>> tom: the facebook i.p.o.-- it's the biggest hit for investment banking in years. we look at what it could mean for the sector. >> the lead is the position you want. the other companies will get fees, they'll add that to revenue, but the prestige of having that is what you strive for. >> susie: then, ben bernanke defends his decision to keep interest rates at record lows longer, and he warns lawmakers need to strike a balance between cutting the debt and spurring growth. it's "nightly business report" for thursday, february 2. 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. a strong warning today from federal reserve chairman ben bernanke, and a pledge about reforms from the treasury secretary. first, susie, the fed chairman told a house panel the federal budget deficit is growing at an unsustainable and potentially dangerous rate. >> susie: tom, the fed chairman urged the house budget committee to make easing the growing divide between government revenues and expenses a priority. he blamed the rising deficit on an aging population, higher

health care costs, and most recently, the recession. >> tom: but bernanke warned lawmakers that slashing federal spending also carries risks. just last week, the fed forecast the economy wouldn't fully recover for another two to three years. and he said the combination of high unemployment, low consumer confidence, and a weak housing market make cutting federal spending a delicate job. >> even as fiscal policy makers address the urgent issue of fiscal sustainability, they should take care not to unnecessarily impede the current economic recovery. fortunately, the two goals of achieving long-term sustainability and avoiding additional fiscal headwinds for the current recovery are fully compatible. >> tom: and late today, treasury secretary timothy geithner defended financial reforms undertaken by the obama administration, arguing there's no evidence new rules on banks have hurt the economy. those comments came just hours after we saw another drop in new claims for jobless benefits.

claims fell 13,000 to 367,000 in the week ending january 28. it's their third straight week below the 400,000 level. still, investors stayed on the sidelines ahead of tomorrow's all-important report on january's employment levels. the dow fell 11 points, the nasdaq rose that much, and the s&p 500 tacked on a point. as for trading volume, 809 million shares moving on the big board; 1.9 billion on the nasdaq. >> susie: the u.s. deficit, the problems in europe, and uncertainty in washington are issues that concern our next guest. paul reilly runs one of the nation's largest regional investment firms. he's c.e.o. of raymond james. when i met with him today, he talked about his outlook for the markets in 2012. >> our outlook has been kind of more where it is today, that we think we're going to stay in a trading range. obviously there are all these companies to pick that will do well. but until there is real clear, i think, leadership

in washington and a direction for the economy, i think people are going to tend to be more cautious. so with interest rates low, we may still get a little pickup in the equity markets but i don't think january has been a pretty good month t would be hard to multiple that one by 12. >> susie: as you know, paul, everyone is worried about the financial situation in europe yet we are seeing in the u.s. encouraging numbers about the u.s. economy. can u.s. stocks do well even though there is a crisis in europe? >> i think as long as europe doesn't implode. you know, as people have watched the european situation, they see -- they think greece is isolated, that they will take care of their own kind of issues. and that with the leadership of germany, especially, and france, that the european union has really made great strides in coming up with a solution to make sure the youreau zone stays intact. i think as long as that happens there is no big shock that that is an im-- isn't impacting us right now. so people have gotten over that fear at least for the short run. it's not fixed but it's on its way to being fixed. that the u.s. is now to kexd

on the u.s. economy. >> there is some speculation today that greece is close to am canning to a deal with its creditors. if that happens, what does that mean forth u.s. markets going forward. >> i think it is just another calming factor. i think greece is annis lighted issue. it's not that big 6 a number, even if it was not-- if it went bankrupt and didn't come through, the european markets would be okay in the u.s. market. it is not a big number. so just having that resolve makes another one of those worries. you can check a box and say okay, i'm not worried about that. you know, europe is okay and therefore the u.s. will be okay. >> susie: what are the stock sectors that the raymond james managers have identified that have the most growth potential for this year? >> energy, people still feel that energy has room to run, that there is going to be demand as demand goes up pricing will. real estate which is the sector that has been beat down. continues to draw capital and do very, very well. and last but not least is technology. there is almost a pent-up demand for technology companies. hopefully facebook helps some but i think they're

going to have to come too price on their own. >> your firm raymond james does a lot with individual investors. what is your take on investor confidence? >> well, investor confidence has gone up in december and january. our own polls show that investors are feeling better but it is still less than half. they feel better about the markets but they are still nervous. so between europe, questions on the u.s. and the debt, people are still cautious and have been investing not to lose money. so sentiment is improving. but i don't think it's really going to go up until we get through the election, when we get a clear collection on how we are going to grow the economy. we're going to add jobs and take care of our deficit. >> you know there is a lot of excitement about-facebook going public. and some people are saying that this public howevering could be the thing that will reignite investor confidence. what do you think? >> i think it will make them curious. but to me it's like saying diamond sales are out there, or retail sales will be up. it's something very, very special and its he unique.

so i think it sets a good framework to say okay, the market is working. there is opportunity. i think what it does show is if you have a offering that people like, there is plenty of money to invest in it but i wouldn't draw the parallel to say because they're successful that lesser known companies with less embedded positions, you know, will get the same kind of reception. the money is in the market. people can go public. it's just the pricing and facebook is going to get a pricing premium because of who they are. >> susie: great talking with you today, thank you so much. >> great being here. >> tom: still ahead, if new jobs were created in the past month, some came from this internet marketing firm in florida, thanks in part to incentives from local governments. >> susie: shares of morgan stanley inched up slightly today after word yesterday it's the lead underwriter on the facebook i.p.o. but morgan stanley isn't the only investment firm that will win big from the facebook offering. suzanne pratt takes a look at

what the facebook deal means for the investment banking community. >> reporter: the facebook i.p.o. is the crown jewel for the investment banking world. for months now, bankers have been wooing the company for a piece of the multibillion dollar deal. surprisingly, however, it's not so much about the money as it is bragging rights. morgan stanley gets to do all the bragging. by winning the coveted role of lead underwriter, the bank gets a big chunk of the fees. but morgan stanley is also well positioned for future facebook offerings or acquisitions and, experts say, it's pretty clear why the bank got the prized trophy. >> morgan stanley has done several recent internet i.p.o.s, therefore, they had a leg up versus their rivals. >> reporter: j.p. morgan, goldman sachs, bank of america, barclays capital, and allen & company will also get in on the

action, and there could be others added to the roster. but wealth manager jeff sica says not being top dog is a big black eye for those firms, especially goldman. >> the lead is the position you want. the other companies will get fees, they'll add that to revenue, but the prestige of having that is what you strive for. >> reporter: exactly what those fees will total are yet unknown, but it's widely rumored they'll only be about 1% of the gross proceeds. that's far less than other recent internet i.p.o.s, like zynga and groupon. and while 1% of $5 billion is still something, some experts say it's not enough to "friend" morgan stanley's stock. >> it's definitely not a reason to buy it, primarily because investment banking fees, no matter what, are declining. they're declining rapidly. >> reporter: still, if the facebook shares do well in the

after market, that could open the door for other i.p.o.s-- good news for all investment banks. suzanne pratt, "nightly business report," new york. >> tom: before trading firm m.f. global collapsed in late october and billions in customer funds disappeared, the firm's chief risk officer said he warned about the company taking too much risk. michael roseman told congress his warnings about the company's multi-billion dollar bet on european bonds helped cost him his job. darren gersh reports from washington. >> reporter: m.f. global's former chief risk officer says the futures broker had ample warning. well before m.f. global failed, michael roseman says he had cautioned former c.e.o. jon corzine about the risk the firm was taking on in buying european debt. >> the sovereign positions and the associated risk with those positions were very well- communicated, very transparent within the organization, and to

mr. corzine and to the board. >> reporter: if m.f. global had not taken a huge $6 billion bet on european debt, roseman says, the company would still be here. roseman says his warnings helped cost him his job. michael stockman replaced roseman as chief risk officer, but said he was not hired to be a yes man. stockman insists he grew concerned last summer about the risk m.f. global was taking on. >> i found that the risks and rewards were acceptable, and then in july, i had a change of view. >> reporter: the ratings firms were next to feel the heat of congressional outrage. lawmakers demanded to know why moody's and standard and poor's waited so long to downgrade m.f. global. >> i don't know which one of you i should be more upset with-- the one who says, "it took me six months to get upset," or the one who said, "i didn't catch it in the first place, and as soon as i figured out i blew it in the first place, i got upset within a couple of days." both those answers stink. >> reporter: standard and poor's said m.f. global's chief

financial officer sent an email a week before the firm failed, saying it had never been stronger. richard cantor, moody's chief credit officer, said his firm always considered m.f. global to be highly reliant on the trust of customers and the firms that traded with it. >> our rating reflected our view that m.f. global's credit profile had speculative characteristics, compared to other rated credits. in fact, for several years, moody's viewed m.f. global as one of the riskiest credits among all u.s. banks and securities firms. >> reporter: regulators have traced almost all of the money that went missing from m.f. global customer accounts, but it is not yet clear how much of that $1.2 billion can be clawed back for its rightful owners. darren gersh, "nightly business report," washington. >> susie: after a year-long effort to tie the knot, the deutsche boerse and the nyse euronext are calling off their proposed merger. the move comes after european union regulators formally blocked the deal, saying it

created a "quasi-monopoly." so the companies have agreed to what they're calling a "mutual termination" of the $17 billion deal. and because regulators torpedoed the deal, neither exchange will have to pay the $250 million euro break-up fee. and tom, the nyse shares rose on this news today, up about 2%, closing at $27 share, but when you look at the stock chart that's down from the $38 level when the deal was announced a year ago last february, right around this time. >> tom: yes, significant value destruction has happened with lots of noise about regulation in europe squelching this deal here, let's look at what else is going on with tonight's market focus. the major stock indices marked time ahead of tomorrow's report on jobs as retailers turned in generally solid january sales. the dow was the sole major stock

index to fall today, down for the fifth time in six sessions. the dow has been the laggard this year, compared to the s&p 500 and the nasdaq. leading the gainers for the broad market-- energy, financial and consumer staple sectors, each up only a half percent or less. as a group, retailers saw a fairly decent post-holiday period, with industry sales coming in better than anticipated. 20 retailers tracked by thomson- reuters reported a 4.3% increase in january same-store sales. that's more than twice what was expected. among those stores actually reporting less than forecast sales growth was macy's. but with its stock up 3.5% today, clearly, investors ignored that disappointment, focusing instead on the company raising its earnings outlook. also raising its guidance, kohl's. shares up more than 2.5%. just last month, it lowered its guidance, but now, it increased it, thanks to growing sales of accessories, handbags and men's wear.

the best and worst today was the gap, and abercrombie and fitch. the gap shot up more than 10%. while sales fell, they didn't drop as bad as feared. its earnings outlook improved, as well. but abercrombie and fitch warned its fourth quarter earnings would be disappointing, due to heavy discounting. shares plunged almost 14%. the afterglow of the facebook stock offering news yesterday was on display today in shares of zynga. this is the video game company behind farmville and words with friends, huge games on facebook. shares soared almost 17%. it was among the most actively traded issues on the nasdaq. the stock came public in december at $10, and fell below the offering price until just last week. zynga was responsible for 12% of facebook's revenue last year, indicating its importance to facebook's business model. while we're talking about video games, electronic arts shares jumped 6%. it's "star wars" internet game

has sold two million units, calling that a strong start. other consumer-focused stocks moving up-- sara lee added 4% to a new 52-week high after reporting better than expected earnings. costco stock rallied almost 3% with a bigger than anticipated bump up in january sales. and kellogg saw strong fourth quarter sales, helping push shares up more than 2.5%. green mountain coffee is best know for its patented k-cups coffee machines. and those machines keep brewing up big profits. shares shot up more than 20%, thanks to very strong quarterly results. but that remains well below its $115 dollar high from last year. mastercard earnings were charging ahead before accounting for a big charge tied to lawsuits from merchants. the company sees more than half its revenue come in from outside the u.s., and despite the worries in europe, it says it has not seen a slowdown. shares saw heavier than usual volume, moving up almost 7%.

during the session, it hit a new intra-day 52 week high. visa stock did the same with its 3.5% rally today. the two have been hit by lawsuits alleging they violate anti-trust laws with the fees they charge stores to have customers use their cards. finally, natural gas prices saw a pop while oil cooled off. nat gas jumped 7%. traders called it short covering after so many had been betting on lower prices, thanks to warm weather and record high supply. meantime, crude oil settled below $97 per barrel, its lowest of the year as weekly supplies were up. and that's tonight's "market focus". >> susie: fresh signs that chrysler's turnaround is gaining traction. the auto maker today said it plans to hand out profit sharing checks to 26,000 factory workers next month. while chrysler would not say how much each of those union represented workers will receive, a formula in its latest labor contract, basing the

bonuses on chrysler's $2 billion operating profit, calculates the checks at about 1,500 bucks each. >> tom: more than 150,000 new jobs were created in january, or at least that's the low end of the forecast for tomorrow's report on employment. while nowhere near spectacular, it would mark the seventh straight month of more than 100,000 new jobs. a handful of january's new jobs

came from a growing dot-com company in south florida, thanks to help from local governments. this man has 500 jobs to fill at his company over the next three years. >> we are representing fortune 200 companies, so one of the most important things that we stress as an organization... >> tom: and this woman's community helped come up with incentives to attract the new jobs. >> so when this opportunity came about, we could not be happier. >> tom: what the mayor of margate, florida, is happy about is saveology and the hundreds of new jobs it brings to this town northwest of miami. saveology is an internet firm that works with at&t, verizon, time warner cable, and others. it provides them with online marketing, sales and call centers. so when you call for adt home security, for instance, you may be calling one of these workers. saveology expects revenues will grow this year to $200 million, and it plans to hire a few hundred people, including call center workers, technology support managers, and web

developers. >> i can tell you right now, if i had 70 more developers working for us, we could generate at least another 20% to 30% above and beyond our growth what we need to do. so our problem right now is actually time. >> tom: information-based jobs are growing. there are more people working with information service firms today than there were back at the height of the dot-com bubble in 2000, adding almost 20,000 jobs last year alone. to attract saveology, margate and the state of florida came up with more than $2 million in incentives, which were key to getting the company to renovate and move into a long-vacant space in a strip mall, an office space that now includes a gym, a barber shop, even a marmoset and a macaw. >> as an organization, we probably would not have done this to this extreme and have been so motivated to do it. we probably would have just continued growing the organization in the three different states we were in, which is utah, new jersey, and florida. >> tom: so 300 saveology jobs in utah and new jersey will be florida's gain, in addition to 500 brand new jobs.

this highlights the competition among municipalities to bring jobs to town, especially those like margate with unemployment rates well over the national level. >> when you have this many people in one location, they have to eat, they have to shop, so i think it will boost the city of margate's economy and put us on the map, quite frankly. >> tom: the incentives provided to saveology amount to $700 per job from the city and $2,500 from the state. the jobs have to be created over three years, and the company gets the incentive money over six years, ensuring the jobs stick around. >> susie: here's what we're watching for tomorrow: it's all about jobs. we'll see the january employment numbers first thing tomorrow morning, and the institute of supply management issues its latest index on growth in the services sector. also tomorrow, marshall front is our "market monitor" guest. he explains why he's favoring u.s. and emerging market stocks and staying away from bonds.

amazon.com says it recently got a big tax bill from the state of arizona-- $53 billion. amazon disclosed the amount for unpaid transaction taxes in a filing with the s.e.c. the transaction tax, similar to a sales tax, covered amazon orders placed in the state between 2006 to 2010. amazon says it plans to fight attempts by arizona to collect. >> tom: if you have a 401(k) retirement plan, some rule changes today by the department of labor could affect you. plan providers will have to disclose administration and other costs to employers. this would allow companies to shop around. another change would make it easier for employees to use their 401(k) accounts to buy annuity investments. the rules go into effect july 1.

>> susie: as we mentioned, the labor department issues the january employment report tomorrow morning. most economists expect american businesses added 150,000 jobs. tonight's commentator says he's hearing good news from the nation's businesses. he's mark zandi, chief economist at moody's analytics. >> here is an intrepid forecast: the unemployment rate will be below 8% by year's end.

while still disappointing-- anything over 5.5% means there are those who want work but can't find it-- unemployment is definitively moving in the right direction. just over two years ago, it was in the double digits. in my travels as an economic consultant, talking to clients in all walks of life, businesses are almost uniformly more upbeat. layoffs are as low as during the best of economic times, and hiring, which has been extraordinarily weak, is picking up. american companies are much more competitive. they've worked hard to get their costs down. unit labor costs, which account for how much workers are paid and their productivity, have fallen in recent years. in chinese yuan terms or euro terms, u.s. labor costs are as low as they've been since the 1990s. some of the strongest job growth will be in manufacturing, the technology and energy sectors, and agriculture. the healthcare, retail, and hospitality industries will also add more. and believe it or not, there will be some construction jobs, after six years of dizzying declines. please note that i heard

similarly positive rumblings from clients a year ago, but they were dashed by surging gasoline prices and the political acrimony in washington. the psyche of business people remains fragile, and it won't take much to upend their budding optimism. nonetheless, businesses and thus the economy finally seem to be getting their groove back. i'm mark zandi. >> tom: that's "nightly business report" for thursday, february 2. i'm tom hudson. good nht, everyone, and good night to you, too, susie. >> susie: good night, tom. i'm susie gharib. good night, everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by: captioning sponsored by wpbt

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