nightly business report - wednesday march 13 2013

7/29/2019 Nightly Business Report - Wednesday March 13 2013

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ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen andSusie Gharib.

SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: Grinding higher.The Dow ekes out a gain, another record high and the first nine-day winning streaksince 1996.


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TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Taking thethreat seriously. The president meets with CEOs about how to deal with possible cyberattacks on American businesses and critical infrastructure. We`ll tell you what it meansto you.

MATHISEN: And a new leader. The Catholic Church elects a new pope.

We`ll tell you why this pope will need to be part spiritual leader and part CEO.

Good evening, everyone. And welcome to our public television viewers.

So, Tyler, history in the making, not only in Vatican City but on Wall Street.

MATHISEN: That`s exactly right. The day began with lots of suspension in bothplaces and it ended in both places with definitive outcomes. On Wall Street, thatoutcome was another record high close for the Dow, and we begin there tonight.

Now, the Dow`s win streak continues, nine in a row. The blue chip index hasn`tdone that in 16 years. In fact, it hasn`t had a down day this month. Today, the Dowadded five points, ending at 14,455, its seventh straight record closing high.

The NASDAQ was up nearly three points and the S&P 500 inched two pointshigher. That leaves it less than 11 points from its all-time closing high.

Now, the markets got an early boost from strong retail sales last month, whichrose 1.1 percent, nearly double what economists had expected.

That`s the biggest spending gain in five months.

But as Courtney Reagan tells us, those top line numbers can be deceiving.


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(BEGIN VIDEOTAPE)

COURTNEY REAGAN, NIGHTLY BUSINESS REPORT CORRESPONDENT:Well, the government`s headline retail sales number came in nearly double whateconomists expected for February. The details reveal a less than rosy picture when itcomes to discretionary spending.

MATT ROSS, JPMORGAN RETAIL ANALYST: I think the consumer is still in afragile state. Remains very resilient but with an air of underlying stability, which is thekey. I think that`s what you`re seeing come through in the numbers right now.

REAGAN (voice-over): The national average price for a gallon of regularunleaded gasoline rose more than 20 cents in February from the end of January,accounting for the five percent increase in spending at gas stations. Auto dealershipspending also increased. And as the housing market continues to recover, consumersare spending on building equipment and garden supplies.

But areas of more discretionary spending didn`t post such strong numbers inFebruary. Department store spending fell 1 percent after increasing half a percent inJanuary. Furniture and home furnishing store sales dropped 1.6 percent. Electronicand appliance store sales decreased

0.2 percent.

Americans also ate out less in February with spending in food service locationsdropping 0.7 percent.

ROSS: I think what we`re seeing is underlying stability, but I do still think that theconsumer is susceptible to some of the headwinds out there, whether it`s gas prices,the payroll taxes, or whether disruptions.


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REAGAN (on camera): Lower income Americans seem to be the most fragile.On Tuesday, Walmart CFO Charles Holley said taxes are his shoppers number twoconcern, adding it`s the first time in a long time taxes were a top concern at all.

(voice-over): ITG investment research chief economist Steve Blitz says this retailsales report illustrates two separate consumer groups.

With higher income Americans spending on autos and building supplies, while lowerincome Americans continue to be adversely impacted by higher payroll taxes, rising gasprices and delayed tax refund checks, a sentiment echoed by the national retailfederation.

For NIGHTLY BUSINESS REPORT, I`m Courtney Reagan.

(END VIDEOTAPE)

MATHISEN: And as Courtney just mentioned, consumers are spending onhousing and garden supplies. And coming up, we`ll take you behind the scenes of thehome depot product walk. It`s where companies showcase their hottest home items for

this spring.

GHARIB: Chief executives of some of America`s biggest companies areoptimistic about the U.S. economy, expecting it to grow more than 2 percent this year.

The Business Roundtable is out with its latest CEO economic outlook index. Itrose to a score of 81 in March. Now, that was much higher than the previous reading of

65 back in December. Anything above the score of

50 indicates economic expansion.

Another positive, the survey was taken even before the recent run-up in the stockmarket.


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Now, 72 percent of those CEOs surveyed expect their company sales to rise inthe next six months, 38 percent plan to boost capital spending in that same period, butonly 29 percent of them expect to hire more workers over the next six months.

Now, if you`re thinking of making new investments, here`s your chance to getinto the exclusive world of private equity. Carlyle Group, the giant buyout firm, is lettingin newer investors by sharply lowering the minimum amount of money needed to get in.And while many investors love the idea of investing with the big boys, Kayla Tauschewarns us: buyer, beware.

(BEGIN VIDEOTAPE)

KAYLA TAUSCHE, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):

Admission into Wall Street`s inner circle has long been expensive. If you didn`t havemillions of dollars in your bank account or 401(k), investing with top money managerswould have been completely off limits. Not anymore. Top private equity firms havebeen lowering the barrier to entry, slowly introducing new funds open to everyday

investors.

The pitch: for future retirees, a more sophisticated approach, one beyond plainvanilla stocks and bonds and access to the complex, yet profitable investments of WallStreet.

The Carlyle Group, one of the largest of these firms, is just the latest to make this

offer. For those making more than $200,000 a year and with more than $50,000 tospare, Carlyle will spread your money across its buyout investments which rise when ittakes over new companies.

(on camera): These deals for decades were the industry`s bread and butter.Takeovers of American icons like Nabisco or Hilton Hotels pumping up their profits.


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Until it was time for the private equity firms to go public themselves, they needed morediverse revenue than just deals alone.

(voice-over): Now, the four largest firms Carlisle, Blackstone, KKR

(NYSE:KKR) and Apollo manage half a trillion dollars. But only a handful of mutualfunds making up just a tiny fraction of that total are open to retail investors and most ofthem have just launched in recent months.

Morningstar (NASDAQ:MORN), which rates mutual funds, waits three years toevaluate a fund`s track record/ But for these funds in the short time they have beenopen, the S&P 500 has proved a better investment.

For NIGHTLY BUSINESS REPORT, I`m Kayla Tausche.

(END VIDEOTAPE)

MATHISEN: A lot of movement in technology, and that tops our "Market Focus"tonight.

BlackBerry again the most active stock as it booked an order of more than amillion new Z10 smartphones from an established partner company.

Netflix (NASDAQ:NFLX) was the biggest gainer of the day, up 12 percent, as it

goes social, giving users a tool to tell their Facebook

(NASDAQ:FB) friends what they`re watching, however dangerous that might be.


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And Facebook (NASDAQ:FB) itself was down more than 2 percent, as the FTCtells social media companies to make sure their ads on their screens are clear andtruthful.

Now, Google (NASDAQ:GOOG) announcing an executive change in its Androiddivision. Andy Rubin is stepping down.

Well, who`s Andy Rubin? He`s the guy who developed the Android operatingsystem now used on roughly two-thirds of all the world`s smartphones. He`s going tostay with Google (NASDAQ:GOOG) in a yet to be disclosed role.

Shares were down, closing at $825 and change.

GHARIB: Amazon (NASDAQ:AMZN) is trying to get more consumers to buy itslarge-screen Kindle so it`s cutting the price by $100, undercutting Apple`s iPad. TheKindle Fire, the HD version, with wireless capability, will now start at $399.

Amazon (NASDAQ:AMZN) shares gained slightly to $273.

Well, a clear message to J.C. Penney`s investors from the struggling retailers topmanagement today. Penny`s chief financial officer, Ken Hannah, told the conferencehe`s not resigning and the same goes for CEO Ron Johnson. Hannah said, quote,"We`re not going to run and hide."

JCP shares rose for a while for those comments but close unchanged at $15.65.They`re down 20 percent so far this year.

MATHISEN: The Securities and Exchange Commission is allowing four of thebiggest banks, Citigroup (NYSE:C), JPMorgan (NYSE:JPM) Chase, Bank of America(NYSE:BAC) and Morgan Stanley (NASDAQ:NBXH) (NYSE:MS) to block shareholder


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votes on potentially breaking up the companies. The shareholder proposals had beenmade by corporate watchdog groups affiliated with the AFL-CIO and religiousorganizations.

Here`s how those banks did today. Three of them higher, JPMorgan

(NYSE:JPM) Chase down 12 cents.

Nissan is recalling five 2013 models sold in the U.S. because the front passengerair bag may not deploy properly because of faulty sensors.

The models are the top selling Altima and Sentra, the Pathfinder, the Leaf and the

Infinity JX35.

Now, Nissan did not provide the number of vehicles affected, but said there havebeen no reports of injuries or crashes.

Nissan shares, which do not trade heavily here in the U.S., were up

1.5 percent today.

Well, the big news today, of course, is that the Catholic Church has elected anew pope. Argentina`s Jorge Bergoglio, the first pontiff from outside Europe in morethan a thousand years. He will be known as Pope Francis I.

The crowd in St. Peter`s Square rejoiced as he was introduced to the world for

the first time, an electrifying moment. Not only will he be the spiritual leader of theworld`s one billion or so Roman Catholic, he will also have to lead in a lot of other ways.

Mary Thompson is here to explain.


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What will Pope Francis I have to bring to the table in terms of management skills,the skills of a CEO?

MARY THOMPSON, NIGHTLY BUSINESS REPORT CORRESPONDENT:That`s right.

You know, I spoke to Dr. James O`Rourke, who`s a professor of management at theUniversity of Notre Dame. And he said, basically, there are four things that the newpope has to have.

First of all, he has to have a strategic vision. What does he need to changewithin the papacy?

Second of all, and probably most important, is he needs team-building skills.Anyone will tell you if they spent time at the Vatican, it`s not the friendliest place. Thereare a lot of people there who are very ambitious. They have their own agenda, one theysometimes put ahead of the Holy See. So he needs to build a team and say, we rehere to do this for the people, for the Vatican, put aside your individual ambitions andlet`s go ahead.

Thirdly, he needs strong financial skills. It`s odd. Would you need a pope withan MBA? Maybe not an MBA, but certainly interest and acumen about financialmatters.

And lastly, Professor O`Rourke said he needs charismatic empathy. He has totell his followers why they should follow him. Why he has a path to a better life.

GHARIB: Harvard Business School has a new CEO training program withMichael Porter, he might want to check that out.

But, seriously, in terms of looking at the Vatican and what he`s overseeing, weknow it`s a huge empire but exactly -- what are the business units so to speak?


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THOMPSON: Well, from a financial standpoint, he does handle the day- to-dayfinancial operations of the Vatican and most importantly, the Vatican Bank, which hashad its shares of problems. You might recall a couple of years ago they fired the

president of the bank, accused him of gross negligence.

Pope Benedict started reforms and a number of people hope will continue underPope Francis. He brought in a new president and also you need to get the VaticanBank up to European Union banking standards and that`s a goal that they want theVatican to stay on track of.

MATHISEN: Very quickly, do we know much of anything about him as amanager and administrator?

THOMPSON: Not that I know so far about Pope Francis I, but he did run anarchdiocese and not a small one in Buenos Aires.

MATHISEN: In Buenos Aires.

THOMPSON: Yes.

MATHISEN: Mary Thompson, thank you very much.

THOMPSON: Sure.

GHARIB: Well, moving from the Vatican to Washington, security is always anissue. Today, President Obama sat down with some top CEOs to talk about cyberattacks. We`ll have the latest on that meeting and we`ll also explore the biggest threatto our cyber safety.


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But first, let`s look at how stocks fared around the globe.

(MUSIC)

GHARIB: A federal judge is ordering Apple`s CEO, Tim Cook, to testify in thegovernment`s antitrust case against the company. The lawsuit, which was filed lastApril, claims Apple (NASDAQ:AAPL) conspired with several book publishers to hike e-book prices. Apple (NASDAQ:AAPL) has denied the charges.

MATHISEN: Senate Democrats released a federal budget proposal today thatincludes nearly a trillion dollars in tax hikes and almost another trillion dollars inspending cuts over the next decade. That is in sharp contrast, of course, to the HouseRepublican budget unveiled just yesterday outlining more than $4.5 trillion in totalspending cuts and no tax increases.

Meantime, President Obama went to the Hill today to meet with HouseRepublicans, hoping to sell his proposal to strike a so-called grand bargain of tax

increases and entitlement cuts, but when the president releases his own budget plan inApril.

GHARIB: Also in the spotlight in Washington today, President Obama meetingwith some top CEOs to talk about the threat of cyber attacks and the huge economiclosses that come from computer hacking. The president said he`s taking cyber securityseriously, so seriously that he met with those business leaders in the Situation Room atthe White House.

Eamon Javers joins us from the White House with more -- Eamon.

EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Hi, youguys.


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Well, it was about a dozen CEOs here at the White House. The White Houseitself has been a little cagey about the list of CEOs who attended this meeting. Westaked them out. We didn`t see a whole lot on their way in or way out, but we`re told

Jamie Dimon of JPMorgan (NYSE:JPM) was here, also Rex Tillerson of ExxonMobil(NYSE:XOM) was expected to attend and a long list of other top business CEOs from arange of industries.

Clearly, this was a meeting that the president said was important for his agenda,and we talked with David Cote, the CEO of Honeywell on his way out. He explainedthat a lot of the CEOs were really behind what the president had to say today.

Take a listen.

(BEGIN VIDEO CLIP)

DAVID COTE, HONEYWELL CHAIRMAN & CEO: This is a scary area. Andwhen I think about any single thing that I worry about the most when it comes to what

could happen that I just don`t know about, that kind of unknown threat that could justreally cause pain, cyber security is it. So I`m fully supportive, and so is every CEO whowas in that room.

(END VIDEO CLIP)

JAVERS: Fully supportive, but what Cote also said in that interview was that he

wants a light touch from government in terms of regulations and requirements on cybersecurity for companies.

Now, that`s something that we`ve heard from other CEOs as well.


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Clearly, there`s a little bit of a point of tension from the company`s perspective over howmuch authority the White House and the U.S. government is going to have over cybersecurity issues.

GHARIB: You know, Eamon, we`ve been getting warnings about cyber attacksever since 9/11 and yet, we`re still talking about it, we are still vulnerable.

Why do you think that businesses and the government have been dragging theirfeet to fix this problem? Did you get any sense of that from talking to people today?

JAVERS: Well, there`s two real reasons for that. The first one is it`s just veryhard to tell who is actually doing these cyber attacks, tracing them back to their sourcecan be infuriatingly complicated. And also, when you do trace it back to its source,often it`s offshore in a remote location. In some cases it`s a unit of the Chinesegovernment that`s sponsoring a lot of these attacks.

That makes it very difficult in terms of geographic location and also diplomaticallywith foreign governments and foreign intelligence services.

It gets very, very complicated. And that`s part of the reason why this is so difficult.

GHARIB: All right, Eamon, thanks a lot.

JAVERS: You bet.

MATHISEN: Our next guest says cyber attacks are a war on Americanbusinesses and consumers.

Paul Viollis is CEO of Risk Control Strategies, a New York security firm thatadvises companies on how to protect their businesses against cyber attacks.


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Mr. Viollis, welcome. Good to have you with us.

PAUL VIOLLIS, RISK CONTROL STRATEGIES CEO: Thank you.

MATHISEN: I`m wondering whether cyber attacks are becoming much morefrequent or are we just hearing more about them?

VIOLLIS: Actually, certainly not new to us (ph). I mean, this is something that`s

been going on many years right now. It`s starting to come more and more into thepress, but it`s certainly not a new concern to us whatsoever.

MATHISEN: But are there more of them? Are you detecting more of them? Aremore of your clients saying we`re getting hacked or we`re worried about gettinghacked?

VIOLLIS: I can say, you know, without question over the last several years,we`ve seen an exponential increase in attempted hacks into -- as well as successfulhacks into our corporate as well as our private clients.

And the interesting part about it is, though, the business model associated with this is sostrong that it attracts the major organized crime groups, such as those out of theeastern bloc and those coming from various parts of China.

GHARIB: Paul, you heard our report and you heard the reaction from the CEO of

Honeywell.

How do we fix this problem? Is it going to come from the private sector? Is itgoing to come from government or is it going to come from both working together?


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VIOLLIS: Well, I think, you know, it`s got to come from both. One, when youtake a look at government, you have to look at our infrastructure and just where that isright now and what we have to do to make that stronger. It`s no great secret that it`sweak and it`s vulnerable. So, that`s going to take a government commitment and Icommend the president by stepping up and doing the right thing and bringing a group of

leaders in there to discuss that.

But it can`t stay there. It`s got to start there. It`s got to build from there.

The government is going to have to do their part to protect our infrastructure, toprotect what we have as a country.

And corporate America is going to have to step up. They`re going to have toinvest in making sure that they begin to holistically identify their vulnerabilities and thendevelop a strategic plan to mitigate those vulnerabilities preemptively.

MATHISEN: It`s pretty easy to see how this is a major threat at the corporatelevel, particularly in critical infrastructure, water systems, power companies and so forth.But round third base and bring it home for me as a consumer, as an individual investor,

as a person living in this country.

What is the risk to me? How am I going to feel it?

VIOLLIS: All right. That`s a great question. Think about it this way. When welook at the individual itself, you`ve got to take a look at who the perpetrators are andwho`s actually focusing on the potential target.

So from the general consumer, the one thing we need to recognize more thananything else is that we cannot simply just send our proprietary, our financialinformation over the Internet without a decent level of protection. Hence, therecommendation there, the solutions that more people are moving towards is attaching


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a small encrypted box, firewall, to their existing router so when they are communicatingproprietary information, that`s communicated safely and securely.

When you take a look at the collateral effect to the consumer today for corporateAmerica not doing what they should, on the small ending, you`re talking about losingyour personal identifying information all the way up to your financial information.

And let`s put it this way, when something is gone and your identity or thatinformation is stolen, it`s stolen forever. It`s not going to come back to you.

GHARIB: What about the Cloud? A lot of people feel like if everything is backedup on the Cloud and they have password protection, that they`re OK.

VIOLLIS: Right. If you speak to any real cyber security expert, they`re going totell you that the Cloud is just another example of putting information in a place you can`tcompletely control. The part that we really need to identify here is that whenever wehave a human element, a human element that controls the gate to that data, whetherit`s the data center or the Cloud, wherever it maybe, we have to make sure that theintegrity of that individual is intact.

So, any information that goes to the Cloud, or anywhere else, where you don`thave complete and total control over who`s accessing that information is subject tobreach. That`s the part that I have never been enamored with the cloud.

MATHISEN: That`s kind of my feeling too, Paul. If it`s out there, it s out there.That`s the way I`ve felt.

Paul Viollis, CEO of Risk Control Strategies, thank you very much for being withus.


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GHARIB: And coming up on the program, as we head into spring, what someimportant CEOs think will get consumers to spend.

But, first, we look at where currency closed today.

(MUSIC)

MATHISEN: And on our radar for tomorrow, we`re going to get a measure of thehealth of the labor market when we see the weekly jobless claims numbers. We`ll alsohear from Treasury Secretary Jack Lew in his first on the job interview. And Samsung

expected to unveil its new Galaxy 4 phone.

That is all tomorrow.

GHARIB: Well, spring officially begins one week from today -- the heart of thereal estate spring selling season and a chance for many of us to plan some homerepairs and lawn cleanups. The nation`s largest do-it- yourself chain, Home Depot(NYSE:HD), is getting ready too.

Brian Sullivan takes us to the company`s annual new product walk in Las Vegasto show us what companies are banking on this spring.

(BEGIN VIDEOTAPE)

BRIAN SULLIVAN, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):

The home improvement business is massive, with some estimates of how muchconsumers spent on their homes last year peaking as high as $300 billion.

After years of sluggish growth, thanks in large part to a major housing downturn, thatfigure looks poised to go even higher.


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Fitch Rating says home improvement spending will increase by another 4percent this year and an industry group projects spending will balloon to nearly $345billion over the next five.

So, what is driving all that growth?

FRANK BLAKE, HOME DEPOT CEO: Housing we think is getting better. Youcan see it in terms of household formation, housing turnover, new home starts. Thereare a lot of data that says housing is actually improving.

So as home prices increase, they`re more likely to do projects in their house becausethey know they`re going to get the value out that they put in.

SULLIVAN: Home Depot (NYSE:HD) takes the job of getting all its employeesready for the spring season seriously.

(on camera): Over the next two days, 3,100 store and district managers for

Home Depot (NYSE:HD) will gather here at the company`s annual product walk. Thegoal: make sure the managers and employees know everything about the productsthey`re selling.

(voice-over): And there are lots of products. Everything from toilets to tilecutters, with more than 600 exhibitors spread out over

400,000 square feet of display space, about four times the size of the average HomeDepot (NYSE:HD) store.

But there have been some signs that the red-hot market is starting to cool down.According to the latest remodeling index from BuildFax, the number of building permitsfell by 6 percent in December from the previous year. If you take out the rebuildingefforts in the Northeast following superstorm Sandy, that drop would have been evenbigger.


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Some of the industry`s major players have taken notice.

TIM WADHAMS, MASCO CEO: I think your pointing about the consumer iscertainly one that has not played out yet but possibly could, just in terms of, you know,less disposable income.

SULLIVAN: And when it comes to a more cautious consumer, even the queen ofhome and garden can be humbled.

MARTHA STEWART, MARTHA STEWART LIVING OMNIMEDIA, INC.: I thinkthe consumer is coming back. I`m an optimist. I certainly hope that the turn- around isoccurring and with the stock market doing so well, I think it would be a great thing.

SULLIVAN: For NIGHTLY BUSINESS REPORT, I`m Brian Sullivan in LasVegas.

(END VIDEOTAPE)

GHARIB: Tyler, I don`t know about anybody else but I can speak for myhusband. He`s going to contributing not just to Home Depot (NYSE:HD) but the U.S.economy. As soon as the weather gets like this, he`s out there --

MATHISEN: He`s going to be out there buying and spending.

GHARIB: I say go and get a hose and he comes back with $500 of stuff.


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(LAUGHTER)

MATHISEN: I`ve got to meet him. He`s a good guy, because I do the same

thing. I`m really looking forward this weekend to planting some grass seed in my --

GHARIB: Isn`t it kind of early?

MATHISEN: It`s OK. It`s OK. It will come up. So I look forward to spendingsome time at Home Depot (NYSE:HD).

It`s a really amazing day. Nine days in a row of gains for the Dow and a newpope in Rome. Whether you`re Catholic or not, it is an electrifying moment to see all ofthose people gathered there in Vatican Square rejoicing over a new leader.

GHARIB: It was pouring rain. Everybody was waiting to find out who this wasgoing to be.

And I think from what Mary was telling us, he sounds like he`s at a crucial pointfor the Vatican and it will be very interesting to watch what he does.

MATHISEN: The pope was announced about 2:00 p.m. Eastern Time and I betthey all went out and had a very nice dinner for us.

All right.

GHARIB: That`s it for us, NIGHTLY BUSINESS REPORT for tonight. And wewant to remind you, this is the time of year your public television station seeks yoursupport -- support that makes programs like NIGHTLY BUSINESS REPORT possible.


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MATHISEN: All righty. On behalf of your public television station, thank you verymuch for your support. Good night, everybody. We hope to see you right back heretomorrow night.

END

Nightly Business Report transcripts and video are available on-line post broadcast athttp://nbr.com. The program is transcribed by CQRC Transcriptions, LLC. Updates maybe posted at a later date. The views of our guests and commentators are their own anddo not necessarily represent the views of Nightly Business Report, or CNBC, Inc.

Information presented on Nightly Business Report is not and should not be consideredas investment advice. (c) 2013 CNBC, Inc.

nightly business report - wednesday march 13 2013

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