>> tom: from google to cisco to apple, big u.s. companies have billions in profits stashed overseas. would a tax holiday be a boon for the u.s. economy? history says probably not. >> companies used most of it to basically pay dividends and buy back stocks. >> susie: then, worries that china's red hot economy is cooling down set a sour tone for trading here in the u.s. it's "nightly business report" for tuesday, march 20. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" ispossible by:

captioning sponsored by wpbt >> tom: good evening and thanks for joining us. china was the talk of wall street today. investors sold stocks, worrying the world's second largest economy could be slowing down, susie. >> susie: tom, a slowdown in china has been an ongoing concern, but today, there were two fresh reasons for the jitters. china raised prices for gasoline and diesel fuel by as much as 7%, the second price hike in less than six weeks. also, the c.e.o. of bhp billiton, the world's largest mining company, said china's steel production is slowing. the dow fell almost 70 points, the nasdaq and s&p 500 were both down by more than four points. joining us now to talk more

about this, david kelly, chief market strategist of j.p morgan funds. hi, david, nice to have you back. >> glad to be here. >> susie: so should investors be worried about what's going on in the chinese economy? >> i don't think they should be too worried. we are seeing a gradual is theredown in the chinese economy, and i think that's the news that dominated markets. but when we look at emerging markets overall we still see pretty good growth. i think the emerging markets in general will grow by 5% in real term this is year and that's not bad. so we're seeing a bit of a slowdown, it's not all bad because it that's taking the edge off commodity prices. the u.s. economy is actually getting better. >> susie: i wanted to ask you about that, because there is this sense that the u.s. economy is getting better. do we really need to worry about what's going on in china or in the european markets? the european economy. what is your thought on that? >> i think we have, if people need to be diversify because any of these things could cause a problem at some stage,

that's why you spread your money around. what a lot americans are doing is they're holding money in cash accounts and they're very joseph weight fixed income and don't have enough, posher to the stock market. so the u.s. economy is moving back towards balance and i think people need to move their poiles back towards balance and that still means to be diversified because something could go wrong anywhere in the world. >> susie: there are trial yuns in cash on the sidelines, a lot of it in money market funds. what are you telling your clients who may be skeptical of thaiblging air money away from safe platess and putting it into the marketss, what are you telling them to do? >> first i think we need to redefine the word safe. if you're earning nothing, zero on your money or close to zero and the inflation rate is 2 to 3%, then your money is lose value over time. if you're lucky to live long and you don't get your money to grow it's not going to last. so you take a risk by not taking a risk, that's the first thing. the second thing is a lot of

people think high quality long duration bonds are a safe place, but not when long-term interest rates are rising. so to me safety means a diversified portfolio, stocks and bond, large and small, get back to investing from the middle. >> susie: we have been seeing a big move in treasuries, with prices going down, yields going up. some people are saying that it's a risky strategy to keep your money in treasuries. what are your thought on that? >> yeah, i think it's worth having some exposure there because if some disaster occurs around the world treasuries tend to israelly off. that but if you look at how low long rates are, the inflation rate is 2.3%, normally you'd have the 2.5% more in long-term yields. as those rates rise, treasuries will lose money so, i think it important for people to be underweight in treasuries, not zero, but be underweight. >> susie: gold rices are down

$20 an ounce what is your view on gold? >> i never understand what pushes good one way or the other. it used to be a place where people went when they were scared, now it seems to be a place where people go when they feel happy. to me, it's a little unpredictable, and so i like exposure to commodities, my favorite commodity is probably oil because a lot of things go wrong, if something goes wrong in the persian gulf, then oil spikes. anything in small quantity is not going to really harm you. >> susie: so the dow is on track for out sixth positive month in a row. what's your outlook to the markets? where do you think stocks go from here? >> it's interesting because i don't think that earnings are going to go up very much. i think we're close to peak earnings and earnings will move up a little from here. but i think the market ought to continue to go up without a shock because what's happening

is confidence is graduated really rising, sort of a warming confidence climate and that is moving money away from cash and bond and towards equity. so as long as confidence continues to improve i think money will move into the stock market and we'll just see price earnings ratios rise. i think going for p. e. ratios may go up and that may help stocks outpace bonds for the rest of this year and indeed in 2013. >> susie: all right, interesting stuff to think about, david, thank you so much for coming on our program. >> you're very welcome. >> susie: we've been speaking with david kelly, chief market strategist at j. p. morgan funds. >> tom: a mixed picture on the housing market today-- builders broke ground on fewer homes last month. february housing starts fell just over 1%, while january's starts were revised upward. but builders are optimistic about the future, pulling more permits for new construction. permits rose over 5% in february to their highest level since the height of the financial crisis.

and real estate web site zillow is tracking 30-year mortgages. it shows they're up again for the second week in a row, rising to 3.97%. that's up from 3.74% last week. >> susie: while apple's finally offering a dividend, it won't be bringing cash back from overseas to pay for it. the tech titan has over $64 billion stashed overseas, but bringing that money back home would have steep tax consequences. so, apple and a growing number of firms are asking for tax relief, arguing it would quickly help the u.s. economy. erika miller takes a closer look at whether a tax holiday would really provide an economic boost. >> reporter: would you rather pay 3% in taxes or 35%? your answer is undoubtedly the same as apple's. the maker of ipads and iphones currently pays an international tax rate of less than 3%, according to bernstein research.

but if that money is brought back to the u.s., apple would face the standard corporate tax rate of 35%. so that helps explain why apple has only a third of its $100 billion cash hoard in the u.s. >> there is a great hope that by shifting business offshore, paper profits off shore, companies can really lower their tax rate to a very low rate. >> reporter: it's not just apple griping about u.s. tax policy. many big american companies, like google, cisco, microsoft, kodak, and pfizer are lobbying the government for short- and long-term tax relief. they argue a one-time tax holiday would provide an immediate boost to the economy. >> allowing companies to bring back money from overseas could provide a near-term jolt. but i would argue that a lot of companies are already sitting on a lot of cash and are already well positioned to hire workers or to make large expenditures. >> reporter: instead, levitt would rather the government simplify the tax code and lower corporate taxes long-term.

but perhaps the biggest argument against a tax holiday is past experience. in 2004, the government gave companies a one-time tax break that led to $312 billion coming back to the u.s. the goal was to encourage companies to use the money to hire u.s. workers. but that wasn't what happened. >> companies used most of it to basically pay dividends and buy back stocks. so, this was a boon for the shareholders, the investors in those companies, and also to the executives, who had a lot of options and stock in those companies. >> reporter: the debate over a tax holiday is likely to grow more heated as election day approaches, especially since u.s. non-financial companies hold more than a trillion dollars in cash, over half of that in foreign countries. erika miller, "nightly business report," new york. >> susie: still ahead, it's back to school for professor bernanke. the fed chairman leads a lecture on fed history. we'll tell you how students

graded his performance. >> tom: the republican presidential contest is in illinois tonight, a state with a struggling economy, an unemployment rate higher than the national level, and one of the worst credit ratings in the nation. james nowlan is a senior fellow at the institute of government and public affairs at the university of illinois. tonight with us in chicago. jim, welcome to the program, nice to see u.. >> good to be here. >> tom: two big issues for republican voters, regardless of the state. the economy and social issues. which of them is driving illinois republicans tonight? >> i think about 2/3 of the voters will resonate to the economy and about one-third generally in the central and southern illinois to the social issues. >> tom: with that in mind, the illinois state finances are in terrible shape, as the federal candidates walk through the land of lincoln. the budget deficit in your state is 13 billion this year, unfunded liabilitys, $83 billion. what role are state financing playing in this national

contest? >> i think that illinois is generally aware that illinois is a fiscal basket case at the state level so, anybody who presents a business background is attractive to many of the voters. the situation in illinois is grim, and a recent significant tax increase hasn't righted the ship as yet. so illinoisafs are pretty sour about the state fiscal situation. >> t: seemingly with argue for candidate romney tonight versus santorum, wouldn't it? >> it certainly would. i predict that romney will take about 2/3 to 3 / 4 of the 54 delegate at stake. santorum is only listed for 44 delegate total. so he can't, he's at a disadvantage going into the election. >> tom: of course we're talking about these federal politicians trying to tackle state issues. the man in the white house comes from the state of

illinois. has president obama been able to help or hurt those state finances that you say are playing a role tonight in the g.o.p. contest? >> i think the president has been responsive where he can be, but the federal government can't really do much to resolve the state's problems. the state and many local governments are suffering because of the economy, which began to worsen before the president came into office. and we still struggle. so illinois has to dig its way out of its own hole, which was created by years of spending more than we were taking in, plus failure to pay our pension obligations. >> tom: that brings up an interesting point. what's holding back the illinois economy? is it state regulations, state rules, state taxes? or is it something more on the federal level that really is at issue tonight? >> i think outsiders view illinois as having a poor business climate. we have one of the highest corporate tax rates in the nation, and the budget is

unstable and businesses can't come into the state with a sense of stability and predict ability as to what the future holds. so i think the outside world view itself illinois in a negative way, and we need to turn that around. i think illinois has a lot of strengths, we have a great location in the heart land, we have great infrastructure that needs to be modernized, we have an educated work force with more college graduates as a percentage of the total than most states. we have lots of water so, we have a lot of good things going for us. >> tom: you have a big pool of water there just off shore, known as lake michigan, obviously, but do not put ketchup on the hot dogs in chicago. we've got to leave it there. james nowlan with the university of noi. >> susie: deep spending cuts are key to the latest budget proposal from house republicans. budget committee chairman paul

ryan today took the wraps off the g.o.p. plan to cut the federal deficit by $800 billion. he'll get there by slashing discretionary spending on everything from education to space exploration. medicare reform, cuts to welfare programs, and a revamp of the tax code all figure prominently in ryan's plan. >> at the end of the day, it's all about growth. it's about growing opportunities, growing the economy. it's about lifting the debt, restoring economic freedom. reforming the tax code so that we can help have our economy reach its full potential. it's about turning our system that has become a dependent culture into an upward mobile society. >> susie: the house plan has little chance of passing. the democratic-controlled senate says it won't even bring the measure to the floor. >> tom: chinese solar panels will now carry tariffs in the u.s. the commerce department imposed the import tax today.

panels made by trina solar will carry almost a 5% tariff, suntech panels almost 3%, and panels from all other chinese makers, nearly 4%. the case stems from a complaint by a group of u.s. solar companies. they believe the chinese government puts tons of money behind its solar industry, and those chinese makers dump their products at below market value in the u.s. >> susie: we're getting word of fresh changes at hewlett-packard tonight. "the wall street journal"

reports c.e.o. meg whitman plans to combine the tech giant's printing and personal computer groups as part of her efforts to turn h-p around. one of whitman's first acts as c.e.o. was to reverse a decision by former c.e.o. leo apotheker to dump the p.c. business all together. combining printers and p.c.s would help h-p cut costs and could result in significant job cuts. h-p's not commenting. but investors were. hp shares fell slightly, down about 1.5% to just under $24. >> tom: in fact this is the first time h. p. has closed below $24 since last fall. some selling pressure taking hold there for h. p.. let's get you updated with the rest of tonight's market focus. the worries about china's economy cooling squarely hit the u.s. stock sectors that have been fueling that growth.

while the selling pressure came right at the opening bell, the downward pressure on stock prices waned throughout the session, with the s&p 500 closing down just a fraction and down from its post-recession high yesterday. the sectors most closely tied to the global market saw the brunt of the selling. the energy and industrial sectors were down by more than 1% each. materials fell more than a half percent. the signs of slower steel production in china hit u.s. coal mining stocks, a key fuel for steel makers. also hurting coal-- historically low prices of natural gas, making it a more attractive fuel for power companies. peabody energy fell more than 5% on heavier than usual volume. the share price has been trending lower for at least the past year. shares are just above their 52- week low hit last week. word of slower chinese steel making hit shares of cliff's natural resources, an iron ore and metallurgical coal miner.

the stock fell by almost 2.5%, leading the materials sector lower. and global industrial companies- - mining equipment maker joy global, diesel engine maker cummins, and construction machine maker caterpillar-- all saw selling pressure over concerns about lower commodity demand coming from china. while caterpillar's loss was the biggest drop among dow industrial stocks, bank of america was the dow's biggest gain, as the financial sector limited the broad market's fall today. b-of-a shot up almost 3%, and on heavier than usual volume, even for it. this is bank of america's highest closing price since july. we have more analysis of b-of- a's stock chart on our web site under the "blogs" tab an nbr.com. the market's focus was on oracle after the closing bell. the business software giant had a much better than expected quarter, earning 62 cents per share, six cents over estimates. even though hardware revenue dropped from the previous quarter, new software licenses,

a key area for growth, continued to move up. shares have rallied since the year began, and moved up 1% ahead of tonight's report. while the company has almost $14 billion in cash, it did not increase its dividend. >> i was surprised oracle didn't raise their dividend this quarter, actually. they're not a dividend machine, but they have tons of cash, and sales have been growing. i'd think they could easily afford to up it. they did raise share repurchase by $5 billion, which shows a little confidence, but that's also offsetting a lot of stock option dilution, so i wouldn't get too excited. >> tom: one of the stocks we mentioned last night to watch, adobe, fell almost 4% today. that came after disappointing revenue as the firm switches its focus to a subscription model from software licenses. the high-end customer still has an appetite for the blue box from tiffany. while earnings per share were down from a year ago, they came

in better than anticipated. after a worrisome holiday season, tiffany said business was back on track. and it increased its profit and sales forecasts for this year. people were buying the stock, sending shares up almost 7% on heavy volume. tiffany is at its highest close since november. the company credits easing of worries about europe and the stock rally in the u.s. for encouraging its customers to spend. finally, the metals group hurt commodities. silver, copper, and gold all fell, partly in concern over less demand if china's economy slows considerably. and that's tonight's "market focus." >> susie: federal taxes are due

in less than a month, and if you need some help, send us your questions. all next week, kevin mccormally joins us with his best tax advice. he's editorial director of kiplinger's personal finance. and kevin is taking your questions online-- just email taxtips@nbr.com. >> tom: $96 million may not sound like a big deal in the age of mega-mergers, but that's how much peyton manning will get to resume his nfl quarterback career with the denver broncos. in tonight's "beyond the scoreboard," rick horrow finds not only bronco fans win, but so do shareholders of companies manning endorses. >> reporter: though he wasn't on the football field last season, peyton manning saw plenty of action on tv. the most marketable nfl player, according to nielsen's n-score, manning makes nearly $15 million a year pitching products for mastercard, papa johns, directv, kraft's oreo cookies, and pepsi's gatorade brand. regardless of whether he returns

to his football mvp form after recovering from neck surgery, manning will remain an endorsement mvp for the companies he works with. a recent study found sales for products endorsed by athletes go up by an average of 4%, but with a spokesperson of manning's caliber, his impact likely is even greater. in fact, manning could be even more valuable to his sponsors when his playing career ends. bottom line, like retired athletes michael jordan and joe montana before him, expect to see a lot more of peyton manning for years to come. i'm rick horrow. >> susie: here's what we're watching for tomorrow: we get more data on the housing sector with the release of the february numbers on existing home sales. also tomorrow, cheerios maker general mills reports fiscal third quarter earnings. and market strategist hilary kramer is our "street critique" guest. there's still time to get your question in-- streetcritique@nbr.com. before he was federal reserve chairman ben bernanke, he was

professor bernanke. and today, the head of the world's most powerful central bank returned to the classroom, teaching a small group of students at george washington university about the history of central banking. darren gersh was there and took some notes. >> reporter: i don't know about you, but none of my college classes had a dress code or a professor who brought a bomb- sniffing dog. but then again, few lecturers have lived and shaped the history they are teaching. >> so, it's very important to get in there aggressively as a central banker, provide that short-term liquidity, and avoid the collapse, or at least the serious stress on the system. >> reporter: when you hear professor bernanke describing how the federal reserve handled the great depression, it is easy to imagine chairman bernanke telling himself "i won't let that happen again." and he should know-- he's one of the world's experts on the history of the great depression. >> unfortunately, the fed met its first great challenge in the great depression, and it failed. >> reporter: 30 lucky students earned a seat here by submitting an essay on the fed.

michael feinberg wrote about the central bank's impact on students, investors, borrowers, and literally billions of other real people. perhaps that explains his reaction today. >> it was kind of startling when he walks in and you're like, "all right, he's just a guy." >> i had a name tag. he pronounced it correctly. >> reporter: melanie hoffman's essay was on quantitative easing and the fed's global impact. she enjoyed the give and take with one of the world's most powerful men, though the first lecture was pretty basic. >> i think he kind of started from day one, square one, "this is economics." >> reporter: and with good reason. clearly, the audience for this lecture goes well beyond a couple dozen college students. in speeches, interviews, and even news conferences, bernanke has spent his career demystifying the fed. now, he's teaching the world about his role in the economy. thousands watched online today as the fed chairman described the lead-up to the financial crisis and great recession. >> and we'll begin to see how the history of central banking explains how the federal reserve

responded to this most recent and severe crisis. >> reporter: chairman bernanke says he will read some student papers, though he won't be scoring any tests. so we won't know where the fed chairman stands on the critical issue of inflation, at least when it comes to grades. darren gersh, "nightly business report," washington. >> susie: that's "nightly business report" for tuesday, march 20. 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.

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