>> tom: when it came to spending this past holiday season, maybe the markdowns weren't deep enough. >> the consumer has become accustomed to the markdowns. they're not going shop if they don't get some sort of deal. >> susie: coming up, what december's softer sales mean for the outlook for retail stocks. you're watching "nightly business report" for thursday, january 6. 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 >> tom: good evening and thanks for joining us. looks like retailers didn't get their christmas wish for robust sales. susie, the holiday season was pretty good, but not good enough. >> susie: tom, you can blame it on those nasty snowstorms in the northeast. december sales at the nation's retailers were mixed; many chain stores reported results below analyst estimates. the 28 chains tracked by thomson reuters rang up an average sales gains of 3%. that's much less than the 5.5% jump in november. >> tom: so what does a ho-hum december mean for retailer

profit margins? erika miller reports. >> reporter: you've seen the signs, offering deep discounts of 70% off, sometimes more. but don't be fooled-- retail analyst rob samuels says most of those promotions were planned, preserving profit margins. >> the consumer has become accustomed to the markdowns. they're not going shop if they don't get some sort of deal. retailers know that's the game we're playing. >> reporter: although sales results were generally soft in december, november was strong. combine the two together, and mastercard's spending pulse says it adds up to the best holiday results in five years, up more than 5%. the biggest profit gains are expected to come from stores selling electronics, home furnishings, home improvement items, and footwear. but analyst roxanne meyer sees some major margin headwinds ahead for retailers, including rising cotton and energy prices. >> higher input costs, sourcing costs, are a big concern. and it's really the first time in over a decade when sourcing costs are actually up.

we've been in a deflationary environment for a long time. >> reporter: as a result, you can bet some merchants will try to raise prices this year in a sneaky way. >> what retailers are going to try to do is they'll try to take up the initial ticket. so let's say, for example, a price of jeans last year was at $29.50. this year, it may go to $34.50, but what you'll see is that then you'll get the promotion or the markdown on that higher ticket. >> reporter: the strategy is not without risk-- all things being equal, higher prices help profit margins. but there's always a chance consumers will notice the increase and shop elsewhere. erika miller, "nightly business report," new york. >> susie: here are the stories in tonight's "n.b.r. newswheel." those december retail numbers pressured stocks-- the dow fell 25 points, but the nasdaq rose seven and the s&p 500 lost two. as for volume-- a billion shares on the nyse; two billion on the nasdaq. investors also turned cautious ahead of tomorrow's employment report on word jobless claims

rose by 18,000 last week to 409,000. last week, those claims dropped below 400,000 for the first time in two years. a belt-tightening at the pentagon as the defense secretary calls for the biggest spending cuts in a decade. robert gates wants to cut $78 billion in spending, going to the heart of the budget process. >> my hope and expectation is that, as a result of these changes over time, what has been a culture of endless money, where cost was rarely a consideration, will become a culture of savings and restraint. >> susie: meanwhile, president obama offered an olive branch of sorts to the business community. he named former commerce secretary and j.p. morgan chase executive william daley as his chief of staff. the chamber of commerce, a critic of the administration, welcomed daley's appointment calling it "strong." still ahead, where best to invest?

this man says index funds. our interview with burton malkiel, author of the best- selling "a random walk down wall street". >> tom: citing missteps, poor communication, and systemic failures, president obama's oil spill commission lays the blame for last year's gulf oil disaster on lax industry management. that drew a sharp response from the industry's largest player, exxon mobil, which was not involved in the gulf disaster. c.e.o. rex tillerson said the commission did not investigate the entire industry and ignored years of good performance. for more on the safety of deepwater drilling, washington bureau chief darren gersh spoke with the oil commission's co-chair, william reilly. >> thank you very much, for your time, i appreciate it. >> your report concludes the bp oil spill was avoidable, why? >> well, if you look at the sequence of decisions that lead up to the explosion, the blowout, there were any 23478 of them that are difficult to explain and just plane wrong. if those had not been made,

many of them the way they were, a negative pressure test that was judged a success but was clearly not, and they had evidence that it wasn't, and mistakes like that, you could have certainly avoided the loss of well control. and even after that happened it's possible one could have diverted the gas over the side and avoided the explosion. it's possible, it's not obviously certain. >> b.p. shares are up today because an mists are reading the report to show that the company was not grossly negligent for what happened. is that the right way to read this report. >> you know, the operator is in charge. b.p. should have overseen the contractors. they will obviously be held to account it was not the function of our commission to assign blame or to talk about negligence or gross negligence. we purposefully stay away from all that. as the president directed.

he asked that we let the justice department pursue their civil and criminal investigations and let that go where it will. but there is no question that b.p. made some really egregious mistakes. >> egregious but not negligent? >> he grej use. negligence is a term of law and i'm to the going to go there. >> some of the industry insiders that i have spoken to are angry with b.p. because they believe the company is giving the entire industry a bad reputation. >> does your report support the idea that this is kind of an isolated problem that the rest of the industry may not be, may not have these kinds of problems. >> i would say two things with that. first of all i think b.p. was especially challenged with respect to process safety. there is a long history that makes that quite clear. i think lord brown himself acknowledged in his memoir that they paid insufficient attention to it. didn't spend the money they should have. >> the former c.e.o.. >> former c.e.o. of b.p. didn't spend the money on the coroading pipes in alaska resulting in 5,000 barrels spilling in the snows there. and then the texas city refinery explosion so there

is reason to believe that there is a special cultural problem, a special problem of management and leadership in b.p.. beyond that, however there were two other companies involved with this. those companies operate in virtually every ocean. they service the industry. transocean is the largest rig owner and halliburton does cementing for everybody. that suggests to me and to the commission a broader, more pervasive problem. >> right now oil prices are heading towards $100 a barrel and there are many people who argue that we need to explore for a oil and a lot of our oil is in the offshore deep water. and that we have to have access to that oil. can we wex more for it safely? >> a third of america's oil now comes from offshore. it will go higher, that percentage in future years. there are many cases in history of high risk enterprises, aviation in the 1950s which used to have 15 accidents a year. we lose submarines at the rate of one every third year.

the chemical industry after bopal. nuclear after three mile island. these industries can learn to manage their operations safely. the oil industry is among the most sophisticated techno onlyically of anything. look at the technology it takes to go into these very deep waters. they can fix this problem and we recommend ways that they should. >> is this solution essentially better regulation, tougher regulation? >> well, i don't think the regulators are the final solution. i think the regulators need to pick up their game. and we have plenty of documented evidence of their lack of professionalism, their lack of training, their lack of competence and lack of resources, flankly, including compensation. those have to be fixed too. so that they are more a match for the people that they are inspecting. but industry is going to have to take the initiative on this. it is quite clear in the near term it's going to take some time to get the regulators i think up to the professional standard one would hope they would display. industries got to look at what has happened, for example, in the nuclear industry and police itself

to supplement and support, not to replace, the regulations. >> william riley the co-chair of the oil spill commission, thank you. >> you're very welcome. >> tom: for about a year now apple has hadded tablet commuter market almost entirely to itself. that will change this year with dozens of competitors enteringing market. many of those new devices are being introduced at this year's consumer electronics show. paul reynolds is a reporter

for consumer reports and he joins us now from that show in las vegas. paul, nice to see you. welcome to nightly business report. >> thank you very much. >> tom: so how are the competitors going after the ipad what are you seeing on the convention floor? >> i think they're going after the i pad in part by trying to add some features that the ipad, fine as it is, has been lacking. for example, the toshiba tablet that has been unveiled at this show has some features like a memory card slot. usb and other inputs. dual cameras that have been among the highest complaints that people have about the ipad. so i think they will trying to do it partly by adding the functionality that the ipad may lack. >> tom: now the tablet market is forecast to just explode this year and continue for the next several years, for rest researcher presignatures 10

million last year, double this year almost double again by 2014. you mentioned toshiba, what other companies are poised to steal market share from apple? >> well, it seems like at this show, just about every manufacturer that has ever made a computer or a television set is coming out. so you are starting to see companies like sharp and visio who are coming from the tv end. so i think you've got a lot of different players in there. it's not quite clear to me whether, you know, all of them will be successful in this space. it's really a different-- a different kind of market and i guess we'll see how it plays out. we may not even see all of these devices come to market as scheduled this year. >> tom: you mentioned some of the tv manufacturers. and i want to ask you about tv because it was last year that we first saw 3-d television, very expensive at the time, very limited programming. but yet another consumer electronics trend that is expected to grow. what kind of price trends are you seeing for 3-d television? >> well, i think you're

going to see them coming down in price and being on many more sets in the manufacturers line-ups. and you've had manufacturers like samsung say that they want to, as a goal, have the price of their 3-d sets come down by two-thirds this year. so that alone is going to make it that much more accessible. in addition, they're adding in glasses that are lighter and cheaper than the glasses before on other 3-d television sets. >> i want to ask you about just those glasses. because that was seen as really a hurdle for consumers and the broad adaption of 3-d television. how are they bringing their prices down. are they chintsing on the glasses it in the programming or still of high quality? >> well, we're going to see. you know, the passive glasses with way little different technology, cheaper, simpler are just that. we're eager to take a look at how good the images really are. so certainly the glasses is one way they do it. presumably all of the usual things, economies of scale,

also apply in terms of bringing that price down. >> paul, we'll let you get back to the show floor, continue with with the tour. with us from the consumer electronics slow in las vegas tonight is paul reynolds with "consumer reports" >> some of the moves we saw in today's market can be attributed to the news out of that consumer electronics show. let's get you updated in tonight's "market focus" it's the first down day of 2011 for the dow industrials, but technology stocks were able to show some gains. the nasdaq 100 exchange traded fund saw just a fractional gain, but enough to hit a new high. this is better than a 52-week high; this is the fund's highest price in a decade. graphics chip make nvidia led the way for technology, adding to yesterday's gains. shares have taken off here in the past few sessions. they ended the year around $15,

and with today's 14% rally, they're over $19. this week at the consumer electronics show, nvidia has unveiled phones using its chip, and announced plans to broaden out beyond graphic chips into semiconductors to power computers. that new line of business would mean a new competitor for intel. shares of intel fell almost 1% on three times their usual volume. this is a 90-session chart. tonight's close is intel's lowest price since november. microsoft confirmed today it's newest windows operating system will work with computer chips designed by arm holdings, in addition to intel chips. the current windows software only works with intel chips. intel downplayed the announcement, though, calling it no news. we mentioned the disappointing retail sales earlier. that led to a real mix of responses across the sector. discounter t.j. maxx raised its outlook. it jumped almost 6%. luxury department store saks

rallied with a double-digit pop in december same-store sales. macy's missed same-store sales expectations for the first time in a year and shares fell. target said low-margin items drove sales, leading to the sell-off today. let's roll out a closer look at target. this 7% drop came on seven times its usual volume. the stock hasn't closed below $55 per share since mid- november. this sell-off takes them to what had been the top of its range last summer and fall. >> 46% jump higher, not quite to the 52-week high but within a dime, positive results for type ii diabetes drug. finally an earnings to tell you about, monsanto a profitable first quarter here and through the end of last year, orders for soy beans, corn and cotton seeds all ahead of last year.

the stock certainly grew some, up more than 2% on a big pop in volume. this is monsanto's highest price since last spring. and just to remind you-- we have a video on our web site explaining our new charts-- nbronpbs.org. that's tonight's "market focus." >> susie: investing in index funds and the strategy of "buy and hold" still make sense. so says the author of the classic finance book, "a random walk down wall street" the updated tenth edition comes

out next week, and burton malkiel's message hasn't changed-- the stock market is pretty efficient, and investors are wasting their time chasing after strategies trying to beat it. when i talked with malkiel today, i asked him why he thinks index funds are still the most sensible way to invest in the markets. >> twoo thirds of active managers are regularly beaten by the index. and the third that win in one period aren't the same as the third who win in the next period. so it's not average. it's above average performance. index funds do better than actively managed funds. >> so how do you explain the warren buffetts of the world who make a lot of money by actively managing and not indexing? >> you know, there are a few warren buffetts in the world. there are just a few exceptions. but the problem is you don't know in advance who they are. and i don't know who they are. and if you try to find the

warren buffett, it's like looking for a needle in a haystack. i say buy the haystack, buy the index fund which will guarantee you not average performance but above average performance. and incidentally, warren buffett says most people would be much better off with index funds than with actively managed fund. >> professor malkiel we here so much that the old rules don't work, buy and hold is outdated and diversification does not reduce risk because all of the markets around the world are interconnected. you say in your book these strategies still work. >> absolutely. diversification does still work. even though markets are more tightly correlated together because while they may go up and down together, the performance of different markets has been completely different. emerging markets have doubled during the first decade of the 2 012 the u.s. market went down. new on buy and hold clearly

if we knew when the top was and when the bottom was we would be better off without buy and hold but the fact is when we try to time the market, we typically buy at the top and sell at the bottom. >> in this new edition you insist that american investors need to diversify into emerging market, especially china. tell us why and how much should they have, what kind of mix should they have in their investor portfolio. >> let's take china. china is the fastest growing country in the world it has 13 percent of the world's gdp and that share is growing, almost nobody has 13% of their portfolio in china. and i think that that is the right mix. i think people should have only about a quarter of their portfolio in the united states. >> and are you not at all concerned about bubbles in chinese stocks, real estate or banking? >> today based on forecasts of 2011 earnings, china's stock market is selling at about 15 times earnings.

it is about as reasonably valued as i have ever seen it. >> you know professor malkiel, a lot of people have been scared away from the markets between the financial crisis and the flash crash. what do you say to people who feel that the markets are a dangerous place or they're just for professionals? >> they are a dangerous place. and the only thing you can do to reduce risk is to be broadly diversified and to rebalance your portfolio from time to time. the fact of the matter is that individuals buying low cost index funds or exchange-traded funds have done very, very well over time if they stayed the course. and it's the only game in town, really, for individual investors. and individual investors can and will continue to make good returns from stocks. >> susie: thank you so much, professor. and good luck with your book. >> thank you so much, susie.

>> tom: here's what we're watching for tomorrow: jobs! december's employment report is out. we'll see if employers went on a hiring spree last month. federal reserve chief ben bernanke testifies before the senate budget committee. and president obama announces his new economic team. also, our friday "market monitor" is bernie schaeffer, chairman of schaeffer's investment research. >> susie: facebook will soon be more investor-friendly. the social-networking giant will begin disclosing financial information, or go public by april of next year. that's according to a memo to potential investors. meanwhile, goldman sachs is expected to close the book on client orders for private facebook shares, after being hit with huge demand-- as much as a billion and a half dollars worth. goldman values facebook at $50 billion. >> tom: his psychiatrists say accused ponzi schemer allan stanford is not fit to stand trial. the doctors say the former financier is addicted to drugs and depressed. today's testimony was part of a

hearing in houston federal court on whether to postpone the january 24 start of stanford's trial. stanford wants a two-year delay. prosecutors suggest he's faking mental illness. stanford is accused of leading a phony $7 billion investment scheme. i >> susie: many americans are

still feeling battered and bruised from the great recession; some struggling to find work, others scrambling to find ways to stay in their homes. with the national debt topping $14 trillion, tonight's commentator thinks we're seeing a new wave of income inequality- - in other words, the rich are getting richer, and the poor are going by the wayside. he's bill rodgers, professor at rutgers university. >> the "great recession" forced the elderly, veterans, minorities, youth, and less educated and less skilled americans to move from our nation's main streets to its side streets. the new stimulus will accelerate the recovery's pace, but in 2011 and beyond, i am concerned that many americans will not move back to main street. with republican power increasing, all americans, especially these groups, will bear an even greater share of the systemic risk that is inherent in our economy. to get americans back to main street, i suggest the following: we must reinvigorate our investment in education and

training. we must strengthen our cities' infrastructures, parks, community centers; and our social safety nets, which are highly successful at reducing poverty. we must stop the bleeding in the government's monitoring of the economy that occurred during the bush administration. if not, we jeopardize not only our economic competitiveness, but also our position as a global political and cultural leader. our nation is at a fork in the road. we should take the sage advice of the mechanic in the 1970s fram oil filter commercials-- "you can pay me now, or you can pay me later." i'm bill rodgers. >> susie: that's "nightly business report" for thursday, january 6. i'm susie gharib. good night, everyone, and good night to you, too, tom. >> tom: good night, susie. i'm tom hudson. good night, everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by:

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 >> be more. pbs.