this is "nightly business report" with tyler mathisen and susie gharib. brought to you in part by -- >> the street.com. founded by jim cramer, the street.com is an independent source for stock market analysis. cramer's action alerts plus service is home to his multimillion dollar portfolio. you can learn more at the street.com/nbr. stocks tumble. the dow falls to a 5 week low as china, the global growth engine sputters. is this time start of the correction so many have been calling for? strong quarter. microsoft surprises investors with better than expected results. but is its bread and butter product, windows, going stale? on the front lines, some of the world's biggest drugmakers

want to change the way cancer is treated. and they're investing big money in promising new therapies. we have all that and more tonight on "nightly business report" for thursday, january 23rd. good evening and welcome. stocks had one of their roughest days in months today. they fell sharply and broadly on some lackluster earnings reports. but the real catalyst today was china. data showed its manufacturing sector contracted this month. that plus concerns over credit conditions there sent shiverers of worryabout around the globe and especially into the emerging markets. one prominent emerging market's fund lost 2.5%. u.s. economic data out today was pretty good. first time jobless claims are roughly back to pre-recession levels. sales of existing homes rose 1% in december, enough to lift overall sales in 2013 to the highest level in seven years. but neither those reports nor a stunning 16% surge in netflix shares after yesterday's blowout

earnings could turn the tide on wall street today. the dow ended well off the lows of the session but still off a big 176 points, a 1% decline, even though the dow transports did manage to close at an all-time high. the nasdaq was by 24, and the s & p 500 lost 16. our reporter has more now on how trader played out today from the new york stock exchange. >> reporter: it was not a good day for the market so we ended off the lows for the day. it started overnight when chinese manufacturing numbers came in below expectations. china december economic data has been weaker than expected for a few weeks. why does china matter so much? emerging markets like china are an important part of the global growth picture. if that growth is below expectations investors are going to light up on their exposure and that's what they're doing. not surprisingly, chinese stocks were among the weakest performs. other emerging markets stocks were weak. u.s. stocks declined in

materials, energy and industrial sectors. while defensive sectors like utilities and telecom were very little changed. not surprisingly, the dollar weakened, gold rallied, and the yield on the 10-year treasury dropped. it's been a very strange year for stocks. there's lots of divergences. the dow transports are up over 2% and the nasdaq and russell 2,000 are also up fractionally. it's been a big cap selloff in 2014. the rest of the market is holding up fine. for "nightly business report" i'm bob pisani at the new york stock exchange. let's turn now to nick cole for his analysis what's going on in the market. chooes strategy ex officer at the convergence group. the rest of the market is doing just fine. not a broad-based telloff. so many people are saying this could be the beginning of a market correction. what do you think? and if so how big a correction could it be? >> certainly there's been a lot of complacency in the market.

we had a very strong end to 2013. and the expectation at the beginning of this year was for continued gains. we haven't gotten that. we've gotten a lot of volatility instead, particularly those big cap names. our expectation is volatility is going to continue for at least the next we're we are week or sl the new federal reserve meeting. >> why are big caps suffering so much more than smaller companies? >> big caps tend to have more exposure to overseas markets such as china as bob talked about. so the investors investing in those sectors and those names worry a little bit more about overseas economic conditions than those investors who focus more on domestic names that tend to be smaller. >> you just mentioned the fed a moment ago. and we all know that that meeting is coming next week. we've gotten so many indications that the fed policymakers are going to begin this tapering process. and yet will this be a positive or negative for investors once the news is official? >> right now there's a little bit of uncertainty about what

the fed policy will be next week when they announce how much more they may cut their quantitative easing or bond buying program. right now market tends to be -- there's been some talk about them cutting another $10 billion, reducing their monthly purchases to $65 million. still quite a bit of money to support the market. right now market is uncertain about future fed policy. that's never good. investors don't like that kind of uncertainty. >> nick, last year it seemed like investors played past the bad news. this year they're doing anything but. what changed? >> what changed primarily is van weighses. last year we began the year at roughly 14 times the earnings that we're going to see from u.s. companies through the course of 2013. this year we begin with 16 times earnings. when valuation levels get that high more things have to go right. in any kind of interim difficult news like today tend to create selloffs because expectations are higher. >> i also want to follow up on something else that was in that package that bob was doing about

a lot of divergences in the market. you see that the dow transportation average is at a new record today. and usually that's considered a bullish signal. and yet we saw gold prices were up, oil is up, the treasuries were up, which is a signal that things aren't so good and you better put your money in these safe places. so which is it? >> i'll tell you, it's been very interesting to watch the market over the past five years. because correlations among different asset classes, how much they move in common has been at record highs. while that was felt pretty good as the market was rallying, it's actually unhealthy. lower correlations are better because they provide more diversification. while it may feel odd on a day like today, the diverge enses are really a healthy sign to the market for 2014. >> one of the things that sent shivers were the concerns about the nonbank lending sector in china and specific concerns they may be up against a kind of sub prime crisis of their own. how worried should american investors be about that?

>> right now it does not appear to be a large concern. china has about $1 trillion shadow banking system very analogous to the one that funded sub prime lending in the u.s. in the 2000s. china's economic growth is much better than the u.s. experienced in the 2000s. so for the moment its is not a huge concern. however if it begins to grow or if the economy continues to slow in china it could snowball into a bigger issue. for right now, not yet a big issue. >> you've given us a lot to think about. thank you so much for coming on the program. >> thank you. >> nick coles, chief market strategist at convergence group. strong second quarter results from the dow component microsoft after the closing bell. very strong. software giant earned 78 cents a share. that was a full 10 cents better than forecast. revenue was sweet, too, up 14% in the quarter. more than 25 billion. strong sales of a new x-box video game console helped. so did sales of its office

products to businesses. windows was a weak spot as consumers favored tablets over pcs. microsoft shares initially rose after the results and finished the regular session slightly higher. sima, modi,what was the one things you saw in this report you can't overlook. >> microsoft earnings beat expectations thanks to strong demand for its cloud services. coo kevin turner says quote we continue to take share from our competitors by delivering the devices and services our customers need as they transition to the cloud. so it's microsoft's efforts to gain more traction in the cloud. that was one of the factors that helped the software giant this quarter. tyler. >> money from the cloud, pennies from heaven. sima, thank you very much. microsoft though has a lot more than just earnings to focus on, including a pending $7 billion hardware acquisition and the search for a new chief executive officer. josh lipton has more.

>> reporter: as soon as steve balmer announced last august that he would step down as microsoft's ceo, investors started to focus on who would replace him. >> whoever comes in is going to have to choose where to focus. >> reporter: walter pritchard, citi's software analyst, says the issue for microsoft isn't so much about a person but rather a very important product which accounts for about 30% of the company's profits. >> i think at the end of the day whether it's an insider or outsider they face the same set of challenges, which is a company that's sort of increasingly losing a grip on the core what built the company, which was windows. >> reporter: windows has been the foundation of microsoft's product line for 30 years. pritchard says it's quote waning in relevance as fewer consumers are using pcs. >> i think gates is not going to let it go. with baumer leaving and mistakes made under his watch, i really think microsoft's going to adapt. >> personally i'm an mac user as

you can see. but do i run windows for business services. >> i know people that love it and hate mac. and they swear by windows. >> reporter: mobile devices, like smart phones and tablets, are growing rapidly. microsoft is moving hard into the mobile market by buying nokia's device business for $7 billion. but that business is struggling. today nokia reported that sales in its device business dropped 29%. nokia runs windows phone, the mobile version of windows. market researcher idc says windows phone controls a miniscule percentage of the global mobile operating system market. far behind rivals like google and apple. he thinks the most successful strategy would be for microsoft to pay back its windows and tablets and focus on enterprise opportunities. rick shoreland has a different take. he agrees with pritchard microsoft needs to rethink its business model.

he says the most important question is who will be the next ceo. sherman says only an outsider who has the courage and self-confidence to stand up to steve baumer and the board can fic microsoft. the next ceo will face tough choices between emphasizing its business customers or trying to crack the consumer market. pritchard says it can't do both. josh lipton, "nightly business report," silicon valley. besides microsoft, one of the few dow components ending higher today was mcdonald's. even after reporting a sales decline last quarter. but there's a lot more cooking at the world's biggest burger chain. sarah eisen has the story. >> reporter: a challenging year. that's how mcdonald's ceo don thompson is describing 2013. the fast food giant struggling with the the wobbly global economy but also making some mistakes of its own on menus and pricing. since thompson took the reins about 18 months ago the stock has only risen 8%. whyte while the broader market

is up 37% in that period. that disappointing performance is being driven by weaker sales, especially in the united states. and for the year, total sales were only 2% higher than last year. mickey d's has been trying to beef up its menu options to draw customers, introducing mighty wings, the new dollar menu and more. but so far, they've been a flop. and competition from smaller rival burger king and wendy's for $1 menu items is intensifying. the ceo says near-term challenges remain. >> 2013 was a difficult year. and we're keenly aware of our short-term challenges. due to economic predictions are mixed, but most assume some limit global improvement in 2014. >> reporter: some are betting the future may be looking up. the stock was a bright spot on a down day on wall street. still ahead, treasury

secretary jack lew tells congress to act on the debt ceiling soon. but first, emerging market currencies were routed today on worries about china and the fed. the argentinian peso led the way lower off 12%. here's how that all affected latin and international markets. could warren buffett's berkshire hathaway be too big to fail? it could be according to the financial stability oversight council. it's headed up by treasure secretary jack lew. this risk council is trying to determine if berkshire could threaten the nation's financial stability should it fail. and if so, the company would be subject to stricter regulatory oversight. >> from the here we go again file, the economy could be in real trouble real soon if we hit

the debt ceiling and washington can't borrow more money to pay its bills. treasury secretary jack lew told congress it has to act now and not wait until the last minute to increase the nation's borrowing limit. >> i think they know what they have to do. i think they know it was not a good thing to create the kind of economic anxiety that was created just a few months ago. we're doing pretty well in the u.s. economy right now. we've got some tail winds. we're seeing the year ending strong, beginning strong. we have to make sure there are no more self-inflicted wounds. >> on wednesday, lew wrote to congress telling them they have less time than originally thought before they'll hit the $16 trillion limit sometime in february. john harwood, we have been here before. how much time do we really really really have this time? >> reporter: well, you can never be exactly sure because of the extraordinary measures the treasury can take. also their revenues depend on

the strength of the economy. the stronger the economy is, the better the chances are that it could go a little bit later than the late february that jack lew has talked about. harry reid the senate leader has talked about much later in the spring, in fact. but i think that everyone knows that sometime in the next couple of months, congress is going to have to do this. and as jack lew said, congress knows going to have to raise the debt limit. the only question is how we get there. >> and that is a good point, john. and speaker boehner made some comments today, is he signalling he wants a fight on this issue? we've seen over the years that this drama over the debt ceiling has led to a government shutdown, a downgraded u.s. debt and market selloffs. so should investors be nervous? >> reporter: john boehner does not want a fight over this issue but some of his members do. what he's trying to do by saying he will not permit or the house will not pass a clean debt limit increase is signal to his members that he's not throwing in the towel. but i do think it is correct that as we saw in this most

recent budget deal, people are weary of the brinksmanship. they want to get back to some sort of a normal operating atmosphere in washington. and i think that is going to pull republicans back, even if some of the tea party members do want a confrontation over this. >> we sort of know what the white house view is on this. is this going to be a bargaining chip for some sort of negotiation or not this time? >> reporter: there'll be a conversation. i was talking to a senior white house official today who said yes, the republicans want something but they're not very specific about what they say that they want in a back and forth. nobody's talk about more spending cuts because they've just made a budget agreement. so it is not clear what the back and forth will be. there will be some. there will be a courtship. jack lew is trying to begin that right now. but i think investors can be reasonably confident that it's not going to end in the sort of train wreck that we've seen in the past. >> john harwood, thank you very much. john in washington for us tonight. a massachusetts senator

calls for an investigation into herbal life's business practices, and that's where we begin tonight's market focus. senator edward markey sent letters to the securities and exchange commission, the federal trade commission and herbal life itself. he's asking for more information ant the company's operation and compensation system. herbal life, which sells vitamins and drink mixes to a network of individual distributors, has been under scrutiny because of act accusations that it's operating a pyramid scheme. shares plunged 10% today to 65.92. linobo, the chinese pcmaker, is buying ibm's low end server business for more than $2 billion. it could be china's biggest test do ever. the purchase lets ibm focus on more profitable areas like software and services and to move out of hardware. in ibm's latest earnings report, weak results from its hardware operations were a big factor in the company's revenue mix. shares of big blue rose a fraction today to $182.73.

after the market close, starbucks reported that profits rose 25% last quarter. that was better than expected. but revenue came in below forecast. sales fell during the holiday season because more consumers shopped online. global sales were also slightly below estimates. shares fell a bit in the regular session closing at $73.39. well, with those strong transports helping the markets today, union pacific beat street estimates thanks to strong grain, automotive and industrial shipments. the rail operators saw overall volume growth for the first time in six quarters despite weaker coal shipments. that sent shares up more than 3% to $174.12. united continental also out today with earnings. they topped consensus the airline got helped last quarter from an increase in travel, higher ticket prices, cheaper fuel. but a weak view for the current quarter did overshadow those results today. they expect unit revenue to be

flat because of the recent winter storms. shares there fell 1.5% today to $48.43. shares of johnson controls took a nice hit today. well, not so nice 23 you were one of the owners of it after the company reported profit that is matched forecasts in an outlook that trailed estimates. sales at the auto partsmaker were better than expected helped by higher sales in china, but investors couldn't get past the outlook and weakness in some of the company's main units. the stock fell more than 4% today. it finished at $49.30. and shares of lockheed martin tumbled 4% today. profits at the nation's biggest defense contractor fell 14% from a year ago. that was because of budget cuts and job reductions at the pentagon. dominic chu takes a look at howed sequester cuts have impacted the entire defense sector. >> reporter: washington budget woes were viewed as an overhang on the overall defense industry. but optimism among investors

those issues would ultimately be resolved helped propel some of the biggest companies in the business to big gains in the stock market. earlier this month, analysts at goldman sachs said that they think there could be more up side returns because of the recent budget deal and improving margins. there was a similar tone among the experts at oppenheimer who like the larger cap defense companies because of quote budding confidence that the bottom of this budget cycle is finally coming into view. take lockheed martin, the world's biggest defense contractor and maker of the next generation f 35 joint strike fighter. profits fell from the same time last year, but cfo bruce tanner said that he hoped this year would represent a drop or low point in u.s. defense spending. general dynamics also reported better profits in sales than analysts had anticipated. the maker of tanks and nuclear submarines said it plans to buy back 11.4 million of its own shares during the first quarter. but not all investors are convinced that everything will come up roses for the defense

industry. >> i think defense stocks have had their run. i think going forward they'll be cutting kwocosts and pruning th balance sheets. the industry as a whole is going to have a hard time growing since they've had such a good run and demand has really been picking up in the last couple of years. >> reporter: investors will get a better idea of how things are shaping up. aerospace giant boeing, combat drone maker northrup grum mund and raytheon will also report earnings next week. what will get analysts to change their bullish tone on the defense stocks? for "nightly business report," i'm dominic chu. and coming up, new and innovative ways to fight cancer and the drug companies that are leading the charge.

kneeman mar -- neiman marcus is coming clean about its massive data breach. it says more than 1 million customer credit cards were hacked between the months of july and end of october last year. but company insist that is no social security numbers or birth dates were stolen, and that customers who shopped online were not affected. hyundai has a problem for the first time in three years. global sales have declined. the automaker blames a stronger south korean wan and cheaper japanese yen for making rival asian models more affordable in the u.s. and other key export markets. >> but business is booming at toyota for the second year in a row, toyota was the world's

number one automaker in 2013. selling nearly 10 million cars and trucks all around the globe. toyota outsold general motors by 270,000 vehicles last year. germany's volkswagen came in third. a new poll finds a marked decline in the number of uninsured americans. the gallup health ways index says because more people signed up for health care coverage under the affordable care act, the number of uninsured adults in the u.s. fell by more than 1% this month, leaving roughly one in six people still without health care. and finally tonight, drug companies big and small are investing in promising new cancer therapies. giving hope to millions of victims of the disease. morgan brennan has more. >> reporter: there's a monumental shift taking place for the drug industry in the fight against cancer. it's called immunooncology. think of it as cancer treatments

2.2. immunooncology is a new class of therapies that use your own immune system to target cancer cells. they're coupled with more traditional therapies and could help prevent relapses. they say it's a paradigm shift for how new cancers will be treated. >> what we appear to be seeing is very profound tumor shrinkage. we still need more data but this is why it's generated so much excitement. >> reporter: immune yo on colim still budding but analysts believe it could grow quickly as new drugs particularly those already in late development stages begin to win approval. larynk partners estimates it could grow -- double by 2025.

a number of companies have been focusing in on these promising new therapies, including roche, merck -- bristol-myers squibb which reports its fourth quarter earnings on friday. >> roll the clock forward into the latter part of the decade, i think it's plausible it could be over half of their p and l. i think it's going to be a very material part of what they become. we think bristol can double their earnings from these levels by the end of the decade. >> reporter: immunooncology has been a long time in the making. with companies first trying to harness the immune system as far back as 15 years ago. the earliest examples were not commercial successes. so new research and promising trials mean cancer patients could soon have more options than ever before. for "nightly business report," i'm morgan brennan. >> that's some upbeat news. >> exactly. >> promising. >> that's "nightly business report" for tonight. i'm susie gharib. thanks for watching. >> i'm tyler mathisen.

thanks from me as well. have a great evening, everybody. we'll see you right back here tomorrow night. "nightly business report" has been brought to you in part by -- >> the street.com. found by jim cramer, the street.com is an independent source for stock market analysis. cramer's action alerts plus service is home to his multimillion dollar portfolio. you can learn more at the street.com/nbr.

kevin: today on "ask this old house"... i'll show you a high-tech kitchen faucet with a user-friendly installation. have water coming down this way, and then this side is pitched, so it helps wrap the water around here, and it all gets concentrated and goes into the backyard. if you don't have good drainage, a little rain can do a lot of damage. i'm going to show you how to fix it. it's yellow, it's flexible, and it has two steel hooks. what is it? well, let's say i got to get in the corner... [laughter] kevin: that's next on "ask this old house." or, on the wall.