>> susie: blue chip stocks turn red hot. a gut-wrenching day on wall street ends with a federal reserve promise to keep interest rates low and a market comeback. >> i can't overstate the manic way in which the market whip- sawed back and forth. it still hasn't, i think, fully assessed what the meaning of this is. >> tom: from the late-day rally in stocks to the economy and where best to invest now, we've got you covered. it's "nightly business report" for tuesday, august 9. 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. a gloomy economic outlook from the federal reserve today, but here on wall street, a rip- roaring stock market rally with the dow surging more than 400 points. the fed voted to keep its key interest rate near zero until 2013. it's a highly unusual move that means the fed thinks the u.s. economy is still in bad shape and will stay that way for two

more years. >> tom: susie, the major averages fell right after the fed's announcement, but staged a big rally in the last 90 minutes of trading. the dow had a 640-point swing. here's today's session. it opened with a triple-digit gain; mostly holding that until just before the fed's statement. the dow was down almost 200 points a half hour after the fed announcement, but came back strong into the close. almost a 4% gain. the dow ended up 430 points, the nasdaq jumped 125, and the s&p climbed 53. volume was heavy, but a little less than yesterday's sell-off-- 2.4 billion on the big board and 3.8 billion on the nasdaq. >> susie: let's take a look at what exactly the fed said about the economy. economic growth has been "slower than expected"; job market indicators have been weaker than anticipated; the unemployment rate will "decline only gradually."

housing is "depressed"; consumer spending has "flattened"; and "downside risks to the economic outlook have increased." >> tom: so why did investors go on that late-day buying spree today? suzanne pratt went to wall street to find out. >> reporter: today was a day for some serious bargain shopping on wall street. after the recent pounding and panic in u.s. stocks, investors finally saw value. and they found it almost everywhere. but the federal reserve also threw a curve ball at the stock market today, and veteran trader art cashin says that sent investors on a wild ride. >> the market went through whip- saw gyrations like i've hardly seen in the 50 years i've been here. it couldn't make up it's mind. >> reporter: even with today's buying, fear remains the dominant sentiment among investors. equity strategist scott wren says that's because it's going to take time for the market to

digest what the fed is now saying about the economy. >> the market was hopeful that, coming in to this fomc meeting, that the fed would do something with the language, and possibly even take some sort of defined steps to inject more liquidity into the system or something. >> reporter: before the last month of trading, the dow had only experienced moderate volatility in 2011. but experts say the trading environment is changing, and investors should get used to more crazy days like today. >> typically, when you enter into the middle part of the cycle and there's questions over earnings growth and the sustainability of the recovery, you tend to have a lot of volatile trading days and really muted-to-flat returns for a period. >> reporter: experts say this market is all about uncertainty: consumer uncertainty, business uncertainty, and investor uncertainty. and those conditions won't disappear overnight. suzanne pratt, "nightly business report," new york.

>> susie: so, what impact will that volatility have on confidence? most often, market slides leave behind nervous consumers. but will confidence take a big enough hit to tank the economy? darren gersh takes a look. >> reporter: consumers began this up and down market ride in a very bad mood. in july, the university of michigan's confidence reading showed consumers were expecting a recession. >> so they were pretty downbeat. a key to understanding that is that they had given up hope the government could or would do anything about the future economic situation. >> reporter: researchers say consumers generally view the stock market as an economic indicator, a signal of the outlook for hiring and pay raises. but with stocks whipsawing up and down, consumers might conclude the latest moves are a wall street problem, unconnected with their lives. and if the market decline is just a blip, consumers may shrug

it off. >> in which case, consumers could weather this very well and it's not going to have a significant or prolonged impact. >> reporter: but the wild market ride, combined with the political drama over raising the debt ceiling, could have a greater impact abroad. investors around the world have new doubts about u.s. economic and political leadership, says economist fred bergsten. >> i think many of my foreign friends are a little naive in giving the u.s. the benefit of the doubt and giving us a pretty long leash. all of a sudden, they were shocked to see how dysfunctional the system is and how difficult it was to come up with anything concrete. >> reporter: and once lost, confidence is not easily regained. consumers won't be in a better mood until they see proof there will be more jobs. and investors around the world will need to see progress in washington before they are willing to once again give the united states the benefit of the doubt. darren gersh, "nightly business report," washington. >> susie: our guest tonight says

there are no instant solutions to this financial crisis. he's mohamed el-erian, c.e.o. and co-c.i.o. of pimco, the world's largest bond fund. >> hi susie. >> still picking up with jared left off, talking about confidence. do you think that the fed today laid the foundation to restore confidence? >> the fed did three important things in a wild day and a wild week. it's hard to believe it's only tuesday. but importantly, the fed first recognized an unusually blunt language that the economy is in trouble. second, it did something unpress denied. it showed it could think out of the box. not only would it keep rates at zero but do so at least until june 2013. and third, it told us that its its -- it's willing to do more. so the fed is showing a willingness to react. the question mark is will it be effective.

at best susie, the fed is a bridge, a bridge to other agencies getting their act together in washington. >> susie: all right. do you think that the fed's description of the economy is an accurate portrait, and how bad really are things going to get? >> i think it's getting more accurate. it's getting more accurate because they recognize that things are bad so they used words like depressed, which is unusual for an up beat institution. and secondly, finally recognizing publicly that these are not transitory factors but these are more structural in nature. and that speaks the reality, i think every american knows the housing market is in trouble. every american knows that the drop market is havingknowledges and the small businesses cannot get enough credit. they are simply recognizing what americans know from their day to day life excuse sues. >> susie: yes we do know

those realities. the question is how do we get out of this mess? >> the first thing is for washington to recognize the issues, including that they are structural. the reason why, susie, is structural problems need structural solutions. so recognition is very important. second, the fed is trying to give other agencies time to react so it's saying i'm going to try to calm the market down for you, but please step up to the plate. the big question mark is whether the other agencies in washington can step up to the plate. so far they have shown a sad inability to do so. >> susie: that is the big question. who is going to fix this because as we talk about confidence, investors and consumers are looking for someone to step up, take a stand and take charge to fix this problem. is it going to be the fed, is it going to be the u.s. government, is it going to be central banks from around the world. who is going to fix the mess? >> it has to be all of the above. so the fed is necessary but it's far from sufficient.

it needs help from other policy makers. and also it needs the rest of the world to be relatively calm. so the fed can ill afford anotherout burst in the debt crises in europe. so you need all of the above. that's the irony, susie, this is like an or kes tree. you need everybody in the orchestra to be playing to the same music and you need someone to be coordinating this and we're not there yet. >> susie: with the little bit of time left, i do want to ask you about what happened in the markets today in the sense that there was unprecedented buying of short term treasury at a time, after the s&p 500 -- down grade. that's where it should be as we wait for the solution. >> it's unprecedented buying because basically the fed said it's not going to move. so suddenly a two-year treasury bill became almost an over night treasury bill. and a five year one traded at 1%. what the fed did is basically

collapse the whole front but giving assurances. >> susie: is this the right place for investors to be. >> it's only the right place if you're worried about your capital as opposed to the return on your capital. if you're worried about your capital, it's a fine place to be. if you're worried about generating returns, that's not the place to be. so it all depends on your risk. >> susie: we're going to leave it there for now. lots more to talk to you at another time. thanks so much moaned. >> thank you. >> we've been talking about owned el ranger. >> tom: still ahead-- with the major averages down more than 10% in the past two weeks, even though bank stocks were among the big gainers today, there are new worries about their financial health. the recent downgrade of u.s. debt hit the sector the hardest, as investors worry about a slowdown in global growth. erika miller looks at whether another banking crisis could be brewing. >> reporter: for many investors, this feels a lot like the financial meltdown of 2008, which saw the collapse of big american institutions like lehman brothers and bear stearns.

but relax-- bank analyst erik oja says the sector is in much better shape today. >> we do not expect large institutions to fail this time around. we do not see any breakdown in liquidity. if you look at libor, which is one indication of liquidity, libor is far below where it was three years ago. >> reporter: in addition to increased liquidity, oja says banks have bigger reserves and far less leverage. but it's clear there are still major headwinds for american banks, including the possibility of another recession. >> bank profits depend mostly on how well the economy is going to do. loan growth, credit quality, fee income growth, and then capital levels-- everything depends on how the u.s. economy does. >> reporter: there are also concerns about fallout from the european banking crisis. true, most u.s. banks have little direct exposure to

greece, portugal and spain, but as morningstar's jim sinegal explains, there could be serious indirect effects. >> if the european financial system gets into a lot of trouble, it's an enormous problem for the european economy. the european economy is a major part of the world economy. >> reporter: sinegal says it may take years for bank earnings to improve substantially, but that doesn't necessarily mean investors should avoid the stocks. >> we think the high quality banks-- banks like u.s. bank, pnc, banks like j.p. morgan-- they are all very high quality banks. they are trading at single-digit multiples on current earnings. basically, if anything goes right for those banks, we think we're going to see the stock prices appreciate. >> reporter: and any improvement in financial stocks would not just be good for those firms; it

would also be a positive sign for the u.s. economy and the overall stock market. erika miller, "nightly business report," new york. >> susie: a milestone for apple today-- for a moment, it was the world's most valuable public company, as it briefly overtook exxon mobil in terms of market capitalization. but the market's late comeback put exxon back on top, valuing it at over $348 billion, $2 billion more than apple. >> the metics are weird because exxon revenues are four times bigger than apple. >> yes, significantly larger by sales. it tells us a lot about the economy, energy and consumer technology are the two big else publicly traded companies here in america. let's go ahead and take at look at tonight's market folk. the major stock indices had that sharp turnaround late in the day. traders tell me the market

reassessed the federal reserve's pledge to keep interest rates low for another two years. yesterday's big loser in the dow was today's big gainer-- bank of america. shares of b-of-a rebounded almost 17%. volume was huge again today. after yesterday's 20% plunge, c.e.o. brian moynihan sent a letter to bank employees saying, "our company remains financially strong, much stronger than we were either during or coming out of the economic downturn in 2008-2009." the other financial stocks in the dow were also the biggest gainers. american express and j.p. morgan were up about 7% each. travelers insurance bounced up by almost 6.5%. the financial sector was the strongest in the broad market after yesterday's rout. material stocks did well, and so did consumer discretionary names. among those consumer names was disney. shares were up 5%; back in march, shares hit an all-time high. this is what the past quarter

looked like at the house of the mouse. earnings were a nickel better than estimates. while movie income was down, business was better at its theme parks and television units. meantime, cable tv company cablevision is losing subscribers, and that's costing shareholders. the stock was the worst performer in the s&p 500 index, losing almost 13%. its price has been cut in half since early july. one bright spot the federal reserve mentioned in its statement was business investment continuing in software. construction design software autodesk rallied almost 7%; database giant oracle popped 6%; and microsoft was up 4.5%. another technology bellwether, cisco systems, will bear watching tomorrow. it will release its quarterly results after the closing bell. the stock has had a tough year, stair-stepping lower after a series of disappointing outlooks. during today's session, the stock hit its lowest price since

spring of 2003. >> down another $2 per barrel today. below $80 a barrel for the first time since late last summer. now we were back over $80 tonight in electronic trading, so watch for more volatility in oil tomorrow. finally, the government bond- buying continues, despite the credit downgrade. this is the yield on a ten-year government note, dropping to 2.25%, it's lowest since january 2009. and that's tonight's "market focus."

if you own stock, if you have a 401k, an ira or if you own mutual funds a lot of damage likely has been done to your portfolio in the foist few weeks. tonight's critique, with hillary kramer is back with us. so hillary the market down about 15% in less than three weeks. how does an investor protect against further big losses that may happen? >> well the important part is to understand your own risk aversion, what you can stomach yourself as an investor, tom. but if you have the guts, this is an opportunity because stocks are undervalued, to go in there and buy some dig diversified

industrial numbers because we might have some recession but we still have growth in some parts of the world and get in there and buy the 3m or the caterpillar, united technologies, some of the pharmaceuticals have been hurt very badly in this market and you can pick up some nice stocks. >> tom: what about corporate bonds and the environment for fixed income on the business side. we know what the situation is with government bonds. what about corporate bonds. >> investors have to have a certain level of sophistication and be able to watch and understand how bonds are rated, the different pricing of bonds. and i think it's difficult, you might be better off as an investor looking at a bond fund with for example a van guard. >> tom: let's get to some viewer questions given the market turmoil. andrea sent us a note, given some are dpeld to sell trade -- what should people do with their fresh cash. >> first of all keep some of your powder dry on this side. that's the first thing that we do.

but besides that, you want to take some of these opportunity stocks. i really like, for example, conocophillips, cop is the particular symbol. it's going to bring themselves up, they've fallen down really hard. apache down around 100. oil prices should stabilize and come back up. >> tom: looking at energy dan sent us this note, i would like to know if there are any high yielding real estate investment trust. high yield means high dividend looking for a bit of protection. what do you think. >> you're better staying away from real estate right now. it's still on life support. look at companies like verizon high dividend yields and go global. a french company supplies water all over the world. >> tom: do you own anything you mentioned here tonight hillary. >> i do own some of the pharmaceutical comes, i own conocophillips and -- >> you can e-mail street critique at nbr.com. lots of questions coming in. send us a note at twitter and

facebook as well. more questions next week. our guest street critique hillary kramer. >> susie: here's what we're watching for tomorrow: the commerce department is out with wholesale trade inventories for june. we'll also see quarterly earnings from cisco systems and macy's. and rupert murdoch faces a grilling by analysts and journalists about the recent phone hacking scandal. he'll take questions as news corp reports fourth quarter results. the white house unveiled today the first-ever fuel efficiency standards for big trucks like semis, buses, and other heavy vehicles. the obama administration says the new rules will reduce fuel costs and better protect the environment. it's estimated the new standards will save the trucking industry $50 billion in fuel costs, or half a trillion barrels of oil. but manufacturers will have to shell out billions to build more

efficient vehicles. >> tom: with more and more americans accessing the internet from tablet computers, televisions and video game consoles, demand for personal computers is falling. market researcher ihs isuppli predicts more internet-ready devices will be made within the next two years, overtaking personal computers. isuppli says the internet is not just for pcs anymore, with the web revolutionizing the consumer electronics business.

>> susie: with today's comeback in mind, do you think the worst is over for stocks? we want to hear from you. join our online conversation on facebook and twitter. you can find us on both at biz report-- that's b-i-z-r-p-t. or comment on our web site at nbronpbs.org. >> tom: that's "nightly business report" for tuesday, august 9. 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. >> tom: thanks for joining us, and don't forget to support your local public television station. i'm tom hudson. good night, everyone. you, too, susie. >> susie: good night, tom. i'm susie gharib. we'll see all of you again tomorrow evening. "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