n.b.r. >> tom: italy's borrowing costs soar, sending u.s. stocks spiraling down. >> this is a leapfrog effect, where the markets have gone past spain and past portugal right to the euro jugular, which is italy. >> susie: we look at why the debt dominoes falling in italy are having such an impact here. it's "nightly business report" for wednesday, november 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. captioning sponsored by wpbt >> susie: good evening, everyone. a rough day on wall street, with all the major stock averages tumbling 3.5% or more. italy was the big worry today, tom. investors fear that italy's financial crisis is getting worse. >> tom: susie, it is costing the italian government more to borrow money-- up to a new record. the interest rate on italy's 10- year government bonds are now above 7%. that's the level that forced greece and portugal to seek bailouts. u.s. investors sold stocks on worries italy may not be able to

pay its debts. the dow plunged almost 390 points, the nasdaq was down 105 and the s&p fell about 47. >> susie: you might be wondering, what's the connection between italy's financial problems and the u.s. economy? as erika miller reports, there could be a big impact on the economy here. >> reporter: italy is a relatively small country, about the size of arizona. but make no mistake-- if that country defaults on its debt, there could be serious domino effects around the globe. italy is the third largest economy in the eurozone after germany and france. economist bob brusca says italy's crisis creates doubt about the future of the european union and its common currency. >> suppose you are trading currency. suppose you are trying to make a bet on whether the euro is going to go up or down. it makes a big difference whether the euro is going to be the euro with the same currencies in it, or whether the weak countries like greece and italy, and maybe spain and portugal, are ejected from it.

>> reporter: in addition to the currency link, there's a trade link. the u.s. and the european union are each other's biggest trading partners. so, if europe plunges back into recession, expect a big hit to u.s. exports. but assuming the situation in europe does not get worse, many strategists like stephen wood think the u.s. economy will eke out modest growth. >> it's kind of this balance between the us not doing that bad, corporations in the u.s. doing great and this risk that keeps spasming out of europe. so, you want to understand the risks, but i don't think you want to panic. >> reporter: perhaps the most worrisome unknown is the impact on the global banking system if italy defaults. true, most u.s. banks have little direct exposure to italian debt. but there's plenty of indirect exposure. >> you start thinking in terms of the domino effect. something bad happens to italy, and italian bank loans go bad. then the banks that lend to italy have problems. then the banks that lend to banks that lend to italy have problems. and on it goes. >> reporter: so, the big fear is if italy defaults it could spark

another global credit crisis similar to 2008. because unlike greece, italy's debts may be too big to bail out. erika miller, "nightly business report," new york >> susie: joining us now with more analysis? stuart schweitzer, global market strategist at j.p. morgan private bank. >> great to be here. >> susie: great to have you with us as always. you heard our reporting from erika miller. what is your thoughts on this investors have been so worried about this domino effect, are we in the domino phase now? >> irthink investors have to decide whether they think the world financial system is going to be allowed to crumble around their feet. i doubt that very seriously. but of course we're going to be in a sort of back and forth environment, some days we'll feel better, some days such as today we'll feel a whole lot worse. i think in the end the europeans have to decide whether they can afford to

have the kind of crisis affect their banking system and their economy that has the potential to unfold. i doubt very seriously that they will allow that to happen. >> susie: you know, today we heard from the head of germany, talking about a new europe. france's sarkozy talking about a two-speed europe. seems like they are beginning to reexamine the euro zone and how it all works and what countries should be in or not. reading between the lines, if there is some kind of new makeup of the euro zone, i hate to simplify this question, but is that good for bad for the u.s. economy and the u.s. market? >> let me put it this way. i think first of all there is a two-speed europe. italy, greece and so on, they're in deep recessions. germany, france, they're in milder recessions. but they're all in recession, or they will be if they're not there now in our view. so that's number one. number two, if some of the countries are going to leave

the euro, i think that would pose significant threats to the european financial system, and not just the banks in the countries that may be leaving, but the banks in the other countries that hold the debt of the countries that may be leaving. so that's why i really think they are going to try to prevent that sort of outcome, they're going to try to hold the euro together, and if that's the case there will be some spillover effect from the weaker european economy to the u.s. economy. but it won't be disaster by any means. >> susie: so if that's the case, then it won't be disaster by your analysis, today we have this huge selloff. so was it about fundamentals then or was this just about a lack of confidence? >> oh, i think it is about a lack of confidence. a lack of confidence about the europeans fun meants and the fundamentals of the financial system. but this has been going on now for months, that we have this

incredible volatility. i doubt it's over, i really do. on the one hand the european authorities are going to try to come up with a program that will prevent it. but on the other hand ever arery time they try, there's some wrinkle, there's some question about it. i think in the end that that investors have to decide whether they can weather the volatility. my colleagues and i on behalf of our clients have been substantially underrisked in europe. we've had much less european equity risk than is a normal and that's been the case for the past two years, by the way. >> susie: if you're saying that volatility will be around for a while, for u.s. long-term investors, are they better off putting their monies in things like cash or gold and staying a way from stocks for now? >> well, i don't know that i would go that far, because once everybody decides that they're really scared of this market, that's probably the right time to be entering the market. i think if you believe as i do

that we're going to weather the storm, but it's going to stay stormy for some time, then you kind of grit your teeth and you hold on, but you probably have less risk than normal and you probably do have maybe a little more cash than normal, maybe more gold. i'm a believer in the potential for commodities, gold included, to do better in the coming years. once again, as they have until recently. and i believe that also investors can take advantage of market opportunities for example, credit spreads, the yeels on high yield bonds have moved out significantly in recent months. and there's the potential to take advantage of those bigger spreads by taking some risk in that area. >> susie: i have to enter rut this great conversation, stuart, we've run out of time. thank you so much, but we have to leave it there. >> always a pleasure susie. >> susie: we've been speaking with stuart schweitzer of j. p. morgan private bank. >> tom: there are big debt issues a lot closer to home.

late today, jefferson county, alabama, voted to file for the nation's biggest municipal bankruptcy. the chapter 9 filing would be worth mroe than $4 billion. the county has struggled for years with its wall street creditors over $3 billion in debt from the botched refinancing of a sewer system overhaul. there had been a tentative deal with those creditors, including j.p. morgan chase, back in september, but the agreement fell apart after the estimated savings from the deal shrank by the governor said he is disappointed. >> susie: the clock is ticking for the so-called supercommittee on capitol hill. there are exactly two weeks to go for the supercommittee to come up with a plan to cut the federal deficit by more than $1 trillion. and for the first time, republicans have offered tax increases-- some $300 billion worth. for more on that offer and a progress report on the supercommittee's deficit cuts, washington bureau chief darren gersh spoke to representative chris van hollen, a democratic member of the super-committee.

darren began by asking van hollen what democrats think about those tax hikes republicans have offered. >> i can't get into all the details, but if you look at the public reports, what they're proposing is actually a tax break for folks at the very top, compared to current law. that means if congress did nothing, the people at the very top of the income scale would be paying significantly more in taxes than they are under their proposal. so, you got to take a look at it in that context. >> reporter: but republicans have offered tax increases, isn't that progress? >> our view is that you should achieve at least as much with respect to high-income individuals as current law. as if congress did nothing. as if there were no joint committee. so i don't think that's progress. >> reporter: the big problem seems to be that republicans won't move on revenue. democrats won't move on entitlements, and every budget expert says that you have to do both. so how do we solve this problem if you're not going to move on

both issues, and is it possible to be solved? >> it's not true that the democrats haven't moved on entitlements. we recognize that we have to modernize the medicare system. we need to reform it in a way that puts an emphasis on the value of care and the quality of care rather than the volume of care. and there are a lot of misaligned incentives that need to be fixed, but what we will not agree to is end the medicare guarantee, which was the house republicans' budget proposal and said to seniors, "you're forced into the private insurance market and you're on your own to eat additional costs." >> reporter: but nancy pelosi said no medicare cuts. >> no, what she said is no cuts in benefits. and we do no want to reduce the benefits that seniors get under medicare. but there are ways to improve the system that make sure the incentives are aligned. for example, right now there are a lot of incentives in the medicare system for overuse. >> reporter: do you still see an prospect for a large agreement in the supercommittee? because all the washington analysts are bringing down their expectations for anything

getting done. >> look, i think every member of the committee recognizes that we have a tremendous responsibility and that it would send a very good signal to the country if we were able to get something done. and so that remains our goal. i understand the skepticism, looking at the history up to today. but as we sit here today, i cannot tell you what the final outcome will be. >> reporter: if the supercommittee doesn't come up with a package of cuts, the rules require that there will be automatic cuts in entitlements called a sequester. but now the super committee is having problems, we're hearing some members say these-- this sequester, these automatic cuts- - they're too deep. they're going to hurt too much in defense. we should do away with them. so if the supercommittee doesn't come up with a package of deficit reduction, is congress just going to rewrite the rules and say, "well, you know, there just shouldn't be any consequences"? >> that would be a huge mistake. and it would demonstrate a clear lack of seriousness about the deficit.

if you undo the sequester, automatically, according to the accounting, the u.s. deficit will jump by $2 trillion. $1.2 trillion. that would be a huge mistake. so people who are talking about undoing the sequester are not serious about taking on the deficit. >> reporter: congressman chris van hollen, thank you for your time. >> susie: we asked our facebook friends if they were managing their investments differently because of the recent volatility in the markets. tom, let's share some of the responses. alex says he's investing mostly defensively with an eye on value plays and special situation stocks. >> tom: david says, "i am being much more careful in investments, picking companies for long-term buy-and-hold only if i believe the company could survive a great depression." >> susie: frank writes, "i'm just riding out the volatility. selling on the high days and moving to cash."

we saw a lot of people going into cash today and one statistic that stands out for river stock on the big board that went up today, 12 went down. >> tom: we're going to take a look at the market, it was broad based selling and the market breadth was significant as we saw the worst day for the blue chips in a couple months here. so let's get to it with tonight's market focus. >> tom: the worries of the past couple of days turned into fear, with stocks sinking and bonds rallying. prices plunging right out of the gate. the market was weak coming into the opening bell and prices plunged this morning. this is today's action in the dow jones industrial average. the index hit its low just after 2:00 p.m. eastern today, ending the day down more than 3.2%. putting the drop in perspective, here are the past 90 sessions.

selloff was broad and wide. fewer than 300 tock were up. tonight, it's at its lowest price since the halloween sell- off. financial stocks led the losers and j.p. morgan saw the biggest drop among dow industrial components. shares fell hard, down more than 7%. volume was a bit heavier than usual. at of the end of the third quarter, j.p. morgan had a $2.4 billion exposure to italian government debt. other financial firms taking stock price hits today. morgan stanley shed 9%. its total exposure to italy, including corporate bonds, is just under $2 billion. it lost $3 billion in market value with today's sell-off. citigroup dropped more than 8%, down to a three-week low. and bank of america fell more than 5.5%. after the close, the market focus fell on cisco systems. the tech giant turned in better- than-expected earnings as c.e.o. john chambers' turnaround is gaining traction. the company dropped guidance in

cisco earned 43 cents a share in its fiscal first quarter, four cents above estimates. but remember, the company dropped its guidance back in august. revenues also were stronger than anticipated, coming in at $11.3 billion. cisco says most of its restructuring is finished. ahead of those results, cisco fell almost 4% on stronger-than- usual volume. a year ago, shares fell hard after disappointing guidance and again in february. after the close, shares made up almost all of what they lost during the regular session. other tech stocks making moves today? software maker adobe systems dropped more than 7.5%. volume was five times normal after announcing a restructuring to focus on digital media. it means job cuts and a slowdown in its revenue growth. software firm oracle fell 6%. hewlett packard fell more than 5%. general motors shares were in reverse today, sliding almost 11%. volume more than doubled as the stock dropped to its lowest price in a month. g.m. returned as a publicly traded stock almost a year ago, selling shares at $33. tonight, they're closer to $22. the automaker saw third quarter earnings drop to $1.03 per share. that was still seven cents ahead of analysts estimates. the company had losses again in europe and south america, but noted china remained a bright spot in its overseas operations. green mountain coffee roasters may be roasted tomorrow.

after dropping more than 4% during the regular session, the stock lost a third of its value after the close tonight. the company came up short in its latest quarterly earnings and revenues. if tonight's selling holds, it would push the stock down below $590. $50 finally, money was moving back into american bonds. the yield on the 10-year government note fell back below 2% as prices rallied. u.s. i.o.u.s have benefited from the worries in european government bonds. and that's tonight's "market focus."

>> susie: several investigations are under way in connecticut to see if the state's largest utility broke any laws in its handling of recent power outages. the october 29 storm downed trees, leaving more than 800,000 people without power. 3,500 are still without electricity. connecticut power & light says the investigations are to be expected. its parent company wants to establish a $10 million fund to help residential customers who experienced losses because of the storm. >> tom: the cloud continues to be one of the hottest trends in technology. the cloud is on-demand software or services. it allows companies to rent the technology they need when they need it. tonight's "street critique" guest her head in the cloud. she's hilary kramer, author of "the little book of big profits from small stocks." congratulations on another new book, hilary. >> tom, thank you.

>> tom: we're talking about a cloud computing firm here, mgic the ticker symbol. why do you like this one and what expectations do you have for it? >> i was in israel last week and spent two days and i met with some of the high tech leaders there. unanimously they all recommended magic software. mgic. the stock is almost in half from where it was from its 52-week high, but the cloud is what's helping companies do their business cheaper, especially companies that in particular magic serves which are large customer based companies, anything from trading, banking, all the way to automobile industry. so magic has some real cutting edge technology, because remember a lot of the sales force out there, they're on their mobile phones and devices now. the cloud is essential. >> tom: with all the volatility in the marketplace, all the concerns in the mediterranean, not israel, but lots of risk here? lots of reward? you put a stop loss in? >> well, i believe there's a lot of reward in these smaller

stocks. if you look at the indices, the russell 2,000 of small stocks, it's down 8.3% year to date. versus the dow which is still up over 1%, tom. so these companies have just been beaten down, and then you combine that with what you just mentioned, which is the israel middle eastern part, and that's where you end up with all this opportunity. go for the stocks that are growing, 34% growth on revenue, 60% on income with magic and yet at the same time have been beaten down with the market, throwing out the baby with the bath water. >> tom: we've seen some big broad based selling. let's get to viewers questions. a stock that dendreon, is this a dead stock? a bio pharma company. this stock back in january when you first picked it was 36, tonight it's around 7. it has gotten shellacked.

>> that's true, but white comes to dendreon, i did recommend it in the 30s, it went all the way up to 56 and stayed there for a protracted period of time, so those that were in it could take their profit, it's a great lesson the learn, but dendreon in particular, there are other technologies in terms of therapies for prostate cancer that may surpass dendreon. but the real problem here right now is not being able to ramp up the way they intended with their strategy. when it comes to dendreon, someone made by them again, it had plenty of lives, but you could deploy your money in other places much better than dendreon. it's very risky, i know a lot of people have been trying to catch the falling knife. >> tom: do you still have a position? >> a very small position in dndn. >> tom: and do you money magic stock? >> yes, do i, and i'm buying more magic. there were there's e-mail

address on the screen. thanks, hilary. >> thanks, tom. >> susie: here's what we're watching for tomorrow: an update on what's coming in and going out in the u.s. when we see september trade numbers. also, more quarterly results. retailers kohl's and nordstrom are scheduled to report. and, from advertising at espn to consumer attendance at its theme parks and cruise ships, we'll find out if it was a wonderful quarter for walt disney. seven international cyber bandits have been charged in a multimillion-dollar scheme to use internet ads for profit. they allegedly used infected computers to drive traffic to sites, allowing them to rake in $14 million. court papers unsealed today show that 500,000 u.s. computers were infected, including some used by educational institutions, non- profits and government agencies like nasa.

>> tom: cheaper internet connections are on their way to low-income americans. starting next summer, families qualifying for free school lunches will be able to sign up for high-speed internet services for $9.95 per month. the service will come from cable providers, including comcast and time warner. the low-income families also will be able buy low-cost computers from leading technology companies like microsoft.

>> tom: when we talk with c.e.o.s and professional investors, they usually point to the level of uncertainty as a big problem for the economy. but there are ways to turn chaos and anxiety into opportunity. in tonight's "money file," how being certain can lead to bad financial decisions and bad luck. here's jonathan field, author of "uncertainty: turning fear and doubt into fuel for brilliance." >> in a world where disruption is the new black, we'd all love a little more certainty in our lives. but what if certainty wasn't the solution, but rather the problem, especially when it comes to our finances? when you're 100% certain about anything in life, you often blind yourself to better alternatives. you ignore smarter investments, more rewarding careers and unforeseen opportunities. and, here's an interesting twist, being certain or unwilling to consider the anything outside your model of the world may also make you unlucky.

in a fascinating experiment, university of hertfordshire professor richard wiseman asked people who considered themselves very lucky or very unlucky to count the photos in a newspaper. the unlucky ones took two minutes, the lucky ones took two seconds. why? because on the second page were the words, "stop counting, there are 43 photographs." the unlucky people literally blinded themselves to anything beyond what they assumed to be the rules. good decisions and good fortune, it seems, are about the fine line between having enough certainty to act, but also inviting enough uncertainty to remain open to the possibility that something better or unforeseen lies just beyond your view. >> tom: that's "nightly business report" for wednesday, november 9. i'm tom hudson. good night everyone, and good night to you too, susie. >> susie: good night tom. i'm susie gharib. 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. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org