>> for right now, i think there's the possibility the summer rally will continue. >> susie: wall street's blue chips kick off august with a triple-digit gain. >> jeff: what's behind the optimism? strong profits and some hopeful economic data. you're watching "nightly business report" for monday, august 2. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by: this program is made possible

by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt >> susie: good evening, everyone. tom hudson is off tonight, jeff yastine joins us. treasury secretary timothy geithner delivered a pep talk today on the new rules to reform wall street and the banking system. speaking to business leaders at new york university, not far from wall street, geithner promised the reforms would not crimp innovation or competition, jeff. susie, the financial regulatory reforms were signed a few weeks ago by the president, and today geithner said the government will move quickly to put them in place and there won't be layers of red tape. >> susie: the treasury secretary also had a tip for wall street:

>> don't wait for washington to draft every rule before you start changing how you do business. get out ahead of the process and out in front of your competitors. >> susie: also talking about the economy today, ben bernanke. echoing his testimony to congress last week. the federal reserve chairman told a legislative conference in south carolina he sees modest economic growth and a long and bumpy road to recovery. he thinks persistent weakness in the housing and labor markets and weighing down the economy. >> jeff: wall street didn't let those worries keep it down today. stocks started august with a powerful rally: the dow jumped 208 points, the nasdaq added 40 and the s&p 500 rose 24 points. the rally came on lower trading volume on both the n.y.s.e. and the nasdaq. today's gains come after a strong performance in july, but can the momentum continue? erika miller asks the pros. >> reporter: this is the time of

year for winding down and taking it easy. but what's true for beach vacationers... is not true for the stock market. since the start of july, the s&p 500 has been blazing ahead, gaining more than 9%. strategist chris hyzy says there's one major factor driving momentum: >> the big news really is coming out of corporate earnings. corporate earnings are not only outperforming for the second quarter looking back, but guidance... guidance going forward across the board has been better than expected. >> reporter: he thinks the stock market is on the road to recovery and will end the year 10% to 15% above current levels. s&p's sam stovall also thinks stocks will end the year higher, but he sees plenty of reasons stocks could retreat in september and october. >> i could easily see the sentiment of the market turn once again, if we start to get additional concerns about the mediterranean countries not being able to meet the requirements of the e.u. and the i.m.f. bailout; if we find out that there are additional problems with hungary; if we feel that some additional

economic data comes out weaker than anticipated. >> reporter: also adding to uncertainty are midterm congressional elections. if history is any guide, the s&p could be headed for trouble. >> in the three months leading up to the midterm elections for first term democratic presidents, the average decline is about 5.5%, and the market has fallen in five of five times, so it does not bode well for equity prices" >> reporter: almost everyone agrees that friday's employment report will have a big impact on market direction near term. if private sector payrolls are strong, experts say it will add more heat to the stock market rally. erika miller, "nightly business report," new york. >> susie: here are the stories in tonight's n.b.r. newswheel: a 12th straight month of expansion for the nation's factories added to today's market rally. while the i.s.m.'s manufacturing index dipped slightly in july, it was still well above 50,

indicating growth. oil prices surged almost 3% on that manufacturing data. in new york trading, august crude futures settled at $81.34 a barrel, the first close above $80 since may. meanwhile, the securities and exchange commission is looking into possible insider trading in b.p. shares. reuters reports the agency is looking at trades made after the april 20 explosion that started the gulf disaster. >> jeff: still ahead, if you own stock in a public company, the people who sit in these chairs answer to you. we kick off "the rules of the board," a three-part series looking at what to expect from corporate boards. >> susie: included in the energy bill the senate is expected to take up this week is a requirement that natural gas drillers disclose the chemicals they use in their process. the issue has hit a nerve along the marcellus shale, which runs

beneath the surface of much of new york, ohio, west virginia and pennsylvania. until recently the gas was hard to get to, but new technology has opened up the opportunity. as stephanie dhue reports, people in the town of hickory, pennsylvania are in the midst of controversy about the environmental impacts of tapping the reserve. >> reporter: stephanie hallowich built a house three years ago on top of a marcellus shale field. she didn't know there was already a contract for the mineral rights under her land. from a ridge above her house, you can see gas wells, a compressor station and waste water containment site. >> there's so many so many what ifs in that contract, it doesn't talk about pipelines and compressor stations, and processing plants, and 24-hour traffic, and noise, and dust and what people dealing with every day. >> reporter: she's worried about the impact it's having on her kids, who aren't allowed to play

outside unless the wind sock is blowing away from the house. the family buys the water it uses because of fears their well water is contaminated. >> we still don't know exactly what we're being exposed to. >> reporter: the development of shale gas wells is done in stages. first the lease rights must be secured, then a well is drilled. to efficiently drill in shale, the well is drilled down 8,000 feet and then about a mile horizontally. >> after the well is drilled, comes the fracking, which involves sending water, gas and a small amount of chemical solution into the well bore to force the natural gas to the surface. >> reporter: that fracking process is suspected of contaminating water. ron gulla had one of the region's first horizontally drilled wells on his 141-acre farm. he claims the drilling company polluted his pond. >> i don't know what all they did up here, you got to realize, this is the second horizontal done, this was all experimental, we are the guinea pigs.

who knows what they were using up here, we're not privy to that information. >> reporter: both gulla and hallowich are suing range resources, which drilled the wells. range says there's no evidence either property has been contaminated. also involved in the controversy is the pennsylvania department of environmental protection. it says gulla hasn't been able to substantiate the claim his pond was contaminated. colorado congresswoman diana degette has sponsored the frac act, which would force drillers to disclose the chemicals they use in fracking and comply with the federal safe-drinking-water standards. >> we've had a lot of anecdotal evidence about contamination of drinking water around fracking sites, but because the law does not require the disclosure of the components of the fluid, people can't prove what it's being caused by. >> reporter: range resources recently says it will release the makeup of the chemicals it uses in fracking. degette says self-disclosure can

work, but there has to be a standard. >> if there's a standard method by which the companies disclose their information, then we're ok with that, but we have to make sure that it's consistent, that it's easily accessible, not just by government regulators, but by the general public and by emergency responders. >> reporter: consol energy is a big player in the marcellus shale and uses fracking to release natural gas. c.o.o. nick deiuliis admits companies in his business have driven hard to prove the opportunity to investors. >> that rush to drill and prove or demonstrate has resulted in some bumps, okay, with how we deal with the community and we have not put our best foot forward, as an industry and that's where we need to tighten up. >> reporter: he says the industry needs to be more proactive and that it may need to slow down. >> to take a 30 or 40 year look, and if our values are first,

truly safety, and second compliance, then that means we're going to have to slow as it goes to a certain extent to make sure that we're being transparent and make sure that people know the risks and become comfortable in terms of what this opportunity means to the community. >> reporter: the community here will have to decide if the risks are worth the rewards. the people here may get some help from the u.s. environmental protection agency, which has begun a two-year study of the impact fracking has on drinking water. stephanie dhue, "nightly business report," hickory, pennsylvania.

>> jeff: for weeks, all we've heard about is how bad things are in europe... and then today comes strong results from european bankers h.s.b.c. and b.n.p. paribas, and wall street caught fire. let's take a look in tonight's "market focus." h.s.b.c. and b.n.p. are some of the biggest banks in europe. profits at h.s.b.c. doubled in the first half of the year. everyone saw that and realized, "hey maybe we've been too negative, too pessimistic about the global economy." that set the stage for a big run up in u.s. financial stocks. here is a look at the s.p.d.r. financial sector fund. today's gain puts it up 11.5% from july lows. that's welcome news for investors who felt the sector's painful 13.5% percent plunge in q2.

speaking of financials, metlife shares added to the gains. the insurer is issuing new stock, 75 million shares, to help pay for its purchase of american life insurance, formerly part of a.i.g. a.i.g., for its part, rose 4%, putting shares 10% below its april high. next up, energy stocks. a couple of developments here. first, oil prices rose almost 3% to $81.34 a barrel today, up nearly 14.5% since may. and late friday, the house of representatives approved a bill that would lift the current moratorium on deepwater drilling in the gulf. it still needs senate approval, but that would turn on the deepwater taps in the gulf again. among the drillers, anadarko petroleum was the best performer in the s&p energy sector. rising oil prices also helped exxon mobil. the company recently topped off its stock repurchasing program, $3 billion for the third quarter. two of the biggest names on the dow-- g.e. and intel-- are forming a joint-venture health

care firm. both firms saw gains today. the new company will look at how the elderly and others manage and live with chronic disease. the venture will combine g.e.'s home health division and intel's digital health group. today, alcoa led the s&p materials sector higher. alcoa completed the buyout of traco, a maker of windows for commercial buildings. on the nasdaq, guess what company is now the top seller of mobile phone operating systems? according to research firm canalys, it wasn't apple. it was google and its free android operating system. both stocks getting a lift today. and what about research in motion? saudi arabia and united arab emirates see the blackberry as a national-security threat, and want to suspend blackberry service later this year. closer to home, rimm is readying a new blackberry rollout. and get ready for the "blackpad." it's a competitor to apple's ipad. that's due out in november.

humana shares seeing nice gains after second quarter results. profits rose 21%. given the economy, fewer people are heading to doctors' offices. humana also boosted enrollment its medicare-advantage program for seniors. and finally, hewlett packard settled a justice department lawsuit over its government contracting business. the settlement will cost h.p. shareholders about two cents a share in third quarter profits. >> susie: there's a fight

brewing over occidental petroleum's board of directors. two big institutional investors said today they would try to unseat at least a third of oxy's board members. relational investors and the california state teachers' retirement system object to the c.e.o.'s lavish pay package; ray irani was paid $52 million last year. this is the latest example where shareholders are asked to make a judgment call on the board of directors of a company where they own stock. tonight, we begin a three-part series called "rules of the board" with a look at how much shareholders can expect a board to know about the company it oversees. tom hudson reports. >> tom: from the banking crisis to the b.p. oil spill, it's common for c.e.o.s to try to explain what went wrong. >> i am here today because i have a responsibility to the american people to do my best to explain what b.p. has done. >> i personally do not think citi was too big to manage. to be sure, it was a challenge to manage.

>> tom: but while chief executives are the faces of their firms, they're backed by boards of directors keeping watch on behalf of shareholders. after all, shareholders technically decide who sits in that board room. in the best examples, experts say a board is made up of industry professionals with loads of real world experience. members are big thinkers about where a company should be and what it will take to get there. consider this group: the former c.e.o.s of i.b.m., halliburton, vodaphone, telemundo, sotheby's and chemical company celanese, a former wall street economist, a former u.s. navy rear admiral and a one-time broadway producer. sounds like it has the makings of a high quality board of directors. in 2007, that was the board of lehman brothers. >> cronyism is a polite word to describe what we've had in the past. >> tom: nell minow is a shareholder activist and co- founder of the corporate library, a group that focuses on business governance. >> we take these incredibly capable people with tremendous

integrity and somehow, you put them around a board room and half their i.q. points fly out the window. why is that? well, i think a lot of it has to do with the fact that these are very capable people, but because they're invited onto the board by the c.e.o., they're interviewed by the c.e.o., they don't really know what their job is. so what should shareholders expect from the board room? how much should the people who sit around a table like this be expected to know about the company they oversee? after all, these companies may be operating in dozens of countries with thousands of employees doing millions, maybe billions, of dollars of business every day. ralph ward publishes the newsletter "boardroom insider." he has watched and studied corporate board behavior for 20 years. >> the board of directors, by definition, isn't going to be involved in the day-to-day issues and really isn't going to be in a position to monitor as closely as a lot of people think they are. ward says the work board members like doing includes mentoring executives and providing insight. but, boards tend to fall short

when it comes to monitoring and disclosure-- what he calls the nitty-gritty. jeffrey sonnenfeld from the yale school of management thinks more should be expected of corporate directors. >> there's entirely too much getting along to go along. people really don't want to be seen as a skunk at a lawn party. that's a problem. it has much less to do with what boxes you check on certain kinds of structural artifices instead of taking a look at how-- what does a board actually require its directors to do? >> tom: let's look at some. home depot requires its board members to visit at least 20 stores a year, ensuring they see the results of their decisions in action. pfizer requires board members to own at least $300,000 of pfizer stock within five years of taking the job. part of their pay comes in pfizer shares. last year, members got just under $75,000 worth of pfizer stock each. intel limits its directors from serving on no more than three other public company boards. more and more firms are careful to spell out some general expectations and qualifications for board members.

you usually can find these on the investor pages of company websites or in annual reports. but, expecting directors to know about a bank's exposure to mortgage derivatives, or an oil giant's deepwater disaster plan, may be unrealistic. tom hudson, "nightly business report," miami. >> jeff: tomorrow, tom looks at how shareholders can tell a good corporate board from a bad one. we're also watching july auto sales, june factory orders, and quarterly results from mastercard, pfizer and procter and gamble. and tomorrow's word on the street is: uncertainty. despite it, some top-rated funds are making money. we'll find out how. >> susie: no black eye or blackout for cbs viewers. the t.v. network and comcast agreed to a ten-year deal today. the cable giant will broadcast cbs's programming through 2020. the deal covers cbs-owned cable channels showtime, college sports network and the smithsonian network.

comcast will also have rights to cbs content for its online platforms. recent disputes between some cable firms and cable channel owners have led to channel blackouts in some areas. >> jeff: "newsweek" is saying goodbye to the washington post company and hello to audio pioneer sidney harman. the founder and chairman emeritus of harman international is buying "newsweek." there's no price tag on today's deal, but harman has agreed to keep most of the "newsweek" staff. in exchange, the "washington post" will keep newsweek's pension assets and liabilities. the magazine has struggled through the recession, losing nearly $30 million last year alone.

>> susie: virginia's lawsuit challenging the obama administration's health care reform cleared its first legal hurdle today. a federal judge turned down the justice department's request to dismiss the suit. other observers, like tonight's commentator, call it an opportunity to fix health here's alice rivlin, senior fellow at brookings and former vice chair at the federal reserve. >> critics of the new health reform call it the road to socialism. but, wait a minute, isn't the central innovation a new marketplace, called an exchange, in which the uninsured can buy health insurance? doesn't the exchange allow consumers without health

coverage to choose among competing private-sector health plans? the law charges states with setting up exchanges, although they can form regional exchanges if they like. health plans meeting certain standards offer their wares. consumers, armed with federal subsidies for those with low incomes, make choices. small businesses can also use exchanges to shop for the best deal in a larger pool. that doesn't sound like socialism to me. it sounds like a serious effort to make competition and choice work for people and businesses that have been left out of existing markets for a long time. but, designing functioning markets is tricky and consumers cant make intelligent choices without easy-to-understand information. so, market enthusiasts had better work hard to set up efficient, customer-friendly exchanges. health reform is an opportunity to move beyond the rhetoric of market solutions and demonstrate that consumer information,

choice and competition can actually improve quality and restrain the rising costs of health care. lets not mess it up! i'm alice rivlin. >> jeff: that's nightly business report for monday, august 2nd. we want to remind you this is the time of year your public television station seeks your support. >> susie: support that makes programs like "nightly business report" possible. >> jeff: thanks for joining us, and don't forget to support your public television station. i'm jeff yastine. good night everyone. you too, susie. >> susie: goodnight jeff. i'm susie gharib. we'll see all of you again tomorrow evening.

this program was made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org