>> jeff: the senate passes $26 billion in aid to states and school districts; the money's aimed at plugging budget holes and saving teaching jobs. but, economists say its just a band-aid. >> it's not that we could say "if this passes, the economy is somehow on a healthy growth path." >> suzanne: what the bill will and won't do to help the states navigate their budget woes. you're watching "nightly business report" for thursday, august 5. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:

this program is made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt >> jeff: good evening, everyone. weekly jobless claims hit their highest level since april today, and that's raising concerns about tomorrow's july employment report. suzanne, many economists think 65,000 jobs dropped from payrolls last month. >> suzanne: jeff, meanwhile the senate today moved to help stem further job cuts. it passed a bill sending $26

billion in aid to help supplement state medicaid spending and school funding. >> jeff: that money is aimed at helping state and local governments save thousands of jobs. but, as stephanie dhue reports, lawmakers had to make some significant cuts. >> reporter: the bill sends $16 billion to states for their medicaid budgets and $10 billion to schools to prevent teacher layoffs. senator patty murray says the money could save 130,000 jobs. >> this is a huge victory for american families in our country, and everyone who's worried about where we're going. we're putting people back to work and we're making sure our kids are taken care of. >> reporter: nearly half of the $26 billion tab is covered by cutting food stamp benefits to low-income americans beginning in 2014. that means a reduction of about $47 a month for a family of three beginning in april 2014. social workers here at bread for the city, which runs this food pantry, say the food stamp program already isn't enough to meet the need. social services director tracy knight says many of their clients receive just $10 a month.

>> the levels for food stamps are insufficient currently, so any additional cuts or freezes on increases is just really, really hard for our clients. >> reporter: client jesse howard uses the pantry, which supplies families with about three days worth of food each month, to supplement food stamps. >> what little they give you now is barely last you through the month. >> reporter: the bill would also limit tax credits for u.s. companies that do business overseas, saving almost $7 billion. and, it would cut $1.5 billion from a renewable energy investment fund. economist dean baker expects the bill to have a modest impact. and he says, if the economy doesn't pick up by 2014, the cut in food stamps could hurt domestic growth. >> if the economy is weak, if we still have excess unemployment, you don't need anything to create a further drag, which this would do. >> reporter: the bill still must win approval from house lawmakers. they plan to return early next week from their august recess to vote. stephanie dhue, "nightly business report," washington. >> suzanne: the obama administration said today the

new health care law is improving the outlook for the nation's retirement programs. that's according to the annual report from medicare and social security trustees, released today. the report says medicare won't start running out of money until 2029, 12 years later than last year's projection. social security will remain solvent until 2037. that's also expected to improve when new taxes take effect in the coming years. at a briefing today, treasury secretary timothy geithner said the impact of health care reform is monumental. >> these are very, very, very substantial improvements in the rate of growth of health care costs that make a very substantial improvement in our long-term fiscal position. much, much larger than anything we've considered, much less embraced, as a country over the last several decades. >> suzanne: despite the improved outlook for social security, the program's payments this year will exceed revenues for the first time. still, the trustee's report says that imbalance will correct as

the economy improves. >> jeff: here are the stories in tonight's n.b.r. newswheel: stocks were flat, thanks to worries about tomorrow's july employment report and today's reading on weekly jobless claims. the dow fell five points, the nasdaq lost 10 and the s&p 500 was off a point. the pace of trading volume dipped on both the big board and the nasdaq. the senate has approved u.s. supreme court nominee elena kagan, this october she'll join justices ruth bader ginsburg and sandra sotomayor in forming the first three-woman block on the nine-member high court. mortgage rates hit another new record low, the sixth in the past seven weeks. freddie mac says the average rate on a 30-year fixed loan was 4.49%. that's down from 4.54% last week, and well below where rates were last year. the european central bank held its key interest rate unchanged today, at a record-low 1%. rates have been at that level

for the past 15 months. e.c.b. president jean claude trichet said he thinks economic growth will remain modest as the continent works to fix its debt problems. >> jeff: still ahead, in tonight's "of mutual interest," all that glitters is not always gold. especially when it comes to investing in e.t.f.'s. john waggoner, mutual fund columnist at u.s.a. today, joins us to explain. >> suzanne: july was a lackluster month for many of the nation's retailers, as they relied on heavy discounting to move leftover summer merchandise. the reuters same-store sales index rose almost 3%, slightly less than expected. if you think back-to-school shopping is all about the k-12 crowd, you're wrong. twice as much money is spent on college students, $40 billion a year. college freshman are usually the

cash cows, but this year's incoming class plans to spend 20% less than last year's. erika miller looks at why that is, and the implications for retailers. >> reporter: chanel simmons on the left, and her friend symone martin, are this season's v.i.p.'s: very important purchasers. both are college freshmen, the group of students that spend the most on back-to-school items. today they've come to best buy to shop for laptops. how big a priority is a laptop for you? >> everything for me. because i need stuff so i won't be bored in college. i need to listen to music, do my work. >> also, like... typing. essays and stuff. it will make it easier for us. >> reporter: it may surprise you to learn college freshman plan to spend just $280, on average, for all their electronics needs this year. that's a 36% drop from last year. retail analyst howard davidowitz blames high teen unemployment: >> they have no income.

that supplemental income was very important, and a lot of that was spent on electronics. it doesn't even exist any more. allowances have been cut back. the parents are much more conservative, and they are saving instead of spending. >> reporter: there may be still another reason freshmen are spending less on technology. in general, prices for computers and other devices have been falling steadily, so many incoming students are finding they can buy all the electronics they need, but pay a lot less than they would have in years past. best buy manager sy paulson says price is usually just one of many factors students consider before buying. >> i think students are more interested in computers, laptops specifically, that have longer battery life, that are lighter weight. that maybe have special features like antivirus software or microsoft software that are already packaged with the system. >> reporter: so what do these changes in buying habits mean for retailers and their stocks? >> electronics retailers are

starting to level off, like best buy, and they are not seeing the growth that they have seen in prior years. i mean circuit city closed down, another concern is weak spending by college freshmen could signal trouble for retailers this holiday season. but ellen davis, of the national retail federation, says back-to- school is not always a reliable predictor. >> we're dealing with a much smaller market, and many people see back to school as necessity spending. and the holidays have a lot more wiggle room for that budget. >> reporter: as for chanel and symone, they still have a lot of necessities to buy. >> the laptop mostly... clothes, i need clothes. i don't know what else. >> reporter: and you symone? >> i would say like the laptop, ipod... clothes, definitely. like the stuff to decorate my room... those are like the stuff that i want. >> reporter: and you can bet retailers are going all-out to win that business. erika miller, "nightly business

report," new york. >> jeff: a surprise announcement from russia today. beginning next week, it's banning grain exports for 4.5 months. you can blame it on a severe drought that has decimated the country's crops. in chicago trading today, the wheat market hit two-year highs, and the action was so heated, trading curbs were triggered twice. since june, wheat futures have gained nearly 85%. that rally in wheat also helped to drive up prices for corn, oats and soybeans. it's also good news for u.s. farmers, whose crops will make up some of russia's shortfalls. but, there's a tradeoff. shoppers here will likely pay a bit more for bread, cereal and pasta over the next few months.

>> suzanne: jeff, it looks like stocks were in a holding pattern before the release of tomorrow's unemployment numbers. >> jeff: suzanne, some economists think the fed will be paying extra-close attention to tomorrow's jobs report, especially if it shows much larger than expected job losses. let's take a look at tonight's "market focus." >> jeff: as erika miller pointed out in her story, when teens are spending 36% less this year on

back to school, it's hardly encouraging news for retailers. we saw that in the stocks of many retailers today. abercrombie and fitch making fractional gains, despite reporting a sales gain of 7% for july. that's nearly double what analysts expected. aeropostale saw a modest jump in sales, but no warm hugs from investors. sales at hot topic and buckle saw drops in sales of at least 9%, and that gave investors an excuse to exit the stocks. turning now to the larger retailers: shares in j.c. penney received a black eye today. sales fell about 0.5% last month, and deep discounting will likely weigh on second-quarter results, seen at the low end of estimates. costco sales climbed 6% last month, but the stock still finished lower. target the only bright spot. food and apparel sales making up for sales declines in video games and electronics. >> jeff: shares in regis looking pretty.

the chain of hair salons is looking for a buyer-- the company weighing its strategic alternatives with the stock still stuck in the doldrums. it did bounce nicely today from the new yearly low of $13.14 hit last month. as you heard, russia's government banned all wheat exports because of a severe drought. that's pushing not just wheat, but other grains prices higher. you can see the trend in this agriculture e.t.f., up 13% since early june. corn and soybeans commodities posted 13-month highs today. another winner in russia's wheat crisis is archer daniels midland. some see the company stepping in to sell grain to cattlemen in europe as russia's grain exports to that region disappear. but, of course, the high grain prices will have to be passed on by cereal makers and food processors to consumers. shares of kellogg and general mills getting whacked. both companies cut profit forecasts last week to boot.

say cheese, kraft's latest quarterly results giving investors something to smile about in after-hours. the dow component says it's really starting to see cost savings from its purchase of cadbury earlier this year. earnings handily beat analyst's estimates. shares are up 6% in the current quarter and a dollar higher in after-hours. now the nation of lebanon reassessing black berry service after saudi arabia, the uie and india expressed similar worries. and that's tonight's market

focus. >> suzanne: uncle sam is helping ford motor boost its exports. the automaker will receive $250 million in government financing to help it send more than 200,000 cars and trucks to mexico and canada. today's announcement came as president obama toured ford's chicago assembly plant. ford is expected to pay back the loan within a year with fees and interest. the president says assisting ford will help meet his goal of doubling u.s. exports over the next five years. >> suzanne: separately, general

motors is promising impressive second quarter results when it reports next week. but, the automaker was less definitive today about a date for its initial public offering. g.m. chairman and chief executive ed whitacre said the company is working as fast as it can to go public. still, the timing of the deal remains questionable. he suggested an i.p.o. before november's midterm elections would be a stretch. while the paperwork has been started, the process will take months once it's been filed. whitacre says it could be the largest i.p.o. ever for the u.s. market. >> jeff: here's what we're watching for tomorrow: jobs, we'll find out how many were gained or lost last month, from july's employment report. also, our "market monitor" guest looks at investing trends for the second half of the year, along with attractive sectors and those you may want to avoid. she's mary ann bartels, head of u.s. technical and market analysis for bank of america, merrill lynch.

>> suzanne: federal regulators are no longer trying to negotiate with cable and phone companies on a new policy for the internet. the federal communications commission said today it has called off meetings with at&t, verizon, google and skype on how the flow of broadband content is managed. the agency had been criticized for holding closed-door talks with those firms. that announcement comes amid rumors of a deal between verizon and google. but, the two powerhouses are denying reports they've agreed on new ground rules for internet traffic. >> jeff: fannie mae is asking for more taxpayer money, saying it needs an additional $1.5 billion to make ends meet after posting another quarterly loss. the mortgage giant lost $3 billion in the second quarter, or 55 cents a share. still, it's the best results fannie has seen since being put under federal control two years ago. so far, fannie and freddie mac have taken nearly $147 billion in taxpayer aid.

>> jeff: investment scams always seem to heat up during a recession, as more people try to make up for lost ground in their retirement savings. the north american securities administrators association this week is warning about investment pitfalls, and it says investing in high-leverage e.t.f.'s is one of the biggest dangers. joining us in tonight's "of

mutual interest guest" is john waggoner, mutual fund columnist at "u.s.a. today." why the warning on leveraged etf? >> most etfs are fine investments, they're low cost and tax efficient. they're very good for the average person. but the leveraged ones use futures and options to magnify their returns two or three times more than the underlying index. people can get themselves into a lot of trouble using them if they don't know what to expect tz we have an example of within of the problems people can encounter with leverage funds. we're comparing an unleveraged gold etf that is the gld to a double leveraged gold etf with the symbol ugl. now over the last 19 months or so the gld is up about 35 percent. and you would think that the double leveraged one would be up basically double that, 71% or so. but it's not. it's up 62.9%. how do you account for that sort of thing and how should people think about that sort of situation? >> well, because the losses

are calculated on a daily basis, and because losses can inflict greater pain using gains, sometimes the whole one-to-one respect or two-to-one aspect of an investment to its underlying investment gets out of whack. and so if you lose 10% on a day when the fund is up 5%, for example, the loss is hard to overcome. >> so the math, basically, it gets a little more complicated to work out the math on this but it is very much disclosed in a lot of the prospectus of these funds as well. now john what about the fee structures for these? because it seems like there is an awful lot of back and forth movement as the fund manager tries to keep the fund indexed, you know, on a proper leverage level to whatever index it is supposed to track. >> right, you are going to have a lot more trading with these than with a normal index fund and again because it's done on a daily basis t only promises to go up 2% if

the index goes up 1%. there is a lot of adjusting that has to go on with those funds. >> john, got about 30 or 40 seconds or so. just how popular are these leveraged funds. >> well, they are popular with traders. you know, if you are a day trader and you are good at these things, okay. but if you are looking for a long-term investment it's not a good idea. you should stick with a big broadly diversified etf and be a long-term investor in that. >> because even if are you guessing right as we showed on the gold etf, if you are guess right on the trend are you still going lose something. are you to the going to get the double or triple that you thought you would. >> you may or may not. and it's not a risk that the average investor should take. >> john, do you own any of the funds we talked about or have any other disclosures to make. >> no, i don't. >> our guest john wagoner of "u.s.a. today", thanks. john waggoner, mutual fund >> suzanne: finally, crayola makes just about every color you can imagine. now, they're all much greener.

crayola's newest assembly line is powered by clean, renewable energy from the sun. that's thanks to 15 acres of solar panels in a field behind the company's pennsylvania headquarters. the field will generate enough power to make a billion crayons. along with solar crayons, crayola is also making black markers from recycled bottle caps. that's expected to keep a million tons of caps out of landfills. >> i can still remember the smell of that box of 64 crayons. >> i don't need to buy any new ones, with my three-year-olds i'm always finding more underneath the couch and everywhere else. >> i bet you are. >> that's nightly business report for thursday, august 5th. we want to remind you this is the time of year your public television stations seek your support. >> sport that makes programs like nightly business report possible. >> thanks for joining us. and again don't forget to support your public television station, suzanne, good to see you and good night, everyone. >> good night, geoff. we'll see all of you again tomorrow evening.

"nightly business report" is made possible by: this program was made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt

captioned by media access group at wgbh access.wgbh.org >> more information about investing is available in "nightly business report's" video "how wall street works". to order this dvd, call 1-800- play-pbs or visit online at shoppbs.org.