>> the conditions are really challenging in europe, and they're going to be so for quite some time. >> susie: standard & poor's knocks down the debt ratings of nine european nations. we'll tell you how the move could affect you. >> tom: and a look at a group facing unemployment three times the national level-- they're married to the military. it's "nightly business report" for friday, january 13. this is "nightly business "nightly business report" is made possible by:

captioning sponsored by wpbt >> susie: good evening, everyone. it was a bad luck day for europe and world markets on this friday the 13th. first, it was a rumor and then after the u.s. markets closed, ratings firm standard & poors announced that it is stripping france of its aaa credit rating. it is now at aa-plus with a negative outlook. s&p is also cutting ratings on eight other eurozone countries, including italy, spain and portugal. but tom, there was no rating change on germany, europe's top economy. >> tom: on top of that, susie, crucial debt negotiations in

>> today investors were nervous in information so ahead of that news the dow industrials lost 49 points after an earlier loss of 150 points, the nasdaq was down 14, the somebody 500 closing off by 6.5. >> and as erica miller reports financial crisis may be something that affects the u.s. and around t >> reporter: the s&p downgrade of european debt has been well flagged. the ratings agency put 15 of the 17 eurozone nations on review for a mass downgrade over a month ago. but the sharp sell-off in global markets today illustrates just how nervous investors are about the region. >> the entire situation is one big issue of confidence and whether the europeans can act decisively and swiftly enough to restore investor confidence. otherwise, this issue that's been dragging on for two more years could get a little bit worse before it gets better. >> reporter: and if it gets worse in europe, you can bet

there will be reverberations around the globe. downgrades typically make it more expensive for countries to borrow money, and that increases the risk that the economic downturn in the region will become more severe. >> the more expensive it becomes for them to service debt, that's eventually gong to lead to weaker growth of those economies-- the need to tighten fiscal policy. so you are talking about a weaker global growth outlook. it also means financial markets are a lot more volatile. >> reporter: but there might be some small benefit for some small benefit for americans in the form of lower borrowing costs. if trouble in europe gets worse, economists predict the u.s. federal reserve will not hesitate to take action in the form of more quantitative easing or bond buying. >> the implication there for both investors and consumers is while we are seeing historical lows on mortgage rates, while we've seen historical lows on

let's say 10-year and 30-year bonds, those could go even lower if the fed implements another round of quantitative easing. >> reporter: what's clear is that the new year does not mean an end to worries about the situation in europe. investors are hoping europe will get a better handle on its problems in the coming months. but many economists warn it will take years before confidence is fully restored. >> i think there will be periods where europe remains in the headlines not just the next year, but 2013 and 2014. these issues are going to be with us for a very long time. >> reporter: you can be sure those issues will be grabbing headlines again next week. european regulators are meeting to seek ways to prevent western europe's banking woes from spreading. erika miller, "nightly business report," new york. >> susie: joining us now to talk more about those ratings downgrades? john chambers, managing director of standard & poor's ratings service and chairman of the sovereign rating committee. nice to you have back on the program. >> thanks for having me. >> susie: well, tell us why did you do the downgrades today? why now?

give us your analysis? >> well, we see rising systemic stress throughout the eurozone area. that lead us to put 16 of the 17 sovereigns on credit watch. we did that on december 5th. credit watch action is usually resolved within 90 days, usually much seen. and we see the systemic pressure coming really from several fundamental factors. and these include, and they are all inner related. these include tightening credit conditions, we see rising cost of refinancing external debt which is partly a function of a reversal of the globalization that we've seen and financial market integration. we see governments and households attempting to delever because their own level of indebtedness had reached very high historical levels. nd all of this has markedly weakened the growth prospect to europe. and compounding the matters and hurting investor sentiment has been a

prolonged and open debate among european policymakers about what the causes of the crisis have been and we're not even sure that their diagnosis is spot on. >> well. >> susie: well, to that point you did put these countries on warning a few weeks ago in december. and since then policymakers in europe have had countless emergency meetings including a big summit on december 9th and promising better fiscal discipline. are today's downgrades a vote of no confidence in what europe is doing? >> well, it's a matter that i think it's two things we should look at. one is on the fiscal side we don't see the issue as being primarily a fiscal one. we see it more as being one of a level of divergence, of competitiveness between the periphery and the center. and you're going to need fundamental economic reform for this to be arrested and

partly reversed. and that of course, is even more problematic when you have issues in financial market integrate-- integration. >> but with the downgrades isn't it going to make it even more difficult for these countries to grow, to borrow money and to do commerce? isn't it kind of a catch-22. >> we think that investors are best served when we give timely opinions on the prospects of default risk, when we take steps that are measured. we've got 21 rating steps between aaa and sc. four ratings today went down by two notches. another 5 by a single notch. seven were affirmed. if you look at these rating actions in the perspective of our overall scale we think that they are measured responses. and we think that investors are best served if we give timely views so that they can, you know, set their investment decisions accordingly. >> john, when you finished talking with me today and spend the weekend with

friends and family you're going to get a lot of questions of what is the significance of this s&p decision. what does it mean for people in our audience who are investors or working for a company that does business in europe. >> well, i think it simply means that the credit standing of a number of eurozone governments has modestly decreased. but again 14 of the 17 eurozone governments are still an investment grade, over a 15 year horizon since 1975. only 1% of investment grade sovereigns have defaulted. we don't see the eurozone in crisis. but we see its credit standing as having modestly weakened. >> all right, we'll leave it there. thank you so much for come on the program tonight. >> thank you. >> we appreciate it we've been speaking with john chambers, managing director of s&p's ratings service. >> tom: still ahead, it's said when your spouse is in the military, so are you.

the unique challenges facing military spouses finding jobs. and tonight's "market monitor" is bullish. elaine garzarelli joins us with exchange-traded funds she thinks will beat the market this year. >> susie: a big government merger today, and this one from president obama himself. he's proposing to merge six government agencies that focus on trade and commerce into one single department. he says it will save businesses money and save taxpayer dollars. the move comes a year after the president proposed downsizing government. now he's appealing to lawmakers to greenlight his plan. if congress lets him, president obama would apply new math to federal agencies, turning six into one. >> in this case, six is not better than one. sometimes more is better. this is not one of those cases, because it produces redundancy and inefficiency. with the authority that i'm requesting today, we could consolidate them all into one department with one website, one phone number, one mission--

helping american businesses succeed. that's a big idea. ( applause ) >> reporter: the small business administration and five other agencies dealing with trade and commerce would be rolled into one, and the s.b.a. will also be elevated to a cabinet post. the consolidation would save an estimated $3 billion over ten years and lead to the elimination of as many as 2,000 jobs, through attrition rather than layoffs. no president since ronald reagan has been granted the power to consolidate agencies. republicans were skeptical, suggesting the president is fine-tuning his campaign rhetoric. >> susie: a spokesperson for senate minority leader mitch mcconnel said it's about time that the president acknowledged that the government has grown to be "out of control." >> susie: the first of the nation's major banks to report,

>> susie: the first of the nation's major banks to report, j.p. morgan, says it is seeing signs of improving loan demand across the united states. the bank earned 90 cents a share in its fourth quarter. that was in line with expectations, but down 23% from the previous year. profits from trading activity were lower than expected. some analysts expressed worries over mortgage liabilities lingering on the banks' books. >> more critical to them is the u.s. housing market and the liabilities that have remained from 2008 and before and how

those liabilities are eventually resolved. that's a problem that j.p. morgan faces, but some of the other banks face to an even larger degree. >> susie: next week we'll see results from citigroup, goldman sachs and wells fargo. tom, what's on tap in tonight's "market focus"? jp morgan led the losers today. let's take a look at tonight's "market focus." the results from j.p. morgan, along with waiting for the government debt downgrades in europe, set the tone today. it was a bit negative. the dow industrials was able to climb off its worst level of the day about an hour after the opening bell. the dow finished with a loss of 49 points. for the week, the dow was down two sessions but had a net gain this week of 0.5%.

the nasdaq was up each session this week except for today, for a net gain of 1.4%. and the s&p 500 also saw four sessions of gains. yesterday, it was at a five- month high. this week, it gained 0.9%. earnings season just got started this week, and next week's calendar is jammed with lots of bank earnings. the financial sector led the market lower today, falling 0.8%. industrials and info tech each fell 0.7%. all 10 major stock sectors were down. within the financial sector, bank morgan stanley was the biggest loser, falling more than 3%. morgan stanley is among those banks reporting earning next week. some questions about its exposure in europe. the focus on europe intensified today with the action by standard & poor's to cut the debt ratings of several governments. one beneficiary is the u.s. dollar.

the euro currency fell in anticipation of the ratings cuts, dropping to $1.26 per euro. that's the lowest price against the dollar since august 2010. also benefiting from the european worries? bond investors. bond prices rallied, pushing down yield. the benchmark 10-year government note saw its yield fall to 1.87%. that puts it close to its mid- december low. still below 2%. but again, we did not see a corresponding rally in gold. gold can be a traditional safe haven for investors in times of distress, but not today. gold fell by almost $17 an ounce. since september, gold has seen a series of lower highs. weakness in the international market for a different kind of metal has hit coal mining stocks. after increasing production of coal used for making steel last year, patriot coal will idle some mines to cut production. patriot shares fell more than 12%.

alpha natural resources and arch coal fell about 10% each. with that news, steel stocks were hit as well, a.k. steel, u.s. steel and steel dynamics falling about 4% each. snack food maker diamond foods continues to find itself under the microscope of investigators. at issue is the company's accounting of payments to walnut farmers. federal prosecutors have launched a criminal probe. shares sank 10%. since questions began about these payments late last year, investors have wored about diamond's purchase of the pringles brand from procter and gamble. for many holiday seasons, video game sales were the gift that kept giving, but market research firm n.p.d. reports in-store video game sales fell 14% in december, much worse than anticipated. industry leader electronic arts shed 7.5%. e.a. also lost its executive overseeing social and mobile gaming to zynga. fellow video game maker activision fell more than 2.5%.

but the drop of in-store sales may help online social game company zynga. shares rallied 5%. still, the stock trades below its december initial public price of $10 per share. and that's tonight's "market focus." >> susie: as the country fixates on an 8.5% unemployment rate, here's a number you may not have heard: 26%. that's the unemployment rate for husbands and wives of military members. sylvia hall reports on what's driving unemployment in the military community. >> reporter: u.s. military troops deploy around the world, sacrificing their time and effort to serve. back at home, their wives and husbands often find themselves dealing with a different sacrifice. >> my career came to a screeching halt when i married my husband. >> reporter: cristin orr schiffer is a job seeker with a master's degree. but she's not your typical applicant. a navy wife, she's lived 11 places in 10 years and is planning a move to hawaii. today, she joined more than

1,300 military spouses in search of jobs that fit the military lifestyle. she says they're often hard to find. >> so there's problems of continuity, there's also problems of seniority. every time you start, you start on the bottom again, because you start at a new organization. or maybe you've moved up one step for every three of your moves. >> reporter: statistics back up orr schiffer's story. one in four military spouses is unemployed, and that number may be much higher. many of the spouses we spoke with here say they have friends in the community who have stopped looking for work altogether. despite the challenges military spouses face in building their careers, employers are finding unique advantages to hiring them. turns out, military life produces some of the skills that businesses want most. >> what we found is social media-- they're moving all the time, you want to stay connected, and so a lot of the folks here are really good at social media and new media. there's a lot of skills that a lot of employers should value. >> reporter: adaptability is also a big priority for recruiters here. laura fuentes represents capital one and says military spouses

are used to change and comfortable in new environments- - a quality her company values more than geography. >> we look for folks that are really show high integrity and a great focus on results, and so military veterans and their spouses fit that bill perfectly. >> reporter: so in this down economy, military spouses have the added challenge of turning what could be a negative into a positive point on a resume. sylvia hall, "nightly business report," washington. >> tom: here's what we're watching for next week: the latest inflation data with the release of the producer and consumer price indices. and monday, with the markets closed, we bring you our latest "women in leadership" special edition. join us as we profile harvard president drew gilpin faust and learn how this historian is taking one of the world's biggest universities into the future. >> susie: for the first time ever, apple has issued a list of its major parts suppliers and an

update on working conditions at plants along its supply chain. the maker of iphones and ipads listed several big names among its 156 suppliers including intel, sony corp and micron technology. but after years of criticism, apple issued an audit. >> reporter: meanwhile in china, violence broke out after hundreds of customers waiting for hours outside apple's flagship store in beijing were told there are no new iphones available. the release of the iphone 4s was delayed, and as seen in this video from russian television, customers were not pleased. they yelled at employees and threw eggs after police made the announcement.

>> tom: forget about cautious optimism. tonight's "market monitor" is a bull, plain and simple. elaine garzarelli is president of garzarelli capital. elaine, nice to see you, and happy new year. >> same to you. >> tom: you use a set of indicators to discern your market outlook. why so optimistic? >> well, my indicators range from 0 to 100%. and currently they're at

80%. they include fundamental indicators such as monetary indicators, economic cycle sentiment and valuation. and anything below 30% would suggest a major bear market below 43 would be a 10 to 15% correction. so at 80%, that is very, very bullish. >> you are looking at the fundamentals there. but what about the headline risk, especially all those attorneys-- concerns about europe. you heard in the reporting earlier in the program about governments getting their credit ratings cut overseas. >> i think that is discounted. we have known about that since december. and you know, i think most of the countries should be double d anyway. so i don't think that's going to have much of an impact. i think the stock market today needed a little bit of an arrest. it's been rallying since october. >> i am sure the european governments are glad you are not an -- >> what about the u.s. economic environment. last spring we saw green shoots but they dissipated

by the second and third quarter is this lasting? >>. >> well, we see real gdp growth this year of about 2%. and about two and a half percent next year. and the strongest sectors will be residential construction, he kbipment-- equipment spending, technology, commuters, software and manufacturing structures. >> tom: with thax, we'll look at new exchange traded funds beginning with the russell 2,000 exchange traded fund. iwm. why look at small caps in this environment? >> well, they don't have much exposure to europe which is a major reason. and also they were the worst performers last year, down close to 7%. and the areas that the russell 2000 make up are mostly basic materials which i like, industrials and consumer durables. >> you mentioned technology earlier as a place where there may be some economic growth. xlk is the technology fund here in the mid --. what do you anticipate this

year in terms of a return? >> well, i think that the technology group could probably do twice at well as the s&p 500. and that xlk includes companies like apple, ibm, microsoft, google, intel and sysco. >> all certainly household names. how about industrials. they have been kind of the market leaders and laggards as of late and we've seen a nice rally off that october low. >> right. and they were a bad performer last year during the correction phase and the stocks would be ge, united parcel, utx cat, 3m and deere. >> are you not afraid of international exposure there at all, are you. >> no, not really. because i think the group has corrected so much that it discounted a lot of that. >> finally here in fixed income we talked about credit ratings but you are not afraid of bad credit ratings, junk, jnk the etf that focus on the high yield, is it protected. >> yeah, high yield does well in an environment of 2 to 3%, real gdp growth we

foresee and i think the default rate will be low because we don't see a recession for the next couple of years. and it's yielding jnk about 7% now. corrected quite a bit last year and that's a very good yield. >> three times what the government bonds are yielding. let's look at your last pick back in april, you were last with us. you like the materials exchange trade fund down 10%, financials down 16%. also at that point like energy down 13%. and advantaged fixed income closed n fund down 2%. dow still like any of these? >> i love them all. we had a signal last year of a 10 to 15% correction so hedged in may of last year, the groups have corrected quite a bit and they look absolutely fantastic now. >> elaine, do you and your investors have positions in all the funds mentioned tonight? >> i do. and the sector analysis fund we own all of the things i mentioned. >> she is a bull. no caution, just optimism. our friday market monitor, great to see you.

elaine garzarelli of garzarelli capital. >> thank you. >> susie: and finally, the unseasonably warm winter is bringing with it some economic surprises. with cheaper heating bills, people have more cash in their pockets. airlines are offering deals because they're not paying overtime to battle blizzards and de-ice planes. and shoppers are cleaning up on a glut of unsold cold weather gear, like coats and boots. but tom, this warm winter isn't all roses. snowblower sales are way down. >> tom: i was talk together parents last night in iowa, six inches of snow. first six inches this winter season on the driveway last night. >> susie: i'm heading to cleveland tonight. i'm probably going to get same sort of thing. >> tom: good luck, bring a book for the plane there it is nightly business report for this friday 13th in january, i'm tom hudson. have a great weekend. you too, susie. >> susie: same to you, have a great weekend everyone, we hope to see you all again next week. "nightly business report" is made possible by:

this program was made possible captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org >> tom: 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 follow us on twitter @bizrpt.