Transcript: Nightly Business Report – September 29, 2015

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

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Four horsemen of the
fourth quarter. With the ugly third quarter almost done, there are four
things investors need to watch that could make or break the year for
stocks.

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Up, up and away. As
home prices rise, developers are hoping big sales come in small packages.

HERERA: Reinventing the Strip. What gaming industries are doing to
lure millennials and turn around the rough year.

All that and more tonight on NIGHTLY BUSINESS REPORT for Tuesday,
September 29.

MATHISEN: Good evening, everyone, and welcome.

Just one day to go before the end of the month. And September sure
hasn`t been pretty for investors. All the major indexes, equities that is,
on track for declines and once the book closes on September, it also closes
on the third quarter, which could be the worst quarter for stocks in years.

But now, attention turns to the fourth when football games and
investment years are won or lost. And this year`s fourth quarter has at
least four challenges that will determine whether 2015 turns out to be a
winner for investors like you or a loser.

(BEGIN VIDEOTAPE)

MATHISEN: Challenge number one: China and the global economy. The
world as Thomas Friedman wrote is flat, interconnected. That`s one of the
key lessons of 2015.

When China sneezes, the world catches a cold and China`s slowing
economy no one knows by exactly how much has spelled trouble for
commodities, oil and the metals most notably. It`s also meant harder times
for companies that export into the world`s second largest economy,
companies like Caterpillar (NYSE:CAT) and the automakers, including the
besieged Volkswagen. China`s stock market nosedived albeit after steep
run-ups. Billions in wealth evaporated.

So, what`s next for China and what will it mean for investors the
world over?

Challenge number two: U.S. corporate profits. How will they stack up
for the third quarter when companies start reporting about ten days from
now?

FactSet predicts S&P profits could decline 4 percent or more. The
bright areas like consumer discretionary and financials will be more than
offset by declines in energy where profits could fall by two-thirds from
just a year ago. It`s tough for stocks to make headway when corporate
profits stall.

JEREMY SIEGEL, WHARTON PROFESSOR: The big picture is we are in an
earnings recessions. I think it`s these continual hits downtown grade in
earnings that is just weighing on this market.

MATHISEN: Challenge number three: Congress and the White House.
Speaker Boehner`s resignation may make a government shutdown less likely
this week.

REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: I spend every day
trying to do the right things for the right reasons. I`m not going to be
any different tomorrow than today. I`m not worried at all.

MATHISEN: But Boehner will be gone come November. What then? What
happens in December when the government`s borrowing ability dries up unless
the debt ceiling is raised?

Americans seem to like divided government. Dysfunctional government?
Not so much.

Finally, challenge number four: the central banks. Will easier money
from the central bankers in Europe, Japan and China help those economies
stabilize or even expand?

And when will the Fed move? Janet Yellen and others say a rate hike
will probably come this year. But if a rate hike finally does come, how
will the markets react?

Four big unknowns, four big challenges as the fourth quarter kicks
off.

(END VIDEOTAPE)

HERERA: And Brian Jacobsen joins us now to talk more about what lies
ahead for the market`s next quarter. He`s portfolio strategist at Wells
Fargo (NYSE:WFC) Funds.

Nice to see again. Welcome back, Brian.

So, look into —

BRIAN JACOBSEN, WELLS FARGO FUNDS: Thanks for having me.

HERERA: Look into the fourth quarter — is it going to be better?
Start out with a blanket kind of statement here. Is it going to be better
than the quarter we`re just ending?

JACOBSEN: Well, I really don`t see how it could be much worst than
the quarter that we`re ending. As you pointed out, there were a lot of
things that were sort of weighing on the markets, concerns about China,
concerns about corporate profits, concerns about commodity prices. But the
fourth quarter I actually do think is going to be better not just because
it can`t get much worse but also because at third quarter the fundamentals
weren`t all that bad. There are a lot of concerns about the outlook for
growth especially coming from China.

However, I believe a lot of those concerns are somewhat overblown.
Their manufacturing sector has been slowing. But what isn`t often talked
about is how the service sector, which is a much bigger part of their
economy, is actually growing fairly decently.

So, I think that`s actually the concerns about China as those concerns
may be abate a little bit, we could have this headwind get a little gentler
for us going forward.

MATHISEN: We identified four challenges, China, corporate profits,
Congress, and the central banks.

Of those four, which is the one you will be watching most closely in
the fourth quarter?

JACOBSEN: Most immediately I`m going to be looking at the data coming
out of China, mainly because I think some — a lot of investors are fixated
on what`s going to happen there. Are they going to be able to navigate the
slowdown in their growth rate going from 10 percent a few years ago to 7
percent, maybe 6 percent going forward?

Also in October, we`re going to be seeing the results of the fifth
plenum of China, the communist party will have the fifth plenum where
hopefully they`ll lay out a road map what sort of further market reforms
they will be implementing.

So, I think it`s actually going to be a very pivotal month and a lot
of it will be focused on China. But we also have corporate profits, as you
point out, that`s coming up here soon. And right now, expectations are
very low for those corporate profit growths and I think low expectations
are actually good in terms of being able to beat those.

HERERA: Central banks, the U.S. Fed, we hear from several members of
the Fed at different times saying they are on track to raise rates sometime
there year. But that would put them at odds with the majority of central
banks across the world. Do you think that they will raise rates before the
end of the year and what kind of headwind might that be in the fourth
quarter?

JACOBSEN: I do think that the Fed will raise rates at some point this
year. I actually think that the maybe the October meeting, October 27th
and October 28th, is on the table for a rate hike. It`s all depending upon
the economic and financial conditions going into that meeting.

So, if we see some better data coming out of China, if the corporate
profits may be earnings didn`t decline by 4 percent, if it was closer to 1
percent or flat which is what I`m expecting, I think the Fed could have a
good footing for actually hiking rates. The key isn`t necessarily whether
or not the Fed hikes. It`s, why do they hike? If it`s hiking because they
think that the economy can handle it and inflation is turning up, the
markets could actually take that as a very positive signal.

HERERA: All right. Brian, we`ll leave it there. Thank you so much,
Brian Jacobsen with Wells Fargo (NYSE:WFC) Funds.

MATHISEN: And on Wall Street today, stocks meandered between gains
and losses as investors looked ahead to Friday`s employment report
following yesterday`s stiff declines. The Dow Jones Industrials, well,
they rose 47 points to 16,049. NASDAQ dropped 26, weighed down by a
decline in Apple (NASDAQ:AAPL). And the S&P 500 gained two points.

HERERA: Consumers remain confident in September despite all the
volatility. The conference board said its index of consumer attitudes rose
to the highest level since January. Lower gasoline prices were part of the
reason for the rise in optimism.

MATHISEN: Fiat Chrysler underreported highway deaths, this according
to the National Highway Traffic Safety Administration, which said the
automaker failed to report some fatalities and injuries required by law.

Fiat Chrysler says it is cooperating with regulators.

HERERA: The Senate is expected to vote at some point tonight on a
bill that would keep the government funded at least temporarily. And while
it`s expected to pass, the deadline to get it all done is tomorrow at
midnight.

Eamon Javers is in Washington for us tonight.

And, Eamon, the temporary spending bill would keep the government open
until December 11th — but then what happens?

EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, it`s
anybody`s guess, Sue. I mean, we`ve got a really weird situation in the
House of Representatives where there`s a total leadership vacuum after
Speaker of the House John Boehner said he`s resigning from that position.
So, they`ll kick the can down the road here until December 11th. We expect
that will pass tomorrow. So, you`ll look at a government shutdown
potentially then and there will be a new leader in the House of
Representatives and a very fractious Republican conference that`s looking
to pick some fights and not looking to cut some deals with the Obama
administration.

MATHISEN: It`s not merely the government shutdown that is hanging
over the ledge here as Speaker Boehner wraps up his tenure. What else
might he get done? There`s the Ex-Im Bank. There`s a highway bill.
There`s a lot of stuff out there.

JAVERS: Yes, there`s also the debt ceiling package — don`t forget
about that one, so important for financial markets as we go through the
fall. That`s going to expire sometime in November, according to the
Treasury. So, we`ll have to watch and see what Speaker Boehner wants to do
here.

There is a school of thought he might want to clean the barn as he`s
put it, and get a lot of these things done before he leaves as speaker at
the end of October. The question though is, does he even have the votes to
do that? Could he pull that off?

He`s been playing it very close to the vest. He simply says he won`t
do anything differently than he would have done it otherwise now that he`s
announced his resignation.

HERERA: All right. Eamon, thank you. Eamon Javers in Washington.

JAVERS: You bet.

MATHISEN: Still ahead, why developers are thinking small to get the
renter nation generation back into buying.

(MUSIC)

HERERA: Home prices continue to rise. The latest report from S&P
Case-Shiller reported a nearly 5 percent increase nationally in July from a
year ago. The index has risen at a 4 percent or higher annual rate since
September of 2012, and that`s a rate of growth that`s much higher than
inflation.

MATHISEN: And it is those rising prices that are keeping many
millennials from buying a home especially in urban areas where they want to
live. But now that millennials are aging out of college and into marriage
and parenthood, developers are coming up with new ways to get them back
into buying, very small ways.

Diana Olick reports.

(BEGIN VIDEOTAPE)

LAINA LEE: This is really simple. Pull this —

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: And the whole
thing comes down.

LEE: Yes.

This is a picture frame that converts into a dining table.

OLICK: Welcome home to your 372 square foot home that is.

LEE: These are magnets.

OLICK: The eating space is small but the whole idea is that the condo
doesn`t eat up your home buying budget. This unit sells for $275,000,
about half the neighborhood`s medium price. That is how developers are
targeting millennials who until now have been the renter nation generation.

LEE: Definitely first time home buyers. So, about 80 percent of all
of our buyers including our one-bedrooms have all been first time home
buyers.

OLICK: The studios may be small but in the heart of a trendy pricey
D.C. neighborhood, where most young people can only afford to rent.

CHRISTOPHER BALLARD: We`re definitely getting a consumer that`s
prices out of the market. You know, they look at older resales, and now
they get to come and look at something that`s brand-new. So that`s a great
difference when you`re comparing a 1970s build, too tight pipe older
condominium with something that`s brand-new with all the fit and finish.

OLICK: The building does have this communal rooftop deck with
spectacular downtown views. It does not, however, have some of the fancier
amenities. No pool, no fitness center, but no sky high condo fees either.
Everything here is smaller.

BALLARD: We`re certainly seeing the average unit size of the last
five years has fallen from a plan standpoint by about 13 percent. So
you`re seeing a drive toward more efficient units, smaller units, less
hallways, less wasted space. Spend a lot of time in the design process on
efficiency.

OLICK: The building is about 70 percent sold even before the grand
opening. A big sign that a big cohort is willing to come back to buying,
just not in a big way.

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

(END VIDEOTAPE)

MATHISEN: And to learn more about what developers are doing to get
millennials back into home buying, read Diana story on our Web site,
NBR.com.

HERERA: Las Vegas is also trying to lure millennials who don`t play
traditional games like slots. So, executives are reinventing the Strip in
an effort to turn around what has been a rough year for the gaming
industry.

Jane Wells reports tonight from Sin City.

(BEGIN VIDEOTAPE)

JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT: It`s not your
prerecession Las Vegas anymore. Sin City these days is about making slot
machines more like video games.

It`s about things that have nothing to do with gambling like building
a massive outdoor arena. It`s more about the rooms than the casinos. All
part of sharper, smarter management as Las Vegas got back up from the
recession`s knockout punch.

JIM MURREN, MGM RESORTS CHAIRMAN & CEO: We`re doing better. Thank
God.

WELLS: Still, it`s not quite the glory days. Gaming revenues overall
on the Strip are down 2 percent this year. There are fewer high rollers
from Asia as a corruption crackdown in China is felt from here to Macau.

MURREN: Really struggling in Macau. Our revenues are down 30
percent, 40 percent. The whole market has been under a lot of duress.

WELLS: MGM`s CEO Jim Murren thinks Macau will bottom by the end of
this year, and start turning around in 2016 as new properties open. In Las
Vegas, the company is busy building a $400 million 20,000 feet stadium with
AEG as it continues looking for revenue outside of gaming.

As for gambling, gaming equipment makers admit they`re struggling to
attract millennials to play slot machines. So, Nevada has approved new
machines which mix chance with skill, like video games. And casinos want a
piece of daily fantasy sports leagues currently not regulated like
gambling.

GEOFF FREEMAN, AMERICAN GAMING ASSOCIATION: The concern we have right
now is many regulators, many policymakers are saying that this is a gray
area. Well, we`re trying to make it black or white. Casinos can either
get involved on this or they can`t.

WELLS: Meantime investment in casinos has taken a pause. Planned
developments have really slowed down their rollout. Some buildings are
still vacant, but not everywhere.

The Tropicana was just bought out of bankruptcy by one of the gaming
companies whose shares are up this year, Penn National Gaming (NASDAQ:PENN)

TIM WILMOTT, PENN NATIONAL GAMING: We only paid $360 million for it,
which we —

WELLS: Only.

WILMOTT: — only and we love the location.

WELLS: CEO Tim Wilmott says Penn plans to spend a couple hundred
million dollars to improve the Tropicana and provide a Strip destination
for its loyalty members across the country.

And in another fire sale, the Blackstone Group bought the Cosmopolitan
from Deutsche Bank for half off.

BILL MCBEATH, COSMOPOLITAN: We posted our first net income ever in
the history of the operation in the second quarter. So, yes, I mean,
that`s the goal is to make money.

WELLS: And if management is smart, the house always wins eventually.

For NIGHTLY BUSINESS REPORT, Jane Wells, Las Vegas.

(END VIDEOTAPE)

MATHISEN: More layoffs in the oil patch and that`s where we begin
tonight`s “Market Focus”.

Chesapeake Energy (NYSE:CHK) will cut about 15 percent of its
workforce which it`s blaming on slumping oil and gas prices. The company
will take a one-time charge of more than $50 million. Shares were down in
initial after hours trading. During the regular session, the stock was up
1 percent to $6.79.

Ralph Lauren is stepping down from his post as CEO. A former
president at Old Navy, go figure, will be taking his place. Lauren has
been the CEO and lead designer since he founded the firm nearly 50 years
ago. Shares popped in initial after hours trading. At the close, the
stock was off slightly to $104.05.

And AT&T (NYSE:T) may take a $1.1 billion charge. According to a
regulatory filing, a change in exchange rates could wipe more than $1
billion off the value of the company`s newly acquired DirecTV assets in
Venezuela. Shares rose slightly today to $32.07.

HERERA: Japan Tobacco is going to pay $5 billion to acquire the
rights to Reynolds American`s Natural American Spirits brand outside the
U.S. Reynolds brands include Camel and Newport (NASDAQ:NEWP), it will
still have the rights to Natural American Spirit here in the U.S. Shares
were up slightly to $43.47.

Positive late-stage drug study results lifted shares of Eli Lilly
(NYSE:LLY). The company`s treatment that it`s developing with a firm
called Incyte (NASDAQ:INCY) for rheumatoid arthritis was more effective
than a commonly prescribed medication. Shares rose slightly to $80.28.

And Bank of America (NYSE:BAC) is expected to announce layoffs,
according to “The Wall Street Journal”. A couple of hundred people in an
effort to cut costs. Shares were off a fraction to $15.35.

MATHISEN: Well, Sue, the big business of sleep may get even bigger.
A new study shows getting a solid night`s rest can not only help your
memory but can also boost your immune system, keeping you healthy.

Meg Tirrell takes a look at the value of getting extra Zs.

(BEGIN VIDEOTAPE)

MEG TIRRELL, NIGHTLY BUSINESS REPORT CORRESPONDENT: Scientists have
known for a century that sleep facilitates our memories. Research
published today suggests it`s similarly helping our immune systems
remember, as well. Researchers in Germany and the Netherlands compared the
way our brains are understood to store memories with the way our immune
system recognizes invaders.

It all comes down to slow wave sleep, that time in our non-REM cycle
that`s the deepest slumber. It`s during that time an important transfer
occurs from our memories from initial to long-term storage. Similarly,
they say, it`s then that our immune systems retain information necessary to
recognize invaders when they return through increases in what are known as
persisting T-cells.

The work adds to a growing body signifying how crucial sleep is to our
health and happiness. But the centers for disease control and prevention
says so many people get inefficient sleep, it`s a public health problem.

FRED HASSAN: A very large percent of society either doesn`t get eight
hours or seven hours that they need, or they are unhappy with the amount of
sleep they`re getting. And even more importantly, the quality of the sleep
is not that great.

TIRRELL: An estimated 50 million to 70 million American adults have a
sleep or wakefulness disorder. And almost a third report sleeping less
than six hours a night, according to the CDC.

HASSAN: If you get two or three hours of very high quality sleep,
that can then offset the fact that you may not have gotten your full eight
hours.

TIRRELL: More than 55 million prescriptions were written for sleep
drugs last year, according to industry researcher IMS Health, including for
medicines Lunesta and Ambien. The total market topped $1 billion in
revenue.

As we enter cold season, today`s research appears to fortify there`s
nothing better than a good night`s sleep.

For NIGHTLY BUSINESS REPORT, I`m Meg Tirrell.

(END VIDEOTAPE)

HERERA: Coming up, why entrepreneurs are flocking to a city far from
Silicon Valley.

(MUSIC)

MATHISEN: And here`s what to watch tomorrow. We`ll get a read on the
labor market ahead of Friday`s big employment report. ADP`s employment is
out on Wednesday. Fed Chair Janet Yellen speaks tomorrow afternoon and a
report on weekly mortgage applications. And that is what to watch
Wednesday.

HERERA: When you think of Nashville, you probably think of country
music and good barbecue. But soon, you might think of startups and
entrepreneurs.

Kate Rogers (NYSE:ROG) reports from this southern city in Tennessee.

(BEGIN VIDEOTAPE)

KATE ROGERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Nashville is
known for its music thriving scene which contributes some $10 billion to
the region each year. But a different industry quadruples that stat,
health care contributing $39 billion to the regional economy in 2014,
according to the Nashville Health Care Council. Programs like the
Jumpstart Foundry are helping Nashville`s health care startups take their
ideas to the next level. They`ve graduated 48 companies in the past six
years raising a total of $31 million.

VIC GATTO, JUMPSTART FOUNDRY: The great thing about the health care
industry is they`re going through dramatic change where there`s new ways to
reimburse, new ways to pay doctors, new ways to manage populations, new
partnerships that are being formed. And that`s all very scary and lots of
change going on in the industry. Huge businesses are having to rethink the
way they run their business. But that`s exciting for the entrepreneur,
exciting for the innovators.

ROGERS: And graduates like InvisionHeart which created an ECG machine
that fits in the palm of your hand are trying to disrupt the health care
industry in a time of major change.

JOSH NICKOLS, INVISIONHEART: Nashville is a great city for launching
a health care company. You know, we`re at the crossroads of where there`s
innovation and health care services and by being in this place, we can take
our technology and test the waters.

ROGERS: But health care is just one piece of a thriving startup scene
in Nashville, which is home to the Nashville Entrepreneur Center where we
are right now. Now, this is one of nine regional hubs across the state of
Tennessee dedicated to giving would be startups and entrepreneurs access to
resources including capital and mentorship opportunities.

STUART MCWHORTER: The only way to attract good ideas and
entrepreneurs is to have really good mentors, people that have been in
their shoes before that have started businesses. They understood how
difficult it really was to or is to start a business. And really walk with
those entrepreneurs along the way.

ROGERS: But Nashville wouldn`t be complete without its own music
startup success story. Artisan created a product called the Instrument One
that turns basic musical gestures into any sound, including a guitar or
drum. The user wants to create when hooked up to an iPhone, iPad or
computer. They`re in the top 100 most funded projects on Kickstarter,
raising over a million dollars.

JACOB GORDON: Nashville`s become a perfect storm. There`s the
interest in startup culture and tech-based innovation is unprecedented.
The tools that are available to people mean that they can start companies
in a lot more different places and environments than they otherwise could.
You no longer need to be in Silicon Valley.

ROGERS: And that setting is music to these entrepreneurs` ears.

For NIGHTLY BUSINESS REPORT, in Nashville, Tennessee, I`m Kate Rogers
(NYSE:ROG).

(END VIDEOTAPE)

HERERA: Very cool.

MATHISEN: That is a cool device.

HERERA: It really is.

To learn more about why entrepreneurs are flocking to Nashville, head
to our Web site, NBR.com.

MATHISEN: Well, the calendar may say September for another day, but
some of the nation`s biggest retailers are acting like it`s December. From
Walmart to Toys “R” Us, national stores already rolling out holiday offers.

And as Courtney Reagan reports, they`re going all out to make sure
they get a piece of your Christmas cash.

(BEGIN VIDEOTAPE)

COURTNEY REAGAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: It`s less
than three months until Christmas. To some, that may sound like an
eternity, but for others, shopping time is already running short. Every
year, the competition gets hotter and hotter. And this year is no
exception, as retailers race to put out holiday programs earlier and
earlier, and hopes of grabbing shopper`s dollars before rivals.

PAUL SWINAND, MORNINGSTAR: it`s always a tough competitive
environment, but I think another interesting point is because retailers got
so promotional in Black Friday in the last four or five years, it`s
diminished the importance of the holiday. They`ve extended promotions
throughout the whole holiday season and put them all online so now
consumers don`t feel the pressure to be in the store 6:00 a.m. Friday,
Black Friday morning.

REAGAN: Walmart has already been running its layaway program for a
month and has released its hot toys as chosen by kids list, with many Star
Wars toys topping the list.

Kmart has already put out its now yearly tonguing in cheek layaway
commercial.

UNIDENTIFIED FEMALE: Ridiculous to take your gifts home today.
Avoiding the holiday rush with no money down leasing

REAGAN: And Toys “R” Us has lowered its free shipping threshold to
$19, citing the upcoming holiday season as a reason for the move.

Despite the ever earlier holiday program releases, the first forecast
for holiday sales are among the weakest in years. Retail consultancy Alex
Partners forecasts holiday sales to increase but at a level below the five-
year average and a level that could fall below the lowest growth rate since
the Great Recession.

While there are a lot of positive factors influencing consumers
currently, there are also many negatives. The job market is steadier, but
wage growth is stagnant. Home values are rebounding, but expenses like
health care and education are rising, too.

Gas prices are low, but depressed oil prices are partly a result of
slowing global growth.

Deloitte`s retail practice leader Rod Sides says the balance
ultimately tips with how it makes consumer cans feel when they look at
their economic portfolio. Sides says Deloitte`s weak forecast is causing
his clients, retailers, to take down their expectations as well.

Fewer are predicting a terrible Christmas for retail, but it could be
more ho, ho, hum.

For NIGHTLY BUSINESS REPORT, I`m Courtney Reagan.

(END VIDEOTAPE)

HERERA: I`m not ready.

MATHISEN: I`m not ready. I`m not ready for Christmas or winter.

HERERA: Or winter, exactly.

That will do it for us for NIGHTLY BUSINESS REPORT tonight. I`m Sue
Herera.

MATHISEN: And I`m Tyler Mathisen, thanks from me, as well and have a
great evening everybody. We hope to 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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