hi, everybody. welcome to "the wall street journal report." i'm maria bartiromo. a rare interview with a voting member of the federal reserve. my candid conversation with charles evans about the feds' next move, raising interest rates and whether he is concerned about inflation. the markets wrap up a blockbuster first quarter, but will the bull keep on running? where should you put your money now? plus, don't look now but it's almost tax day. last-minute tips before you file. and what the irs is smiling and frowning on. "the wall street journal report" begins right now. >> this is america's number one financial news program, "the wall street journal report."

now maria bartiromo. >> here is a look at what is making news as we head into a new week on wall street. shoppers got little rest during the month of march. same store sales showed a surprise increase of 1.7% increase last month. in spite of bad weather across the country and late easter shopping. analysts had expected a decline of 7/10 of a percent. the dow jones industrial average closed at the highest point in nearly three years on monday, was higher again midweek, but stocks fell on friday. crude oil just keeps on rising. futures touching $111 a barrel on friday, a 30-month high. the federal reserve's open market committee released minutes from the last meeting which showed few signs othe fed easing efforts and showed few concerns about inflation. in a couple of minutes i'll be talking with one othose fomc members, charles evans, ceo of the chicago federal reserve. the markets have had a powerful run during the first quarter,

and now with the second quarter underway and earnings season just about to begin, what is the outlook? joining me now is dan chung, ceo and chief investment officer of fred alger management with $17 billion in assets under management. dan, good to you on the program. >> thank you. >> great to see you. we just had the strongest first quarter in stocks in more than ten years. what is your outlook for the second quarter? >> i think the second quarter repeats the string of fundamental upside, corporate america revenues and profits will again i think be better than expectations. >> what is driving this corporate sector? that's really one of the best parts of the economic recovery. right? the corporate story is the strongest. >> yeah. i think it's multiple factors. first, globalization, global growth. much oindustrial and technology benefits from that. i think we are ocourse also seeing on the internet a continuing revolution in the internet, mobile data, telecommunications, internet

services. and then in some sectors, i think we're seeing still the continuing recovery from the recession and collapse in 2008 and 2009. >> we do, though, have some headwinds, right? you've got the federal reserve getting out of the way in june. that happens in the second quarter. the end othe qe-2. we've got the ripple effects of the earthquake, another earthquake in japan this week. unrest in the middle east continuing. so with all of these headwinds -- oh, and i haven't even mentioned the housing market, foreclosures in the pipeline. >> right. >> this market keeps climbing this wall of worry. >> right. i think it's actually one othe most positive signs that the market has been so resilient in the face and particularly the middle east unrest and the crisis and tragedy in japan, which was right in the middle of this quarter. that the market managed to finish up and in a continuing line i think is an indication of how strong corporate fundamentals really are underpinning this market.

and i think it's one of the reasons we think there is still upside. >> so what groups, now that we're in the second quarter, we're going to be getting i guess alcoa reports monday, j.p. morgan next week, a number o big important companies reporting earnings next week for their first quarter. what are your expectations in terms of the sector leadership in the second quarter? >> so at alger, we are always looking for what we call dynamic change. the industries and the companies that are really adapting to the challenges otoday. and for several years energy and industrials has been a theme within our portfolios as well as technology. and i continue to think that those three sectors offer a lot of opportunity. energy has been the leading sector year to date. obviously the crisis has highlighted again both the growing demand for energy, but also the issues about supply and also what source oenergy we're going to use. so we see a lot of opportunity within the energy sector, both in terms of the enp companies

and providers that help find it. >> oil prices $110 a barrel, and yet everyone i speak with continues to tell me that the supply is there, right? so this week i spoke with sheik hamid, the prime minister of qatar, the largest gas producer, exporter. i spoke with the ceo of exxon mobil, john watson, the ceo of chevron. across the board they all said there is enough oil in the world. the reason oil prices are up is because of speculation, because of mid east unrest and the possibility or speculation of a disruption in supply. >> i think there are three things there. first oil, and many other commodities from '85 to 2003 were in a bear market. they had actually declined in inflation-adjusted terms. and we are entering a period of i think higher prices for these commodities, large lay because of global growth and rising standards of living. they are correct that the supply is there, but the cost of bringing that supply has risen.

the permean basin for example is the oldest american large oil reserve. it's worked by almost all of the major u.s. companies. but the costs of getting the oil that is left there have risen. so it requires a higher energy price in order to bring that supply. >> so is inflation an issue for you? i mean with the strong commodities prices, ocourse, inflation has been front and center in terms of conversation in the country, in the minutes released from the federal reserve this week, the fed seemed to view inflation as a temporary issue. >> yeah. i don't think inflation is a serious issue at the moment for the u.s. stock markets. our country is not as energy intensive or as food sensitive as it used to be. while those prices are clearly going up, on the flip side, we still have a very slack labor market, and as you know, we have a very slack housing market. both of those are big dampers on overall inflation. so i think inflation will be

acceptable in the u.s. >> it appears the fed will withdraw the support of qe-2 in june that program supposed to be going away. do you think that impacts the stock market? a lot of people say look, if the fed is not going to be there to be buying the $600 billion in treasuries, who is? what is your take when qe-2 goes away? >> i think qe-2 first of all should go away. i think the markets have already factored in that fact. and i think it's going to be good for u.s. equities. for example, when we're looking in our investments in say the hotel sector, the real estate sector, we also act as actors as part of our research process. and i think that the federal government's role, heavy role in the financial markets right now is actually keeping all of the cash that we see on the sidelines and a lot of investors out of the market, because there is driving interest rates to levels where they're not good returns. we looked at a hotel deal where plus 2%, basically 2.2% was the

rate of return on a small private hotel. it was a terrible rate oreturn so of course we decided not do it. when we look at the capital structure in the investment equities, i think a lot of what has happened is a crowd-out effect because of quantitative easing. when that goes away you're going to see yet another round of private investors and capital step in. and it's going to be great for equities and a lot of opportunity for investors. >> dan, good to have you on the program. >> thank you. >> we appreciate your time, dan chung from fred alger management. up raveling the mystery of the fed with a voting member o the federal reserve. what charles evans says about inflation, rate hikes and unemployment. and later tax day, it is approaching. last-minute advice iyou still haven't filed, and thou to owe less to uncle sam. as we take a look, take a look at how the stock market ended the week.

♪ what do you see yourself doing after you do retire? client comes in and they have a box. and inside that box is their financial life. people wake up and realize. "i better start doing something." we open up that box. we organize it. and we make decisions. we really are here to help you. they look back and think "wow. i never thought i could do this." but we've actually done it. [ male announcer ] visit ameriprise.com and put a confident retirement more within reach.

well, it's not often that

voting members of the federal reserve's open market committee sit down for a one-on-one interview, but this week have i the opportunity to talk with charles evans, ceo and president of the chicago fed. he joined me in chicago where we talked about jobs, inflation and the state of the economy. >> i think the economy continues to improve. i think that, you know, we made steady progress since last fall. last summer i was concerned that things were slowing, that we didn't have the proper momentum to be self-sustaining in the recovery. but i think things have improved quite well since last fall. and it's pretty much according to plan i would say. >> and you have been talking to a number of your sources in business, and every meeting you talk to various executives and people out there in business to get a sense of what they're thinking about. do you think the $600 billion quantitative easing number was the right number, or do you think we'll need more, perhaps qe3? >> i do talk to a lot opeople before every fomc meeting, and i

get the same kind of reports from them, that things seem to be improving. last fall things were not nearly as good. i thought going into the asset purchase program that we might need to do more than $600 billion eventually, but 600 was a good start. so now as we've seen pretty good growth in the unemployment numbers are improving, it's quite likely that 600 could be about the right number. >> so would higher interest rates, then, be more oa 2012 affair? >> well, i have talked at great length about how i think the economy has been in a liquidity trap. i think there is good signs that we might be coming out of that. it's too early to say. and i think that we're going to need a few more quarters ogood growth and employment growth in order to feel comfortable that we have achieved philosophy. i won't be surprised iit is 2012, but i will be open-minded in looking at how things evolve. >> i think it's a great point you made. we need to see sustainability, and we need to see these numbers continue. 200 plus thousand new jobs

created. what is it going to take to see that kind of job growth every month? >> 200,000 is what we should be expecting and much more than that. we're going to need 300,000 and more than that in order to make good progress in closing the unemployment gap. i'm looking for 4% growth in gdp about as strong as anybody has on the table forecast. still, the unemployment rate is not going to come down that quickly. that's why i think it will be a little bit otime before we're feeling confident that we're emerging from quitty trap conditions and inflation will move back up towards what i think is appropriate, a 2% rate for inflation. >> why is that? why it is taking so long to actually get the heads on the payroll? what is the issue in terms of job creation right now? >> well, when i talk to business people, they feel pretty comfortable with all othe actions that they have taken in the last year and a half. they've had to make some dramatic cutbacks, obviously. nobody felt good about it. but they cut a lot of discretionary spending. and they think they are right

sized for growing their company given the demand that they're facing. until demand really starts to outstrip where they are today, i don't think they're going to be focusing on adding a lot of workers. >> let me get your take on where the growth is coming from, where you expect it to come from. you're looking for 4% growth over the next two years. >> right. >> what will be the leading sectors leading that growth? >> i think it's got to be the business sector. i think it's investment. i think it's business spending in general. i think the consumer will contribute in a solid fashion, but i don't think we'll see the outsized contributions from the consumer sector like we saw over the last ten or 15 years. we've had a tremendous reduction in that worth during this recession, and consumers need to get their balance sheet in order. good growth but not outsized growth. >> let me get your take on inflation. okay. so here we have oil prices at $108 a barrel. silver sitting at a 31-year high. gold at record levels. across the commodity space, copper, iron, steel, it said, you name it, we're seeing price

hikes. isn't inflation an issue? >> food and energy prices are definitely up. food prices are up. energy prices even more. consumer energy prices are up 25% over the last six months, and everybody feels it. if you have gone to the gas pump any time recently, you know here in chicago it's about $4 a gallon. it's quite a lot. grocery stores, i go buy cereal, bring it back, put it in a tupperware container, it doesn't fill up the container as it used to. they're not putting as much in there at a higher price. what we're seeing is an increase in relative prices. it's not really inflation. it definitely hurts the pocketbook. but for it to be inflation, we're going to have to see those effects work their way through other prices. second-round price increases. and in an environment with as much resource slack as we have, i'm not looking for that to take hold. i would like to see inflation move up closer to 2%, like what we sort of target for our inflation objective. but at the moment, we're about 1% year-over-year on core

inflation. and by many other measures of underlying inflation. we're about a percentage point too low. >> what about wage growth? >> that's a great point. this is going to be a very unusual increase in inflation if wages don't increakreecrease commensurate with that. wages normally would be growing as well. but when i talk to business people, i might hear complaints about commodity prices, raw materials prices. but when i point out wages are unlikely to grow, everybody understands that's the most likely case, and it would be more difficult for inflation to pick up quite strongly without wage growth. >> my thanks to charles evans. up next on "the wall street journal report," it's that time of the year again. tax day. last-minute tips for filing and some good news for the procrastinators among

well, there is nothing so certain as death or taxes, but only one of them comes with a dayton calendar. and it's almost here that deadline is approaching with last-minute tax tips is "money" magazine donna rosato. great to see you. >> good to be here. >> procrastinates have a few extra days. >> yes, if you haven't filed your taxes yet, you have a little more time because there is a holiday in d.c. >> what is the most important last-minute advice for those who have not filed yet?

>> i think one othe most important things is to efile. especially if you're getting a refund rather than owing money. that's the fastest way to get your refund. and about 70% of filers did that last year. and if you do that, that paper return takes six weeks to process, but only two weeks if you're doing an efile. >> and it's easy to understand? >> it's simple to do. it's quick. if you do any kind othe software, if you're doing it yourself, it's very fast. i would say another really important thing to remember is the common mistakes people make. and the most common one is math errors, if you can believe that. people transposing numbers, just not doing simple math correctly. and then not signing their return is very common as well as sending to it the wrong address. so you want to keep your eye on that simple stuff. >> wow, that is the simple stuff. and that's what people usually get wrong. so advice for people who may have converted from a traditional ira to a roth in 2010. this was popular because the income -- the income limits were

lifted, right? >> exactly. there is a lot of buzz about it last year. people were deciding whether to convert or not. a lot of people did. but you get hit with a big tax bill because that is considered income. the good thing to remember about that is you can spread the tax bill over two years. it's a pretty good bet because back in december, the tax cuts were extended. and that's going to stay for two years. >> okay. last year the tax credit for first-time home buyers encouraged people to buy homes. what paperwork or information do we need to know about for those filers who got that home buyers tax credit? >> it was very popular. it was up to 8,000 for first-time home buyers and 6500 for people who are existing home buyers. but the key thing to know is that you had to have a signed contract on your home by april 30th. now it was taking a lot longer for people to close because the banks have had higher standards and a lot of paperwork to process. so iyou had the signed contract but you didn't close until september 30th, you can still take part in the tax credit. the key thing is if you didn't

have a signed contract, you're out of luck. >> okay. what about the investment side of things, if you have taxable gains or losses for the year? >> that's right there. are a lot of folks who want to take advantage of selling stock because they've had a nice run in the market this past couple of years. but starting with your cost basis, which is really what you paid for the stock when you purchase it can be very complicated. a lot of stuff may have happened since you purchased it. say stock splits or dividends. so it's kind of hard to figure out, but it's important to figure it out right because that's going to determine whether you had a gain or loss, how much tax you're going to pay. if it's a publicly traded stock, it's going to be easier to figure out. if it's more complex, you want to talk to your accountant about that. >> and we've seen a lot of small business owners come forward. what deductions qualify for the expense of going out on your own? >> that's right. you've definitely seen a lot of people go their own business route there is a lot of tax breaks when you're operation your own business. you can write off a lot of expense. anything from office supplies to a new computer, even working

lunches, which is kind of nice. 10 just remember to keep really careful records, because the irs definitely looks at those very carefully. >> and i understand that they're looking so carefully lately, they're auditing the number of audits are off pretty significantly. >> that's right. if you have a home-based business, they're going to look really hard at that. you have to keep careful records. >> any other popular records? job search, expense, energy efficient appliances? talk to us about all othat string of write-offs that are possible. >> that's right. you want to do whatever you can to boost your refund if you're getting one. well, the energy home appliance, the energy efficient home appliance and hybrid cars have been scaled back. be careful to see whether you qualify or not. but one of the good news on the job front, iyou have been out of a job for a while, you can write off a lot of your job expenses, your travel to a job, the resume writing service, and even a job coach. that's the good news iyou've been out of work. you can write off a lot of those expense. >> used clothing, furniture,

anything like that? >> charitable deductions. it's gotten a little tougher to prove that you've made charitable deductions. if you contribute any more than $250, you to get written confirmation from the charity that you have donated that amount of money. but if it's under $250, a canceled check or a credit card statement is fine. >> donna, great to have you on the program. >> thanks. >> thanks for all your great insights. donna rosato joining us. up next a look at the news this upcoming week that will have an impact on your money. and then harnessing your home's commercial curb appeal. getting your mortgage paid and a free paid job. sound too good to be true? we'll tell you be it next.

for more on our show and our guests, check out the website wsjr.cnbc.com. and i hope you'll follow me on twitter at maria bartiromo. now the stories in the week ahead that may move the markets and impact your money this week. we'll get reports on the first quarter of 2011 from companies such as alcoa, jpmorgan chase, google and bank of america next week. wednesday retail sales for the month of march will be released as well as the federal reserve's latest beige book report that is a survey othe company's regions of the economy. thursday a look at the major inflation indicate were the latest producer price index out. the ppi tracks the price of goods at the wholesale level. and of course that's followed up on friday with the consumer price when we get the consumer price index coming out. it's not quite wearing your heart on your sleeve, but it is

putting your ad on your house. mobile advertising companied azookie wants homes to turn into billboards. in exchange they say they'll pay your mortgage. the california startup is looking for homeowners only, no rental or lease properties, willing to have the entire exterior of their homes painted with commercial messaging. the mortgage for paint deal must last for at least three months, and possibly up to a year. more than one thousand homeowners applied within the first day the promotion was announced that will do it for us today. thank you so much for joining us. my guest next week blackrock strategist and money manager bob doll. each week keep it right here where wall street meets main street. have a great week, everybody, and i'll see you next weekend.