Transcript: Nightly Business Report – September 27, 2016

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

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Sneaker stumble. Nike beats the street, but the road ahead has some people worried.

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Flirting with a shutdown. A spending bill that would keep the government up and running past Friday’s deadline is blocked. Sound familiar?

HERERA: Lashing out. Why airlines want to hear frustrated flyers rant on social media.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Tuesday, September 27th.

MATHISEN: Good evening, everyone. And welcome.

Stocks rally on Wall Street, following the first presidential debate. More on that in a moment.

But we begin tonight with Nike. The stock fell sharply in initial late-day trading after it reported earnings. On the surface, the Dow component’s quarter looked pretty good. Profit and revenue both rose. But a key growth key metric there that the world’s largest sportswear maker uses as a gauge of future demand slowed, and investors didn’t like it.

Here are the numbers: Nike earned 73 cents a share, Wall Street expected just 56 cents. Revenue for the quarter came in at more than $9 billion. But that gauge of future orders was below forecast, and weighed on the stock initially.

Dominic Chu has more on Nike’s results.

(BEGIN VIDEOTAPE)

DOMINIC CHU, NIGHTLY BUSINESS REPORT CORRESPONDENT: Another earnings report, another beat by Nike. They beat, of course, when it came to the profit number, and they beat when it came to sales. But this time around, the weakness in Nike stock and the after-hours session came because of an indication of future orders that Nike has on the books.

This is what people are going to order in the coming months, so it’s an indication of how much business Nike will have down the line. This time around, Nike showed some real weakness in those futures orders. They came in below expectations.

But even more importantly, they came in below expectations for certain key markets for Nike. And that is North America, obviously, with the U.S. and Canada, but then, of course, in China and then the emerging markets, as well. Those areas of weakness are seen by many as perhaps becoming a little bit more of an issue for that company down the line, and that’s the reason why those shares are down in extended hours trading.

Remember, they were already down about 11 percent over the course of the past year-to-date period and the last 12 months. So, those futures orders really taking a dive for Nike shares.

For NIGHTLY BUSINESS REPORT, I’m Dominic Chu at the New York Stock Exchange.

(END VIDEOTAPE)

HERERA: On Wall Street, stocks broke a two-day losing streak. The rally was held by strong reports on the economy and followed the first presidential debate, suggesting the markets are giving the first debate decision to Hillary Clinton. A Trump win, according to some investors, would inject more uncertainty into the market. But the close, the Dow Jones Industrial Average rose 133 points, to 18,228, the NASDAQ added 48, and the S&P 500 was up 13.

MATHISEN: Stocks climbed despite a fall in oil prices. This is the prospect for a production deal diminished. Both Iran and Saudi Arabia played down the possibility of a deal at the information meeting of producers that’s taking place in Algiers. Iran has reiterated its vow to increase output. Saudi Arabia has said it would support a freeze but only if all players are committed to that plan. Domestic crude settled down more than 2.5 percent.

HERERA: Trade is a big issue on the campaign trail, and today, the World Trade Organization cut its forecast for the growth of exports and imports to the slowest pace since the financial crisis. The international body says such a slow down could weaken long-term economic growth and should serve as a wake-up call, giving growing anti-globalization sentiment.

MATHISEN: The uncertainty around the election apparently not hurting consumer confidence in the U.S. The conference board’s index rose to its highest level in nine years. The report says Americans feel better about their jobs and their prospects the same, even though they do remain neutral on their wage prospects.

HERERA: Last night’s presidential debate was the most-watched ever, according to Nielson’s preliminary estimates. More than 81 million Americans tuned in for the first one-on-one between Democrat Hillary Clinton and Republican Donald Trump. The numbers include 11 networks. They do not include, though, those who streamed it online through Twitter or Facebook. The next debate is scheduled for October 9th.

MATHISEN: Well, sniffles and snarky comments may have gotten a lot of the attention in last night’s first debate between Ms. Clinton and Mr. Trump. But that’s not what really matters. What really matters to most Americans is the economy. And both candidates did have a lot to say.

Steve Liesman has more.

(BEGIN VIDEOTAPE)

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: It’s really very simple. Two different visions of the right path to economic growth presented in the big debate last night.

Here’s Hillary Clinton’s vision.

HILLARY CLINTON (D), PRESIDENTIAL NOMINEE: I want us to invest in you. I want us to invest in your future. That means jobs and infrastructure and advanced manufacturing, innovation and technology, clean renewable energy and small business, because most of the new jobs will come from small business.

We also have to make the economy fairer. That starts with raising the national minimum wage, and also guarantee, finally, equal pay for women’s work.

LIESMAN: The Committee for Responsible Federal Budget says Clinton’s combination of increased spending and higher taxes will increase the deficit by a modest $200 billion over ten years, though some of her plans are federal mandates on businesses, like for a higher minimum wage or equal pay for women, that will be born by the private .

And here is Donald Trump’s vision.

DONALD TRUMP (R), PRESIDENTIAL NOMINEE: Under my plan, I’ll be reducing taxes tremendously from 35 percent to 15 percent for companies, small and big businesses. That’s going to be a job-creator like we haven’t seen since Ronald Reagan. It’s going to be a beautiful thing to watch.

Companies will come, they will build, they will expand. New companies will start. And I look very, very much forward to doing it.

We have to renegotiate our trade deals and we have to stop these countries from stealing our companies and our jobs.

LIESMAN: Trump’s plans are estimated to cost $5.3 trillion over a decade. Though his camp says they’ll pay for themselves through trillions of dollars of benefits from deregulation and renegotiated trade deals.

So, for a very unconventional race, the economic choices have come down to typical Democrat/Republican choices for the public. It must be added, though, the size, scope and claims of growth from the Trump campaign from his plans are considered by many economists as neither typical nor conventional.

For NIGHTLY BUSINESS REPORT, I’m Steve Liesman.

(END VIDEOTAPE)

HERERA: The debate had an immediate impact on private prison stocks. Shares traded lower today, following comments made by the Democrat presidential candidate.

(BEGIN VIDEO CLIP)

CLINTON: I’m glad that we’re ending private prisons in the federal system. I want to see them ended in the state system. You shouldn’t have a profit motivation to fill prison cells with young Americans.

(END VIDEO CLIP)

HERERA: Just last month, the Justice Department said it planned to eventually stop using private prisons. The idea that states would follow pressured shares of two of the biggest operators in trading today.

Wells Fargo’s board is reported considering executive pay clawbacks. According to the “Wall Street Journal”, the bank is looking into taking back some pay from CEO John Stumpf and the former head of bank’s retail operations, Carrie Tolstedt. The board reportedly wants to make the decision before Stumpf testifies on Thursday in front of a House panel on the fake accounts scandal.

MATHSEN: Senators have gone after Wells Fargo for forcing customer to sign arbitration clauses when they open accounts. But it’s not just Wells Fargo. Millions of Americans sign away their legal rights when they enter into routine contracts with credit card companies, cell phone providers, even employers, which begs the question, are these arbitration clauses unfair?

Brian Wolfman is a law professor at Georgetown University Law Center.

Professor, welcome. Good to have you do it — with us.

BRIAN WOLFMAN, GEORGETOWN UNIVERSITY LAW CENTER PROFESSOR: Thank you.

MATHISEN: How many companies to have these kinds of clauses in their contracts? And what sort of companies are most prone to have them?

WOLFMAN: Well, nowadays, many large and even medium-size companies are moving towards this in the financial services sector, in the Internet sector, and even many employers have mandatory arbitration clauses with their employees. So, it’s a growing — it’s a growing phenomenon.

HERERA: And is it fair to consumers or not?

WOLFMAN: Well, in my judgment, it’s quite unfair to consumers, because it effectively means that the companies that have these mandatory arbitration clauses can break the law with no consequence, because when there’s arbitration clause, arbitration itself is too expensive for small and medium-sized claims. The only way to sensibly be able to enforce the law when you think itit’s been violated is by going to court. Often, together, in class actions.

And almost all of these class act — these arbitration clauses these days ban class actions. And the Supreme Court has upheld that. So, I support a movement in Congress and elsewhere in regulatory agencies to overturn these previous decisions and ban these type of class action bans and ban mandatory arbitration.

MATHISEN: You know, I can almost hear people saying, well, of course, he’s a Georgetown University law professor. Of course, he’s going to be against these kinds of deals because he’s a lawyer.

WOLFMAN: I think that is not correct because my — my main concern here is not giving people access to the courts, although that’s very important in our democratic system. But to deter wrongful conduct in the first place.

So, for instance, Wells Fargo, and we all know what happened with Wells Fargo.

MATHISEN: Right.

WOLFMAN: Creating these fake accounts and churning their customers and charging fees. If there is not access to the courts for compensation, for people wronged by Wells Fargo, it’s not just people that will be wronged and not compensated. But there will be no deterrence and deterrence is the key.

I’d like to see complete deterrence and much less wrongful conduct and much less need to go to court. The problem with arbitration is it creates both no compensation and no deterrence.

MATHISEN: That was going to be my next question. Forgive me, Sue.

The rewards under arbitration, are they capped?

WOLFMAN: Oh, they frequently are capped, and they don’t include things like punitive damages and the right to class action. But the problem is no one goes to arbitration in the first place, because it’s too expensive.

Let’s say I have a $300 claim. My employer has cheated me out because it didn’t pay me overtime. I can’t go to arbitration, because in arbitration, I can only go alone, class actions are banned by many employers and I have to pay the costs — often the costs of the arbitrator.

The arbitration is a private system with private rented judges. And you have to pay for them. The beauty of our civil justice system, it’s supported by the taxpayers.

(CROSSTALK)

MATHISEN: One more question. I stole her.

HERERA: No, it’s fine.

Very, very quickly, professor. Do most consumers know that they have an arbitration clause when they sign their name?

WOLFMAN: No. That’s the problem. These are in take it or leave contracts, in which you’ve signed up with their Internet service provider, you’ve signed up with your bank and buried in the fine print is a mandatory arbitration clause saying if you ever have a dispute with us, sorry, you can’t go to court. You’ve got to go to arbitration. And, by the way, you can’t do it through a class action. So, in fact, you can’t do it at all.

MATHISEN: Brian, thank you. Very interesting conversation. I’m sure we’ll pick it up again sometime. Brian Wolfman —

WOLFMAN: Love to be back. Thank you.

MATHISEN: Thank you, with Georgetown University Law Center.

HERERA: Coming up, investors who manage more than $2 trillion in assets say North Carolina is bad for business. And they are demanding change.

(MUSIC)

MATHISEN: In Washington, it’s deja vu all over again. With just days before the end of the fiscal year, the Senate blocked a spending bill needed to keep the government up and running beyond Friday midnight.

Eamon Javers following the story from our nation’s capital.

Eamon, is Washington creeping closer to a shutdown at the end of the week and what are the sticking points?

EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: It is creeping closer to a shutdown, Tyler. They tried today to get this vote done. They weren’t successful.

And that’s because of this main sticking point, the Democrats want to see in this spending bill. They want to see money for Flint, Michigan. You remember the lead water crisis there. They are very unhappy, Democrats are, that they haven’t been able to get funding to help Flint, Michigan, in that fight so far this year out of Congress. They say this is their last chance to do it.

Republicans say, hey, wait a second. We’ll take that up in a separate bill all together. Let’s just pass this bill this week to keep the government open. All of that sets us up for a showdown at the end of the week, whether or the get it done by October the 1st.

So, we’ll have to wait and see. Typically, what you get is a lot of brinksmanship in negotiating, horse trading, going on right now. We expect they will get something done before we see a government shutdown this week. But that’s just an expectation, not a guarantee.

HERERA: Right, I was going to ask you to handled cap it, because they do have the habit of taking the market right to the brink.

JAVERS: Yes.

HERERA: And it increases volatility frequently.

JAVERS: Yes, absolutely. And what you could see over the weekend is one of those situation where they have a temporary shutdown. They shut it down through the weekend and maybe Monday where you have the national parks.

But all the essential employees of the government would be working on Monday. That’s some of the scenarios we have seen in the past. That could be where we’re headed here.

Ultimately, though, if Republicans are interested in passing this Flint money anyway, just through a separate bill, it seems like we could be headed for a compromise where they just stick it in this one and be done with it, because a lot of members up on Capitol Hill want to get back home to their states and their districts to start campaigning. There is an election coming up.

MATHISEN: Quick final thought on this latest report, hacked into Democrats’ cell phones.

JAVERS: Yes, it’s interesting, Tyler, because now, we’re seeing it expand from into their computers, into their phones. We all carry these devices with us every single day. We know how much personal information there is on there.

“Reuters” reporting this afternoon the new allegations that Russians may have been hacking into Democrats’ cell phones, and particularly possibly Democratic officeholders. That’s a new level to this story. Still, very nebulous. We don’t know who did it or why.

MATHISEN: But not hackers lying on a bed somewhere, presumably.

JAVERS: Yes, right.

MATHISEN: Eamon Javers in Washington, thanks very much.

JAVERS: You bet.

HERERA: Home prices show no signs of slowing. The Case-Shiller Home Price Index rose more than 5 percent in July from a year ago, to near record levels. As we have been reporting, strong demand for homes and a shortage of inventory are helping to drive prices higher.

But unlike the period before the financial crisis, people aren’t borrowing as to finance their homes.

MATHISEN: If you’re buying or selling a home today, you may be more frustrated with the process than usual. A severe shortage of appraisers is delaying closings and there is no short-term fix in sight.

Diana Olick reports.

(BEGIN VIDEOTAPE)

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Joyce Smith is on her fourth appraisal of the day.

This 23-year veteran of the business has never been so busy.

JOYCE SMITH, APPRAISER: I get calls five, six, seven, eight times a day. And I used to go far away to do appraisals. Bu there are so many, I don’t have to go very far anymore.

OLICK: Smith is busy, because she is one of the fast many shrinking appraisers. The ranks have dropped by 23 percent since the start of the financial crisis, ironically, due to new rules designed to safeguard both borrowers and lenders. Anyone who wants to become a licensed appraiser must now get 2,500 hours of experience in two years as an apprentice.

But appraisers are now required to be onsite during an inspection with an apprentice. The results, appraisers see no reason to hire and pay apprentices.

BRIAN COESTER, COESTER VMS CEO: We definitely overcorrected and I think there was some unforeseen consequences. Initially, when they remove the trainee to be able to inspect the property, I didn’t think they understood the trickle down effect it would have in affecting the entire mortgage market.

OLICK: Some argue it’s not just new rules but appraisal management companies underpaying workers.

Still, as the number of appraise drops, the time line for appraisals grows, especially as low interest rates prompt more refinances. Appraisal delays have jumped by 50 percent, just since the beginning of this year.

COESTER: You’re seeing significant delays. You’re seeing cost increases, you’re seeing rates expire.

OLICK: And without new recruits, the industry is aging fast. Now, more than 60 percent of appraisers are over the age of 50.

SMITH: If you’re really, really busy, you don’t have time to train anyone. And if you’re not busy, you don’t have anything to train them with.

OLICK: Changes to the new rules are being considered, but there’s no quick fix. And in the meantime, the number of delays and the level of frustration continue to rise.

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

(END VIDEOTAPE)

HERERA: Rental car stocks head in reverse, and that’s where we begin tonight’s “Market Focus.”

Shares of Avis and Hertz were hit hard after Avis’ president and CFO said European demand in August was, quote, “disappointing”. He noted that weakened demand was felt across the industry and believed the softness was driven by security concerns in Europe. Avis shares fell 8 percent to $35.77. Hertz dropped 10 percent, to $41.55.

Medical devices company, Boston Scientific, will buy EndoChoice for $210 million. EndoChoice, which makes products and services for treating gastrointestinal conditions, will become part of Boston Scientific’s endoscopy business. Shares of EndoChoice soared more than 88 percent to $7.95, while Boston Scientific dropped a penny to $23.72.

Shares of Juno Therapeutics took off after competitor Kite Pharma reported positive clinic results on a cancer treatment. Juno is reportedly having a similar drug that may prove to be similarly successful. Juno shares finished up nearly 13 percent at $33.42. Kite flew as well, up 9 percent to $60.04.

MATHISEN: American Express will hike its dividend 10 percent to 32 cents a share. The company’s board approved a new 150 million share buyback. This replaces AmEx’s previous buyback that had 50 million shares remaining. Shares of American Express rose more than 1 percent on the day to $64.28.

The mattress maker Tempur Sealy warned that third quarter sale will be below expectations, saggy, and sees 2016 sales down from 2015. The company also guided its full-year adjusted earnings lower. Shares of the mattress-maker took some lumps after-hours, initially dropping more than 20 percent after closing the regular day flat at $74.45.

The drive-in restaurant franchise Sonic estimated fourth r sales and profit will be below expectations. Sonic CEO cited lower consumer spending in restaurants and continued competition as reasons for the numerical miss. Shares of Sonic initially fell on the — after the bell news following a fractional gain during the day. It finished at $27.44.

HERERA: A group of U.S. investors with more than $2 trillion in assets in North Carolina says that state is bad for business. And they want change. The group is calling on the state to repeal the House bill — the House bill law that makes it harder for companies to hire top talent by limiting protections for lesbian, gay, bisexual and transgender people.

Erik Spanberg is senior staff writer at “The Charlotte Business Journal”, and joins us now to discuss the impact on business that that has had on that state.

Eric, nice to have you with us. Welcome.

ERIK SPANBERG, CHARLOTTE BUSINESS JOURNALL SR. STAFF WRITER: Thank you. Thanks for having me.

HERERA: Do we have an idea of how much this bill has cost the stat so far?

SPANBERG: Well, the estimates range. There has been a high estimate of $5 billion. By the UCLA Williams Institute, it’s a law school there. A lot of people who support this law say that’s grossly inflated.

Locally, the Charlotte Chamber of Commerce says $285 million has been lost because of this state law. But this much is clear — events, companies, conventions, all are saying bye-bye to North Carolina, because they are frustrated with this law known as HB-2.

MATHISEN: And Charlotte, of course, has been racked by civic unrest, and demonstrations over the past week back dating to the shooting of that individual last week. Is Charlotte really the epicenter of where this business impact has been felt? Or is it statewide?

SPANBERG: It is statewide. But Charlotte is the economic engine of North Carolina, the largest economy, largest city. And so, Charlotte feels it as much if not more than anyone else.

You mentioned the unrest. That certainly is not helping. That’s not a Chamber of Commerce type postcard.

And then the largest corporate employer in this region is Wells Fargo. Wells Fargo, as you well know, has been eviscerated on Capitol Hill in the past few weeks. So, it’s really been a rough go for the business community and the image-makers of Charlotte, North Carolina.

HERERA: So these investors with the $2 trillion worth of assets under management want to see change. But what are the odds that this bill will either be repealed, that there will be a compromise among lawmakers? Is there any hope of that?

SPANBERG: Well, there was some hope over the summer, because the threat of losing the NBA all-star game was hanging over the city of Charlotte. Even that was not enough to motivate the two sides to come to an agreement. So, the all-star game has been moved.

And now, most people don’t think anything will happen before the election, and they’re not sure anything will happen after the election, because North Carolina is controlled at the state level by Republican super majorities that is veto-proof. There is Republican governor. If the Republican governor who favors this law is replaced by his Democratic opponent, it seems highly unlikely that the Republican legislature would want to undo the bill that they passed and fought to keep in place with a new Democratic governor.

So, I tell you right now, there is a lot of pessimism and a lot of concern about still more losses in terms of events and corporate expansions.

HERERA: Erik, thank you very much. Erik Spanberg with “The Charlotte Business Journal”.

SPANBERG: Thank you.

MATHISEN: Coming up, is someone listening to your Twitter rant over a delayed flight? The answer is — yes.

(MUSIC)

MATHISEN: Here’s something a lot of us have done. Our flight is delayed or cancelled, and in frustration, we lash out at the airline on Twitter or Facebook. So, do those rants on social media do any good? Do airlines even read the posts?

A new study says yes, you are being heard.

Phil LeBeau reports tonight from Southwest Listening Center in Dallas.

(BEGIN VIDEOTAPE)

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: It happens thousands of times every day. Travelers rant online about an airline, because their flight is delayed, or they have had a bad experience.

UNIDENTIFIED MALE: I don’t think they can listen to us. Because there so many people who are flying and complaining at the same time.

UNIDENTIFIED FEMALE: I don’t think that the airlines are listening to the complaints.

LEBEAU: Fact is, airlines are watching, and often responding to what you put on social media. Southwest Airlines has a team tracking Twitter, Facebook and other online sites 24 hours a day, and when customers vent about a problem, Southwest reaches out to them.

LISA GOODE, SOUTHWEST AIRLINES: The approach is really how can we help? Wait a minute we hate to hear that, so what’s going on? Give us some information. Let’s see what we can do to straight this out.

LEBEAU: Social media teams help airlines by rebooking customers or just keeping them a little calmer by relaying the latest information when a problem pops up. Like in July, when Southwest cancelled over 2,000 flights due to a computer outage.

And even though every major airline tracks and answers customers online, some do it better than others. For example, Southwest answers almost half of the customers who mention the airline on social media, the best among airlines in North America. Meanwhile, Alaska is the fastest, answering social media posts within three minutes, according to Conversocial, which works with airlines like Alaska and tracks the industry’s interaction with millions of travelers.

JOSHUA MARCH, CONVERSOCIAL: If you know that you can tweet a company and get a response and have your issue resolved literally in minutes, that’s a phenomenal experience. And if you can do that, you will every single time.

LEBEAU: While more of us are taking out our phone whenever our flight plans hit turbulence, experts say you should think twice before sending that tweet or go to Facebook with a rant dripping in anger. They say a calmer request for help often leads to a quicker response, which could end up resolving your problem that much faster.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Dallas, Texas.

(END VIDEOTAPE)

MATHISEN: To read more about how your complaints about airlines are being heard on social media, head to our website, NBR.com.

HERERA: That will do it for NIGHTLY BUSINESS REPORT tonight. I’m Sue Herera. Thanks for joining us.

MATHISEN: And I’m Tyler Mathisen. Thanks from me, as well. Have a great evening, everybody. And we’ll see you 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) 2016 CNBC, Inc.

This entry was posted in Transcripts. Bookmark the permalink.

Leave a Reply