, ICAHN ENTERPRISES: I’m very concerned about the market. And I think the market is overheated, especially the high yield market. And it’s sort of a sad commentary, because I think the public is walking into a trap again as they did in 2007. What I’ve said is, you know, as I get older, I think it’s almost the duty of well-respected investors like myself, I hope, to warn people, tell people that you’re really making errors.

(END AUDIO CLIP)

GRIFFETH: Well, when all was said and done, the major averages finished on their lows of the day. The Dow lost 178 points, closed below 18,000. The NASDAQ was down by 37. The S&P down by 15.

HERERA: And speaking of Carl Icahn, the activist investor announced that sold his stake in Netflix (NASDAQ:NFLX), calling the streaming TV space overheated. After spiking on news last night that it would split its shares 7-1, Netflix (NASDAQ:NFLX) sold off slightly today.

So, do stock splits really matter for investors?

Dominic Chu has the takeaway.

(BEGIN VIDEOTAPE)

DOMINIC CHU, NIGHTLY BUSINESS REPORT CORRESPONDENT: Stock splits don’t happen all that often. There have only been seven among the S&P 500 stocks this year and there were 11 last year.

So, what exactly is a stock split and why do investors care?

Simply put, a company takes each share of its stock and divides it into smaller pieces. For example, let’s say you own 100 shares of stock, each worth $700 a share. Meaning, your holding is worth $70,000. Now, the stock splits 7 for 1. You’d end up owning 700 shares, but each is now worth only $100 per share.

Either way, your holdings are still worth the same $70,000.

JOHN NAJARIAN, OPTIONMONSTER.COM CO-FOUNDER: Stock splits affect the company not one bit. In fact, as far as the fundamentals of the company, they remain exactly the same. Whether or you want to invest in the company shouldn’t change based on the number of shares that they just took from $1 million to $7 million, for instance, on a 1 for 7 split. Shouldn’t change your investment pieces one bit.

CHU: A big reason why company split their stock is to decrease the price of each individual share. Investors are given more shares to compensate for that. Some argue that it helps performance, but the evidence is mixed.

JASON LILLY, ROCKLAND TRUST INVESTMENT CHIEF: Apple (NASDAQ:AAPL) is a great example, where they did a stock split and the stock performed quite well after that. But that isn’t a guarantee and believe it or not, Netflix (NASDAQ:NFLX) is a great example of that. Last time they split, it didn’t work so well for the stock in the preceding six to 12 months.

CHU: That’s why many professionals say that a stock split shouldn’t be the sole reason to invest in the company.

NAJARIAN: I don’t think traders should flock to a stock or investors just because of a stock split, although empirical evidence shows that they do tend to drift higher, there is no guarantee. All you’re doing is trading the same stock in greater volume than you did before.

CHU: The important takeaway when it comes to stock splits is that it has no effect on the fundamental business of a company engages in. It’s just a mathematical maneuver to reduce the price of a stock without reducing the total market value of the entire company.

For NIGHTLY BUSINESS REPORT, I’m Dominic Chu.

(END VIDEOTAPE)

GRIFFETH: And on this down day in the markets, we have a look at one sector that does continue to outperform. That would be the banks.

Bob Pisani shines a light now on the bank stocks and tells us whether or not the rally has more room to run.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Banks have been the standout performers for second quarter. The large cap banks are up over 10 percent, well outperforming the S&P 500, up to 2 percent.

And investors have noticed as these stocks started breaking out a month ago, volume in key ETFs, like the spider bank ETFs, that’s the basket of bank stocks, saw a surge in volume.

So, what’s moving these banks? Improved economic data has been a big help, so they can hope that loan growth would improve. Well, that’s slowly happening but it hasn’t translated into big revenue growth because rates are so low.

The most important factor, though, in the bank rally has been the belief that short term interest rates would eventually be moving up and the yield curve would steepen. Those bank loans are tied to the short term rates. Investors are trying to figure out if they should change this bank rally.

Deutsch Bank made a very bold call today by downgrading Citi and Goldman Sachs (NYSE:GS) for exactly this reason. They acknowledged that economy has improved, but the huge rally in these stocks means there is much less upside in their opinion.

Now, not everyone agrees with that. Others have told me that the Fed funds rate boosts in the right direction, the direction the Fed wants them to move, gradually up into next year. That would private a significant lift to the bottom line of many banks and in that case, these banks can definitely move higher.

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

(END VIDEOTAPE)

HERERA: A vote in Washington tonight on President Obama’s trade push. The Senate OK’d fast track authority, granting the White House the power to speed trade deals through Congress. Now that bill moves to the president’s desk to be signed into law.

GRIFFETH: A major policy from the White House. As we reported last night, President Obama unveiled new rules that would allow families to offer private ransom payments for relatives held hostage overseas.

Eamon Javers is at the White House tonight with more on these new ransom rules — Eamon.

EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Yes, that’s right, Bill. It’s an executive order from the president of the United States. It’s a significant shift here on hostage policy here.

What the president is saying is that the United States is no longer going to threaten members of the families of those people who have been taken hostage with prosecution under anti-terrorism finance laws if they negotiate with or ultimately end up paying ransom to get their loved ones back to the United States.

The president also saying in his speech today here at the White House, that the United States is going to set up what he is calling a fusion center. And that’s going to bring together assets from the FBI, the Department of Justice and others, and they’re going to spend full-time focusing on this hostage issue.

And we got one fascinating number out of the White House today, Bill, that is 30. That’s the number of Americans that are currently being held overseas, according to Lisa Monaco here at the White House today. That’s a big number and bigger than a lot of people might have expected.

HERERA: Eamon, though, does the White House or the U.S. policy perhaps better said, change at all in terms of negotiating with people who are being held hostage? With the terrorists that have them?

JAVERS: Yes, that’s a good question, Sue. The answer is no, it doesn’t.

What the White House is saying, that their policy remains the same. The United States has a no concession policy when it comes to hostage takers. That is, they won’t negotiate with the hostage-takers and they won’t pay ransoms or give them any other concessions. The president saying that he feel that protects American travelers overseas if hostage takers think they can get a big check from Uncle Sam, that’s going to put a lot more Americans in danger. The president said that policy is not going to change.

GRIFFETH: Clearly, the original rule was designed to keep people from trying to circumvent negotiations if they were going to go on or some way to try and free those hostages. Why the change now, do you think?

JAVERS: It all came from the pressure from the families who have been through this ordeal over the past several years. A lot of those families speaking out publicly to the press and elsewhere, saying that they felt U.S. government was actually getting in their way or threatening or bullying them, as they tried to reach to the captors, to try to get their loved ones back.

The president today saying this is all about those families. He spoke to them today and he said that no longer will those families feel like the United States government is not on their side. The U.S. government is going to work hand in glove with the families of the current hostages and also any future hostages that are taken.

GRIFFETH: Eamon Javers at the White House for us tonight — thanks, Eamon.

HERERA: Well, all states are not created equal, at least when it come to doing business. So, what is the best state for business? The answer, coming up next.

(MUSIC)

GRIFFETH: It is that time of year again. CNBC’s night annual America’s Top Stage for Business. All 50 states were scored in more than 60 metrics in ten categories, including thing like cost of living and quality of life.

So, let’s give you the top five for this year. Georgia dropped to fifth place after being ranked number one last year in the survey. Colorado came in fourth. Utah was third. Number two, Texas. They were last year as well.

Scott Cohn has more from the top state for business this year.

(BEGIN VIDEOTAPE)

SCOTT COHN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Minnesota has never been one to conform. This is the state that once elected a former pro wrestler governor and sent a former comedian to the U.S. Senate. But attracting jobs is serious business.

So, when the current governor, Democrat Mark Dayton, laid out his plans upon taking office in 2011, Minnesotans were aghast.

Step one, eliminate the $6 billion budget gap.

GOV. MARK DAYTON (D), MINNESOTA: My proposed solution will be reasonable, balanced and painful, because I see no easy alternative.

COHN: It took two years and a government shutdown before Dayton got his way. A $2 billion tax increase targeting the wealthy passed in 2013. Today, Minnesota has a $2 billion budget surplus, one of the lowest unemployment rates in the nation, one of the fastest growing economies and some of the top performing schools.

Wealthy taxpayers didn’t leave the state and neither did businesses, even though the state now has one of the highest income tax rates in the nation. Its other advantages including quality of life push it to the top of this year’s top states for business rankings.

DAYTON: We’re not a low tax state but we’re a high value state. The bottom line for business is profitability. And it’s proven here that Minnesota businesses do very well.

COHN: State Republicans and the business lobby are unconvinced. They fear the tax hikes will eventually back fire, sapping the state’s newfound competitiveness.

CHARLIE WEAVER, MINNESOTA BUSINESS PARTNERSHIP: It’s a slow drip, drip, drip in terms of people leaving the state. It’s is not something you see right away. It is hard to measure the town that doesn’t come here because of the high taxes and regulatory environment.

COHN: Little surprise then that the most recent legislative session just wrapped up was as bitter as they come. In the end, the governor failed to get all the new spending he wanted, but the Republicans failed to reverse the tax hikes, leaving Minnesota on its off beat path to competitiveness.

Scott Cohen, NIGHTLY BUSINESS REPORT, Minneapolis.

(END VIDEOTAPE)

GRIFFETH: And to see where your state ranked and for more information on how this study was conducted, you can head to our website, NBR.com.

HERERA: Well, Bill, also in Minneapolis, many in the business world are gather to discuss the evolution of health care. Needless to say, the cost of drugs will likely be on that agenda.

Meg Tirrell is there and she has more.

(BEGIN VIDEOTAPE)

MEG TIRRELL, NIGHTLY BUSINESS REPORT CORRESPONDENT: Health care is changing, from multi-billion dollar mergers among health insurance providers, to pricing pressures on specialty medicine. The industry has to adjust.

Those topics were on discussion in the Piper Jaffray Heartland Summit in Minneapolis this week. CEOs, investors, analyst and others gathered to debate how health care will evolve.

BROOKS WEST, PIPER JAFFRAY SR. RESEARCH ANALYST: We’re going through a demographic trend right now globally. And patients are actually living longer and therefore needing more end of life care. And so we have a cost burden that is insurmountable now. You hear these statistics about health care’s percentage to GDP going from 10 percent to 15 percent to 20 percent over time. So, how do we solve that?

TIRRELL: One shift is toward so-called value based health care, realigning incentives to reward positive outcomes for patients rather than multiple treatments or procedures.

OMAR ISHRAK, MEDTRONIC CHAIRMAN & CEO: The people that incur the costs, or the stakeholders who incur the costs, providers, for example, or even patients, pay for it before they actually realize the value. As a result, no one is really accountable for delivering the return of the cost that was invested. In other words, the cost treatment, the return being the person, the patient gets better and no one is really accountable for that.

TIRRELL: Medtronic (NYSE:MDT) CEO Omar Ishrak said that’s a key initiative at his company, now the largest maker of medical devices after a $50 billion merger with Irish competitor Covidien.

Mike Mahoney, CEO of medical device maker of Boston Scientific (NYSE:BSX), said we should expect the merger activity to continue. Though he said his company is focused on competing in specific markets.

MICHAEL MAHONEY, BOSTON SCIENTIFIC PRESIDENT & CEO: We think M&A is an important strategy for us. That’s the largest isn’t the best. So, our goal is to be the best for our customers.

TIRRELL: The growing concern over the cost of drugs has also been a key topic here at the summit. With the prospect of five of these hot health insurers consolidating to just three, the question is, will that pressure only intensify?

For NIGHTLY BUSINESS REPORT, I’m Meg Tirrell, in Minneapolis.

(END VIDEOTAPE)

GRIFFETH: Elsewhere, Ford is jumping on the ride-sharing craze. That’s where we begin tonight’s “Market Focus”.

The auto maker is launching its own pilot program in six U.S. cities and in London. Customers who finance through Ford’s credit service will be able to rent their vehicle out to pre-screened drivers for short-term use. And, separately, by the way, the company is recalling more than 200,000 vehicles because of instrument panel and seat belt issues. Still, shares were more than 1 percent higher to $15.50.

Dividend news from Disney (NYSE:DIS) tonight to tell you about. The Dow component is increasing its payout by 15 percent to 66 cents a share. That will be payable to shareholders of record on July 29th.

Also, the firm is going to pay dividends twice a year now, up from once a year. The yield is around 1 percent. Shares rose on that news in after-hours. Before the close, though, the stock was down a fraction to $113.77.

And Freeport McMoRan is planning an energy initial public offering . The mining company filed to sell $100 million in shares of its oil and gas unit which will be listed on the New York Stock Exchange under the ticker symbol “FMOG.” Shares of the parent company up more than 2 percent to $20.56.

HERERA: Shares of Lennar (NYSE:LEN) also higher on strong results. The home builder trumped earnings estimates with new orders rising nearly 20 percent. The firm also says it’s seeing a strong future for sales. The stock popped 4 percent to $51.06.

Box and IBM are teaming up. The Dow component and the Cloud storage company will integrate existing products and develop new ones. This will give Box access to IBM’s huge base of corporate customers. Box was 5.5 percent higher to $18.53. IBM fell about 1 percent to $166.97.

Investors getting a chance to react to news today that a federal judge halted the merger between Sysco (NYSE:SYY) and US foods. The ruling could kill the $3.5 billion deal, which was announced in December, to combine the nation’s two largest food distributors. Shares rose 3 percent to $38.75.

And the Dutch based supermarkets operator Ahold has reached a deal to buy its Belgian peer Delhaize. The $28 billion deal would create one of the biggest food retailers in the United States and a major player in Europe as well. Delhaize slid 7 percent to $22.83.

GRIFFETH: Whole Foods is under investigation by the New York City Department of Consumer Affairs for allegedly overcharging customers by overstating the weight of some of its prepackaged goods. Whole Foods vigorously denies any wrongdoing.

They issued this statement, “We disagree with the DCA’s overreaching allegations and we are vigorously defending ourselves. We cooperated fully with the DCA from the beginning until we disagreed with their grossly excessive monetary demands.”

The statement goes on, “Despite our request to the DCA, they have not provided evidence to back up their demands, nor have they requested any additional information from us. But instead, have taken this to the media to coerce us. Our customers are our number one stakeholder and we highly value their trust in us.”

Burt Flickinger is here with us tonight. He is managing director with Strategic Resource Insight Group.

I don’t want to get into what is turning into be a pretty vigorous problem between New York City and Whole Foods. But this is not the first time we’ve ever heard allegations of overcharging or weight discrepancies in the grocery business. Sloppy business or just one notorious for slime margins?

BURT FLICKINGER, STRATEGIC RESOURCE INSIGHT GROUP MANAGING DIRECTOR: It’s a combination of the two, Bill. Most of the problems with the suppliers, rather than the retailers, because the suppliers are short, waiting the product before it ship to the retailers. And then when the inspector comes, it is too late, it is tougher for company like Whole Foods that don’t have their own distribution centers and they’re relying on suppliers.

That said, you can have rogue employees and given stores, which are not at Whole Foods. Whole Foods has the highest level of institutional and individual integrity amongst its leaders.

But sometimes you can have rogue employees, short-weighting products that’s made in the stores. But that doesn’t appear to be the case. It just appears that nuts and blueberries and other things where you get thousands of items in a given day to a store. Those were short-weighted, short-weighted by the supplier.

HERERA: So, from the consumer standpoint, what are the items, or what parts of the supermarket are there most likely to be violations if indeed there are some.

FLICKINGER: Sue, you’ve had to be really careful in some key areas. Prepared foods is number one. Sliced deli cheese, deli meats, also regular meat, and in some cases, produce, particularly when it looks like it doesn’t have the retailer’s logo on it. It has the logo of the supplier, that if there is margin pressure, it’s on the supplier.

So, the supplier short-weights the product, hoping that it gets by the inspector that comes into the store.

GRIFFETH: And again, I’m not convicting Whole Foods. These are allegations. But it doesn’t help their public image, an image where they already have the nickname whole paycheck which I’m sure they don’t appreciate because of their high prices.

FLICKINGER: Yes. And looking into the allegations from the full report from New York City, there are about eight violations per store. Whole Foods typically has over 100,000 selling units per store. So, eight is well within the norm.

If you look at Whole Foods being the size of stadiums and the other retailers cited being the size of a nursery school, Whole Foods would actually be very low on the list in terms of violations. And it looks like the violations were not caused by Whole Foods, but caused by others.

So, both sides are well-intentioned in this battle, Bill. But the industry needs to get better, the inspections need to get better, and the consumers need more protection.

HERERA: Very quickly, what types of firms are most vulnerable to this type of activity? Is it the big guys like the Whole Foods? Or the Kroger’s or is it the smaller players?

FLICKINGER: It is the smaller, independent, as well as the major chains, because this is really a USDA or Department of Ag issue to inspect all the suppliers before they ship it to the stores. So, there needs to be local and national coordination, Sue.

GRIFFETH: Burt Flickinger with Strategic Resource Insight Group — good to see you, Burt. Thanks for joining us.

FLICKINGER: Good to see you, Bill and Sue.

GRIFFETH: Thanks.

HERERA: Coming up, overcoming the obstacles of entrepreneurism. That is next.

(MUSIC)

GRIFFETH: Here’s what to watch tomorrow. Dow component Nike (NYSE:NKE) announces earnings. Then, on the data front, we have weekly jobless claims, as well as the read on consumer health. They report on personal income and personal spending. That’s what to watch for on Thursday.

Starting a business is a dream for many people. But as every business person knows, there are plenty of struggles for every success story.

Kate Rogers (NYSE:ROG) tracked down a few Los Angeles to get their pearls of wisdom.

(BEGIN VIDEOTAPE)

BERT JACOBS, LIFE IS GOOD CO-FOUNDER: Life isn’t easy and life isn’t perfect.

KATE ROGERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: If there’s anyone that knows the struggles that come with entrepreneurship, it’s Bert Jacobs.

JACOBS: We didn’t have any experience and we didn’t have any money. We wanted to start a business together. The first step in starting a business is the most important. Courage is a super power.

ROGERS: The founder of the Life is Good Company started his business with his brother with less than $100. Today, the company has grown to more than $100 million. Jacob spoke to hundreds of entrepreneurs at CNBC and “Inc. Magazine’s” stop on the iCONIC Tour in Los Angeles.

This city is taking a page out of Silicon Valley’s playbook. As the economy regains its footing and small business optimism climbs steadily higher, L.A.-based startups are leveraging technology in new and unique ways.

Disney (NYSE:DIS)-backed narrative is using Snapchat for branding campaigns for big companies like P&G and Marriott.

DANIEL ALTMANN: Brands usually marketing to an older generation are now looking at Snapchat and other platforms as, you know, a way to reach a next generation consumer before they make those decisions.

ROGERS: Entrepreneurs at the conference like Tony Ubertaccio say there’s nothing stopping individuals from launching their own ventures.

TONY UBERTACCIO, SEMPER AVANTI: There is almost no barrier to entry to get started. Kickstarter is a great example. But YouTube, there are, you know, millionaires that were made by creating silly video on YouTube.

ROGERS: And for many here in L.A., like Brandy Montague, setting up shop in this city had been big a reason for the early success.

BRANDY MONTAGUE, TRENDY LITTLE SWEETHEARTS: I’ve been able to find other groups of moms or other business, dads, everybody who’s also starting things like this and connects with them.

So, every single day I feel like I continue to find motivation.

ROGERS: For NIGHTLY BUSINESS REPORT in Los Angeles, I’m Kate Rogers (NYSE:ROG).

(END VIDEOTAPE)

GRIFFETH: How many times have you said I could have done that, right?

HERERA: I could have done that, or why didn’t I think of that?

GRIFFETH: Well, we have thought of it plenty of times. The difference is, they are entrepreneurs and they act when they have a good idea.

HERERA: They act and they do it and they work hard, too.

GRIFFETH: They do.

HERERA: That does it for NIGHTLY BUSINESS REPORT. I’m Sue Herera.

GRIFFETH: I’m Bill Griffeth. Thanks for watching, everybody. Have a great evening. See you 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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