>> tom: wall street welcomes the new year with a sharp rally. >> i think it's going to be a good year for retail investors, because they're more educated, because they understand better. whether the market is up or down, they're going to understand the causes of it, and a lot of them are going to take precautions. >> tom: and the race for the white house. how the economy is playing in iowa as caucus-goers vote tonight. it's "nightly business report for tuesday," january 3. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:

captioning sponsored by wpbt >> tom: good evening and thanks for joining us. susie gharib is off tonight. the stock market rang in the new year with a new push higher. positive economic data on the u.s. manufacturing sector fueled the rally. but it was sparked by unemployment falling to a two- decade low in germany, and china's services and manufacturing sectors rose in december, despite worries about a chinese slowdown. the major u.s. stock averages logged big gains. the dow gained 179 points, the nasdaq added 43, and the s&p 500 was up 19.5 points. trading volume picking up steam as we come off the holiday-- 853 million shares moving on the big board and 1.7 billion on the nasdaq.

the pick-up in share prices and trading volume comes as many smaller investors continue on the sidelines. suzanne pratt reports. >> reporter: it's cleanup time in manhattan from this weekend's new year's eve celebration. but today on wall street, the partying was still going strong, making for a beautiful beginning to what could be a better year for stock investors. many market pros remain guardedly optimistic about 2012, but with the lackluster performance of stocks in 2011, it's questionable whether small investors will even tiptoe back in. and if this manhattan ameritrade office is any indication, at least some are taking a wait and see attitude. >> i don't feel that confident in the market just yet. maybe in a few years, the market will turn around, but as of yet, it's still up and down.

>> yeah, there might be ups and downs, but it will be volatile. for someone in my age, it's not the right haven. >> reporter: ameritrade branch manager jeff goldberg says the good news is that small investors are more savvy about their portfolios. >> i think they know there's going to be volatility in the market. and they don't necessarily fear it, but they understand it better and they try to develop strategies to cope with it. >> reporter: it's no wonder that some investors have simply had enough, what with the financial crisis, and then all the volatility that's followed. but small investors provide bedrock for the u.s. stock market through mutual funds, 401(k)s and other retirement accounts. the majority of those investors are sitting tight, sticking with a long-term commitment to equities, and continuing to fund their accounts. but others have lost faith in stocks. not only has trading volume been extremely light, but $19 billion was pulled from stock funds in november, compared with just

$220 million in november 2010. early indications show investors were just as nervous about stocks in december. market strategist stephen wood says alienated investors probably won't return until till we get a really good rally. >> unfortunately, what it will take to get the average person comfortable in the market is for them to miss most of the upward move in the market. so, if you look at retail asset flows, they tend to be contrarian confirmation points. >> reporter: after all, money usually goes where it's treated best, even after the party is over. suzanne pratt, "nightly business report," new york. >> tom: soon, there will be more for investors to consider from the federal reserve. the central bank has said it wants to do a better job of communicating with the public. so this year, the fed's open market committee-- the folks setting short-term interest rates-- will begin forecasting interest rates. this may not sound like a big change but it is. the fed has never predicted in public what its target interest rate may be.

the forecast will tell us when policymakers expect short-term interest rates to move from their current spot near zero. iowa republicans are heading to their caucuses tonight, kicking off the 2012 election cycle. the hawkeye state has traditionally cast the first votes, but this year, it's earlier than ever. sylvia hall tonight reports on how the economic issue plays a little different in iowa. >> reporter: today, republican presidential hopefuls ended their tours across iowa. late tonight, they will know which one has locked in enough votes to win the first state contest of the 2012 election. >> tonight is your night to weigh in and make a difference. >> reporter: in some ways, iowans are luckier than many americans. the largely agricultural state enjoys a 5.7% unemployment rate, much lower than the national average. statistically, iowa isn't a heavyweight, and only carries seven electoral votes compared to california's 55. but tonight's caucuses could set the pace for the rest of the race. >> typically, iowans don't pick

a president, but they often rule people out. >> reporter: william galston of the brookings institution says government spending is on the minds of iowa republicans, and you can hear that in the last- minute pitches from candidates. >> we can't go on spending and spending our children and grandchildren's future. and so some programs you like, and i like, we're going to have to stop. >> we're living off debt, we do too much overseas, and we're running a welfare state here at home. ♪ ♪ >> reporter: traditionally, social issues have played well in iowa. even though they rank as the third most important concern for caucus-goers, the latest republican to experience a bump up in the polls, rick santorum, has made pitch about family values. >> that's what america always stood for, that bottom-up, entrepreneurial, individual spirit based upon strong families that molded and instilled values that were

important for success, like hard work and honesty and integrity. >> reporter: in iowa, as is the case across america, the economy is the biggest issue this election. but in iowa, that has meant more about government spending and self-reliance than jobs. president obama isn't sitting on the sidelines. he's scheduled to hold a video conference with iowa democratic caucus goers tonight. sylvia hall, "nightly business report," washington. >> tom: larry zimpleman is the c.e.o. at principal financial. he joins us from his firm's headquarters in des moines, iowa. >> larry, happy new year and happy caucus evening to you. >> happy new year to you tom. it's nice to be with you, thank you for having me. >> tom: how has the economy been playing as a political issue leading up to tonight votes. >> well i think the economy, tom, is always going to be one of the most important elements in any voter's decision about who they want to support. but i do think we're a little bit different here in iowa, the economy in general is a little bit better than it is in much of the rest of the country. and unemployment here is in the 6% range, so again we see it

being about two thirds the national average. so the economy remains very important but i think it's about country. it's about how are we going to get some of the long term budget deficits under control. those are kind of issues i think are playing into the politics this time. >> tom: back to the iowa economy. what does the state's economy in the small state in a generally agriculture state tell us about the nation's overall economic health? >> well i think in this case iowa isn't necessarily a good example of what the candidates are going to see as they go around to other 125eu9 states ao other primaries. we are still significantly driven by the agriculture sector here which of course has been actually doing quite well. agriculture had two of its best years ever in 2010 and 2011. over the course of the last 0 or 30 years we've diversified that agricultural base both afterring as well as financial services through companies like principal financial groups. so today our state here in iowa

represents a diversified mix that has muddled through, if you will, this economy in a fairly decent fashion, frankly. >> tom: you mention the unemployment rate much lower than the insure average. the demographics are different in iowa than the rest of the country. what will the candidates see in the rest of the country as principals sees the rest of the economy in the economic lens it looks through out of des moines. >> right. we are a very much of a barometer, tom, of small medium business. we have about 100,000 small medium businesses, about six million workers covered by the small medium businesses. we still see significant challenge out there for small business. we're not seeing any particular job growth. we are seeing stability in sort of month to month payrolls and we are seeing some optimism that perhaps there is good news down the track a ways, but today would be more of a vo solid and

steady. in iowa, some figures released by the state last week, state revenues in iowa in this next fiscal year are slated to be up about $250 million over the current fiscal year which would be an increase of three to four percent. that gives you the sense the economy here is growing albeit very slowly. >> tom: larry we appreciate the view from des moines the capital city. thank you so much. >> glad to be with you. >> our guest from des moines is larry zimpleman. still ahead, former senator and governor bob graham. he ran for president in 2004, but dropped out before the iowa caucus. we'll talk about the money involved in modern day politics. there was big international interest today in u.s. energy. in separate deals, a french and chinese company bought into what has been a big source of new domestic energy, american shale. france's total is spending $2.3 billion for a minority interest in land in eastern ohio.

under that ohio shale rock is thought to be oil, butane and propane. cheasapeake energy is the seller. the second deal has devon energy selling a stake in five american shale fields to china's sinopec for $2.2 billion. devon's near 7% gain today helped u.s. oil and gas explorers move higher. a strong start to the new year for stocks, thanks to the stronger u.s., german and chinese economic data. let's get to tonight's "market focus." it's probably natural for a new year to begin with some optimism. we saw that today reflected in higher stock prices. prices were strong throughout the entire session, getting a boost right at the opening bell. the s&p 500 hit its low for the day around the time the federal reserve released its minutes from last month's meeting.

the index finished with a 1.5% gain. that puts it at its highest close since the high right before the halloween sell-off. the materials sector saw the best gains, up 3%. financial stocks and the energy sector followed, up more than 2.5% each. we see the same type of leadership from inside the dow. aluminum maker alcoa shot up almost 7%, closing above $9 per share for the first time in three weeks. alcoa begins fourth quarter earnings season when it releases its results on monday. two big bank stocks in the dow, j.p. morgan and bank of america, gained more than 5% and 4%, respectively. among the economic statistics helping fuel today's buying was an increase in construction spending. construction equipment maker caterpillar sees china's construction market growing this year. shares of cat jumped almost 4%. china is caterpillar's largest market. it sees the chinese market growing 10%. meantime, an analyst at j.p.

morgan predicted the u.s. construction industry is "on the cusp of recovery." we mentioned the two multi- billion dollar international plays today for u.s. energy supplies. between those deals, tensions with iran, and the stronger economic data, oil closed back over the century mark. the u.s. benchmark oil price settled just below $103 per barrel. its highest close since mid- november. any move up from here would take oil back to prices seen last summer. 2011 was disastrous for research in motion. it saw the market share of its blackberry smart phone shrink and the debut of its tablet computer, the playbook, fizzle. canadian media reports the company is close to deciding whether or not its co-c.e.o.s should lose their chairmen of the board titles. while it's not exactly a management shake-up, it did help shares of rimm rally more than 7%. the two current co-c.e.o.s and co-chairmen also happen to be

the company's second and third largest shareholders with a little over 5% of the stock each. the stock lost three quarters of its value last year. finally, after decades, eastman kodak soon may no longer have its stock traded on the new york stock exchange. the one-time photo giant received notice it may get kicked off the big board because it's stock continues trading below $1 per share. e-k closed at 66 cents during the regular session. it last traded above $1 about a month ago. shares are down almost 90% in the past year as it wrestles with re-inventing itself. in recent weeks, three members of its board of directors have quit. and that's tonight's "market focus."

>> tom: the scoreboard many of us will be watching tonight won't be a college football bowl or the nba. it will be the winners and losers of the iowa caucus. it's estimated about $10 million was spent by candidates in iowa. while that's considerably less than four years ago, thanks to the earlier-than-ever date of the caucuses, this election year promises to be an expensive race. tonight, we go beyond the political scoreboard. rick horrow spoke with former u.s. senator bob graham. graham ran for the democratic presidential nomination in 2004 but dropped out before the iowa caucus. ran for president in 2003. we know the economy is not so

great now we have an earlier than usual election season. does it impact funding, raising, if so how. >> the economy is the dominant factor across the board and how people are organizing their campaigns, spending their time, how they are approaching getting other people to participate financially in their campaigns. i think it's more difficult to raise money as an individual during the poor economic times. >> tom: the yoabl administration has set a million dollar cap on its fund raising goal. how do you govern and raise money at the same time if you're president? >> if you're president of the united states, if you're a governor or senator or member of congress, fund raising clearly takes time that you otherwise would have spent doing your

regular public responsibilities. >> tom: should federal election campaigns be publicly financed and if so how would you structure it. >> the answer is yes and the model that we have had for most of the last 50 years for finance and presidential campaigns i think is about the right way. >> tom: these are all complicated issues and is it really possible to address the entire issue of campaign finance without looking at the tax laws. >> i think it is. i think the two subjects are not unrelated but are distant cousins. the main, to me, barrier to effective campaign finance reform now is the supreme court has declared that a corporation is a person for all purposes including their political participation. >> tom: i'm not going to ask you who you're endorsing in the next election but what kind of traits would you look for in our next president. >> i think the most important trait is judgment.

our society is so mobile and so dynamic that nobody can anticipate what those big issues. so what you're really electing, in my opinion, is judgment. you want somebody with whatever the issue is, to be able to bring to that issue a thoughtful and consistent capability of reaching a judgment which is in the broad public interest. >> tom: bob graham former u.s. senator and snra florida senator. >> tom: modifications and money. those are two big forces in the housing market. we look at both of them over the next two nights. first, modifications. in one of the states hardest hit by the housing collapse, some have found hope by getting their mortgage payment plans changed. the sun is shining in south florida, but the sunshine state remains second in the nation for home foreclosures. that's why scenes like these are

common-- a workshop targeting homeowners struggling to pay their mortgages. >> we're eager to pay our mortgage. >> tom: this wells-fargo sponsored workshop is the second one for 52-year-old firefighter mike wise. he and his wife, a registered nurse, purchased their home in 2005. both work full-time, but they're upside-down on their home and way behind on their mortgage. >> historically, it's always been medical issues, over- extension of debt. but you compound that with unemployment or underemployment, which is a big one that we're seeing nationally, that creates the inability to pay a mortgage with greater frequency. >> tom: when we're talking about struggling homeowners, we're talking about four million who have fallen behind on payments. but there are millions more who are current with their bills, but owe more than their home currently is worth. since the modification effort started, more than two million homeowners have gotten their loans changed; 13,000 in florida alone in the third quarter. >> we've been doing the process

for a year on the phone, and it was very difficult because every time somebody needed something, it would just go back and forth, and it was just long and tedious and we weren't getting resolution. >> tom: jacqueline alvarez, an i.t. specialist, and her husband al is a car salesman. they were about $35,000 behind in their mortgage and taxes, due to job loss. but at this workshop... >> we got approved for a loan modification and our payment dropped by half. yeah! >> tom: now, their monthly mortgage will be $1,600. in the third quarter, two-thirds of floridians who got their mortgages modified shaved at least 20% off their monthly payment. the firefighter and the nurse, the wises, also were successful. >> what we owed on the front end, they decided to put on the back end of the mortgage. just go ahead and work with us to allow us to stay in the home with an affordable monthly mortgage.

>> tom: a modified mortgage has not meant an end to the threat of foreclosure. 15% of the mortgages modified in florida in the first quarter were delinquent again six months later. while these homeowners are struggling to stay afloat, we will look at another side to the housing market tomorrow night-- buyers paying cash for multi- million dollar properties. you might be surprised at just who they are. also on the calendar for tomorrow: who had the most auto sales in december? we'll find out with the latest vehicle sales numbers. in advance of the december employment report out friday, a.d.p. issues its take on december jobs. we'll also see if santa claus made his way to wall street. market watcher and historian jeff hirsch of the stock trader's almanac will join us for "street critique." that morning coffee or afternoon caffeine fix could cost you more if you go to some starbucks. the coffee chain is raising prices in some regions, thanks

to higher raw material costs. about 1% of starbucks in the northeast and sunbelt will see price hikes, including new york city and washington, d.c. the price of a tall coffee will go up ten cents in those areas, but prices on grandes, the next size up, will stay the same. coffee isn't alone. the new head of the united nation's food agency predicts another year of volatile food prices as europe heads towards recession. jose graziano da silva, director-general of the food and agriculture organization, says his top priority remains eradicating world hunger. he said, "there will be many more people getting hungry, unemployed, and we will need to find new ways to assist those governments."

>> tom: if you're watching us on television, thank you. but also know that's so last decade. tablet computers, smart phones, twitter feeds, and facebook walls-- that's how media, and how people consume media, have changed. here's harry lin, executive in residence at idea-lab. >> i was chatting the other day with a co-worker about his wife's job at a very large and well-known entertainment company. this company is in the movie, television, publishing, and

internet industries. she's unhappy at her job because there's constant anxiety and uncertainty. i know other folks at this company, too, who sound the same lament. they keep telling themselves, "well, when things finally settle down..." like that's ever going to happen. the warner brothers and the disneys and the tribunes of the world, they just got to know that things are never "settling down" for them, ever again. the businesses of entertainment and media are in the midst of a terrifying and unpredictable disruption. consumers and creators aren't consuming and creating entertainment and media by old business-model rules anymore. comedians and musicians are selling their shows direct to the audience on the internet, no distributor required! youtube stars are making six figures on advertising-- no network or cable channel required! and just look at what amazon continues to do to the publishing industry. so i tell my friends at big media companies, there is no "when things settle down" time coming. it's just constant change, if

that's not an oxymoron. happy new year. i'm harry lin. >> tom: and finally, with the new year underway and the iowa caucuses in the offing, the next big event of the year already is sold out. the super bowl! we don't even know which teams will be playing, but nbc has sold all the commercial air time for the game on february 5 in indianapolis. the average price tag for a 30- second ad-- $3.5 million. that's up from $3 million last year. that's "nightly business report" for tuesday, january 3. i'm tom hudson. good night, everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by:

captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org >> tom: when we're not on the air, join us online at nbr.com. there, you'll find full episodes of the program. you'll find complete show transcripts and all the market stats on our facebook page at bizrpt. and don't forget to folls on twitter @bizrpt.

the future direction of this