>> susie: $600 billion. that's the how much money the fed is planning to pump into the banking system, hoping to pump up the economy. >> the fed is saying we are insuring the downside scenario. we are not going to let a double dip happen. we are not going to let unemployment continue to rise and we are going to continue to be aggressive. >> tom: economist diane swonk and market strategist mike holland join us with analysis of the fed's move, and that other big story-- the midterm election and the republican takeover of the house. you're watching "nightly business report" for wednesday, november 3. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:

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>> susie: good evening everyone. the federal reserve said today it will buy $600 billion in government bonds. tom, it's a controversial strategy, but as the fed wrapped up a crucial two-day meeting, policymakers decided this is the way to boost economic activity. >> tom: susie, this strategy is called quantitative easing, and the fed did it once before, during the financial crisis. here's what it's proposing now: it'll buy $75 billion a month of longer term treasury bonds. this buying will continue for eight months, through june of next year. and the fed will regularly review the purchases, adjusting if necessary. >> susie: the central bank is also keeping its key interest rate at close to 0%. as erika miller reports, experts are divided over whether this move will fix the economy. >> reporter: traders were glued to their computers this afternoon, waiting for the fed's announcement.

many were hoping the central bank would commit to buying $500 billion in treasuries. so, they were pleased by the total amount, $600 billion. economist julia coronado believes the fed's so-called quantitative easing is a smart strategy. >> the fed is saying "we are insuring the downside scenario. we are not going to let a double dip happen. we are not going to let unemployment continue to rise. we are going to continue to be aggressive and protect the economy from that downside double dip scenario." >> reporter: here's how it would work: by buying treasuries, the fed hopes to lower long-term interest rates further, encouraging consumers and businesses to borrow and spend. but wall street has plenty of skeptics who think the plan is misguided. societe generale's aneta markowska is not convinced lowering interest rates will help. >> the problem with that sort of logic is that we've already seen record-low mortgage rates since, about, the summer and they really have done absolutely nothing to stimulate housing

demand. you know businesses are sitting on big piles of cash, and they haven't invested that either. >> reporter: critics also worry the money the fed spends will instead end up in bank coffers and not lent out. but most economists do agree the fed's move will likely push up stock prices near term. that's because when interest rates fall, higher-yielding investments typically become more attractive. the fed's plan may not be a cure-all, but supporters say it's better than sitting on the sidelines. in order for the program to work, some economists believe it will have to last at least a year. >> i do think they will probably have to expand the program. although i would probably guess that, at the point that they expand it, they can slow down the purchases a little bit. >> reporter: the fed's next meeting is december 14, and it's the last one of the year. but economists do not think the central bank will have enough new economic data by then to justify tinkering with the asset purchase program. erika miller, "nightly business report," new york.

>> tom: ben bernanke may not get much help from congress on fixing the economy. with the republicans sweeping to victory in the house and dividing the congress, a quick deal on any new economic medicine is unlikely. darren gersh looks at the new congress' agenda. >> reporter: republican leaders today were united on the new agenda that brought them to power. >> cutting spending. >> spending and debt. >> the voters yesterday voted against excessive spending. >> reporter: many of the candidates who will be sworn into office next year are determined to cut back the size of government. but political economist andy laperriere says making those deep cuts will be harder than campaigning against record- breaking peacetime deficits. >> the downside is when you start actually identifying where to cut programs. obviously, those programs have constituencies. a lot of them are very broad based constituencies. they're popular programs. >> reporter: the president and the new republican house are certain to battle over repealing health care reform and the fate of the bush tax cuts. the area of most likely agreement is far smaller, looking something like what senate republican leader mitch

mcconnell laid out. >> trade agreements and nuclear power and clean coal technology. >> reporter: in a news conference today, the president said he would work with republicans on deficit reduction and energy policy. and he extended an olive branch to business as well, saying he wanted to strike a balance. >> making absolutely clear that the only way america succeeds is if businesses are succeeding. >> reporter: once again, voters have chosen a divided government. and that makes big and expensive plans to cut taxes or boost spending highly unlikely. >> policy is on hold, and to the extent the economy is going to grow on its own, it's going to do it. but don't expect that washington and policy is going to come in and do a whole lot to rescue the economy, to rescue the housing market. that basically, we're on our own. >> reporter: investors seemed to realize that today. and veteran market watcher art cashin says washington gridlock

may not be as welcome as it was in the bull market of the 1990s. >> the reason that this time it's different is that the economy is still on life support, and something could come up-- some geopolitical financial event that might require rather instantaneous response from the government. and if everybody is still picking and not talking to each other, that could be a problem. the normal "gridlock is good" has turned into "gridlock is somewhat suspect." >> reporter: the first test of post-election washington will come later this month, when the lame duck congress returns to consider extending the bush tax cuts and benefits for the unemployed. darren gersh, "nightly business report," washington. >> tom: here are the stories in tonight's n.b.r. newswheel: wall street welcomes the fed's move with a muted reaction. the dow rose 26 points, the nasdaq was up six and the s&p

500 gained four. more details coming up in "market focus." trading volume on the big board topped one billion shares. it was over two billion on the nasdaq. general motors detailed its return to life as a public company. it will offer 365 million shares priced between $26 and $29 each. it plans to list on the new york stock exchange later this month, under the ticker symbol g-m. meanwhile, g.m.'s october sales gains lagged its biggest u.s. rival. g.m. sales rose 3.5%. ford motor credits new models for driving its sales higher by 19%. chrysler also posted strong sales, up 37%. toyota struggled, with sales falling over 4% on a drop in small car demand. still ahead, microsoft wants to kinect with you this holiday season. we look at its latest xbox add- on and see why video gamers can't wait to get it. >> susie: back now to our two big stories: the fed decision and the election results.

joining us: diane swonk, chief economist at mesirow financial, and mike holland of holland and company. >> susie: hi, diane, and hi, mike, how are you? >> good. >> hi, susie. >> susie: you heard our reports. let me begin with you, diane. do you think the fed's strategy will work? will it give a boost to the economy? >> nobody really knows. anybody who says they do know is lying. this is unchartered territory. i've listened to the smartest economists duke this out, among economists, and they're heated most of the time. i come down on the side of ben bernanke who says it is better to try and fail than not to try at all. the fed is the last game in town. it may not be the best game in town, but it is the last game in town. better to try and fail than to not try at all. >> susie: mike, we hear

from so many economists who say interest rates are already low, the 30-year mortgage is historically low. it won't motivate consumers and businesses to borrow more and lend more. will this fed action really make a difference? >> by itself, simply lower rates, susie, the answer is, of course not. the logic is impeccable. having said that, we've already had a positive effect -- diane said this is the last game in town. ben bernanke is going to do something that hasn't been tried before, but he is going to do something. when he announced he was thinking about doing this in august, the stock market was up 14%. and a lot of the other commodities markets and china are welcoming in some cases what we're doing. so i think it may have a positive economic benefit. but as diane said, nobody knows because it has never been done like this before. >> susie: and diane -- let me just ask you -- we all know that the big

issue here is jobs. and so will this quantitative easily result inputing more out of work americans -- getting them hired? >> well, the tools of the fed are really bad at stimulating job growth, fiscal policies that cater to that. but the indirect affects or the biggest affects, the asset prices, and the dollar has increased dramatically. exports have been one of the bright lights in the economy, and the manufacturing sector is one of the places that we look to that is actually generating jobs, and, more importantly, the profits that feed into the service sector from the manufacturing sector can help boost some job growth, too. not a lot, but we have not much of anything at this point in time. so a little bit is a lot in a small number. >> susie: i'm sorry, diane. i jumped in.

was there another thought you wanted to add to what mike was saying? >> mike was pointing out it was the indirect effect. people focuses on the interest rate effects, but that's not what the fed is focusing on the most. the fed is looking at reinflating the economy. they're more willing to wrestle the demons of inflammation than deflation. it is not a united fed by any means. there are clear risks out there. if the economy doesn't pick up enough to support the asset prices, you could fall off another cliff down the road. something to worry about. >> susie: mike, you mentioned how well the markets did in august. but what about today? there wasn't much enthusiasm whether you're talking about the stock market or the bond market. >> very interesting reaction to the elections and the quantitative comments. you would comect buy on the rumor and sell. and it certainly wasn't. the market actually priced in these moves in the

elections, and most importantly with bernanke did. and to that extent, my guess is diane may be right. as we move forward, if this thing starts to work, we get some employment numbers later this week, and people think maybe employment will be looking a little better because we have uncertainty out of the way with both of these. if that starts to feed on itself, you have to get confidence back before you get jobs back. and then maybe bernanke got it right and we all could be better off a year from now. >> susie: the consensus is 60,000 jobs were created, and unemployment holding steady at 9.6%. do you have any sense, diane, that the economy is turning? >> i don't think it is turning rapidly right now. i think the fourth quarter is going to be another miserable quarter of 2% growth or so, but i think we'll reaccelerate as we move into 2011. and the census hires, who would have thought that was the biggest job gainer, and then the

biggest loss when we let them go. at the end of the day -- >> susie: let me jump ahead because we have less than a minute, and i do want to get your take on the elections. diane, there is a sense that the american public thinks there is a better chance of fixing the economy now that there is a new congress and i guess because of the new actions by the fed. what do you think? >> i hope they're right. the reality is if there is a silver bullet that could fix the economy, it already would have been shot. i think there is going to be a lot of winners' remorse because i don't think it is going to be strong enough to bring down the unemployment rate to make us all feel a lot better about the economy. that said, i never wished i was wrong. >> susie: and president obama trying to build his relationship with the business community, and hoping if he sets the right tone, to use this words, businesses may change how they make their investment decisions. will it make a difference? >> my guess is he will

actually do that. surprise, surprise. i'm an optimist about the fact he wants to get re-elected. he will actually build some bridges he had burned recently. i think we will actually be pleasantly surprised, i hope, because of his self-interest. i think it has to be done. we need this to create jobs. it is very straightforward. >> susie: we're going to have to leave it there. thank you both for coming on the program tonight. our guest tonight, diane swonk, and mike holland, of holland and company. >> tom: our coverage of quantitative easing continues tomorrow. we'll ask the c.e.o. of one of the country's biggest banks how the fed's move affects bankers, buyers and borrowers. join us for our interview with b.b.&t.'s kelly king.

>> tom: well, as we heard, the federal reserve action today, not much of a surprise, really, for the markets. still, though, kind of choppy around the time of the decision. let's get you updated in tonight's "market focus." this is today's trade of the s&p 500. within 45 minutes of the fed statement, it hit both a new low and a new high for the day before settling higher. the market is feeling more optimistic.

the chicago board options exchange volatility index fell 9%. this measures how much investors are paying for options protection. and a falling index usually means investors are felling more bullish. now with the fed creating more dollars, the dollar index, currency, closed at its lowest level of the year. senior market strategist at international futures group, arjan ligtenberg, thinks that trend will continue, even as it may help the economy. >> i think when the dollar gets weaker, it's going to help our export numbers. as our exports go up, that will obviously most likely create labor, through the docks and through firms hiring and getting more money in for their exports. so i think coming forward here, we'll be looking for the dollar to trend down a little bit more. >> tom: with the fed decision today, financial stocks put up the best numbers, helped by an insurance company and several regional banks. the insurer, hartford financial services, saw lower insurance claims in the past quarter and

that's good news for shareholders, increased its profit targets. shares jumped 9%. m.&i. bank, based in milwaukee, and the tennessee-based first horizon were up 5% each. both hit new yearly lows just yesterday. despite losing money, m.g.m. resort's c.e.o. says the bottom is happening this year. the hotel and casino operator didn't make any money last quarter, but is looking forward to a stronger 2011. here are those losses, coming in the past quarter not quite as bad as feared. it's saddled with multi-billion- dollar financing troubles at its city center las vegas complex, but m.g.m. is optimistic it can restructure that debt. shares responded very well to the optimism. shares jumped more than 10% on very strong volume. home builders were sinking, with pulte group returning to losing money last quarter as the homebuyers tax credit faded. in addition to a quarterly loss, the builder saw orders drop and announced a plan to cut $100 million of costs next year, which will include lay-offs.

shares dropped almost 8%. this is its lowest since november of 2008. a couple of navigation companies were going in opposite directions. garmin and trimble were moving off their earnings results. that we saw during the day. garmin fell 5% with disappointing earnings and cutting its 2010 forecast. meantime, trimble jumped 5% after better-than-expected profits. trimble focuses more on the corporate market, such as defense and construction. a couple to watch tomorrow after strong earnings tonight? whole foods and qualcomm. qualcomm blew away estimates, beating the street by nine cents a share. shipments of its wireless chips also hit a new record. meantime, grocery store whole foods beat by a nickel per share. it gained market share, and it raised its outlook for the year. coming into these reports, qualcomm was about 1% higher, while whole foods was up 1.5% in the regular session. each added to these gains after close.

finally, canadian government protects potash, shares fall 5%. and that's tonight's "market focus." >> susie: 5,000 retail stores will open at midnight tonight to sell something we haven't seen since 1995: a hot consumer product from microsoft. scott gurvey was in times square today and got an early preview of the kinect. >> reporter: they have been camped outside the times square toys 'r' us for days, even though microsoft's kinect doesn't go on sale until midnight. kinect is a $150 add-on for the popular xbox game console. you could call it a non- controller, with no buttons and nothing to hold. >> what's cool about it is you get to pick these games, and you don't even need a controller. just you. >> reporter: in fact, that's the tag line: you are the controller. kinect is 3d sensors, cameras, microphones and sophisticated software. microsoft's don mattrick calls it a game changer. >> we're having the computer,

the sensors learn about you as a human. it's building on things that you and i do naturally. the sense of identity. the ability to use voice to control things. the ability to use gestures. all of those are important shifts in computing, and i think its going to expand the market. and it really resonates with consumers. >> reporter: the early buzz for kinect has been good. a consumer hit for microsoft could give a kick to its flat stock performance. i've tried kinect, and see it leading to a new way of interacting with our computers. but for its introduction, microsoft is positioning kinect for gamers. jim yin of standard and poor's thinks it can expand the market. >> by removing some of the controls, by just using your hand motions or your body motion, it makes that much easier. we normally associate sports by just moving our arms, hands, feet and so forth. by doing that, it really simplifies playing these games and i think may attract to a large, broader audience. >> reporter: judging from today's crowd, kinect will get off to a good start. >> it just looks like it's fun,

and gets your body moving and i think my son will be very jealous, because he's always on the xbox and now i will get a turn on our xbox. >> reporter: microsoft hopes to sell three million kinects this holiday season. success would bring cheer to microsoft and to retailers everywhere. scott gurvey, "nightly business report," new york. >> tom: here's what's on our agenda for tomorrow: quarterly results from kraft foods, starbucks and toyota, along with october chain store sales. and, we continue our look at family businesses with pritchard family auto stores. they've been around for nearly 100 years. we'll tell you why the new generation of pritchards is combining that history with higher education. >> susie: old cars are providing new jobs. today carmax, the country's largest seller of used cars, says it's recruiting to fill more than 1,200 jobs nationwide. while part of that is seasonal hiring, it's also part of a broader expansion. carmax says the majority of positions are in sales and

service. >> tom: freddie mac today asked the treasury for an additional $100 million to stay in business. at the same time, the mortgage giant posted a $4 billion third quarter loss. freddie blamed the loss on continued weakness in the housing market and a hefty dividend payment on the government's 80% stake in the company. combined, freddie mac and fannie mae have gotten almost $150 billion in aid from taxpayers and returned $14.5 billion in dividends.

>> tom: finally, today is national sandwich day. it's also the birthday of john montagu, the fourth of earl of sandwich. legend has it the 18th-century englishman wanted to eat his meal with one hand during a 24- hour card game, so he instructed his servants to place meat between two slices of bread... and the sandwich was born. the hamburger is the most popular sandwich in the u.s., but susie, this week mcdonald's rolled out a nationwide launch of the mcrib sandwich. coincidence? i doubt it. >> susie: i don't know, but you're making me really hungry. >> tom: just in time for dinner tonight. that is "nightly business

report" on this wednesday, november 3rd. thanks for joining us, have a great evening, you, too, susie. >> susie: good night, tom, and good night, everyone. hope to see all of you again tomorrow night. "nightly business report" is made possible by:

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