this is "nightly business report." with tyler mathisen and sue herara. >> iphone sales surge and that's exactly what investors wanted to see in apple's results. sending shares initially higher. >> not your corner pharmacy. late news tonight, two of the nation's largest drugstore chains will merge. turn up the heat as the temperature drops because this is winter, it may not cost as much. all that and more tonight on "nightly business report" for tuesday, october 27th. >> good evening, everyone. welcome. apple may be asking what global slowdown? the world's most valuable company reported strong demand for iphones over in china, and a sharp rise in profits and revenue overall. for the quarter, the dow component earned $1.96 a share, and that was eight cents better than expectations.

revenue beat estimates. it climbed 22% from just a year ago, and that sent shares of the widely held company in mutual funds and retirement accounts among other blaises initially higher in extended trading. our josh lipton has more on apple's quarterly results. >> reporter: 48 million, that was the big number in apple's latest earnings report. that's the number of iphones that apple shipped in the quarter. and that was up 22% year over year. it was in line with what wall street had forecast. remember, we can talk about apple pay or apple music, but the end of the day, this is an iphone company. it is the iphone that generates the bulk of this company's sales. some investors and certainly some analysts on wall street concerned about whether apple can meaningfully grow iphone units in the quarters ahead. a maturing smartphone market, a slowing china and certainly tough comps. i did have a chance it 0 speak to apple's ceo tim cook. he remains confident and knows

that more people than ever are switching over from google's and groid and he notes 70% of the install base is on the iphone 5 base or earlier. that implies a lot of potential upgrade headroom. i'm josh lipton in cupertino, california. >> so let's turn to our guest, david garrity to talk more about what lies ahead for apple and what it may mean are for you and his money. he's principal of gva research. good to see you. welcome. >> thank you very much. >> let's talk about this report. were you as impressed as those who traded the stock in after hours were? >> well, certainly we had a lot of investor concern about china going into the quarter's report and if you look at china, revenues from china are about 24% of the total company's revenues compared with less than 14% a year ago. looked on a percentage basis, china revenues are up year over year by about 114%. that was a major driver for the 22% revenue gain. certainly you have to look at

china and say that fine, revenues might have been downtown quarter over quarter by 5%. we're still in a situation for apple global little that china is a significant gee og xwraf if i to them. with the holiday shopping season, in the december quarter in the western lem sphere, and the lunar new year in the first quarter of next year, apple has a good six months in front of them. >> some nitpick sisters it found this nit to pick, the guidance for the upcoming quarter was a little softer than they had hoped. is this just apple being apple and setting the bar at a level where they're comfortable that they can meet or exceed it. >> i think apple has always shown a strong pattern of trying to lower expectations after they release a quarter. from that standpoint, apple is being consistent with their historical pattern. there is a debate though that investors have, and that certainly is to what extent do we there apple has sat righted

the high end of the smartphone market. one would argue it's still a very, very large market out there as was mentioned earlier. you still have a substantial base of apple iphones out there that are not yet upgraded to the 6 or 6 s. from that standpoint, there's significant pent up demand in our view. >> the comments about the apple watch were encouraging. talk about some of the other products other than the iphones. >> yes, in terms of the apple watch, we're in a position right now going into the year end holiday shopping season where we think the watch is going to be an important gift for people to consider. this is something that's slowly going to build up over time. we don't necessarily have expectations for the apple watch to ramp as rapidly as we're seeing with the iphone. certainly apple is sensitive to the competition in the market and not breaking out the apple watch results separately. we think it's going to be an important driver. we would look near term for apple tv. they've come out with a new

version of their settop box offering more content and access to the app store. >> where do you see the stock in a year? >> $150 over the next 12 months. we think that also we're going to see nice gains in terms of dividends and buybacks. >> david, thank you for joining us tonight. david garrity with the gva research. >> thank you shares of the dow components pfizer and merck roads today on better than expected is profits helped by growing sales of expensive drugs including new cancer medicines and both raised their profit forecasts. shares of pfizer rose almost 2.5%. merck which also benefited from cost cuts last quarter au gains of 1%. fellow dow component du pont saw its sales and earnings drop in the third quarter. the strong dollar and weak agricultural demand in emerging markets contributed to the decline in profits, but the interim cea said he was considering potential deals in the ag industry. the stock climbed more than 2.5%. >> ibm says the sec is

investigating the way it accounts for certain revenue from transactions in the u.s., uk and ireland. ibm says it learned of the investigation in august but disclosed it today in a required regulatory filing. ibm says it is cooperating fully with the regulators. the disclosure sent shares of big blue down 4%, didn't need that. separately the company's board has approved a $4 billion share buyback. ibm shares weighed on the blue chip index along with disappointing economic data just one day ahead of a policy statement from the federal reserve. the dow jones industrial average fell 41 points to 17,581. the nasdaq dropped 4 and the s&p 500 was off 5 points. walgreen boots alliance will bite rite aid. the deal confirmed after the closing bell is valued at around $17 billion, a huge premium for that stock. it will combine two of the nation's largest drug chains.

there was speculation an agreement was close during the day sending shares of rite aid up 42%, but that's before the deal was consume mayed. walgreen up 6. as bob pisani explains there are reasons why is this tie-up makes sense. >> this is all about cost savings. the affordable care october is putting pressure on pharmaceutical companies and the retail drugstore chains to keep drug costs down. so if you're a walgreens or rite aid or cvs, you want to get bigger so you can having lower administrative costs and be in a better negotiating position against the pharmacy benefit managers that sell you all those drugs. what about anti-trust issues? the deal will certainly be scrutinized by regulators, but rite aid is much smaller than wall greens or cvs and only has a large presence in a few regions like the northeast. there is speculation the deal might be able to go through with them selling only a small amount of stores. one analysts estimates wall

greens would only have to divest about 10% of the acquired outlets. remember the retail drugstore business has a lot of competition, everyone from walmart to target to kroger, even the small local grocery stores are in this game. that greatly diminishes the chances that anti-trust alone would blow up the deal. for "nightly business report," i'm bob pisani. >> starwood is reportedly being pursued by chinese buyers. according to "the wall street journal," three chinese companies submitted proposals to beijing. the government is expected to select a bidder in the next few weeks. such a deal would likely be the largest ever chinese takeover of a u.s. company. shares of starwood rose 9%. now to the economy, consumer confidence fell in october in part because americans were feeling less optimistic about job prospects. orders for long lasting manufacturing goods, durable goods, dropped 1.2% in september. following a 3% decline in

august. and within the durable goods report was a key gauge of business investment. it fell for a second consecutive month. the price of homes went up in august. the s&p case shiller home price index rose a little more than 4.5%, greater than july's increase. san francisco and denver saw the biggest gains both up double digits. >> the data dependent federal reserve is taking note of the incoming economic reports. the central bank began a policy meeting today and will release a statement tomorrow. many expect the fed will wait a bit more before raising interest rates. as steve liesman reports. >> a slowdown in hiring. weaker overall economic growth. they've combined to convince wall street the fed won't hike rates at this week's meeting and maybe not even this year. the cnbc fed survey finds the median of the 41 respondents who include economists, analysts and fund managers see the fed hiking in december. that's three months later than

the last survey. >> my guess is the reason the fed won't raise rates this year is the job market is decelerating. i expect job growth to remain on the relatively soft side through the rest of the year. at the same time, i don't see the much inflation pressures developing. > but the group is split. half see a hike this year. the other half next year or even 201717. >> if they didn't find reason to do it in september when they had great opportunity to do so, i don't see how they're going to rationalize doing it tomorrow or even in december. not much is going to change. >> the weak data has made wall street more worried about recession. the chance of a downturn in the next few months rose for the fourth time in a row. the measure the highest in two years since the nation last struggled with a debate over a government shutdown. >> there's a rising chance of recession but the base case is an economy limping along at roughly a 2% pace but the second half of this year growth will probably be under that, and that's the reason why the fed's not going.

>> all the off again on again talk has many criticizing the chair. janet yell lynn gets a grade of c plus. for "nightly business report," i'm steve liesman. >> still ahead the new face of blue collar america and why the manufacturing sector is still struggling to create jobs. ♪ >> oil prices slid to a

two-month load today but crude isn't the only thing that's sliding. the price of natural gas is falling, as well. dropping about 15% in the past week alone. if the trend continues as some say it will, that could mean lower heating bills for many this winter. jacquie deangeles has more. >> reporter: natural gas prices hitting a three-year low this week as warmer than normal temperatures spook the market ahead of halloween. in the case of nat gas, it's a classic supply/demand story. not only are total inventories nearly 14% higher than they were last year at this time, that's according to platt's, but expectations for soft demand are leading some analysts to believe we could see prices fall to levels not seen in more than a decade. why weaker demand? well, u.s. weather models calling for temperatures to remain above normal in the northeast and the midwest. both key regions for usage. el nino is being cited as a reason. as prices fall, consumers are hoing their heating bills will, too. more than 50% of u.s. homes run

on nat gas and it supplies more than 20% of energy needs overall in the united states. >> the trend is clearly down and the weather continuous to be extraordinarily good. we're probably going to be warmer this year than last year. if that happens, as long as there's no shutdown continuing in production, you're going to -- you might just to do it put a one handle up on nat gas. that's hard to believe. we might get there. >> for homeowners using heating oil, prices are down more than 5% in a month. propane prices down 12% in the same time period. but buyers beware. when futures prices drop, that typically is a lag effect before we see bills drop. the last time nat gas was under $2 was 2012, the fourth warmest recorded winter in history. still, mother nature could throw us a curveball and if she does, all bets are off. for "nightly business report," i'm jacquie deangeles. in washington, the house of representatives passed a highway

and railway safety bill. the measure will fund road and bridge construction projects into late november. and it gives the house more time to work on a longer term bill. it also extends a key rail safety deadline to the end of 2018. the measure now heads to the senate. and a tentative budget deal has been reached in washington but not everyone be praising it. not by a long shot or praising the process, not even the current speaker of the house. >> i'm in full agreement, it stinks. this is not the way to run a railroad. but when you've got a situation that we're dealing with today, it's -- there wasn't any choice. >> last night we told you a deal was near and tonight we can tell you that the agreement increases federal spending by $80 billion over two years. and raises the federal borrowing limit through 2017. ed mills it, senior financial policy analyst at fbr capital joins us now with his analysis of what is happening in

washington. you know, mr. mills, there's so much to cover here. it sounds like not anybody is really very happy with that which may mean as the speaker just said, it's the best deal they can come up with. will it pass? >> this bill is going to pass. it's because there's something in it for everyone. democrats do not want to kind of change speakers unless the debt limit's increased. republicans have the talking point that obama didn't want to negotiate with the debt limit but he did and we're able to see entitlement reforms for the first time since reagan was in the white house. >> so what do you anticipate that there will be any pushback? >> oh, absolutely. i mean, members of the freedom caucus voting against this. maybe even a majority of the house republicans vote against this. but all you need is about 30, 40 republicans to come on board with the vast majority of democrats in the house and it gets sent over to the senate and the senate, they have a different problem. there's a lot of republicans in blue states who don't want to have this brinksmanship for the next two years.

and they'll very willingly kind of have a filibuster proof majority in the senate by the end of the week. >> we talked about the overall parameters of the deal. i want to zero in on two things that are part of this deal. one is of high interest to seniors. and that is the matter of rising medicare premiums that were expected for some to go up 52%. does this solve that one, and does it solve the questions about the disability payments under social security? >> absolutely. so under this bill, it doesn't completely solve those medicare increases. but it does cap that increase at about 20% rather than 50 plus percent. on social security disability, this was something the trust fund didn't have a lot of news but this fund was going to go bankrupt next year. instead of having a fiscal fight over that and another fiscal cliff they've reworked formulas and added fraud prevention provisions to make sure the people who are on disability who the should not be are more

audited and kicked off making sure this fund will have the funds to stay on for years to come. >> thank you very much. ed mills with fbr capital markets. light guidance weighs on shares of twitter. that's where we begin tonight's market focus. the firm reported slower user growth and gave a disappointing revenue forecast. this is twitter's first earnings report with jack dorsey as its ceo. shares tumbled in initial after-hours trading. rlg session, it was 1.5% to 31.34. ford reported earnings that missed estimates. the automaker's revenue topped forecasts in the company's north american unit had its best quarter ever. the chief financial officer says he doesn't see that flowing down anytime soon. >> we're growing the top line, the bottom line, the cash generation that was also a record in the quarter. it's vet positive. and in the u.s. which is critical for us and for many in the industry, we don't see any signs whatsoever that the industry is going to be slacking

off at all from the very high levels it's at. >> nonetheless, shares tumbled 5% to 14.9. ups reported earnings that topped consensus even though its revenue dipped in the recent quarter. the package delivery giant says it is expects lol day season deliveries to rise at least 10% from a year ago. . the stock fell nearly 3% to 103.10. and jetblue saw earnings rise in the third quarter helped by lower fuel costs. also charging for checked bags bolstered the company's bottom line. still revenue came in just below consensus. shares slipped 3% to 25.36. >> and coach came out with mixed results. the handbagmaker's revenue shy of estimates but sales declines. but at the lowest pace in over two years as depend in north dakota america rebounded. shares up today almost 34.5% to 31.65. bristol-myers squibb saw shares rise after it posted a beat on both the top and bottom lines.

it hiked its full year guidance as one of its cancer treatments performed. shares up to 66.80. cummins slashing up to 2,000 jobs or 4% of its workforce is attributing the move to weaker demand for its engines. if you're an enginemaker, it's not a good thing. it cut revenue outlook for the year. shares off 9% to 102.35. >> tomorrow night in boulder, colorado, the republican party will hold its third presidential debate. this one will focus on the economy. we will likely hear every candidate talk about creating more jobs, especially manufacturing jobs. but as phil la bowl reports from colorado springs, getting millions of jobs back on the shop floors is a promise few politicians have fulfilled. >> candidates love talking about creating more blue collar jobs. jim james has heard it for years. he runs ideal industries which employs almost 2,000 people making tools at 16 u.s. plants.

he says to manufacture in america, you have to compete globally. >> our customers can only afford so much to pay for certain products. and if we can't get our costs in line, then you know, you've got to go where you can get your costs in line. so unless our products can differentiate greater than what's coming in from offshore, we're going to be at a disadvantage always. >> so ideal has to do more with fewer workers. in fact, the company is laying off up to 150 employees at this plant independent colorado springs. while investing in automation and in some cases robotics. this is the new face of blue collar america. leaner, smarter, with more skilled workers. factors that explain why president obama is falling way short of his promise to create 1 million manufacturing jobs in his second term. >> it's been a restruggle to bring even more people into this industry. and i think to focus on that as

your crux of judging the health of an industry is a mistake. >> still, candidates like donald trump keep making big promises. >> i'll bring back our jobs from china, from mexico, from japan, from so many places. i'll bring back our jobs and i'll bring back our money. >> jim james is skeptical. >> i think it's really hard to think you can force people back here and still be able to get somebody to buy your product at a higher cost. in this comes down to can your customers afford the price of your product. that's really what it comes down to. >> james is optimistic is the jobs being cut at this plant here in colorado may eventually return. once the company invests in new technology which will allow ideal have is to be more competitive globally. he says those investments not political promises, are the key to growing manufacturing jobs in the future. phil la boerks "nightly business report," colorado springs. >> northrop grummon won a $60

billion air force contract to build bombers. this ends a four-year long competition between northrop, boeing and lockheed martin. shares rose initially after the close on that news. and coming up, will microsoft's new video game release be enough to power up its lead against rival sony? here's a look at what to watch for tomorrow. the federal reserve will deliver its post pleating statement, and highs your bush imbev and sab

miller have till tomorrow to complete discussions on a potential merger, the biggest beer deal ever. house republicans will vote on a house speaker to replace john boehner. >> a new study shows families spend a lot more caring for dementia yag patients than other diseases such askancer ore heart disease. according to research published in the annals of internal medicine, average out of pocket spending for dementia yag patients was 81% higher than it was for those with other diseases. microsoft is the launching the latest install thement of its biggest video game franchise and it may be a key part of the company's strategy to compete with the sony playstation. julia boorstein has our story. >> contact. >> halo is microsoft's most valuable game franchise by a long shot. generating $4.6 billion in sales for the tech giant. and halo 5 guardians is particularly important and not

just because it costs a reported $100 million to produce. halo which is exclusive to microsoft's xbox is considered a key way to help the tech giant recoup its investment in the xbox 1, which is lagging its rival sony's playstation 4. xbox chief phil spencer says microsoft knows consumers carefully evaluate a console's exclusive games and halo is microsoft's biggest exclusive. >> it's critical to xbox's success that it is successful. they're a very sbim is by ot tick relationship between xbox and halo's success. i'm encouraged but the early signs that this is going to do well for us. >> microsoft faces competition. sony's playstation 4 has outso would it by nearly 2 to 1 and halo is against activision's blizzard's call of duty games have sold over $11 billion at retail. activision's next install thement call of duty back ops 3

launch aweek from friday. it has the advantage of selling versions for both major consoles. still, xbox's spencer says he's not concerned about the competition. >> it's really a great time in the game industry. you see sony having great success with their console. we're selling more xbox 1s than we've solved any previous xbox this point in the generation. more players on xbox live. it's a really healthy time in the game industry. i think the success of many companies shows that. >> reporter: people certainly seem invited at midnight events at stores around the world and the youtube stream last night. reviews have been positive particularly of a new 24-player mode. we'll see how that helps it stick from its the competition this crowded holiday shopping season. for "nightly business report," i'm julia boorstin in los angeles. there will be knob promotions, no doorbusters no waiting in line at outdoor retailer rei on black friday.

the store will be closed. on one of the year's biggest shopping days. the company is encouraging would be shoppers to spend the day outside. rei also says it will pay its 12,000 employees for the day. even though they're not work. makes me like them even more. >> i think so. they're true to the mantra of being outdoors and communing with nature. that does it for us on "nightly business report." i'm sue herara. thanks for joining us. >> thanks from me, as well. i'm tyler mathison. have a great evening, everybody. we'll see you tomorrow.

i think that the openness of the internet is it's greatest strength and weak necessary. people who tour these say wow. i had no ideas. if you have ever shopped online or texted a friend you know that computing is about you. in 2008 security experts discovered the most computer programs ever written i. range an alarm among experts. in this episode