NIGHTLY BUSINESS REPORT for February 16, 2016, PBS - Part 1

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Morgan Brennan, Hampton Pearson, Courtney Reagan>

Affairs; Education; Minorities; Technology; Youth>

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

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Falling into place? A lot has changed in the past few days, helping the S&P 500 put together its best two-day rally since August of last year.

SHARON EPPERSON, NIGHTLY BUSINESS REPORT ANCHOR: Production freeze. Will a pledge by some of the world`s largest oil producers succeed in tackling the global glut of crude?

MATHISEN: And bridging the divide. Increasing diversity in the nation`s fastest growing and highest paying industry, while helping girls of color reach their dreams.

The first part of a week long series begins tonight on NIGHTLY BUSINESS REPORT for Tuesday, February 16th.

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

MATHISEN: And I`m Tyler Mathisen. Welcome, everyone.

OK, folks, let`s not go crazy. It is, after all, just two days, but a year in which two-day rallies for stocks have been rarer than two days without a GOP presidential debate, investors will surely take it. In fact, since the intraday lows on Thursday, the S&P 500 and NASDAQ are up about 5 percent.

What`s more: the rally is broad and it seems to be sticking and it even happened as oil prices fell. That`s a rare disconnect this year.

Today, the Dow Jones Industrial Average rose 222 points to 16,196. NASDAQ gained more than 2 percent or 98 points, and the S&P 500 rose 30. Two of this year`s most battered sectors, finance and technology led the way today.

Bob Pisani reports on why the bulls are in charge for now.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: The markets are putting together one of the few multi-day rallies of the year. It`s the best two- day rally for the S&P 500 since August of last year. What`s change? Well, there`s a lot of talking, but it`s high level talking and it`s about three of the four biggest worries for the market.

First, the Russia-Saudi talk of a freeze in oil production. Most don`t believe it, but these are the two biggest producers in the world at least agreeing that something is very wrong. And even though oil is down, more than 60 percent of the energy sector was up today. That`s interesting.

Secondly, there`s concern about weak growth in China and a big devaluation of the currency there, the yuan. Traders took note of the record loans that Chinese banks gave out in January. That`s good news, the consumers strong. And an influential People`s Bank of China governor strongly defended the yuan, implying that there would be no sudden devaluation. So, the China market rallied overnight.

Third, there`s worry about European bank debt. ECB chief Mario Draghi said he would not hesitate to act at a March policy meeting if the markets turmoil threatens the economic outlook. And Deutsche Bank said last week they would be buying back some of their bonds and others may do so.

Finally, on the fourth worry, this is the Fed raising rates. There`s been no jawboning in the last few days, but the Feds funds futures market indicates essentially no hikes for 2016 or at least traders believe there will be no hikes.

But this is still not good enough. So much damage has been done that no one will believe anything until we put together a string of up days. We have not put together a three-day rally in the Dow or the S&P since December 21st to 23rd of last year. Wow.

For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock Exchange.

(END VIDEOTAPE)

EPPERSON: As Bob just mentioned, some of the world`s largest oil producers reached a deal to freeze production. But prizes rose just briefly and settled lower, because it wasn`t the production cut that many had been looking for. Will there be more additional meetings or agreements down the road?

Jackie DeAngelis reports.

(BEGIN VIDEOTAPE)

JACKIE DEANGELIS, NIGHTLY BUSINESS REPORT CORRESPONDENT: After weeks of headlines, big oil producers would have to cut production and speculation that OPEC could hold an emergency meeting, we`ve finally heard from the Saudis and Russia that an agreement is in place, just freeze output at current levels. But a freeze isn`t a cut and a freeze may not do much when it`s at or near record highs.

JEFF GROSSMAN, BRG BROKERAGE PRESIDENT: The statement with Russia and Saudi Arabia, to me, is a step in right direction. I don`t know how much is going to affect the overall the price near term here. But again, if some of the other players come into line, also, we do have at least a consolidation of sentiment here. And this market could work its way a little higher.

DEANGELIS: So, the question now, is this a first step? Could OPEC and non-OPEC parties that are adversaries agreeing to a freeze mean that they could agree to more? It could be.

But remember who is staying out of this, Iran and the U.S. The Saudis won`t cut if Iran doesn`t cut. And U.S. producers have lowered costs. While they`re suffering, they`re still in the game.

GROSSMAN: Twenty-seven and a half dollars was a pivot point over the last, let`s say, two weeks or so. So, if we stay above there, the market still stays in somewhat positive range. But again, let`s look at, let`s say the upside, there`s tremendous resistance above this market and about anywhere between 31.5 and 31.80. That`s again a number that`s going to take some work for the market to get above and hold.

DEANGELIS: While surging supply has certainly been part of the story and forecasts haven`t changed for global demand, there could be a caveat coming that`s seasonal that could change the game here.

GROSSMAN: We`re talking about a winter that could, you know, really draw down heating oil stocks, natural gas stocks. If we have an early spring, it will be driving season coming in. I think people are going to be very free with gasoline.

DEANGELIS: But for the moment, the market is at a standstill. The freeze heard about today could keep it from moving lower, but it`s not necessarily enough to drive it higher.

For NIGHTLY BUSINESS REPORT, I`m Jackie DeAngelis.

(END VIDEOTAPE)

MATHISEN: Let`s turn now to Patrick Kaser for more on the global markets and today`s stock market rally and the rally around the globe the past couple of days. He`s managing director and portfolio manager at Brandywine Global Investments.

Patrick, welcome. Good to have you with us.

PATRICK KASER, BRANDYWINE GLOBAL INVESTMENTS: Thanks for having me.

MATHISEN: You know, we get paid to put on a show every night. So, forgive us on putting a microscope on today`s rally and thinking it may be a big thing.

Do you think that the market had overdone it to the downside this year and maybe things weren`t as bad as stock prices would lead us to believe?

KASER: No, absolutely. I do believe that. You know, right now, there`s a hit song out there by a band called 21 Pilots and the song is called "Stressed Out."

I think that`s what the market has been this year. It`s been stressed out. It`s been driven by emotion.

I think the market overall is pretty healthy. I think if Mr. Market will go to the doctor, the doctor would tell Mr. Market, relax, get some rest. You`re really doing better than you think.

EPPERSON: Well, you know, the market is obviously still troubled or at least investors are troubled by the market. Many wondering, will we see a recession, what they should do? What do you tell investor to do and what are you doing with your money? Where are you putting money right now?

KASER: Well, right now, we`re telling investors the economy really is pretty strong fundamentally. Whether it`d be the employment picture. You know, obviously, consumption is doing pretty well. Gas prices are down. So, we`re really sending the message that the economy is not doing poorly and there`s a lot of area, financials, energy, some of the more cyclical industries out there, they`re implying as if we`re heading into a global financial crisis or a deep recession.

So, we`re really out there with two messages. One, the economy looks OK and then second, because we`re not headed into a terrible environment, there`s some real value out there. What matters is the price you pay, of course, but, you know, for an investor to go against the crowd, we see long term opportunities.

MATHISEN: And I know Brandywine, that`s what you do. You go against the crowd and pick value plays.

You can name names if you want, you can shy away from naming names if you would prefer it that way. I gather implicit in what you just said is that you`re out looking at financial names, at energy, maybe at some of the technology stocks that have been hit so hard.

KASER: Yes. So, let me -- let me give you an example of big banks. If we`re looking at Citigroup (NYSE:C) or Bank of America (NYSE:BAC), Citigroup (NYSE:C) right now is trading below $40 I think is where it closed. Tangible book value is a little bit north of $60. People say, well, that doesn`t matter. But the reality is, for Citigroup (NYSE:C), you`re worth $40, you have to believe first they stop earning $24 billion a year and then almost 15 percent of their loans go bad. And it just doesn`t make any sense.

We talk to bank executives every week. Credit is looking OK across the economy. There`s obviously pockets here and there. But big banks is certainly an area.

You know, I own it personally, Brandywine owns them. So, I do have an interest there, where you have voted with our money in that regard.

And then, energy -- the reality of $30 oil is that all the major producers, the three largest countries in the world that produce oil are Saudi Arabia. They are having massive deficits with oil where it is. Russia is running through its reserves and U.S. producers are losing $2 billion a week. $30 is simply not sustainable. So, if you take a time frame longer than a week, or longer than a day or longer than a month, I think you do quite well on these stocks. You know, as you said, that`s what we do here at Brandywine.

MATHISEN: Patrick, thank you very much for your help tonight. We appreciate it.

Patrick Kaser with Brandywine Global Investments.

Well, low oil prices forcing an offshore oil driller into bankruptcy. Paragon Offshore said it wants support from a majority of creditors to its cut debt from so-called a pre-packaged bankruptcy agreement. Paragon says it expects to maintain sufficient liquidity throughout that restructuring process.

EPPERSON: Tyler, Paragon Offshore may not be alone. A new study says one third of oil producers globally are at risk of filing for bankruptcy this year. Auditing and consulting firm Deloitte says low commodity prices will hurt some companies` access to cash and ability to cut debt. The study was based on a review of 500 publicly traded oil and natural gas companies worldwide.

MATHISEN: To housing we go, as the spring selling season gets underway, home builders are slightly less confident about present sales and buyer activity. National Association of Home Builders says the gauge filled with lowest level since May. Some economists attribute the drop to poor weather in February.

EPPERSON: Manufacturing in the New York area shrank for the seventh straight month. The latest empire state index missed expectations, but there was a bright spot. Orders fell at a slower pace than in January. A strong dollar, low oil prices and weak global demand have been weighing on the manufacturing sector.

MATHISEN: One industry that`s been doing well is the toy business. Sales last year with the strongest they`ve been in years and now thousands of manufacturers, distributors, vendors are hoping to build on that momentum as they gather at the North American Toy Fair.

Morgan Brennan got the fun assignment to look at the serious business of play.

(BEGIN VIDEOTAPE)

MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: This is a North American Toy Fair, the largest convention of its kind. For more than 30,000 toy makers, vendors and occasional celebrities converge.

RICK NASH: Last year, we had the six original games and now, we`re adding 12 more. It`s amazing the toys are going off the shelf pretty fast.

BRENNAN: From WowWee`s robotic dog, to Barbie`s new hoverboard, companies are unveiling the newest gadgets and play things. U.S. toy sales grew nearly 7 percent last year to over $19 billion, one of the strongest performances in years. Experts hope 2016 product line up will keep that momentum going.

STEVE PASIERB, TOY INDUSTRY ASSOCIATION CEO & PRESIDENT: We`re going to see similar growth. We are at a phase where we`re seeing year over year growth. A lot of innovation from technology, a lot of traditional play coming back, licensing being very strong. So, we believe we`re going to see a few years of good growth here.

BRENNAN: "Star Wars" has helped with a number of companies benefitting from the franchise`s force. Lego saw sales surge last year and expect that to carry over in 2016.

SOREN TORP LAURSEN, LEGO AMERICA`S PRESIDENT: Ninjago, we`re building our own story and "Star Wars" is another one where we buy license and the same with super heroes. But there`s no doubt the importance of story of toy industry is ever increasing.

BRENNAN: Licensing is a big business, accounting for roughly for 45 percent of the overall toy industry. 2016`s film roster should continue to fuel sales.

MARTIN BROCHSTEIN, LIMA SVP INDUSTRY RELATIONS & INFORMATION: The hopes are very high and a lot of them are on the fantasy kind of genre with the Avengers and Justice League. Star Wars rogue one. They are also other movies on the softer side, "Angry Birds" and "Ghostbusters", the all female "Ghostbusters".

BRENNAN: Playmobil is hoping its licensing with the National Hockey League will help propelled into the U.S. mass market.

MARK COHEN, PLAYMOBIL: We decided to go after it nationwide. We`re promoting it on television this year. We really feel it will be the mainstay of our alliance for 2016.

BRENNAN: While some toymakers are debuting new line, others are revamping classic ones. Take Barbie, Mattel`s 57-year-old iconic doll is getting more eye color, hair styles, even more body types, in an effort to appeal to more girls and stoke more sales.

For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan in New York City.

(END VIDEOTAPE)

EPPERSON: Still ahead, the new entrance to the world of fashion is not what you might expect.

(MUSIC)

EPPERSON: Neel Kashkari, the president of the Minneapolis Fed and former head of the government`s financial industry bailout said he wants to toughen banking laws to prevent another crisis. In his first speech as a Fed official, Kashkari said that while significant changes have been made to the financial system, more are needed.

(BEGIN VIDEO CLIP)

NEEL KASHKARI, FEDERAL RESERVE BANK OF MINNEAPOLIS PRESIDENT: I believe we must begin this work now and give serious consideration to range of options, including breaking up the large banks into smaller, less connected, less important entities, turning large banks into public utilities by forcing them to hold so much capital they virtually can`t fail with regulation akin to that of a nuclear power plant, taxing leverage throughout the financial system to reduce systemic risk wherever they lie.

(END VIDEO CLIP)

EPPERSON: In his speech, Kashkari made it clear that he feels the biggest banks still pose a risk to our economy.

MATHISEN: President Obama reiterated he will nominate what he calls a qualified Supreme Court candidate to succeed the late Justice Antonin Scalia who died over the weekend. Many members of the GOP say he should hold off in this election year and let his successor chose Scalia`s replacement.

The conflict will likely spawn a political donnybrook, but while that drama plays out, there are a number of important social and business related cases before the current eight-member court that could be affected by Scalia`s absence.

Hampton Pearson reports.

(BEGIN VIDEOTAPE)

HAMPTON PEARSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Inside the high court chamber today, Justice Antonin Scalia`s chair and desk draped in black, a high court tradition honoring the death of each sitting justice that dates back to 1873.

On the horizon, the likelihood the Supreme Court may have to operate with just eight justices for more than a year, given the political standoff between the White House and the Republican-controlled Senate over choosing Scalia`s successor.

BEN WHITE, POLITICO CHIEF ECONOMIC CORRESPONDENT: They`re going to fight it until there`s another president. It doesn`t look like the Republican- controlled Senate is going to consider any Obama nominee.

PEARSON: When you look at the conservative versus liberal make up of the court, it means that four-four ties are possible even probable. When the justices are tied, the lower court ruling stands, that means no national precedent.

Some example, in Friedrichs versus California Teachers Association focused on the power of public employee unions, a split decision would be a victory for the unions seeking to uphold mandatory union dues.

Zubik versus Burwell is a religious freedom challenge by charities and non- profit organizations to mandatory birth control coverage as part of Obamacare. Seven separate petitions are part of this case because the lower courts are divided.

Whole Women`s Health versus Hellerstedt, a Texas case that will determine how far states can go to restrict abortion. It could be a set back for abortion rights groups because some restrictions approved by lower court would go in effect in the Lone Star State.

And next month, Puerto Rico versus Franklin California Free Trust will examine legal options for Puerto Rico to restructure its massive debt.

GEORGE HICKS, FORMER SCOTUS LAW CLERK: The court has survived and decides cases. There`s a number of different ways it can approach that. It can decide cases on narrower grounds. That`s happened in recent past. It can make different decisions in the types of cases that it takes.

PEARSON: The most basic challenge for the Supreme Court, resolving unsettled law just got a lot more complicated.

For NIGHTLY BUSINESS REPORT, I`m Hampton Pearson at the Supreme Court.

(END VIDEOTAPE)

EPPERSON: Home security firm, ADT, saw its shares skyrocket. And that`s where we begin tonight`s "Market Focus".

Shares rose on the news that ADT has agreed to be acquired by private equity firm Apollo Global Management for nearly $7 billion. Apollo will pay $42 per share of ADT and that`s up 56 percent premium over ADT`s Friday closing price. Once the deal finalizes, ADT will merge with Apollo`s home security company protection one. Shares of Apollo gained more than 5 percent to $14.12, while ADT shares surged more than 47 percent to $39.64.

Community Health Systems (NYSE:CYH), which is the country`s second largest for-profit hospital chain, posted an unexpected loss yesterday for its latest quarter. Revenue also fell short of analyst expectations. The company cited lower admission due to flu season and slower than expected benefits from its two-year-old acquisition of rival health management associates. Shares of Community Health Systems (NYSE:CYH) lost 22 percent to $14.56.

Generac saw revenue and profit fall in its fourth quarter due to weak sales of its commercial and industrial segments. But despite the loss, the makers of generators still managed to top analyst`s estimates. Generac said it expects sales to climb up to 12 percent for 2016, thanks to a new acquisition expected to close this quarter. Shares surged more than 17 percent to $32.75.

MATHISEN: The Chinese e-commerce giant Alibaba disclosed it had purchased a more than 5 percent stake in Groupon (NASDAQ:GRPN). The transaction which was disclosed in an SEC filing late Friday also revealed that Alibaba is now the fourth largest own of the daily deals company. Groupon (NASDAQ:GRPN) shares surged 41 percent, yes, you heard me right, to $4.08. While Alibaba was up nearly 9 percent to $66.29.

Apple (NASDAQ:AAPL) announced it has filed plans to sell $12 billion worth of debt to fund its share buyback program and dividend payment. The smartphone maker will sell a series of bonds maturing between two and 30 years. The offering also included a 7-year green bond where proceeds will go to fund environmentally friendly projects. Apple (NASDAQ:AAPL) shares rose nearly 3 percent to $96.56.

EPPERSON: Call it digital couture. Fashion week is under way in New York but it`s not a new up and coming designer that`s turning heads in the ultra competitive design industry.

Courtney Reagan has the story.

(BEGIN VIDEOTAPE)

COURTNEY REAGAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: There`s a new entrant to the world of fashion and it`s not who you might expect. Printer maker, Epson, joined the ranks of New York fashion week with a presentation featuring 11 designers, all with textiles printed by Epson printers. A printer software and finishing hardware system can be purchased for as little as $15,000.

Epson says it`s the first time a large company has developed a complete printing solution of its kind for the fashion industry, an industry Epson thinks is right for production disruption, as designers and brands look to get consumers access to the newest looks faster than ever before.

MARK RADOGNA, EPSON PROFESSIONAL IMAGING DIVISION: The designer has the ability to come up with an idea, create the idea and actually have fabric printed and within 24 hours, have it in their hands.

REAGAN: Only 3 percent of the $7.5 billion global printed textile market uses digital printing technology. So, not only is it a hopeful new growth engine for Epson but also offers new opportunities to smaller, independent designers to make their mark on the fashion world.

CHLOE TRUJILLO, DESIGNER: In the past, I`ve encountered problems with technologies that existed where the vibrancy of colors were lost and the details were lost. The new technology I could see possibilities and, you know, all the vibrancy of color is kept, all the details are kept. It`s like a dream come true.

REAGAN: Speed to market has long been a hot topic in the world of fashion, with names like Zara, H&M, and Forever 21 wearing the crown for fast fashion or getting designs from conception to stores in as little as three weeks, a far cry from the traditional six months. It`s moving big high end brands like Burberry to work on shaking up the fashion ecosystem when it comes to speed, in order to satisfy consumers demand for instant gratification. Time will tell whether Epson will be part of the solution.

For NIGHTLY BUSINESS REPORT, I`m Courtney Reagan in New York City.

(END VIDEOTAPE)

MATHISEN: Coming up, bridging the divide by building a robot -- the program that is empowering girls of color to pursue degrees in computer science. The first part of our week-long series is next.

(MUSIC)

EPPERSON: There`s a wide gap between black and white in many sectors of the U.S. economy. This week in a special series, we take a look at the efforts to bridge that divide starting today with education. One way to increase diversity in the nation`s tech sector, the fastest growing and highest paid industry is to make science, technology, engineering and math education more accessible to everyone.

I talked to some young girls who were part of that change, thanks to a pioneering non-profit group.

(BEGIN VIDEOTAPE)

MADISON HARVEY, 11-YEAR-OLD: I have no interest in doing this. I thought it was boring at first. Then when I started doing it, it was fun.

EPPERSON: Eleven-year-old Madison Harvey (ph) is one of 300 girls learning how to build a robot at this weekend workshop.

UNIDENTIFIED MALE: What is our purpose?

EPPERSON: It`s put on by Black Girls Code, a non-profit aiming to bridge the gap in STEM education for young girls of color.

VANGERIA HARVEY, MADISON`S MOTHER: She`s excited about science and math and engineering. What other opportunity for her to be around other girls that look just like her.

UNIDENTIFIED FEMALE: This one is right here.

EPPERSON: Many of these girls don`t have role models in engineering or computer science. Black women make up less than 3 percent of the work force at the biggest tech companies. Kimberly Bryant, an electric engineer who worked in biotech for more than 20 years, understands their dilemma.

KIMBERLY BRYANT, BLACK GIRLS CODE FOUNDER & EXECUTIVE DIRECTOR: I was one of maybe two or three students of color in my electrical engineering class when I went to college.

EPPERSON: Bryant founded Black Girls Code with hopes of literally changing the face of technology.

BRYANT: We generally think of computer science as now, it does not like a woman of color. It does not look like someone that is of Hispanic background. It`s very much white, male dominant. And that`s important for us to show that black girls can code and they can do many other things in terms of the leadership standpoint in this field.

TAYLOR LOWE, BLACK GIRLS CODE PARTICIPANT: Most black girls aren`t into computers. It`s really cool and fun. I encourage other people to do it. It will help open up new worlds.

EPPERSON: Black Girls Code held its first event four years ago in San Francisco with eight girls. Today, the non-profit has chapters in eight U.S. cities and Johannesburg, South Africa, with plans to expand to Dallas and Miami this year.

It`s funded through corporate sponsors and partnerships, donations, and a $35 fee to attend workshops, which can be waivered in some cases.

They starting in 2011, Black Girls Code has offered workshops to about 5,000 girls, ages seven to 17. They are still learning from everything from computer programming to coding, to building mobile applications and even robotics.

Many of these girls won`t just come to one Black Girls Code workshop. Madison is here for the second time.

M. HARVEY: Interacting with (INAUDIBLE) and it`s like, oh, I enjoy this.

EPPESON: The organization, though, still young, is already achieving its intended impact. Some former participants are majoring in computer science at top colleges including Spellman and Dartmouth.

BRYANT: We`re really starting to see the girls take what they learn at Black Girls Code and take that spark and create something even bigger for themselves.

EPPERSON: Madison may just follow that same path.

M. HARVEY: Got me to open mind. So, it`s like the door opened for me. So, there`s a possibility that I might want to do this.

(END VIDEOTAPE)

EPPERSON: Black Girls Code founder Kimberly Bryant said, by 2040, she wants to reach one million girls. And with black males making up only 4 percent of the workforce in the biggest tech company, she plans to start Black Boys Code very soon.

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