>> tom: wall street kicks off june with a swoon. the dow tumbles 280 points on fresh signs the u.s. economy is slowing. >> what this data point indicates is an economy that is moderating, an economy that is going to grow below its historical trend rate. >> susie: from sluggish auto sales to slower jobs and manufacturing growth, what the economic signs spell for investors and where your portfolio should be headed into summer. >> tom: you're watching "nightly business report" for wednesday, june 1. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by: this program is made possible

this program is made possible by contributions to your pbs station from viewers like you. captioning sponsored by wpbt >> tom: good evening and thanks for joining us. a tough day on wall street-- stocks tumbled as u.s. data on jobs, manufacturing and auto sales came in weak. on top of that, moody's downgraded greece's bond rating deeper into junk status. >> susie: tom, the latest read the dow fell 279 points, the nasdaq was off 66 and the s&p 500 down 30-- all of the major averages off over 2%.

what spooked investors at the opening bell, a dismal report on jobs. adp, the big private payroll processor said the private sector added just 38,000 new jobs in may, that's way below the 190 thousand most economists were expecting. still oppenheimer thinks hiring will pick up later this year. >> our expectation is businesses will continue to invest in labor and capital, and that'll support economic activity in the second half of the year. it's not going to be strong. we're not heading into another recession, but breakout growth still remains out of reach. >> susie: joining us now for more analysis of today's market action, david kelly, chief market strategist for j.p. morgan funds. hi, david. >> hi. >> susie: so the big question for many investors today was that, is the u.s. economy heading for another recession. what do you think?

>> no, i don't think so. it is clearly slowing down, i mean these were very bad vehicle sales numbers. we got a weak employment report, also a weak report from the i. s. m. index on manufacturing. looks like the u.s. economy is only growing about a 2% pace right now and that's not enough to create a lot of jobs. i think the key thing people need to realize is that it's more likely this economy will sort of trouble along and then pick up speed than it will collapse. because when you have a recession, what happens is something goes from boom to bust, and there's nothing booming in this economy. it very hard for something to collapse when it's already in the basement. you look at vehicle sales or housing starts or business unveners to, they are all very low now, so we don't expect them to move down. we think they will move up in the second half of the year, so we still feel confident about the second half of the year. but it a little surprising the market sold off today. >> susie: a lot of people are saying the federal reserve will step in and fix things up. do you think the finish will come in and buy more

government -- bonds or take some other action? >> i sure hope not. because the u.s. economy is not suffering from a lack of liquidity. it's suffering from a lack of confidence. and the problem is that every time the federal reserve says it going to come in in some emergency action to fix things, people with faith in their abill -- lose faith in their ability to fix things themselves. and the best thing the finish could do is tell people that interest rates -- the best thing the federal reserve could do is tell people that interest rates are going higher. this is a great time to buy a house, but as long as they say they're not going to raise rate, people wait and see. >> susie: most people get worried when they hear that interest rates will go up. why would that be a good thing? >> i think would it abe good thing for two reasons, first i think it would reflect confidence, everybody else is confident that the economy is getting better, that the market will get better.

and i think a lot of people are hesitating to make business decisions today, like hiring, like buying new equipment, or buying a house or car, they're hesitating because they're not sure where the economy is going. rising interest rates would be a sign that the economy is getting better. and rising interest rates would tell people that if you want to bore pro money, do it now. you're not going to see better rate for many years so, this is a good time to for pro -- borrow money, invest and make the decision today. >> susie: over the next six months what do you think we'll be saying about the economy, about the market? better, the same or worse. >> i think by the end of the year things will be better. i think right now we've got a deficit of good us in and awe surplus of uncertainty. we have to get past the end of q. e. 2 and we'll see how the bond market reacts to the federal reserve no longer buying bonds. we need to get past these things and we need to see some stronger economic growth, which i think we will see in

the second half of the year. if we see that i think we'll see a higher market by the end of the year. >> susie: now david you manage and oversee over half a trillion dollars in assets at j. p. morgan funds. what is your investment strategy? are you changing your strategy at this point? >> obviously i don't manage it all directly myself, but we do in j. p. morgan fund have assets under management. the main point we make to people is first of all be very balanced because there are things that can hurt the economy and hurt your portfolio. but also still take a long view n. the long run, stocks still are somewhat cheap, bonds are and a expensive and we still see -- >> susie: thank you so much, david, we appreciate you coming on tonight. you're very welcome. >> susie: we've been talking to david kelly from j. p. morgan fund.

>> tom: here are the stories in tonight's n-b-r newswheel: late today, google said its gmail service recently came under attack from china. hundreds of gmail users were tricked into disclosing their passwords. u.s. and asian officials, as well as journalists, were affected.* chinese activists house republicans met with president obama, hoping for a deal on the debt ceiling. they want to slash trillions of dollars in spending in return for letting uncle sam boost his ability to borrow. after the meeting, house speaker john boehner said he told the president now is not the time to kick the can down the road. >> if we're going to raise the debt limit, the spending cuts should exceed the increase in the debt limit, otherwise it will serve to cost us jobs in our country. it's not what the american people want. >> reporter: without some kind of action, we'll hit the current debt limit of $14.3 trillion by august. >> tom: still ahead, it's the one sector outperforming the

rest of the market this year. tonight's "street critique" has a prescription for health care stocks. >> susie: the slowing economy combined with tight supplies and higher gas prices to put the brakes on auto sales last month. at general motors, sales dipped just over 1% in may and fell a fraction at ford, but both automakers said strong sales of small cars offset weak truck sales. chrysler was the star-- sales up 10%. both toyota and honda struggled to meet demand as sales tumbled double digits. $4-a-gallon gas prompted some consumers to ditch their larger vehicles for more fuel-efficient ones. but as diane eastabrook reports, not everyone thinking small is able to buy small. >> reporter: at this toyota dealership, customers are still checking out the tundra pickup. but recently, they've been more interested in buying smaller vehicles like the corolla, and they're interested for one reason. >> it has to be easy on the gas. at $4.50?

oh yeah. >> reporter: with pump prices still above $4 a gallon in many areas, fuel economy is a top priority for many car shoppers, and that's putting manufacturers in the driver's seat when it comes to deals. last month, incentives were down a staggering 23% for compact cars and 14% for subcompacts. industry-wide incentives were down less than a percent. even if consumers are willing to pay more for small cars, they may not be able to get them. japanese dealerships are short of some products because of the march earthquake in japan. so, toyota dealer dennis pecho has been working harder to satisfy customers who want products like the prius. >> there's a lot of people that want to be in a car that's more efficient than the one they have, and we believe that we have enough. everybody that walks through the door, we manage to find a solution for. >> reporter: some consumers in search of smaller cars have been crossing over to domestic dealerships, but often they're out of luck there too. ford dealer roger rudin had only

one newly redesigned focus in stock, and it had already been sold. >> i'd like to have twice as many vehicles as i can get from ford, and it's just not going to happen. >> reporter: ford c.e.o. alan mulally is opening the supply spigot. in washington yesterday, he said the company's ratcheting up production in the third quarter. >> we are matching our production to the real demand, and it's very gratifying to see the ever-increasing demand for the ford product line. >> reporter: but despite help from ford, morningstar auto analyst david whiston is skeptical auto sales will reach 13 million units this year. >> high twelves to low twelves is still certainly a possibility. it really depends on how quickly can the japanese ramp up. and the good news is their-- toyota and honda's-- production resumption in the united states is coming back faster than originally planned. >> reporter: if fuel prices stay on the high side through summer, analysts think big sales of small cars could continue through the remainder of the year. diane eastabrook, "nightly business report," hodgkins, illinois.

>> tom: meanwhile in japan, good news for auto makers and suppliers there. the bank of japan says supply bottlenecks are easing faster than expected after the earthquake and tsunami disasters, known in japan as 3/11. the bank expects the economy will start to rebound this fall, but as lucy craft reports from tokyo, many analysts are still bearish about japan's prospects longer-term. >> reporter: while japan is experienced when it comes to bouncing back from natural disasters, the 3/11 catastrophe still weighs heavily on the economy. citizens are fearful about continued emissions from the crippled fukushima nuclear plant. >> ( translated ): we don't really know what's going on. the mass media doesn't know, and i don't think the government does, either. >> reporter: although background radiation has returned to normal levels in tokyo and throughout most of japan, the invisible radiation menace continues to depress consumption and taint the image of japanese products abroad.

>> ( translated ): what's holding down spending now is the nuclear accident-- fears about radiation. people are trying to avoid going outdoors. also, in order to wring as much as possible out of the budget for recovery, a tax hike has become much more likely, and this is also discouraging consumption. >> reporter: disarray and disunity reign at japan's fractious parliament, presided over by an unpopular prime minister. >> the shock of a terrible loss, the largest loss in tohoku, came the nuclear disaster. and this was really where the feeling set in that the country is almost rudderless. so consumers are thinking, "oh, this is not over. its going on, and we have to save." >> reporter: while infrastructure damage has been estimated at $300 billion, some question whether trillions of yen should be spent on a region that was economically struggling even before the quake. >> some things shouldn't be rebuilt, anyway. the issue is what do you rebuild, and what kind of economic activity is accompanied by that?

how can we affect the flow of economic activity? my worry is the focus on the initial numbers-- the 1,625 trillion yen-- is taking peoples eyes off the real issue: how to support the medium- to long-term economic growth of the country. >> reporter: but such deep- seated structural issues are hard to focus on, as japan confronts a looming energy shortage and with no guarantee the nuclear plant will be stabilized as promised, later this year. japanese officials are upbeat, saying that production is recovering and the economy remains resilient. but observers warn that with the legislature badly divided, japan will find be unable to make hard decisions about what to pay for and how to pay for it. lucy craft, "nightly business report," tokyo.

>> tom: let's get you updated on the selling with tonight's market focus. a drop in manufacturing and building worries about friday's report on the may employment situation rattled investors. the dow industrials had its worst day since last august. let's put up today's chart of the dow jones industrial average, showing how the selling pressure was seen all session long. the dow closed just off its worst level of the day. the dow hasn't been at this low

of a price since the day after income taxes were due-- april 19. financials saw the worst of the selling. volume almost tripled for this financial select exchange traded fund. with today's 3.4% drop, the fund is at a new year-to-date low and has been trending lower since february. regional banks were the worst in the sector, led by regions financial falling more than 7%. suntrust was down almost 6.5%. bank of america's 4.3% fall made it one of the worst dow jones industrial components on the day. asset managers also got hit as goldman sachs cut stock price targets and earnings estimates. t-rowe price and janus capital were among those hit, and shares fell by about 6% each. but goldman singled out blackrock, the company behind the i-shares brand of exchange- traded funds. the analyst upgraded blackrock to a buy. shares fell a more modest 3%. despite the stiff selloff, the market's fear level remains within its recent range.

the chicago board options exchange volatility index measures option prices. this index tends to go up when the stock market drops, as it did today. this is the past 90 sessions. while it saw almost a 19% jump, it is below its high last month and well below the march high. nokia's american shares sank to another 13-year low, falling almost 5% on a big jump in volume. the company cut its forecast yesterday and today it denied market rumors it's talking to microsoft about selling its mobile phone handset business. a couple of deals today. marathon oil will pay $3.5 billion for land in a south texas shale oil area. the seller is a joint venture which includes private equity firm k.k.r. marathon shares fell almost 3%. meantime, sealed air dropped almost 7% after announcing a $2.9 billion deal to by a private cleaning products company.

the market didn't like the price. finally, american airlines picked up its lawsuit against its former business unit sabre holdings. the two had been negotiating over how american airline tickets are distributed and sold. meantime, after the close, an illinois court ordered american to put its ticket information back on travel website orbitz. orbitz shares heading lower since december when american pulled its flights off orbitz. continuing this downtrend. after tonight's ruling, orbitz stock shot up to over $3 per share. one to watch tomorrow. and that's tonight's "market focus."

>> tom: the health care sector has been a port in the recent stock selling storm. our street critique guest is hillary kraemer, editor of game changer stocks. always nice to see you. health care has been one heck of a sector for investors, so far this quarter it fwn best performing. up 7%, up better than 12.5% since the beginning of the year. where are you still finding value? >> health care is going to continue to rise, tom, because it all about the trend and the trend is your friend, it's the demographic of the baby boomers aging, and a need for pharmaceuticals, medical devices and biotech makers. >> tom: maco surgical had one heck of a stock price run this

year. it was in the teens the beginning of the year now new yorking on the door of $33 per share. what's the catalyst from here? >> maco surgical does new replacements, they have robotic instruments, for knee and hip replacements. what mako does is it's less even vaseive. it's really resurfacing of the knee and hip, so therefore many more patients will go for it, the insurance companies love it because it costs less and there's less recovery time. 28 million americans over the age of 25, tom, have degenerative joint disease. it arthritis. this is a growing area, the stock seems to be overvalued but it's not when you look at the growth trends, and if the bigger guys out there could easily swallow mako. >> tom: you have not shied away from the megacap pharmaceutical and drug companies in the past, johnson and johnson was one you mentioned back on february 2 and it's had a nice rally since then. do you still like j and j?

>> stick with j and j, four blockbuster drug therapys in the pipeline, lots of biotechnology, great medical devices. >> tom: what about pfizer, that was you mentioned back on april 13. kind of a choppy chart, but it has been trending higher. do you still like it? >> yes, tom, that's a strategy that the c.e.o. will put in place, of unlocking value by spinning off different divisions of pfizer, including animal health, for example, as well as maybe the consumer products. so shareholders stand to make a lot of money over the next 12 to 18 months. >> tom: op tima received news last week that its drug for cdif got approved. do you still like it? >> yes. i like optimer, but i have an $18 target. so those that have may 60% on your money you might want to take it off your table.

but it could be a buyout. the drug is expensive at $128 for a 10-day supply, but it a huge break through drug. >> tom: a quick e-mail from dennis, he writes please ask hillary for her current thoughts on bio scientists, this one you picked at 2.49 a share in early february, it's at 3.38 tonight. still own it? >> yes, and i'm waiting for them to present next week in chicago, and we could see some of the stock go up further. >> tom: finally, zales, one you liked ahead of the holiday season around $3, it's twice that tonight, and you're recommending take the profits. >> use double your money on zales, and my recommendation, move on. i'll give you some new recommendation from there as it's fully valued. >> tom: so you sold zales. do you own everything else we've mentioned tonight? >> pfizer and johnson and johnson i do not own as of yet, but will. >> tom: e-mail us at street

critique at nbr.com, we're on twilter and facebook as well. we'll feature some of your questions next wednesday. our guest this evening "street critique," it's hilary kramer with gamechangerstocks.com. >> susie: here's what we're watching for tomorrow: the weekly update on crude oil and gasoline inventories, along with april factory orders and may chain store sales. speaking of retailers, we'll talk with the c.e.o. of saks about how the upscale, luxury store is catering to big spenders while keeping costs down. taxes and identity theft. a growing number of americans are grappling with both. there were more than 248,000 incidents of taxpayer i.d. theft last year, compared to fewer than 52,000 in 2008. many involve scammers using stolen social security numbers to file fraudulent returns to get a quick refund check. but in some cases, people use fake social security numbers for work, so the victims find

themselves stuck with unexpected income. >> tom: attention travel bargain hunters, groupon is joining forces with expedia. the venture, announced today, is called groupon getaways. it will offer hotel stays at deeply discounted prices. the partnership also plans to offer specials for package deals, airline tickets, car rentals, cruises and destination activities around the world. the service is expected to launch later this month.

>> susie: in the "money file" tonight, enjoying more with less. manisha thakor has some thoughts on financial minimalism. she's co-author of "on my own two feet: a modern girl's guide to personal finance." >> do you want less stress, more joy and increased freedom? if so, consider practicing financial minimalism. what is financial minimalism? i think of it as the process stripping down your financial life to the bare essentials. the idea is to make sure that everything you do with your money is increasing either your health and/or your happiness. why do this? because millions of us find ourselves slogging away at jobs we don't enjoy to pay for things that require us to clean, repair, insure, worry, tend and

mend them. so look around your house tonight and notice how many unused small appliances, unworn clothes and outdated electronics you spot. and then the next time you have the urge to splurge, ask yourself if living lightly-- if reducing financial overhead-- might feel better than making that purchase. the answer may be yes, it may be no, but asking the question will put you on the path to finding your own personal financial alignment. i'm manisha thakor. you can reach our website, and watch our program on npr at pbs.org. that's our report for wednesday june 1. have a great evening everyone. tom, you too. >> tom: you too, susie. thank you for joining us and we hope to see awe back here tomorrow night.

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