TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Nowhere to hide. An
intense, late-day sell-off sends the three major indexes into the
correction zone, down 10 percent or more from their recent highs. Not a
single market sector is up for the year so far. So, where can you find
SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Switching cities. The Rams
move West, General Electric (NYSE:GE) goes North. The big money behind two
MATHISEN: In it to win it. The record jackpot grips the nation, but why
do we play even when we know we won`t win?
All that and more tonight on NIGHTLY BUSINESS REPORT for Wednesday, January
HERERA: Good evening, everyone, and welcome.
The selling was intense. The financial pain that has dominated the market
so far in 2016 was back again today. The slide steepened late this
afternoon, despite earlier gains, gains that the market just really
couldn`t hold on to.
All three major indices falling 2 percent or more, now in correction
territory. The Dow Jones industrial average plunged 364 points to 16,151.
The NASDAQ dropped 159, nearly 3.5 percent, and the S&P 500 lost 48,
trading below 1,900 for the first time since September.
And the selling occurred despite a modest rise in the price of domestic
crude, very modest. For the year, the blue chip index is off about 7
percent, the NASDAQ down more than 9 percent, and the S&P 500 is also off 7
Bob Pisani explains why this market just can`t seem to catch a break.
BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: It was another day
where traders just wanted to take down their exposure to the overall
market. Everything was down 2 percent to 3 percent from auto stocks to
financials to health care to technology stocks, virtually everything.
There`s a distressing similar pattern in the trading activity in the last
few days. Stocks invariably start to the upside, but then traders sell
directly into the rallies. It doesn`t help that oil has been very volatile
recently. But this sell into rally thing is relatively new. Traders seem
to be in no mood to pick up any bargains at all.
Oil is a symptom, though, of a larger issue going on. There is concern
that global business activity is slowing down. You can see this in the
earnings reports. Recently, we`ve had 23 companies report fourth-quarter
earnings, including big consumer names like Nike (NYSE:NKE) and Bed Bath &
Beyond (NASDAQ:BBBY) and General Mills (NYSE:GIS). Nineteen of the 23 have
missed revenue expectations.
That`s a sign that business conditions are slowing down.
For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock Exchange.
MATHISEN: The Federal Reserve says the economy expanded at a modest pace
across most of the country in December. The Central Bank`s Beige Book
survey of economic conditions showed an increase in consumer spending and a
tightening labor market. Growth reported in ten of the Fed`s twelve
regional districts. Federal Reserve policymakers next meet in about two
HERERA: Ahead of that Fed meeting, Boston Fed President Eric Rosengren
said estimates for economic growth are falling, and he`s urging caution on
further rate hikes. Speaking to greater Boston Chamber of Commerce, he
said that despite significant progress made over the past year, current
events have to be taken into account.
(BEGIN VIDEO CLIP)
ERIC ROSENGREN, FEDERAL RESERVE BANK OF BOSTON PRES.: It`s really
important that despite some of the weakness that we have been seeing over
the last week or two, monetary policy shouldn`t overreact to the short-term
fluctuations in financial markets. That being said, we have to be aware
that there are downside risks to our forecast, and we have to take quite
seriously what`s happening elsewhere in the world.
(END VIDEO CLIP)
HERERA: Mr. Rosengren added that the future path of rate hikes will be
highly dependent on the Fed`s evolving outlook.
MATHISEN: Well, as stocks sell off, some of the nation`s biggest banks are
getting ready to report their earnings. Tomorrow, JPMorgan (NYSE:JPM).
Friday, we hear from Citi. And Morgan Stanley (NYSE:MS) and Bank of
America (NYSE:BAC) are due out early next week.
But as Kayla Tausche reports, there may not be much to like in those
KAYLA TAUSCHE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Banks were supposed
to be one of the bright spots in the market, but they`re going to need to
get through what looks to be a dismal fourth quarter of earnings before
they turn around. Analysts are expecting ever so slight revenue growth of
around 2 percent but a sharper rise in profits, thanks to massive cost-
cutting that is still ongoing. The street actually sees Bank of America
(NYSE:BAC) improving the most over last year but sees Wells Fargo`s
business model as being able to best stand up to recent headwinds.
Some of those headwinds are too big to ignore. First, the steep decline in
oil prices. Banks collectively have more than $100 billion of debt related
to the energy sector. Now, most of it is high grade, but they`re having to
set aside more money in case of potential losses.
Second, higher interest rates will mean the banks earn slightly more money
on some loans they`re underwriting, but there`s a worry that credit quality
has peaked. The number of companies and consumers defaulting on their
debts is at or near an all-time low. Experts say it can only go up from
here, and that`s a problem, as debt is getting more expensive.
In the past, volatile markets like energy and interest rates would have
spurred more trading activity, but executives like JPMorgan (NYSE:JPM) CFO
Marianne Lake have said a seasonal slump in trading activity that has
plagued recent years will also be present in the fourth quarter. We will
hear from JPMorgan (NYSE:JPM), the first out of the gate for the major Wall
For NIGHTLY BUSINESS REPORT, I`m Kayla Tausche in New York.
HERERA: A bright spot today was General Motors (NYSE:GM). The automaker
raised its earnings guidance for 2016 while also dramatically increasing
its stock buyback program and its quarterly dividend. The upbeat outlook
follows what many think will be one of the most profitable years ever in
North America for GM.
(BEGIN VIDEO CLIP)
MARY BARRA, GENERAL MOTORS CO. CHAIRMAN AND CEO: Our overall financial
outlook for 2016 is based on a strong product launch cadence, growth in
adjacent businesses, modest global industry growth and aggressive efforts
to drive efficiencies.
(END VIDEO CLIP)
HERERA: The improved outlook comes two years after Mary Barra took over as
CEO. Shares of General Motors (NYSE:GM) rose today in the overall down
MATHISEN: Well, from one general to another, General Electric (NYSE:GE), a
longtime resident of Fairfield, Connecticut, and one of the nation`s
largest businesses, of course, will move its headquarters to Boston and the
city`s fast-growing south Boston Waterfront. State and local government
officials offered the conglomerate $145 million in incentives to make the
move, which will likely have little effect on the majority of its global
Following the announcement, Connecticut`s governor expressed his
(BEGIN VIDEO CLIP)
GOV. DANNEL MALLOY (D), CONNECTICUT: Of course, I`m disappointed. I know
many in Connecticut share the disappointment and frustration. Today`s
decision is a clear signal that Connecticut must continue to adapt a
changing business climate, actually, a subject that the president touched
on extensively in his speech last night. So, I say continue, because
Connecticut is already in the process of changing dramatically.
(END VIDEO CLIP)
MATHISEN: According to CNBC`s top states for business study, Massachusetts
ranked 20th overall. Connecticut finished 33rd last year.
HERERA: Shares of MetLife (NYSE:MET) also bucked the broader market trend
and finished higher, this on news we reported to you last night that that
insurance company is looking to sell its U.S. retail business, and that is
leading many to wonder whether others will follow suit.
Recall that activist investor Carl Icahn is pushing AIG to break up in
large part because of the government`s plans to oversee the insurance
industry`s big three.
Mary Thompson tells us whether getting smaller will become a big trend in
the insurance industry.
MARY THOMPSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Already fighting the
government in court, MetLife (NYSE:MET) is seeking other ways to remove its
businesses from the Federal Reserve`s oversight.
JAY GELB, BARCLAYS: At the end of the day, I think it`s a good move for
THOMPSON: Like property and casualty giant AIG and rival Prudential,
regulators topped MetLife (NYSE:MET) as a nonbank systematically important
financial institution, just because of its size and complexity. The
increased oversight a key reason it`s now planning on selling or spinning
off its key domestic variable annuity business.
GELB: By separating that business, it reduces the potential for increased
capital requirements on it.
THOMPSON: MetLife (NYSE:MET) doesn`t expect the sale to change regulators`
minds about its remaining businesses being systematically important, though
the news did send MetLife (NYSE:MET) stock higher. In the wake of the
financial crisis, regulators increasing oversight of large nonbank firms
that are seen as posing a threat to the U.S. economy in the event of
The additional capital and reporting requirements expected to be costly for
these big firms. It`s one reason activist investor Carl Icahn wants AIG
broken up. He believes a smaller firm might be removed from Fed oversight,
eliminating those costs and potentially unlocking value at the insurer, a
move analyst Jay Gelb sees AIG continuing to resist.
GELB: My sense is that AIG`s highly unlikely to split the businesses for a
variety of reasons, but now with MetLife (NYSE:MET) saying they will
undertake a split, that puts pressure on AIG to justify why they would keep
the company together.
THOMPSON: It might also put similar pressure on big banks. They`ve
resisted breaking apart, despite the additional regulatory burdens imposed
on them after the financial crisis. But with shareholders reacting
positively to MetLife`s decision, it might prompt some big banks to rethink
For NIGHTLY BUSINESS REPORT, I`m Mary Thompson.
MATHISEN: Still ahead, low risk, low cost, high reward. It may be why the
entire nation is playing the Powerball lottery, even though the odds are
stacked against you.
First, though, a look at how all 30 Dow components closed today. All but
one finished lower, ExxonMobil (NYSE:XOM).
HERERA: Securities regulators are reportedly looking into the risks posed
by high-yield bond funds in the aftermath of the collapse of Third Avenue`s
junk bond fund last month. As reported by “Reuters”, regulators are
concerned about how mutual funds manage their liquidity risks. They also
want to determine the impact such disruptions could have, not only on
shareholders, but also on the broader market.
MATHISEN: The workplace is changing, the rules are evolving, and some of
the proposed changes, especially to paid sick leave, are making small
business owners stand up and pay attention.
Kate Rogers (NYSE:ROG) reports tonight on a growing concern for some on
KATE ROGERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: In President Obama`s
final State of the Union Address, worker protections were front and center.
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Equal pay for equal work,
paid leave, raising the minimum wage. All these things — all these things
still matter to hard-working families. They`re still the right thing to
do. And I won`t let up until they get done.
ROGERS: The comments come at a time when the push to build up employee
benefits at businesses nationwide is gaining momentum, but new data
analyzing one congressional paid sick leave bill shows Main Street could be
The conservative National Federation of Independent Business modeled the
Healthy Families Act, which allows workers in businesses that have at least
15 employees earn up to seven paid sick days per year. If implemented this
year, the NFIB says the mandate could result in the loss of 430,000 jobs
over the next decade, 58 percent of which would be at small firms.
What`s more, the NFIB projects a real output loss of $652 billion, half of
which would be borne by small companies like Larry Stottlemyer`s Adventure
Park, USA, in Frederick, Maryland. Stottlemyer has up to 140 employees in
the summer and 45 in the winter, but only 6 have paid sick days. Extending
the benefit further would be a burden for the business, as he hasn`t yet
fully recovered from the last recession.
LARRY STOTTLEMYER, ADVENTURE PARK USA OWNER: And to come up with this
stuff when we`re just coming out of recession? We just got hit with a
minimum wage increase in the state of Maryland. Our last governor hit us
with that, and that`s something that we`re serving now. And every time we
turn around, there`s something else, and it`s really unfair to small
businesspeople, entrepreneurs that have risked their homes, their
livelihood, and has put everything into their businesses.
ROGERS: But advocates say change is necessary and momentum is building in
2016. In the past year, big companies, including Netflix (NASDAQ:NFLX) and
Microsoft (NASDAQ:MSFT), announced enhanced paid leave plans.
ELLEN BRAVO, FAMILY VALUES & WORK EXEC. DIRECTOR: We live in a nation that
says we care about family values, and yet, being a good parent to your
child or a good child to your parent literally costs people their paycheck
and often their jobs.
ROGERS: While getting a bill passed in a Republican-controlled Congress
may prove tricky, on the Democratic side, there`s growing support for
better policies nationwide. In the past week, both Hillary Clinton and
Bernie Sanders have expressed support for full paid family leave policies.
For NIGHTLY BUSINESS REPORT, I`m Kate Rogers (NYSE:ROG).
MATHISEN: To read more about the push for paid sick leave, head to our Web
HERERA: A brewer launches the second largest corporate bond deal ever, and
that`s where we begin tonight`s “Market Focus.”
Anheuser-Busch InBev is selling $46 billion worth of bonds to help finance
its $110 billion purchase of rival SABMiller. The deal is second only to
Verizon`s $49 billion offer in 2013. Investor demand, however, was the
most ever for a corporate bond deal with the maker of Budweiser beer
receiving more than $100 billion in offers. Shares of Bud were off about
2.5 percent to $116.14.
HERERA: Shares of Supervalu got slammed today after the supermarket chain
disappointed with its latest quarterly results. The company`s revenue fell
more than expected in the face of stronger competition. Last week, the
company said it would spin off its discount brand, Save A Lot, which
accounted for more than a quarter of Supervalu`s sales in the quarter.
Shares were off 15.5 percent to $5.08.
And auto parts maker Borg-Warner issued full-year earnings guidance below
Wall Street forecasts. The company citing in part a strong dollar for
coming in light of targets. Borg sees double digit sales growth for the
year, but that still wasn`t enough to please investors. Shares were off
more than 9 percent to $33.84.
MATHISEN: Shares of Intuitive Surgical (NASDAQ:ISRG) managed to eke out a
gain on an otherwise bad market day. The company gave fourth-quarter sales
projections that were ahead of expectations. Main driver continued growth
in the robotics system used for minimally invasive surgery. Intuitive
surgical closed the day up a little bit there, about a half percent at
Qualcomm (NASDAQ:QCOM) getting an upgrade from Susquehanna Financial from
neutral to positive. The analyst there saying while the semiconductor
company still faces competition from the likes of Intel (NASDAQ:INTC), he
believes the worst may be behind Qualcomm (NASDAQ:QCOM) and its stock.
Shares were off about a percent today to $46.10, but they`ve fallen nearly
40 percent over the past year.
GoPro says its revenue for the fourth quarter will come in below
expectations. Slower sales of its action cameras, the company also cutting
7 percent of its workforce. Shares of GoPro flat today, but the news did
break after hours and the stock was halted. When it reopened, shares
dropped more than 20 percent.
HERERA: One and half billion, that`s the record jackpot in tonight`s
Powerball drawing. People are standing in long lines for the chance to win
the pot, even though the odds are slim, extremely slim.
Eric Chemi catches the Powerball fever that`s gripping the nation.
ERIC CHEMI, NIGHTLY BUSINESS REPORT CORRESPONDENT: With just a few hours
left to buy tickets in tonight`s record-setting Powerball lottery, people
all over the country are ling up and spending big bucks to get a chance at
the $1.5 billion jackpot.
UNIDENTIFIED MALE: Oh, I`m going to win. This is a winner.
CHEMI: It`s the biggest jackpot in American history. Still, the odds of
winning this week are no different than they were last week, 1 in 292
But the excitement isn`t about the odds, it`s about the big prize.
What would you do with the money, if you won the big prize?
UNIDENTIFIED MALE: I would vanish.
UNIDENTIFIED FEMALE: I would take my whole family and disappear somewhere.
UNIDENTIFIED MALE: I`d give it to a lot of people I love and care about.
UNIDENTIFIED MALE: Take care of the family.
CHEMI: Everyone`s got their own strategy for picking numbers, whether it`s
letting the computer pick for you or choosing lucky numbers, like your
birthday. Some are doing exactly the opposite, going for unlucky numbers,
hoping to avoid sharing the big prize.
UNIDENTIFIED MALE: I found that, you know, most people have lucky numbers,
so I`m trying to go against that so I can win the whole thing for myself,
CHEMI: No matter who wins tonight, these local grocery stores come out on
top. They get to keep 5 percent of every sale.
SUNG BAE, BODEGA OWNER: Today was a top seller, $800.
CHEMI: Tickets or dollars?
CHEMI: I know the odds of winning are long, but in order to properly tell
the story, I feel like I need to take a chance as well. One Powerball
ticket, please? Thank you.
For NIGHTLY BUSINESS REPORT, I`m Eric Chemi in New York City.
UNIDENTIFIED MALE: Thank you. Good luck.
CHEMI: Thank you.
MATHISEN: If he wins, we`re going to split it. He`s got to turn it back
All right, so, why do people get lottery fever when the jackpot swells to a
staggering amount of money, in this case, a whopping $1.5 billion?
David Just is a behavioral economist at Cornell University`s Charles H.
Dyson School of Applied Economics and Management. He`s here to answer
that, among other questions.
My odds, Professor Dyson, are 1 in 292 million, the same basically every
week, because it`s 60-some numbers times six places or whatever it is. But
why is it — tell me from a behavioral point of view, why I will get out of
my chair to go try for $1.5 billion when I couldn`t be bothered for $40
DAVID JUST, CORNELL UNIVERSITY BEHAVIORAL ECONOMIST: Good question.
Basically, there are two things going on. First, we know that,
essentially, when people evaluate these sorts of gambles, they focus in on
the large numbers. If you have a giant possible jackpot out of this,
people completely ignore the probability of winning and just become
enamored with the idea of winning that much money.
But it`s not only that, you know, we also have this sort of feeling of,
we`re going to regret it if we don`t at least try.
HERERA: Right. Yes, there`s a fear element, isn`t there? I mean, what if
you played lucky numbers in the past, you decide you don`t want to do it
this time around and those numbers come up? You`d be devastated, right?
JUST: It`s absolutely that. You know, when we see the winners, when we
see other people who have, you know, actually made it big, we feel like we
should have been doing something, and we had a chance and we could have
done it, and all we had to do was buy the ticket. So, it`s sort of
predicting that regret. We decide it`s time to buy.
MATHISEN: Our producer, Rebecca White, was saying today she was in line to
buy, she bought one ticket. She thought, well, the guy behind me might
have the right number, so I`d better buy another ticket or he`s going to
get the number that wins, not me. So, it plays with your mind a lot.
Let`s go to the question of happiness. People who win, you say the history
is not all that good. They do not report higher happiness.
JUST: No, they don`t. So, people have this anticipation that you win this
much money and just all of your cares sort of melt away, and you have that
as an expectation. And then you actually win money and reality sets in
that, no, you still have a whole bunch of problems.
And you know, while it`s a huge, huge amount of money, it`s still not
unlimited and it still doesn`t quite buy you all the sorts of things you
want in terms of, you know, well, a lifestyle. So, no, on average, they`re
actually less happy than the average person and even less happy than people
who have been put on kidney dialysis, believe it or not.
HERERA: Whoa. That took me by surprise.
You know, also, there was one gentleman who was interviewed who was a
previous lottery winner I saw on one of the other networks, and he said he
actually felt sadness and guilt because so many people came to him with
very tough luck stories, so he felt terrible if he didn`t give them some
money. It was a real burden to him.
JUST: There`s exactly that. A lot of people will come out of the
woodwork, and you feel like, you know, you`ve been so lucky, you need to
help others who haven`t been lucky, and just managing that amount of money,
you know — if you work for it and you build it up over time, you adapt to
it over time, but otherwise, it ends up being something that you just can`t
So, they end up having higher rates of bankruptcy, believe it or not, and –
MATHISEN: Here`s the $1.5 billion question — have you bought a ticket?
JUST: I have not.
MATHISEN: Have you ever?
JUST: I have never played the lottery. I`ve studied it a lot. I guess
you could say I`m still studying my first purchase.
MATHISEN: Spoken like a professor. David Just of Cornell, thank you very
JUST: Thank you.
HERERA: All right. Coming up, the NFL scored big, so did the city of Los
Angeles, which is about to see a big spike in revenue to that area. That
story`s coming up next.
But first, a look at how the ten sectors in the S&P 500 fared today. And
as you can see, it was ugly out there.
MATHISEN: Here`s a look at what to watch tomorrow. As we reported,
JPMorgan (NYSE:JPM) Chase due to come out with its earnings, along with the
Dow component Intel (NASDAQ:INTC). Best Buy (NYSE:BBY) will release
holiday sales figures. St. Louis Fed President James Bullard speaks on the
economy and monetary policy in Memphis. And that is what to watch
HERERA: The Rams are moving west to their new home in Los Angeles, and the
San Diego Chargers have the option to join them. The announcement late
last night came after a day of marathon meetings.
Jane Wells tells us why the decision is as much about business as it is
about the sport.
JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT: It was a long night for
Tom Benson of the New Orleans Saints and other NFL owners, and finally,
just as the State of the Union was about to begin, the state of American
ROGER GOODELL, NFL COMMISSIONER: The NFL owners tonight approved the
return of the Los Angeles Rams to the market starting with the 2016 season.
WELLS: Stan Kroenke`s St. Louis Rams beat out a tag team of the San Diego
Chargers and Oakland Raiders because he`s promising a glitzier stadium in
the L.A. city of Inglewood, unlike anything the NFL has ever seen, and
outshining a proposed stadium in Carson by the other two teams.
Now, the Chargers have one year to decide whether to join the Rams in
Inglewood, and if they decline, the Raiders get that choice.
The league is also giving both losing teams $100 million towards new
stadiums, should San Diego and Oakland choose to build.
MARK DAVIS, OAKLAND RAIDERS OWNER: We`ll be working really hard to find us
a home, and that`s what we`re looking for and for our fans and everything
else — don`t feel bad, we`ll get it right.
WELLS: But after a 21-year NFL drought, does Los Angeles have a fan base
for one or possibly two teams? From a business perspective, it may not
PAT RISHE, WASHINGTON UNIV. IN ST. LOUIS: Ultimately, it may not matter if
the NFL`s ultimate end game is to just have a showcase facility in the
second largest market in America, where they can have Super Bowls every
WELLS: And with the Clippers and Dodgers selling for $2 billion each, any
L.A. NFL team would be worth at least $3 billion, wealth spread to all the
UNIDENTIFIED MALE: Raiders! Whoo!
WELLS: Some fans were not the only ones feeling low. Bob Iger had
spearheaded the losing stadium proposal at Carson and hoped to be part of
that enterprise after retiring from Disney (NYSE:DIS).
What was harder, buying Pixar, Lucas Films or this?
BOB IGER, DISNEY CEO: I`ll let you know when this is over.
WELLS: In the meantime, the new stadium won`t be ready until 2019. So,
this fall, the Rams will likely play in the coliseum, the very arena which
drove them out of Los Angeles so long ago.
For NIGHTLY BUSINESS REPORT, I`m Jane Wells.
HERERA: Before we go tonight, here`s another look at the sell-off on Wall
Street. It was a difficult day. The Dow Jones Industrial Average plunging
364 points to 16,151. The NASDAQ dropped 159 points, nearly 3.5 percent.
And the S&P 500 lost 48, trading below 1,900 for the first time since
And just a week and a half into the New Year, the blue chip Dow index is
off 7 percent, the NASDAQ down more than 9 percent, S&P 500 also off 7
And the transportation average got creamed today.
MATHISEN: In bear market territory, even as oil and fuel prices go down.
Not a good sign.
HERERA: No, not a good sign.
But that does it for us tonight on NIGHTLY BUSINESS REPORT. I`m Sue
Herera. Thanks for joining us.
MATHISEN: And I`m Tyler Mathisen. Have a great evening, everybody, and
we`ll see you back here tomorrow night.