NIGHTLY BUSINESS REPORT for December 22, 2015, PBS - Part 1

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Javers, Phil LeBeau, Jane Wells, Mary Thompson, Kate Rogers (NYSE:ROG)>

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ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Sue Herera.

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Game on. The best performing stock in the Dow this year tops profit expectations. But is the outlook for Nike (NYSE:NKE) just as strong?

SHARON EPPERSON, NIGHTLY BUSINESS REPORT ANCHOR: New rules. Why real estate pros blame Washington for a sharp drop in sales last month.

MATHISEN: And, `tis the season. More people are giving back this year and the improving economy may have a lot to do with it.

All that and more tonight on NIGHTLY BUSINESS REPORT for Tuesday, December 22nd.

EPPERSON: Good evening, everyone. I`m Sharon Epperson, in tonight for Sue Herera.

MATHISEN: And welcome from me, as well. I`m Tyler Mathisen.

We begin tonight with earnings from the hottest Dow stock of the year, Nike (NYSE:NKE). The world`s largest the world`s largest sportswear maker continued to see strength in its North America and Chinese operations, reporting earnings of 90 cents a share, that was 4 cents better than estimates.

Revenues came in at nearly $7.5 billion for the quarter, just shy of expectations, but about 4 percent higher than last year. Shares rose in initial after hours trading, adding to Nike`s 37 percent gain so far this year.

Sara Eisen digs deeper into Nike`s results.

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SARA EISEN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Nike (NYSE:NKE) is firing on all cylinders. Few highlights from the quarter, China remains a bright spot for this company. Nike (NYSE:NKE) posting 24 percent sales growth in the region and a very strong outlook when it comes to future orders. This despite a slowdown in the Chinese economy.

Nike (NYSE:NKE) continuing to see double digit gains there. In fact, CEO Mark Parker told me a few months ago, he doesn`t see any sign of the economic weakness reported in the numbers. But like any global company, Nike (NYSE:NKE) is feeling the pain of the stronger U.S. dollar which continued to strengthen over the quarter.

Total sales growth for Nike (NYSE:NKE) this quarter was 4 percent. That would have been 12 percent though without the impact of the stronger U.S. dollar, which Nike (NYSE:NKE) feels particularly acutely in the emerging markets and, of course, in Western Europe with the weakness of the euro.

But when it comes to Nike`s story these days, it`s all about profitability, increased margin again this quarter driven by new innovative products and sneakers which Nike (NYSE:NKE) was able to charge higher prices for. That coupled with its efficiencies in the supply chain and new technologies when it comes to manufacturing like fly net all helping drive gains in Nike`s bottom line.

Overall, a solid quarter in what was high expectations, going into an earnings report from the Dow`s best performer of 2015.

For NIGHTLY BUSINESS REPORT, I`m Sara Eisen.

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EPPERSON: Paul Swinand follows Nike (NYSE:NKE) for Morningstar (NASDAQ:MORN) where he`s retail equity analyst.

Welcome, Paul.

You know, we just heard Sarah talk about high expectations for Nike (NYSE:NKE). Will that continue into 2016?

PAUL SWINAND, MORNINGSTAR: Don`t forget 2016 is going to be a strong year because you`ve got a number of events. The Olympics, the European Cup which is really important now. Nike`s pretty big in soccer. So, that`s a big event for them.

The other thing is don`t forget the dollar hopefully won`t restrengthen. If anything, it might weaken over the course of the year. Investors are already anticipating improvements.

MATHISEN: So, let`s talk a little bit about one of their critical markets and that is China. We hear every day, a drumbeat of news about how China`s growth is slowing, slowing, slowing. Is that slowing of growth affecting the Chinese consumer? Do you expect it in 2016 to show up there?

SWINAND: I cover luxury as well as sporting goods, and in sporting goods growth in China`s been strong. In luxury, it has not. But I this I that`s because a lot of Chinese consumers are going abroad either to Japan or to Europe to shop for luxury goods.

The other thing is, you know, $100, $200 pair of sneakers in China is kind of a luxury good in itself. So, I`m seeing this as a very positive read on China, the futures orders for Nike (NYSE:NKE) were up 34 percent.

EPPERSON: You know, a lot of investors are a little bit wary perhaps about apparel and particularly how some retailers have done during the holiday season. Is it better in 2016 to perhaps stick with athletic brands like Nike (NYSE:NKE) if you`re going to go for an apparel retailer?

SWINAND: Well, you know, you`ve got to be a little bit careful with apparel and also fashion. Obviously, in my view, athletic apparel and footwear athletic brands in general are a little less fashion sensitive than let`s say a Michael Kors. So, yes, athletic apparel has been a fashion trend in the last five, six years. But in general, a broad based company like Nike (NYSE:NKE), although they are fashionable, they`re kind of -- they`re more insulated than in other pure apparel brands.

MATHISEN: If I were to buy the thesis that I want to be part of the active wear world and I want to invest in either Nike (NYSE:NKE), Underarmor or Adidas, which one would you choose based on price and future prospects?

SWINAND: Yes, that`s a layup because even though I think all the companies are priced a little rich right now, Nike (NYSE:NKE) and Adidas are actually equally -- Adidas actually trades for a higher earnings multiple and they trade a little bit above my fair value, both companies. However, Nike`s long-term growth is about 10 percent to 12 percent where Adidas is only 6 or 7 percent. So I would pick Nike (NYSE:NKE).

EPPERSON: All righty. There we have it.

Paul Swinand, thank you so much, with Morningstar (NASDAQ:MORN).

MATHISEN: On Wall Street, stocks rallied as oil stabilized. And one of the most beaten downtown Dow stocks this year, Caterpillar (NYSE:CAT) saw big gains for a ching. The Dow Industrials rose 1655 points to 17,417. NASDAQ gained 32. That put it back above the psychologically important 5,000 level. And the S&P 500 added 17.

And the energy markets domestic crude traded basically at parity with Brent. That`s the global oil benchmark. West Texas settled at $36.14 a barrel, slightly above Brent at $36.11.

EPPERSON: The U.S. economy expanded a touch slower in the third quarter than first thought. The final read on third quarter GDP, which is the broadest measure of economic activity, came in at 2 percent from July to September. The economy had expanded by 3.9 percent in the second quarter.

Steve Liesman explains what`s working within the U.S. economy and what`s holding it back.

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STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: The government made a modest revision to third quarter growth, bringing gross domestic product to 2 percent. But that average of very pedestrian figure masked both strengths and weaknesses inside the U.S. economy.

First the strengths, the consumer`s been doing just fine for almost two years now. Six of the past eight quarters have seen growth of 3 percent or better. You have to go back to 2006 for a better running average than that. That`s helped send autos flying off of dealers` lots and meant pretty good gains in home building. So, if consumers are strong and they`re such a big part of the economy and it helped autos and it helped housing, why isn`t overall growth closer to 3 percent?

Well, there`s two reasons. First, business investment, second, weak overseas growth. Equipment spending, it was solid in the third quarter, but it`s been moving in fits and starts. It was up 9 percent in the third quarter, but just 0.3 percent in the second.

It`s been hampered by the crash in oil prices where spending for rigs and pumps and trucks for the oil field, they have been slashed. Companies have also -- it`s been reluctant to investment amid a climate of overall nervousness and uncertainty. After that, a stronger dollar which made American goods more expensive overseas and challenged domestic manufacturers. They`re trying to sell more expensive goods into mostly weak overseas economies.

The bottom line: domestic growth outside of oil doing pretty well, but weak overseas is growth and strong dollar -- they are taking away from total U.S. growth. The optimistic scenario for 2016, job and wage growth continued to underpin strong spending. Then, the dollar in oil stabilized and weak overseas economies turned around, giving manufacturing and business in the U.S. a lift. That could propel is the U.S. to the sought after 3 percent or even 4 percent growth.

It`s possible, but many on Wall Street are more worried about the opposite. That the weak parts of the economy in 2016 drag down the strong.

For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.

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MATHISEN: Home prices surpassed their 2007 peak in October. This according to the federal housing finance agency. Prices increased that month a half percent from the prior month, low inventory and improved job markets helped drive up those prices.

EPPERSON: On the other hand, Tyler, sales of existing homes suffered a surprise setback in November. The National Association of Realtors says sales tanked 10.5 percent for the month, way below expectations, to its weakest level in about a year and a half. And much of the decline is being blamed on new regulations out of Washington.

Eamon Javers has our story.

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EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Rising home prices and low inventory were expected to slow existing home sales last month, but new mortgage regulations got the blame for the whopping double digit decline in November.

LAWRENCE YUN: The big reason for the latest decline appears to be the new federal rule of regarding some new closing documents that needs to be processed. Because it`s new, people need to work through it. There`s a learning curve that they`ll go through.

JAVERS: Josh Greene at Eastern Title & Settlement Company has experienced that learning curve firsthand. The new rules that took effect October 3rd have changed the way his business interacts with lenders and slowed down the process.

JOSH GREENE, EASTERN TITLE & SETTLEMENT COMPANY: Where we`ve had four or five settlements in a day, they`ve ended up only being one settlement, and they get pushed back each day, due to the new closing disclosure rules.

JAVERS: While the closing process has been frustrating for buyers and sellers, it appears to be causing delays, not cancellations. But it could be a few more months before the real impact is known.

DEREK BLAIN: I think it`s going to take 60 to 90 days to work out all the kinks.

JAVERS: Some say the new regulations are a convenient scapegoat.

NELA RICHARDSON: What we have seen all year is very low inventory and appraisal issues. That`s been a big change in the market. It`s really derailed a lot of closings and it`s delayed settlements.

JAVERS: The Consumer Financial Protection Bureau says that future closings should go more smoothly once everybody gets used to these news rules. Meanwhile, the realtors say demand remains steady. It`s just price and affordability that are the issues.

For NIGHTLY BUSINESS REPORT, I`m Eamon Javers in Washington.

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MATHISEN: A measure of factory activity in the mid-Atlantic region rebounded in December. A survey by the Federal Reserve Bank of Richmond showed volume of new records picked up this month, while shipment is flat. The manufacturing sector has been hard hit by the strong dollar and weak global growth.

EPPERSON: While manufacturing overall has been floundering, the automotive portion is doing well. Today, there are reports that Ford and Google (NASDAQ:GOOG) are talking about working together to develop self- driving cars and a partnership if true could be announced shortly after the New Year. That sent shares of Ford nearly 3.5 percent higher and Alphabet, that`s the parent of Google (NASDAQ:GOOG), was up a fraction.

Phil LeBeau tells us why this reported partnership could mark the beginning of a new era in transportation.

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PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: With self- driving cars picking up speed, Ford is reportedly looking to partner with Google (NASDAQ:GOOG). The tech titan turning heads with tiny self-driven cars. Neither company confirms planning a partnership but both admit to talking with a number of companies about the future of automobiles which include self-driven cars.

DAVE WHISTON, MORNINGSTAR: How long has Ford been trying to do this themselves? We don`t know the exactly. But it also makes sense it partner with someone who`s already doing a lot of the work themselves too, and wants to partner with an automaker.

LEBEAU: Earlier this year, when Ford`s CEO Mark Field showed us the company`s new research center in Palo Alto, California, he admitted Ford is focused on the Silicon Valley because it`s a hot bed for innovation.

MARK FIELDS, FORD CEO: And that`s why we`re here, because we want to be part of this community.

LEBEAU: Meanwhile, Google`s self-driving test cars have logged more than 1.3 million miles. Reporting just 17 minor accidents and none where the Google (NASDAQ:GOOG) car was at fault.

CHRIS URMSON: So the end goal is to get this technology out so everyone can use it. We think the right way to do that is in partnership with those folks, you know, the car companies today who make these vehicles, do an amazing job doing it, and have been doing it for 100 years.

LEBEAU: Tesla`s autopilot already allows drivers to go hands free for short periods, and GM will soon unveil similar features with super cruise control. Meanwhile, Apple (NASDAQ:AAPL) is rumored to be researching electric autonomous drive cars.

It`s clear the auto and tech industries are on a collision course. What remains to be seen is which companies or partnerships wind up building the next generation of self-driving cars and trucks.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago.

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MATHISEN: Meantime, Ford is recalling some older cars. The automaker identified 313,000 vehicles in North America that have headlights that can go dark. And cause a crash. The recall covers Crown Vics and Mercury Grand Marquis from 2003 to 2005 model years. Safety regulators found 15 crashes and one injury related to these faulty headlights.

EPPERSON: Still ahead, nailed the landing. Why the launch of this rocket may mark a new phase in space travel.

(MUSIC)

MATHISEN: SpaceX completed a dramatic and historic launch and landing last night of its Falcon 9 rocket. It was the first time an unmanned rocket returned to land vertically.

And as Jane Wells reports, it marks a giant leap for the future of space travel.

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JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT: It was already big news that SpaceX was launching a Falcon 9 rocket. Its first launch since a rocket explosion had grounded everything last June until the problem could be solved. But last night in the Florida sky, it wasn`t what went up that had the biggest impact but what came down.

UNIDENTIFIED FEMALE: History in the making.

WELLS: For the first time, SpaceX was able to bring back to earth in one piece a first stage booster.

(CHEERS AND APPLAUSE)

WELLS: Not only was it the first successful landing, it was the first time Spacex had tried it on land after previous attempts to land the booster on a floating site at sea failed.

UNIDENTIFIED FEMALE: I can`t quite believe it.

WELLS: CEO Elon Musk said on a conference call with reporters that he thought at first the booster had exploded on impact because of the sound of the sonic boom. He was wrong. The booster was fine. And SpaceX even created an image of both the rocket`s launch and return.

ELON MUSK, SPACEX CEO: We could not have asked for a better mission or a better day.

WELLS: Why is this such a big deal? Well, reusing rockets can bring down the cost of launches by a factor of 100, says Musk. A necessary price cut to make space travel more prevalent and affordable and critical to his goal of putting people on Mars.

MUSK: I think it really quite dramatically improves my confidence that have a city on Mars is possible.

WELLS: Last month, Jeff Bezos of Blue Origin also successfully landed a rocket, which reached the edge of space before coming back down. Bezos sent his congratulations, sort of pointing out the altitude of the booster, quote, "Congrats SpaceX on landing Falcon`s suborbital booster stage. Welcome to the club."

But the SpaceX rocket landing was different. It was on a much more difficult mission carrying a payload of 11 satellites. SpaceX will test the booster to see if it could fly again, though it probably won`t fly this first one anymore, preferring to keep it as a very big memento.

For NIGHTLY BUSINESS REPORT, Jane Wells, Los Angeles.

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EPPERSON: Meanwhile, Boeing (NYSE:BA) reaches a settlement with the Federal Aviation Administration. That is where begin tonight`s "Market Focus".

The Dow component has agreed to pay a $12 million fine and improve its auditing and compliance procedures. The FAA says the fine could double over the next five years if the company does not implement the terms of the settlement. Shares of Boeing (NYSE:BA) rose 1 percent to $142.38.

ConAgra reported profits that topped expectations, despite a decline in sales. The maker of Slim Jim and Chef Boyardee was helped by cost- cutting and lower commodity expenses. Last month, the company said it would sell the majority of its private label business. Shares of Conagra were up a fraction to $41.37.

And paycheck said earnings rose 9 percent as it expanded its human resources services business. Revenue however came in slightly below analysts expectations. Paycheck shares were up slightly, though, to $52.71.

MATHISEN: Express (NYSE:EXPR) Scripts issued a strong earnings outlook for next year. The largest pharmacy benefits manager now expects a 10 percent to 14 percent increase to its adjusted 2016 earnings. The company also says it is negotiating the re-pricing of its contract with the big insurer Anthem. The stock started the day higher but it did finish down slightly at $86.67.

Investors getting a chance to react today to earnings from steel case. The office furniture-maker missed expectations on the top and bottom lines, gave weak fourth quarter earnings and revenue guidance. Shares down nearly 23 percent on the day to $14.55.

For the declines in shares of Chipotle as we told you last night, the Centers for Disease Control warns now of a potentially new E. coli outbreak unrelated to the other ones that have weighed on the fast casual chain in recent months. That has prompted JPMorgan (NYSE:JPM) to downgrade the stock. Shares off another 5 percent today to $494.61.

EPPERSON: Tyler, I don`t know if you`re like, but if you`re not quite done with your Christmas shopping, there`s actually an app for that.

Mary Thompson has the story from Amazon`s Prime Now hub in New York City.

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MARY THOMPSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: For workers at Amazon`s Prime Now fulfillment center in Manhattan, the one hour shoutout means get moving. This app-based service promising to get the goods to clients in select cities in 60 minutes or less for $7.99.

STEPHENIE LANDRY, PRIME NOW: It is a pricey thing to do one-hour delivery to customers. But we really do focus on keeping our costs in line so we can offer great things to customers.

THOMPSON: Launched last December, Prime Now is upping the game this year, promising clients using the Prime Now app on their phones to deliver last minute Christmas gifts to them by 11:59 p.m. on Christmas Eve.

Typically, clients condition use Prime Now to order household items and bakes like bottled water. Closer to Christmas though, Amazon (NASDAQ:AMZN) Prime Now`s worldwide director Stephenie Landry is seeing a change in client`s wish lists.

LANDRY: Heading up to the holiday times, we`ve seen a shift with people buying more holiday stuff, toys, lots of board games, consumer electronics, more things for the holidays lately.

THOMPSON: Amazon`s Prime Now hubs operate pretty much the same as the online giant`s traditional warehouses, though at a faster pace and higher turnover of inventory to keep up with customers` requests.

Prime Now also keeping up with the times, giving you can only order using your mobile device.

And this holiday season, that`s where more and more people are shopping. Adobe saying mobile sales are up over 26 percent this holiday season, accounting for 37 percent of all online shopping, as more shoppers phone it in.

For NIGHTLY BUSINESS REPORT, I`m Mary Thompson in Manhattan.

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MATHISEN: Meanwhile, the economy doing better, are consumers making more donations this year?

Patrick Rooney is associate dean for academic affairs at Indiana University`s Lilly Family School of Philanthropy and he joins us now.

Patrick, welcome. Good to have you with us.

Last year, Americans gave something like $358 billion, three-quarters of which came from individuals. Do you expect that number to be up this year and how tied is giving to the fate of the economy and the stock market?

PATRICK ROONEY, INDIANA UNIVERSITY`S LILLY FAMILY SCHOOL OF PHILANTHROPY: Yes, we think that the economy is very important player in overall giving because people give generously out of their incomes every year. And the more incomes they have and the more wealth they have, the more they are likely to give and the bigger gifts they`re likely to make. Each year, we see increases and decreases as we see with the business cycle. So, we`re hopefully their giving will increase next year.

EPPERSON: Are people, Patrick, being more discerning in terms of where they give? I`m hearing about impact philanthropy and people wanting to work in an organization perhaps, volunteer before they give money, really checking out these organizations to make sure that they`re doing what they say they`re doing, that their money`s going to the right purpose. Are we seeing more research and more activity like that among a lot of donors?

ROONEY: Absolutely. More and more donors are saying I want to understand the impact my gift will have. I want to understand the organization. I want to make sure it has good leadership and good management.

So, they look at the board members. They sometimes volunteer themselves first, and they want to look at what are the long-term outcomes as well as short term impacts.

MATHISEN: Where do Americans give the most?

ROONEY: Well, about a third of total giving goes to their faith- based organizations. So, mass, mosques, synagogue, other congregations. Higher education and other educational institutions get about 15 percent. Health and human services get another 15 percent. Those are the biggest sub-sectors.

EPPERSON: Very quickly, Patrick, where can you go to check out the charity you`re interested in? Where should you do the research?

ROONEY: Well, one of the resources that`s available to everyone for free is Guide Star, www.guidestar. It`s a resource that has annual reports and IRS informational tax returns for all the charities in the United States. So, that`s a good resource as a starting point.

MATHISEN: Quickly, I would assume that the more affluent you are, the more inclined as a percentage of those people that those people would give. But do the affluent give a larger percentage of their income than those who give who are not so affluent? Or do you know?

ROONEY: That`s a great question. We absolutely see an increase in giving and the propensity to give with increases in wealth across the entire income and wealth spectrums. At the same time, some people speculate that low income households give more sacrificially out of their incomes because they have less to deal with.

We do a study every other year for Bank of America (NYSE:BAC) on philanthropy among high net worth households, and we see that very high net worth households tend to give a larger and larger share of income compared to the middle class and lower middle class in the United States.

MATHISEN: Patrick, thank you very much. Patrick Rooney with Indiana University`s Lilly Family School of Philanthropy.

ROONEY: Thanks for having me.

MATHISEN: And coming up, seeing green a small business hoping to make it big when New York`s new medical marijuana laws kick in in the New Year.

(MUSIC)

EPPERSON: Here`s what is to watch tomorrow. Lots of economic data to keep an eye on, including durable goods orders, a read on personal income and spending. The new home sales report is also out. That`s what you need to watch Wednesday.

MATHISEN: The New Year will bring changes to New York. Some marijuana laws, the state`s five licensees will be able to legally sell medicinal cannabis in early January.

And as Kate Rogers (NYSE:ROG) reports from Johnstown, New York, one entrepreneur is ready to open for business.

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