this is night by business report with tyler mathisen and susie gharib brought to you by -- >> sails through the heart of historic cities and the river you get close to historic landmarks, to local life, to kur cultural treasures, viking cruises exploring the world in comfort. bernanke speaks and investors listening. the economy could use his help and the comments could make a difference. >> mega deals get done, we'll take you there and tell you what is being discussed by media and

technology. >> back to school, yes, it's july and yes, retailers are starting their sales on notebooks and pens and with good reason. we have that and more tonight on "nightly business report" for wednesday, july 10th. good evening everyone. a very busy news day, especially late in the day. if you thought the market's fascination with the federal reserve and chairman ben bernanke was over, you thought wrong. tonight speaking to economists in massachusetts he says the economy still needs help and the data show the feds current accommodative policy is needed for the foreseeable feature. on that news, bonds and sock futures rose and the dollar fell and the market twitched slightlierlier in the day when the fed released minutes from the june meeting. those records show a much more sharply divided fed than previously thought, about half the officials thought the fed could end it's bond purchases by the end of the year, and the

other more accommodative half basically said not so fast. let's see what the data say. here is what ben bernanke had to say on that tonight. >> both sides of our mandate, both the employment side and the inflation side are saying that we need to be more accommodative. >> on wall street, investors mold over those minutes trying to figure out what the fed's next move might be and what they might mean for interest rates. those comments from chairman bernanke we told you about will certainly set the tone of trading tomorrow. ahead of that, the dow lost 8 points, the nasdaq rose 16 and the s&p 500 edged up a fraction. but more action in the oil market. crude prices spiked to a fresh 16-month high shooting up $3 to $106 a barrel. the catalyst for the move, u.s. stockpiles of oil fell more than twice the amount that analysts expected. and joining us now to talk

more about the next move from the fed and the economy glen hubbord, advisor to george w. bush and author of "balance the economics of great powers from an excellent rome to modern america." welcome. >> thank you. >> you saw the open of the program, my question for you is if you were sitting on the fed's governing borard the open marke committee how would you approach the quantitative easing. >> i agree with chief man bernanke the economy's recovery is not vigorous, that's not no doubt. the question is continuing it, whether that will help that much. i'm rather doubtful and leaves great risk. on top of that, the fed's communication leaves something to be desired. >> glen, nice to have you on the program on a night like tonight.

tell us, you say there are risks offi continuing kwaunlt daytive easing. >> having low interest rates and the expanded balance sheet for such a long period of time. the other is the need for more clarity on what an exit strategy is. >> do you think kwaunlt daytive easing, the bond buying the fed engaged in, has it helped? has it created jobs? has it brought interest rates down, mortgage rates down? has that helped the economy? >> it brought longer-term interest rates down but the fed's studies that suggestion the easing is unlikely to have a large effected on the economy. the economy needs an improvement on business confidents that could come better from fiscal policy than monetary. >> there is not much more the

fed can do? the rest has to come from washington? >> removing the gridlock and fi fiscal policy is more important. >> your book is talking about financial i'm banbalances and a of it you say has to do with history over politics. >> right. >> where are the pitfalls? seems like we're at an inflection point where this knowledge of history might be important. >> when politics don't keep up with economics, politics stumble and it's the large debt builtup and the political institutions don't seem to be able to control it. we need to make change if we want america to remain on top of the economic power list. >> why has the political system not been able to keep on top? isn't that their job? wasn't that your job in part in working in the white house? >> it's definitely the job. the problem is the budget rules were built for a period when big

movement movements in debt were about war and peace. we have to change rules and processes. >> all right. so want to ask you about succession at the fed because there has been a lot of guessing of who it might be, larry summers, janet, the names coppicop ming up. do you think there will be a change at the top of the fed and who will that be? >> that's up to president obama. ben bernanke has done a good job there are a number of good names to choose. the good question for the chairman is what will be his or her view of the economy and exit strategy from the current policy. >> one final question, do you think the economy will strengthen in the second half of the year or not? >> i don't see markets strengthening in the second half of the year. i see a continuing recovery, to

be honest. >> mr. hubbord and congratulations on your book. well, one thing the fed keep as very close eye on is housing, and today just as mortgage rates hit a two-year high app captions for new mortgages fell by 4% and those rising mortgage rates are creating sticker shock for home buyers. diana olick has that story. >> reporter: at a broker's open house in northern virginia, agents are sizing up this single family home and recalculating what their clients can pay now that mortgage rates are far higher than they were six weeks ago. >> it's a lot quieter, which is a same because historically the rates are very low. >> some people say it will cut down on business because people will say hey, i missed the boat. i'll hold off. >> reporter: mortgage rates are a full percentage point higher than early may but not so much the rate which is still historically low, the sharp

jump. >> we had this spark happen, 45% jump in mortgage rates from 3.5 to 5 over the period of six weeks. i can find no president for that. the only president i can find is the tax credit in 2010. >> reporter: that stimulus which hampton calls small compared to the government induced rate is a drop off in sales when it expires. new home sales fell 38% in a single month in the spring of 2010. >> my biggest concern is we're just not going to have demand anywhere remotely close to what we had three months ago, 12 months ago when this super fed stimulus was in place. >> reporter: compounding the rate shock is sticker shock in home prices, as very tight supply has buyers out bidding each other. >> i think it's been a lot of primmed up demand and rates going up, the buyers want to act

right now. >> reporter: the question is, how long will that last? in may, weapon did see a rush to buy as rates started going higher, signed contracts hit a six-year high but that was before the recent spike and while rates at 5 or 6% are not historically high, it was the spike that spooked the market and for consumers, 3.5% had become the new normal. for "nightly business report," i'm diana olick in washington. for more on rising impact rates, log on to our website nbr.com. a big set back for apple today. a federal judge in new york ruled that apple conspired to raise the prices of e books. she came down hard on apple saying the company not only colluded with five major publishing houses to take on the lock on electronic book sales but master minded the strategy. according to the ruling, apple encouraged publishers to jack up prices 50% or more overnight to

break the $9.99 book prices. apple insists it did nothing wrong and will appeal the ruling. apple is facing a ban of top-selling bad ggadgets on aug 5th. they are asking the trade commission to lift the band pending the appeal of another case thecently lost. last month they halted the sales of iphone 4 and ipad 23 g in a ruling apple infringed on a patent owned by rival samsung electronics with technology on those two devices. the tribune company wants to split into two. it plans to separate the newspaper publishing businesses that includes big dailies like the los angeles times from the more profitable broadcasting division. it's similar to the split at news corp. last week they spun off the 21st

century fox movie entertainment into a accept trbrett company. some of the biggest names in idaho for the alan and company conference where big deals have been made in the past like the timewarner aol merger in 1999 and julia shows us what big deals some of those participants may be working on now. >> reporter: the alan and company conference is nicknamed summer camp with big names like news corp murdoch, amazon and warren buffet. the gathering of the teches and ceos includes off the record panels on top picks including education and cybersecurity and speakers like cheryl sand burg and in the halls of the lodge, everyone is talking about the economy. >> my outlook on the economy is hopeful.

europe is tough, as everybody knows and there are signs of life here in the united states and we hope it can continue. >> reporter: with sun valley's track record for mega deals, they are watching the billion-dollar sale and all the major players are here. disney and news corp and timewarner cable. >> we'll see something because they are in play. i would like to see hulu get acquired by somebody. it creates another competitor to netflix and amazon. the more people that want our content, the better. >> reporter: they are sitting on 2.6 billion-dollar in cash and there are reports sony's ceo will spend off the foundation. robert johnson and a surge of deals. >> there is plenty of cash out there circulating and the question is what is the best deal you can find in a marketplace like this? i think digital growth spot.

>> reporter: that means more digital ceos. both of which would be the next mega ipo or acquisition. the conference entintroduces to wearables. with so many deep pockets, we're watching for deals. for "nightly business report," i'm julia borston. still ahead, how much does the u.s. need china and china need us? buying the world's two largest economies, but first a look at the closing numbers for the international market.

a major ruling by wall street regulators, hedge funds will be allowed to started a vertizing. securities and exchange commission voted to lift the decades long ban on hedge funds marketing, which investments they are putting their money into. >> all right in washington, the senate today failed to pass a plan aimed at restoring lower interest rates on subsidized student loans. one week after the inaction by the senate caused rates on new stafford loans to double, the senate voted down a measure to return rates to 3.4% for another year. the hurdle, a competing plan that would link student loan rates to the benchmark treasury rate. smith field foods got a grilling today. they wanted answers on the safety of the u.s. food supply and what foreign ownership on the biggest pork producer would mean to workers and the u.s.

larry pope said what he thinks the takeover is about. >> this transaction is about exporting high quality meat from the u.s. to china to meet the growing demand. this combination will not result in any u.s. imports of food from china. >> the deal would be the biggest takeover ever of a u.s. company by chinese concerns. a troubling sign of a poubl slow down in china's red hot economy today. trade data for june fell sharply. chinese made exports fell more than 3% compared with the same a month earlier and imports into the asian nation were down, as well. both were well below forecast. the u.s. and china in opening talks for the dialogue aimed at building corporation between the world's two biggest economies. among the attendees representing the u.s., secretary of state john kerry and jack lieu and vice president joe biden. maintaining an open dialogue between the u.s. and china is

more important than ever as the world's two biggest economies increasingly rely on each other despite differences. we see just how much the two countries have become so closely connected. >> grab us a handful, come on, get us some. >> reporter: when the u.s. ambassadors takes time to market imported cherries at a sam's club it's clear, china is important to america. >> more interaction between all of our people at every stage from academics to students, to policy makesers, business people are important. >> reporter: they depend on each opter and trying to reboot ties. a faith of china's experts go to the u.s. while american ex perpts to china have jumped sixty fold since training the world trade organization. the two do as much bickering as

trading, arguing over market access, foreign policy and more. >> when it comes to theft of the inlek well property, that's a huge problem where china is coupeble. >> many people here in china believe the united states may like -- may try block the development of china so that's why we see this must trust deep seeded mistrust. >> reporter: even though china is growing in strength, it relies on the u.s. for growth, jobs and investment. this chinese auto parts makeer sends 3/4ths to america. they are shipped out every day. we want more americans to buy our products. the more our company earns, the more money we make and the more american goods chinese will be able to afford. and an american company with

big business in china leads the market focus tonight. sales tumbling 20% because of the swine flu square. the company sees those china numbers turning around in the fourth quarter despite the quarterly profits did beat analysts estimates. shares of yum drifted lower during the trading day and stopped slightly in after hours trading. hewlett packard lead the dow thanks to a buy rating from city investment research. the analyst doubled the price target to $32 a share and increased earnings estimates saying cusay saying cost cutting will boost profiting setting an 18-month high. family dollar led the s&p 500 winners. expect full year same store sales to increase by 3 to 4%. family dollar ceo howard lavine

says customers will face financial head winds and may help his business. investors crowded into the stock, shares up 7%. and submitting a promising lymphoma and leukemia treatment. the fda granted breakthrough status which should mean a quicker approval process. a johnson and johnson company is a partner in that treatment. shares of pharmacyclics jumped 12%. investors continue to pull out money from bond fund s but the with drardraws are slowing . here to put these numbers into perspective is brian reed, ici's chief economist. brian, do put them in

prospective and given what you heard from chairman bernanke temperature top of the program, do you think investors will continue to withdrawal money out of bond funds, or is this it? >> this is typical to pull money out when interest rates rise and i think when chairman bernanke said as the cow moeconomy impro they will have monetary policy, they will continue to factor in the improving economy and future decisions, the market is factoring that in right now. we see pretty typical of what we saw coming out of the 1990s recession and early 2000s where interest rates rose and bond investors continued to pull money out over an extended period of time. >> there is talk about the great rotation of money out of bond funds and into equity funds. are you seeing that or is the money going into cash, money

fund ps and sitting there waiting until investors feel more confident? >> we're seeing about half of it going into money fund ps by the looks of it. looks like investors are stepping on the sidelines. domestic stock funds invested in companies here in the u.s. continue to have out flows last week and seeing money coming into international equity funds, they have inflows for several years now. so by and large it looks like investors are stepping aside and not too surprising given that we've had this incredible bond market rally that investors, some will step aside, even though 9 8% of the assets have stayed there through this pretty incredible runup in interest rates. >> can you read between the numbers and give us your take on investor sentiments? they are holding onto the cash but what more can you tell us about how they feel about jumping in into some kind of investment?

>> yeah, investors generally, you know, one of the things that strikes me over and over again is how really resilient they are. you look at the, you know, nearly $15 trillion we have invested in mutual funds. the flows for bond funds, equity funds are fractions of a percent. sometimes they accumulate to 2% like they have since the end of may. but generally, investors are very resilient and understand markets flux wait and we'll see good inflows, that's a testament to strong investor sentiment. >> all right. let's leave it there. brian, thank you so much. brian reed chief economist at the investment institute. coming up, beaches barbie k -- barbecues and back to school. retailers are pushing pens, pencils and more but first how

treasuries, come -- commodities faired today. the calendar may say early july but for big retailers it looks like late august, early september. back to school sales are here and according to those stores with good reason. courtney regan has the details. >> reporter: well, kids in some parts of the country just got out of the classroom for summer vacation, others are heading back in a few weeks and they will need new clothes and fresh school supplies. the retailers are rolling out back to school promotions, throw the 4th of july fireworks are hardly in the rearview mirror. >> customers say they want an early jump. do the back to school shopping several weeks before students go back and honestly, many parts of

the country, students go back first week of august, in some cases late july. >> but i like coming here, though, actually because they have the big signs saying this is cheaper to the one next to it and it's handy. >> i'm looking for coupons but i usually do back to school shopping towards the end of the school year, way before the back to school starts. >> here you can actually go online, find it and reserve it at a store and pick it up. >> reporter: there is a lot at stake for back to sale. it's the second most important selling period setting the tone for the holiday season. $8 billion was spent in 2012. shopper track estimates back to the school sells and traffic will increase.

back to school isn't always a slam kudunk for retailers. shoppers don't often care what brand so they have to compete on price. staples is offering packs of pens, e race lse -- erasers and cards for a penny. >> we hope they will come in, love the assortment and buy more than that. >> reporter: neons will be big with kids this year. an online price is bigger than ever with parents. while clothes shopping tends to happen later in the season, a number of analysts project macy's will be a top destination for back to school shoppers with walmart and target. for "nightly business report," i'm courtney regan in new york city. back to our top story, mr. bernanke speaking in massachusetts taking a more accommodative stance but based on the minutes providing over a fed market company.

>> interesting debate and interesting to see how it plays out in the market. >> join us again tomorrow night. that's it for "nightly business report" tonight. i'm susie gharib thanks for watching. >> i'm tyler mathisen. good evening from me, everybody. we'll see you back here tomorrow evening. nig"nightly business report has been 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.

% hello and welcome to this is us. i'm becca reed. a you tube sensation when they posted a thank you video to the preponderate. we there take a look at the video, and we will find out why people are willing to stand in lines a block long to get this ice cream. later we meet legendary surfer who has been on the job 50 years. we've got a lot of stories and it all starts now.