Transcript: Nightly Business Report- October 23, 2015

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

rally as the worries of the past few months seem to have faded. Is the
stage set for a rally into year`s end? We have both sides of that

pilots issue a labor threat just as the busy holiday season fast

HERERA: Streaming sports. Will Yahoo (NASDAQ:YHOO)!`s experiment
with football this weekend give us a glimpse into the future?

All that and more tonight on NIGHTLY BUSINESS REPORT for Friday,
October 23rd.

MATHISEN: Good evening, everyone, and welcome.

So glad you could join us. Well, well, well. The pieces may be
falling into place. Stocks have been flying high in October. A reversal
from what came just a couple of months before. August, September.

S&P 500 now on track for its best month in four years. It has now
turned positive for the year. The NASDAQ closed today at a two-month high,
back above 5,000. And the Dow Jones industrial average notched a 2 1/2
percent gain just this week.

It seems like all those big worries that consume the market like
China, earnings, and the Federal Reserve, they don`t seem all that big
after all, at least for now. Today, the blue chip index rose 157 points to
17,646, NASDAQ gained triple 1, 111. Mostly on those strong tech earnings
we told you about last night. And the S&P 500 added a double deuce, 22.
As for the week, all of the major indexes saw gains of at least 2 percent.

And today`s rally started with a surprise — an announcement from the
Chinese Central Bank.

Eunice Yoon has the details from Beijing.


Central Bank cut interest rates by 25 basis points and reduced the reserve
requirement ratio at the banks by 50 basis points. On state radio, the
Chinese premier said that the government would continue to make reasonable
use of both interest rate cuts and triple R cuts in order to shore up the

Now, the timing of the move might have surprised the markets, but
there`s been a lot of speculation here in China the government was going to
make some sort of move around this time. There`s a big economic planning
conference that`s coming up next week, and the leadership is expected to
set an economic agenda for the next five years. There is a belief that the
government wanted to show that the economy is strong.

Ironically, though, this could have the opposite effect. This could
be an indicator that the leadership here is much more concerned about where
the economy is than what the numbers tell us. The GDP for the third
quarter came in at 6.9 percent. And there`s been increasing doubts that
the headline figures aren`t reflective of what`s actually happening on the

And so, this was seen as a very aggressive move of an interest rate
cut, as well as a triple R cut, could just continue to fuel those concerns
among investors that the real economic performance in China is
significantly lower than what`s being reported.

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


HERERA: China earnings and interest rates were big worries for the
market. Are they still? And if not, are stocks set to rise over the next
three to six months?

Bob Pavlik says yes, they`re headed higher. He`s with Boston Private
Wealth. Jim Paulsen says no. He`s with Wells Capital Management.

Good to have you with us, gentlemen. Welcome.


HERERA: I`m going to start, Jim, with you.


HERERA: You know, earnings in many cases came in better than
expected. We have accommodative central banks around the world. China
just cutting interest rates.

Why does that not underpin the market and forward its ability to
continue this rally mode?

PAULSEN: Well, it certainly has ended this correction, sue. There`s
no doubt about that. It feels pretty good. But I don`t think this
correction did much to extinguish some of the forces that put it in place
in the first case. In others, I think that we were dealing with a market
that was fairly highly valued, and tonight, we`re back at about the same
valuation we were at the market top.

It`s still pretty highly valued. It hasn`t dealt with the need to
reset interest rates. We got very close to doing that. The market was
starting to deal with the fact that we`re headed to higher rates and headed
to an exit of the Fed, which we have and we`ve still got that ahead of us.

It didn`t deal with the aging earnings cycle now in the seventh year
of the economic recovery. Earnings may grow, but they`re likely to grow
much slower going forward than they have in the past.

And I think in the United States, Sue, now that we`re closing in on
full employment, the stock market`s got to deal probably with a little
higher inflation and some cost push pressures that might challenge profit
margins. Most of those challenges I think are going to come back again and
re-challenge the stock market.

MATHISEN: All right, Bob. Jim has given you plenty to respond to.
Go ahead.

PAVLIK: I think the most recent correction shows you the value of
being able to keep an open mind and willing to change the — sort of the
makeup of your portfolio and not be able to sort of stick to the same thing
because I think if you continue to stick to the same thing, you`re going to
prove yourself to be wrong.

What the market is dealing with right now is a cheap money
environment. The market is not looking at economic news. It`s not looking
at earnings that have beaten very lowered expectations. The market is
going back into the risk on assets.

And that`s what`s going to continue to work because we got the Federal
Reserve basically on hold. They can`t raise interest rates with the U.S.
economy slowing. The ECB is looking like they`re going to put more
quantitative easing out there. China just did it. And so that fuels a
risk on bubble.

Now, Jim is right. There are a number of issues that still have to be
addressed. But that`s not the market`s concern right now. There`s issues
that Main Street faces but it`s not the market`s concern.

The market still has at least 8 percent to 10 percent left in it. I
think this year. And then we continue to go into next year. I think the
economic news continues to remain weak, keeps the Federal Reserve on hold.
The market pays attention to these earnings beats even though they`re
lowered. And it likes that and it stays fueled invested in stock.

HERERA: You know, Jim, what kind of market if indeed we aren`t going
to see this rally mode continue for the market, what type of performance
are you looking for from stocks into the end of the year, the beginning of
the New Year?

PAULSEN: Well, I think, Sue, that we may go back up and challenge the
old highs, which are only about a percent away now at 2,123 on the S&P 500,
something like that. I just don`t know if we have, as I said, a foundation
here, a valuation foundation to face the different challenges we face going
forward. And I don`t know if we`ll get a lot higher than that in the
United States.

One way I deal with this, Sue, I would go away from the United States
because I think they`re in an earlier part of their cycle. They`re not
worried about policy officials that may pull away and become hostile.
They`re all going to push up for the next few years. There are better
valuations abroad. That`s how I`d deal with this. I`d minimize my
exposure here and maximize it offshore.

MATHISEN: Let me ask you, Bob, to just sort of address what I think
is sort of the central argument that Jim is making. The S&P 500 right now
is basically flat for the year. NASDAQ is up a little bit more.

Those are not big gains, but people are concerned that the earnings
levels aren`t sufficiently strong and growing fast enough to support prices
where they are today. What has to happen for earnings — with earnings in
the fourth quarter and into the first and second quarter of next year for
stocks to get a further lift?

PAVLIK: I think the primary thing that this country needs is growth
in earnings. We need to see salaries and wages increase. I don`t think we
get it. I think this market is not trading on fundamentals. It`s based on
quantitative easing, and again, the risk on assets. I think Jimmy`s spot
on as far as the problems that remain with the overall economies around the
world here in the United States.

But again, there`s this divergence between what`s going on in the
economy and the overall stock market. Investors really want to pay
attention to what`s happening with the economy and earnings and looking for
growth, but it`s sort of the secondary to what`s really driving the market
here right now. The correction wasn`t based on a decline in earnings. It
was really just a rotation out of the risk on assets heading into
September. They surprised us by not raising interest rates. And you know,
here we are.

I think in order to get this economy moving forward, you do need an
interest rate hike because that will get banks ready to lend and ready to
move the money from their vaults back to the borrowers.

HERERA: All right. That`s the next thing the market has to deal
with, I guess. Gentlemen, thank you so much. Bob Pavlik with Boston
Private Wealth. Jim Paulson with Wells Capital Management. Have a great
weekend, guys.

MATHISEN: Dow component Procter & Gamble (NYSE:PG) reported a sharp
drop in quarterly sales, but earnings were better than expected thanks to
cost cutting. Executives at the world`s largest consumer products company
are optimistic they say about a return to growth in the current quarter.


JON MOELLER, PROCTOR & GAMBLE CEO: There was a big currency impact
but sales were a little bit weaker, we`re expecting them to accelerate, to
get back to organic sales growth in Q2 and to strengthen in the back half.


MATHISEN: The maker of Tide, Crest, and other household products is
shedding about 100 brands as part of its turnaround plan. Shares rose
almost 3 percent.

HERERA: A couple of food deals are reportedly in the works.
According to Reuters, TreeHouse Foods is in advance talks to acquire
Ralcorp, which is ConAgra`s private label business. The deal will likely
be valued at about $2.5 billion. Shares of TreeHouse Foods rose, while
ConAgra fell.

And Kellogg (NYSE:K) is reportedly in advance talks to buy snack food
company Diamond Foods (NASDAQ:DMND) for more than $1.5 billion. Diamond
foods rose 6 1/2 percent. Kellogg`s fell.

MATHISEN: The union representing UPS pilots voted to authorize a
strike at the company. More than 99 percent of those who voted said yes.
It`s an overwhelming number according to the union.

And as Morgan Brennan reports, the strike threat comes at a tricky
time of the year for the company, when shopping increasingly means


Independent Pilots Association, which flies cargo planes for UPS, has been
at odds with the company since 2011 over wages and retirement benefits.

been at this for four years. UPS has been engaged in stall and delay
tactics. And it`s really time to settle this. And the ball is really in
UPS`s court.

BRENNAN: But before you get too worried about shipping those holiday
gifts, this is a strike authorization. Meaning the union`s board can
formally request a release from federally mediated negotiations with UPS,
then stage the strike itself.

UNIDENTIFIED MALE: Is that the parking brake?

BRENNAN: Adding pressure, the International Brotherhood of Teamsters,
the union covering the quarter million drivers and package sorters at UPS,
has said it too will stand by the pilots. And not cross picket lines if a
strike does ensue.

Both sides, UPS and pilots, are scheduled to return to the bargaining
table early next month. For its part, UPS says it continues to negotiate,
quote, “in good faith” for a contract.

MIKE MANGEOT, UPS SPOKESPERSON: It`s important to understand that the
vote is purely symbolic, that these are very common in airline contract
negotiations, that talks actually continue to progress with negotiation
dates scheduled out for several months. And that our customers are in
great hands headed into a busy holiday season.

BRENNAN: UPS points out that its pilots are guaranteed at minimum
more than $255,000 per year. It maintains the typical UPS crew member
works roughly ten days per month, flying about half what a typical
passenger pilot flies.

But the union says it wants better safety practices as it relates to
fatigue and scheduling. All of this unfolding just as UPS is gearing up
for peak season, which analysts note needs to go smoothly after two tough

serious service issues. They blamed it on weather but it was really a
combination of weather and just a huge surge in volume.

Last year, they spent like drunken sailors to try and prevent that
service problem but they had two earnings misses in a row as a result. But
the bottom line is UPS cannot afford to have its customers nervous about
service going into the holidays and this needs to get settled.

BRENNAN: This just as rival FedEx (NYSE:FDX) has ratified a new
contract with its own pilots, meaning if some shippers are nervous about
these events, they might be tempted to take business elsewhere.

For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan in New York City.


HERERA: Still ahead — looking for some stocks to add to your
portfolio? Our market monitor has some names you might want to consider.


MATHISEN: A big day for big tech. Microsoft (NASDAQ:MSFT), Amazon
(NASDAQ:AMZN), and Google`s parent company Alphabet all soaring after
reporting strong quarterly results last night, as re reported to you.
Microsoft (NASDAQ:MSFT) up 10 percent. That made it easily the best-
performing stock on the Dow. Alphabet up more than 5 percent. Amazon
(NASDAQ:AMZN) gained 6.

And there are a few things all of these tech companies have in common.

Josh Lipton tells us what they`re doing right.


Bezos, Alphabet`s CEO Larry Page, and Microsoft`s chief Satya Nadella might
focus on different areas of the tech universe, but they have all figured
out how to please investors this quarter. One common theme across all
these tech giants: a new focus on transparency.

MARK MAHANEY, RBC CAPITAL MARKETS: Investors for some time have been
saying they need to understand these businesses better. And they`re many,
many years beyond their early stage, hyper growth, IPO days. So, the
companies have become more mature, the investing base has become more
mature, and they`ve met through the — they`ve met in the middle with
greater transparency.

LIPTON: Amazon (NASDAQ:AMZN), for example, now discloses the
performance of Amazon (NASDAQ:AMZN) web services, its powerful cloud
computing division, where revenue just jumped nearly 80 percent.

Google (NASDAQ:GOOG) reorganized under a new corporate name, Alphabet,
and will soon provide additional detail for Google (NASDAQ:GOOG) on the one
hand and all the other Alphabet businesses on the other hand.

On the conference call, CFO Ruth Porat talked about why the company
will report in this new way.

RUTH PORAT, ALPHABET CFO: By doing this, we expect that you will be
better able to understand how we manage the businesses, including the pace
and allocation of our investments. As Larry said in his CEO letter
announcing Alphabet, we are focused on rigorously managing capital
allocation and working to make sure each business is executing well.

LIPTON: As for Microsoft (NASDAQ:MSFT), the software company now
breaks out its performance into new divisions, allowing shareholders to
better track how effectively the company is executing on its plans to
capitalize on a mobile first, cloud first world.

A second theme, all three companies are moving as fast as they can to
capitalize on the $56 billion cloud services industry, though analysts say
it`s one company that`s leading the charge.

MAHANEY: It`s wide open in terms of potential participants in the
market. It`s not wide open, however, in terms of market leadership. That
market leadership has very clearly gone to one company and that`s Amazon

LIPTON: Investors are cheering these recent earnings reports, but
some of the biggest winners are the executives themselves. In just the
last 24 hours, for example, Jeff Bezos has enjoyed paper gains of well over
$3 billion.

For NIGHTLY BUSINESS REPORT, I`m Josh Lipton in San Francisco.


HERERA: Fellow tech company Yahoo (NASDAQ:YHOO)! is making a major
move into the most valuable TV content there is, football, of course. This
weekend, an NFL game will be streamed for the first time on Yahoo
(NASDAQ:YHOO)! sites and apps. And the NFL is looking to cash in on the
new digital revenue.

Julia Boorstin has more on this digital sports experiment.


morning`s game between the Buffalo Bills and the Jacksonville Jaguars on
Yahoo (NASDAQ:YHOO)! is a milestone. The first time an NFL game has been
live-streamed free as its primary distribution. It`s just the latest in a
slew of NFL digital deals, with Snapchat, Twitter, and YouTube. Plus, the
league is offering more live games on NFL mobile on Verizon (NYSE:VZ) and
more content on its app NFL Now.

BRIAN ROLAPP, NFL EVP MEDIA: We`re in the reach business. We`re in
the aggregation of audiences business. And there`s a tremendous amount of
audience going on on the Internet and connected devices, and we are focused
on capturing that.

BOORSTIN: Rolapp says he`ll measure the success of Sunday`s game
based on whether the stream is technically smooth, goes off without a hitch
all around the world, and whether it delivers viewers to advertisers. And
though most of the NFL`s rights are locked up through the 2020-2021 season,
Rolapp says he`s looking for more digital deals to help reach consumers
wherever they are.

ROLAPP: Television`s still the most effective way to distribute our
game packages. Having said, we will look at the Internet, whether it`s
with Thursday night football or some of these early windows we`re doing on
Sunday, we`ll look hard at the Internet as a potential distribution
platform going forward.

BOORSTIN: Sources tell me Yahoo (NASDAQ:YHOO)! spent nearly $20
million for the rights to air the game and promised a reported 3 1/2
million viewers to advertisers. Despite concerns raised by reports that
Yahoo (NASDAQ:YHOO)! had to cut ad prices from $200,000 per 30-second spot
to $100,000, the ads did sell out. And sources tell me that`s roughly in
line with the regular Sunday games, TV ad pricing.

ROLAPP: Now, all the sports leagues will be closely watching Sunday`s
game to see if day 2 should deliver their valuable games to consumers first
via digital. Working against the game is 9:30 a.m. Eastern, which means
few folks on the west coast will be watching and the Bills and the Jags
aren`t exactly having their best season.

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


MATHISEN: The appliance giant Whirlpool (NYSE:WHR) announcing better
than expected earnings and that is where we begin tonight`s “Market Focus”.

The appliance maker saw its profit rise this past quarter but lowered
its full-year guidance slightly. The trouble spots, Latin America, demand
there, and the strong dollar, which makes U.S. products more expensive
overseas. Shares of the company down almost 9 percent on that word to

And VF Corp., owner of popular brands like Wrangler, Vans, and who
doesn`t have a North Face, reporting softer sales — all families with kids
do — as it deals with lessening demand for work wear products.

The company saw softer sales in its outdoor brands which have
historically performed well for the company. VF also lowering its guidance
for the year. The news sent shares down nearly 13 percent today to $63.75.

HERERA: Royal Caribbean reporting a better than expected profit,
citing higher demand, lower fuel cost and more money spent by passengers on
board its ships. The world`s second largest cruise operator also raising
its full year guidance because it expects bookings to improve for the rest
of 2015. Shares of the cruise line up over 3 percent to $98.04.

A printer maker, Lexmark, says it`s exploring strategic alternatives
as it believes the current share price doesn`t reflect the value of the
brand. Shares getting a boost from the news, up over 7 percent to 35.26.

MATHISEN: And our market monitor for Friday says there are three
stocks you should consider buying right now. He`s Kevin Caron, Stifel
Private Client Group market strategist.

Last time Kevin was on in March. He recommended Abbott Labs, Emerson
Electric (NYSE:EMR), and Becton Dickinson (NYSE:BDX). All of them are down
a bit since then.

Let`s start there. Do you still like those? Would you be comfortable
buying them? They holds? They sells? What?

have been long-time holdings for us. And I think what the theme is among
all of them is that the global economy is relatively soft. This is why you
see the Europeans and now the Chinese looking to cut interest rates
disbursing growth and the strong dollars has hurt those companies
translating profits to U.S. dollars.

HERERA: Kevin, I like your stock picks. We start with stuff you
wear, stuff you eat, and then stuff you use.

So, let`s start first of all with T.J.Maxx. Stuff you wear.

CARON: Yes, sure. So, T.J.Maxx has a tremendous buying clout within
the industry. They have a terrific moat around their business. And
they`re very well-positioned I think going forward. I think we can see
some margin expansion there. I think that stock can generate some very
nice returns going into 2016. We`re looking for the stock to trade up into
the mid 80s from here.

HERERA: Home Goods, one of their properties, is to my wife what
Dick`s Sporting Goods (NYSE:DKS) is to me. She goes there all the time.

Let`s move on to General Mills (NYSE:GIS), Kevin. You`ve got a price
target of $61.

CARON: Yes, sure. General Mills (NYSE:GIS), essentially this is a
company that is a more conservative kind of name. It has been growing more
slowly. Consequently, we see maybe a 7 percent or 8 percent kind of move
in the stock, very healthy dividend yield over 3 percent. They`ve been
moving more towards healthy foods, including some gluten-free alternatives.
They`re doing very well in their yogurt business. They`ve recently spun
off, in the process of spinning off one of their businesses that should
provide a lot of cash flow to them.

So, I think the business is very well-positioned going forward.
Conservative investors should expect a high single digit type front-runner
that name.

HERERA: And, finally, Microsoft (NASDAQ:MSFT) — very good earnings
the stock was up about 10 percent today. You still like it, though. It
has more room to the up side?

CARON: Yes, I think this stock can trade into the — easily into the
high 50s from here. It did have a good move. Maybe it pulls back a little
bit from today but I think it is positioned very well. I think they`re
converting their business of revenue streams into a more consistent higher
margin kind of business. Businesses like the cloud I think are going to be
very successful for them.

And ultimately see the stock moving higher from here. I think today`s
move was very generous. But on any bit of a pullback or weakness I think
you can buy it. I think it has up side into the high 50s.

MATHISEN: Kevin, thanks very much. Turn off the lights before you
leave there, will you?

HERERA: There`s nobody —

MATHISEN: Totally empty, man. Working late for us.

Kevin Caron with Stifel.

CARON: Enjoy your weekend. Thank you.

HERERA: You too.

MATHISEN: Coming up, the fastest growing private companies. Meet the
entrepreneur who`s rung a business with a growth rate of — is this right?
— 100,000 percent.


HERERA: Imagine a company that has a growth rate of — are you ready?
— 100,000 percent. It`s a reality for the entrepreneur who landed the top
spot on “Inc” magazine`s list of fastest growing private companies.
Kate Rogers (NYSE:ROG) is at the Inc. 5,000 Conference in Orlando and
introduces us to some entrepreneurs on that list and shares the secrets to
their success.


based startup Tatcha runs a line of luxury cosmetics inspired by the beauty
rituals of Geisha culture. While most of today`s startup are raising
capital and gaining notoriety at the speed of light based on new
technology, Tatcha has turned into a multimillion dollar brand relying on
Japanese history.

With 2014 revenues at $12 million, Tatcha ranked 21 on the “Inc.”
magazine`s 2015 Inc. 5,000 list of the fastest growth private companies in
America. Her three-year growth rate was almost 11,000 percent.

VICKY TSAI, TATCHA FOUNDER: In the American beauty industries,
particularly skin care, we have long believed that the answer`s in the
future. It`s going to be the next peptide. It`s going to be the next high
complex molecule that is going save our skin. But the fact is that women
have wanted to look beautiful and have healthy radiant skin since heaven
knows when, probably since we were hunters and gathers. So, we think old
school is new school.

ROGERS: Whether it`s new technology or old tradition, these small
businesses are growing fast. Collectively, the companies on the list
generated $203 billion in revenue in 2014 and over the past three years,
their median growth rate has been more than 135 percent and they`ve created
more than 600,000 new jobs.

Single mom Melissa Kieling`s PackIt based in Westlake Village,
California, is on track to do just less than $20 million in sales this
year. Her lunchboxes have gel-lined walls that can be frozen and can
actually cool food by about 20 degrees in the first hour. She got the idea
when her own kids` lunches wouldn`t stay cold. Now, she`s selling in Bed,
Bath & Beyond, Target (NYSE:TGT), Whole Foods and more.

MELISSA KIELING, PACKIT FOUNDER: I didn`t really set out to be
determined to be an entrepreneur. I had an idea that I thought was a good
idea, it was something that I needed in my life, a better way to pack
lunches for my kids. And I was just so passionate about seeing that idea
and that concept go to market because I knew I needed it and thought others
would too.

ROGERS: David Glickman`s Ultra Mobile took the top spot this year. A
carrier that combines calling cards, free global calls, data and text all
rolled into one. The company grew more than 100,000 percent in the past
three years.

DAVID GLICKMAN, ULTRA MOBILE CEO: We basically offer a product that
gives the store a lot of money for carrying it and selling it as well as
giving the consumer tremendous value. We have the thinnest margin and we
make it up in huge, huge volumes, which is why growth has been our
objective from day one and without growing, we wouldn`t be surviving.

ROGERS: The success of the businesses at Inc. 5,000 proves America`s
spirit of entrepreneurship is alive, well, and growing fast.

For NIGHTLY BUSINESS REPORT, in Orlando, Florida, I`m Kate Rogers


HERERA: I have a PackIt sitting on my desk.

MATHISEN: One of those things. It keeps things cold.

HERERA: It keeps things cold. It does. I bring my lunch in it every

MATHISEN: All right. Good.

HERERA: Now you know.


HERERA: That`ll do it for NIGHTLY BUSINESS REPORT. I`m Sue Herera.
Thanks for joining us.

MATHISEN: And thanks from me as well. I`m Tyler Mathisen. Have a
great weekend, everybody. We hope to see you back here on Monday.


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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