Transcript: Nightly Business Report – May 20, 2016

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

Mart (NYSE:WMT), the world`s largest retailer, has working in its favor that many of its rivals do not.

New front.  Amgen`s medical breakthrough that could drastically reduce the
world`s number one killer, heart disease.

One trillion dollars.  Why Americans are borrowing more money than ever to
pay for that new ride.

All of that and more tonight on NIGHTLY BUSINESS REPORT for Thursday, May

Good evening, everyone.  I`m Sue Herrera.  Tyler Mathisen is on assignment

Stocks rattled, a familiar worry on Wall Street is pressuring the markets.
There is growing concern that a Federal Reserve interest rate increase
could come as early as next month and weigh on an already struggling global
economy.  It crept into the market yesterday and remained there today,
pushing the S&P 500 into negative territory for the year.

By the close, the Dow Jones Industrial Average fell 91 points to 17,435.
It had been down nearly 200.  The NASDAQ was up 26, the S&P 500 lost 7.

Dominic Chu has more on today`s slide.


worries crept back in the markets as traders continue to digest headlines
from the Federal Reserve, as well as some key earnings reports.

The weakness comes a day after the Fed left the door open for a possible
interest rate increase as early next month and earlier today, New York
Federal Reserve President Bill Dudley reiterated the same stance.

my forecast, my own forecast is sort of on track, then I think a tightening
in the summer, the June/July time frame is a reasonable expectation.  So,
it`s really a question of whether the economy sort of cooperates and
performs in line with my personal expectations.

CHU:  Interest rate concerns were just part of the picture.  You also had
more uncertainty injected into the outlook for consumer spending and retail
stocks.  Wal-Mart (NYSE:WMT) gave a more upbeat earnings report that
seemingly bucked the trend of largely negative results elsewhere in the

Add to that, the ongoing investigation into the circumstances surrounding
the crash of an Egypt airplane, and you get enough to keep traders on the
more cautious side.  Not positive enough to push markets higher but not so
negative as to cause a broader market sell-off either.  Traders will have
data to digest on home sales and earnings for the likes of Deere, which is
the world`s biggest farm equipment maker.

For NIGHTLY BUSINESS REPORT, I`m Dominic Chu from the New York Stock


HERERA:  And as Dom just mentioned, the bright spot today was Wal-Mart
(NYSE:WMT).  After a string of weak retail reports the world`s largest
retailer surprised investors with an upbeat outlook and better than
expected earnings and revenue in its most recent quarter.  That sent shares
of the company up more than nine and a half percent, its biggest one day
jump since October of 2008.

Courtney Reagan takes a look at why Wal-Mart (NYSE:WMT) bucked the broader
retail trend.



The world`s largest retailer giving Wall Street more confidence in the
consumer today.  Wal-Mart`s first quarter profit and revenue coming in
better than expected with that key U.S. comparable sales metric also
stronger than analyst forecasts, gaining for the 7th straight quarter.  In
store traffic improving for the sixth consecutive quarter.

Well, the discounter wouldn`t elaborate on details of its month by month
performance.  CFO Brett Biggs told me over the phone that it was pretty
good throughout the quarter which differs from what most other retailers
detailed.  However, more than half of Wal-Mart (NYSE:WMT) sales come from
grocery and less than 8 percent come from apparel, a category which has
been challenging for many others.

Plus, Wal-Mart`s core consumer is one that has likely benefitted from more
positive macro economic factors.

beneficiary, ultimately, of what effectively seems to be the pay raise for
lower income households.  You`re seeing income grow at above average rates
for the bottom quartile.  You see pay raises across retail, and I think
that`s a proxy for wage increases in general for unskilled workers.  That`s
really just gotten under way.

REAGAN:  While minimum wage has increased for many Americans, I asked Wal-
Mart`s U.S. CEO Greg Foran on a media call specifically if the higher wages
it`s now paying have led to higher employee purchasing in stores.  He said
the simple answer is yes.

Wal-Mart (NYSE:WMT) CFO Brett Biggs also told me he agrees that several
macro economic factors are helping the retailer`s core consumer but added
there is an air of uncertainty that`s likely keeping the consumer from
being as bullish as they would like to be.

To be sure, Wal-Mart`s quarter wasn`t perfect.  The retailer`s e-commerce
sales growth only improved 7 percent, which is low by industry standards
and also below what the company would like to see.

MICHAEL LASSER, UBS RETAIL ANALYST:  E-commerce is leading the way.  Wal-
Mart (NYSE:WMT) has got to show that it can fully participate in a growth
of that channel.  At this point, they`re not doing that.  So, we need to
see better trends on the e-commerce side from Wal-Mart (NYSE:WMT) to really
justify where the stock is trading.  Right now, imports (ph) appreciate
from here.

REAGAN:  Wal-Mart (NYSE:WMT) is spending billions to improve the online
shopping experience and the operations that support it.  But it`s going to
take some time for the investments to generate results.



HERERA:  The Gap (NYSE:GPS) reported earnings late today.  The clothing
retailer plans to close 75 of its Old Navy and Banana Republic stores
overseas by the end of the year.  Gap (NYSE:GPS) says that move will save
nearly $300 million a year and improve its operating margins.

The company also issued earnings that match analyst expectations but
revenue for the quarter was shy of estimates.

So, what is wrong with fashion apparel and why aren`t consumers buying

Liz Dunn, CEO of her own retail consulting firm Talmage Advisors joins us
now with some of those answers.

Good to see you, Liz.  Welcome.

LIZ DUNN, TALMAGE ADVISORS CEO & FOUNDER:  Good to see you as well.

HERERA:  Is it on the shoulders of apparel, some of these bad results that
we`re seeing, or is there something else there?

DUNN:  I think apparel is certainly, you know, a little bit of a whipping
boy right now.  It`s certainly not a strong category.  Consumers are
spending on other things.  I don`t think that it`s necessarily a weak
consumer that we`re seeing.  It`s a consumer that`s voting for other
categories of spend.

HERERA:  And they like experiences.  We keep hearing that, especially with
millennials.  They would rather, you know, I guess go to a concert or
something like that.

DUNN:  Absolutely.

HERERA:  They don`t have to be in the latest designer clothes.

DUNN:  Right.  We are seeing kids spend or young adults spend thousands of
dollars going to festivals and really going out to eat.  They are voting
for experiences.

They also don`t want to look like all the other consumers out there.  So,
this younger consumer is really more focused on what kind of life they are
living and the experience they are having, and less so on wearing the
fashion labels that everyone else is wearing.

HERERA:  How does retail combat that though?  How do they adjust to what
looks like a pretty sizable shift in their industry?

DUNN:  Right.  Well, there are a couple of things they can do.  I think
fast fashion is one of the answers.  It is one of the pressures and one of
the answers.  So, traditional brick and mortar retailers need to get
quicker at delivering fashion.  They need to do so in smaller increments.
Not, you know, buy deep and sell cheap, but really buy smaller batches and
deliver really fast fashion to consumers.

I think they also need to bring experiential elements into the store.  Have
events.  Bring some excitement.  Really connect with the consumer.  I think
those are some of the answers, but I think the other answer is we are going
to see a lot more store closures from some of the biggest retailers.

HERERA:  Yes, used to be the mall was a place to be.  That`s where the kids
wanted to hang out.  That`s not the case anymore.

DUNN:  Yes.  They are really forfeiting the mall.  It`s interesting.  We
saw out of Wal-Mart (NYSE:WMT) traffic is up 1.5 percent.  The mall traffic
for the first quarter was down mid to high single digits.

So, that`s a pretty big disconnect.  It really says that consumers are
going other places other than the mall.  Not to mention the online sales
that continue to increase.

HERERA:  Yes.  Digital.

All right.  Liz, thank you so much.

DUNN:  Thanks for having me.

HERERA:  Liz Dunn with Talmage Advisors.

German drugs and chemicals company Bayer made an unsolicited take over
offer for the seeds company Monsanto (NYSE:MON).  That combination would
create the world`s biggest agricultural supplier and would be the biggest
foreign corporate take over ever by a German company.  With few details,
that deal could be valued at more than $42 billion.  Monsanto (NYSE:MON)
says its board is reviewing the proposal and its shares rose 3.5 percent.

A medical breakthrough that could drastically reduce heart attacks, the top
cause of death worldwide.  The company behind the research is Amgen
(NASDAQ:AMGN) which uncovered a previously unknown genetic mutation that
could pave the way for new drugs to prevent heart disease.  According to
the CDC Foundation, about one in every six U.S. health care dollars is
spent on cardiovascular disease annually.

Meg Tirrell has more on the findings.


future of drug development, using genome sequencing and big data to
identify genetic differences that affect our health.  That`s how Amgen
(NASDAQ:AMGN) has identified a gene mutation that it says is linked to a
significant decrease in the risk of heart disease and heart attack.  It`s
now working to develop a drug focused on that target to try to mimic the
effects of mutation.

KARI STEFANSSON, DECODE FOUNDER AND CEO:  The mutation we found is so-
called loss-of-function mutation.  It`s a mutation that damages the
function of the protein made by the gene.  So, what Amgen (NASDAQ:AMGN) has
started to do is to develop an inhibiter of the protein hoping to be able
to basically simulate the effect of the mutation by a drug directed against
this protein.

TIRRELL:  Kari Stefansson is the CEO of deCODE Genetics, the Icelandic
company Amgen (NASDAQ:AMGN) acquired four years ago for this research.  The
work was done by sequencing the genomes of 2,600 Icelanders.  A population
he says is especially helpful for this kind of work because of similar
genetic backgrounds.

STEFANSSON:  A rare mutation exists in Iceland.  It is more common than
similar rare mutation in more (INAUDIBLE) population.

TIRRELL:  In a paper published this week in “The New England Journal” of
medicine, researches say people with this mutation have on average a 35
percent lower risk of heart disease or heart attack.  They also on average
lived for more than a year longer.

The hope is that the discovery will provide a new tool in the fight against
heart disease.  The number one cause of death worldwide.  Many say this
approach will lead to an edge in developing medicines for multiple

targets is one of the hardest things for drug development.  So, if you have
access to genome technology, you`re going to be able to identify new
targets, sometimes new diseases, new indications.

TIRRELL:  It`s also the focus of part of President Obama`s precision
medicine initiative, comparing the genome sequences of a million Americans
for their medical records with the hope of identifying new ways in which
differences make us stronger.

Amgen (NASDAQ:AMGN) estimates that maybe two years from testing this new
drug in people.  From there, it would be several years more before it could
apply for approval.  So, a new drug isn`t imminent but scientists are
encouraged by a new approach.



HERERA:  And now to a story that the world is watching.  An EgyptAir flight
from Paris to Cairo disappeared from radar.  Sixty-six people were on
board.  Terrorism is not being ruled out.

Hadley Gamble at Charles de Gaulle Airport in Paris has more on the tragedy
in the skies.


House says it`s just too early to say what exactly happened to EgyptAir
Flight 804.  It originated here last night at Charles de Gaulle Airport in
Paris around 11:00 p.m. and was expected around 3:15 a.m. in Cairo.

Today, the flight never made it.  It lost radar contact between 2:30 and
2:40 a.m. over the southern Mediterranean.  There are reports from Greek
authorities that the plane was swerving, even doing a 360 degree turn
before it plummeted out of the radar.  Now, what we understand, of course,
now is that from Egyptian authorities they are still refusing to say the
plane is anything other than missing.  They say until they see debris,
they`re not going to say anything further.

We`re expecting to hear for more from them in the coming hours.  There were
multiple, conflicting reports throughout the day that debris had been
found, even a life vest about 120 miles off the coast of Crete.  Now, we`ve
heard, of course that the Greek authorities say that the debris that was
found in the Mediterranean did not belong to Flight 804 and the French also
reacted strongly today.

A scheduled vote in the French parliament went through that basically
extends the state of emergency law in this country that`s been in place
since the attacks last year.  So, a lot of moving parts to this story.
We`ll update you as we know more.

For NIGHTLY BUSINESS REPORT in Paris, I`m Hadley Gamble.


HERERA:  Still ahead, a former corporate chairman, a gambler and a pro-
golfer and the insider trading case that ties them to all together.


HERERA:  House Republicans and Democrats have struck with the White House
to help rescue Puerto Rico from its debt crisis.  The bill would create a
board that would help manage its financial obligations and oversee some
debt restructuring.  House Speaker Paul Ryan says this plan will help put
the U.S. territory on a path to real reform.

In inside trading triangle, federal prosecutors announced criminal charges
against former Dean Foods (NYSE:DF) chairman Thomas Davis who they say
illegally fed secret information about Dean Foods (NYSE:DF) to the gambler
Billy Walters who made profitable trades.


for over five years, Davis repeatedly and systematically fed material
nonpublic information about Dean Foods (NYSE:DF) to Walters who, in turn,
benefitted handsomely to the tune of about $43 million in profits made and
in losses avoided from his trading in Dean Foods (NYSE:DF) stock.


HERERA:  Walters allegedly fed some of the information to the pro golfer
Phil Mickelson, according to a separate SEC complaint.  Mickelson said he
plans to repay those profits.

Eamon Javers has more for us from Washington.

Eamon, it`s always good to see you.

A lot of us are questioning why the former chairman of Dean Foods (NYSE:DF)
would do something this dangerous.

question here, Sue. And what you see in these SEC documents that were
released today, they are painting a picture of a former board chairman here
who is in financial dire straits.  They say he needed money and he needed
it fast.

At one point, they said he owed money to the IRS, he had tens of thousands
of dollars of debt on his credit card.  He also owed money to an investment
fund and they also alleged that he had misappropriated money from a
battered women`s charity in order to pay back gambling debts he owed in a
Las Vegas casino.

So, this is a portrait of a former Dean Foods (NYSE:DF) chairman going
through a personal financial very difficult time.  The SEC said it was
related to his spending and his gambling habits.

HERERA:  You know, a lot of us are also wondering, why they did it and why
Phil Mickelson would make the trade once he got the information and how the
authorities tied it all together and busted the operation?

JAVERS:  Yes, that`s one of these questions that you always ask in these
insider trading cases.  Usually, you`re dealing with powerful, sometimes
famous, often wealthy people who are trading tips to one another to make
more money, and saying, hey, don`t these guys already have enough money?
Why would a guy like Phil Mickelson need to make this particular trade?

The allegation that`s laid out by the government today — and it is just an
allegation for now — is that the gambler Billy Walters had taken some bets
on behalf of Phil Michelson.  Phil Michelson owed the gambler money.
That`s why the trade happened.

The gambler passed him a tip and said, hey, want to trade in Dean Foods
(NYSE:DF).  Phil Mickelson made the trade, profited about $931,000 on the
single trade.  And then allegedly repaid his gambling debt.  This is all
about gambling, golf and business lifestyle that all three of these men
were participating in to one degree or another.

HERERA:  All right.  I know we`re going to hear more about this case

Eamon, thank you.

JAVERS:  You bet.

HERERA:  Eamon Javers in Washington.

Television network executives are presenting their fall schedules to a host
of advertisers, hoping to lure in more ad dollars.  These up fronts as they
are called mark an important time of year for broadcasters who are battling
back against the fast-growing digital world.

And according to Julia Boorstin, this time around, what`s old is new again.


wrapping up the up fronts expect a 5 percent increase in ad dollars.
That`s the first increase in five years amid a seismic shift in the way
people consume content.  Judging from the network plans released this week
in the up fronts, content is still king.

JEFF BEWKES, TIME WARNER CHAIRMAN & CEO:  Advertisers know that it`s a deal
to get the reach of television.  So, I think that`s true across the
industry for our company Turner.  I was blown away from the up front.  We
have terrific new original shows at TBS and TNT.

BOORSTIN:  In addition to the new shows, the network stressed their new
high tech capabilities to better target viewers and deliver more measurable
results, helping broadcasters pulled dollars back from digital, where there
are growing questions about the reach of digital ads.

NBC Universal (NYSE:UVV) hosted its first up front that combined all of the
company`s media properties, pointing out their ability to reach at least 20
percent of the viewing audience at any time.

LINDA YACCARINO, NBCU AD SALES CHAIRMAN:  When you really take a moment to
look at the facts and you look at the average American spend seven times
watching television than they do on Facebook (NASDAQ:FB), or they spend 15
times more watching television content than they do on YouTube.  Then the
narrative really changes.

BOORSTIN:  NBC focusing its up front on the power of live events, including
the Olympics and upcoming live musical “Hairspray”.  Plus, it`s investing
in its historical strength in comedy.

Across the channels, what`s old is new.  CBS (NYSE:CBS) is remaking
“MacGyver”, FOX bringing back “Prison Break” and “24”.  HBO with “Tales
from the Crypt`, and Showtime with “Twin Peaks”, familiar names to break
through the clutter.  To make this content more appealing to consumers, TV
giants are adapting to consumer demand, by offering more content on demand
with fewer ads.

JOHN MARTIN, TURNER CHAIRMAN & CEO:  By producing the ad load, the sheer
amount of ads but by making the ads more relevant and increasingly every
day we`re getting more sophisticated and analytics and the ability to
target consumers, that we can actually demonstrate to advertisers and
marketers more value.

BOORSTIN:  Turner among several networks cutting down on advertising time.
To make sure those ad dollars pay off for marketers.

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


HERERA:  And Julia just reported on NBC Universal (NYSE:UVV), which is the
parent company of CNBC which produces this program.

Applied Materials (NASDAQ:AMAT) sees new orders surge, and that`s where we
begin tonight`s “Market Focus”.  The maker of semiconductor manufacturing
tools raised its profit forecast after saying orders hit 15-year high in
its latest quarter.  Earnings per share beat expectations.  That sent
shares initially higher in after-hours trading.  The stock closed the
regular session slightly lower to $19.91.

Perry Ellis saw its quarterly profits soar more 50 percent, thanks to
increased sales on higher margin products.  The clothing designer and
distributor reported a drop in revenue as currency head winds weighed on
the results.  The company also raised its earnings forecast for the next
year.  Perry Ellis shares rose 13 percent to $18.61.

In contrast, Dick Sporting Goods reported a decline in profits, as
consumers spent less.  However, sales did rise and were in line with
targets.  The sports equipment retailer gave a downbeat outlook for the
year as the clothing of rival sports authority is expected to weigh on
those results due to anticipated deep discounts from the company`s
liquidation.  Shares were up almost 8.5 percent to $41.36.

And it was a worse than expected quarter at Advanced Auto Parts.  The same
store sales drop with the company attributing those results to service
short falls.  The news prompted advance auto parts to lower its revenue
forecasts for the year.  Shares were down just a fraction to $143.54.

To the world of politics now.  A new national poll of registered voters
puts Donald Trump slightly ahead of Hillary Clinton in a general election

It`s still early, of course.  We want to know what John Harwood makes of
that polling.

John, it`s good to see you as always.

The initial expectation was that Ms. Clinton had a big advantage over Mr.
Trump.  What has changed?

is once you wrap up a party`s nomination, two things happen: a lot of
Americans see you as a winner.  Winning begets winning in politics.  Also,
people in your party who had been supporting other candidates rally around

So, in April when the NBC/”Wall Street Journal” poll came out and showed
Hillary Clinton with an 11-point lead, the biggest reason was that Donald
Trump had only 72 percent of Republicans supporting him.  Now he`s in the
high 80s.  That`s close to what you need to win a national election.

He has got his party unified.  Hillary Clinton, not so much right now.

HERERA:  Yes.  What else is weighing down her performance in the polls at
this point?

HARWOOD:  Well, Hillary Clinton came into the race with image problems.
You have a lot of Americans who find her untrustworthy.  That`s a problem
she has to deal with all campaign long.

But she has also this persistent fight with Bernie Sanders in which Bernie
Sanders is casting doubts about her, about her commitment to real change,
and that`s causing Democrats to be less than enthusiastic about Hillary
Clinton.  It`s hurting her numbers and helping Donald Trump.

HERERA:  So, does she have to mend fences then?  What does she have to do
with Mr. Sanders?

HARWOOD:  She does need to mend fences.  She made a gesture in that
direction today.  An interview on CNN in which she said, of course, I`ll
talk to Bernie Sanders about the platform, the convention process, all
things that people think concessions might be made.  But she asserted she
had, in effect, already won the nomination.

Bernie Sanders just this afternoon put out a statement saying, not so fast.
Millions of Americans have doubts on Hillary Clinton`s campaign.  He says
he`s going to fight all the way to the end, and that is not good for
Hillary Clinton.

HERERA:  No, it`s not.

All right, John.  Thank you so much.  John Harwood at the White House for

Coming up, $1 trillion.  Why drivers are paying more money than ever to get
behind the wheel of a new car.


HERERA:  TD Bank is retiring its coin counting machines.  Last month, we
told you about errors that penny arcade machines made when counting cash.
Soon after, the bank took them out of operation and conducted an
investigation.  Today, the bank said it will be retiring the fleet and will
provide alternative ways to count coins to its customers.

General Motors (NYSE:GM) is reportedly close to creating a plan that would
compensate owners of some late model crossovers purchased with window
stickers that overstated their fuel economy.  According to numerous
reports, the plan would cover nearly 170,000 vehicle owners.  The automaker
says the mislabeling was an error.

Americans are borrowing more money than ever to pay for new cars and
trucks.  In fact, the total for all auto loans now tops $1 trillion.

As Phil LeBeau reports, that figure is expected to go even higher.


running at close to a record high, the demand for new vehicles, especially
higher priced pick-ups and SUVs has consumers borrowing more money to pay
for their new models.  According to Experian, auto loans topped $1 trillion
in the first quarter of the year, a 10 percent increase compared to last
year.  Who is borrowing?

The majority of auto loans are held by those with solid credit ratings of
prime or super prime.  But there has been a slight increase in subprime
loans issued to those with the poorest credit records.  That combined with
an uptick of loan payments 30 or 60 days overdue had some worried that
debate for new cars and trucks has hit its limit.  In fact, some of the
largest dealerships believe industry sales are being propped up with hefty

Those concerned along with questions about the overall health of the
economy helped explain why auto stocks shifted into reverse.  In the last
year, all of the major automakers have seen their shares drop more than 10
percent and some are down more than 25 percent.



HERERA:  To read more about auto loans roaring past $1 trillion mark for
the first time ever, you can head to our website,

And finally tonight, gas prices may be inching a bit higher, but this
Memorial Day weekend they will be at an 11-year low.  According to the oil
price information service, gas prices will average about $2.29 per gallon
during the upcoming holiday weekend.  Last year, prices were about $2.75 a

And that will do it for NIGHTLY BUSINESS REPORT tonight.  I`m Sue Herera.
Thanks so much for joining us.  Have a great evening, everybody.  And we`ll
see you tomorrow.


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) 2016 CNBC, Inc.

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