while all eyes are on capitol hill today, we are watching wall street for trader plays on sequestration. in today's cover story, a major threat hangs over the food industry as many inspectors could get the axe. and groupon bids farewell to its ceo. will investors say hello to the stock? plus, american brands that are doing a belly flop "surface" in today's traders unplugged. first business starts now. you're watching first business: financial news, analysis, and today's investment ideas. good morning. it's friday, march 1st. i'm angela miles. in today's first look: sequester cuts take effect. $85 billion in reductions to the federal budget kick in with democrats and republicans stuck

in gridlock on capitol hill. there was a mild sell-off in the market across the board yesterday; however, the s&p 500 is now up 4 months in a row. it's goodbye to groupon ceo andrew mason. shortly after reporting another round of disappointing earnings, mason was removed from the daily coupon company he founded. shares rallied 7% after the close. the search is on for a new ceo. and today could be decision day for detroit. the governor is expected to announce he is taking over mototown by sending in a manager to run the city's finances. joe cusick of options express joins us this morning for trader talk, and while the rest of the world has been worried about sequestration, i have no doubt that traders have been thinking of ways to make money. good morning to you. > > good morning. > i know it has probably crossed your mind a time or two - you are a trader after all. so, what do you see as a way to

profit off of sequestration? > > you know what, i think first of all you look at what is going to be impacted by sequestration. to be quite honest with you angie, when we are down here in the market, it has actually been something that we have priced in. we have had this, this has been one of those worst-kept secrets. it's there, it's happening. so, right now, we are just reacting to what is really happening. and if you look at sectors like defense sectors or consumer discretionaries, these sectors are really performing well. > what about the earnings after hours last night? anything cross your mind that you might want to play today? > > you know what, looking at retail, we had mixed results. obviously j.c. penney came out, they got hammered on bad results. but then you have things like gap stores and so forth. the bottom line is, watch the consumer discretionary sector in general. don't just let individual names

sway you on your decisions. and the consumer is still very much part of the markets. the sector has been strong, it is one of those offensive sectors; and i think there is a lot of those positive stories coming out, especially with what you saw from the earnings last night. > what about the automakers? car numbers are coming in today. > > right. watch the materials sector. they have been on fire. obviously china is a big push there. but car manufacturers, the gm's and so forth, ford's, have been performing very well - some of the best quarters that they have had in the history of those companies. as long as the materials sector keeps running, as long as the economy continues to move forward - and we saw from the claims data yesterday it has been better than expected - so right now, it looks like there is still upside push behind all of these names. > joe, thanks for letting us pick your brain this morning. have a good one. > > you too. ever since upton sinclair's book "the jungle" ignited public outrage over meat packing in chicago 107 years ago, food inspectors have been deemed "essential personnel" by federal law to ensure public health and safety. in our cover

story, the budget battles threaten to cut more than the fat. this small purple stamp tells you a usda food safety inspector in colorado made sure this meat is safe for people to buy from this butcher in chicago. consumers know its necessary. "it's important to prevent people from getting sick or dying from food, especially meats." but inspectors at more than 6,000 food facilities may be furloughed as much as 15 days as part of across-the-board cuts. some see a ripple effect. "if those inspectors are unable to work, the plants are unable to operate; and if they can't operate on a consistent basis, then yes, that could have a disruptive effect on the supply - not just now, but also down the road." but not everyone it's the worst that could happen. butchers such as bill begale think meat processors will make up the difference, somehow. "they'll just produce more the next day. if they have to work 14 hours one day, they'll do it to make up for the day the inspector's not here."

some commodities traders say sequestration is what the private sector has done, anyway. "it's actually going to show that government can cut, just as mom and pop have done around the dinner table at night." on the floor of the senate, party leaders continue to trade jabs publically- "you want to control washington spending, america? fine. let me show you how much i can make it hurt. that's the president's strategy." "you're told you have to have three fingers cut off, and their proposal is send it to the president and let him decide which finger is going to go first." -all of the back-and-forth leaving the butcher a little queasy. "it's like they're playing a game. i'd say to them, 'grow up.'" one commodities trader thought wholesale prices may go up to

cover shortage, but cattle futures may fall with less demand, a prediction shared by some ranchers. traders are anxiously awaiting today's economic data on manufacturing. yesterday, the gdp number for the 4th quarter showed meager growth in the economy by budging up just .1%. the index for chicago shot up to 56.8 - an 11-month high. today traders expect the national ism number will come in at 52.a number above 50 indicates expansion in the economy. "we do have a few hiccups to get past here in the u.s., but overall the momentum we're having in the chicago business barometer is very strong." that was alyce andre frantz of market news international. she tells us u.s. manufacturers are finding it challenging to get raw materials for production. the housing market remains in recovery mode. 2012 had the lowest number of foreclosure- related sales in 5 years. 21% of home sales were from foreclosures, down from 23% in

2011. prior to the industry's collapse in 2005, only 1% of repossesed homes were on the market. california, georgia and nevada are just a few states that are still seeing high rates of foreclosure-related sales. a new leader is heading to the federal trade commission. reports say edith ramirez has been chosen by president obama. ramirez has served as an ftc commissioner since 2010, where she is said to have pushed for robust competition and innovation in the high-tech sector. she replaces fellow democrat jon leibowitz, who resigned in january. walmart's chief administrative officer is checking out. tom mars plans to leave the company march 13th, after nearly 10 years. the wall street journal reports that mars oversaw the retailer during a 2012 bribery investigation. last year, walmart was accused of bribing officials in mexico in order to

improve business in that country. walmart has declined to say why mars is leaving. major retailers hit a rut in the stock market. shares of sears, khols and jc penney all fell yesterday following earnings news. sears faired the best with earnings that doubled from last year. khol's' numbers were down 8% but managed to come in better-than-expected, while jc penny reported a loss of $552 million. here's a prediction about what's next for the retailer from margaret bogenrief of financial advisory firm acm partners: "i think what's going to happen is jc penny is going to bottom out in the next 6 to 12 months. ron johnson will quietly leave and an actual turnaround will take place." jc-p ceo ron johnson came from apple. his most notable move was to end sales and promotions at penny. the deparment store has lost nearly $1 billion since that move. shares are down 58% since last february. boeing says it's "deeply regretful" over the grounding of its dreamliner. the aircraft maker publicly apologized to all nippon airlines and japan airlines employees this week. both airlines have lost

millions in revenue after the faa grounded the fleet. ana plans to seek compensation from boeing. the company says it's still researching possible solutions to get the dreamliner back in the air. europe is attempting to rein in banker bonuses. under a proposal drafted in the european parliament, bonuses for europe's financial industry may be limited to the level of an annual salary. some officials blame large commissions as a driving force behind the financial crisis. bankers became more willing to take on risk for larger payoffs. the proposal calls for a shareholder vote to allow extra perks at the end of the year. the u.s. is in for a natural gas boom in the next few decades. shale-rock formations are expected to provide a source of natural gas through 2040, according to a study by the university of texas. the surge in production should keep prices at moderate levels. gm is increasing its supply of plug-in cars. production of electric cars like the chevy

volt will increase by 20% this year. gm also has high hopes for its upscale electric release, the cadillac elr, that will hit the market later this year. meanwhile, gm workers at its opel plant in germany will not get raises. however, gm guarantees 20,000 workers will keep their jobs in exchange for the pay freeze, which will last through 2015. automakers are playing on american's "need for speed." several new cars have speedometers showing 160 miles per hour, even though the cars can't actually go that fast. critics tell the associated press 80% of cars won't go over 110 miles per hour. automakers save money by selling the same car speedometers worldwide. in china and europe, the governments require the top speedometer number to be higher than the actual speed of the car. also, cars appear attractive if they at least look like they could crank it up. some mini refrigerators may make you ill. an investigation by a d.c. television station found that some mini-fridges

using thermo-electric cooling don't keep food at safe temperatures of 40 degrees. in the test, the internal refrigeration temperatures rose as outside room temps heated up. sears and hh gregg have pulled unsafe models from shelves. mcdonald's is moving around its menu. the chain is nixing two items due to slow sales. it will remove its apple walnut salad and chicken selects. it is also taking a second look at sales of its angus burger. sources say mickey d's plans to add a wrap, and is still testing out chicken wings. casinos can no longer keep a poker face. the texas hold 'em craze is fading fast. casino revenues are slumping around 6% each year as gamblers spend less money at poker tables. in vegas alone, at least 8 poker rooms have folded during the past couple years. still to come, battle of the brands: we take on the most

beleaguered names on wall street later on in traders unplugged. but first, how washington politics are stressing out the small businesses sector. that's next with bill moller.

the engine of the american economy is driven by the small business, and every month we take the measure of the attitude of small business owners across the country. we do this through what's called the surepayroll small business scorecard. they poll 10s of thousands of their members. michael alter is the ceo of surepayroll. michael, the sequester kicked in a few hours ago. i know you have been saying for months that that is one of the key elements of uncertainty that is kind of driving small business owners nuts. > > it certainly is, and i think one of the challenges while it's kicked in is, there's still uncertainty as to what the real impact is going to be. so i think we will see that over the next week to month in terms of what the real impact of this is. this is one of those strange things where you can put two very educated, very credible economists in the same room, one arguing one side and one arguing the other, and you will get a completely different answer. > what are we supposed to make out of it? we certainly don't know. > > exactly right. > and that is not the only element of insecurity. we have the debt ceiling coming ahead, we now have uncertainty about taxes. that is back on the

table. > > absolutely, and we have uncertainty in the european market in terms of what is going to happen to italy, in terms of the english government being downgraded. there is all sorts of uncertainty, both here in the u.s. and globally, and that weighs on how you make decisions - or actually i think you don't make decisions at this point. > let's talk about some of the key elements that you measure each month with the small business payroll. first of all, hiring, what is that looking like? > > hiring was down 0.1% month- over-month, so, continuing to, as we see it, sort of bounce along the bottom. we haven't seen significant hiring growth in a long time. > how about payroll? > > the average paycheck went up 0.1%. so, of those that are working, there is a little more money in their pockets. but again, that is not enough to move the needle. > optimism is another area that you always poll. is that showing any change? > > so optimism- > i'm guessing not.

> > no. that is the reality. it continues to be low. it is at 59% of small business owners are optimistic about the future. and a lot of that is driven, again, back to the original point, by all the uncertainty, this tidal wave of uncertainty around the impact of sequestration, around the debt ceiling that is going to come up, around taxes being back on the table, about the european crisis. > contractors, that is another measure that indicates if they want to hire their own people or not. what is that doing? > > the trend continues to be more contractors in the workforce, and a lot of that has to be a relief valve for small business owners, because you can bring them in on a temporary basis instead of committing to a long-term hire. > all right. michael alter, next month, hoping for better things. thanks so much. > > we can hope. still ahead in traders unplugged, the guys go heavy metal with their views on investing in copper. and coming up later in chart talk, more ways to make money on the sequester.

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time now for traders unplugged. joining us from the floor of the cme group, pro traders alan knuckman and andrew keene, ready to jump into the ring with round 1 - brand bets: a number of brands on wall street have fallen out of favor. which one would you buy: groupon, hewlett-packard, or blackberry? > > i am going to actually choose hewlett-packard. i can't believe i am going to say this on tv. the stock is trading north of $20. on the chart, that stock looks the strongest. trading above the $20 on the 50-, the 150-, the 200-day moving average. they just reported a good earnings quarter. if they can actually come out with a good earnings quarter that's quite amazing, possible break-up of this company here. i think it's hpq. > > i like a distressed company - facebook. it is 20% off its january high, so this is a good level here, because this is the halfway point at around $26 of the ipo initial price there at $36 and the lows. > > initial price was $38, though. $38. > > $36? > > $38.

[bell ring > > $38 at the bell. round 2 - coppertown: china has bought enough copper to wrap around the world. is this a heavy metal that should be in investors' portfolios? > > i wanted to look at different mining stocks. when i started this research. fcx, the copper company, that became very attractive looking at that chart. it is distressed as well, but i think commodities have a long ways to come back. looking at it at the $32 level, it has solid three-year support at $32. you can really lean on that. > > fcx is basically a copper etf. i would not look to invest in this one. i couldn't bring a stock. i was looking at rig, i was looking at valley, i was looking at rio tinto. i would not be investing in this company- > > i've got a whole bunch! > > i've got chesapeake, which are a natural gas plant. invest in that before any of these copper mines. > > cleveland-cliffs is a great iron ore mining company- > > did you see what that stock did on earnings? down 30%. > > it is down 25, with a really strong base at $20. so there is- > > these stocks are all going lower. > > metals and materials are distressed right now, and that is when you want to buy, when they are out of favor! > > i'll buy chesapeake and i'll sell fcx to alan. > round 3 - the next titanic: a

billionaire is out, and he says he wants to build another titanic, the titanic 2. if you had a choice between boats, bonds, or stocks, what would you buy? > > depends on my time period. on the short-term, i'm going to say stocks. on the long-term, i don't know. i cannot buy bonds at a 1.6 rate. it doesn't make sense for a 10-year. stocks right now- i like to make money; i'm a trader. the stock market looks like it is going higher in the short run. > > death is not an option. you do have to make a choice here, and it is interesting that in 2016 they have 40,000 people that want to take a ride on this titanic. the guy made all of his money, the billionaire that's building this, made all of his money trading commodities. so there you go, australian copper mines- > > you could also buy chinese shipping material companies. > > ccl. look at that stock. look at ccl. carnival cruise lines has been distressed, that is another value. > > another stock with bad earnings. > bonus round time: the best story of the week, oracle's larry ellison, now he has an island and an airline from hawaii. so this question has to do with hawaii: was there ever a stock exchange in hawaii? yes or no? > > alan is a lot older than me so i am just going to say whatever he says. > > maybe the fish exchange, possibly for tuna to be shipped

into tokyo, but i don't think there were stocks traded. > > i would say no, but i am just going to agree with alan because he has been around a little longer. > there actually was a stock exchange in hawaii. > > what year? do you know? > i do know actually. there actually was a stock exchange in hawaii to 1976. there is the bell. > > '76, you were probably 20. > > yeah, there you go. > thanks for being on the show. first business continues right after this.

tim biggam of moneyblock joins us for chart talk with his ways of making money on the sequester. good to have you on the show. let's get down to it: what stocks are you involved with? > > i am actually looking at taking a short position on some of the defense stocks, which have actually rallied pretty strongly in front of the sequester. one stock in particular, united technologies, which isn't a pure defense stock play, but also has a lot of economic exposure as well. this stock is pushing toward all-time highs. it has been on just a tear lately. i think the sequester effects have been poo-pooed overly so. i think they will have some effects certainly on growth, and i am actually trimming out of utx and some of these defense stock names given the rally we have seen here. > any other stocks on your

list? > > actually looking at a way to play kind of a pullback in the market by going long, the vxx, which is volatility, which is inversely related to the market. that one, if we do get a sell-off of any magnitude, will pop sharply, so, i am adding that as kind of a protection for the overall portfolio, and also as a short of short-term spec play here. > you're staying nimble it sounds like. > > got to in this market. i think we will be range-bound and slogging around here. you know, sell rallies, buy dips i think going forward for the next couple quarters. > good to have you on the show. tim biggam with moneyblock. have a good weekend. > > thank you angie. it's time for us to wrap up the week. coming up next time on first business, the best last- minute travel deals if you want to spring out of town. from all of us at first business, thank you for watching, and we hope it's a great weekend.