this is "nightly business report" with tyler mathisen and susie gharib. >> the great divide, when will the federal reserve start hiking interest rates? that question is intensifying a debate and grabbing the attention of investors, wall street and main street. >> turning point, target cuts the profit forecast as it tries to win back customers and increase sales but there may be a glimmer of hope in the latest earnings report. >> and subprime trouble, is a bubble brewing in one of the hottest segments of the economy? we'll have that and more tonight for wednesday, august 20th. good evening, everyone, and welcome. thanks for joining us. great rate debate intensified today. some of the most powerful people

in monetary policy gathered in the small and beautiful town of jackson hole, wyoming. this afternoon, the minutes of the federal reserve's last meeting were released in washington showing that some officials think the economy is getting better quicker, so much so that the central bank will need to hike rates sooner than planned. the initial reaction in the stock market was one of concern, and stocks shed some of the gains for a short time before they resumed their august asent. in the meantime, a cnbc survey shows wall street thinks the next round of interest rate hikes, wherever they begin will be so gradual and so prolonged they won't end until the next president is in the oval office for nearly a year. steve liesman is in jackson hole where federal reserve chair janet yellen will speak on friday with a look at why everyone on wall street to main street will be watching jackson. >> reporter: when the leading luminaries of the central banking and economics world

convention on the mountains for the annual conference this year, there will be three top picks on the agenda, jobs, jobs and jobs. the jackson hole meeting to include the heads of the u.s. european and japanese central banks is set to take a deep dive into labor markets, but it really comes down to a great rate debate between just two numbers, the 6.2% and falling unemployment rate and the zero fed funds rate which hasn't budged in almost six years. the key question for the fed is the easy monitory poll say risk inflation down road. >> the labor market largely healed. as you see, employment is back above trend in services and manufacturing. today's fed policy seems not only unnecessary but brought with unappreciated risk. >> reporter: alan kruger will loom large. he was invited but couldn't attend and argued the market is

tighter than believed risk inflation because those long-term unemployed and dropped out of the work force he believes are not coming back to work. >> long-term employment remains high and in my view, the evidence suggests the long-materilong-term unemployed kpes plus sure on the labor market and give up searching for a job. >> reporter: janet yell loen >> reporter: janet yell loe kno of his work. >> i think it's premature, frankly, to jump to that conclusion that that argument is correct and i've made some arguments in other remarks that i've given about why i think that the long-term unemployed are likely to move back more actively into the labor force. >> reporter: yellen got some backing in the most recent jobs report that showed 230,000

people came streaming back into the work force and wage gains were muted. at issue in the great rate debate, when will the fed hike rates and how far will they go? judging by years past, big things happen. so this year while it's about labor, it's really about interest rates, markets and the economy and that's why wall street was listening very closely. for "nightly business report" in jackson hole, wyoming, i'm steve liesman. >> with us to talk more about this, chief global economist at deutsche asset and management and chief investment strategist at wells capital management. thank you so much for joining us to talk about the debate. josh, let me begin with you. what do investors and business leaders need to hear from janet yellen on friday? >> i'm not sure what they need to hear. what they are going to hear as steve pointed out is big focus on the labor market that progress is being made and increasing confidence with the fed that that progress can

continue but we're not there yet. there is still slack, it's too soon to throw in the towel on the long-term unemployed and those who left the force. the fed would like to give these folks as much of a chance to repair the damage from the great recession as possible. while the fed is inclosingly getting their heads around the idea economic conditions will justify them starting rate hikes next year, i think they will want to move slowly and cautiously. they don't feel a great sense of urgency and they would rather air on the side of the giving the economy more chance to improve the damage. >> jim paulsen today, a lot of people, my humble little self included read it to be more hawkish than some anticipated. did you read them that way? and if you did, why did the stock market move higher by the end of the day? is the stock market being naive? >> well, i did read them the same way, tyler.

i thought it was more hawkish commentary than we've seen from the fed, and i think the market looks at it a couple different ways. on the one hand, the fact that even the fed is becoming a little more hawkish in their comments suggests that even they are seeing recovery going on in the economy, which really is a good thing. even they now have confidence. that's good for the market overall. what the market wants to see is that the fed also sees improvement but not to an extend that they have to panicly move up the timetable for rate hikes, and that's what i think investors will be looking for in jackson hole commentary is there a move of foot that we might move the first hate rate hike from next summer, maybe the first quarter of next year, that would be more concerning for the markets overall. >> what do you say about that, josh? in those minutes it said some members want to move for promptly, most members were going to be more gradual. what is the risk if this time --

if the fed misses the right timetable? >> well, i think there is a more active debate going on within the fed and reflects we are getting closer. the center of gravity, yellen and others around her are likely to be a little slower. they just don't feel that there is a sense of urgency, inflation is subdued, wages are extremely subdu subdued, they still believe there is slick and they just feel that it would be inprudent to move quickly. if it starts to show signs of over heating, of course the fed will get going more quickly. the risk of that is still fairly remote and i think more likely the fed will move, you know, that summertime table maybe and then just move quite slowly thereafter. >> does it really matter, jim, whether to the economy and not just to traders in the marketplace, whether the fed raises interest rates in june of next year or april of next year

or august of next year? does two or three months really in the grand scheme of things matter to anybody but you guys who want to trade? >> i think there is truth to that. it creates volatility short term but like josh said, ultimately it's not the fed's decision. it's going to be the fed's bosses' decision and that's the conme. with the unemployment rate to drop into the fives and likely to go over 80%, we're one hot inflation report away from the economy, the boss of the fed telling the fed and the financial markets hey, we got to move this thing up. and i think that would be concerning is not so much when they do it but if they have to do it more aggressively and quicker in terms of magnitude that would have to force investors to reprice assets on a different rate schedule. >> all right. to be continued.

thank you so much, gentlemen. deutsche asset and fine management. despite the pull back midday on the fed minutes we've been talking about, the s&p 500 rebounded to within a few points of a new high but it didn't quite have enough steam to close. by the end of the day, the index did rise almost five points to 1986, the third straight day of gains. the blue chip dow industrials up 59 points and the nasdaq ended one point lower. >> looks like $17 billion is the big number for bank of america. reportedly the bank agreed to pay a record $17 billion with federal and state officials to pay for its role in the sale of mortgage backed securities in the runup to the 2008 financial crisis. the officials say that bank of america will pay $10 billion in cash and provide consumer relief at $7 billion and expected to announce all of this tomorrow.

also in the spotlight once again, bank of america's trouble system acquisition of country wide financial. this is a mortgage lender at the center of the financial crisis. it now appears that anglo mizilla, the founder is on the justice deputy's radar according to bloomberg and the u.s. attorney's office in los angeles is considering filing civil charges against him and other country wide employees. target slashed the annual profit outlook as it struggles with last year's massive data breach, a disappointing expansion in canada and sluggish sales here in the u.s. the nation's third largest retailer reports the second quarter earnings fell 6 2% but inside the down beat report, they may have found a little gem, a glimmer of hope and that may be why they rose almost 2% today. >> reporter: another far from bulls eye quarter for target. the big box retailer continues to struggle with falling store

traffic and sluggish sales, plus its still relatively new entry into canada continues to disappoint. shareholders are most disappointed by target's much lower full-year profit forecast. many retailers have been struggling to grow sales and traffic, but target has additional hurdles. the entrance into canada has been nothing short of a mess and losses there continue to mount. the discounter is dealing with losses associated with the holiday season data breach and while the breach did hurt target's shopper confidence, most say, including the company, shoppers have put it behind them. chief financial officer john mulligan says most have recovered. while waiting to hear from the new ceo, he said little. he said he's focused on doing

his homework. >> brian did a great job when he was at sam's club. i would expect him to write the ship here. target's biggest issue is can they get traffic back in the store store? it's not clear how they do that without heavy investment, which means a longer low-term earning structure. >> reporter: they see improvement over the last three quarters and says sales at u.s. stores have been positive for the last six weeks. mulligan added the company feels good about back to school so far. now investors are waiting to hear the plan to grow the business and reinvigorate the brand, though cornell won't say when he'll be ready to share more. for "nightly business report", i'm courtney regan. now american eagle outfitters was a bright spot in the retail sector. they reported higher than expected second quarter profit in sales, helped by inventory

reductions. the interim ceo said the company isn't performing up to potential but investors were happy. the stock finished 12% higher. one day after home depot lowered the outlook, lows raised the forecast. the company made upmost of the sales it lost during the long winter but wasn't enough to cover the retailer's full year's sales forecast. still, the retailer d eer did ra 10% rise and anticipating higher spending on renovations around the house in the second half of the year. that sent shares up 1.5%. hp reported a surprise revenue gain in and a spike in personal computer sales in the earnings report released after the market closed. the company earned 89 cents a share right in line with analysts estimates. revenues came in slightly better than expected at nearly $28 billion thanks to the strong pc sales but sales in other units

didn't do as well. the stock initially rose in after hours trading only to fall back. still ahead, is there a bubble brewing in the subprime auto loan industry. details of a new report, next. hertz is in a world of hurt today. it's withdrawing the full year forecast and expects 2014 results to be well below the previous estimates because of accounting irregularities and massive recowels from gm and ford. the recalls are hurting hertz' ability to have cars available for customers. despite that, maybe because of it, carl icahn has taken an 8.5% stake in the company according

to a regulatory filing calling the stock under valued and that lifted shares from a big, big slump, still the stock finished lower by almost 4%. a new report says americans are having more problems making their monthly car payments. and many of those making late payments or no payments have some of the lowest credit scores. it's the latest sign the surge in auto sales to people with subprime credit scores could be creating serious problems. phil lebeau has more. >> reporter: go to any showroom and dealers will tell you, business is booming. new and used auto sales are the strongest in eight years, one reason why, dealers are selling more cars and trucks to those with less than ideal credit scores. >> right now the subprime borrower is for the most part staying current on their automotive loans. we're seeing some increases in lateness but it's modest. >> reporter: experian auto says more subprime borrowers were a

month or two late on the payments between april and june. at the same time, the number of auto loans that ended in default with cars being repossessed jumped 70%. while the percentages are still well below where they were during the recession, some are worried the push to sell more cars has lenders writing too many loans to those who can't make monthly payments. >> maybe some of the -- these people should buy aless expensive car or a used carver sustained a new car and having the transaction prices continue to climb when they maybe can't really afford them. >> reporter: the average price for a new vehicle tops $31,000. to afford that price with lower monthly payments, more borrowers are stretching out the payments over six, even seven years. >> the extension of term is a bit of a catch 22. it helps keep the payments lower but at the same time, it does force consumers to stay in the loan a little longer. >> reporter: when auto loans do

go bad, the amount lenders have to write off have gone up by $1,000. the charge off amounts are well below they were at the depths of the recession, when lenders were repossessing cars than they are right now. phil lebeau, "nightly business report", chicago. a $3 billion semi conductor deal is where we begin tonight. that's what they are paying for u.s. based international rectifier. this is a company that makes chips for satellites, cars and aircraft. the merger is expected to be completed by early next year, as long as regulators give the okay for the combo. shares of international rectifier soared to $39.10. a billion-dollar forecasting error cost top executives their job at walgreens. the chief financial officer made a $1 billion forecasting error in the company's medicare

related business. shares were off slightly at $62. providence sales decliened t staples. they are working to close stores and improve the presence online. that won't help the retailer right away. it warned sales might decline in the current quarter as it sells fewer computers and basic office supplies. shares fell to $11.32. >> with a name like smucker, it may have to be good but the results weren't. disappointing earnings there. the coffee maker missed on the top and bottom lines and lowered the sales outlook. the company said promotions took a bite, a bite, maybe a sip out of the coffee profit. shares down 1% to $102.42. madison square garden, msg, mixed quarterly results there. fourth quarter profit fell as they were hurt by higher operating expenses and revenue climbed beating estimates on growth in the entertainment and

sports segments. good year for the rangers. shares popped about 3.5% to $65. shares of shutter fly flipped higher today. the online photo sharing services provider rose after reports that silver lake partners and bain capitol are among the firms interested in buying the company and the private equity firm heldman and freedman will make an offer to buy the company this week. that sent the stock 1% higher to $50.47. and the oracle of omaha can make a mistake. warren buffet is paying $396,000 to settle charges his company failed to report a transaction that boosted stake in a products company. in a statement today buffet said quote, we made a mistake. >> labor day is almost here and with it, the official kick off to the 2014 campaign season. this year, the balance of power is up for grabs in the senate

and that could have a big impact on the world of business. john harwood has more from iowa, which hosts one of a dozen races that will determine whether republicans or democrats take control of the senate. >> reporter: we found a little news here in iowa looking at one of the races that will term the ball lapse ance of power betwee democrats and republicans. it was on the export, import bank. republican candidate came out in favor of the bank joining democrat bruce brayley. >> it has enormous benefits to iowa, $220 million in loans, the vast majority to small businesses. you look around this state and the ability to export commodities and to export john deere tractors and combines around the world. >> as long as other countries offer that opportunity to their exporters, i think that is

something that need to offer to our industry, also. >> reporter: but mostly this race like other senate races across the country is about big disagreement issues. obama care, republicans want to defund and repeal. s is, republicans say it may need structural changes to survive in the long term. democrats say they are going to protect the existing structure of the program. the environmental protection agency where republicans proposed the rules curbing carbon emissions from power plants. democrats are supporting them in the name of helping climate change and minimum wage, republicans say it should stay where it is at the federal level. democrats say it should go up to $10.10. how big are the stakes? very big if you consider mitch mcconnell said if republicans gain control in 2015 and 2016 they will play hardball up to the point of threatening a government shut down. for "nightly business report",

i'm john harwood in des moines, iowa. coming up on "nightly business report", imagine having a green lawn in the middle of drought ridden california. it's now possible without using water and big business for some small companies. we turn to california where the severe drought by one estimate could cost the economy more than $2 billion. that warning from a new study. to conserve water some towns and cities imposed mandatory rationing but some want to keep

their lawns green and that is creating a business for some. >> reporter: look at this lush green grass here in los angeles, how does it stay looking this way? like a lot of things here, it's fake. we're in an epic drought, the one big difference isn't how bad it is but how much water agencies are giving away in rebates, as much as $3 a square foot for people to rip out their old lawn and put in something else, like the fake stuff. vick waterson, yes, his name is waterson owns waterless turf and business is up 30 to 40% even though it could cost $10 a square foot. >> i attribute that to the drought and the department of water and power, the water companies providing an incentive rebate to install the turf and replace their live turf with the artificial turf. >> reporter: he says business doubled for his lawn painting business which costs the average

homeowner about $175. >> it's kind of sad. it's not good for everybody else but yeah, for the business it's very good. during the summer you can get up to three months. it depends how long it will last. i refer to it as hair die, you keep getting haircuts, it will come off. during the winter you get a good solid six months out of it. >> reporter: this is how his lawn looked before and he has a fake one put in but even with the $6,000 rebate, it still cost him 19 grand and he figures it will take eight years of water savings to pay it off. >> the current cost is $7.50 a day for water. my projection is we'll be down to $3 a day. that's a considerable savings. >> reporter: the irony with the water restrictions in california, in sack moramensacr state capitol it's against the rules to have fake glass in your

yard, only in california. jane wells, los angeles. >> you don't have to mow it, either. good deal. finally tonight, the big business of football. the buffalo bills up for sale you may want to know how much nfl teams are worth in case you want to get a bid together. according to forbes mog sceagaz it's a lot. the average team is valued under $1.5 billion, up 20% from last year fueled in part by the $2 billion microsoft's ex ceo steve balmer paid for the la clippers and football teams are worth more. here is the partial list, fifth most valuable team, houston texans worth $1.8 billion and number four the new york giants valued at more than $2.1 billion and worth more than $2 billion, my hometown team, the washington redskins 2.4. they would be worth more without that last name.

the patriots worth $2.6 billion and the dallas cowboys $3.2 billion. first franchise to top $3 billion, only the soccer team royal madrid is worth more. forbes puts their price tag for the bills at $935 million. >> big numbers. >> those are big numbers. >> that's "nightly business report" for us tonight. i'm susie gharib. thanks for joining us. >> i'm tyler mathisen. have a great evening, everyone. we'll see you back here tomorrow night.

tonight on quest -- from the time an embryo is three weeks old the heart never stops working to keep us alive. but if children are overweight, they double their risk of heart disease later in life. >> individuals who have obesity from childhood, have old blood vessels in their heart. >> heart disease kills more americans than any other cause of death -- more than cancer, car accidents or aids. on this quest special, meet a teenager fighting to lose weight. >> i really would like to get under 200 pounds. >> then, find out how the chances of surviving a heart attack depend on how fast you get to the operating table. >> there's an adage that we use in cardiology that "time is muscle." >> and finally, see how doctors may one day be able to rebuild damaged hearts with a s