Transcript: Nightly Business Report — July 6, 2015

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

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Into the unknown. The European Central Bank tightens the screws on the Greek banking system, one day after the Greeks voted no to the terms of the bailout.

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Emergency measures. Not just in Greece, but in China, as well, where the government of the world’s second largest economy is taking dramatic steps to stabilize its stock market.

HERERA: Slip ‘n slide. What caused the sharp tumble in oil prices today? And might that continue?

All that and more tonight on NIGHTLY BUSINESS REPORT for Monday, July 6.

MATHISEN: Good evening, everyone, and welcome. Thanks for joining us.

The stakes are high and rising. And the pressure is ratcheting up on a Greek banking system already under severe stress. Greek banks will stay shut for another two days, at least, to avoid running out of cash. The European Central Bank told Greece, it will not provide more emergency funding, but instead will keep it at current levels.

And today, it also became more difficult for the banks to tap loan money they need because the ECB effectively made their collateral worth less. All this a day after Greeks voted no in overwhelming fashion in yesterday’s controversial referendum. In it, they had to decide whether to accept or not accept those difficult reforms in exchange for a new round of bailout money.

Michelle Caruso-Cabrera is in Athens with more on what the outcome means for Greece’s future in the euro.

(BEGIN VIDEOTAPE)

MICHELLE CARUSO-CABRERA, NIGHTLY BUSINESS REPORT CORRESPONDENT: Celebrations late into the night in Athens, after Greeks learned that no had won by a landslide. Sixty-one percent voting no to a bailout program. Only 39 percent voting yes.

UNIDENTIFIED MALE: I think every one of us was afraid. But we said no.

UNIDENTIFIED MALE: (INAUDIBLE) democracy.

UNIDENTIFIED FEMALE: I’m happy. But I don’t know what is coming tomorrow.

CARUSO-CABRERA: The result puts Greece farther along the path for leaving the euro.

Just a few weeks ago, most Wall Street firms and rating agencies put the chance of Greece leaving the euro at below 50 percent. Today, as a result of the referendum, many announced they now think that is the most likely outcome.

The Greek Prime Minister Alexis Tsipras still insists a no vote does not mean that Greece is leaving the euro, only that it gives him a stronger position to get a deal that is easier on the Greek people when he returns to Brussels tomorrow for an emergency summit of European leaders.

It’s up to Tsipras to make the first move, showing up with a proposal that German leader Angela Markel (NYSE:MKL) and others will accept. And that’s key, since every previous Greece proposal has been rejected, as not strong enough in response.

In a surprise move, the flamboyant finance minister, Yanis Varoufakis, who is besieged by journalists wherever he goes, announced his resignation via blog post. His good friend, Professor James Galbraith, told us that Varoufakis resigned because so many of the other European finance ministers don’t like him.

JAMES GALBRAITH, UNIVERSITY OF TEXAS-AUSTIN PROFESSOR: I think the major reason was to help facilitate the rapid conclusion of the deal with the creditors over the next couple of days. It was clear that he personally was a bit of an obstacle to that. That had been expressed by the Europeans, and so he felt Alexis Tsipras felt that it would be better if he stepped aside.

CARUSO-CABRERA: In his blog post, Varoufakis said, quote, “I wear the creditor’s loathing with pride.”

Even without Varoufakis at the table, the deal is going to be hard to get as positions have only hardened and perhaps even grown farther apart after the referendum.

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

(END VIDEOTAPE)

HERERA: An emergency negotiation between Greece and its creditor will start up again tomorrow when Eurozone finance ministers meet to discuss the debt crisis. This is their first official gathering since that referendum, and wide gaps still separate the two sides.

Geoff Cutmore has more from Brussels.

(BEGIN VIDEOTAPE)

GEOFF CUTMORE, NIGHTLY BUSINESS REPORT CORRESPONDENT: The message is both private and public in Brussels at the moment that the Greeks will have to arrive with significant reforms if they want to make progress in new rounds of negotiations. I think it’s worth pointing out e voices that has not been heard so loudly in the drama around the referendum is that of the creditors themselves. And as a result, both unilateral exposure, and exposure through the euro system, countries like Germany are on the hook for almost $100 billion. And as you go down the list, France, in exist of $70 billion and all members of the euro system will have some exposure of sorts.

And they’ll be keen to get some of that money back or at least see a program that leads to reforms that would suggest that there is a viable way for Greece and all me euro system will have some exposure of sorts. And they’ll be keen to get some of that money back or at least see a program that leads to reforms that would suggest that there is a viable way for Greece to pay its debts in the future.

This is Jeff Cutmore for NIGHTLY BUSINESS REPORT, in Brussels.

(END VIDEOTAPE)

MATHISEN: U.S. stocks ended the day lower in a volatile session on concerns about Greece, recovering from sharp losses earlier in the day. China, the world’s second biggest economy, didn’t help matters, either. More on that one in a moment.

By the close, the Dow Industrials, they were down 46 points, to finish at 17,683. It had been, that index, off as much as 166 points. NASDAQ down 17, S&P 500 lost 8.

HERERA: China’s Shanghai Composite remained volatile today, even after Beijing took dramatic steps over the weekend to support the country’s stock market. It has been in a downward cycle over the past few weeks now. Since hitting its high on June 12th, the Shanghai Index has lost more than a quarter of its value.

Eunice Yoon in Beijing has more on the measures and why investors across the globe are closely watching what’s happening in the world’s second largest economy.

(BEGIN VIDEOTAPE)

EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: After a weeks-long stock mark correction, the government authorities here came in guns blazing with heavy ammunition to try to shore up investor confidence. Over the weekend, the leaders, including the Chinese premier himself, met and presided over meetings which resulted in dramatic moves. Brokerages were mobilized to invest in a stabilization fund, IPOs were suspended, and the Chinese central bank was called on to provide liquidity assistance to a government backed margin finance company that puts money in the hands of investor so they can buy more stock.

Now, the speculation has been that the leadership here is very concerned about the potential social fallout, because many of the investors are new, inexperienced, and are borrowing on margin.

The stock market in Shanghai saw massive gyrations. It was up by 8 percent at the open, fell back and then closed the day higher by about 2 percent. Investors have been saying that they’re skeptical about the long-term impact of these measures, and many of them believe that the government may have lost control of the market, and is going to have to come in with even further measures to rebuild confidence.

For NIGHTLY BUSINESS REPORT, I’m Eunice Yoon in Beijing.

(END VIDEOTAPE)

HERERA: Chinese stocks trading the U.S. fell today despite those emergency measures. Weibo fell 15 percent, 21Vianet was off 10, and JA Solar (NASDAQ:JASO), Baidu (NASDAQ:BIDU) and JD.com were off as much as 8 percent.

And copper often seen as a barometer of what’s happening in China was also sharply lower today.

MATHISEN: Well, Sue, that weakness in China was one of the reasons behind oil’s big tumble today. West Texas crude off nearly 8 percent, that its second biggest drop of the year so far. But that wasn’t the only reason for the dramatic fall. And traders say this may be just the beginning of an even sharper drop.

Jackie DeAngelis has more.

(BEGIN VIDEOTAPE)

JACKIE DEANGELIS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Fireworks day, in the oil pits. Intense selling pressure coming into play as the market digested the meaning of a no vote for Greece. The Greek situation bearish for oil because it’s likely to boost the dollar. Since crude is priced in dollars, it makes it more expensive for traders using other currencies.

But also, trouble in Greece making traders question Eurozone economic growth and demands for oil.

Adding to worries, China, perhaps overshadowed at the moment by Greece. But slowing demand out of the world’s largest energy consumer is also troubling.

Meantime here in the U.S., the peak of the summer driving season has passed. Gasoline demand will now start to fall.

ALAN HARRY, SPARTAN COMMODITY FUND: Right now, I think that it is having an impact on global demand. But I think it’s going to be short-term. So, I think what’s happened in Greece and the worries that it’s going to spill over into other countries, it’s going to be short-lived, and I don’t think we’re going to go down much more.

DEANGELIS: On the supply side, no signs of production slowdowns abroad, or here at home.

Then there’s Iran, nuclear talks still in focus. Secretary of State John Kerry saying that genuine progress has been made. But is it enough to foster a deal that could flood the market with more oil?

HARRY: We are heading down, and I think we’re going to see a low of $48. After that, I don’t think we’re going to see much lower. Unfortunately, I think we’re going to start to see higher price against.

DEANGELIS: Some firms on Wall Street have maintained the bearish stance going against the grain and predicting a big drop in oil prices for the second half of the year. At the moment, it appears that this could be just the beginning.

For NIGHTLY BUSINESS REPORT, I’m Jackie DeAngelis.

(END VIDEOTAPE)

HERERA: So, how will the issues in China and Greece impact the U.S. financial markets?

David Kelly is going to tell us. He is the chief global strategist at JPMorgan (NYSE:JPM) Funds. He’s here to put it all in context for us.

Good to see you, David, as always.

DAVID KELLY, JPMORGAN FUNDS CHIEF GLOBAL STRATEGIST: Glad to be here.

HERERA: Let’s start, first of all, with China. You know, we did see the markets roiled a little bit in the early morning by Greece. But there are others on the street who think that perhaps the stock market is underestimating what’s happening in China.

KELLY: Well, I don’t think the Chinese economy is slowing down that quickly. I mean, I don’t believe the GDP numbers. I think it’s always been growing slower than that.

But other indicators we get from China aren’t too bad. I think there’s a special problem in the Shanghai stock market, which has gone up hugely over the last few months and is very volatile. And what I think we’re seeing here is the Chinese government just — they love stability. And I think the Chinese government has decided that they cannot put up with this much volatility in the Chinese stock market.

So they’re not quite that committed to free enterprise. I think they want to interfere. They didn’t come in with a lot of money here. This program from the brokers in China is not huge relative to the size of the overall Shanghai stock market. And I think that’s why it didn’t have more of an effect.

But overall, what we’re seeing here is U.S./China once again trying to control things. And, ultimately, they’ve got a long history of actually achieving that. So I don’t think the Chinese economy is that weak and I do think they’ll be able to bring some stability to the Chinese stock market.

MATHISEN: It is a fascinating litmus test of how the Chinese would interpret the equity markets. In the U.S. if your money goes down, you’re stuck over there. They want to jump in and save it.

Let’s switch pivot if we might to Greece. What do you think the likeliest outcome is there? And what are the stakes for the Eurozone, for the global economy, and maybe most importantly, for the Greek people themselves.

KELLY: Well, you know, Greece is as thick as it’s ever been. But, sometimes when you got a virus, after awhile, you’re no longer contagious and I think Greece is no longer contagious. I think we’re beginning to see that. If you actually look today, the euro ended up against the U.S. dollar.

I think what’s going to happen here is I think the European Central Bank can’t move forward and they can’t move back. They don’t want to lend Greek banks more money. But they can’t get their money back from the Greek banks because they don’t have it. So, they’re holding this level of support for the Greek banks. The problem is as Greek depositors pull money out, as the Greek government runs out of financing, their banks are just going to get weaker and weaker and weaker.

So, every day that they sort of effectively tighten the screws on Greece a bit more, I think that’s one part of it. The other part of it is European leaders outside of Greece do not want to do a deal with Greece so it makes Greece look like the winner here.

So, I think it’s a very rough situation for Greece. I think that we will go on for, you know, days, weeks, months with things getting pretty hairy in Greece, and eventually, I think the hope by the European government is there will be some either change of government in Greece, to a government they want to work with, or Greece just unilateral decides that they can’t take the euro anymore, tries to launch the drachma and washes its hands of Europe.

But either way, it’s going to turn out very badly for the Greek people. But the key is, we do not see a particular contagion either in terms of politics or finances or economics. You know, it’s not where we were a few years ago. But right now, Greece could sink without taking Europe with us.

HERERA: What about the U.S.? I mean, does our economy certainly looks resilient. We didn’t see all that much impact from Greece today. So, what’s your perspective on our economy and our stock market?

KELLY: Well, I think our economy is actually bouncing back very strongly. I think it looks like GDP was negative in the first quarter. It could be between 3 percent and 4 percent in the second quarter. I think the earnings season is starting this week. It gets into really full swing next week.

And I think the — I think people will — you know, they’ll check to see did this Greek explosion cause a real problem. But once it didn’t, then I think people will get back on to looking at U.S. earnings, U.S. economy. I think that’s probably pretty positive for U.S. equity.

HERERA: David, thanks. Good to see you again.

KELLY: Sure.

HERERA: David Kelly with JPMorgan (NYSE:JPM) Funds.

Ty?

MATHISEN: And still ahead, are you one of the millions of who could still benefit from a mortgage refinance, even as interest rates rise?

(MUSIC)

MATHISEN: Growth in the service sector in the U.S. quickened in June. The Institutes for Supply Management says its index edged higher last month to 56 — a reading that indicates that firms are, in fact, expanding. It also signals steady improvement in the biggest part of the economy, thanks to a pickup in business activity and an increase in new orders.

HERERA: Earnings season is almost here again. And many consider it to be the next big hurdle for the stock market. Alcoa (NYSE:AA) unofficially kicks off the second quarter reporting period on Wednesday. But, similar to last quarter, this one is not expected to impress

Dominic Chu has more.

(BEGIN VIDEOTAPE)

DOMINIC CHU, NIGHTLY BUSINESS REPORT CORRESPONDENT: It’s time to kick off earnings season yet again. And what happens over the next few weeks will really set the tone for stocks in the second half of 2015. The first thing investors should know is that expectations for profit growth are already low.

According to data compiled by Thomson Reuters (NYSE:TRI) IBIS, analysts are looking for profit declines of 3 percent for S&P 500 companies. But, just because the expectation is for a decline doesn’t mean it necessarily plays out that way.

BRIAN BELSKI, BMO MANAGING DIRECTOR: First quarter earnings surprised everybody on the upside, and we think second quarter earnings are going to surprise to the upside, too. This is backed up by better economic numbers I think most people expected. And U.S. fundamentals continue, we think, to pace the rest of the world.

So, we think earnings are actually going to be in pretty good condition.

CHU: There are a couple of key sectors to keep an eye on. Energy stocks are expected to be the biggest drag on profit growth as oil prices remain a focus.

As for the biggest gain in profits, it’s the financial sector. So, bank stocks will be key.

PHIL ORLANDO, FEDERATED CHIEF EQUITY STRATEGIST: There are other pockets of the market that frankly are doing pretty well. So, we happen to think that financials, consumer discretionary, industrials, technology are areas that should produce some pretty good numbers, certainly compared to very difficult comparisons to the energy space.

CHU: Of course, that’s the rosier outlook. The bearish case is still looking at a stock market that hasn’t seen a significant pullback in years and that’s amidst the backdrop of bigger picture risk from all over the world. Still, some see U.S. stocks as a safer bet on a relative basis to many other markets globally.

BELSKI: I think the volatility around world is going to continue and what I think investors have to rely on and really appreciate is the stability and consistency of U.S. earnings growth, and I think we’ll ultimately garner even more assets in terms of investment dollars back to the U.S. second half of 2015.

CHU: The corporate profit growth picture could go a long way to showing whether the U.S. stock rally has legs, or is due for a breather.

For NIGHTLY BUSINESS REPORT, I’m Dominic Chu.

(END VIDEOTAPE)

MATHISEN: Humana (NYSE:HUM) cut its earnings outlook for the full year and issued downbeat guidance for the current quarter. The warning comes just days after Humana (NYSE:HUM) said it was being acquired by Aetna (NYSE:AET), hope they told Aetna (NYSE:AET). The two insurers are combining in a $37 billion. That makes for the largest-ever combination in the insurance industry.

In an interview today, both CEOs explained why they think the merger will work.

(BEGIN VIDEO CLIP)

MARK BERTOLINI, AETNA CEO: I think at the end of the day, where strategy really works in this industry is at the local market level. And I think where health care is headed to a retail market, it’s all about the consumer — improving access, improving affordability, and improving choice.

BRUCE BROUSSARD, HUMANA CEO: It really was, I think, a complementary acquisition for Aetna (NYSE:AET). And really that’s what brought it together, is how do we transform health care for the long term?

(END VIDEO CLIP)

MATHISEN: Shares of Aetna (NYSE:AET) fell 6 percent today, Humana (NYSE:HUM) up a fraction. There’s increased speculation that other major insurers will merge, as well, in trading today, Cigna and Anthem fell a fraction while United Healthcare rose slightly.

HERERA: And there are reports that the rate that you pay for health insurance could go much higher next year. “The New York Times (NYSE:NYT)” says insurance companies around the country are looking for rate increases of between 20 percent to 40 percent or more. Insurance companies say those who enrolled under the Affordable Care Act were sicker than expected and that rising rates will help them to meet costs. According to the report, federal officials want to see those rate hikes requests rolled back.

MATHISEN: Well, GoPro shrinks the action camera and that is where we begin tonight’s “Market Focus”.

The company unveiling its new Hero 4 Session model, which is the size of an ice cube. It goes on sale July 12th and will cost more than an ice cube, $400. GoPro CEO explains what special about this new device.

(BEGIN VIDEO CLIP)

NICK WOODMAN, GOPRO CEO: It’s the smallest camera we’ve ever made. It’s half the size of our other cameras, 40 percent lighter. And yet it packs our Emmy Award-winning image quality into what we think is one of the most convenient ways to capture your life.

Share fell, though, 1.5 percent to $50.94.

(END VIDEO CLIP)

MATHISEN: Meantime, shares of Weight Watchers bulking up today on reports of a possible takeover. According to “The New York Post”, at least one unnamed suitor is interested in buying the company. The stock up 8 percent to $4.42.

HERERA: Seritage Growth Properties making its trading debut. This is a real estate investment trust created by the retailer Sears (NASDAQ:SHLD). The spinoff will receive an estimated $1.6 billion from its rights offering and will use those proceeds to buy more property and lease some of it back to Sears (NASDAQ:SHLD). Shares rose 3 percent to $37.10.

Advanced Micro Devices (NYSE:AMD) lowered its second quarter revenue guidance. The chip maker citing weak PC demand. Shares tumbled after the close, down as much as 13 percent. During the regular session, the stock was off 2 percent to $2.47.

Black Friday might have some competition. Amazon (NASDAQ:AMZN) is launching its own version of the shopping holiday. On July 15th, the day before the online retailer turns 20 years old, it will host a big sale for prime members called Prime Day. Shares fell a fraction to $436.04.

MATHISEN: Mortgage interest rates have been seeing pretty steady gains for the past few months, even shrugging off a lot of instability in Greece and other overseas markets. Application to refinance loans have been falling as those rates rise, but a new report says there’s still a lot of borrowers who could benefit from what are still historically low interest rates.

Our Diana Olick has all the details.

(BEGIN VIDEOTAPE)

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Your house could cost you less money per month. That is if you still have a high-ish mortgage rates. Charts like this, though, can give borrowers the wrong idea when it comes to refinancing home loans. Yes, the average rate on the popular 30-year fixed mortgage is moving higher. Rates are now at the highest level since last October.

As a result, applications to refinance are down from a year ago. But there are still plenty of borrowers who could benefit from a refi. How many? About 6.1 million, to be exact, according to Black Knight Financial Services.

That’s 1.6 million more than a year ago, due to higher home prices, and interest rate reductions, and additional 450,000 could also qualify for the government’s so-called HARP program that helps underwater borrowers refinance.

How much can these folks save? About half a million borrowers could save as much as 500 bucks a month or more, and 3 million could save at least $200 a month.

One warning, though, if you think you’re eligible, do it now, just a half percentage point increase in interest rates could push more than 2 million of you out of the poll. It’s hard to say how fast interest rates will rise, but it’s an easy bet they’re not coming down anytime soon.

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

(END VIDEOTAPE)

HERERA: Coming up, why small business half a world away from Greece are feeling the squeeze of its debt crisis.

(MUSIC)

MATHISEN: Here’s what to watch tomorrow. International trade data are out. A read on economic trends here and abroad. The JOLTS report from the Labor Department, love that one, on the number of job openings last month. And, finally a look at the state of Americans’ finances with consumer credit numbers. That’s what to watch for Tuesday.

HERERA: It is the end of an era. The roar of the futures pits in Chicago an New York will go quiet. Frenzied buying and selling in the pits once helped set the price on cattle and corn and other commodities. And after a nearly 170-year run, the CME group is closing the books and will complete a total migration to electronic exchanges.

MATHISEN: For some American business owners, the Greek debt crisis is hitting home. Small businesses that rely on importing and exporting goods into and out of Greece are starting to feel the impact of that country’s banking issues. And the no vote this weekend is adding to their anxiety.

Kate Rogers (NYSE:ROG) has more.

(BEGIN VIDEOTAPE)

KATE ROGERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: The Greek crisis may be unfolding halfway across the world, but, for some small American businesses, the impact is being felt at home.

Costas Mastoras has run his store, Titan Foods in, a store in Queens for 31 years. The store is a landmark in the neighborhood, but hasn’t received a shipment in two weeks.

COSTAS MASTORAS, TITAN FOODS OWNER: This trust has been lost between the businesses. The credit has been lost, and all the transactions are done in cash basis so that affects our regular supply of goods here, and if we don’t — we’re not going to be resupplied within a certain time, then shortages will be here in our store as well other stores that we’re supplying.

ROGERS: Titan has about 3,500 products on its store shelves from olive oil to cheeses, with enough supply to last between six to eight weeks from their more than 400 distributors in Greece. Sunday’s referendum results paint an uncertain future for the store.

MASTORAS: I just hope that a miracle will happen, a deal will come.

ROGERS: Nick Stamatakis is hoping for the same thing. The owner of this sponge company in Deer Park, New York, both imports and export sponges to Greece. He also sells to retailers in the U.S., including Whole Foods. Stamatakis is currently sitting on about $15,000 worth of sponge exports. But his associate can’t take delivery of them due to the country’s capital controls.

NICK STAMATAKIS, THE SPONGE COMPANY OWNER: He wasn’t sure he was going to be able to pay, he was also not sure if he’s going to have enough money to pay for the percentage of VAT taxes he would need to pay in order to import the sponges. And other customs expenses that he has.

ROGERS: Now, the business owner is focusing on Greece’s July 20th payment to the ECB, hoping things will stabilize by that point. If not, he’s worried not only for his business, but for the future of Greece.

STAMATAKIS: I don’t think I want to think about a doomsday scenario. It’s going to be too catastrophic for this business, for our associates in Greece, for my family, some of my family is still there.

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

(END VIDEOTAPE)

HERERA: And finally tonight, Warren Buffett just donated nearly $3 billion to charity. The billionaire gifted about 20 million class B Berkshire Hathaway (NYSE:BRK.A) shares to five foundations. The donation is divided between the Bill and Melinda Gates, Susan Thompson Buffett, Sherwood, Howard G. Buffett and NoVo Foundation. It’s all part of Mr. Buffett’s annual pledge to give away stocks which he has been doing since 2006.

MATHISEN: Good for him.

HERERA: Very good causes. Yes.

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

MATHISEN: And I’m Tyler Mathisen. Thanks for me, as well. Have a great evening, everybody. We’ll see you right back here tomorrow night.

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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