this is "nightly business report" with tyler mathisen and susie gharib. brought to you in part by -- >> thestreet.com featuring stephanie link who shares her investment strategies, stock picks and market insights with action alerts plus. the multimillion-dollar portfolio she manages with jim cramer. learn more about thestreet.com/"nbr." upbeat outlook. federal reserve chair janet yellen says the economy is growing but she's worried about the housing and job markets and gave no hints on when interest rates might start to rise. yahoo!'s windfall. what might do it with that cash from alibaba? will any be returned to shareholders? >> and hitting the books. student loans were set today. and guess what, borrowers will pay more. all that and more tonight on

"nightly business report" for wednesday, may 7th. >> going, everyone, and welcome. federal reserve chair janet yellen went to capitol hill today. she told congress' joint economic committee that the u.s. economy is turning up after a winter of virtual standstill. but she pointed to several areas that bear watching, among them, housing. steve liesman has our report. >> reporter: fed chair janet yellen's testimony before congress' joint economic committee today blamed the first quarter's economic weakness solidly on the harsh winter weather saying she already sees a rebound in spending and production in the first month of the spring. and that leads her to be optimistic about growth this year. >> looking ahead, i expect that economic activity will expand at a somewhat faster pace this year than it did last year. that the unemployment rate will continue to decline gradually, and that inflation will begin to move up toward 2%.

>> reporter: behind yellin's optimism she sees less fiscal restraint, that is, a small er decline in government spending, gains in home prices and equity leading to increased spending, increasing confidence among business and consumers. yellin cited geopolitical tensions and possible financial stability in emerging markets as the biggest risks to her forecast. she's also clearly concerned about recent housing weakness, suggesting it's a serious risk to the fed's outlook. the new fed chair, though, gave no hint that rates would rise any sooner than the market currently believes, about the second quarter of 2015, and says the fed remains on course to end its bond-buying program for quantitative ease big the end of this year if the forecast for strong growth pans out. several representatives peppered the chair with kes about whether the fed's policy of keeping interest rates so low for so long are creating financial bubbles. yellin said it's not a concern at this time. >> valuations are in historically normal ranges.

now, interest rates, long-term interest rates are low, and that is one of the factors that feeds into equity market valuations. so there is that linkage. so there are pocket where is we could potentially see this valuations in smaller-cap stocks, but overall those broad metrics don't suggest that we are in obviously bubble territory. >> reporter: yellin said there could be bubbles in high-yielding corporate debt or junk bonds, but overall she said the financial system did not appear to be overleveraged. for "nightly business report," i'm lease leels. >> for more analysis, let's turn to josh fineman, chief of xwroeglobal economist at deutsch wealth and asset management. josh, twhafs key message from your point of view from janet yellen and translate what her message means if you're an investor, a business owner, or someone looking far job? >> i think it's couple things.

one is she reiterated the point that the economy's weakness earlier this year was largely transitory. she expects the momentum to pick up as the year progresses. and the recent indicators have been supportive of that. but the other thing she stressed is that, while we've made a lot of progress, there's stale long way to go to repair the damage that was done, particularly in the labor market, that there's still a lot of slack out there. with slack still persisting, wage pressures and inflation pressures very, very dormant, it's not a recipe for the fed rushing for the exits. >> why is she worried about housing, josh? >> well, recently, say the last six months or so, the recovery in housing seems to have stalled about at bit, and that is a bit of a worry, but i think part of that is the weather, part is a response to the backup in interest rates we saw last year. i think going forward we're likely to see housing continue or resume, i should say, its recovery. but if it doesn't, we get to the summer and it's not happening, i think that would be a concern. >> so, josh, i know the years of

forecasting 4% economic growth for this current quarter that we're in right now, and yet you're talking about problems in housing, problems in the labor market. where's that growth going to come from? it is for the winter. it is you know, we have no growth in the first quarter, so if we get 4% in the second quarter, that shouldn't be extrapolated forward the underlying trend. some of it is the makeup. what i think is happening, though, is the underlying momentum in the economy is picking up and we'll start to see that more clearly as the year progresses, but the important point is that progress is being made, the labor market, as i said, still has a ways to go and there's still a lot of slack. i think that's why fed chair yellin was reiterating the point that they're not likely going to be moving quickly to start renormalizing rates. >> where has inflation gone? >> nowhere. i mean, inflation has just been largely kauai e lly quiescent, fed's target, another reason the recipe is for patience, because, you know, they're missing both

sides of their dual mandates still. inflation is below target and we're below full employment. both those things would argue the fed should move quickly to start renormalizing rates. >> to use an overused word, the new normal. where do you see the unemployment rate going? will we ever get back to full employment, roughly 5%? and where do interest rates ultimately go? what's the new normal on that? >> i think we'll ultimately get back to something close to full employment. it's just going to take a while. we've gone that 76 months with no net job creation. even using a conservative estimate, you probably need to create about 80,000 jobs a month to keep up with the trend in the labor force. we've created zero over the last 76 months. that means it's about 6 million jobs shy of what i would consider full employment. if we continue to create jobs at 200,000 a month, it would still take us more than three years to get back to full employment. >> amazing number to think about. josh fineman, thanks for coming by. >> great to be here. >> chief global economist at

deutsch wealth and asset management. the major averages began the day sharply lower, disappointing earnings, and now with the help from janet yellen and signs that puten may be looking to ease tensions over ukraine, the dow and the s&p 500 battled back from the those early losses to notch their biggest gains in three weeks. the nasdaq, though, well, it was lower throughout the session on a sell-off in internet, technology, and social media stocks like twitter. it lost another 3.7% today. at the end of a choppy trading day, the dow was 117 points higher. nasdaq lost 13, but at one point it was down 50, so it, too, came back but just not enough to go into the green. the s&p added 10. while most stocks did end higher, some names you know got hit hard. dominic chu takes a closer look. >> reporter: for weeks now, investors have been taking money off the table when it comes to stocks and have had tremendous upside runs. they're also known as those momentum stocks.

today we saw some dramatic single-day sell-offs. take upscale grocery store chain whole foods. it said that stores and sales open at least a year grew at a slower pace than expected as competitive pressures picked up. as a result, they cut sales and profit forecasts and the stock lost around a fifth of its value. then there's cybersecurity firm fire eye. the once high-flying company said that losses for the current quarter would be worse than previously thought. the stock lo a quarter of its value. then there's aol, the online media and entertainment company reporting a bigger drop in profits than wall street had been expecting. aol is in the middle of a turnaround effort and has been shutting down underperforming units and investing in its advertising business. the shares lost around a quarter of their value as well today. of course, when stocks drop that much in value in such a short period of time, some investors use it as a buying opportunity. >> a lot of these companies importantly are reinvesting aggressively in businesses which is holding back earnings and cash flow, and i think in a lot

of cases making them look even more expensive than they are. a couple that are kind of cases in point there are amazon and linkedin. >> reporter: the bigger concern whether or not this kind of sell willing carry into other parts of the market. >> there's no need for the retail investor at home, who's invested in nonhigh-beta momentum type of names to have significant concern. >> some investors are taking comfort that while there are sell-offs in certain stocks, i would's not happening across the entire market. and they'll point to the fact we still remain near record highs for the dow and s&p 500. for "nightly business report," i'm dominic chu. and yahoo! is another stock that got slammed today, down more than 6%, and that's despite encouraging news that the company will be one of the biggest beneficiaries when alibaba goes public later this year. yahoo! owns nearly a quarter of the chinese e-commerce giant. so what does yahoo! stand to gain from alibaba going public and what could that mean for

yahoo! shareholders? josh lipton takes a look. >> reporter: jack mott is bringing his company public, but what alibaba's public debut with will mean for yahoo! shareholders is still an open question. yahoo! owns 23% of alibaba and will sell 9% of that stake in alibaba's offering. exactly how many billions of dollars that will net yahoo! depends on alibaba's valuation and various tax considerations. estimates range from $7 billion to $11 billion. but what will yahoo! do with all that money? ceo marissa meier was asked that very question today at a conference in new york city. she said the company will act as a good steward of capital. >> we had previously sold part of our stake in alibaba and gotten proceeds. we returned some of those proceeds to shareholders, a majority of proceeds went to shareholders, but we did make some smart investments in the

company in terms of building out talent, technology, and platforms like tumblr. >> reporter: analyst sas yahoo! could use the capital to pay a dividend or increase its buyback program. that would provide support for the stock price and send a message to investors that their stock is a smart investment. >> it does convey to investors that management, this new management team, is is putting their money where their mouth is. >> reporter: yahoo! could also use the money to do acquisitions. the ceo has completed multiple acquisitions including a mobile news app and tumblr, a blogging service. analysts say she should now be on the hunt for bigger acquisition targets. >> an acquisition like aol makes sense because it's stronger than yahoo! in video views. they do about 1.3 million videos per month. yahoo! does about 600,000. if you combine those two companies together, not only is there a lot of cost synergies,

but to get that knew growth, you get that positioning in video that yahoo! seeks. >> reporter: meyer would have to be careful choosing acquisition targets. unlike facebook, yahoo! remains a turnaround story. investors might not give mayer the same leeway to make risky bets as they do for facebook's mark zuckerberg. the bottom line, the jury is still out for shareholders and where whether to stick by her strategy for yahoo! or sell alibaba shares as well. still ahead, heading off to college this fall? it just got a lot more expensive to take out a federal student loan. we've got the details just ahead.

another sign of life in the housing market, mortgage applications rose more than 5% last week as interest rates dipped just a bit. both refinancings and any home loans were up. last week, applications for home loans fell to their lowest level since december of the year 2000. higher mortgage rates, a spike in home prices, and tougher credit rules have all combined to stall the housing recovery, especially for younger would-be buyers. now more of them are becoming renters and doing so by choice. here's the story. diane olick has the story. >> reporter: the dream of home ownership isn't exactly dead. it's just being postponed, especially for younger americans hit hardest by the recession. >> younger renters have told us by a vast majority that they eventually want to own a home but the road to get there, to

get the mortgage financing is going to be pretty difficult. >> reporter: housing began to recover thanks to all-cash investors. but as they now slow down, younger mortgage-dependent buyers are not picking up the slack. >> readings on housing activity, a sector that has been recovering since 2011, have remained disappointing so far this year and will bear watching. >> reporter: employment for younger americans is still weak, but it's not just jobs. a new survey by fannie mae found big changes in why younger renters choose to stay renting. in 2012, 35% said they were renting in order to make themselves financially ready to own. that dropped to just 26% in 2013. more rerns now say5+ they rent because it's a more affordable option. there are also social changes afoot. unlike their parent who is prefer gated communities, today's younger millennials are more social. they want to be here, downtown, close to work, close to

amenities, and that usually means renting. >> the rental market is so hot today that the rental owners are really building sort of places that renters want to live in. like you can get a pool, a movie theater, you know, concierge at your apartment complex. if you bought a house at 23, you wouldn't get any of that stuff. >> reporter: jonathan, ceo of ravpad, a new app designed to make every facet of renting easier. also a millennial renter. >> last thing you want to come out of college when you have that is all debt is fork out more debt far house. >> reporter: the majority of renters said they did not have sufficient funds to cover eve an 5% down payment plus closing costs on a typical starter home. so while the monthly payment for owning a home may be chapper than rent in some places, buying that home is the barrier to entry. for "nightly business report," i'm diane olick in washington. >> to read more about millennials and the housing website, go to our website, "nbr".com. another big challenge for

the millennials, the more than $1 trillion in outstanding student loan debt. today interest rates on most federal undergraduate student loans rose for the upcoming school year. most of those loans are now pegged to the yield on the ten-year sold at the last auction in may, and that happened today. yields rose and as a result rates will go up and kick in on july 1. the chairman joins us now. how much are they going to go up? what's going to happen? >> we're talking about rates for 2014-2015 school year go up less than a percentage point but it's still going to be a significant gain for some people. we're talking about what most borrowerers take out, which is a stafford loan, going up to almost 5%, 4.66%, then we're looking at the plus loan, which you can take out as a graduate student or parents can take out, over 7%. the graduate stafford loan flb the middle, over 6%. >> that's a big hit. i guess if you're a senior going into senior year, not a big

deal. but a freshman -- >> month to month, it's only about $4 a month if you're talking about $10,000 in student loan debt and a ten-year repayment period. you'll be paying an extra four bucks or so a month. >> does it make more sense to take out private loans? >> a lot of people look at the federal rates and think i should -- >> just go to my bank, credit union. >> right. still likely pay more over the life of the loan. stafford is cheaper than many of the private loans you can take out. looking at sallie mae, their fixed-rate loans range anywhere from 5.75% above 12%, as much as that much, and a variable rate loan, yes, if if you have outstanding credit, maybe you can qualify for one around 2%, a little more than that, but it's going to fluctuate and could go um more than 10%. >> talking about fluctuating and high numbers, elizabeth warren, senator from massachusetts, is proposing some kind of refinance bill so you could refinance your student loans like we refinance our mortgages. do you think this proposal will

go through? >> there's a lot of merit to it. anyone with a big loan balance and not a lot of income, this is supposed to help them. and so bringing those rates down, and she's looking at the rates we currently have, under 4% for that stafford loan, refinancing at that level would be a great idea. but it's very unlikely that this is going to get through with all the different hurdles that we'll have to go through in terms of how divided congress is right now. there's not a lot of likelihood that people think it's going to pass, but there are pars of this bill that could have merit and be incorporated. >> are there any tax wrinkles that borrowers ought to be aware of with respect to student loans? for example, is the interest tax deductible? if my mother or phat rer paying for it, is it a gift to me or what? >> the borrower, the student loan interest deduction is for the borrower so, the parent doesn't have the tax write-off but the borrower does. that's something very important to point out and very important for borrowers who pay attention to other tax credits they could get in terms of paying for

college. one of the important things to look at. >> sharon, thank you very much. d.e. master blenders is joining forces to create the world's biggest coffee company. the two will combine coffee assets creating a business expected to have annual revenue of more than $7 billion a year. it's part of a new restructure to to focus on the natural units like oreo cookies and ritz crackers. earnings topped estimates. shares popped more than 8% to $38.10. shares of directv surged on reports that it's working with advisers including goldman sachs about a possible deal with at&t. reportedly, at&t is the one that approached the satellite tv provider last week about combining forces. shares jumped about 8% to $88.25. well, humana was out with earnings that easily beat analyst estimates. the insurer reported growing membership in its medicare advantage and prescription

plans. the actual quarterly profit did fall more than 20%, but that's because last year's results were helped by a settlement. humana's customer growth outlook was also strong. shares rose almost 9%. shares of phillips 66 got a lift ap the company hiked its dividend by 28%. the quarterly payout of 50 cents a share will be made to the oil refiner's shareholders in june. do the math here. if you own seven shares that means you can afford a gallon of regular. the stock was up slightly to $85.03. all right. moving on, freeport-mcmoran selling its eagle ford shale assets in texas for $3.1 billion. the buyer is a canadian energy company. the deal will almost double their oil output. freeport trying to sell energy assets to trim its debt. shares of incana um more than 4%. freeport up a fraction, $33.99. and tesla's earnings topped

expectations and apparently investors to what extented on the company's warning that expenses will rise. the electric carmaker produced more cars than it said it would and made more money after separating out accounting items. but the costs of new model rollouts, international expansion and a new battery factory tossed ice water on an otherwise favorable report. the stock was down more than 7% after the close during the regular session, shares down about 3% to $201.35. well, it isn't easy for a city to declare bankruptcy, and it turns out it isn't cheap either. court documents show that total fees and expenses from law firms, consultants, and other adviser involved in detroit's bankruptcy reached nearly $36 million last year. and officials predict the fees will be even higher in 2014. the fast food worker movement demanding higher pay and better working conditions is about to go global. organizers from the group fast food forward with representatives from dozens of

countries on six continents were outside of mcdonald's in new york city today calling for a fast food worker strike.protestn may 15th. the group is calling far base salary of $15 an hour for the united states' 4 million fast food workers. coming up, the future of wall street and why the financial capital of the world may be unrecognizable 25 years from now. some big money was spent in the kickoff to the new spree art auction season. as we told you the other night,

a rarely seen 1907 painting by claude monet titled "water lily," was put up for auction and last night sold for $24 million plus $3 million more in commission at christie's auction house. the bidder chose to remain anonymous. nbcuniversal has locked up rights to air the olympic games through the year 2032. the network already secured the rights for all summer and winter games through 2020 but is now paying nearly $8 billion more for another 12 years of broadcasting rights across all media platforms including free and subscription tv, the internet, and mobile telecast. nbcuniversal is the parent of cnbc, which produces this program. since we're talking about the future, what might wall street look like in 25 years? will there be any traders still working at the new york stock exchange or will they all move the london, hong kong, or another financial hub outside of

the united states? we take a look at how the future of finance might change. >> reporter: most have fled the financial district for curbier places elsewhere. by the year 2039, what was once the epicenter of high finance might be just a relic and the world's new commercial hub oceans away. since the late 18th century, wall street has been the world's premier trading hub. by 2039, it will be more of an idea than a place. banks will lean on their core businesses of liasing between core business and investors, making loans to consumers and businesses. one author says that's how it should be. >> i would like to see banks go back to being community banks irrespective of where they're located, buttressing and em powering the local economy through lending and securing deposits. you know, they're pulling more people into the formal economy instead of necessarily just

gambling on a collateralized debt obligation. >> reporter: consultants agree, saying the masters of the universe mentality will fade, regardless of the political climate. companies will seek independent advice on mergers, complex trading will become automated, and head count will shrink dramatically, especially in the financial centers. emergence of new economic centers will follow gdp growth like the one local chinese officials are building in shenzhen, laying groundwork for a working population giving new york, london, and hong kong a run for their money. competition will come from all over. international banks, big data, and some in the shadows says dave hoffman. >> there will be a move afoot, whether it's a hunedge fund or different kind of entity. there will be other sbi iies in the game, but the question is who's going to really create the most frictionless customer experience, who's going to have the rust trust of the consumer, whether it's a desit or loan

account, and who are the regulators going to ultimately let in the business? >> for "nightly business report," in new york. >> that is "nightly business report" for new york. i'm gear gesusie gharib. thanks for joining us. >> i'm tyler mathisen. have a great evening. hope to see you back here tomorrow nigh.

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