>> it shouldn't take the risk of default-- the risk of economic catastrophe-- to get folks in this town to work together and do their jobs. >> susie: president obama signs the debt deal, but says there's still much to be done to fix the economy. >> tom: the economy is what worried investors today. the major stock averages plunged. blackrock strategist bob doll joins us to explain what happened and what may be yet to come. it's "nightly business report" for tuesday, 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. captioning sponsored by wpbt >> susie: good evening everyone. president obama signed the long- awaited debt deal in washington today, but on wall street stocks sold off big time. tom, the losing streak continued here at the new york stock exchange with the dow negative for eight straight days and all 30 stocks in the dow closing in the red. >> tom: susie, the good news today was the debt agreement averts america defaulting on its debts, but investors returned to the worries regarding the health of the u.s. economy.

the dow fell 265 points, the nasdaq lost 75 and the s&p 500 was off 32 points. the selling came on stronger volume, 1.25 billion shares moving on the big board and 2.3 billion on the nasdaq. >> susie: while investors were selling stocks they were buying gold, sending the yellow metal to a new record. in new york trading, gold futures for december delivery jumped almost $23 or 1.5% to $1644.50 an ounce. >> tom: also weighing on the markets today? another disappointing economic report. consumers spent less last month and saved more, adding to investor worries about a further slowdown in the economy. and there remains the risk of a downgrade of u.s. debt. erika miller reports. >> reporter: over the long term, the debt agreement could help the u.s. improve its balance sheet. but near term, the deal is not

expected to have much impact on the economy. f.t.n.'s chris low worries the recovery is losing steam. >> it is really weak. we are not in a recession again, but we have growth that is just barely growth. recent economic indicators have reinforced that view. manufacturing, real estate, construction and consumer spending have all softened. and the closely watched employment report, which comes out friday, is expected to show continued weakness. many economists don't think there will be major improvement in conditions any time soon. >> meaningful job growth will come when we get meaningful economic growth, and i think that's probably about a year away. >> reporter: but strategist sam stovall sees a more important, more immediate concern for investors. >> the sovereign debt rating decline is probably the biggest overhang for equity prices. even though the congress has approved a debt ceiling increase, the question is still

outstanding whether it is enough to satisfy the credit ratings agencies. >> reporter: stocks fell sharply today, but the s&p 500 is only down about 8% from its april high. that's because, in spite of economic weakness, u.s. corporate profits are expected to hit record levels this year. >> the revenues have been picking up. we've also been seeing a continuation in cost-cutting activity. we've also been seeing share buyback activity, and lastly, a lot of growth overseas. >> reporter: but investors worry a slowdown in the u.s. economy could have a spillover effect. the u.s. is a major consumer of goods made overseas. so if demand here falters, other economies will likely suffer too. erika miller, "nightly business report," new york. >> susie: joining us now? robert doll, chief equity strategist at blackrock. he oversees more than $1 trillion in assets.

>>nice have to you with us tonight. >> good evening, susie. >> susie: it was really a nasty day, i'm going to ask you is this the beginning of a bear market. >> i don't think so susie. they reported 8% off the high. we showed a chart of the s&p 500, and all year long we've been 50 points either side of 1300. right now that doesn't feel so good, but we're bouncing around with lots of cross currents of late more negatives but there are still some positive out there. >> susie: we expected to have a relief rally now that the deal was signed. where do you stand on this, on the rationale behind the selling? was it about the debt deal or was it about the economy? >> i think it's more about the economy, susie. but they are related. at the end of the day, i don't think there's anyone in the financial market to really have debt default by the u.s. and so the assumption was in the 12th or 13th hour, we get something done. i think the skepticism is okay, you've got something done, that's good news. but over half the cuts are still

to be identified. markets have uncertainty and we now have more of it. coincident with the gdp downward revisions in the back part of last week as you just pointed out the consumer spending survey today, purchasing manager's survey yesterday. and so the benefit of the doubt has gone to the weak economy side. >> susie: the economy is barely moving and some strategists are saying we could be headed for a recession. what do you think? >> i think like last year at this time, when people were worried about it, we will avoid it. but the probability is not zero, susie. a policy mistakes could send us in the wrong direction. growth as was pointed out was barely positive in the first half. the question is will it improve somewhat in the second half. for a variety of reasons we think the answer to that question is probably yes. nothing robust just a little better than where we've been. >> susie: a lot of people watching this are wondering what many asupposed to do with my

minute with this uncertainty. some are putting it into cash. what is your -- >> the last 12 months is a reasonable time to step in and purchase some stocks. it takes a lot of guts and intestinal fortitude to do it but i think that's when you get rewarded. if the economy shows some better life, you will be rewarded. if we have a recession it will have been a wrong move. that's what investing's al about. >> susie: are you changing your asset location in terms of equities 16 common cash. >> not really susie. we are modestly overweight equities versus our bench mark and fairly short durations and we don't have a lot of cash because cash is returning is ze. >> susie: where you feel better about the markets if you saw the feds step in. again a number of economists are saying that the fed may be in

for another round of stimulus for the economy, the so-called qe3. would that do anything to fix the economy? would that create jobs? >> well, i think qe2, it would have a positive announcement effect and some positives thereafter. the problem, zeus -- susie things get a lot worse before we get a qe3. if it was a bipartisan effort to encourage investment and capital formation which would lead to jobs. or the european central bank deciding to increase the sheet to solve some of problems there. either of those would get me more excited than a qe3. >> susie: let me go back to the debt deal and the credit rating. one of the credit rating agencies says it will set a path. it's fine on came the u.s.'s triple a credit rating. what do you think s&p and moody, what do you think they will do and what's it mean to the

market. >> i think they will be watching like all of us with uncertainty like okay what are they going to do with this remaining trillion and-a-half plus. where are those cuts going to come from. so hopefully they'll give the u.s. the benefit of the doubt until we get that theory but that's not a foregone conclusion. they were asking for four trillion. we're not going to get to four this round. if there's a debt down grade, i don't think that's the end of the world. so many of us have been talking bit, preparing for it and perhaps we're already trading if that's the case. >> susie: that's a reassuring way to end this conversation. thank you so much, bob, nice seeing you. >> thank you susie. >> sues spooz we've >> tom: president obama signed the debt deal into law today. the legislation immediately boosts the nation's ability to borrow by $400 billion, staving off default as we mentioned. spending caps kick in october and a congressional joint committee gets down to work in november. it's charged with finding as much as $1.5 trillion in spending cuts.

after passage in the senate, president obama today thanked the american public for pushing lawmakers to work together on raising the debt ceiling. it's likely the raising of the debt ceiling for both businesses and consumers hash unsettling, and just one more impediment to the full recovery that we need. so let's take a closer look at some of that uncertainty. what will deficit reduction mean for defense companies and communities that rely on defense spending? darren gersh looks at the size and scope of those cuts, and finds different answers. >> reporter: depending on how you look at it, defense spending will either be frozen for the next couple years, or it will be slashed dramatically, or it will go up. let's look at the cuts first. next year and the year after defense spending, not including afghanistan and iraq, is essentially frozen, give or take a few billion dollars, at $530 billion.

that would require the pentagon to trim some spending, not a hard thing to do. >> instead of building two submarines a year, i build one. that's $2.5 billion right there. >> reporter: now you may have heard defense spending will be cut by $350 billion over the next ten years. that's right, and it sounds like a lot, except the new debt limit law allows the next president and congress to change the formula for defense spending in 2014. another uncertainty is what happens if congress fails to enact a second round of promised deficit cuts. if that happens, the overall defense budget will be slashed by 10%. >> and probably procurement will fall by more than 10%. if you're a contractor, you better freshen up your resume. >> reporter: by now, you get the point that the path of future defense spending cuts is uncertain, and spending could rise if a new threat appears in an always dangerous world. >> the real thing in defense is next year's budget. other than that, it means

nothing. >> reporter: well, almost nothing. pentagon spending is now at its highest level since world war ii and it's almost certain the boom years are over. >> if i were a defense investor, i would view this as a good time to get out. there's no visible way for revenues in this industry to rise in the foreseeable future. it looks like peace is coming one way or another to afghanistan. i think this is a good opportunity to sell. >> tom: washington bureau chief darren gersh joins us. kind of a bearish comment there at the end of the is piece there. with the possibility of cuts, certainly not certain cuts as you reported. does it mean that the pent dpawn is going to have to spend -- pentagon is going to have spend smart or cutting deeper in the years ahead. >> they have to do a little bit of boarkts i -- of both, i mean. but this is a huge budget sore they have a lot of room -- so they have a lot of room to spend

smarter. an f35 jet costs over $100 million. if instead they bought a few ta teens, those are around $40 million. that's one way you can still buy a lot of jets but spend a lot less. >> tom: one of your sources mentioned the droop draw down still scheduled in afghanistan. where will this play into and we will see a smaller military force ahead because of the debt deal. >> it looks like, that is larry corb who used to be an undersecretary at the pentagon. his belief is that we're going to go back to a pre 9/11 military. we're not going to go about invading another middle east country. his belief is we could go back to using more of the seal teams, the seal team that took out osama bin laden, they're going to have a lot more work to do. we're going to depend on that more so we can have some troops draw down. in europe we have 80,000 troops in europe corb says.

maybe a few of those are going to be vacationing in arizona and will be patrolling in the black forest. >> tom: just final 20 seconds here, real quick. the method of this debate within the defense spending budget, is that a model for how congress is going to face other possible spending cuts? >> yes. individual program cuts will be highly uncertain. spending's going to go up. it will go up more slowly but big programs like medicare, disease fence are going to have to use technology better. they're going to have to be smarter about the way they spend money. and companies that rely on government programs, some are going to lose and there are going to be other gainers and the ones who can provide more efficiency and use government money better, they're going to be the ones who are going to do better. >> tom: in washington at our bureau in the capitol city it's our chief darren gersh. thanks,. >> any pleasure. >> susie: still ahead, tonight's "word on the street"? "safety." bryan ashenberg of thestreet.com joins us with three defensive

stocks for a volatile market. some bright spots among an otherwise lackluster july for sales as u.s. automakers shined while japanese makers continued to struggle. g.m.'s sales were up almost 8% thanks to strong sales of its redesigned chevy cruze compact. ford also higher-- its fusion, escape and explorer models all strong sellers. chrysler in with the biggest sales gain, up 20%. its jeep division saw a 40% jump in sales. but toyota and honda are still recovering from japan's march earthquake, with sales down double digits at both. with consumers worn out from the debt battle, few buyers were out today. we stopped by this normally busy ford and lincoln dealership in miami where operations manager lomberto perez says he has deals just waiting for buyers. >> right now we have incentives up to $5500 on specific cars,

some lincolns, even the f-150. we also have zero percent interest. the consumer doesn't have to pay anything at all in terms of interest. >> susie: forward's not the only one trying to lure in buyers. japan is offering heavy incentives now the supply chain is getting back to normal. >> tom: those stocks were among the big losers here at a broad sell off suzy so let's get with tonight's market focus. we start with today's trading of the s&p 500. pull out and roll out. prices tried to stabilize in the mid-afternoon and sank to new session lows into the closing bell.

here we go, with the day's trading. let's put the drop in context. here is the s&p 500 over the past year. the index is down almost 7% in the past week and a half. today's selling takes us below the low in june and below its march low. over the past 12 months, the index is up 11%. meantime, a lot of buying interest in uncle sam's debt. here we have the interest rate on the 10-year government i.o.u. rates plunged today, falling to its lowest level of the year. 2.6%. lower rates mean higher prices as people buy up bonds. the fear factor over a weak economy also helped metal prices. there's that gold price yet again. gold continues hitting new highs, at $16.43 an ounce. silver closed back over $40 an ounce. the soft economy concerns pushed oil lower. light sweet u.s. crude fell more than $1 per barrel. the day the government agreed to raise its borrowing limit hoping to avoid a credit rating downgrade, and the stock of the

parent company of one of those credit rating agencies hits a new 52-week high. how about that for irony? mcgraw hill owns standard & poors. shares were a stand-out today, jumping more than 7% on strong volume. two big shareholders say they may push the company to break apart. in addition to s&p, mcgraw runs television stations and publishes textbooks. one of the biggest losers was pre-paid wireless phone service company metro p.c.s. earnings were four cents per share shy of estimates. it did not add as many new customers as anticipated. clearly a disappointing quarter. the stock lost more than a third of its value, falling hard. volume exploded, more than 20 times normal as the stock fell more than 36%. the firm warned those weak customer numbers continue this quarter. all 10 major stock sectors were in the red. consumer spending fell in june and consumer stocks led the losers. tiffany fell more than 8%. hotelier starwood resorts shed 7.5%, and coach dropped 6.5%. earnings were up for coach but the rate of growth slowed down. leading the dow industrials

lower was drugmaker pfizer. it was able to beat earnings expectations by one penny per share but key sales figures declined as it faces generic competition against some of its medicines. pfizer stock was off 4.6%. the generic competition threat has been hanging around pfizer for some time. its best-selling anticholesterol drug, lipitor, comes off patent. later on this year. despite that, the stock had been able to rally over plans to spin off one of its business units. and that's tonight's "market focus."

>> tom: the stock market has fallen more than 6% in the past two weeks as the debt debate dragged on and we've seen fresh signs of the slow economy. that brings us to tonight's "word on the street," "safety." bryan ashenberg is a portfolio manager at thestreet.com. bryan, nice to see you. the first safety idea you brought along comes from the strongest sectors this year, healthcare. the name of the company is healthcare services group, the ticker symbol is h.c.s.g., it cooks at nursing homes. share price has fallen off considerably as you noticed here with worries over medicare spending. how about this here, bryan. >> the worries over medicare spending can actually help this company because if you are look to go save money, they will look to healthcare services to provide those services for them at a cheaper price.

company boasts 90% customer attention rates and it has a strong balance sheet and 4.5 percent yield. >> tom: there are safety plays beginning with s.b.a. communications that runs wireless telecom towers, s.b.a. c. what's going to break it out of the most recent price share. >> the mega trend. i think that continue. demand for broadband here is huge. the company has long term agreements for its cell towers and it sees highly recurring revenues from this. it has annual price rent escalators and that gives it great revenue and steady cash flow which makes it a safe haven. >> tom: they have liked that lately. how about a lot of communications. this one's based in israel provides data versus for internet and wireless service providers. share price off by 9.255 today after falling from shares to raise money. does that concern you. >> no it doesn't. that's just the buying

opportunity in my opinion. this company really sometimes what you have is an area where your best defense as good offense. that's what it offers. it enable its customers the service providers to monetize their network but let these service providers charge customers the broadband they're using, consumerring and what they're getting. it's really the next generation of broadband service the company has strong top line growth and expanding operating margins and a healthy balance sheet. >> tom: disclosures hear, bryan, can you own these shares, do you own them. >> i don't own any of these shares personally. >> tom: bryan ashenberg his article is on thestreet.com and our website as well. bryan ashenberg with thestreet.com. >> susie: here's what we're watching for tomorrow: we'll see the latest estimate on private payrolls when payroll processing firm a.d.p. issues its july job numbers. also tomorrow, earnings from some big consumer brands. chiquita brands, clorox, and mastercard report results. and hilary kramer is our "street critique" guest. you can email your questions to streetcritique@nbr.com.

living social is entering the south korean market in a big way. it's buying local daily deal service "ticket monster" for an undisclosed price. monster accounts for 45% of korea's daily deal market. this is living social's ninth acquisition in the past year and its biggest to date. it's expected to follow its bigger u.s. rival, groupon, to the public market, filing for an initial public offering later this year or early next. >> tom: while the debt deal is history, the senate failed to end a partial shutdown of the federal aviation administration today. senate lawmakers continue objecting to legislation approved by the house to fully fund the agency because the bill includes cuts to some subsidies for rural air service. with congress on vacation for the rest of the month, no action is likely until september, leaving most federally funded airport construction projects on hold.

>> susie: as washington puts the wraps on the debt ceiling debate, tonight's commentator has some thoughts on the budget negotiations still to come. here's conservative david keating, executive director of the club for growth. >> remember the silent movie scene where the dastardly whiplash character ties the lady to the railroad tracks? that reminds me of the budget

negotiations. a debt disaster is speeding down the track, yet our politicians come up with a plan to slow the train a few miles per hour. we're still heading for disaster. if they stick to the plan-- and they probably won't-- the debt will still soar nearly 50% in ten years. next year's budget will be cut by less than 1%. after that, discretionary spending, which is just a fraction of the budget, will rise by nearly $200 billion by 2021. only in washington could spending more money be called a cut. washington can and must do better. it can start by working to grow the economy, passing tax reform that cuts tax rates, cutting red tape and passing trade deals. the faster we create jobs, the more tax revenue comes in and less money will be spent on things like unemployment benefits. our leaders also must reform entitlements-- social security, medicare and medicaid-- that threaten national bankruptcy. and cut nonessential spending.

there's also a bias for more spending and debt. it's time to pass a constitutional amendment to balance the budget. it works in the states and it can work in washington too. lets hope the voters can solve the problem next year. we're running out of time. i'm david keating. >> susie: that's "nightly business report" for tuesday, august 2. i'm tom hudson. good night everybody. 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. captio