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Chu, Eamon Javers, Diana Olick, Phil LeBeau> Agriculture; Consumers; Food and Beverage; Lifestyle> ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Sue Herera. SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Rising odds. The Federal Reserve is thinking seriously about increasing interest rates next month. But there`s one thing they want to see first. Housing conundrum. With starter homes in short supply, what`s preventing builders from creating more of them? And going green. Demand for organic foods is growing fast, but farm acreage hasn`t kept pace. Why that maybe about to change if one company has its way. All that more tonight on NIGHTLY BUSINESS REPORT for Wednesday, May 18th. Good evening, everyone, and welcome. I`m Sue Herera. Tyler Mathisen is on assignment tonight. June looks to be a key month for the market. Today, it became even more important after the Federal Reserve gave the clearest indication yet at its meeting next month that the central bank could potentially raise interest rates again. In its just released minutes, most of its members say that they are ready, they just need the economy to cooperate. And that sent stocks on a wild ride with the Dow moving 200 points in 45 minutes. By the close, the blue chip Dow index was off just three points and the NASDAQ rose 23 and the S&P 500 was up fractionally. We have two reports tonight. Mary Thompson is covering today`s market reaction. But, first, Steve Liesman reports from the Federal Reserve on the minutes of the Central Bank`s last meeting. (BEGIN VIDEOTAPE) STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: The U.S. Federal Reserve strongly suggested the possibility of a June interest rate hike if the economic data improved as expected. In fact, in the minutes to its April meeting released today, the Fed said some of those conditions had already been met, including a stabilized dollar, rising equity prices, and diminished global risks. Many members of the Fed expected other conditions to be in place for a June hike by the time the Fed meets. Mostly, that meant further evidence the economy would rebound in the second quarter from the weak GDP numbers we got in the first. Now, if those conditions were met, the minutes said, quote, "It likely would be appropriate for the committee to increase the target range for the federal funds rate in June." Now, not all were convinced. Several members were concerned about risks for a persistent slow down, about weak inflation and continued risk from overseas growth, including the June vote on Brexit or the exit of Britain from the European Union. But the minutes also indicated the Feds even discussed an April rate hike and there were some who supported the idea. As it was, the Fed decided to keep the options open for a June hike. Some worried the market wasn`t paying enough attention and wasn`t sufficiently prepared for a June rate rise. Now, there`s going to be attention paid to speeches by the Fed chair and the vice chair, Stan Fischer, and New York Fed President Bill Dudley. They`re seen as leaders of the FOMC and their comments there would go a long way to convincing markets the Fed could move as soon as next month. For NIGHTLY BUSINESS REPORT, I`m Steve Liesman in Washington, D.C. (END VIDEOTAPE) (BEGIN VIDEOTAPE) MARY THOMPSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: A choppy day of trading on Wall Street as traders are now bracing for rate hikes that could sooner than many had expected. At the high of the session, the Dow was up over 100 points ahead of the release of the Federal Reserve`s minutes from its April meeting. When those minutes were released, it showed that the Federal Reserve would consider raising interest rates in June if the data supports such action. That sent stock prices lower and the Dow dropped more than 100 points. It also put pressure on treasury prices, so yields moved higher, the dollar rallied, though, and that put pressure on both gold and oil. Now, the prospect of high rates putting pressure on some rate-sensitive sectors, like utilities in the session, but it benefitted financials as a lot of banks would like to see higher short-term rates. The rally that we saw in the financial sector are not enough to drive the Dow back into the green, though it did help the S&P to recover late in the day, and the NASDAQ, which dropped recently into correction territory during the session recovered, thanks to strength the tech and biotech. All in all, a mixed, two flat sessions for the market after a very choppy day. From the New York Stock Exchange, I`m Mary Thompson for NIGHTLY BUSINESS REPORT. (END VIDEOTAPE) HERERA: Shares of Dow component Johnson and Johnson are trading near all time highs, largely on the strength of its pharmaceutical business. Today, shares closed slightly lower to $113.59. But with a growing threat of lawsuits over its popular talcum powder product, shareholders want to know how J&J plans to grow the rest of the business. Meg Tirrell reports from its analyst day meeting in New Brunswick (NYSE:BC), New Jersey. (BEGIN VIDEOTAPE) MEG TIRRELL, NIGHTLY BUSINESS REPORT CORRESPONDENT: Johnson & Johnson (NYSE:JNJ) makes some of the world`s most iconic brands, Band-Aid, Tylenol, Listerine and more. But the conglomerate`s growth in recent years has been driven by its prescription pharmaceuticals. So, today, it met with analysts and investors to chart out its plan to grow the rest of its business. ALEX GORSKY, JOHNSON & JOHNSON CHAIRMAN & CEO: We`ve been looking at our portfolio because while we`re very excited about the investments that we`ve been making in the future in certain areas, we realized that in other areas, frankly, we needed to be more effective and more efficient. We also see the business model changing with our medical devices and making sure that we`re sized the right now, that we`re organized the right way for emerging customers. TIRRELL: J&J said it plans to apply for approval of more than 20 new products in hospital medical devices over the next two years, with sales potential of at least $6 billion. In its consumer-focused medical device units, which includes contact lenses and diabetes care, J&J says its near term pipeline has $2 billion in sales potential. Its total medical device business brought in $25 million last year. As for its consumer unit, J&J says they`ve got three brands worth $1 billion today. Those are Listerine, Johnson`s Baby and Neutrogena. By 2020, it says it will add two more brands to that list, Aveeno and Tylenol. Tylenol is part of the company`s over-the-counter medicines unit that`s still recovering from a series of recalls starting in 2009, that wiped out two-thirds of the unit`s revenue. MIKE WEINSTEIN, JPMORGAN MANAGING DIRECTOR: They`re really put that behind them. But both businesses are still growing roughly at 2 percent in aggregate. So, they`re making the case today why the other half of the portfolio, the device consumer pieces are going to re-accelerate and try to close that gap with pharma. TIRRELL: More recently, the company has been battling a series of lawsuits alleging it`s talcum powder is linked to ovarian cancer, a claim J&J denies. GORSKY: We`re disappointed in some of the recent verdict findings and we always have a lot of empathy for plaintiffs and the families that they may represent. But in this case, we think, frankly, it`s inconsistent with more than 100 years of experience with powder and more than 30 years of very compelling clinical evidence. TIRRELL: J&J says it plans to appeal. Meanwhile, analysts` focus is on growth, which many expect to see in the form of acquisitions, particularly as biotech valuations have fallen so much in the last year. For NIGHTLY BUSINESS REPORT, I`m Meg Tirrell in New Brunswick (NYSE:BC), New Jersey. (END VIDEOTAPE) HERERA: Fellow Dow component Cisco (NASDAQ:CSCO) issued a solid outlook after reporting better than expected earnings in the most recent quarter. The company whose results are closely watched as an indicator of demand for corporate technology reported earnings of 57 cents a share, two cents better than estimates. Revenue was in line with estimates at $12 billion, though slightly lower than a year ago. That rosy outlook helped lift shares in the initial after-hours trading. Dominic Chu has more on Cisco`s results. (BEGIN VIDEOTAPE) DOMINIC CHU, NIGHTLY BUSINESS REPORT CORRESPONDENT: There`s a reason why a lot of investors still pay attention to earnings from Cisco (NASDAQ:CSCO) Systems. It`s because they make the stuff that many called the backbone of the Internet. So, the company is seen as a bellwether or indicator of spending on technology by both companies and governments around the world. But what Cisco (NASDAQ:CSCO) is looking to do in the future is different than how it got to where it is today. Instead of focusing on making communications hardware, it wants to transition more towards one that sells software and data management services, many of which can be done on a subscription basis so the company gets more regular and recurring streams of revenue. Two of the fastest growing businesses for Cisco (NASDAQ:CSCO) are the ones that provide video content solutions and then ones that provide computer network security. They are two of the smaller units that`s measured by sales, but they`re still the ones that Cisco (NASDAQ:CSCO) is touting as a bigger part of the future of the company. Now, on the more cautious side of things, CEO Jack Robbins also said that he`s seen a fair amount of caution coming from the company`s customers. Now, it`s about whether investors view the story as bright enough to break the stock out of a trading range it`s been stuck in for some time now. For NIGHTLY BUSINESS REPORT, I`m Dominic Chu. (END VIDEOTAPE) HERERA: In Washington, new rules will expand overtime pay for millions of workers. Beginning later this year, anybody making a salary of nearly $47,500 will automatically qualify when they work more than 40 hours. That`s about double the current level. And according to the labor secretary, it`s exactly what both business and consumers need. (BEGIN VIDEO CLIP) THOMAS PEREZ, SECRETARY OF LABOR: I think what this is going to provide for employers is clarity and what it`s going to provide for workers is either more money or more time with their family and for us, what it does is it fortifies the basic pillars of worker protection which is middle class jobs should pay middle class wages. And when you work extra, you should be paid extra. (END VIDEO CLIP) HERERA: The overtime threshold was last updated back in 2004. Trade tensions are on the rise, this time between the U.S. and China. The Department of Commerce has slapped a 500 percent duty on some of China`s steel products, which is used to make things like appliances and cars. Beijing is demanding its removal and is urging the U.S. to, quote, "correct its mistake", end quote. China produces about half the world`s steel and last month, U.S. steel accused dozens of Chinese companies of breaking trade rules. Shares of U.S. Steel, AK Steel and Nucor (NYSE:NUE) all traded lower today. On this fourth anniversary of Facebook (NASDAQ:FB) going public, the social media company is hosting a summit of conservative thought leaders to discuss allegations of political bias of the website. The claims that curators of Facebook`s news feed has censored certain topics surfaced last week. Eamon Javers is following this story for us. Good evening, Eamon. Good to see you as always. What is Facebook (NASDAQ:FB) hoping to accomplish with this? EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, the first thing they want to do is stop the PR bleeding. They`ve taken a real beating ironically on social media, but also in the mainstream media over this story, even though they`ve denied the story and said that there`s no political bias at Facebook (NASDAQ:FB), and the original story was based on unnamed former Facebook (NASDAQ:FB) employees and quoted just on one website, Gizmodo.com. Still, this has taken off into a national discussion and Facebook (NASDAQ:FB) wants to see if they can button that up by having all these conservatives come in, talk to them and then broadcast that message out to the conservative community. HERERA: And what do the attendees, the conservative attendees want out of this. JAVERS: Well, I think part of what they want is to broaden Facebook`s own conception of what diversity means. You hear a lot of conservatives saying that Facebook (NASDAQ:FB) needs to think about diversity of thought, in addition to all the other types of diversity that Facebook (NASDAQ:FB) may be focusing. And when you look at the list of who is actually going to this meeting, there are a lot of TV personalities here. So, it`s clear that Facebook (NASDAQ:FB) is going to try to bounce those people out into the media, and get some second and third tier effects here from the meeting they`re seeing. You see Glenn Beck from "The Blaze". Dana Perino, she`s with FOX News Channel. Jim DeMint, he`s at the Heritage Foundation. And S.E. Cupp of CNN, a conservative commentator. All of those people will go out to their respective audiences and sort of retell the story of this Facebook (NASDAQ:FB) meeting that happened today and get those audiences engaged. That`s what Facebook (NASDAQ:FB) is hoping to do here is get conservatives talking in a positive way about Facebook (NASDAQ:FB). We`ll see if that happens. HERERA: Right. As I understand it, one of the reasons this is so important to the conservative attendees is because so many people tend to get their news exclusively from Facebook (NASDAQ:FB), correct? JAVERS: Sure. Facebook (NASDAQ:FB) is huge. It`s dominating the lives of Americans who consume news. It`s dominating the lives of people around the world, who consume news. And conservatives have long complained that mainstream media outlets, television and newspapers, have a liberal bias and they`re now seeing that they have to pay attention to social media as well. And when you look at the top leadership at Facebook (NASDAQ:FB), there are people with well known liberal views who are running that company. This is an opportunity for the conservatives to say, hey, you may be personally a liberal but we`d like you to make sure that your platform is open to the arguments and thoughts and news of all people of all persuasions here. HERERA: All right. Eamon, thanks. JAVERS: You bet. HERERA: Eamon Javers in Washington. Still ahead, costly regulations. What home builders have to go through to do what they do best -- build? (MUSIC) HERERA: The lowest mortgage rates in years was not enough to get home buyers to take the plunge. Total application volume last week fell about 1.5 percent from the previous week. Refinancing applications increased slightly while applications for new purchases fell. It is the ultimately double-edged sword in housing. There`s huge demand for entry level housing and little supply. You would think that would present a big opportunity for home builders but it`s not. Diana Olick explains why from California. (BEGIN VIDEOTAPE) DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: It is being called the last seaside development in Southern (NYSE:SO) California and the poster child for how increasing regulations are stifling builder productivity. PHIL BODEM, TAYLOR MORRISON SOUTHER CA (NASDAQ:CA): I would say it`s more expensive to develop master plan communities today than ever before. OLICK: Sea Summit in San Clemente s finally open, building and selling luxury million dollar homes. This, 40 years after developers first looked at building here. BODEM: There are a lot of requirements and hoops that we had to go through to get the project approved. OLICK: Arizona-based Taylor Morrison purchased the project two years ago for a reported $200 million after previous development had stalled. The plan is for 300 homes here. Decades ago, they could have built twice as many on this land. JOHN BURNS, JOHN BURNS CONSULTING: Every time you turn around, there`s a new regulation. OLICK: Regulations that are now costing home buyers 30 percent more in the purchase price of the home than they were just five years ago, according to a new study. Much of that is due to higher land costs resulting from regulations on development. These costs are passed on to buyers as builders not only raise prices, but focus on higher end homes. Add it up and the cost of regulation is rising more than twice as fast as the average home buyer`s ability to pay for it. BURNS: A lot of good things to protect the environment, but it`s making building affordable homes impossible. OLICK: Extra costs that didn`t exist a decade ago. Erosion control, fire sprinklers, energy code cost and understaffed jurisdiction offices are builders` biggest complaints, according to a survey by Burns. BURNS: I think what cities and counties are looking for is for the project to make a significant contribution beyond just the homes to the city in which the project is located. OLICK: Here at Sea Summit, Taylor Morrison had to build four new parks, miles of hiking trails and plant new vegetation on 100 acres of open space, all of which pushed the costs higher. BURNS: They would love do entry level, but they need to be able to make money doing it and it`s getting increasingly hard to build a home for less than $250,000. OLICK: So more million dollar homes go up in areas where they can sell like this one and the rest of the nation struggles under tight supply and rising prices for the precious few starter homes for sell. For NIGHTLY BUSINESS REPORT, I`m Diana Olick in San Clemente, California. (END VIDEOTAPE) HERERA: Beautiful. To read more about new regulations for home builders, head to our website, NBR.com. Target (NYSE:TGT) warns of a slow down in sales and that`s where we begin tonight`s "Market Focus". The retailer saw a drop in both revenue and earnings for its latest quarter as unseasonable weather and lower consumer spending hurt results and the impact of the weakened spending is expected to continue as the company sees sales for the current quarter to be flat to down 2 percent. Shares of Target (NYSE:TGT) fell over 7.5 percent to $68. It was a different story, though, over at Lowe`s. The home improvement retailer posted solid revenue and profit growth that came in above estimates. Strong demand for home renovation products helped to lift results and sent same store sales up more than 7 percent. In addition, the company raised its earnings guidance for the year. Shares up 3 percent to $78.60. The New York Department of Financial Services has subpoenaed Lending Club over its business practices. This launches the third investigation. According to a report from "The Wall Street Journal", this most recent investigation is unrelated to the recent resignation of Lending Club CEO. Shares were up nearly 11 percent to $3.99. Oil producers Apache (NYSE:APA) saw its shares rise today after a report from oilandgaspeople.com said rival Occidental Petroleum (NYSE:OXY) will buy the company in a deal believed to be about $25 billion. However, Occidental said it had no knowledge of this news while Apache (NYSE:APA) declined to comment. Apache (NYSE:APA) shares were up more than 2 1/2 percent to $56.61. But Occidental was off 2 percent to $74.81. Auto maker Tesla said it will sell about $2 billion of its stock to help expedite production of its new Model 3. About $1.4 billion worth of shares will be offered to the public by the company, while CEO Elon Musk will sell the remaining shares to cover tax obligations. The news sent shares down initially in extended hours after the finishing the regular session up 3 percent to $211.17. And Southwest Airlines (NYSE:LUV) is hiking its dividend to 10 cents up from 7.5, but it`s also buying back $2 million worth of its shares. Meanwhile, outside of the company shareholder meeting, the airlines pilots and flight attendants protested that they haven`t received a pay rise or an updated contract in several years. Shares rose more than a percent to $42.90. Well, it`s a story we`ve been telling you about and today, it was another long and frustrating one for millions of Americans traveling through some of the country`s busiest airports. Many had to wait in TSA security lines that lasted more than an hour and now, a new report is predicting airports will be even more crowded this summer. Phil LeBeau reports tonight from O`Hare Airport in Chicago. (BEGIN VIDEOTAPE) PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: Six a.m. at O`Hare Airport and the long wait begins. These people spent more than an hour in the TSA security line. UNIDENTIFIED FEMALE: In all my years in Chicago, we end up five or six blocks. How did we get to this point? It`s crazy. What`s being done? UNIDENTIFIED MALE: Terrifying, terrifying. Brutal, straight chaos. So, I`m pretty nervous. We have two hours to go so, pretty nervous. But I mean, hopefully, we`ll make it. LEBEAU: Their fear of missing a flight is real. Sunday, dozens slept on cots at O`Hare because they couldn`t get through security in time to make their flight. The TSA blames the long lines on the combination of factors. Budget cuts have limited how many officers are staffing checkpoints. Meanwhile, more people are flying, and with many taking carry on bags checking people takes longer. But should travelers spend two to three hours in line? The man who runs the Department of Homeland Security which oversees the TSA says that wait is too long. JEH JOHNSON, DEPT. OF HOMELAND SECURITY SECRETARY: Obviously, waiting three hours for what may be a two hour flight or a 90-minute flight is not unacceptable, and it`s not a good thing and it would tax everybody`s patience. LEBEAU: Now, a new report warns it will be more crowded at airports this summer. Airlines for American predicts a record number of people will fly in the U.S. in June, July and August. More than 231 million flying somewhere, after enduring security lines so long that some in Congress want private companies to take over airport security and eliminate the TSA. REP. JOHN MICA (R), FLORIDA: TSA is a huge bureaucracy. It can`t get it right. It hasn`t got it right. They cannot -- they cannot recruit. They cannot train. They cannot retain. And they certainly can`t administer that workforce. LEBEAU: With the TSA under fire, it`s hoping more staffing and more overtime will shorten security lines. Here in Chicago, more than 250 new TSA officers will be added by mid-August. But until they`re hired and trained, O`Hare Airport is warning travelers get here well before your flight, just to make sure you make it through security. Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago. (END VIDEOTAPE) HERERA: Coming up, as more people eat organic, why aren`t more farms growing organic foods? What one company is doing to change that. (MUSIC) HERERA: Here`s a look at what to watch for tomorrow. Dow component Walmart reports earnings and investors will be looking to see how the world`s largest retailer is fairing as competition increases. We`ll find out how many Americans filed for unemployment benefits last week, and a handful of Fed officials are scheduled to speak. And that`s what to touch for Thursday. Soda makers must include health warnings on advertisements for soda and other added sugar drinks in San Francisco. This after a federal judge declined to halt a new law that goes into effect in late July. San Francisco will be the first city to require such warnings on paper ads and posters and billboards but not TV commercials or packaging. Genetically engineered crops are safe for humans and animals to eat. That`s the finding from the National Academy of Science which says GMO foods have not caused increases in cancer, obesity, kidney disease or autism. The group reviewed more than 900 studies and data covering 20 years. The report also concluded that these crops have saved farmers money but have not increased yields. And as you know, more people are eating organic but it takes a long time and a lot of money to convert a traditional farm to an organic one. Jane Wells takes a look at what one company is doing to ease the burden on the nation`s farmers and meet the growing demand. (BEGIN VIDEOTAPE) JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT: The whole country is going organic except for America`s farms. While organic food is a $39 billion industry, less than 1 percent of U.S. farmland is certified to grow organic food. Why? It`s a hassle. DAVID DENHOLM, KASHI CEO: Mostly, they have to get new infrastructure and that may involve silos, new equipment. WELLS: The USDA says a conventional farm which wants to become certified organic has to spend three years using organic practices before it can slap on an organic label. Anything grown during that transition has to be sold at lower conventional prices. In other words, farmers have to spend more over three years for something that sells for a lot less. So, Kashi, the healthy cereal company owned by Kellogg`s, is trying to create a reason for farmers to make the switch. It`s created a new labeling process called certified transitional, paying farmers a higher price for their crops during that three-year period and making consumers aware. DENHOLM: A lot of consumers know about organic. They have a lot of intellectual curiosity around organic food, but many don`t know that farmers face challenges and it takes three years to transition a farm from conventional farm to organic. WELLS: Farmers have to pay a third-party certification program to be part of the transitional program, but Kashi has not trademarked the label. In fact, quite the opposite. The company wants it to become a standard which rivals can use. Kashi has to see if consumers understand the label and take to it, to see if more farmers will switch over to organic farming because of this program, to see if rivals will join in and support the label. That`s a lot of "if", but the long term goal is to create more organic farms, more supply for demanding market, and maybe eventually make organic food less expensive. For NIGHTLY BUSINESS REPORT, Jane Wells, Los Angeles. (END VIDEOTAPE) HERERA: And finally, tonight, the fittest cities in the U.S. For the third year in a row, Washington, D.C. tops the list, thanks to its low rate of smoke. That`s according to the American fitness index. Minneapolis St. Paul came in second, followed by Denver in third. Residents of all three cities tend to walk more and have greater access to parks for recreation. The survey also uncovered a new trend, more than 75 percent of Americans reported exercising within the past 30 days, a double digit increase from last year. And the city at the bottom of the list, Indianapolis. That will do it for us tonight on NIGHTLY BUSINESS REPORT. I`m Sue Herera. Thanks for joining us. Have a great evening, everybody. And we`ll see you right back here tomorrow. 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. (Copy: Content and programming copyright 2016 CNBC, Inc. Copyright 2016 CQ- Roll Call, Inc. All materials herein are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of CQ-Roll Call. You may not alter or remove any trademark, copyright or other notice from copies of the content.)
