>> announcer: this is "nightly business report" with sue herera and bill griffeth. >> market route. the sell-off deepens. the s&p 500 closes at its 2018 low as investors grow concerned that growth is slowing in the u.s. and worldwide >> sentiment slump. builder confidence at its lowest level in more than three years. buyers hesitate to purchase new homes. a sharp reversal from just one year ago. >> new prognosis? a legal blow to the affordable care act is creating questions for both consumers and investors. those stories and more tonight on "nightly business report" for monday, december 17. good evening, everyone. welcome.

bill is off tonight. the chill on wall street this december deepened. the selling intensified as investors zeroed in on the idea that the economy will slow into 2019. a handful of weaker economic readings on the housing market and manufacturing came one day before the start of a two-day meeting of the federal reserve policy-makers. the dow jones industrial average dropped 507 points to 23,592. the nasdaq was down 156 and the s&p 500 fell 54. right now the s&p 500 is on pace for its second worst december ever. more than half of the stocks in the s&p are in bear market territory meaning 20% down or more from recent highs. the small cap index is also in a bear market. there are a lot of positives in this market, but as mike santoli reports, investors don't seem to

care. >> for the past two months the stock market has been nearly immune to what seemed like good news. not only are u.s. employment and retail spending still strong, but several promised positive catalysts have passed without stemming the drop of more than 10% in the s&p 500. including corporate earnings growth, the resumption of share buy backs by companies in october, the passage of midterm elections with the grid lock result that wall street likes, a trade truce with china and a softer tone from the fed on interest rate plans. this run of upbeat or hoped for events has not been enough to rescue stocks from a fear of a 2019 global slowdown. the chance that the fed will hasten the downturn with rate hikes and continued uncertainty over china trade relations. as wall street entered the final two weeks of trading with the s&p down, the question turns to whether the market priced in enough negative possibilities to find support even if we get the feared slow down. some strategists calculated the

reduced valuation is implying something close to flat corporate profits for 2019, suggesting there may be a cushion already. measures of investor sentiment are showing anxiety that could leave the market open to pleasant surprises. investors pulled a record amount from stock funds in the latest week which could mean the public is braced for tougher times. perhaps a reaction to the interest rate decision and outlook this week will be the best signal of whether the market has worried itself into a state that leaves it primed for a relief rally that doesn't immediately fizzle. for "nightly business report" i'm mike santoli. >> the fed meeting mike referenced has been a focus for investors and especially today. over the weekend, long-time hedge fund manager stanley drukenmiller wrote central bankers should not raise interest meets this week. that was echoed by white house

adviser peter navarro. >> on wednesday, the only argument i'm hearing for the fed to raise rates now is that somehow they have to exert their independence from the white house. this is a bad argument. i think what the fed should do is simply do what it says it is going to do which is look at the data. >> so with the fed meeting looming and volatility on the rise, what should investors be watching? we are joined by jeremy bryan from gradient investments. nice to have you here. >> thank you for having me. >> let me pick up on what mr. navarro said. there are people on wall street who feel as though the market is concerned about the fed's independence and as a result of that, it almost forces them to maintain their independence by raising interest rates this week. what do you think of that argument? >> yeah. there's an argument to be made there. i think the bigger component is that we haven't had a dramatic deceleration in economic data

yet. i think the fed is going to stay the course for the december rate hike. i think the probabilities out there are probably fairly accurate. what may change is what the 2019 outlook looks like and the conversations that may come as a result of that. if they change course in just the sentiment for 2019's outlook, that may give the market a little bit more of a relief rally as a result. >> the other big fundamental factor looming large is the possibility of a government shutdown which created volatility in the market last week and also today as well. how much of a possible shutdown is factored into the market already? >> sure. i think the market's digesting at least the threat of a shutdown. at this point we don't have anything concrete, but what we do have that's different is we have a democratic house that's coming into play. that's a different dynamic than we have had since 2016. it will be an interesting dynamic to see where the market shakes out from that. i think if we have a small

shutdown, the market can digest that okay. i think if we start to see worsening rhetoric around it or a prolonged shutdown, that's something the market isn't ready for yet. >> it's kind of difficult for longer-term investors to take a look at the portfolio and try to rebalance when you have a market that goes from up 46 to down 507. but i think that's what you think they should do is look at their game plan, correct? >> that's exactly right. what we are assessing here at gradient is reassessing and rebalancing. that's the biggest component you can do now. if you have gains and you have stocks that you can trim gains from, there is not a lot being that most asset classes are down this year. if you have some you might want to trim here and there, that's fine. what else you might want to do is if you have taxable accounts it might be a good time to think about doing some tax rebalancing and taking some of the tax losses, especially for companies that you don't want to be involved with longer term. >> that's if you are an active

investor. what about passive investing? jeffrey gundlock gave an interview to cnbc which produces this program and he made comments on passive investing. he took a swipe at it. here's what he had to say. >> i think passive investing is a mania or reached mania status as we went into the peak of the global stock market and the u.s. stock market. i think, in fact, passive investing and robo advisors which i think tie together are going to exacerbate the problems in the market because it's herding behavior. >> what do you think of that statement? >> my stance is there is no such g passive investing. you need to know what you own whether it's etfs or individual stocks. you need to understand what the etfs are for. if you own an s&p 500 etf you own 500 u.s. companies.

you need to know what it means for your portfolio. that's the way we think about it from our perspective at gradient is understanding what you own and investing in that regard. >> all right. on that note, jeremy, thank you very much. jeremy bryan with gradient investments. >> thank you very much. >> now to the weaker economic data we mentioned at the top of the program. the new york regional manufacturing index slumped to a 19-month low. factories in the empire state reported a sharp slow down in business. economists say the latest report adds to the signs that the u.s. economic growth is, indeed, moderating. sentiment is also down in the home building industry. a new report puts confidence at its weakest level in three and a half years. home builder stocks, however, finished mixed on the hopes that the central bank will halt the rate hikes. that doesn't erase the downbeat mood in the sector. diana olick has details. >> the expectation was that the drop in mortgage rates would

boost builder confidence a little. that didn't happen. home builder sentiment dropped to 56, the lowest level since may of 2015 and a steep drop from 74 just a year ago. this according to the national association of home builders. anything above 50 is considered positive sentiment. it's all about affordability which is still very weak despite the pullback in mortgage rates. home prices are just too high. nahb chairman randy knowles said we are hearing consumer demand exists and customers are hesitating to make a purchase because of rising home costs. of the three components, current sales conditions fell six points. expectations dropped four points and buyer traffic fell two points. sentiment fell hardest in the northeast and west where home prices are highest. it was down across the nation. tomorrow morning we get a read on housing starts which have been weak for months.

for "nightly business report" i'm diana olick in washington. >> johnson & johnson announced a $5 billion share repurchase program. the company reaffirmed the 2018 sales and adjusted earnings per share guidance. this after the stock fell sharply on a report of asbestos in baby powder, something we told you about on friday. in an interview today with cnbc's "mad money" ceo alex gorski responded. >> i would start by saying we unequivocally believe our talc, our baby powder does not contain asbestos. that's demonstrated in thousands of studies, not only conducted by johnson & johnson, but conducted by independent authorities, well respected authorities where we work closely with regulators who are overlooking the methodology. by the way, throughout this process we also not only use the best testing methodologies that were available, but we continued to improve them through the years. >> shares fell nearly 3% today

adding to the 10% decline of friday. goldman sachs found itself where no company wants to be. it is tangled up in a corruption scandal. the scandal is in malaysia and that country is filing criminal charges. that sent the stock down more than 2.5%. w wilford frost has details. >> goldman sachs was dealt another blow in a scandal it's been trying to contain. malaysia filed charges against the bank and two former employees saying they committed gross violations of the country's securities laws. this relates to a bond issuance in 2012-13 that saw goldman sachs help the sovereign wealth fund 1mdb raise $6.5 billion, some of which was later siphoned off by 1mdb employees. the malaysian attorney general says goldman sachs had to be held accountable and is seeking off the top of my heads worth

over $3 billion. the u.s. department of justice is also investigating the issue. goldman sachs responded today and said, quote, we believe these charges are misdirected. we'll vigorously defend against them and look forward to the opportunity to present our case. the firm continues to cooperate with all authorities investigating these matters. they added, quote, certain members of the former malaysian government and 1mdb lied to goldman sachs. the stock has fallen sharply in recent months on news of the investigations, down nearly 27% since early november, losing nearly $15 billion in market cap. investors not only fearful of a large fine but possible loss of revenue for goldman and possible rising cost from a need to improve internal functions. this is the first time goldman faced criminal charges on the case. neither malaysian or u.s. justice departments have suggested goldman's involvement was intentional.

wilford frost in new york. >> time to look at upgrades and downgrades. best buy was downgraded to under perform at merrill-lynch. the analyst cites slowing sales of tvs and iphones. the price target $50. the stock fell to 52.23. lululemon was upgraded to buy from hold. the analyst cites the potential for double digit revenue growth. the price target is $151. the stock fell a fraction with the broader market to 118.87. stanley black and decker was upgraded to buy from hold at deutsch bank. they like the fundamentals and is less concerned about the possible impact of tariffs. the price target is $143. the stock rose more than 1% to 119.98. still ahead, the market turmoil doesn't appear to be slowing down online shopping. >> today is one of the busiest of the holiday season for fedex.

the company expects to break the record for holiday deliveries. coming up, how e-commerce is the driving force. oil prices settled below $50 a barrel for the first time since october of last year. the market is concerned about oversupply in the u.s. this after industry data showed inventories at the storage hub at cushing, oklahoma, rose by over 1 million barrels. add worries about global demand and domestic crude settled down about 2.5%. ceo confidence has fallen to a

two-year low. a new survey says chief executives are concerned about a cooling economy, rising interest rates and uncertainty related to trade with china. corporate debt levels are a developing concern, especially if the fed continues to hike rates. it was a rough day for health care stocks. the sector was pressured not just by the broad market sell-off, but also by a legal ruling late friday that said the affordable care act or the aca was unconstitutional. insurers molina and centine have the highest exposure. hospital stocks also fell. what happens next for the industry given the ruling? mary agnes kerry joins us now. welcome. nice to have you here. >> thank you. >> it was a shock for the market partly because of the timing of the ruling. it came late friday night eastern time. so the market only had today to react to it. in essence, what does this change, if anything at all? >> right now it doesn't change a

thing. insurers that are part of the affordable care act marketplace are still in place for 2019. consumers on the federal exchanges had through friday midnight to enroll. states like california have a longer enrollment period. everything is in place for 2019. but, of course, another legal challenge to the affordable care act just creates uncertainty for a lot of companies. >> and a lot of people as well. >> a lot of consumers, exactly. >> it is millions of people. can you put in context for us how many people use the affordable care act? >> sure. about 20 million people have newly found coverage on the affordable care act, either the exchanges or in the marketplaces. for millions of other americans that might get health care through work, the idea that their pre-existing medical conditions will still be covered is incredibly important. there is also no more lifetime or annual limits and no cost-sharing on preventative services. for some americans a more

comprehensive package of benefits. all that's thrown into question with this legal challenge. >> do you view an appeal in the offing? >> absolutely. there are other matters in this particular texas case that need to be settled with the judge in january. there will be an appeal to the appeals court for the 5th circuit. some analysts expect it to go to the supreme court. >> now what will that do basically to those industries involved? they have choices as to whether or not they want exposure to the affordable care act. we mentioned centine and molina. do they make business decisions based on the idea that it's going to be appealed or do they just stay the course and see what plays out? >> for now, they would stay the course. as you look to when the firms need to put in their bids for 2020, for example, by that point in time will the appeals court have heard and ruled on this particular ruling? and if they have, are there signals at that point of whether or not it's going to the supreme

court and when? i think for now people will hold. as they look to the next enrollment season for 2020, it could have some impact. >> mary agnes, thank you so much. >> thank you. >> mary agnes is with kaiser health news. well, the cloud helped lift oracle's bottom line. that's where we begin tonight's market focus. they reported better than expected earnings and revenue and added more clients to the cloud services and licensed support which is the biggest business unit. hardware revenue was a little shy of estimates. in general it helped lift the shock in after hours trading. 45.73. boeing is increasing the dividend by 20% to $2.05 a share. they announced a $20 billion buy back program up from $18 billion approved last december. that lifted the stock in initial after hours trading. it finished the regular session down a fraction to 316.13.

jack in the box looking into selling itself. the restaurant chain has seen lower sales and operating earnings and talked to buyers about a potential sale. the board didn't lay out a timetable. the stock rose 2% to 82.03. california regulators late friday said pg & e falsified natural gas pipeline safety records for years. an inspection found the company didn't have sufficient staff to fulfill required inspections and it pressured employees to complete the work. pg & e is taking action in response to the findings. the shares fell 6% to 24.44. today is one of the busiest days for fedex this holiday season. they expect to break records and process for packages than ever. frank holland takes us behin the scenes at a facility in edison, new jersey. the e-commerce boom has this

fedex facility busier than ever. >> it's a huge impact on the holiday shipping season and also a year-round phenomenon. >> reporter: the company predicting it will deliver more than 400 million parcels, packages and products between thanksgiving and christmas, breaking its record from 2017. >> the volumes and the peak season start to accelerate earlier every year as e-commerce grows. >> reporter: u.p.s. and the post office expect to ship a record amount this holiday season. for thanksgiving week, cyber week, and the week after, all three getting high marks for on-time delivery. fedex hit 95%. the average for the rest of the year is 98%. >> definitely growing. we can handle the volume. we are looking at new ways to automate to handle more of the volume. >> reporter: this automated facility in edison, new jersey, was built in 2016 in response to the e-commerce explosion. fedex says the automation you see here helps the company handle more volume and deliver even bigger packages.

>> we have about 80% of volume in the middle of the package spectrum that goes through the automated system. this time of year with e-commerce, really the ends of the spectrum change. the smallest packages with volume increases and the largest package increases as well. think of tires and trampolines and small furniture. comes to the facility, especially even higher this time of year. >> reporter: last quarter fedex saw the amount of packages it handles on an average day increase by 3%. analysts expect the trend to continue. fedex expects more and more orders than can fit under a christmas tree. that requires a more flexible supply chain. management says automation is a key to the goal. >> allows us to be flexible. we can ramp up and down. it allows us to move volume around in different ways. during this time of year especially we have surges that happen from our customers. >> reporter: for "nightly business report" i'm frank

holland in edison, new jersey. >> fedex reports the quarterly results tomorrow. investors hope to hear more about the delivery business. coming up -- why the future of retail may be cashierless. cbs's board of directors concluded the investigation into les moonves and cultural issues.

it found sexual harassment and retaliation aren't pervasive but inclusion is inadequate. moonves will not receive a $120 million severance payment. google is providing details of the expansion into new york city. the company plans to spend more than $1 billion in lower manhattan as part of a project that could add more than 7,000 workers which would double the current number in the city. google opened the first office in new york 20 years ago. california has abandoned the plans to tax text messages. regulators say a new fcc ruling prevented the state from leveeing the tax because it reclassified texts. the money raised would have gone to fund programs to bring connectivity to underserved residents. it was opposed by consumers and the wireless industry. the holiday shopping season is entering the home stretch. one theme that's emerged is high tech convenience especially at

check out. courtney reagan is in dallas tonight. >> reporter: time is running short to finish your shopping. but a store with no true checkout may improve your frantic experience. at least that's what retailers like sam's club is hoping. this new sam's clo ee's club no store and technology lab in one. the walmart-owned retailer can test technologies before deciding which to go with. scan and go has been available as one checkout option for sam's shoppers for a couple of years. it's the only way to check out here. there are no registers. sam's club said the scan and go checkout hasn't eliminated jobs, just repositioned what employees do at the store. a member host helps shoppers sign up with the app for the first time which takes about two minutes. then they're ready to shop. you scan items as you go and load up your cart. at the exit you scan a qr code on the phone as you go.

>> we have had great member feedback for almost three years now with scan and go. it's one of these applications, the rare ones where people tell you they love the product, love the time it saves them, the ratings are high. the reusage rates are high. it's 40% up over a year ago. >> at amazon go stores shoppers just scan in with the app when entering, shop and walk out. cameras and sensors detect items in the cart and charge you when you leave. while sam's and amazon built their own systems, standard cognitions sells cashierless technology to grocery, drug and convenience stores. like amazon go shoppers check in with the app, cameras detect purchases and charge the account automatically. none of the companies are disclosing the cost of the technology. standard cognition says in the long run it's less than the cost of traditional checkout. like all technology there are bugs that need worked out.

it's not always perfect. sam's club says that's part of the reason for testing at this one unique store. for "nightly business report" i'm courtney reagan in dallas, texas. >> another look at the final numbers on wall street. the dow dropped 107 points. the nasdaq down 156 and the s&p 500 fell 54. that does it for "nightly business report" tonight. i'm sue herera. thanks for joining us. have a great evening. we'll see you tomorrow.

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