>> tom: another tough tumble for stocks. investors head to the sidelines on renewed worries about the u.s. and global economies. >> susie: meanwhile, as we seek solutions for the sour economy, we turn to big business. dow chemical's c.e.o. tells us what corporate america can do to help right the economy. it's "nightly business report" for thursday, august 18. 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. captioning sponsored by wpbt

>> tom: good evening and thanks for joining us. a nasty stock sell-off today in markets all around the world on new fears about a global recession. and susie, there are growing worries that europe's financial problems could spread to the u.s. >> susie: tom, investors also dumped stocks on several negative reports on the u.s. economy's performance in july: an uptick in inflation-- the consumer price index rose more than expected; weak home sales-- national association of realtors said existing home sales dropped by 3.5%, worse than expected; a significant slowdown in manufacturing-- the philadelphia federal reserve said its regional index plunged to a reading of minus-30; and from the job market-- a spike in filings for unemployment benefits, up by 9,000. >> tom: now, that picture of a stalling u.s. economy led to massive selling on wall street.

the dow tumbled 420 points, the nasdaq lost 131, and the s&p down 53. big board volume rose to 1.6 billion shares, while nasdaq volume climbed to 2.75 billion shares. here's the dow's intra-day performance. as you can see, it was down, down, down at the open, and we stayed lower all day. since the selling began on july 21, the dow is down almost 13%. suzanne pratt was on wall street today and has more on the market plunge. >> reporter: just when you think it can't possibly get any worse for the stock market, it does. today, it was fresh concerns about economies around the world that walloped wall street. a big salvo came from morgan stanley's slashing of its global

growth forecast for this year and next. the investment firm says the u.s. and europe are hovering close to a recession. on top of that, there were worrisome reports on housing, factory activity, and the labor market, all in the u.s. veteran trader ted weissberg says recession talk is the problem. >> what we're seeing today perhaps as a knee-jerk reaction to the morgan stanley downgrade of growth is investors once again saying, "i can't deal with the risk, i can't deal with all the unknowns." >> reporter: today's losses extended a sell-off that began in late july, and the s&p 500 is now down close to 20% since its april high. so, are we in a bear market? >> well, maybe technically not, but it sure feels that way. >> reporter: experts say there's a battle developing in the market between investors fixated on global risk and those focused

on fundamentals. and, speaking of fundamentals-- namely, earnings-- there may be trouble brewing with that previously upbeat story line. in recent weeks, companies have pre-announced weaker numbers and analysts are trimming their expectations for the third quarter. as of today, analyst forecasts call for a 15.6% jump in q-3 profits for s&p 500 firms. that's still a healthy number, but on july 1, it was a more optimistic 17%. earnings expert jharonne martis worries we'll see more earnings pessimism in the next several weeks, something she says stock investors aren't ready to accept. >> i believe they have not taken account yet because they're so focused on the global economic worries. therefore, it's very interesting to see what happens in the upcoming months. >> reporter: then, of course, there are those who insist good corporate profits will be just the right medicine for this sickly market. the problem is we won't start to get a look at q-3 earnings until mid-october.

suzanne pratt, "nightly business report," new york. >> susie: joining us now with more analysis, bruce kasman, chief economist at j.p. morgan. hi, bruce what a day, huh? >> quite a day. >> susie: let me start off by asking you, because everybody today was talking about that morgan stanley prediction, that quote, we are dangerously close to a global recession. what do you think? >> i think we have moved into a zone of danger, no doubt. we were damaged quite significantly by shots in the first half of the year, higher inflation, the japan earthquake. it did look as we moved into june and july things were getting better. i think we have been hit by a new shock, i call it a crisis of competent can tenancy. policymakers around the world don't seem up to the task on both sides of the atlantic. with fiscal policy hurting demand but not dealing with structural problems and real concerns whether monetary policy is either willing or able to do anything to offset weakness in activity at this point.

>> susie: you know, we hear that all the time, whether you talk to economists or market strategists or c.e.o.s. they all talk about a lack of leadership. do you think that policymakers have just run out of policy ideas? >> i don't think they've run out of ideas. i think the institutions are making it very hard to get constructive things done on the fiscal side. i think on the monetary policy side will a reluctance to move aggressively on both sides of the atlantic it may be because the expectations they have on the economies were much better than things are turning out to be. i think we're going to have an interesting time now watching both the ecb and fed in the coming weeks giving the downgrade they are doing to their own expectations for growth. >> a lot of concern as you foe about the health of the european banking system. how concerned are you and how serious a concern is it that a european bank, a major european bank might default. >> i think that concern by itself is rather modest given how ample the

liquidity available is from the ecb. but i think the weighing of continued stresses in europe, the lack of a solution by policymakers to the credit concerns could start to build pressures that don't necessarily have to work through a bank crisis but could just simply be a credit constraint and a significant crisis in terms of overall political stress in europe, feeding back over to our side of the atlantic as well. >> let's switch back to the u.s. because we got all of this negative data today on housing, on the job market, on inflation. when you look at all of that plus what you're hearing from companies about their corporate profits, add it all up what kind of picture are you seeing for the second half of this this year? wince think july was a better month and it was giving me a sense we were starting to get the lift we expected. but what i think particularly in today's phillie fed survey combined with the consumer confidence, a couple of other high frequency things like lack of purchase applications and

mortgages, these things are telling me that the hit that we had to confidence in the last few weeks are going to have real economic consequences and that that lift we were looking for certainly doesn't seem like it's going to be coming. the risk, of course, is if you are growing at a 1% pace which is what we think we are right now t doesn't take much to throw you into reserve -- reverse. >> confidence is key. thank you so much, bruce for coming on the program and talking with us. >> thank you. >> and we've been speaking with bruce, chief economist at jp morgan. >> tom: so, where to in a market like this? jim paulsen, chief investment strategist at wells capital management, joins us. to do, he is with us dr. the twin cities minneapolis, welcome back. are you investing for a recession or are you preparing portfolios for recovery? >> well, i'm worried about a recession, tom. but i think the odds are still heavily if favor that the economy continues to grow. maybe not superfast but

continues to grow. and given as bruce said where expectations are right now, any evidence of a continued growth is probably going to bring a bid to this market and a rally. so i'm investing on the side of preparing yourself for calming fears in a reacceptance that the economic recovery is going to continue. >> tom: jim, how do you protect against those concerns, five of the past eight session force the dow industrials have seen price swings of at least 300 points. how do you deal with that volatility day in and day out? >> i think a couple of things. one is i think you don't want to make any big moves in the middle of really rapedly moving markets to your portfolio positioning. secondly, i think it's good that maybe at the margin try to take advantage of the volatility, tom. and that is if you are going to make small movements in your portfolio, sell a little bit on updays like we had last week at the end. and on days like this, look for small buying opportunities. and that way are you taking advantage of the volatility,

instead of it taking care of you. the biggest thing to remember is stay diversified throughout. don't go bet entirely on recovery. don't bet entirely on recession. stay diversified and work inside those parameters. >> investors have been looking for dividends and finding them in utility stocks as you know this has been a long time favorite. the best performing sector so far this year, it's defensive as well, under your scenario is it time to sell or do you buy more? >> i think it's fine to own some. like i said you want to own a little of everything, that's good. personally i think it's a good time to sell or lighten up on those. the reason is just what you bring up. i would sell safe haven assets. all that stuff that people are running too right now in the stock market, utility stocks, steady eddie consumer staple companies, i would let them have it at elevated prices and then look with the proceeds to look at the things that they are throwing out the window with no regard to value. the industrials and the base

materials, emerging market, small-cap stocks, things people are giving away right now because they are fearful of recession. >> those really got hit today. outside of the stock market. what about those safehavens. big raleigh sdrb -- rallies in bonds despite the downgrade from s&p. big rally in gold, time to sell off those? >> you think so. i mean your bond portfolio i would look at giving away a little bit of that high quality treasury. if somebody really wants that at 2.06 percent, maybe let them have a little bit of that. and look at some municipal bond as that are a little lower grade or maybe even a little junk, if you don't have any. and then in the commodity portfolio i think a great trade right now would be to sell a little gold and buy a little oil, it really changed their relative values. >> tom: real quick, crystal ball wa, do you think happens tomorrow? >> i think we're in a trading race. i think we are testing the 1100 level on the s&p. i think it's going to hold. and i think if not tomorrow, i think early next week

we'll have another rally again back up towards 1200. >> tom: an optimist in the twin cities, pym paulsen, thank you, with wells capital management. >> thanks. a rough after-hours session for computing giant hewlett-packard. the stock fell over 6% on word of a major restructuring and a cut in its sales outlook. with sales slow, h-p is also dropping the touchpad, its tablet computer, and web o.s., senior analyst at investment firm crowell weedon, douglas christopher, says h-p got caught in the "apple effect." he thinks h-p was smart to give up on competing with the ipad and look to where it can really grow its business. >> they have an opportunity here

to create growth when overall growth, the economy, the global economy are very difficult. and what better time to restructure? i think its one of those difficult tough choices of a major multi-national c.e.o. >> a major acquisition, the c.e.o. says hp is buying uk data analytic firm autonomy for 10 million. >> very active te-- actively traded. one of the big drags on the dow and clearly softener after-hours. lots of market activity, no doubt. let's take a look with tonight's market focus. after a few sessions of relatively calm action, sellers were back out in force. economically sensitive stock sectors saw the brunt of the selling.

materials, energy and industrial sectors lost more than 5.5% each. the biggest dow industrial loser is in the materials business, alcoa. shares shed more than 6%. the stock is only 20 cents above its low of last week. this is the past 90 sessions. here are the past 90 sessions for bank of america. b-of-a continues to see big swings, down 6% today on very heavy volume. at just over $7 tonight, the stock is a half-dollar above its low last week. with the weak economic data we detailed earlier, as well as the u.s. dollar moving higher over the european worries, oil prices fell hard, dropping more than $5, closing below $83 per barrel. prices did get below $80 per barrel last week.

energy stocks were hit, led by services firm halliburton and oil and nat gas producer williams, each down 10%. the sell-off in the u.s. began in europe. some european indices saw their biggest slide in two and a half years. this exchange traded fund holds 350 european stocks across ten countries. it fell more than 5%, but similar to the major u.s. stock indices, the lows of last week remain intact. european bank stocks traded in the u.s. were under scrutiny. ubs and deutsche bank each fell to new lows for the year. hsbc is just above last week's low. each of these stocks dropped 6% or more. tech stocks were not spared. this technology etf shed almost 5% on strong volume. technical analyst michael kahn writes "the bears are in charge."

more is on our web site, nbronpbs.org. click on the "blogs" tab. two tech stocks to watch tomorrow. tax software firm intuit and design software company auto- desk. while shares were down during the regular session, both were higher after hours by 4%, thanks to strong earnings and outlooks. as for where the buying was today, video game retailer gamestop gained almost 5%, and volume tripled. its outlook into the holidays was optimistic. gold continues its record run, up more than $27 to almost $1,820 an ounce. and so does the bond buying. the yield on the ten-year government bond briefly dropped below 2% today, ending the day just above that level as investors continue paying up for protection. and that's tonight's "market focus." >> susie: so, what's corporate america's take on the economy? to answer that, we turned to the c.e.o. of dow chemical, andrew liveris.

he runs one of the largest chemical companies in the world. as we continue our series "how to fix the economy," i talked with liveris, and began by asking him if he sees the global economy going into recession. >> so far we haven't seen rescission turn down apart from the japans and the greeces and the economies of southern europe. the rest of the world has continued to grow albeit at a jagged and slow pace in the developed world. >> susie: we saw once again today the connection between europe's problems on the u.s. are you seeing the problems in europe impacting your orders? >> no, not yet. we've seen really in essence a two-speed economy in europe now for the better part of two years. germany and german-speaking countries have had robust demand. and we haven't seen anything that slowed that or changed that in the last, let's call it weeks and even days. of course southern europe and you know latter day beyond during construction in countries like italy and

spain are a new concern. we're not overly exposed to those markets. >> what do you think is the fix for your problem? >> well, the banks have to work across borders and have to be supported by the sovereigns but if it is a sovereign system failing then the banks have to be almost ordered to support the others by their central bankers. that's the fix. and to give us confidence. i mean this is all about confidence. you can see what happens to a market when you get lack of confidence and lack of certainty. >> we got more evidence today that the labor market is still very weak. are you hiring? >> we are. we are hiring because we're investing. we're investing in this economy an we're investing for two very different reasons. one is shell gas and what that means for the united states in terms of competitiveness of energy and in our case feedstock so we're building new facilities in texas and louisiana, $4 billion worth. so hiring for that. and in michigan in particular in michigan but in other states we're investing in the alternative

energy economy, batteries and battery materials and solar panels and in michigan that has been quite a welcome thing because we are retooling displaced automotive workers giving them through community college programs, retraing them, reskilling them and getting them to work in our new factories so yes, we are hiring. >> susie: what about other businesses that aren't hairing in a big way, what do they need to see happen, what is the missing element. >> one word, certainty. policies and polls he -- policies that we can count on in the regulatory world, tax world, energy world, trade, all these things very necessary items in washington. >> susie: as you know today we got a report showing a significant drop in u.s. manufacturing activity. and you say in your book make it in america that manufacturing is critical to reinventing the economy. what do we have to do to get-- in america. >> i i talked about policy certainty, whether it be r & d tax credit and making it

more permanent, ratifying the free-trade agreements so we can export to companies that want our products. how we can simplify the tax code and get a territorial tax cede knit place. lower the tax rate, address issues that are addressable today that congress and the white house need to work together on. >> speaking of trade, you also say in this book how important trade is to jump-starting the economy. what would you like to see happen with trade. >> i think if we need to sell helicopters to china we should. if we need to open our tourism sector we should. we also rebuild infrastructure and put it back together so we can enable ex ports. it is really wrong this economy exports 7% of the gdp and germany expirt 50s%. we need to change our mind-set and export from america. >> people see american businesses are sitting on a pile of cash. what do american businesses need to do to fix the economy? >> they need to see markets that are growing in the domestic economy to invest in them. it's a large economy. it needs to be served but it

is only grows 1% it will-- so the absence of the consumer means what is the reason i would invest in the united states versus investing somewhere else. so i give back to the policy, certainty around policy and i get around to short term demand drivers such as can we cause the u.s. demand to grow again through exports or others like infrastructure. >> susie: thank you so much for your time. >> always a pleasure to be with you. >> susie: tomorrow >> susie: tomorrow, we continue our series "how to fix the economy" with some outside the box ideas to boost job growth. and we'll talk to a small business that's dancing its way to success, despite the tough economy. also tomorrow, our "market monitor" guest, marshall front, says economic numbers, while spotty, are not as bad as sentiment. he's chief investment officer at front barnett associates. one upside to the sour economy-- super-low interest rates, if you can qualify for a mortgage. the average rate on a 30-year fixed rate mortgage has fallen to its lowest level on record,

4.15%. and freddie mac says the rate on a 15-year fixed loan is 3.36%, also a record low. still, the rock-bottom rates have done little to attract home buyers. >> tom: research in motion reportedly is getting into the music streaming business. according to reuters, the company behind the blackberry mobile device plans to roll out its own service to play music across its smart phones and tablets. the move would compete with apple's itunes and google's android. reuters says r.i.m. is negotiating with major music labels. the new service is expected to be announced by labor day, but the company has not commented.

>> susie: as the u.s. continues to leave its manufacturing roots behind, tonight's commentator has some thoughts on what jobs will look like in the future. he's justin fox, editorial director at "the harvard business review." >> here's what work is going to look like in the future-- tiny increments of intellectual labor that can be done from anywhere on earth at any time. this is already happening. for several years, amazon has been running a service called "mechanical turk," in which folks sitting at their computers at home get paid a few pennies to do a few seconds of transcription or proofreading.

yes, that's the same amazon that sells books. as for the name "mechanical turk," i'd explain it, but it would take the rest of my minute. anyway, m.i.t. professor thomas malone says this hyper- specialized approach is now spreading to other fields-- legal work, graphic design, even business writing. the idea is to slice white- collar work into its constituent parts, just as assembly lines did with manufacturing a century ago. the advantage is that more work can get done more cheaply to higher quality standards. the downside is just like with assembly lines-- work can become rote, disconnected, meaningless. i would like to see, though, what it would look like to have 60 people do one of these commentaries, assembly-line style. i'm justin fox. >> tom: just a reminder: you can catch us online at nbronpbs.org. there you can get the latest market data and watch any programs that you may have missed. you can follow us on twitter at

b-i-z-r-p-t or my personal feed at hudson-n-b-r. if tweeting isn't your thing, friend us on facebook at b-i-z-r-p-t. >> susie: that's "nightly business report" for thursday, august 18. i'm susie gharib. good night, everyone, and good night to you, too, tom. >> tom: good night, susie. i'm tom hudson. good night, everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by: this program is 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

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