this is "nightly business report" with tyler mathisen and susie gharib brought to you in part by. >> thestreet.com. founded by jim cramer, thestreet.com is an independent source for stock market analysis s. cry mer's action alert process is home to the multi million dollar portfolio. you can learn more at the street.com/nbr. stock market chill. february continues where january left off. in a deep freeze. the dow plunges 300 points, the nasdaq closes below 4,000. >> small caps touch correction territory, bond yield fall as gold rallies. what is pulling the market lower, and where can you find protection? >> this is a special market sell off edition of ""nightly business report"" for monday, february 3rd.

good evening, everyone. sell, sell and more selling. that was the story on wall street today. on this first trading day of february, stocks got slammed. market pros have been calling for correction and it looks like the major market averages edge closer to correction territory today. so what happened? a weak report about manufacturing activity in the u.s. worried investors, adding to the anxiety china reporting that its factory sector is also not growing much. that was enough to push the major averages down 2% or more in one of the most volatile days in trading in switch months. here are the closing numbers on wall street. the dow plunged 326 points, that's a 2% decline. the blue chip average is down 7% for 2014. the nasdaq tumbled nearly 107 points, closing below the key 4,000 mark for the first time since december of last year. and the s&p lost 40 points with all ten of its sectors in the

red. in the bond market, prices rose and yields fell. the yield on the ten-year note dropping below 2.6%. bob has more on what stocks and sectors were hit the hardest today, and the mood of traders at the new york stock exchange. >> reporter: stocks sold off today with the dow closing at a 3.5 month low. the market started to the downside but it took another leg down in the late morning when january manufacturing data and the auto sales both came in weaker than expected, though everybody sited the weather, concerns about a slightly weaker u.s. economy, on top of worries about emerging markets left traders in an unforgiving mood. it was an ordinarily but broad sell off with sectors down two to three percent. even defense sieve groups like health care and consumer staples were down. the volume was heavy today, one of the heaviest days in a year, in fact. many professional traders were lighting up on exposure to stocks. the bottom line, most traders thought bonds would continue to

drop and the stocks would move up. so far, that consensus has been completely wrong but then again, it often is. for "nightly business report" i'm bob at the new york stock exchange. >> where does one end and another begin? it's not just a matter of say m -- where you take cover. dominic chu has the report. >> reporter: the stock market has gotten off to a rocky start and that's got investors worried. this time many are blaming it on weakness of emerging market countries like brazil and russia, still others are saying it's not just those countries but bigger developed markets like japan. the stock market entered a correction dropping by 10% in value since its recent highs but is a pull back in stocks something to be feared? take a look at the last time we have a pronounced correction for u.s. stocks. it was between april 29th and october 4th of 2011. the s&p 500 lost 18% in that

time frame. among the worst per poforming stocks were the ones with the most exposure to the ups and downs of the bigger picture economy. financials, materials and energy stocks all were hit the hardest. regions financial and oil companies like marathon oil conversely the stocks that weren't as impacted faired better. the so-called defensive stocks, utilities, consumers staples, they didn't fall nearly as much. think duke energy and colgate. after all we use electricity, gas, tooth paste and paper towels, even if times are tough. one shouldn't lose too much sleep over the drop in stocks in 2014, at least not according to bank of america merrill lynch. >> corrections aren't that unusual. we went back over the last few decades and found 5% bull packs

happen on average three time as year. i think what we're seeing now is just kind of a normal, a normal phenomenon. >> reporter: whatever your view, keep an eye on stocks where the action is going to be. for "nightly business report", i'm dominic chu. >> so what is going on in the markets, and why now, and what should you do about it? it's turn to three market experts for their analysis. she's global market strategist at jp morgan funds, aneka at wells fargo and tom. thank you-all for joining us tonight. let me begin and just ask you, how much more selling are we in for and how serious is this really? >> well, today certainly has been a disappointing day, but i think i would agree with the analysis the markets have been right for correction for sometime. we are coming off an exception 2013 and had an exceptionally

strong last five years. the markets were set out for correction. how far does ask a pull back go? we did breakthrough some pretty critical levels, and perhaps there is more to this downside but everything needs to be kept in perspective and what is so important for investors to do now is assess not only how to protect their portfolios but also how to take advantage of this opportunity because that's exactly what we see here today is with the stocks having pulled off some of the highs, the buy list should be looked at carefully right now. >> anika people have been siting weaker economic numbers and siting everybody's favorite excuse, the weather. how weak have these numbers been, and how really justifiable is the excuse that a lot of it is weather related? >> yeah, it's a great question. because most of it really is weather related. even if you look at the ism manufacturing index report, respon danlts, specifically

noted it was the weather and it's not just weather. we typically get cold weather in december. it was unseasonably cold weather, and so it not only had an impact on ism manufacturing, but we also saw durable goods as well as a host of housing market indicators that were hit as a result. as we look forward to the next two months, it's very likely that some of those housing market indicators could be weak, but other indicators should start to come back. >> you know, tom, let me turn to you, it seems like all of our reporting and what we're hering from the other panelists here, this is normal sale off correction sort of stuff, but the bond market doesn't seem to be behaving like everything is okay here. we saw the yield on the ten-year was around 3% the beginning of january. now it's below 2.6%. in bond market terms, that's a huge move. how critical is this and what is it telling us?

>> well, certainly, what we have seen is as you mentioned about a 40 basis point decline in the ten-year treasury. i think it's a classic example of going from a risk on trade to risk off trade. selling stocks and buying treasury bonds as a safe haven. we've seen this numerous times since the credit crisis, and i think it's another good example of it happening again. >> anastasiya, let's turn to what i should do with my money. should i do anything in this context if my portfolio is relatively diversified, and if i want to play defense, and we saw seattle win with defense yesterday, what should i do to play defense intelligently? >> i think there is definitely room for both. let me start with defense first. for the investors where they are critical is to protect principal, absolutely there is room for safety and that's why we turn to safe haven treasuries

and specifically on the longer end of the spectrum they have done very, very well. longer term of the maturity spectrum. also, within equities, investors could rebound away from the stocks, such as industrial, such as materials that are heavily tied to this emerging market trade and focus more on the defensive sectors. i wouldn't say this is the only thing investors should do. investors should be skewed towards looking at the opportunities that lie under the surface, specifically with the s&p stocks that been hit hard because of the e mernged market but in reality, those are economies driving the global recovery, not the other way around. >> anika, let me ask you what role the fed plays in this and how it might impact the decisions that investors should make with personal portfolios. the first day that janet yellen is serving and settle reserve

and now she's faced with market condition. if there is any change in fed policy about the taper business, maybe less tapering, how will that impact investors? will this be a positive or negative for investors in the markets? >> yeah, the fed is still going to be very data dependent. it's going to look at its dual mandate, what is the labor market doing, what is inflation doing and of course, we expect the employment and labor market to continue to increase. what is inflation doing? it's at a low rate today. the fed definitely will use how much to taper as another policy tool. the fed has said it's not on a preset course, and so that means in light of softer data, they could decide not to taper in the march meeting. however, if you look at the fed's projections, they are looking at bter data for 2014

and 2015 which coincides with private sector data, as well. >> tom, if i bought bonds on january 2nd, i'm feeling smart now with the ten-year treasury given the fall in interest rates, but what is the outlook for the rest of this year and what should i do to position my bond portfolio in light of your outlook? >> tyler, i think what is going on now is a correction in what is otherwise an upward trending stock market and upward trending rates, as well. so we've been suggesting to our fixed income clients certainly that they avoid interest rate risks and in lieu of that, where they do need more health care, they are better off taking credit risk to get it, so staying short in duration, keeping interest rate risk low and buying corporate bonds, being invested in high yield and bank loans and those sorts of sectors in the bond market in

order to generate some attractive return. >> we have half a minute, real quickly, do you agree with that, what kind of bonds to put in portfolio and what about gold? >> agree with the statement. what you want to own is sectors that have sensitivity to improve economic development and certainly do. so it's a buying opportunity. gold long term we think the kath list is just not there. it might be a short-term bounce here. >> thank you so much. thank you-all. we really appreciate your input tonight. while stocks did head lower today, gold went up. jackie deangelis has more on why the precious metal is getting renewed attention. >> reporter: gold prices rallying, popping as much as $25 and traders say it could be staging a rebound. when the equity markets are

volatile as they have been recently, investors believe the stock market for safer investments like gold. right now, it looks like a perfect storm is brewing for gold. there is multiple concerns out there including growth in emerging markets in china but also what is happening here at home. recent data showing the u.s. economy may not be rebounding as quickly as everyone hoped coupled with the federal reserve scaling back and questions over earnings and guidance from corporations. and history tells us that when the going gets tough, traders flock to gold. remember the great debt ceiling debate of 2011? the u.s. lost the aaa credit rating and gold hit a record-closing high in august that year. so how high will prices go this time? traders are saying it's difficult to say exactly but if the global markets continue to see more volatility, they do expect gold to continue to shine, maybe not to those record levels, but they are looking for it to recoup some of the losses

it saw in 2013. and coming up, treasury sectorry lou issues another warning to congress, act now because time is running out to lift the debt ceiling. will this be the next big headache for investors? january's rough weather spelled trouble for auto sales and did nothing to cheer investors today. general motors saw sales fall and toyota and ford had a drop

of 7 and chrysler had an 8% increase. the airlines felt a chill. >> reporter: from long lines at airports to no lines in showrooms, the airline auto industry had a terrible month. gm, toyota and fort saw sales drop and chrysler was up but they posted reduced sales from snowstorming keeping people from visiting. >> when the second polar vortex hit, sales dipped again and with sales closing in this past friday, there was no time to recover. >> reporter: when you look where auto sales fell in january, it's the eastern half of the u.s. from chicago to atlanta to new york, bad weather reeked havoc as it did for the airline industry. >> it's safe to say it can't get any worse. january was an all-time low point, so to speak for the

airline business when it comes to cancellations. >> reporter: all together 49,000 flights were cancelled and thousands more delayed, impacting 30 million passengers. changing flights, scrubbing trips, booking and rebooking hotels cost travelers $2.5 billion. those hardest hit, those flying regional jets to smaller cities. >> the airlines try to prioritize the aircraft with the most number of people so regional carries cancelled first so the 200 or 300 passenger planes can take priority. while storm after storm made for a miserable january, they expect business to bounce back this month, provided mother nature cooperates. phil lebeau, "nightly business report", chicago. there could be stormy weather in washington, not from mother nature but lawmakers on capital hill.

the deadline to raise the debt ceiling is this friday. jack lou warned today time is running out. with tax refunding starting to go out, his office will run out of extraordinary measures to keep the government open for business by the end of this month if congress doesn't lift the nation's borrowing limit. >> at the beginning of tax filing season, tax refunds result in cash flows that deplete borrowing capacity quickly. we forecast that we're likely to exhaust these measures by the end of the month. >> a temporary suspension of the debt limit was passed by congress last year, but that expires this friday. john harwood joins us now from washington. john, let me just begin by asking you about, you know, how investors are going to respond to all of this stuff going on in washington. up until now, there was a feeling we don't have to worry, there will be a bipartisan agreement and all of that. with this huge sell off going off wall street, will this debt

limit be another headache? >> susie, i think investors should watch and monitor. i don't think there is reason to be overly concerned about this for the simple reason republicans who are the ones holding up the debt limit in the past realize that that is something that could hurt them politically. they are heading into an election year which things are otherwise looking good. they don't want to get in the way of their own good news. i think it's likely this gets resolved in a non-crisis atmosphere. >> so it will be taken off the railroad track one more time. what is the nature of the solution? will republicans give a blank check to the debt limit raise or what? >> the solution, tyler, is not exactly a blank check. it revolves around something that makes republicans feel like they can tell their conservative base we have some sort of concession. a year ago at this time, it was no budget, no pay. if the senate doesn't pass a

budget, they won't get paid. so it's a matter of coming up with some figure for the speaker to be able to tell conservatives, i got the best we could but let's focus on the things that work for us like obamacare. >> if everything goes according to plan, what is the timetable here? >> well, as you noted, the debt limit, we hit it on friday. then you have extraordinary measures but because the government is going to be paying so much in tax refunds, there isn't the lengthf time that members have become used to. they are used to this dragging on for months past the date. the economy is fairly strong at the moment, so that could provided a digs l cushion. by the end of this month, by the end of february, that's the target they have to shoot for now. >> another count town for us to keep track of. john harwood reporting from washington. >> watching the sell off is the

chair of the central bank. janet yellen says i'm the chair, not the chairwoman was sworn in today as the first female chair of the federal reserve. the oath was administered in the boardroom by daniel and her predecessor ben bernanke will not join the long-term unemploymented. just three days after leaving, he took a position at the brookings institution. he'll be a distinguishied fello on fiscal and monetary policy. and coming up, as yields fall, so do mortgage rates but for how long, and could friday's jobs report send them back in the other direction?

despite the massive sell off on wall street today, pfizer was the only dow component up today and that's where we begin market focus. an experimental breast cancer drug met study goals. the treatment is considered one of the drug maker's most valuable products in development. some analysts believe it could account for annual sales of $5 billion if approved. at&t's move to make customers happy left investors disappointed. it announced a 20% price cut for customers that share large data plans. it's an attempt to gain ground lost to verizon and t-mobile. many expect verizon to follow at&t's lead. the shares still tumbled 4%. verizon also down losing more than 3% to $46.41.

now after the market closed, yum brands, the parent of kfc and pizza hut reported earnings higher than estimate but revenues missed. sales were down which analysts didn't expect and they fell 4% in china, that's yum's top market. the company did reaffirm the guidance for the year. shares were up initially after hours. yum shares were down by 1.5% to $66.16. herbal ice is estimating the fourth quarter profit and sales will come in above the market forecast. the company upped the buy back program. the stock surged toward the end of the day up 7% to $69.02 on a very rugged day in the market. joseph a. bank refused the offer again. the $1.5 billion bid under estimates the company and there is talks they are in talks to

buy eddie bauer. shares of bank and mens warehouse tumbled today. bank to $53.39 and mens warehouse to $44.31. l brands, the market of victoria secret and bath and body works raised the annual dividend by 13% and declared a special dividend of a dollar a share paid on march 7th. still the stock was down nearly 3% to $50.87. markets are selling off and investors rotating money into bonds. there is one upside, mortgage rates. they are ticking lower but with friday's job report looming, is it time to lock in your rate now? diana olick gets answers. >> reporter: this winter's wallop sent a chill but helping borrowers by pushing rates

lower. they are buying bonds sending yields lower, mortgage rates follow the yields. >> some are viewing this as an anomaly so far. it's really only limited by how bad the situation gets for equities and the other markets that investors are leaving. >> reporter: last week the average rate on the 30-year fixed fell to a three-month low and rates dropped again today on weak manufacturing data. for the best borrowers, 4.25% is a real possibility. it's a quarter drop barely $30 a month saved on a $200,000 loan but means for. >> if that quarter of a percent takes rates to say the lowest they have been in several months or a year, then that psychological effect, not only affects borrowers individually but the industry makes a bigger deal. >> reporter: the downward slide is a double edged sword. rates are going down because of the concern in the economy and

that concern has investors fleeing the stock market and what is bad for the market, is not good for the housing recovery. >> affordability is not just about mortgage rates. it depends on your income. if the economy does worse, more people stay out of work, incomes don't rise. that hurts affordability. >> reporter: despite the rate move, credit is tight as ever and potential buyers remain leery. >> the biggest concern is consumer confidence. the question is can we get enough buyers at the table. will people pause because they aren't sure? that's what builders are worry about. >> reporter: the decline may be short lived if the employment report friday delivers good news that's why borders looking to refinance may want to look in now while the hedging is still good. for "nightly business report", i'm diana olick in washington. >> to read more about mortgage rates and where they might be heading, go to nbr.com. that wraps up our special market sell off edition of "nightly business report."

i'm susie gharib, thanks for watching. >> i'm tyler mathisen. thanks from me, as well. have a great evening, everybody. we'll see you back here tomorrow night. "nightly business report" has been brought to you in part by. >> thestreet.com, founded by jim cramer, thestreet.com is an independent source for stock market analysis. the action alert plus service is home to his multimillion mo portfolio. you can learn more at the street.com/nbr. announcer:

(♪ theme music ) (♪) matt elmore: welcome to imagemakers a weekly showcase featuring the best short films from around the world. stay tuned and enjoy the filmmakers of tomorrow today on imagemakers. imagemakers is made possible in part by a grant from: celebrating the vitality and power of the moving image. and by the: (♪ slow dramatic music ) (♪)