captioning sponsored by wpbt >> tom: toyota's recall odyssey comes to the end of the road. >> our conclusion is this: toyota's problems were mechanical, not electrical. >> susie: but after 89 lives lost, a record auto recall, and a record fine, toyota looks to regain its reputation. you're watching "nightly business" report for tuesday, february 8. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:

>> tom: good evening, everyone. vindication for toyota. a ten-month investigation by u.s. regulators cleared toyota's electronics as a cause for sudden acceleration in some of its cars. that problem led to the recall of over eight million vehicles. now today transportation secretary la hood said there's in connection between electronic defects and unintended acceleration in toyotas, period. lahood said that the problems were likely caused by floor mats pinning down the gas pedal, or driver error. >> tom: while toyota paid $50 million in fines over the

recalls, it has insisted there were no problems with its electronics. lahood says that's something many people found hard to believe at first. >> just about every member of congress that questioned me said, "it's got to be the electronics." so, to try to prove the case it wasn't the electronics, we hired the experts. they said it wasn't the electronics. what this says to me is, we have some of the best safety people in the world working at d.o.t. that know what they're doing, that did a thorough investigation. >> tom: diane he'sabrook joins us now. is this finding clear toyota's reputation? >> i don't know that it necessarily clears toyota's reputation. there was a problem, it turned out to be a mechanical problem. you'll remember that there were sticky gas pedals and floor mats. so that was a much easier

problem to fix than a potential electronic problem. but still 8 million vehicles were recalled, it cost the company about $50 million in fines. so i wouldn't say that toyota was completely exonerated. >> tom: it also cost toyota a lot of lost sales and they haven't recovered from those recall levels. over the past couple years its two biggest models continued falling, camry sales off 7.5% last year, corolla sales down almost 10%. so what company has come in to fill this reputation gap? >> i think probably the biggest beneficiary has been hyundai. the sales of the sonata have been doing very well and i also think ford and general motors benefited from it too. you look at sales of the focus and the fusion, those probably benefited from the camry and the crol will. and the malibu has done very well too, so it's probably can balancized sales from camry as

well. >> tom: certainly a very competitive land scale. but today toyota raised its fiscal year forecast thanks to cost cuts and the stock has been responding. toyota tonight up by 4%, just $3 below where it was before the recall. so sales may not have recovered, but the stock price almost has. >> it has. and but take a look, this is a very competitive landscape out there right now. they are pushing incentives. incentives were up about 30% last year. the company is still pushing incentives. we're starting to see sales recover, but it's still a very competitive land scale. so it will be interesting to see how this year plays out for the company. >> tom: then there's the currency challenge. toyotas continues to point to a very strong yen compared to the dollar. as the dollar is falling the yen is rising and this cuts into profits quickly for toyota, right? >> it does, and this is a big

problem for toyota. because about 43 to 45% of the vehicles that they produce are built in japan. they export more, probably twice more than honda or nissan. so you alouded earlier to them making cost cuts, and that helps a little, but it's still eating into their margins. if they go up against american products and products from nissan and honda that are more competitively priced, it's going to be a tough haul for toyota. >> tom: certainly one to watch. diane, thanks for your insights and covering the story. diane he'sabrook. >> susie: here are the stories in tonight's "n.b.r. newswheel." it's lucky seven for the blue chips; they rose today, marking their seventh straight session of gains. the dow rose 71 points, the nasdaq added 13, and the s&p 500 up 5.5.

shares moved on the n.y.s.e., and 1.8 billion moved on the nasdaq. china hiked a key interest rate today, the third time since october. its central bank is trying to cool a red-hot economy and keep inflation under control. and here's a positive for the u.s. recovery: business travel is finally taking off again. u.s. companies are expected to spend about 5% more on travel this year. they spent $230 billion last year. still, experts don't see a return to normal corporate travel levels for another two years. >> tom: still ahead, the beginning of the food chain. tonight's "word on the street" takes a look at where a.g. begins, with under the radar plays in fertilizer, seeds and farm equipment makers. >> susie: more insider trading charges today, and once again they're focused on the hedge fund industry. the u.s. attorney's office in manhattan says three hedge fund managers and a fund analyst swapped non-public information

about publicly-traded companies. 46 people have been charged in the wide ranging probe. so far, more than half have pleaded guilty. u.s. attorney preet bharara says some people in the hedge fund industry crossed the line. >> given the scope of the allegations today, we are not talking simply about the occasional corrupt individual; we are talking about something verging on a corrupt business model where the defendant seems to have taken the concept of social networking and turned it into a criminal enterprise. >> susie: the u.s. attorney's office also said the investigation is far from over and that more arrests are likely.

>> susie: the dow jones industrial average has been on a winning streak for months, racing ahead of the dow jones transportation average. it's a trend that worries some wall street pros. as erika miller explains, those transportation stocks are an important signal for how the economy's doing. >> reporter: if you want to know if the recovery is picking up speed, it pays to watch the rails. like many transportation stocks, they've been trailing the broader market this year. that's not just bad news for those companies; strategist sam stovall says it may be a negative omen for the dow jones industrial average. >> if investors believe that the economy is expanding and therefore buying into the industrials, it has to be

confirmed by the fact that you need to ship those industrials to the end-user, be it a consumer or a business. >> reporter: he is referring to dow theory, coined by charles dow in the late 1800s. the idea is, new highs in the industrials must be accompanied by a new high in the transports for the rally to be sustainable, but that's not what has been happening. the transports have gained 5% in the past two and a half months, about half the rise in the industrials. the weakest parts of the sector have been truckers, airlines and shipping firms. a common headwind is rising fuel prices. but transportation analyst david silver is optimistic the sector is on the road to recovery. >> i definitely do have an optimistic view of the sector as whole, mainly because the u.s. economy is improving. if they are able to improve at the strength we had, that some of the data has shown for the past few months, the dow transports are going to have to catch up. >> reporter: investors will be watching the transportation sector closely for any hints about where the market is headed.

>> the implication is that maybe we want to be watching this indicator a little bit longer because maybe it signals that the industrials have gotten a little bit too far ahead of what the fundamentals say they really deserve to be moving. >> reporter: so the movement of transports could help signal whether the market's rally will continue to chug along or eventually be derailed. erika miller, "nightly business report," new york. >> susie: a nice move at the new york stock exchange on the stocks and some good news after the bell about disney. looks like the momentum may continue. >> tom: nothing derailing in the immediate look in front of us. let's take a look at tonight's market focus. after some early losses, the major indices continued adding to their recent highs, helped out by consumer stocks. among those was disney.

the entertainment giant was the latest dow component to release earnings, coming out after the close tonight. earnings were way above estimates, driven by its media properties and theme parks. income at its espn sports cable channel was a hot spot while advertising revenues at abc television were down slightly. disney shares have been rallying into tonight's report. today, they were up a fraction but added another 3% after the close. if the buying holds through tomorrow's opening bell, it would be a new all-time high for disney. leading the dow industrials, mcdonald's. shares jumped more than 2.5%. january sales were up globally, especially in europe. europe is the biggest source of

mcdonald's revenue, even bigger than the u.s. mcdonald's has been dealing with higher commodity prices, as has sara lee. earnings were a penny lighter than expectations as it wasn't able to raise prices high enough to make up for higher commodity costs. despite the earnings miss, shares of sle were up more than 1%. volume almost doubled. shares topped out just below $20 last month on hopes of a buyout, but instead sara lee will split off into two companies. a couple of other consumer- focused stocks. apparel retailer urban outfitters rallied almost 6%. citigroup raised its opinion from "sell" to "hold." and j.c. penney continues to move higher, up another 5% today. china isn't the only hot economy trying to slow its growth. recently, israel has tried to limit the inflow of short term foreign money.

that foreign money has pushed up the value of the israeli shekel, and that has impacted teva pharmaceuticals. shares fell hard, down more than 5%. volume increased six-fold on this drop. earnings were disappointing even though profits were up considerably from a year ago. teva makes generic and branded prescription drugs. north america sales lagged and currency fluctuations hurt. its full-year forecast was below estimates, too. brazil's economy also has been jumping and we saw very active trading today in the american shares of brazilian banks, here are three. they are all heavier than usual today, the interest coming as fourth quarter results are coming in. a health care buyout creating the biggest provider of health care services for patients after they leave the hospital. kindred health will buy rehab

care for almost $900 million. rehab shareholders will get about $37.77 per share based up on tonight's closing prices. kindred healthcare inc. has agreed to acquire rehabcare for close to $900 million, which the companies said would create the country's largest post-acute health-care services company. and that's tonight's "market focus." >> tom: strong corporate profits have helped the stock market grow to two and a half year highs, but growing worries over food supplies have pushed some

commodity prices up over generation al highs. deborah borchardt is at the street.com and joins us tonight from the nasdaq. welcome back. so in the world of commodities, what makes agriculture more attractive than oil or gold? >> here's the thing. as you mentioned commodity prices have gone up 15 to 20% since the summer, and they are predicted to continue going up. so you don't want to be in the stocks that are at the end of the food chain that are buying food. you want to be at the beginning of the food chain, the ones that are making it. >> tom: so you within to get close toast the ground so, let's start with the seeds that go in the ground. one that analysts have been talking about is monsanto, a mix of seed business and crop chemicals. seed business has been doing well, not so much the chemicals. >> they are known for their roundup pesticides and seeds. usually genetically modified seeds. the usda partially deregulated genetically modified sugar

beats. here's something really interesting. our country gets half of its sugar from sugar beats. and the government has said if you don't use these modified sugar beats the crop is going to be down 20% this year. and we know sugar prices have gone up, so we need these sugar beats in the ground. and monsanto's sugar beats can go into the spring planting, so it's a huge thing for monsanto. >> tom: so now we've got seeds in the ground, now we've got to help them grow. fertilizer maker mosaic has been benefiting not only from demand but also low natural gas prices, which is a key ingredient in making fertilizer. >> this company makes phosphate and potash and animal feed. the company's c.e.o. says they have so much demand for their products that it going to be a chalg challenge to meet those orders, so that's amazing that the company is doing that well. >> tom: farm equipment maker agco not necessarily a household

name, but this is a company behind matthew ferguson and others and it has been rising as crop prices have been rising. what's the catalyst from these levels? >> when you think of tractors, most people talk about deere and cater pillar. but agco is a huge tractor maker also a sprayer and hey maker. that's spraying fertilizers onto the plants. this company has said its sales are going to be up 10 to a% -- 15% in 2011, they are selling their tractors all over the world. so you want to be in the seed, the feed, and the tractors. >> tom: any disclosures for those stocks, deborah? >> no. >> tom: you can read her article on our website as well. our guest this evening, deborah borchardt with thestreet.com. >> susie: here's what we're watching for tomorrow.

fed chairman ben bernanke testifies before the house budget committee. quarterly results from cisco systems and coca cola, and verizon begins selling apple's iphone. also tomorrow, hilary kramer is back as our "street critique" guest. e-mail us your questions. the address is streetcritique@nbr.com. the f.d.a. today proposed a new way to fast-track cutting edge medical devices. the idea is to speed up things that could revolutionize patient care. the f.d.a. has come under fire for losing ground to europe, where devices are approved faster. but some consumer groups worry ramping up the process could be risky for patients. the f.d.a. will listen to those concerns from the public for a month. >> tom: if you've been hiding assets overseas from the i.r.s., you now have a second chance to fess up to the tax man without criminal prosecution. the voluntary disclosure program announced today requires you to settle up with the i.r.s. by the end of august. if you're caught after that,

you'll face harsher penalties and possible jail time. the offer is similar to one the i.r.s. made two years ago that netted 15,000 tax evaders. >> susie: if you've seen the >> susie: if you've seen the movie "the social network," you may be thinking, "why does my kid need to go to college? he could just drop out and create the next facebook."

tonight's commentator thinks we need to get real about the need for higher education. he's jamie merisotis, president and c.e.o. of the lumina foundation, a think tank devoted to expanding education beyond high school. >> pop culture used to tell us that to be discovered in hollywood, you just had to hang out at the soda fountain at schwabs drug store. now we have something much worse: the idea that to become successful you don't even need to go to college. endlessly, we hear about college drop-outs like steve jobs and mark zuckerberg, but their success conceals a startling truth: the u.s. actually needs more college graduates, even taking the great recession into account. now, economist tony carnevale estimates that in a few years, 63% of all jobs will require some form of postsecondary education or training. our colleges and universities must do a better job of managing their resources and connecting degrees to real and relevant learning.

but all of these points pale in comparison to what you are experiencing in your professional life. do you really want to go into the battle with a workforce that's underprepared for the new economy? do you really want to go up against competitors from other countries who have invested more in educating their young people? it's time for the business community to have its say when the value of higher education is being debated. i'm jamie merisotis. >> susie: as we saw with sunday's super bowl, advertisers are always looking for a new ways to reach an engaged audience. they're finding success in the online world of social gaming. that's because millions of people every day log on to sites like facebook to play games. the industry now generates more than $1 billion a year. silicon valley reporter robin mcelhatton takes a look. >> reporter: welcome to farmville, population 30 million. "farmville" is not really a place; it's a social game played

on social networking sites like facebook. last year, the game's popularity exploded, single-handedly changing the perceptions of online gaming. >> yummy, some water for my new trees, that's kind of cool. >> reporter: julie scopazzi is a "farmville" fan. >> farmville entices you, they keep it exciting by creating new themes. >> reporter: san francisco- based zynga makes "farmville" and "cityville." these games aren't child play. the social gaming market will top a billion dollars this year, according to e-marketer, a new york-based research group. that's up 28% from last year. justin smith, founder of inside network, a research firm focused on the social gaming market, calls zynga's growth phenomenal. >> those networks allow the viral spread of games in ways that haven't been seen before on other types of flat forms. they make it really easy for

players to share the games they play, with their friends, enabling these games to grow very quickly. >> reporter: electronic arts, the world's largest game maker, well known for its computer and console games like "madden n.f.l.," made a big play for the social gaming market in 2009 by buying london-based playfish for $400 million. sebastien de halleux is one of playfish's co-founders. >> these games alone, we try to process around 19 million virtual transactions every single day, which is roughly 10 times the volume of the total items on e bay on any given day. >> reporter: more sports and board games are on the way, and definitely more mobile gaming. >> the game experience in the future will be much a platform, meaning that some consumers will start the experience on the iphone, continue it on the laptop, and finish it on the plasma screen at home using their console. >> reporter: the video game experience will grow in other ways too, they expect revenue to

jump 40% this year. >> we expect social game developers to earn about 1.25 billion in 2011 and we think the industry will continue to grow, so it will become a multi billion dollar industry very quickly over the next couple years. >> reporter: companies in the social gaming industry generate revenue through advertising and selling virtual goods. these goods are micro amounts, like paying a dollar for a leash for your dog. virtual goods have become so popular that you can buy game point cards at more than 1,000 retailers, or exchange your credit card reward points for game credits. but some believe virtual play on social networks is an internet fad that will eventually lose its appeal and slow revenue growth. smith expects the virtual goods market to continue its upward revenue climb this year. >> nationally the growth rate is going to slow down. but because social networking is continuing to grow, social

gaming will continue to grow as well. >> reporter: for now, there's a lot of real money in virtual play. >> this morning i have to mick dpots, cows, brush horses. >> reporter: robin mcelhatton, "nightly business report," silicon valley. >> susie: that is so amazing. it means a lot of money for a left players. >> tom: and a lot of very real money with some real growth potential and very real profits. >> susie: people are dicked to them. that's "nightly business report" for tuesday, february 8. i'm susie gharib. good night, everyone. and to you, too, tom. >> tom: good night, susie. i'm tom hudson. we hope to see all of you again tomorrow night. "nightly business report" is made possible by:

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