Transcript: Nightly Business Report – September 15, 2015

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

The Dow rises triple digits as investors bought stocks ahead of the start of the Federal Reserve`s crucial meeting.

SHARON EPPERSON, NIGHTLY BUSINESS REPORT ANCHOR: Wall of worry. The big issues keeping chief executives and Wall Street up at night.

MATHISEN: And study hall. What one startup is doing to try and change education in America.

All that and more tonight on NIGHTLY BUSINESS REPORT for Tuesday, September 15th.

EPPERSON: Good evening, everyone. I`m Sharon Epperson, in tonight for Sue Herera.

MATHISEN: And welcome from me, as well. I`m Tyler Mathisen.

There was optimism on the street today. Not many expected a rally, let alone a big one. But they got it, despite all the general uneasiness.
Today a day before the start of the Federal Reserve`s much anticipated two- day meeting, investors bid up stocks and digested some final economic data ahead of that meeting. More on that a little bit later in the program.

But by the close, here are the numbers. The industrials up 228 points to finish at 16,599, NASDAQ higher by 54, and the S&P 500 was up 25 points.

Bob Pisani now with more on today`s big move in stocks.


BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Stocks started up and they stayed up. Now, it`s the day before a Fed meeting. Stocks usually do advance. But it was a particularly broad rally although the volume was moderate. A lot of big caps up 2 percent or more whether you`re talking about Merck (NYSE:MRK) and the pharmaceuticals or GE and the industrials or Procter & Gamble (NYSE:PG), even united health care, all up more than 2 percent.

Now, there was a twist to the buy ahead of the Fed story we saw today. Some traders aggressively sold treasuries, as well. And that created big moves in interest rate sensitive sectors on top of the rally.
So, big banks like Bank of America (NYSE:BAC), JPMorgan (NYSE:JPM) and Citigroup (NYSE:C) were all outperforming the bond market in general, as were regional banks like US Bancorp.

Why the move down in bonds? That`s not clear. But there have been rumors for sometime that the Chinese government, one of the biggest holders of bonds outside the United States, has been an active seller for several weeks.

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


EPPERSON: Now to the wall of worry. The heads of some of the biggest companies in America have a long list of things they`re concerned about. The quarterly survey of the business roundtable made up of corporations with more than $7 trillion in annual revenues cites growth, a strengthening dollar and a potential federal government shutdown as some of their top concerns.

The chair of the group pointed specifically to Congress as the top impediment to business expansion, specifically if lawmakers fail to fund the government beyond the end of this month and fail to increase the country`s ability to borrow later this year.

Eamon Javers has been following the story from Washington.

And, Eamon, CEOs seem very concerned because of the impact this will have on business. But what really is the likelihood of a shutdown?


This is one of those stories that continues to gather steam as we go toward the end of the month deadline to fund the U.S. government. Now, there`s some question whether or not Congress can sort of get its act together here and pass what`s known as a continuing resolution just to continue the funding at current levels.

There`s concern among Republicans that the current funding includes funding for Planned Parenthood. They don`t like that. They would like to do something about that, but that is a showdown with Democrats that could provoke a government shutdown.

Goldman Sachs (NYSE:GS) put out a note to its clients last week, saying that they`re now rating the chances of a government shutdown higher than they had before. They say it`s nearly 50 percent chance that we`ll have a government shutdown at the end of this month.

MATHISEN: Interesting.

How does what`s happening on the presidential campaign trail impact what`s going on in this particular debate?

JAVERS: Well, that`s so fascinating here, Tyler. We see this surge of Donald Trump in the Republican presidential primary campaign. He is an anti-establishment figure who has great appeal in the Republican base.
What that`s doing I think is riling up a lot of members of the Republican Party here in Washington. They`re a lot more likely to be willing to kind of stick it to their leadership, the Republican leadership, based on the success they`re seeing Donald Trump having out there on the campaign trail.

There`s a real anti-establishment, anti-party chiefdom kind of a mood in the Republican Party right now. And you could see that playing out into more of a willingness to buck leadership on things like this continuing resolution and other things throughout the year.

So, just watch for the impact of that because I think the rise of Donald Trump actually makes it a little bit more dicey for Republican leaders to get a CR at the end of this month.

EPPERSON: Eamon, I know you`re going to be following this. We`ll talk about this more in the program. Thanks so much, Eamon Javers in Washington.

JAVERS: You bet.

MATHISEN: And, Sharon, we`re going to do that right now, because, of course, that Trump surge plays right into one of Wall Street`s biggest concerns apparently. Politico, the website, reports that financial executives are growing increasingly, quote, “terrified” that Donald Trump could win the Republican nomination. Trump has recently ripped into executive pay, he`s promised to raise taxes on hedge fund managers and more.

Dan Clifton is the head of policy research at Strategas Research Partners and he joins us now.

Dan, welcome. Good to have you with us.

Do you see it that way? Do you think that the business leaders are, quote, “terrified” at the prospects of Trump`s winning the nomination? And if so, why?

DAN CLIFTON, STRATEGAS RESEARCH PARTNERS: Well, Tyler, coming into this year, most business executives and large investors believe that this was going to be a Hillary Clinton versus Jeb Bush election. So, any type of deviation from those two candidates creates a degree of uncertainty and there needs to be adjustment to the new candidates.

You then throw in the wild nature of Donald Trump. He`s an unknown.
His temperament is unknown. His main line is that he`s a boss to no one.
And there seems to be a lot of uncertainty building in around what Trump actually means, and that`s creating this uncomfortableness.

I`ll just make one larger point. Six weeks ago to our clients, Donald Trump was a form of entertainment. But because he`s held that lead for so long and his support is somewhat broadened out, it`s starting to make business leaders and investors think his candidacy is a lot more real than they initially anticipated. So, it`s really just about getting used to the flow of this.

EPPERSON: Well, Dan, what else do you think in terms of the landscape that we`re seeing with the GOP candidates is being overlooked here? You said that perhaps people should be looking more at Carly Fiorina right now.

CLIFTON: That`s correct, right? When I look at previous primaries, the winner in the summer before the election is never the actual primary candidate. That includes both on the Republican side and the Democratic side.

Right now, the partisans are paying the most attention, are the most vocal. That`s reflected in the polls. But as you get closer to the year –
– as you get closer to the end of the year and the new primaries races are going to happen, you start to see a winner emerge at the end.

And what we see, the relationship is, a candidate with high net favorable ratings now turns out to be the winner. That`s John Kasich, Carly Fiorina, Marco Rubio and even Ben Carson. Both Hillary Clinton and Donald Trump have high negative unfavorable ratings and historically, that`s not been a good predictor of them actually being the nominee.

MATHISEN: You didn`t even mention the name most people in the business establishment you might think that they would go there, and that would be Jeb Bush.

But let me come back to Trump. I ask this only somewhat facetiously.

Donald Trump is a businessman. And if business doesn`t like a businessman, what`s going on there? Is it because they know too much about him and familiarity has bred contempt?

CLIFTON: Well, look what Donald Trump is advocating, right? Forget that he`s a businessman for a minute. He`s tapping into the populist anger in the Republican Party over immigration and trade. He`s basically saying he doesn`t want to allow immigrants in the country, which are needed for the workforce and saying he wants to go to a trade war with China, where a lot of these companies` overseas markets are.

And so, his positions, although he`s a businessman, his positions are at odds with where many of these markets are going for these business leaders, and I think that`s where the nervousness is coming from.

MATHISEN: Dan, thank you very much. Dan Clifton with Strategas.

CLIFTON: Thank you.

EPPERSON: The failure of Congress to reauthorize the Export-Import Bank which guarantees loans for U.S. companies that do business abroad is forcing General Electric (NYSE:GE) to move 500 jobs overseas. It`s something GE warned could happen, and today, they said, it is.

Mary Thompson is following the story for us.

And, Mary, first and foremost, why is GE doing this in the first place?

MARY THOMPSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, the jobs are going to go to France, China and Hungary, and the reason for this is because without the loans and assurances to foreign clients that GE used to secure through the Export-Import Bank, it has to get them through other export credit agencies or ECAs.

If GE is bidding on a foreign project mostly in developing countries, these lines of credit have to be secured before the bidding process can even begin. And typically, governments will request some of the jobs or production be located in their home countries. So, if they`re going to extend the credit, they need a little some —

MATHISEN: Could more GE jobs be moved overseas as a result of this impasse on Ex-Im?

THOMPSON: Well, GE wouldn`t say right now. It does expect eventually. Keep in mind, it`s bidding on $11 billion worth of projects as we speak. So, each one will have its own financing package and set of criteria.

So, unless Congress reauthorizes the Ex-Im Bank, after failing to do so this summer, the location of the jobs will be at the mercy of the agreements. Now, in a statement today, GE said this could result in thousands of jobs from GE and its suppliers being relocated overseas.

EPPERSON: Now, is GE the only company impacted by this?

THOMPSON: No, but although GE, Boeing (NYSE:BA), as well as Caterpillar (NYSE:CAT), the banks benefit the most from the Ex-Im Bank.
And while GE says the bank will help to — excuse me, the Ex-Im Bank helps to keep the global playing field level because other countries have similar financing arms, conservatives in Congress have wanted to kill it because they feel it`s contrary to the free market system that they embrace. Well, some Democrats, though far fewer, do believe it`s some kind of subsidy for corporations.

So, that`s where the pushback on the bank has been. GE has been trying to lobby for its reauthorization, but so far has been unsuccessful.

EPPERSON: Yes, I know you`ve been watching this carefully, and all the companies that might be impacted. Thanks, Mary.

MATHISEN: Thanks, Mary.

The White House says it does not back a bill, a House bill that would repeal the 40-year-old ban on exporting U.S. oil. White House Press Secretary Josh Earnest says it`s a policy decision that need to be made by the Commerce Department. Earlier in the day, House Republicans said they plan on holding a vote on the issue in coming weeks.

Today, West Texas Immediate rose more than 1 percent as you see there.

EPPERSON: Now to those economic reports we mentioned earlier in the show. Retail sales rose 0.2 percent in August from a month earlier, climbing for the second straight month. Part of the reason for the increase is lower energy prices and a stronger job market.

MATHISEN: And while consumers are holding up, factories are struggling. A report on manufacturing in the New York region showed contraction in September for the second straight month. A separate report on industrial production which measures output in manufacturing fell in August for the sixth time in eight months. Much of the decline attributed to a cutback in production by automakers.

EPPERSON: Tyler, as we know that economic data comes as the Fed is getting ready to start its meeting and the economy looks a lot different today than it did the last time the Fed hiked rates nearly a decade ago.

Steve Liesman compares then and now.


STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: It was 2006 the last year the Fed raised rates. There was no iPad, no iPhone and no Twitter to tweet about the decision. Much of the economic data then painted a very different picture.

Unemployment in June 2006, 4.6 percent. Today, it stands higher at 5.1. Meanwhile, average job growth over the three months is more than twice what it was in `06. But the labor force participation rate is lower today, raising questions about just how much slack there is in the economy.

GDP growth tracking around 3 percents in `06, not far from its four quarter average right now of 2.67 percent today.

But there are big differences in inflation numbers and those are the ones the Fed is concerned about. Inflation now running at just 0.3 percent compared to a real 3 percent back then. Core prices including food and energy were rising by 2.4 percent compared to half that now or 1.2 percent.
The Fed funds rate was already at 5 percent when the Fed last hiked far from the zero rates they maintained for seven years.

Stock market bulls have a strong run since the last time the Fed hike. In June `06, the Dow closed slightly over 11,000 points, about 5,000 points below where it trades today.

Investors will be watching inflation data out tomorrow to see if the picture shows signs of improvement before the Fed`s much anticipated meeting.



MATHISEN: The Fed and what if anything it decides to do is clearly the talk of Wall Street. And some of the biggest names in business and investing have strong opinions about the Central Bank`s next move.


WARREN BUFFETT, BERKSHIRE HATHAWAY CHAIRMAN & CEO: There`s sort of pushing themselves into something where they have to do something here.
But I would no not be terribly aggressive if I were in that position.

LARRY SUMMERS, FORMER TREASURY SECRETARY: That`s no reason to introduce extra uncertainty. So, on all the things that the Fed`s supposed to care about, this isn`t the time to be moving

MOHAMED EL-ERIAN, ALLIANZ: The big question is not whether they`re going to hike or not. The big question is, why are we so obsessing with the single hike?

JEAN-CLAUDE TRICHET, FORMER ECB PRESIDENT: Whatever it is will be according to my knowledge fully in line with what they are aiming at, which is to be anchor of stability.

JEREMY SIEGEL, WHARTON FINANCE PROFESSOR: I think the market is more prepared for this increase than many, many traders believe it is.

RICK RIEDER, BLACKROCK: The Fed`s decision becomes trickier. I would argue that`s the one governor on the Feds being able to move because you can`t drives the dollar too high.

ALAN GREENSPAN, FORMER FEDERAL RESERVE CHAIRMAN: I must admit I`m a little bit baffled by the fact that 25 basis point move on the part of the Fed is going to have a major effect on economic activity across the globe.

DAVID TEPPER, APPALOOSA MANAGEMENT: People are fussing about the Fed, this with the Fed, that with the Fed, that with the Fed. Who cares?


MATHISEN: And he stuck his tongue out. If you want to know just how the Federal Reserve raises interest rates when it does race them, head to our Web site and watch Steve Liesman explain the process.

EPPERSON: Still ahead, American Airlines is on pace for a year of record profits. But where will it find its next leg of growth?


EPPERSON: UPS will hire as many as 95,000 temporary workers for the holiday season. That will number is in line with last year, a year when both UPS and FedEx (NYSE:FDX) stepped up their hiring to handle the growth in the ecommerce purchases. Late today, rival FedEx (NYSE:FDX) said it would increase shipping rates by nearly 5 percent.

MATHISEN: Consumer staples, they`re the products we buy no matter how the economy is doing — think tobacco, food, paper products. But this group has note been performing particularly well in the stock market lately.

Morgan Brennan explains why and looks for pockets of opportunity in the group.


MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Since late August stock market correction, the consumer staple sector has underperformed the broader S&P 500 by half, the second worst performer behind utilities. Comprise of companies selling food, beverage and household supplies, items consumers need regardless of the economy, consumer staples are considered a more defensive sector — one some investors are rotating out of in favor of more cyclical stocks poised to grow with the economy.

Experts expect that to continue.

JAMES LIU: Consumer staples because of its defensive nature is going to suffer once rates start to raise and economic growth starts to heat up.
And the other factor with consumer staples is that it actually has the lowest earnings growth of any sector of the S&P, excluding materials and energy, which, of course, have gotten hit by the commodity downturn.

BRENNAN: Since 1990, there have been four cycles of rate increases by the Fed. One month after the initial hike of each of those period, consumer staples is tumbled every time, losing an average of 1.5 percent, according to data firm Kensho. Still, losses tends to be better than the broader S&P, which averaged a 2.5 percent decline.

Names that have tended to fair better in a rising rate environment include Molson Coors Brewing (NYSE:TAP) Company and Costco (NASDAQ:COST), which each have in the past averaged gains. Names that have historically sold off include PepsiCo and Whole Foods. Still, amid all the market uncertainty, there may be some specific buying opportunities.

LIU: The silver lining of all this volatility, and this is true for many sectors in the S&P 500, is that consumer staples are actually fairly valued at this point. So, although I do favor cyclical sectors in the second half of the cycle, to the extent that you do need a little bit of safety or income or yield in your portfolio, I think this is a much better valuation basis to buy consumer Staples (NASDAQ:SPLS) than we`ve seen in over a year.

BRENNAN: One place to look, companies poised to benefit from the holiday season. Names like beer and wine producer Constellation Brands (NYSE:STZ), which has averaged a 17 percent gain in the final three months each of the past five years, that according to Kensho.

Other stocks that tend to heat up with the holidays, Tyson Foods (NYSE:TSN), McCormick (NYSE:MKC) and Company, Hormel Foods (NYSE:HRL) and Costco (NASDAQ:COST), as consumers eat drink and, well, party more.



EPPERSON: Hewlett-Packard (NYSE:HPQ) is slashing 10 percent of its workforce and that`s where we begin tonight`s “Market Focus”.

The company is cutting 25,000 to 30,000 jobs, in an effort to save nearly $3 billion annually. This is on top of the 55,000 positions already cut as part of the company`s ongoing restructuring. Shares tumbled in initial after-hours trading. Before the close, the stock was a fraction higher at $27.11.

Target (NYSE:TGT) is testing the grocery delivery waters. The retailer is teaming up with Instacart, which is an online grocery delivery service, to let shoppers order food and other products. At first, the service will be only available in Minneapolis, but the two companies are exploring an expansion into other markets in the future. Shares were a fraction higher to close at $77.82.

Positive drug trial results lifted shares of GW Pharmaceuticals in today`s session. The company`s experimental cannabis drug for treating schizophrenia performed well in a study. Shares were up 7.5 percent to $114.92.

MATHISEN: Gray Television (NYSE:GTN) has agreed to buy all of the TV and radio stations of the privately owned company Schurz Communications.
The deal, worth about half a billion dollars will expand Gray`s operations into 28 states. Gray Television (NYSE:GTN), I prefer color, just me, the stock rose 13 percent today to finish at $13.30.

MillerCoors is shutting down a brewery in North Carolina to cut costs. The company, which is a joint venture between Molson Coors and SAB Miller, will lay off more than 500 people who worked at the plant. Shares of Molson Coors popped 5 percent to $72.64.

And Dentsply is buying Sirona Dental in a deal worth about $5.5 billion. According to the firms, the combination will create the world`s largest manufacturer of dental supplies. Both stocks were halted initially after the news, but they closed higher. Dentsply rose more than one percent to $54.35. Sirona Dental was also up 1 percent to $99.31. Please remember to floss.

The cable network AMC is reportedly in talks to acquire Starz, this according to a Bloomberg report. The talks may not result in a deal though. Shares of Starz surged initially after the close, as seen on that chart there. At the end of regular trading, the stock was up more than 1 percent to $38.79.

EPPERSON: Tyler, for airline investors, this summer has been one of the best they`ve ever seen. Low fuel costs and high demand helped deliver the results many hoped for when the largest airline started merging eight years ago. That includes American which has moved one step closer to finishing the integration of U.S. Airways nearly 18 months after they merged.

Phil LeBeau reports from American`s new operation center in Fort Worth, Texas.


PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: If you fly American, odds are somebody in this room at some point will be dispatching or monitoring your flight. American`s new flight operation center is now up and running, 1,600 employees under one roof handling more than a million flights every year.

DOUG PARKER, AMERICAN AIRLINES CEO: A quarter of these people were working out of Pittsburgh and now here in Dallas-Fort Worth. So, we have teams working together. And you can`t tell the difference where they worked before. We have technology that`s working flawlessly. We did all this without one blimp in the operation.

LEBEAU: Making American perform better was a top priority when Parker engineered the merger of his former airline U.S. Airways and the old American which had gone bankrupt. Since then, American has rebounded and is now on pace for a year with record profits. Thanks in large part to lower fuel costs.

It has many wondering if this is as good as it gets for airline investors. An idea Parker dismisses.

PARKER: There was a time where it felt maybe better than it possibly could be for a period of time. Where we are today, it feels like everything pretty much reacted. We`re in pretty good supply/demand balance.

LEBEAU: With operations under roof, American is making a push to improve customer service. That includes putting long-time employees on a team to handle thousands of complaints and comments on Twitter from passengers and customers.

VERONICA MERJIL, AMERICAN AIRLINES: If we need to reach out to flight ops or reach out to our customer service people at the airport, we`ve got them all here within arm`s reach.

LEBEAU: The next part of American`s plan to grow profits, which is already under way, includes upgrading its fleet to newer, more fuel efficient planes.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Fort Worth, Texas.


MATHISEN: Coming up, lesson plans — the big money behind a startup that wants to change education in America.


MATHISEN: Here`s what to watch tomorrow. In addition to the Fed meeting that begins tomorrow, the consumer price index is out. The Fed will be watching that. So, is a measure of home builder sentiment with the housing market index from the National Association of Homebuilders. And FedEx (NYSE:FDX) will release quarterly results.

That, folks, is what to watch for Wednesday.

EPPERSON: The wife of the late Steve Jobs wants to improve the U.S.
education system. Maureen Powell Jobs is committing $50 million to create new high schools, telling “The New York Times (NYSE:NYT)” that her project aims to modernize curriculums and develop new ways of teaching. She chairs an organization called XQ America which over the next few months will accept proposals, partner with winning teams and support at least five schools over the next five years.

MATHISEN: And she`s not the only one spearheading a big investment in education. Other well-known names in technology and Silicon Valley are, as well.

Julia Boorstin tells us about one startup drawing big name backers.


(NASDAQ:FB) partnered with Summit Public Charter Schools to build educational software. Apple (NASDAQ:AAPL) is handing out iPads and MacBooks and IBM is pioneering a model to teach science, technology, engineering and math which it, Microsoft (NASDAQ:MSFT) and S&P are implementing in public high schools. And ed tech startups are attracting serious venture capital. All schools has raised $133 million from Mark Zuckerberg and VC firms including Peter Teal`s Founders Fund and Andreessen Horowitz.

LARS DEGARD: We believe this could be an extremely large and very profitable business. And a company that could go public in that process as a very big school system.

BOORSTIN: Old school, which runs private elementary and middle schools just expanded to seven locations in the bay area and Brooklyn.

UNIDENTIFIED MALE: This is my first day at first grade.

BOORSTIN: A team of engineers and educators is creating software to help teachers deliver a personalized interactive curriculum which old school aims to offer to any school.

MAX VENTULLA: The idea is by allowing on a small scale an experience that indicators to the individual at the large scale, we can be actually evolve much faster as a school system and strike at the central problem which is that schools themselves need to be up-to-date if they`re going to prepare kids for a future that is changing at an accelerating rate.

BOORSTIN: Technology gathers data from iPads and cameras in classrooms help teachers review sessions and they update parents be in app.

CAROLYN WILSON: We`re building tools that super power teachers to enable them to become more efficient and more effective at personalizing children`s learning at meeting their individual needs, respecting their developmental progress, and communicating with their parents.

BOORSTIN: And parents are excited about the new perspective that Ventulla, a Google (NASDAQ:GOOG) veteran, and engineers from Uber and other startups bringing to education.

MIKE NORRIS: The key difference for this school is the enablement of individualized learning plans.

BOORSTIN: And that`s why parents are willing to pay over $20,000 per year.

For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Los Angeles.


EPPERSON: That`s NIGHTLY BUSINESS REPORT for tonight. I`m Sharon Epperson. Thanks for watching.

MATHISEN: And thanks from me as well. I`m Tyler Mathisen. Have a great evening. We`ll hope to see you right back here tomorrow night.


Nightly Business Report transcripts and video are available on-line post broadcast at 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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