business report, with bill griffeth and sue herera. bond beating. stocks get trampled as the yield on the benchmark treasury hits the highest level in sev years. and mortgage rates follow. but is there opportunity here for investors? trojan horse, china ll reportedly ins a tiny spy chip to hack on u.s. companies, including some of the biggest technology names. why this type of hardware hack is potentially devastating. and huffing and puffing. ecigaretteer juul is fighting back against copy cats as the government cracks down on the company. but but the big winner could be big tobago. all that and more on nightly business report for tuesday, 4th.day, octob and we do bid you you good evening and welcome.

there is an oldg say on wall street that the bond market is smarter than the stock market. now,hether or not that is true is not the pinpoint. what is the point is whenever a $100 trillion market has something to say investors probably shouldte l and it's talking right now and loudly. bond yields have been rising anyway recently. but this week yields have been spiking. and today the benchmark0-year treasury hit the highest level since 2011. andishileg yields can be a signal of strong economy and od for stocks. yields risingld too quick c stoke feerps the fed may have to raise interest rates to cool the economy. that isn't good for stocks. today stock investors seemed to listen to the bond market. and they were not happy. the dow oh points by the close to 26627. it had bee down more than 350 points at the lows of the day. the nasdaq took the brunt of the selling, plunging by 145 points or nearly 2%.

and the s&p gave back 23. bob pisani puts it in perspective for us tonight. >> for months trade wars have beenhe t primary market focus focus but the mover was bond yields with rising rates marking concerns in the stock market. what's the deal with the rising yields we've been seeing? the first thing behind ist is the strong u.s. economic data. it's been building for a wewhil. ave had great numbers but data on the u.s. services sector coupled with the strong read on factory orders caused t yield on the u.s. 10-year treasury to up.t the federal reserve is signaling higher rates. the fed chair said accommodative policy is no longer appropriate in the current environme. while i adviced the markets nod to read too much into it. there is no doubt the fed is reading a stimulus. and trade war fierce are subsiding. bond yields have been on a modest upsing since the tensions simmered down in early september as they unloadde the t war

fades. we have seen the stocks take a hit appear sectors have been down as theroer mathematic hit new highs. groups like home construction, real estate and utilities have been down the last month. the global bond yields have also hit multiyear highs. is is not just happening in the united states. the question as it is how far will it go? we don't know but the past severa days volumes in widely traded bond etfs have been the highest we have been seeing in months. bottom line, when are risk access like treasuries have a big move like we have seen, traders sitp and take notice. for nightly business report,ni b pi at the new york stock exchange. >> and that big jump in the as-year treasury yield mortgage rates now at the highest level in 7 years. and as diana olick explains,th at couldn't come at a worse time for buyers. >> reporter: if you didn't lock inehe mortgag rate last week you are out of luck preponderates just took the

biggest jump since november of 2016. the day after the presidential election when bond yields thrged. in jus past two days, the average rate on the 30-year fixed is up 14 basis points to now 4.94% according to mortgage news daily, the average for borrows with solid down payments and credit scores so you are looking at 5% and above for the noto pristine borrows rates are a full percentage poin higher t this time last year, the highest in more than seven years. in conjunction with hot home prices. the gains are s as sales slow but prices rise faster than incomes and in most major markets home prices are well above the last peak. so what ds that mean for home buyers? about $180 more on apaonthly yment for the median priced house. and it's not just thet payment lenders are strict on how much in debt payments you can carry vsus your income.

>> with interest rates going up you have more people being declined for loans because they can't meet the criteria. it's a bad combination of ng up at thtes g same time we deal with record high levels of home prices. >> fridayould be an even bigger day in either direction for mortgage rates depending on e outcome of the all important september jobs report. for nightly business repor diana olick in washington. now, one secretary the of the market that d well were the bank stocks, especiallily the regionals. what does thispi big j in the 10-year mean for bank stocks? is it time to own them? joining us is zwron john trainer, the chief investment officers at people's united advisers thanks for joining us. >> thank you. the u're not here to make case for banks as a long-term investment yet. why. >> we tend to be students of history. and if you look at bank stocks, financial scks ingeneral, they tend to be early cycle stocks. the time you want to buy banks are at the bottom of the recession and you generally want to start lightening as the fed

startssi r rates. now, this cycle because the banks were if the eye the storm back in 2008, they never had the early cycle run. so sort of been the lost decade for financial stocks. think rising rates have a positive impact on bank earnings. we could definitely see banks move up. but we are -- and we own them but we are not making aig bet on financial because we just think owning banks into a fed increase cycle is generally a shorter term sotrade. hat 5-year hold we don't see in financials. >> let's look at what you would be buying at these levels. to holdnstance you wan them between three and five years. are there stocks that you think look aractive? >> well, the financial stocks that we own right now are the larger stocks, the bank of america, and jp morgan and in the regional spates we own key. any will all beef biaries of higher rates. you know, rates move up, that's great for bank earnings.

and because we believe the economy will stay strong as the ic reports of the last couple of days have said, credit quity should be good. so bank earnings should be good. we're just not looking for the rg seculare in financial stocks at this point in the cycle. >> all right. let me push back a little bit on that thinking. causehe banks did have something of a lost decade they haven't enjoy the rise in rates to this point. >> correct. >> i mean,anking 101 says when rates go up banks make more money off the spread between what they lend and what they borrow. why wouldn't they be a longer term investment if we are heading into a long-term trend of rising rates. >> really what impacted banks was the decade -- we'll call it free money, where the fed had interest rates at zero. banks, you know, they hit the floor on in re cost for deposits. and we all saw deposit rates move down to zero preponderates came down also. the banks could not go to a r

negativee. so even though rates came down, the economy did well, that net interest margin, that' the number that bank investors want to lack at. >> right. >> that net interest margin shrink dramaticallyor banks. >> very quickly, john we have a few seconds. why do you think the rate is increasing on the 10-year as quickly as it has been? is it inflation? a good economy, maybe a mb ation. >> i guess two reasons you want to look at why the 10-year would be increasing. the bad reason would be a real inflation shock. you know, your viewers can think bab to the 70s. that's a bad reason for rates to go up. the good reason which is what we see now is this snoong e. so we think investors will do well in the market going ahead beinuse rates are m up. because the news is good. >> before we let you go,lely this doesn't benefit all sectors of the economy. those that are interest sensitive. and today we saw tha utilities, goes without saying. but real estate investment trusts also suffered today.

yeah, we are underweight reits, tunderwei the interest sensitive area and underweighty merging markets. those are the two areas coming under pressure going forward as you see rates move up. we remain underweight knows areas. >> does this change the fed y tall, v quickly, john? >> well, i think jerome powell and part osterday the reason for the rice in rates was he came out and veryly stro reiterated the fact that he thinks the economy is in good shape. i think if anything, the fed stays on course. what would scare us is if the fed ever thought this they were behind the curve if they got spooked andoy said we need to accelerate the rate of increase. i think he -- p chairmanell has telegraphed very well they are going to maintain this course and they think they're in a good position. we are pleased. with th >> very, very interesting. this is -- fls like a watershed week. >> absolutely. >>te people's u advisers thank you for joining us.

>> thank you. a u.s. judge found tha chinese telecom jiend zte violated a protion imposedn the company last year. as a result, the u.s. is ordering the telecom equipmentun maker to rgo additional two years of monitoring that will assess zte's compliance with the u.s. export control laws. zte pleaded guilty in 2017 to illegally shippingducts to iran despite u.s. sanctions. elsewhere, bloomberg is reporting that nearly 30 u.s. companies, including apple and amazon, may have been secretly subjected to surveillance by the chinese government. josh lipton reports on what happened and the reaction from the potentially targeted businesses. >> reporter: it reads like a chapter torn out of a spy novel. chinese government agents infiltrating the supply chains, used by some of america's biggest companies. rg business bloom week is now alleging in an explosive report. saying the chinese military

forced chinese manufacturers to insert special chips into components that ultimately went into servers assembled by a company called supermicro. the sabotaged servers made their way into data centers operated by dozens of companies. the apparent role of such implanted devices, opening doors that attackers cou exploit getting their hands on sensitive correspondent information. but the supposed correspondent targets of the attack dispute it. amazon saying the are so many inaccuracies in this article as it relates to amazon that they're hard to count. apple saying each time we have conducted rigorous internal investigatio based on their inquiresy, and each time we foundo absolutely evidence to support petition of them. and supermicroemphasizing that it has never found anynt tious chips for been informed by any customers that the chips hute been found b the investors seem concept uncle

cal send something the microstock cratering dropping below $500 million. the story speaks to a broader isu.e. lawmakers have been openly suspicious about technology assembled in china and shipped to thi u.s. for reason. >> this is not something that was secret. it's been publicized. the u.s. government put out the cybersecurity initiative back i. 20 in that initiative one of the tenants of that one of the major initiatives was the integrity of te supply chain. this is somethit certainly that the government was aware of, the fragility and the potential vulnerabilities of the supply chain. >> today, senator mark warner echoed the concern, telling cnbt this rep provides more evidence that china's pattern of behavior is a serious threat to supplyl security and chain richk management. some technalysts argue that if a security breach like this turns out to be true or one likm

itican tech companies might indeed have to rt hink how prud is to keep amendabling products in china. report, i'm business josh lipton, san francisco. and let's pick up where jh left off. roger chang joins us to talk more about china reportedly spying on u.s. tech companies and what the implications are for the hack. he is the executive editor at cnet. good to see you again rogerer, welcome back. >> thanks. >> as josh laidous, the tech companies, some are upper back pushing back on the report. but if i eed this didhappen, what are the ramifications for the companies and how could they fight against ? >> yeah, if if reports ends up being legitimate,he consequences are devastating. most attacks, cyber-attacks are software based inserting bits of code, or using software different codes to breach data systems. having a system built around

hardware -- a hardware based breach is extremely rare, very off.cult to pull but sort of the long-term benefits for that hacker are potentially -- potentially elding a treasure trove of information for anyone looking to make this kind of move. >> but i was struck -- i know you were too -- s mentioned this -- the strong denials from the amazons and the apples, even the supermicro? >> apple and amazo are known for being farrell guarded when it comes to public comments and theact that they came out with an official statement that they broke down and dissected the story definitelyaused me to, you know, take a close are look or closer look at the story. it's important that apple kind ofd hed and did say they did t find anything wrong wi their servers. the story didn't say that. they never mentioned apple t discoverin chiep that other

parties like amazon -- and it's important to note that amazon cut ties with supermicro. maybe they know more than ty are leadi on. appit's unusual that both and amazon came out so strongly against the article. >> so maybe the truth is somewhee in the mid there. and if it is, do the tech companieo have rethink whether or not they produce some of their products in china? >> i mean, whether or not this is -- thiis valid, i think all the companies are looking up and down the supply chain, really seeing if there are any issues. you know, there are i guess compliance -- there are definitely checks now process. but i think they are looking ant at l reconsidering the option of moving the supply chain elsewhere. >> on that note, thank you so much roger. it will follow the story. roger chang cnet. >> it's been a swing state in presidential elections and now florida b maye the key for control of the senate. and as always, it's abouthe

economy. we'll head to the sunshine state when we come bac as you probably already know, health insurance is getting more and more expensive. and also for businesses. a kaiser family foundation report shows the average costs of employer health coverage offered to workers rose 5% this year to nearly $20,000 for a family plan. e and whileloyers pick up most of that tab, workers still average $5500 a year in premium. up 65% from a decade ago. well, florida is always a key state during presidential

elhitioning. and year the sunshine state is a battleground for the senate. the so-called i-4 corridorug th the central part of florida is the swing region that will likely determine this year race. john harwood has more from celebration, florida. >> reporter: the democrats are goingo become the majority in the house and the senate. >> reporter: the race in florida bits bilnelson, the long-term democratic incumbent who touts his fightinst wall street and insurance companies against rick scott, t former health care ceo now florida's republican governornd trumpet the job growth. in the state packed with older voters each uses medicare to attack the other's background. >> the career politician bill nelson doesn't think the rule applies to him. news reports reveal that nelson doesn't bay payroll taxes for employees. de themn't even pro with health benefits. it's stealing money from

amedicare, social securi it's unfair. >> rick scott, can't hide from the truth. he was ceo of a company fined $1.7 milli he gave political doaners secret contracts after hurricane irma costing tack pairs $30 million. cut education. he denies health care. >> scott claimsredit for florida's strong economy. and republicans here agree. stoo. >> we're making good stres as far as, you know, being able being ew jobs and progressive and getting back on track. >> but democrats have united in opon to trump. and against his tax cuts. >> i really feel like it's a tax cut for the 1% and not me. >> i do. >> now, the battle over trump's supreme court pick is introducing a new wild card. anger among republicans about a tax on brett kavanaugh. nationally poll sisters show republican enthusiasm risesing. almost on par now with democrats. >> it's such a fraud heissue. >> kavanaugh hearings are a disgrace. >> i don't think the t --

liberal side, the democrats are doing themselves any favor with what's going on right now with this mition. the supreme court nomination. i think it's -- i think it's a sham. i'm disgusted watching it. >> here in florida and nationally, theuestion is whether that new republican energy survives if the senate confirms kavanaugh to the sfrourt? still four weeks untilio ele day. for nightly business report john harwood in cebration, florida. constellation brands raising earnings outlook for the years and that's where we begin the market focus. the company raised the guidance after saying steady growth in the core beers and wines business huss helped quarterly reports top expectations. constellation said there was especially strong demand for corn o and model o beers. the shares rose 5% to $222.10. arrow head pharmaciesle said it berd into a $4 billion license

agreement with johnson & johnsos iary to develop and market the hepatitis b treatment. under the dealrrow head receives $175 million up front. it could receive more than 1.5 billion in milestone paymen m. arrow hea be eligible to receive a separate $2 billion in milestone payments for three additional treatments. but that structure didot ease the street. arrow head shares fell 17% to 15.33. on college company guardant health beganrading the nasdaq today after pricing the initial public offering at $19 a share process that valued the company at nearly 2.5 billion.d guardant cal the liquid bysy blood saying a game changer saying it's simpler and less invasive for cancerous tumors. >> the lung cancer has been a big application but the technology is generalizing. it wor for all cancer. today we are in late stage

disease. where we e going is taking taking this technology as we make it more sensitive it can br used for deeks for the rest of us. and that's really where the powe and promise of this technology ultimately lies. >> look at share they popped 69% the first day of trading closing at $32.20. ng> after the bell costco matched the earxpect iks as and reported revenue inching past estates but the discount warehouse retailer warned it expects to report a material weakness in internal controls relating to its i.t. systems that support the company's financial reporting processes. shares initially fell in after hours. and also futished down a a fraction at 231.68 today. coming up whe government cracking down on ecig make are juul mightge light a fire under the big tobacco stocks.

as we have been telling one the popularity of e-cigaret has exploded among high school students. the fda is cracking down on the industry leader, juul. and as a o adidi roy, tells us that could have an unintended benefit for big tobacco. >> reporter: they'resleek, slim and stylish. that's one reason juul's vaping devices are so popular >> it's on of the products that just flies off the shelf. ar reporter: juul asferly 3/4 of the ecigarettet and now it's fighting copy cat companies. juul is asking regulators to order 1companies to stop selling lock alike e-cigarettes. the company filed a complaint with the u.s. international trade commission, alleging the

companies, quote with, blatantly emated the distinctive design of juul's system. juul wants the agency to stop theng products from b imported, distributed, sold and u.s.ted in the the company alleges copy cat products include flavors byle bubb bubble, apple juice, and sour gummy. which seem to target underage user. juul itself is the focus of an investigation in ecigarette manufacturers and teen use o vaping devices. just last week fda officials showed up at juul headquaaners left with thousands of pages of documents. juul ceo kevin burns said it provided the fda with information about the company's onne age verification protocols and calls the meetings with the fda last week a constructive and transparent dialogue. adding that it's released more than 50,000 pages of documents to the fda. the number of high school students who have used e-cigarettes in the past 30 days has sky rocketed by about 75%,

according toia people fam with preliminary data from the cdc. the fda is investigating whether juul sales and marketing practices have led to the increasing use of vaping products among teenagers. juul ias c ads from early days switching to a more sor tone with older models. juul as run away successd ould coulu tell into sales of traditional cigarettes, piperaftery points to a jfl survey of 19,000 juul users findingrs 62% were smokehen they started using the vaping device and about two thirds of them quit after starting to juul. the one-year stock chart of british american tobacco phillip morrisnd imperial brands show sars down between 5 and 27% in the last 12 months since juul's rise. but since the ona investiga into ecigarette makers like juul, shares of the companies appear to have been rebounded.

ki insight reports that tobacco companies are t about vaping on earnings calls with increasing fitquency british american tobacco talking about vaping the most. somee of big cigarette companies have launched vaping brands and part of the fdast ination. but given juul's huge market share in the category and the fact that the big tobacco companies make all of their money in the higher margin cigarette business, analysts say they don't hav as much to lose in the fda crackdown. for n rhtly businessort, adidi roy, san francisco. finally tonight bond billionaire bill gross put the first part of his u.s. stamp collection on the block last night. id the sale topped $10 million. . maki the most expensive single stamp auction ever. some of the highlights included theent blue hien for 19500. and the famed bible block of unusedst 184ps found in a bible in the early 190 oh

going for $590,000. the rest of his u.s. collection will be auctionedve off the next year or so. and all proceeds will go to charity. >> wow! before we go here is a look at the final numbers on wamz. the dow fell 200 points to 26627. it had been down more than 350 at the lows of the day. the nasdaq took the plunging 145 points or nearly 2%. s&p 500 gave back 23. >> just thinking what happened to my stamp collection. >> i never'lad one. >> look for it. that's nightly business report for tonig. thanks for joining us i'm bill griffeth. >> i'm sue herera. have a great evening. we'll see you tomorrow.

>> this is "bbc world news america." >> funding of th presentation is made possible by the freeman foundation, and kovler foundation, p solutions for america's neglected needs. >> how do we shape our tomorrowa its with a vision. we see its ideal form in our mind, and then we begin to chisel. we strip away everything that stands in the way to reveal new possibilities. at purepoint financial, we have designed our modern approach to banking around you --