>> confidence is an issue. people have really not got the confidence in this market or in this government right now to lead us into a recovery. >> susie: that lack of confidence translated into a triple-digit loss for the dow, the third in five days. so what's behind the selling, and what could turn things around? it's "nightly business report" for wednesday, august 10. 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. captioning sponsored by wpbt >> susie: good evening everyone. my colleague tom hudson is off tonight. it was another ugly day on wall street. the dow plunged 520 points, wiping out all of yesterday's gains. in washington, president obama met with federal reserve chairman ben bernanke and treasury secretary geithner. no word yet on what they discussed. but here at the new york stock exchange, investors were dumping stocks on new worries about europe's debt crisis-- this time in france. here's how things looked by the closing bell: the dow was down 4.5%, a loss of 520 points. the nasdaq tumbled 101 points and the s&p 500 fell 52.

volume remained heavy. on the big board, 2.1 billion shares were traded, and 3.3 billion on the nasdaq. so where do stocks go from here? suzanne pratt reports. >> reporter: on wall street these days, what goes down must go up. and down. and up. and so on. experts say vertigo is the new normal for stock investors, and that's unlikely to change until there's clarity on the global economy. today's worry? france and its biggest bank, societe generale. there's concern s&p will downgrade the bank, too. as a result, financial stocks in the u.s. led the selloff as investors fretted trouble with europe's banks could spill across the pond. n.y.s.e. floor broker doreen mogavero says sentiment is very negative. >> there's really no panic. we've seen no panic here at all. it's been very orderly, but, i think people are really

reassessing their positions in the market. >> reporter: so what's an investor to do in this frightening and volatile trading environment? experts say that depends on the strength of their stomach, also known as risk tolerance. market strategist mike ryan says most investors should stay in the market. >> i think people who are selling at these levels today are going to wind up being disappointed, because i think while we certainly have these concerns, i think the earnings outlook remains. it certainly doesn't justify the market where it's trading at right now. >> reporter: and, that earnings outlook is pretty darn good. big u.s. firms are expected to show tasty profits in the second half, a 16% increase in earnings in q3 and even more in q4. >> reporter: as for what could give this unhappy market some positive traction, experts say good news on jobs. tomorrow, we'll get a look at unemployment claims. a lower number would be great. suzanne pratt, "nightly business report," new york. >> susie: one big question for

investors right now: is the u.s. economy slipping into a ecession? darren gersh reports. >> reporter: on average, the u.s. economy spends one year out of every six in recession. so the odds of a recession in a normal year are about one in six. but who thinks this is normal? >> it makes me wonder if we are not at a precipice. >> the government's inability to make decisions has not been good. >> i do think we are in for a very long and slow recovery. >> i don't think we are going to go back into a recession. i think we are going to skim it, but i don't think we are going to go back into it. >> reporter: the usual indicators of economic health-- employment, industrial production and consumer spending-- still point to slow growth. which is why most economists aren't ready to call a recession. >> we are of the view that the economy will grow slowly, but grow certainly over the next six to 12 months. >> reporter: the problem is that a slow-growing economy is more vulnerable and more likely to fall into recession. so most economists are increasing their odds of a recession to somewhere between

one in four and one in three. the stock market could be saying the risk is much higher, but it's still too early to be sure. >> you can not predict what the economy is going to do on a day- to-day basis when the equity market is going up one day and down the day-- the next day. you can't keep changing your forecast. >> reporter: and while the u.s. may be growing slowly, our export markets are doing much better. >> my bottom line is that the pessimism is overdone. half the world-- namely the emerging market-- is still growing strongly, will continue to grow strongly. its divergence from the rich countries will be even more dramatic, but i think that will keep us from a world recession. >> reporter: the odds may still be against a recession, but no one seems to be betting the u.s. economy will see strong growth any time soon. darren gersh, "nightly business report," washington. >> susie: joining us for more insights on the markets and the economy, david kelly, chief market strategist at j.p. morgan funds, and joe davis, chief economist at vanguard funds.

gentlemen, thank you for joining us. >> nice to be here. >> susie: joe, you've been saying that there's a 40% chance that the u.s. economy will slip into a recession. why, and how bad will it be? >> why, just because the number of the indicators that we watch, some as early as february of this year, have started to deteriorate. not at an alarming pace, but when you look at a constellation of indicators in the financial markets and equity markets today, one of the best indicators, they just continue to say that although it's not, still likely that we have a recession, it's still one of a very precarious and ten with us situation. >> susie: david, you told me that we can possibly scare ourselves into a recession. >> well, yes, i think that's right. one of the frustrating things is that were it's not for this crisis which has reerupted in the last three weeks, we actually thought economic growth was going to pick up.

after the japanese tsunami effects are reversing, there's pent up demand in the economy. numbers in july looked okay so, i think the economy would have picked up. but if we all get scared and hesitate to buy cars, to buy houses, to hire people, we can literally scare ourselves into recession. i'm afraid that's the risk that's increased here. >> susie: and there is a lot of fear, david. so the big question everybody was asking today is how much lower do stocks go from here. >> yes, and unfortunately we can't call it the bottom. the important thing for investors is to remember that nobody can actually tell them that. there are people that say they can tell them that, but they don't know. i think people need to stick with a balanced plan and recognize that right now, yes, risk is a big factor in the economic environment, but also risk is very much factored in in equity prices and bond prices. the very low interest rates, f. e. ratios about 10 times forward earnings so, given those extreme valuations, which make stocks cheap and

bonds expensive, seems like we're priced in a pretty nasty recession any way. >> susie: well, joe, investors will feel a llt better if they knew the economy was growing. we've been trying to jump start the economy for four years now, and it just doesn't seem to be working. so what has to happen? >> i don't think there's any magic bullet. the one thing that would clearly help all investors around the world would be more definitiveness and more comprehensive measures on the dealt concerns, both overseas in europe as well as in the united states. i think with clarity, even if there is a debate as to terms of the composition of the fiscal measures, i think that alone would be a very important step for the u.s. economy over the next several years, because i think it's that uncertainty that has caused some risk aversion to increase both among consumers as well as businesses. as they look into business planning for the foreseeable future. >> susie: david, a lot of

investors are just saying i can't take the volatility any more, i'm not going to waits around for the economy the turn around, they're putting their money into cash. what do you tell clients when the dow it's down 500 points on what they can do to protect their portfolio? >> well, two things, first as to joe's point i couldn't agree more. one of the things that investors ought to december call i their representative or senator and talk to them about coming to a krom pro mice in washington. the fiscal committee that will be set up over the next few weeks, they need to come up with a long-term plan to fix the budget of the united states. if they do that, it will do more than anything else to help with the overall situation. with regard to individual investors, i do think people should stick with a disciplined long-term plan. don't run for cover. because when people get emotional they make bad decisions, and i remember how bad people felt in march of 2009, it was a terrible mistake to get out at that point, i think it would be a mistake to get out tat this point also. >> susie: we'll have to leave

it there. thank you both for coming on the program, we really appreciate hear what you have to say. >> you're welcome. series we've been speaking with david kelly of j.p. morgan and joe davis of vanguard funds. still ahead, an exclusive interview with former xerox c.e.o. anne mulcahy. she tells us how companies are preparing and dealing with economic and market turmoil. one of today's biggest losers was bank of america. c.e.o. brian moynihan tried to reassure investors about the health of his bank, but they weren't convinced. he participated in a web conference call hosted by a mutual fund manager, and for an hour and a half he was grilled about everything from the bank's capital levels to its weak stock price. erika miller reports. >> reporter: investors couldn't see bank of america c.e.o. brian moynihan, but 6,000 people dialed into to hear him defend his business strategy. moynihan reassured investors there's no need for the firm to raise additional capital,

because conditions are improving. >> the fundamentals are so much better in our country, and in our company, and in our industry, than they were four years ago, when the financial crisis hit. >> reporter: moynihan also tried to bolster confidence by pointing to the positives during his 18-month leadership. they include an increase in market share, cost-cutting, lowering risk and selling non- essential assets. >> reporter: but investors remain skeptical. b. of a.'s stock gained all of 16 cents from the start of the call to its finish. the shares are down nearly 50% from where they started the year. n.y.u. finance professor viral acharya says bank of america will continue to face big challenges beyond the weak economy. bank of america's somewhat greater mortgage exposure and it's higher leverage make it vulnerable. in a sense, what i read the market as saying is that if there's a problem, bank of america will face it first.

>> reporter: bank of america shareholders may not be happy these days, but they can take some comfort in knowing moynahan has incentive to boost the stock price. not only does he want to keep his job, but nearly all his net worth is in bank of america stock. erika miller, "nightly business report," new york. >> susie: bank of america shares plunged almost 11% and were the most actively traded issue here on the big board. it was just one of many financial stocks that got clobbered today. lets take a look with tonight's "market focus." you know things are bad when all 30 of the dow components were in the red, and so were all 10 of the s&p 500's sectors. the selling began right at the start of trading. as you can see here, it was a day of massive selling. the dow is now down over 7% for the year. the s&p also falling to its worst levels since september.

as of today, the s&p has fallen nearly 18% from its april highs. we have more analysis on the s&p 500 with technical analyst michael kahn. its on our website, nbr on pbs.org. as we mentioned, financials led the selling. they were the market's weakest sector, followed by the industrials and consumer discretionary stocks. here's the biggest banks by market cap. jp morgan down 6%. wells fargo off over 7%. citi off 10%. and bank of america, off 11% today. year to date, it's down almost 50%. regional banks also taking a big hit-- regions financial and suntrust both off over 11%, and investment manager invesco also down 11%. cisco, while ending lower, was still the best performer on the dow-- down just 33 cents or 2%. after the bell, the tech giant posted better-than-expected

quarterly results. in after hours, the stock rose as much as 10% to over $14. cisco earned 40 cents a share in its fiscal fourth quarter. revenues topped $11 billion. meanwhile, disney was the second biggest loser on the dow 30. we told you last night that disney reported better-than- expected quarterly results, but today investors were concerned about the economy and whether consumers will stop spending on theme parks and movies. disney tumbled 9% to a one-year low. >> susie: and finally, while stocks swooned, gold continued to sparkle. gold prices briefly topped $1,800 an ounce today, but by the close settled at $1,782 an ounce-- up $41. gold prices have jumped over 8% since s&p downgraded u.s. debt last friday night. and that's tonight's "market focus."

>> susie: so how are c.e.o.s and business leaders responding to the market turmoil? with us tonight, anne mulcahy. she was the chairman and c.e.o. of xerox and successfully managed the company in other economic crises. she is currently the chairman of non-profit save the children. ann, so nice to see you again. >> it's nice to see you too, susie.

nice to be here. >> susie: i know you're talking to a lot c.e.o.s and business people. what are they saying to you about this economic and market crisis? how are they preparing for a possible recession? >> well, i think most of my colleagues would say, you know, there's obviously a very disparate impact between what we're seeing in market volatility and the health of the corporate environment right now. you look at corporations who have over the last few years gotten very strong balance sheets, you know, really addressed cost and productivity, and they're a very fit group of companies that i think feel reasonably positive about future prospects. so i think the good news is that i do think we have a business environment that is far healthier than what we're seeing reflected in the markets today. >> susie: so what do c.e.o.s, the ones you're talking to, need to see happen for them to

feel comfortable about hiring more people or expanding their businesses? >> well, obviously, and you know everyone is talking about it, but the uncertainty and the lack of courage and decisiveness right now that we're seeing with regard to government is clearly an issue. so one of your former guests said we need to have a voice as it relates to our congress people, and our expectations for some clear and decisive negotiations that come out of this point of time. so they need a degree of certainty as to how we're going to address the economic crisis of our government. >> susie: well what do you think is going to turn things around and who is going to do it? >> you know, i actually believe that there are a lot of positives in the marketplace today. i think slowly but surely we've seen progress, it's been a little bumpy and certainly

not dramatically positive. but i think people have a sense that we were on the right track. i do believe that identifying the right people right now in congress that are going to be part of this subcommittee to create clarity around how we're going to address the debt is hugely important right now. so that there's an outcome that people can have a degree of confidence in versus the bantering we've all been victims of over the last few months. so that kind of clarity. >> susie: you ran xerox during the 2008-2009 financial crisis. what were the lessons learned from that and what advice can you give to businesses, big and small, of what to do this time around? >> well, i'd say a couple things, one is focus. it's usually to, it's easy to get distracted at a time like this, and focusing on your business is hugely important. and visibility.

and visibility with your key constituencys, your employees, as well as your customers. your employees need to hear from your leadership as it relates to the stability of your company and your future so, that they can stay focused on the business. and your customers, this is a time when leadership needs to be really visible with customers, it's time where you can fall into indecisiveness, and business leaders need to be out there meeting with their key clients and being responsive to what they're hearing from their key clients. have you to actually be willing to do business in different ways at times like this. and i think it's a real test for leadership to make sure that you are active and vocal at a time like this. >> susie: ann, thanks so much for talking with us, it's so good of you to come by, we appreciate it. >> thank you, susie. >> susie: we've been speaking with anne mulcahy, former c.e.o. of xerox.

>> susie: here's what we're watching for tomorrow: weekly jobless claims, along with quarterly results from retailers kohl's and nordstrom. and, should you pay your children for doing chores? our "kids and cash" series has some suggestions to balance giving your kids an allowance and teaching them the value of money. britain's prime minister is working to restore law and order in london and other major cities. about 16,000 policeman patrolled london last night to discourage days of looting and rioting. the unrest comes amid austerity measures that are cutting social services, along with law enforcement. the "guardian" newspaper reports that the insurance bill for the damaged shops and homes would be paid for by police. estimates put the costs at more than $160 million. >> susie: rupert murdoch's newscorp in with solid quarterly results, despite the phone hacking scandal that closed his london tabloid. the media giant earned 35 cents

murdoch said the scandal has not had a material impact on the company's other operations and that the newscorp board wants him to stay on as chairman. the media giant earned 35 cents a share in its fiscal fourth quarter, besting analyst estimates by six cents. revenues also above estimates at almost $9 billion on a strong showing by newscorp's tv and satellite units. >> susie: a lot of comparisons of this economic crisis and the financial crisis of 2008,

but tonight's commentator explains why this time it really is different for the u.s. economy. he's daniel gross, columnist and economics editor at yahoo finance. >> this time is different. those are the four most dangerous words in finance. but as debt downgrades and market turmoil causes people to compare this week to the calamitous fall of 2008, it's worth reflecting on a few key differences between now and then. first, 2008 was a private-sector debt debacle. today, the troubles derive almost entirely from the public sector-- from government. bad, right? but governments in dire financial straits can raise taxes, print money, and they have plenty of people to stiff before they stiff their creditors. in the fall of 2008, lehman brothers-- and all the highly leveraged lenders-- didn't. second, the macroeconomic situation. in the fall of 2008, the u.s. economy had already been in recessiofor eight months. while it continues to disappoint, the economy today is

in its third year of expansion. third, in the past two years, american companies and consumers have vastly improved their balance sheets. the savings rate has gone from nothing in 2007 to about 5 percent. companies are sitting on more than $1 trillion in cash. taken together, these differences make the u.s. system far better able to absorb shocks than it was three years ago. i'm daniel gross. >> susie: we have more on safe haven investing in tonight's "word on the street." you can find it on our website. the street's debra borchardt joins us on nbr on pbs.org. that's "nightly business report" for wednesday, august 10. we want to remind you this is the time of year your public television station seeks your support. support that makes programs like "nightly business report" possible. thanks for joining us. i'm susie gharib. we'll hope to see all of you again tomorrow evening. "nightly business report" is made possible by:

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