announcer: this is "nightly business report" with bill griffeth and sue herera. death of a jagiant. bogel who revolutionized investing has died at the age of 89. banking on it. the big banks power higher, pulling in record profits in 2018, adding steam to the recent market rally. at a ossroads. the markets have moved sharply higher in a short amount of time, but how ft is too fast? and what happens next? those stories and much more tonight on "nightly business report" for wednesd., january 16 we do bid you a good evening, everybody. we begin tonight with some sad news. jack bogel, the founder of vanguard, has passed away. he, of course, was a giant in

th investing world. he revolutionized how americans save for retirement with low cost, low fee mutual funds tied to thet indexes. he helped the small investor build wealth and r wall street's excesses. tyler mathisen takes a look at the life of a legend. >>s indexing alway works best. up, down or sideways. >> in 1975,acbogel started the vanguard group, and with it a new way of investing. e> jack was the creator effectively of index fund. >> index funds, mutual funds whose portfolios match a market barometer, like the s&p 500, are commonplace today, but they were unheard of in the 1970s, much less the early 1950s when bogle wrote his senior thesis about the concept at princeton. >> i sd mutualunds should be operated in the most efficient

and economical w possible. i had a sentence in my thes thaid mutual funds can make no claim, superiorityhe over market averages. >> his thesis research laid the ground work for what become one of the most powerful investing movements of the late 20th centurud he con that active trading mutual fund managers failed as a group to outperform the relevant indexes, especially when you subtracts an expenses. >> anybody can do it for a year, and if you can do it for five years and a few can do it for ten years. but over a lifetime tabre's t a 3% chance a money manager can beat the market. >> afterprinceton he went to work for wellington managent for over two decade eventually becoming ceo. he was later terminated for what he called an unwise merger. so he started over, putting the indexing concepts from his

thesis into practice at vanguard. >> investors suddenly found the playinle field more l. so to a certain extent, in fact to a great extent, i wouldsa he democratized investing for indi aduals, which was huge contribution. >> that initial fund called the indeestment trust and later renamed the vanguard 500 index tracked the s&p 500.ep cs ridiculed it as bogle's folly. by 1990 investing had taken root. the reason, he turned out to be in the 15 years ending in january n2017,ine out of ten actively managed large cap mutual funds underperformed vanguard's 500 index. today vanguard has more than $5 trillion under management. >> jack bogel is pretty much like aex t in terms of what vanguard is versus a little tiny lizard over here. you don't see too many folks anywhere in the world that manage that much money.

>> after retiring from vanguard in 1999, bogle started a resech center on the vanguard campus. there he continued advocating for indexing and buy and hold long-term investing. he called trading stocks a loser's game. >> it comes right out of shakespe ie. these movthe market are like a tale told by an idiot full of sound and fury signifying nothing. i think it's speculato eculating on what other speculators are speculating on. >> and speaking of speculation, few would have bet on vanguard back in 1975, even fewer still would have thought bogle would still be woustingh critics deep into the second decade of the 21st century. he had his first heart attack at age 31. doctors said he wouldn't make it to 40, much t less live 89. he had fiv mowe heart attacks before undergoing a heart transplant at the age of 65. >> i mbe, i don't want to get carried away here, the luckiest guy in the world.

>> and he will be missed. we turn now to the day on wall stre, and it was all about the banks. the sector was one of the worst performersast year, but today it saw some new strength. for that, you can thank dow component goldman sachs, which reported solides earningsts and its stock posted its biggest gain in a decade.rt goldman's q was driven by its investment banking and lending divisions, offsetting weakness in trading revenue. it was the company's first quarter with ceo david solomon at the helm, and he said the future looks bright as well. >> for now the absolute lev of activity in the real economy remains fairly robust. this is i reflect broad ceo sentiment and our investment banking transaction backlog. >> goldman wasn't the only earnings report that lifted the mood onall street. bank of america also had a solid quarter, the result of lower taxes an rising interest rates, which allowed banks to charge more for loans. goldman sachs soared 9.5%.

bank of america gained 7%. those moves lifted the sector, which is one of the biggest, and in turn the broader the dow rose 141 points to . 24,2 the nasdaq added 10, and the s&p 500 was up 5. and now that most of the banks have reported, they have done something never done before. they turned in more than$100 billion in profits last year. thatumber couldrow even more after morgan stanley reports its earnings tomorrow.a ook at the financial etf thege traded fund sho sector is up 11% since december 24th, outperrming the broader markets. so let's turn now to david dietz to talk more about the banks. we had him on the program last friday to share his fourth quarter earnings predictions and he's back tonight to seeinow have fared. he is the chief investment strategist at point view wealth management. david, welcome back. it's great to see you. >> goodo see you. >> a quick thought, if you will,

on jack bogel. >> iev forget his lessons. keep expenses down.se nd is you're unlikely to be able to outtrade the market. the market is very efficient. before you think y have a better idea than the rest of the crowd. and finally, of cour, is you broker is not always your friend. always realize that when dealing with wall street. >> he was one of a kind. >> he was. >> we're going to miss him terribly. the banks, they have done very well with these reports for the most part, which you were expecting. let's review a couple of them here. bank of america, a big number th e. that was about what you were looking for. >> absolutely. bank of america is my favorcke or 2019. omd what i like is brian moynihan isg into his own. remember, he came into a situation where they were going inngll the w directions with ill-fated merger with country wide, ill-fated with merrill lynch at the wrong time and now what is he heing? getting costs down, he's

introducing technology, he's closing branches where that's necessary and avoiding exotic products. that was shown with a uble-digit return on equity. double-digit returns last year? >> we're also looking internationally and at a moredi rse business. goldman sachs also outperformed. >> yeah.ma gosachs, i love the start that david solomon has gotten here. and he's dealt a tough deck of cards here because he's walking into that malaysian litigation. but nevertheless, they were able to outperform in mergerdvory work, even though they had tough results in trading. they bought backhares which helped, of course. at the end of the day made some strategic cost cutting and that really helped them. >> a stumble -- a stumble for jpmorgan. now, you were seeing that last week as a proxy for the global market given their dfootprint. wh you make of their report? >> well, i don't think it was bad, but i think traders were a

little nervous about, quite frankly, jamie dimon's outlook. he was a little more cautious on what he saw going forward, given the shutdown with the government and other issues, tradean issue so forth. and of course they have been the leader. theyere the top performer ong banks last year. expectations were higher. they didn't beat those higher pectations. >> if the fed does stand patton terest rates, what does that do to the profitability of some a,these banks like the b of because those higher interest rates helped their bottom tlin >>t's the key question. on the one hand higher interest rates allow thee to cha more for their loans. on the other hand, the high interestucates r the demands for loans. the key weakness in all these banks was the housing market. there's less turnover inan housg people can't afford the higher mortgage. i think if interest rates stay pat, they'll see a little pick in mortgages and that will help them. >> david dietz, thank you. the rally in the banking

sector comes at a critical time for the market. a rough december has turne a much smoother january, of course, but has the rally moved too far too fast? mike santoli digs into that for us. >> the stock market has turnedor sharpr with its furious three-week rally which has quickly brought the major indexes to a crucial crossroadss the 500 has regained close to half of its 20% drop frombe sept into late december, an impressive comeback by any standard. it's been fueled by a rush of bargain hunting and depressed stock in the new year cbined wi expectations of a pause in federal reserve rate hikes. the rebou has taken the s&p to a level that held for most of 20 market strategists view this as a fairly likely area where the rally might or pull back. an index level that used to serve as the floor often becomes a ceiling for a time when it's approached from the decline from september tote december wasep and damaging enough for the market to require

time and perhapsomehoppy sideways action at least before aroper base is built for stocks, according to standard wall street wisdom. which direction the market takes at this crossroads will have something to do with how the rest of corporate earnings ro seasoneds relative to reduce groh expectations. bank results have been good enough, but they will remain lower than they were in early december. the markets overall valuation has come down quite a bit in the lastear with struggling indexes combining with a 20% surge in profits to compress price earnings ratio on expected profits from 15 to 18. but the recent rally hasn't freed investors from the familiar questions thathe restrained market late last year. how much life is left in this economic expansion? will the f tighten policy too much? and is there a path out of the trade war before global growth weakens further? for ightly business report, " i'm mike santoli. so what is next for stocks? joining us is art hogan, the

chief marke strategist at national securities. we have to start -- of course everybody will be telling stories about jack bogel the next several days as we remember y of walnt not o street but of just life in general. any memories you have? >> i just remember that one time i got to talk to jack bogel. one of the things i remember in theai conversation when he that the stock market is a great distraction to the business of investing. i've alw ts takent to heart. he was the first person that really got arouno people to say you need to get rid of some of that noise and think about th tlong term and buy and the hold. he did more for individual investors than i think a m this ever lived. very sad day to see him go. but it's amazing how much he changed our industry over the 50 years that he was in so. >> tely. aur, you've changed your targets a litt bit for this market because of three main events or utadlines that have been there, and one of them is the government shutdown, correct? >>co ect. i think that -- you know, it's

interesting, sue. the government shutdown is very muchal politevent, but the longer it lasts it becomes an economic event. i don't think we're at a pointel wher we can you how much it's going to take out of first quarter gdp but we know it's something. the longer it drags on, the more that bemes. at the same time you've got global economic slowdown, a lot of that caused by concerns over a trade war with china. so the longer that takes to resol resolve, the more eco damage that does. i think we see the slowing global economy and know some of those cause and we have to ratchet back some of our expectations for earnings for the s&p 500 because of that. so we've come in and still have an upside to where we are now, but certainly not as much as we pected in the first half of last year. >> you know, we've had a pretty good snap-back rally since christmas eve after a pretty dismal december, but there seems to be still a lot of skepticism about this rally, that it may not last. do you think because of these headwinds you just atitemized, why people are looking at this a bit skeptically? >> i think that's it. when you think about where we

are, we're about back to neutral. so an s&p 500 that's trading about 15 times forward and that's about average. we're 10% off the highs and 10% off the lowsnd kind of back in the middle ground. i think that's exactly where the battle goes on. i think 2600 on the s&p 500 is exactly where d we'w that battle loiine. if earnings can come in better than expected and wghve priced enad news in, the problem is with all those uncertainties guidan 2019 would have to be lackluster at best. i don't know i i say things are great in 2019 unless we have re lution on the governmen shutdown, brexit and the trade war with china. >> on that note, art, thank yo as always. art hogan with national aelong sentiment today on wall street was china. that country's central bank jected a record $83 billion into the country's financial ov system, a designed to shore up liquidity in the world's second ecomy. it's aart of a wider

stimulus plan which strategists say may also ilude tax cuts and an increase in government spending. separately, "the wall stre journal" is reporting that the justice department is pursuing a crimal case against huawei for alleged theft of trade secrets. in the unitedm,king prime minister theresa may survived a no-confidence vote, but b not much, and it comes just a daf ter ukawkers rejected her brexit proposal in a historic paulmentary defeat. willem mx reports tonightrom london. >> reporter: theresa mayas now spent 918 days resident at street.10 downing that will soon become 919 after this evening'w nar political escape. >> the ayes to the right, 306. the nos to the left, 325. >> reporter: it was an almostab inevit consequence of yesterday's crushing defeat, when scores of her own nservative mp voted alongside

their political opponents to ithdrawal the agreement the prime minister's team had negotiated with europe. this evening's marginal victory was only possible thanks to what's known as a confidencpp ad deal with a small northern iron party of democratic unionists. without their ten votes, may would have lost. may promptly promised to meet with her political enemies to scuss what could constitute a brexit consensus. >> i would like to invite the leaders of parliamentary parties to meet with me individually an i would le to start these meetings tonight. mr. speaker, the government approaches these meetings in a ndnstructive spirit i urge others to do the same. >> reporter: her opponents immediately insisted they would only attend such meetings with strings attached. the prime minister has always insisted the threat of no deal is necessary leverage for any negotiations with brussels. but jeremy corbyn said talks could not continue if that option remained on the table.

>> the government must remove, must removeea y, once and for all, the prospect of the catastrophe of a no-deal brexit from the eu and all the chaos that would come as a resu o that. >> reporter: may's chief critic in westminster laid out zifrl o -- several options. >> the only way forward is to extend article 50 and ask the people of scotland and of the united kingdom whether they want the prime minister's deals or whether temy want ton in the eu. >> reporter: the british prime minister has if nothing else has won at least a few days of breathing spaceda until m when she returns with a workable plan b that could command a majority among lawmakers. i'm willem marx in london. time to take a look at some of today's upgrades and downgrades. we begin with sharesf nordstrom. they were downgraded to neutral from buy at goldman sachs, the analyst saying that the retailer

is not selling as much merchandise at ful price. last night nordstrom did warn of soft holiday sales. owthe price target $50. that stock fell more than 4.5% to $45.01. ab inbed was downgraded from lnderperform. sales pressure w likely persist which could lead to disappointing earnings. the maker of bud and budfeight 2.5% to $7.50. meanwhile metlife was upgraded to buy from neutral at bank of america merrill lynch. the analyst cited management strategy to address past issues. price target $53. that stock rose in trading to $44.87. still ahead, the parts of theno country where ec concerns are mount

homeer bui started the new year in a better mood. according to the nional association of home builders, sentiment rose in january rebounding from a three-year low. the report cites a declinen mortgage rates in recent weeks and solid job growth. tamonthly housings and builder permits will not be released tomorrow due to the partial governmentshutdown. a new survey from the federal reserve shows a declino inmic optimism in somend districts growing concerns. st e liesman has the detai from washington based federal reserve is

with economic anecdotes from around the 12 districts saw 8 of 12 dtricts reporting increased growth at a modest to moderate kansasut four districts, city, new york, st. louis and cleveland, saw less robust in fact growth was flat in kansas city and leveled off in new york. the outlook remained generally b positive many districts fid their contacts grew less optimistic forr particular reasons, because of the financial market volatility, rising intert rates, falling energy prices also hurting timism as well as elevated trade and political uncertainty. the shutdown was only mentioned by the chicago district related to farmers not receivipa governmentents, but only a small part of the shutdown was covere by this beige book so far. there were several mentions of tariffs linke to risin uncertainty and higher input prices.er some companies able to pass along those hire tariff prices to nsumers. several districts said christmas sales were pre good, but auto

sales were flat. manufacturing expanded in most of the distris, but slower growth waspo ed. serves growth slowed in a few districts and the agricultural sector strgled withower prices. the beige book reported a pretty rerosy picor employment with jobs growing in several districts.ke labor m is said to be tight and business contacts said they had trouble finding staffer. there was even som labor hoarding going on in atlanta where extra workers were hired anneeded. modest gains throughout the country, though entry level wages were rising. despite those higher wages, pric throughout the economy increased only modestly. there were some higher input costs by businesses, but they had troub passing along those higher prices to consumers. overall this was aed m report, showing that growth was still continuing in the country, but at a slower pace. for "nightly business i'm steve liesman in washington. a mega deal in the fast-growing financial tech industry. that's where we begin tonight's

market focus. fiserv is buying first data in a takeover valued at $22 billion making it one of the largest in the sector. they sellte s to financial firms, including those related to electronic payment transactions. first data offers point o sale products for retailers. first data soared 21% to 21.24. fiserv fell 3% to 72.57. blackrock reported quarterly earnings that missedanalysts' expectations. the world's largest asset manager saw its assets underin de but tt was due to the drop of the in market late last year. they did report record etf inflows of more than $80 billion and the shares rose 3% to 413.. a ford says fourth quarter profit won't be as strong as wall street had hope. the automaker cited lingering uncertainty, including trade and britain's exit from the eu, but ford added that it has the

otential to grow earnings this year. nonetheless, shares fell 6% to snap's chief financial officer unexpectedly resigned less than one yearnto the job. in an s.e.c. filing, he said his decision has nothing to do with matters related to accounting or management operatns, but his exit is the latest in a string departures.ecutive shares dropped 13% to $5.64. u.s. bank corp's fourth quarter profit rose by 10%. its results were helped by higher interest rates, lower expenses, and ann increase loan activity. revenue also rose compared to last year. the stock was up more than 2% today to $49.11. charles schwab reported better than e eectednings and profit as well with the brokerage's results helped byin in trading activity as well as record asset inflows acss both its retail and advisory service businesses. shares gained about 5.5% today to 46.70.

railroad operator csx reported quarterly profits that topped wall street expectations. the company cited an increase i shipment and higher prices for transporting that helped offset higher expenses. shares initially fell in extended session today, but csx finished the regular day up a fraction at 65.38. coming up, an american icon gets a second life. here's awe look at what

we're watching for tomorrow. financial sector earnings continue with american express and morgan stanley. netflix reports its quarterly results just days aftersi incr prices on its streaming services. economic data will focus on the labor market with the release of jobless claims. that should be interesting. that's what's coming up tomorrow. incredibly it looks like sears will stay open. ccording to multiple reports, theretailer's chairman, eddie lampert, won a bankruptcy auction aft sweetening his offer twice to more than $5 billion. lampert's last-ditch plan must first be approved by a bankruptcy judge. if approved, it would keep about 400 stores open. but the company is not out of the woods yet. there e reports that some creditors still object to lampert's plan and would a total liquidation of the retailer. the departmeneof agricults recalling workers to temporarily reopen an agency that provides services to farmers and ranchers. about 2500 farm service agency workers hale beend back to

work without pay, by the way, to process existingns farm l and to provide tax documents. the office will not process new applications for trade aid payments, by the way. b andore we go, here's a look at the final numbers from wall street. the dow advanced 141 points, the nasdaq added 10 and the s&p 500 was up 5. and that is "nightly business report" for tonight. i'm sue herera, thanks for joining us. >> bill griffeth. rip, mr. b. we'll see you tomorrow.

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