captioning sponsored by wpbt >> tom: wall street chalks one up in the win column. stocks mark the first closing gain in over a week. >> we're going to remain invested in the equity markets, we're going to navigate through the soft patch. but we're also going to have a split between the cyclical and defensive sectors. >> suzanne: we'll explain why so many wall street pros want investors to get defensive. you're watching "nightly business: report for thursday, june 9. 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. >> tom: good evening, and thanks for joining us. susie gharib is off tonight. i'm joined by suzanne pratt. wall street saw its first rally this month, suzanne, after six straight losing sessions. >> suzanne: tom, stocks moved higher at the open and stayed in the plus column all day. the dow rose 75 points, the nasdaq and s&p 500 both added 9.5 points. >> tom: helping the market: word the u.s. trade deficit fell in april to its lowest level of the year. it dropped 6.7% to just over $43.5 billion. exports hit a new high, climbing just over 1% to $175 billion,

while imports fell slightly to $219 billion. >> suzanne: despite today's rally on wall street, the past month has not been a good one for u.s. stocks. in fact, the major stock indexes peaked at the end of april. since then, the dow and s&p 500 are down more than 5% while the nasdaq has lost 6.6%. experts point the finger directly at the economy and its softpatch. the drop this month has investors looking for protection and safety from the struggling economy. let's first assume the economy will be in "slow mo" for the next several months. against that backdrop, market strategist nick colas says stock investors need to play it safe. >> so, you want to be more conservative and look for things that have steadier dividends, for example, steadier earnings and cash flow streams, and are less reliant on the economy as a whole. >> suzanne: for colas, that means consumer staples and utilities. both sectors have stable demand no matter what the economy is doing, and they often pay nice

dividends. on a year-to-date basis, consumer staples and utilities are already doing pretty well, and so are health care and energy stocks. investment strategist sam stovall thinks the market will be choppy in the next few months, but he says long-term investors can still make money. >> if you're looking for a sector play and you're looking 12 months down the road, we would focus on the later cycle performers because we don't think we're headed into a new recession. >> suzanne: for stovall, that means choosing stocks in groups like energy, industrials and consumer staples. on wall street right now, those defensive areas are popular with many investment pros. strategist mike ryan also likes consumer staples for their dividend growth and large footprint outside the u.s., and he thinks healthcare stocks are a safe bet because of their price. >> it's one of the most cheap, defensive sectors we see out there right now. it's trading at levels that suggest to us that even if we simply see status quo with the profit picture within that

sector, you're likely to see a re-rating. so, healthcare is well- positioned from a valuation standpoint. >> suzanne: other experts prefer to view the stock market with a measuring tape rather then dividing it into sectors they look at company size. strategist jim awad says right now big is beautiful. >> large cap stocks are more conservative. they can weather a downturn better. they've gone up less than the more aggressive small-cap stocks so they're priced cheaper. many of them have dividends, and they have exposure to the fast- growing emerging markets. >> suzanne: tomorrow, i'll take a look at what the pros say stock investors should avoid if the economy continues to slow. >> tom: here are the stories in tonight's "n.b.r. newswheel." the european central bank today left its interest rate unchanged, but a rate hike could be coming. the bank's president, jean claude trichet, said the e.c.b. will remain vigilant against inflation threats. he used that same wording in march, just ahead of the bank's last rate hike.

more weakness in the u.s. labor market: jobless claims rose unexpectedly last week, jumping by 1,000 to 427,000 claims. economists thought they'd fall by that much. and citi credit card customers, listen up: citigroup will issue thousands of replacements after hackers got customers' personal information. the security breach affects 200,000 accounts, 1% of its north american credit cardholders. >> suzanne: still growing economy and look at push and pull weighing on the nation's debt. >> tom: from the backlog of foreclosures to bankrupt homes yet to gone on sale the housing market is an unchartered territory and he is cofounder of the s&p indexes. nice to see you.

>> any pleasure. >> tom: from your estimation how bad is the housing market as we enter into the summertime in 2011? >> well, it's hard to know. the i view it it's been going down for five years. we had reason for hope that it might go up in 2009 when the home buyer tax credit was in instituted they did go up for a while and have been declining half a year now and just hit a new low since 2009. i call it a double dip. it looks like it's resumed. >> tom: looking at the data back to 2002 with the price indexes every month from 2002 we're back at it and if we zoom in on the past couple of years you mentioned in double-dip territory at a new post-recession low. is this seasonal in nature after a long hard winter or do you

still see structural problems in housing? >> part of it is no doubt seasonal. this is the data referred to the weak season before the summer. we might see a good pickup in the summer. >> tom: you us used the phrase double-dip does it create more volatility in the minds of buyers? >> it's been a process over ten years we've been more and more focussed on home prices. if you go back half a century people weren't focussed at all on home prices like we're not focussed on auto mobile prices now no one is thinking we better buy a car now because of pricing. >> tom: it seemed like a wasting asset the minute you roll it off the loss price goes down and homes have been seen as an appreciating asset. >> they haven't always been seen that way. it used to be they were lumped

in with cars. people would say exactly what you said. homes are a depreciating asset. you have to replace the roof and everything sooner or like it. it's exactly like a car. only 20 percent of the value of a home today is land nationwide. it's the structure that deappreciates like the car. >> tom: let's talk about what the government is trying to do to stem the tide of what's happening. as of march the federal government's effort to help bank and homeowner agree to more affordable mortages led to modifications and almost 11 million households are under water on the mortgages. what's your assessment on federal government trying to stem foreclosures. >> it's good to see their trying but the real estate market is enormous. the decline in value may be over $6 trillion since the peak. the government doesn't talk in thos

terms that's to big and their hoping it helps boost the morale but it's not big enough it's a big problem. >> tom: i know it's difficult for you to make a statistical prediction but i would like to know if we talk a year from now do you think you're home price index on a national level is going to be higher or lower than it is today? >> you know, with my firm, macromarkets we do a survey of home forecasts by professionals. most professional forecasters in our latest survey are predicting it will right where it is in a year. that means declining in real terms. i think it will be lower on the pessimistic side. again, i don't know how the summer season will play out and it might turn out i am wrong about that. >> tom: professor, a lot of homeowners hope you are. we appreciate the assessment mon the less. robert shiller with yale university. >> suzanne: the downturn in home building is getting a lot of blame for the nation's high jobless rate.

unemployment in the construction industry tops 16%, and experts say construction and the other related businesses account for nearly one-fifth of the economy. diane eastabrook looks at how the housing slump is rippling through the chicago area. >> reporter: for sale in upscale hinsdale, illinois, is this newly-built nantucket-style house. price tag: $1.6 million. >> in here is the kitchen. this is a white inset painted cabinet. >> reporter: steve subkoyack built the 3,600-square-foot home on spec, and he says it took roughly 175 people to do it. >> that goes from your architect, your engineer, demo, all the way through framers, electricians, plumbers, dry wall, all the way through final cleaning, window washers, everybody. >> reporter: the jobs created by the construction of this one home clearly illustrate why the stagnant housing industry is weighing so heavily on the rest of the u.s. economy. experts estimate one

construction job can generate at least two more in other areas like landscaping and painting. and when construction tanks, it can take those other jobs with it. perhaps no company understands that better than mcilwee millwork. the nearly 50-year-old family- owned company makes frames for doors and windows. in 2006 before the housing market slumped, the company employed about 35 workers; today, it has about half that number. president brian mcilwee says the workers that remain have shorter schedules. >> i don't know if it's the nature of the market. i would have expected to have lost an employee by now because they could only get a four-day work week, but our employees have all stayed with us. >> reporter: there are signs a rebound for the housing industry could be around the corner. while home prices are falling, rents are rising, and that makes ownership more attractive. rising interest rates could also lure many prospective buyers off the sidelines, says stephen fuller, director of george mason university's center for regional analysis.

>> i think, as interest rates begin to move up later this year, back to 5% to near 6% later this year, people are going to start panicking a little bit and get out of the rental market, or get out of their old house, sell it and make the move. >> reporter: hiring back all of those workers shed during the home building downturn might not be that easy. fuller thinks a lot of the construction workers, plumbers, painters and the like will have moved on to other jobs, and that could require recruiting a whole new generation of workers. diane eastabrook, "nightly business report," hinsdale illinois.

>> suzanne: and it was about 100 degrees in manhattan today and maybe that's why investors finally warmed up to stocks. >> tom: a heatwave across the united states and the equity markets and broad-based rally and roll with tonight's market focus investors were back in a buying mood, ending one of the longest losing streaks for the major indices in more than a year. financial stocks had been among the worst sectors during the selling of the past two weeks, but today bank stocks helped push the market up. j.p. morgan led the dow industrial gainers.

up 1.5% from its april high, it's still down 13%. basic material stocks also did well today. dow component dupont check in with a 1.5% gain. yesterday, shares hit their lowest price since late january. helping out the materials sector was a big rally in corn. the price per bushel shot up almost 3% to a record high of $7.86 per bushel. the government cut its corn harvest forecast due to a wet spring. supplies are expected to be the tightest they've been in 15 years. agri-business stocks did well. fertilizer maker c.f. industries jumped more than 4%, farm chemical maker monsanto rallied almost 3%, john deere and company was up 2.5%. higher corn prices is not good news for meat producers like smithfield foods and tyson. each of those stocks lost a

fraction. meantime, food company j.m. smucker has been able to capitalize on higher prices. trading volume tripled after the firm reported better than expected earnings and outlook. shares were up more than 2%, about one dollar away from its high last month. as evident by our conversation with robert shiller earlier, the direction of home prices remains very uncertain, but the owner of u-haul says revenue from renting moving equipment was up last quarter. that helped shares of amer-co pop 8%. the stock has more than doubled in the past year. drug developer vertex saw heavy volume as it dropped almost 10%. early test results on a cystic fibrosis treatment fell short of some expectations. health insurance competitors cigna and aetna both saw decent gains.

an analyst at barclyas capital thinks the two would make a compelling merger. we've been watching the u.s. listed shares of a number of chinese companies sell off hard. this week, several brokerages limited the ability of their customers to borrow money to trade many chinese stocks. charles schwab, t.d. ameritrade, fidelity and interactive brokers all have restricted the use of margin, or borrowed money, to buy stocks of certain chinese companies. e-trade did the same in march. the brokerages point to accounting questions, volatility and risk. many of the stocks with the restrictions are micro-caps trading under $10 per share. and that's tonight's "market focus."

>> suzanne: they met, they talked, they say they made progress, and they'll meet again next week-- in other words, just another day for those deficit negotiations in washington. but now there is a new urgency. as darren gersh reports, concern is growing about the economic impact of any sharp cuts in federal spending. >> reporter: for months, republicans like house majority leader eric cantor have made their economic argument for cutting government spending right away. >> we believe that much of the problem surrounding the lack of job creation and growth in this country has to do with the fact that there isn't a credible plan to manage down the debt and deficit in this country.

>> reporter: but progressives argue now is the wrong time to go cold turkey on the deficit. the economy has slowed, growing at around 2%, half of what economists were hoping for this year. the center for american progress' michael ettlinger says that's too slow to withstand deep spending cuts. >> if we cut the deficit too quickly, too much, we could really cut the legs out of the recovery. and i think that's something that business leaders and the public should be really concerned about. >> reporter: congress is unlikely to extend unemployment benefits into next year, which would mean a $45 billion cut in federal spending. it's unclear whether the payroll tax holiday will be renewed for another year. if not, that's $110 billion consumers and businesses won't have to spend in 2012. add to that any cuts congress makes as part of an agreement to raise the nation's debt limit later this summer. >> i think it's a serious risk, and they have to be careful not to go too hard, too fast. >> reporter: but conservatives like doug holtz-eakin are not

worried. >> congress has never shown any great desire to cut, and i live for the moment when a congress cuts so much that it endangers the recovery. >> reporter: holtz-eakin, a former director of the congressional budget office, points out government spending cuts take time to work through from congressional action to actual cuts in spending by federal agencies. that may delay the economic impact of a debt reduction agreement. and holtz-eakin says cutting the deficit will actually bolster business confidence battered by concerns about unsustainable federal debt. >> you're taking off the table a sovereign debt crisis. you're fixing the greatest threat to the business community, and maybe they come and help. so you might lose over here, but you win big on the other side. >> reporter: but this is a balancing act-- get it right and the economy may get a new boost of confidence; get it wrong and a slow recovery might turn into another recession. darren gersh, "nightly business report," washington, d.c. >> tom: here's what we're watching for tomorrow.

lew piantedosi of eaton vance management is our market monitor. he thinks market volatility presents opportunities for long- term equity holders. speaking of investment strategies, what's the best way to build an index fund: by the size of the company or the financial performance? we look at two popular strategies, their rewards and their risks. >> suzanne: ford's revving up production of electric and hybrid vehicles, tripling its annual output to more than 100,000 units over the next two years. the automaker eventually wants to put electric technology in a quarter of its cars and trucks. one of the first off the assembly line is a modern hybrid only take on the minivan. it's due in u.s. showrooms next year. and ford's electric plans will mean more than 200 green tech jobs for michigan. >> tom: avaya filed for a $1 billion initial public offering late today. the maker of phones and telecom gear is the latest tech firm to tap into a resurgent i.p.o. market. the offering values avaya at

over $5 billion. while it's business has suffered from weak telecom spending, the company has recently inked a series of partnerships with h.p. and i.b.m.

>> tom: just a reminder: you can catch us online at n.b.r. on pbs.org. and once you're there, you can watch any programs you may have missed. you can also follow us on twitter at biz report, or my personal feed at hudson n.b.r. if tweeting isn't your thing, friend us on facebook at biz report. >> suzanne: how much would you pay to have lunch with warren buffett? before you answer, consider this: you get to dine at a top new york city steakhouse, and you can invite up to seven friends. the bidding for the annual auction wraps up tomorrow night, and it's already at $2.3 million. last year's winner paid $2.6 million for lunch with the oracle of omaha. profits go to the glide foundation, a san francisco- based anti-poverty charity. tom, if you win the bidding, the lunch is tax-deductible, but there are no refunds. >> suzanne: they're better be

kobe beef and lobster. >> tom: what's the tip on that lunch? >> suzanne: i don't know. >> suzanne: that's "nightly business report" for thursday, june 9. we want to remind you this is the time of year your public television station seeks your support. >> tom: support that makes programs like "nightly business report" possible. >> suzanne: thanks for joining us, and don't forget to support your public television station. i'm suzanne pratt. good night, everyone. you, too, tom. >> tom: good night, suzanne. i'm tom hudson. we hope to see all of you again tomorrow night. "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