>> susie: ben bernanke downplays the consequences of higher gas prices, calling them a temporary hit to the consumer. still, the federal reserve chairman tells congress the economy is doing better than expected. >> tom: that optimism had investors cashing out of gold. the yellow metal posted its biggest one-day drop this year. but what about bonds? are they still a safe bet? >> if you own a bond fund and its in long-term bonds, you can lose 10%, 20%, 30%. >> tom: it's "nightly business report" for wednesday, february 29. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:

captioning sponsored by wpbt >> susie: good evening everyone. ben bernanke said today the u.s. economy is doing better, but higher gasoline prices could temporarily reduce consumer spending. the chairman of the federal reserve was on capitol hill speaking to congress, updating lawmakers on the state of the economy. in a word, tom, he sees "modest" growth. >> tom: susie, bernanke's comments came shortly after the government reported that the nation's economy grew by 3% in the last three months of last year-- higher than previously thought. also today? the central bank's survey of regional economies-- the beige book-- had some encouraging news. hiring is picking up, the housing market is improving, and manufacturing activity is

expanding. >> susie: as for what the fed might do next to boost the economy? bernanke didn't give too many clues. darren gersh reports. >> reporter: sure, growth is about average now and unemployment is falling faster than the federal reserve expected, but federal reserve chairman ben bernanke was not about to take his foot off the gas. he defended his drive to support the economy. and credit suisse economist dana saporta argues bernanke has plenty of company. >> all major developed countries are being very easy right now because they're concerned that this recovery from the great recession is going to falter otherwise. >> reporter: saporta expects the fed will deliver another boost to the economy. it should come later this year as the economic benefit from good weather fades and higher gas prices hit consumer pockets. but bernanke today gave no hints and showed few worries. >> gasoline prices have moved up, primarily reflecting higher global oil prices-- a development that is likely to push up inflation temporarily while reducing consumer's purchasing power. >> reporter: in case you missed it, the key word there was temporarily.

looking at jobs, bernanke called the labor market far from normal, though he said he'd keep a close eye on signs hiring is picking up. but since he was talking to congress, bernanke also pointed out washington could crush the economy if it fails to deal with all the automatic spending cuts and tax increases that are just months away. >> under current law, on january 1, 2013, there's going to be a massive fiscal cliff of large spending cuts and tax increases. i hope that congress will look at that and figure out ways to achieve the same long-run fiscal improvement without having it all happen at one date. >> reporter: bernanke was again asked by members of congress if low interest rates were hurting savers. he said most retirees had most of their money in stock and mutual funds. >> those assets are assets whose returns depend very much on how strong the economy is. so, in trying to strengthen the economy, we are actually helping savers by making the returns higher as we can see in the

stock market, for instance. >> reporter: the fed has spent so much time explaining itself lately that there were only two real surprises in bernanke's testimony. we learned he does his own grocery shopping. and his son may rack up $400,000 in debt as he makes his way through medical school. darren gersh, "nightly business report," washington. >> tom: the chairman's testimony pushed stocks lower today. still, it was the best february for the stock market in 14 years. the dow lost 53 points, the s&p 500 dropped 6.5, while the nasdaq slipped nearly 20 points. earlier in the day, the nasdaq briefly touched 3,000 for the first time in more than a decade. gold futures got hit by selling today, plummeting $77 an ounce, or 4.3%, to $1697 an ounce. bernanke's comments, or lack thereof, also caused bond prices to slide lower today, pushing up interest rates.

he's not the only one stirring up trouble in the bond market these days. suzanne pratt explains. >> reporter: this is what billionaire investor warren buffet thinks of u.s. treasuries. he calls them dangerous and says they should come with a warning label. and, buffett is not alone. earlier this month, blackrock c.e.o. larry fink told investors to be 100% in stocks. investment pro mike holland says they're making an observation about the bond market, one that holland agrees with. >> the reason it's important is he's observing that when you buy a 10-year treasury or 30-year treasury, you lose money every day you own it. >> reporter: what are these guys talking about? aren't u.s. bonds supposed to be safe? here's the problem. a 10-year bond yields less than 2% these days. and, most of us would agree inflation is about 3%. so even if you hold that bond to maturity, your purchasing power erodes. simply put, you lose. experts say the potential loss for bond fund investors is even worse.

and that's worrisome because investors are gobbling up bond funds like it's their last meal. >> if you own a bond fund you should probably sell it. if you're in a bond fund and if bond prices go down as interest rates go up you are locked into that loss, you never get it back. >> reporter: to be clear, what buffett and others are saying may not happen today, tomorrow or next month. you might not lose money right away. but, they still believe bonds are a very risky place to be. suzanne pratt, "nightly business report," new york. >> susie: so how safe or risky are treasuries? joining us now with two different views? dan shackelford, portfolio manager of the t-rowe price new income fund-- a $15 billion dollar bond fund-- and james awad, investment strategist at zephyr management, which manages more than 20 investment funds.

>> dan, thanks for joining us tonight. >> great to be here. >> dan, let me begin with you. is warren buffet right. are treasuries dangerous? >> i don't want to talk myself out of a job. but warren buffet made an important point along with the report that you had earlier, and that is basically, the fed is targeting an inflation right of around 2%, and as we heard earlier, inflation is running higher than 2% and above the current level of interest rate you can get on a terbry 10 year. so once the inflation eclipses the yield on the treasury bond, i would say it's getting pretty ricky. seam jim, what do you think, are treas reaps dangerous ?i.d that's the consensus now. and in all due respect to warren buffet. he's richer and smarter than i am. but there's another scenario. with all the money thrown at the u.s. economy, at half --

it's growing at half the rate the fed would like it to grow at just as we're about to have the huge fiscal drag that warren buffet was talking about, plus the consumer purchasing power, and europe. at best, it's going to be in a mild recession for many years which is a disinflationaryent. and finally staring down the barrel of a confrontation between israel and iran which could affect the price and vaibltd of oil. all of which would hurt the world economy, and if that happens, i think investors would be rick averse, and in a rick averse environment, there's a place for fixed income vehicles like treasuries. >> you know, smim, that could change in the blink of an eye. inflation and interest rates go up, and treasuries plummet and investors would lose as suzanne reports in the package. are nervous investors better

off just putting their mon necash or a money >> you should have some in cash sdp,? in corporate boppeds. i'm not saying don't own any stocks. i'm just arguing against those who say sell all of your treasuries or go short treasuries which some are doing. >> let me get dan back in the conversation. >> investors have been hearing for a couple of years, get out of treasuries, it's dangerous, and yet treasuries have outpaced stocks. could that be the case again, and treasuries will do better than stocks and investors will make >> i think jinl outlined the risk pretty l. >> my point would be that the probability much those risks,

given that they've known for a while -- there could be surprises in the middle east, otherwise, we've been dealing with the problems. we at t-rowe price say there's room for treasury exposure. but for corporate bonds or high yield, we would prefer sectors where investors are getting paid to wait and earn something at least above the rate of inflation. the other thing i'd like to point out is that the u.s. economy is growing at a one and a half and two percent rate. maybe that's lower than it should be. at some point, our guess is that treasury 10 years would have a 2 handle and should at

least have a 3, and long bonds towards 4%. >> emily: quickly, the point that warren buffet is making is that you're safer with stocks. my question to both you quickly is are you better off in a treasury with a 2% yield or a stock like mcdonald's that gives 3% on the dividend? >> i think over the long term you'll do better in the stocks than the treasury. i'm only making the case that some people are too bearish otd treasuries. >> in a scenario with the economy, you would be better in dividend paying stock that is have an opportunity to go up in price. >> emily: thank you so much. interesting conversation. we've been speaking with dan shackelford of the t-rowe price new income fund and james awad, investment strategist at zephyr management.

>> tom: still ahead? with today's big tumble in gold prices, are commodities still the place to be? we ask "street critique" guest lincoln ellis. microsoft opened up its latest windows software today at a technology conference in barcelona, spain. even though it's officially a consumer preview of windows 8, microsoft calls the new operating system a "generational change for windows." >> we set out to build windows in a new way. we thought about engineering and design from the chip set through the experience and we did this while still maintaining the best of the p.c. ecosystem. >> tom: that computer ecosystem has changed considerably since microsoft last unveiled a new windows software. tablets, smartphones, apps and cloud computing are competing with the familiar desktop computer. >> i think this is the biggest launch that microsoft's going to have since windows 95. i think there's a lot of positive buzz around it, and i think this is going to be a big winner for them. >> reporter: with windows 8, microsoft acknowledges its operating system has to stretch across digital devices.

>> that's what everyone wants, really-- a sort of true integration between all of these devices. it doesn't matter if you're typing on your laptop, calling on your phone-- it's the same operating system, or a similar operating system, running all these devices. >> tom: and to do that, windows 8 sports a new look, using customized tiles to navigate different applications. it's similar to microsoft's latest mobile phone software. >> i think the most exciting thing is that its a completely new look for the operating system, and it feels fresh and i think it's something that microsoft badly needed. i think obviously they have that reputation of being this old slogging company-- plodding company-- that hasn't really innovated in a while and this definitely gives microsoft a shot in the arm. >> reporter: financially, windows is big for microsoft. in its last fiscal year, its windows business brought in 45% of the company's operating income. and a new operating system helps drive sales of microsoft office software, were more than half of profits come from.

>> this is going to be a big launch for them. it's going to drive some upgrades. its going to create some user excitement. and it could be the big push microsoft needs for the tablet market. unfortunately, it's also going to get undercut by the launch of ipad 3, which will get a lot of buzz and take some of their thunder away. >> tom: that ipad 3 launch is expected next week. in anticipation, apple's market value notops $500 billion. microsoft's is a little over half that. >> susie: general motors is

>> susie: general motors is saying bonjour to peujot citroen, buying a 7% stake in the french automaker. the detroit powerhouse says the alliance will help the companies cut annual costs by $2 billion without closing plants or cutting jobs in europe. in other stories we're following, the trial of alleged ponzi schemer allen stanford has gone to the jury tonight. the texas tycoon is accused of bilking investors out of more than $7 billion. a houston jury began deliberations a short while ago. if convicted, he faces more than 20 years behind bars. >> youment to correct the settlement price of gold mentioned earlier. the official settlement was $1711 an ouncement take a look at the rest of the market closeures.

>> tom: the federal reserve's lukewarm outlook for the economy didn't help the mood of the market. after closing over 13,000 yesterday, the dow industrials limped along today in a very narrow trading range, ending this afternoon with a small loss. it was a down note to end what has been a pretty decent month. the dow was the laggard among the big three stock indices, up 2.5% this month. the s&p 500 gained more than 4% and the nasdaq jumped more than 5%. where was the money made? it was technology, energy and the financial sectors leading the gains, helping the market put in its best february in several years. interestingly, the month's worst sector was also today's biggest drag on the market: materials. even though the latest economic data has been encouraging, material stocks have not participated in all of the rally over the past few months. this sector exchange traded fund fell almost 2% today. it was a mix of material stocks weighing on the sector today. thanks to the big sell-off in gold, newmont mining dug itself a hole, down 4% on heavy volume. iron ore producer cliffs natural resources dropped 3%. this is cliff's lowest price of

the year. and fertilizer maker c.f. industries cooled off by 3%. it was at a new high just yesterday. while energy has been in focus lately with rising gasoline prices, solar panel maker first solar dimmed considerably today. it was the biggest drop among s&p 500 companies, falling 11%. volume tripled with shares falling to their lows of the year. while quarterly earnings were better than expected, revenues were disappointing and it lowered its 2012 forecast. also on the selling side was staples-- volume was more than five times normal with the stock falling more than 8%. the office supplies retailer had a disappointing growth forecast, something it blamed on the weak european economy. meantime, staples says its in the cautiously optimistic camp for the u.s. recovery. a couple of beverage companies lost their fizz in a big way. vodka maker central european distribution lost almost a fifth of its value. it has more than $300 million

dollars in debt coming due next year and warns it doesn't have enough cash. that fuels worries about it staying in business. meantime, soda-stream shed 14% after reporting a drop in unit sales growth last quarter. the company sells carbonation machines and flavors. while much of the automobile world has been focused on gasoline prices, the department of transportation has been looking backward. it was expected to announce a new rule that would require rear-facing cameras on all passenger vehicles in the u.s. by 2014. gentex is a maker of those camera systems. shares plunged 14% on today's delay, and volume was huge-- 10 times normal-- with shares back to september levels. the government expects to issue new rules by the end of the year. finally, fannie mae. it's still owned by the federal government and it wants more taxpayer money. the mortgage finance company asked for $4.6 billion more in government aid after losing more than $2 billion in the fourth

quarter. it blames the loss on mortgages issued before 2009 and the continued drop in home prices. and that's tonight's "market focus." we have seen some big moves in commodities, with gold falling below $1700 and energy prices we have seen some big moves in commodities, with gold falling below $1700 and energy prices heating up. tonight's "street critique" guest says forget gold-- go for the grains and natural gas. lincoln ellis is managing partner of poplar jackson. he joins us from the c.m.e. group. >> lincoln, always great to see you, welcome back. >> great to be with you. >> tom: we had multiyear highs. the broad commodity market hasn't been breaking out to new highs. why not? >> interesting thing.

two points, tom worth noting. the commodity market is telling you there's a recovery, it too has rebounded from lows but not as much. perhaps it's better to listen to the commodity complex and not be so irrationally exuberant with the pace of recovery in the economy. and secondly, i would point out that perhaps commodities signaled there wouldn't be a qe flea. we had a middle bubble at the beginning of the mention of qbe across the commodity complex, and clearly today in the federal reserve chairman's testimony on the hill. that was definitely not on the table, and various squanss. >> the quaunltitative easing tried to push money out sdprkts we saw the consequences today with gold. a big move lower. the gold trust exchange traded fund. why don't you think this is a buying opportunity? >> well, if the federal

reserve chairman has actually taken quantitative easing off the table, this is a strong backing for the uds dollar, and obviously, the relationship between gold and the u.s. dollar has been a prominent one over 12 months. and secondarily, until you can buy a big mac and frefrp frys with a exceled to coin, it doesn't have a place in our portfolio. >> tom: how about grains? you like grains. dba. the trend has been lower over the past 12 months. are you looking >> we've had low carry out across the grain complex combineed with warm weather in south america. at these lower levels, we're

interested in the longer term picture for food. >> you still see dmroebl demand increasing? >> i think that's right, and that synchronizes with the global recovery as a backdrop. that's really why and where we see food, and does have san appropriate place in the portfolio. >> tom: natural gas inventories have been at record levels. ung is the exchange traded fund. why are you picking up nat gas at these levels, you don't think it can drop further? >> obviously it has dropped further. the ideas are two fold. first, piess are at decade low refl levels, and political and

technological developments could bode well for official gas. that's the change over to natural gas, and change over to a fleet of trucks across the transportation sector, and secondarily, it's an election year. arily >> do you have a position. >> we have. long natural gas and grains. >> our glefts this evening from chicago. >> susie: it's leap year and karen gibbs is thinking about marriage. in tonight's "money file," she says couples need to do a lot of getting to know you when it comes to joining their finances. >> this year is leap year, a time when women can turn the tables on men and propose marriage. but no matter who pops the

question, vow to discuss these issues before saying i do. how much do you earn? how much do you owe? are you a saver or a spender? what's your credit score? how will you split financial responsibilities-- 50/50 or some other ratio? will you have joint or separate checking/savings accounts? do you want children? are there children outside of the marriage? according to the u.s. department of agriculture, a middle-income, two-parent household will spend nearly $227,000 just to raise a child to age 18. add another $100,000 if you're planning on paying for four years of college and you can see the need for a frank discussion about finances. are your financial goals aligned? where do you want to be five, ten, 20 years from now? disagreement over money is one of the top reasons marriages end in divorce, but talking about money and setting joint financial goals will go a long way toward easing the stress and achieving peace of mind.

give yourself the advantage. start the conversation now. i'm karen gibbs. >> susie: here's what we're watching for tomorrow: we'll see the latest numbers on weekly jobless claims as well as earnings from martha stewart living omnimedia and wendy's. the nation's automakers post their february sales numbers, and we take a speedy spin around the block with the head of ferrari north america, where sales are zooming. >> tom: that's "nightly business report" for wednesday, febraury 29. i'm tom hudson. happy leap year. good night 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 captioned by media access group at wgbh access.wgbh.org