h> announcer: this is "nightly business report" w sue herera and bill griffeth. stocks surged. the market heats up on a new report that the trade war with china may be thawing. forgotten middle child. investing for the long term? why midcap stocks may be your best bet. stressed out? how to make sure your investment decisions are not as volatile as the those stories and much more tonight on "nightly business report" for this friday, january th good eng, everyone, and welcome. as you know, the marketheoves ing about progress in trade negotiations with china, and today that's exactly what it got. there are reports that the world's second largest economy has offered to go on a x-year

buying spree to increase imports from the u.s. the goal, to zero out china's massive trade surplus. investors have bkin l for signs that the trade war may be easing ahead of a key meeting between u.s.nd chinese officials later this month, and that sent stocks thsoaring. dow rallied 336 points to 24,706. the nasdaq added 72, and the s&p 500 wasp 34. the major indexes posted their first four-wk win streak since august. kayla tausche has more on the trade talk that drove today's rally. on he market has zeroed in what will be on the table when top economic officials from the u.s. and china mee later this month. it allt began athe g-20 in december. each side gave a list of demands, sugstions and nonstarters. i'm told those g-20 discussions are where china proposed a massive increase in purchases of u.s. goods through 2024. that six-year time frame was not a coincidence. china's pitch was that the

purchases would span president trp's re-election campaign and his potential second term. china hoped that would resonate with trump, who rejected previous offers focused solely on imports. the price tag, $1 trillion, would cut the trade deficit in half over the next six years. it's unclear whether china would agree also to tackle thornier issues of intellectual property that started theig trade in the first place. >> on the one hand, they may have a shorterm deal that provides some money and some boost for the market, buthe longer term problem is the fact that we are on a collision course particularly in the emerging technologies. >> the chinese have drafted a new foreign iestment law prohibiting the use of force technology transfe but the u.s. has dismissed that as meaningless without strong enforcement. for "nightly business report," i'm kayla tausche in washington. >> that trade talk clearly juiced the marketoday and is one of the reasons why investors are thinking about this market in a different way than they did

just a few wks ago. b pisani explains. >> the markets are resetting higher. we've gone from fears of zero or negative earnings growth in 2019 at the end of december to th nsensus that earnings will grow in the low single digits for 2019. 've gone from fears that a recession was i developinn the latter part of 2019 to the feeling that this is very unlikely now. the danger is that the rally mag be get ahead of itself. the good news is this. trade talk rumors are getting another leg up to an already althy rally. the bad news is the markets are pricing in a favorable trade deal and thets are increasingly vulnerable to a disappointment or sell the news situation. s&p 500 has mov 50points, the dow industrials 500 points since rnoon thursday when "the first reet journal" reported some progress on china trade talks. other reports friday indicated that chiay be making trade concessions, including an offer of a six-year increase in u.s. importts another rephe deal would aim to reduce the trade deficit

to zero by 2024. maybe because we've already had a significant move up aeady the market is vulnerable to a couple of risks, there's no tradal. even with a trade deal the market will sell on the news anh e will be very little, if any, reaction in the markets. another problem, m aajor trade deal could have rippleheffects on.s. economy. hopefully more trade will be beneficial, but there may be one other less desirable side effect. if you get a major trade deal,l bond y could start to rise and the fed may start to get a little more aggressive raising ralts. that's a separate problem. i'm bob pisani at the new york stock exchange. so far this year all of thei majorexes are sharply higher, but did you know that over the long term midcaps outperform large caps and small caps by a lot over a 10-year od pe if you extend that time frame to 25 years, midc stocks gained more than 1300% while the s&p

500 gained about 800 and the small caps added roughly 1,000%. so we decided t shine the spotlight on this group of stocks that tend to be forgotten. joining us tonight is mike bailey, director of research atb capital partners. mike, good to see you, welcome gack. >> thanks for have back. >> i know why you invest in large caps, maybe stable growth, predictable growth, maybe a dividend as well. i know why you invest in small caps. you're trying to get in on a company, maybe a greater growth rate. why do you invest in dcaps? >> it's a great place to play. if you want to own aed diversi portfolio, small caps are great, like ysaid, but you really wanting to own sort of all the pieces in that pie really. so you want to own some large stable companies, may some small riskier high-growth companies and something in the middle to balance that out. we do think it's a good place to be. at the current moment we own a little bit less midcap, a little more large, but we can get into

reasons why now might be an attractive time forlk some if you don't own midcaps, it could be an interesting time to start to loot it. >> does it help smooth out volatility? >> it generally and so as more -- as you can diversify your portfolio re, at really helps out. if the only thing you own is large cap, you start to plug in mid, that's a very good ing. it helps to diversify that volatility, gives you a little moreeturns as you talked about in the beginning so it's helpful. i think the question is what's the optimal setup or optimal mix and we can get into that. i think it's very helpful to own some mid for sure. >> large dcaps, you t to have the smaller price-to-earnings ratios. the bigger price-to-earnings ratios in the small what about midcaps? how do you evaluate when it's a good val or good growth opportunity? >> absolutely. generally like you said it tends to be sort o -- as you think about risk and return, midcaps kind of n as thee suggests is right there in the middle, so

you get a little more growth. it is a bit more expensive than the safer large cap names. the way we thi about it, we generally do own a little bit more large cap. we certainly own some mid. the questios timing. so right now is actually an interesting time town midcaps. we've seen the whole market really get crushed withhat grinch christmas eve bear market. it's come back a little bit. really the large caps have come back a lot more and that leaves the midcaps. they're sitting there , so there's an interesting activity. >> we've got to go at this point but i'm just curious, i know people are saying how to you define a midcap? vequickly, what is the market capitalization range top to bottom for midcaps? >> textbook definition is 2 billion on e low endp to 10 billion. 2 to 10 is what you want to own for ikmidcap. >> bailey, thanks. have a good long weekend. mike with fbb capital partners.

the president of the n york fed i calling for patience and good judgment before raising interest rates.li john ws today cited anxiety about the pace of economic growth,is adding voice to what other central bank officials have been saying about a lessiv aggre approach to monetary policy. he said being data dependent is more relevant than ever. and the latest read consumer sentiment has dropped to its lowest level since the 2016 presidential election. thatm survey fe university of michigan cited growing concerns over economic growth other economists say that the partial government shutdown and riffs are also weighing on consumers' moods right now. a separatelyew report says that industrial production posted its biggest gain inen months in december. the results were helped by a rise inot vehicle production, manufacturing activity you may know accounts for 12% of economic tivity. president trump will hold a second summit with the leader of north korent next the announcement from the white

house followed a meeting today tween president trump and a top north korean official. the two leaders first met last june in singapore. a location was not given for the next mmit. the head of the food and drug administration is warning that the government shutdown may force his agency to make some hard choices. duringd prepaemarks at a hearing, scott gottlieb called this a watershed moment for the fda. >> we're in unfamiliar territory. it's a watershed moment in the life of the we'll come out of this i think much stronger for having grappled with this cllenge together and having prevailed. but the road between now and the end will be marked by continued challengor, hardships our people and continued impacts to our work as we work on preserving our functions. >> and partial government shutdown is coming at a bad tim for some entrepreneurs as they try to get their small busisses off the ground. kate rodgers has our story tonight.

>> elizabeth nguyen was in the process of launching her hot sauce company when things came to a halt. she and herhe husband make t sauce in a commercial kitchen in the richmond arr. heontact at the fda is now furloughed, putting the approval the startup needs to move forward on hold. a>> i feelittle bit like political pawns right now. yes, borders security important, but we don't have anything to do with the border security right now. we are just trying to open a hot sauce business. >> in a statement, the fda sano while we c speak to this specific situation, only certain fda food operationsontinue to the extent permitted by law, such as activities necessary to address imminent threats to the safety of human life. meanwhile outside ofpittsburgh, amanda silk is worried about the growing backlog at the small

business administration or sba peen it comes to loan approvals. silk isng a fitness studio franchise but needs a $350,0 loan from the federal agency. ewe's just a f weeks away from signinon a generalactor and closing on the loan, but is concerned that her project will be delayed. silk's broker told her and other franchisees to prepare for disruptions through the first half of 2019 due to the partial closure. >> i have no control over what's happenin in the government right now. and i feel like my business is being held hostage. my business isn't political, it's a f ness studio. and i feel very help less and very hopeless in a statement the fda said in part that the agency is provi assistance to small businesses in the form of low-cost, long-term loans for equipment and real hitate were approved prior to december 22nd. once full operations are permissible, the sba is fully prepared to handle loan requests to satisfy any met demand. until then it's a waiting game

for entrepreneurs ready to get their businesse off the ground. i'm kate rodgers. timeo take a look at some of today's upgrades and downgrades. we begin with shares of which was upgraded to buy from neutral at ubs. the analystecays that thet pullback in oil prices has presented a buying opportunity in chevron shares. price target $135. that stock rose 2% today to $114.37. f> kimberly clark was upgraded to overweigm neutral at jpmorgan. the analyst says price hikes,in cost s and abating inflation will be good for company.or that price target is $129. the company is scheduled to report its earnings next week. meantime the stock gained 2% to $116.87. nter public group was downgraded to sector perform from outperformt rbc. the analyst expects organic growth to decelerate this year after recent account losses. the price target is $24. the shares fell a fraction to

$22.25. signet was downgraded to sell from neutral at citi. the analyst says it is vulnerable to an economic slowdown. yesterday we told you about its weak holiday sales. the price target is0. nonetheless, the stock rose 1% to $25.41.ti ahead, why tesla's road ahead looks bumpy. facebook's privacy lapses may result in a record fine. according to "the washington post," the ftc is reportedly consering a payment in excess of the $22.5 million imposed on

google in 2012. the ftc announced an investigation into facebook back in march when it was accused of misusing the personal information of its users. opec slowed its oil production in decemb. in fact it was its biggest monthly output decline in two years. according to the international energy agency, that decline was dry saudi arabia, the world's largest crude exporter. like stocks, oil prices today also got a lift from the news on tru.s./china e. domestic crude settled up about 3% today. america's most popular vehicle is going electric. ford is planning an all-electric f-150 pick truck. the automaker said engineers have begun working on a moreen effi vehicle that will come with more power than traditional gas and diesel trucks. the timing of when it will be available is up in the air. meantime tesla is cutting 7% of its workforce. e electric automaker says the move is needed to help the

company turn a profit while it makesower priced models. but investors don't seem to be onbod. they sent the stock down 13% today. or uslebeau has details >> for all the glitz surrounding at a and its electric cars, the end of the day, this is an automaker barely turning a profit, so it needs to keep costs in check, which is why ceo elon musk says he's made the fficult choice of cutting 7% of the company's workers, roughly 3100 people. in an e-mail to employees, musk wrote while we have made great progress, our products are still too expensive for most people. that includes m tesla'odel 3, which on average sells for more than$50,000. musk wants to sell a version of the model 3 for less than 40 grand. that means bringing down production costs. from the battery backth t assembly lineea last yr as tesla raced to

boost sales, it hiredf scores workers and added production by erectingmanent tent in its parking lot where it built more model 3s. the surge in production helped tesla boost deliveries and in the process turn a profit. >> mr. musked surpr wall street by posting a profitable quarter in q3. i think he wants to do that in the future while he takes costs down. he's doing a little bit of right sizing. >> musk says tesla will likely turn a profit in the fourth quarter, though it may not be sizeable. with the company developing n vehicles like an electric semi and an updated version of its roadster, the question now is whether tesla can bring down costs while boosting sales. in the end tesla's fortunes will wme down to whether it can be more efficientle consistently turning a profit. phil lebeau, nightly business report, chicago. the grinc visited tiffany's, and that's where we begin tonight's market focus. the upscale jeweler reported holiday sales fell from a year

ago and gave a downbeat full-year outlook. the company blamed a decline in salesoreign tourists, primarily chinese. but some analysts remain upbeat on tiffany's long-t and that helped the stock gain 5% to $89.82. >> the apparel maker vf corp raised full year revenue and profit .foreca this as the sneakers vans lifted they cut inventory of vans and launched new lines of sneakers. the shares gained 12% to $82.34. state street plans to layoff 1,500o workers cut costs and automate more of its businesses. about s100ior management jobs will be affected. the aim is tohed $350 million in expenses this year. the shares rose a fraction to $71.30. cvs and walmart have settled their d rferences andched an agreement on a pharmacy contract. cvs said on monday it expected walmart to leave the drugstore

pharmacy benefit network because the two companies could not agree on pricing, but the companies did not disclose the terms of the new agreement. they said it covered multiple years, though. cvs gained3% to $65.52 and walmart was up 1% to $97.73. one of eli lilly's cancer drugs as suffered asetback. the company said that its sarcoma treatment did not significantly improve the overall survivalnt of pat in that trial. the drug had been approved back in 2016 but continued approval was dependent on fthertudy to confirm its benefits. lilly is now discussing what comes next with regulators. shares dropped 2% today to $116.59. and schlumberger reported quarterly revenue that toppema ess. given the volatility in crude, the ceo says his company's spending outlook remains uncertain.

it is considered a bellwether for the oil field services sector,nd that stock popped pie 8% to $44.73. time for our weekly market monitor who h aix of large and hadcap companies tt he sees growing double digits over the next year. he is david rainey, portfolio manager. lcome back, nice to see you again. >> good to be here. >> and you pick these from differ.t industri you say that basically they're all going to groonderably over the next couple of years. let's start with your first pick, whichri is an tower. a big cell phone operator with internional aspirations. >> sure. american tower is this country's largest cell tower owner/operator. they both acquire and build sites. the u.s. market is running and gunning rig now. all four wireless carriers are aggressively rolling outic se and technology and building out spectrum. the u.s. market is very strong and they also have very large

presence overseas in select em ging markets. we're confident that their rate ofompounding should be able to continue for well into the next five years. it's been a top holding of ours for years and we look for it to being in the fund for a long time. >> another one, a big holding of yours,s carmax, the big used seller. it's had a tough time but is starting to come back. what do you make of this company right now? >> used car sales ebb and flow in sync with new car sales. they have been a disruptor in the industry for the last 20 years. they have been a mid-teensco ounder for the last ten. they're actually right -- today they're kind of first inning of rolling out a new nationwide omni channel selling strategy, which we thi h willp them address the millenial market, address those car buyers who like to do their research and their buying and their financing

online. and so within the next year or so, they will have rolled out this omni channel strategy across their200 stores. they'll continue to build stores. they'll have same-store sales growth. we think they will continue t be a disruptor in what is a very, very lge industry. >> and another industry that is growing involves hexel rporation who designs and manufactures lightweight performance compouites. why doike it? >> absolutely. they are part of a global oligopoly that designs and creates structures using carbon fiber composites and building blocks. these products are increasingly being used by boeing andirbus in specialized defense, rgy strial and wind e applications. once a product is designed into an aircraft and air fre, it's

there for the next 20 years. >> okay. >> faa certified. verconsequently they're high barriers to entry for competitors and very high switching costs for pnufacturers, so we think it too issed to generate mid-teens earnings growth for the fund for the foreseeable future. >> david rainey, david, thank you. coming up, keep calm and invest on. how to make sure your emotions don't get the best of you in this up-and-down market. with the markets closed for the martin luther king jr. holiday, on monday here's what to watch f on tuesday. dow components j & j, travelers

and ibmhe report earnings. the world economic forumwi in davo be under way. it attracts business leaders from around the globe. and the market will have its first chance to react to china's economic growth report. that is what to watch for on esday. as you well know, the market has been giving investorsor whiplashonths now. it started in early october when stocks beganhat steepdecline. the dow fell by 17% until that troughbe on dec 24th. then a sharp turn-about. it has been roughly 10% higher since tmet it's enough to make any investor feel strong emotions from anxiety to enthusiasm. but fancial planners and money anagers always advise to take emotion out of the investment process. how do you do that? our guest has a little dit take on that tonight. tim mer is director of personal finance. ghanks for joining us to >> it's my pleasure. >> you say don't avoid emotion

but face your emotions. what do you mean? >> we can't avoid emotions, we can't treat them as the enemy, it's a biological imperative. instead of trying to take of the picture, i invite investors to address their emotions and understandre the d to which they can handle market oolatility both the downside and the upside and to customize aio portfased on their unique ability, willingness and need to take risk, understanding the emotional component asto oppose ignoring it. >> and you point out tlot the pain ong impacts us twice as much as the joy of gain. it leads os to that fear missing out. >> it certainly does. i'll give a you great example of this. when was the last time you called your financial advisor to say, hey, i just wanted to thank you for the gre job you've done allocating my portfolio. i've noticed it going up recently. that doesn't happen quis much as when people call their financial advisor to ask exactly

whate going on in market when the market is going down. so that's a good example where you can see precisely how this works. take into doe account the fear of missing out. for example, in december theoi mark was down and people were worried. now if they happen to get out of the market and they see it going up,o they a may feel that same pain of missing out on this new upturn. >> but you also have to know your risk tolerance. if you'reosing mor than you're comfortable with, you're going to become very emotional, right? >> that's a great point, bill. it's probably the most importann factor for investor to look at. i'm not suggesting investors go e0%ities and then white knuckle it through any sort of market downturn. no, in fact it may well be that ur past history with investing will teach you how much volatility you can withstand. then i remember establishing a portfolio that is designedec ically to help you deal with that. so don't have everything in stequities. eople can't handle the

full brunt of the marketha balance out with the right amount of conservative bonds. >> i feel calmer already, by the way. thanks for joining us tonight. tim mauer joining us. >> thank you. before we go a final look at the day on wall street.al the dowed 336 points, the nasdaq added 72 and the s&p 500 was up 34. the major indexes posted their first eefour win streak since august. and that is "nightly business report" for tonight. i'm sue herera. thanks for joining us. >> i'm bill .griffe watch out for that big snowstorm in parts of the country coming your way. have a goo you tud, we'll see ♪

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