this is night"nightly busin report" with susie gharib and tyler mathisen brought to you by -- >> sailing through landscapes through a river you get close to iconic landmarks, local life, cultural viking river crews. welcome to a special 4th of july edition of nig"nightly business report". wall street had plenty of fireworks with this year with the s&p 500 gaining a hefty 12.5% in the first half of 2013, the best of 15 years. since world war ii big increases of the first six months of the

year usually lead to gains in the second half, tyler. >> indeed, they do. what do we expect in the next three months and three months after that? we'll examine top sectors from housing to the consumer, energy and defense and what other ramifications for the ceconomy and stocks. we start with housing fuelled by the comeback in the housing market. home builder stocks had a very nice run of their own in the first half of the year. now as you can see here, the home builders essentially kept pace with the broader market packing on a double digit gain. as for the housing market this quarter, diana olick tells us two words will likely hold the key, interest rates. >> reporter: here is what to watch for in real estate in the quarter ahead. rising interest rates are the wild card for buyer, sellers and big banks. home prices are up over 12% from a year ago according to core logic but the average rate on the 30-year fixed is up nearly a

full percentage point that will put added pressure on the home prices and builders raising prices more aggressively. rising rates hit and could mean more layoffs at the backs and could trickle down to the home improvement sector in q 3. investors felt the pain already and could fall more out of favor as rates rise. for "nightly business report," i'm diana olick. they say the consumer is the backbone of the economy and while the consumer is buying, it seems the rate at which the consumer has been spending is relatively stagnant. confidence in the economy is on the rise. will the consumer keep the wallet open or tighten the pursestrin pursestrin pursestrin pursestrings? >> reporter: here is what to watch for in the retail sector, the second biggest season back to school.

kids out grow clothing and needs new pencils but the fight to win is it. look for big promotions in marketing tactics from heavy weights like walmart and target. trying to win back sales where children's apparel makes up 12% of sales, best buy will roll out window stores in 500 locations at the end of summer as students go back to class. well, one place consumers are putting moneys these day social security thes is their vehicles. it's a strong first half and they expect 15.5 million cars and trucks will be sold this year and things full throttle in the air as the airlines ride a jet stream of strong profits. phil lebeau looks what happens. >> reporter: here is what to

watch for for auto and airline. for auto it's about the truck market and whether or not it remains red hot. as the housing market recovered there is greater demand for construction firms and small business operators to renew the fleet of pickup trucks. that's good news for the big three that long dominated the pickup truck market in north america and if demand remains strong, look for the big three to not only pick up market share but report a profitable third quarter. for the airline industry, it's about jet fuel prices. jet fuel prices have been moderate and that's allowed the airlines to post relatively strong profits that is expected to continue in the third quarter, provided jet fuel does not spike higher. also, remember, the third quarter is among the busiest of the year for the airline industry. as a result, those packed planes mean the airlines will have an opportunity to rack up strong revenue numbers. that's a look at what to expect

from the auto and airline industry in the next quarter. for "nightly business report" i'm phil lebeau. what do these sectors tell us? joining us to connect the dots, an economist at td security. welcome tonightly business report. housing, retail, auto sales, strong for the first six months of the year. do you see that trend continuing for the rest of the year, or will the second half be different? >> well, i think it will be different, better. i'm enkourcouraged by the firstf this year and every indication the pieces are in place, the fundamentals in place to have a more sustained recovery. keep in mind, what we're seeing in the first half, the recovery is a function of the significant fiscal that we've seen. we've seen the biggest drag from fiscal from the peace war period when the economy is growing at 1.5 with fiscal drag of 1.5.

the economy, the fundamentals of the economy are showing greater than 3% rate and with that in place as the drag disappeared in the second half of this year, you'll see the private sector fundamental reassert and growth not of 2.5% in the second half of second part of this year. >> if that is true and accelerates, maybe more into the fourth quarter, what is the implication for interest rates and federal reserve policy? >> that's an interesting question. i think at this point what the fed signalled that their intent is to reduce the level of stimulus and they are looking at three things. for one, they want to see the confirmation in the economy that we are making a turn for the better and the pace of the recovery is accelerating. i think they will get confirmation for that and the september time in the market seemed to have price it appropriate at this time. so at that point, i think the fed will get the indication that

the economy needs less support and would starts1] reducing th level of stimulus providing to the economy. >> so how does this translate for people out of work and looking for a job? do you think the job market will be better? >> absolutely i think so and there are a number of reasons for that. one, is i think the problems we see. the recovery we see in the labor market has to do with uncertainty. global uncertainty and at this point i think it's uncertainty about the nature of the recovery and demand. when businesses get more confirmation that there is a more sustained projectorry for consumer demand, they will be hiring to hire on a permanent basis and be more willing to invest and see that. >> it's a weak spot, hasn't it, investment in capital equipment? >> it has been. they go hand and hand. capital investment. to the extent that we had some clarity on the political front,

the next big step is to have that confirmation of sustained growth. >> let me turn you to housing, if i might. you think the fed will withdraw stimulus at the september meeting or at least indicate they will dial it back from, what is it, 85 billion a month to lower, the housing market is dependent on very, very low interest rates. they ticked up. what do you think that will do to the rate of growth in house prices? >> i think it would slow the rate of growth, but we still have growth. i think the problem with the housing sector, the initial problem wasn't necessarily the fact that rates were high. the problem was the flow of credit. banks were unwilling to lend, and people that were sitting on the sidelines were willing to engage in a sector where they think that over the next year or so they would have capital losses. that has changed. the dynamics changed and with prices at a more sustained upward projectorry that would

encourage potential home buyers to move into the market and them to extent mortgages. >> you've been giving us an up-beat report card for the rest of the year. anything that worries you that could go wrong in the economy? >> the big factor for me is political risk. as much as we've seen a lot of clarity on the political front with the tax deal that we had earlier this year and we know for sure that has gone through, i think the next big thing for the markets and for the economy more generally is what happens in september, october when we have to get the budget deal done. if there's a risk of a government shut down, then i think that would possibly delay investment and hiring decision. similarly, if we do have the government breach it's limit, hit the debt ceiling without it being raised, that would increase volatility in the market. >> lots of good information. so good of you to come by. happy 4th of july. >> thanks for having me.

and one thing many feared would hurt the economy was the government's automatic budget cuts, better known as that sequester and while the sequester hasn't hood the dire impact so far that many had predicted, one thing has become clear, the defense sector is starting to feel the pinch. jane wells has more. >> reporter: here is what to watch for in the defense sector in the quarter ahead. pentagon cuts are slowly nipping away at contracts, so expect companies to update international plans. they think ex perpts can reach 30% of total sales, united technology says it could account for half. competing for multi billion-dollar jet fighter contracts in brazil and south korea but deloit says they are transitioning to more affordable high tech, software and sensors rather than ships and tanks, even so, but where. the last quarter nearly every major defense company beat

guidance. for "nightly business report," i'm jane wells. coming up on the program, we'll check out what might be in store for stocks and bonds, but first, oil right at the psychological 100-dollar level. an expensive quarter in the oil business and what could it mean at the gas pump? the outlook coming up next. oil prices have been hoovering around $100 a barrel for sometime now and gasoline prices are around $3.50 but with

summer driving and hurricane season upon us, and tensions rising in the middle east, it's worth watching the enneergy pat in this quarter. >> reporter: where is what to watch for in the quarter ahead. a record level of supply and the supply may grow as demand for oil and product slows. with oil prices under pressure, gasoline price fears may fall by the wayside over the next month only to perhaps reappear as we head into the middle of hurricane season. but drivers should be worry that prices can vary widely where you live. natural gas prices could slide if temperatures are below normal this summer, reducing air conditioning usage and therefore cooling demand. energy prices can be as fickle as the weather. for "nightly business report," i'm sharon ener son. our next guest expects high oil prices this quarter and maybe a turn for the better as

the year draws to a close. he's founding partner and oil analyst of again, capital. john, welcome, good to have you here. >> good evening. >> we see turmoil in the middle east and china's slowing economy, that might push oil in opposite directions, higher in the case of middle east turmoil and higher in the case of the economy. what am i to think? >> you have the horns of the d dilemmas before you. the high level-- inventories and the shale boom. we're pushing africa barrels out to asia, to the very soft market that you referenced. so my thesis is that we are nearing a tipping point where the supply situation will, in fact, overwhelm the worries of the middle east and other concerns out there, but it's not here yet, and it's down the

road, but i can see a future towards the end of the year or maybe next where that's the new dynamic. >> in the near term, this situation in egypt, what could it do to supplies and the supplies going through the canal and all of that? i mean, how worried should we be about that and what could it mean for prices? >> more so than we otherwise would because we had outages persisting now in libya. the arrub spring hasn't gone away, in libya and iraq. there was a significant bombing on tuesday in baghdad that reminds us that that production there is very much hanging in the balance. so that security that we talked about so much over the years, holding up the price in the 90s towards 100 whereas with our eye on china should be low 80s, maybe 70s. >> let's talk about two oil

types of product that are very important to us. number one is gasoline and what your forecast is this quarter and towards the end of the year for gas and natural gas, which is the main heating fuel in so much of the country. >> since we're in the heart of driving season now, this is the big day. this is where we turn the corner, and peak gasoline demand is here right now. but i think we've paid the high price for gasoline. despite what crude oil is doing now in the volatility, gasoline is coming down. we're seeing more and more refiners come on line. there was a major amount of european refinery maintenance that is coming back online. a big refinery in indiana, bp poured billions of dollars into this thing. it's coming back online and they will see relief in the midwest. the cheap shale oil is getting out to the coast via rail, to california, to new york, new jersey refining centers down south. these barrels are liberated derailed to the tune of 1

million barrels a day by the year. those numbers are coming down, an average of 2.75, maybe 2.50 if we're lucky by the fall. >> what about gas? >> not the low price last year. the shift away from coal to natural gas is sticking and as we saw last winter, an abundance of natural gas, so much so we didn't know where we would put it but a normal winter really chewed through those inventories and got them down low. >> really quickly, the wild card in your forecast? >> still the middle east. if we lose the iraqi production, if libya turns back into a full on civil war, very, very high oil prices will be with us again, $120 a barrel. >> ouch. >> yeah. >> thanks very much. have a great 4th. >> you, too. >> appreciate you. one country that uses a lot of energy, china and it's expected to increase but the world's second largest economy,

which was at one time growing at speeds hit the brakes. with that in mind, we see what to watch for this quarter in china. >> reporter: here is what to watch for in china in the quarter ahead. after slow down in the past few months, everyone is waiting to see if the economy will weaken further and by how much. people are growing increasingly concerned about a credit crunch and are wondering if china's financial sector will come under train if the federal reserve tapers the stimulus and the u.s. and china will meet in july. will the two large economies be able to reset the frosty relationship? and coming up, with interest rates on everybody's mind, what is the outlook for stocks and bonds this quarter? that's next.

billion-dollar deals bound in the entertainment and social media spaces and hollywood is betting big again this year. will the buying continue over the next three months and will the box office break records? julia takes a look. >> reporter: here is what to watch for in the media and social sectors in the quarter ahead. picking the likes of direct tv or peter tormin will determine who takes on net flicks. the box office is on track to rebound from winter decline putting studios on track to beat

last year's box office record and instagram on the heels of the video launch, the big question is when ads will launch and social acre sixth after yahoo's billion-dollar boost and four square and what's app are in the spotlight. for "nightly business report" and. >> and that is the perfect pivot point for us to go to jon fortt. >> reporter: here is what to look for in the tech sector in the quarter ahead. supply chain, expect lots of rumors to move stocks with large screens from the likes of sharp or samsung or back to school numbers particularly in pcs. a chance for intel and microsoft to show the initial poor numbers this year can be turned around and tablets and the like for the holiday season. expecting in september new ipads, iphones and kindles. for nightly business record, i'm jon fortt. well, it's been an excellent

year so far for stock investors. can they count on a strong second half? hue johnson joins us now. he's the chairman and chief investment officer. hue, great to see you. is the second half going to be as good as the first? >> it's hard to imagine that you could get another half in the same year that was as good as the first year, first part of this year. obviously, we had a rise in stock prices, that's not a big surprise, a rise in interest rates, that's not a big surprise but the magnitude in the first half is spectacular. the trade off unfortunately, it's a little over valued so in the second half of the year, although stocks could continue to rise, you're not going to get anything that looks like the first half. so, let's call it good but not great and maybe even a modest correction as we move through the third -- the third quarter of this year. >> if i generally have a 50/50

stock bond mix in my portfolio, hue, where should i be now? should i be at 50/50, a little over weight stocks? >> one of the most important points, tyler now is that the market in bonds is behind us and we started a fair market in bonds, not the place and not going to be and 50 portfolio. and 57.5 or 60, something like that percent of the portfolio and in the bond part of the portfolio, make sure you keep the duration short. the stock part of the portfolio will perform the best between now and the end of the year and particularly between now and the end of 2014. look for the returns from the stock market to be roughly the 6% level through 2014 and maybe minus 1.5% in the bottom market.

>> so, let's talk a little bit about strategy. you said there still could be a correction in the third quarter. >> yes. >> so should investors buy when the corrections are happening and scale back in the rallies? what are you telling investors to do? >> i don't like to call it a short-term swing, suzy, but i think the market is 3 to 4% over valued. i would like to as an entry point, buy at a lower level, cheaper, better under valued level, so i'm saying yeah, you want to have that 57.5% in the stock market, but drag your feet if you're going to be adding to the equity component of your portfolio because common sense alone says after the first half of this year you'll get a correction and maybe a sharp correction along the way. my guess is in the current quarter, buy but drag your feet before you enter. >> i have a vision with a lot of you sitting at home with a hot

dog in one hand and pencil in the other and use that pencil to write down stock choices you would be comfortable with owning in the second half of the year. give me a couple names. >> you want to go with what has been working. consumer discretionary stocks have been working, couple names that i own and all our clients own, coach, disney, in that sector, the financial sector is on fire. i think the margins will expand. first republic, fifth, third on two good financial names and the healthcare sector is doing well. a good place to buy, price ratio, safe place to play the healthcare sector and drugs. take a look at farm and fizer. there are lots of names out there. drag your feet. buy a little now and wait for the so-called correction that i think will come and buy some more. real quickly, on friday, that important jobs report comes out, what do you think that will

do for the market? >> that's important, because that will get everybody talking about what will be the impact of jobs numbers on federal reserve policy. at what point does the federal reserve taper? the number will be 165,000. i don't think that will be enough to inspire or have the federal reserve to think to taper or reduce the quantitative buying or stimulus at this junk tour. it's in the fall, in september, october, november, december, time period that i think you're going to see numbers around 200,000 plus in job growth when the federal reserve will be seriously considering reducing the buying or stimulus, and of course, it depends on the inflation numbers, as you know. >> great to see you. thank you so much. enjoy the holiday. >> my pleasure. >> hue johnson, chief investment officer. it's the 4th of july and many people plan to get away and made it a long weekend, although

aaa expects fewer cars on the road this weekend, it still sees nearly 41 million people traveling. that's a good start to the summer season for the travel business and simon hobbs tells us what else to expect for hotels, cruises and the like. >> here is what to watch for in the sector in the quarter ahead. hotels are able to achieve not just the near record 70% occupancy that's being forecast but if they are also able to raise prices and therefore be substantially more profitable. for hotel owners, watch for short interest and sharp share price moves on changes to fed policy and yields in the markets. cruise lines will likely continue to slash prices to fill ships in response to their spring of mishaps and watch advertising war with travel agencies like expedia and price line for both the cost and pay off especially with the recent big search take overs, mainly kayak. for "nightly business report,"

i'm simon hobbs. >> that's nig"nightly business report" for us. have a great 4th of july. i'm susie gharib, thanks for watching. >> i'm tyler mathisen, have a great 4th of july. we'll see you here tomorrow for the big jobs report. "nightly business report" is brought to you by -- >> sailing through the heart of historic cities and landscapes on a river you get close to iconic landmarks, to local life, to cultural treasures. viking river cruises, exploring the world in comfort.

(peter sagal) the constitution puts limits on the power of government. but what happens when the law of the land... i think the federal government has just grown too big for its britches. ...conflicts with the law of a state? everything you just showed me is in violation of federal law. under the laws of the united states i'm a criminal deserving of the death penalty. (peter) coming up on "constitution usa" with me, peter sagal. (woman) major funding for "constitution usa" with peter sagal is provided by-- u.s. bank wealth management... helping clients grow, preserve, and pass along their wealth. real advice for real goals-- u.s. bank wealth management. the anne ray charitable trust, the national endowment for the humanities--