report" with tyler mathisen and susie gharib. brought to you in part by -- >> thestreet.com featuring herb green who reminds investors risks is reality. researching stocks in terms of risk. you can learn more at thestreet.com/reality check. >> record setting day. dow and s&p catapult to new highs. how solid are the gains. can this rally really be trusted? >> he was one of the most pivotal and controversial figures during the financial crisis. tonight former treasure secretary timothy geithner defends his actions and reveals what he would do over if company. love a sale? not everybody does. the big promotions could pinch some retailers profit when they

report their earnings. all that and more tonight on "nightly business report" for monday, may 12th. >> good evening everyone, and welcome. >> i'm tyler mathisen. >> road record setting day for the markets with the dow jones industrial average and the broader s&p 500 both closing at fresh all time highs. and a rebound in beaten down momentum stocks helped the nasdaq see its biggest one day gain in more than a month. here's how things wrapped up on wall street. the blue chip dow stocks added 112 points ending at a close of 16,695. the nasdaq was up 72, nearly 2% jump and the s&p was up 18, closing at a new high of 1896. so what was behind today's rally in stocks? what may happen in the markets in the days ahead? bob pisani has more. >> reporter: stocks started up

and stayed up today. no late day fade at all. the dow industrials, the dow transports and the s&p 500 all closed at historic highs. several factors kept the rally going all day long. first and foremost there was stability in the two most volatility groups internet and biotech groups. the internet and biotech etf gained 3%. other sectors that have underperformed the market this quarter the banks, home builders and retailers all posted strong showings as well. that quieted concerns that the recent sell off in internet and biotech names might spread and infect the broader market. second bond yields were higher across the globe. the ten year treasury safely above 2.6%. china and india had a strong showing overnight. chinese stocks had a 2% pop on speculation. india popped another 2.5% to close at another historic high at the national elections there

finally concluded and appears the pro market opponent is ahead in the opinion polls. final results are due out may 16th. what would keep this rally going? better economic news. this is a very big week. starting with april retail sales. we're looking for an 0.5% increase over march. and also housing starts and inflation data. i'm bob pisani at the new york stock exchange. a big merger. combining a lot of top brands under one roof. hillshire brands is paying more than $4 billion for pinnacle foods. what do they own? they have duncan hines, wish bone salad dressing and vlasic pickles. investors gobbled up shares of pinnacle. they soared more than 13%.

another possible merger is facing a lot of scrutiny. pfizer is defending its proposed takeover of british rival astrazeneca insisting the $106 billion bid will benefit shareholders and any promises made to uk officials regarding jobs or paying its fair share of british taxes will be kept. here's pfizer's ceo. >> when you look at this combination, it really meets the scientific needs, it meets needs of efficiency, it meet needs of strengthening a balance sheet and our fiscal position. it allows shareholders to number one get an immediate benefit from the cash that we would pay them and it allows them to participate in a very strong combined company with great cash flows, great portfolio. it allows a very efficient allocation of capital by my company. >> this week two british parliamentary committees will hear testimony from pfizer about

its bid to buy out astrazeneca and what it means for the company and its workers. >> an update on another takeover attempt. the $46 billion offer by bill ackman and canada's valeant to take over allergan. the business model create as risk for allergan shareholders. >> tim geithner giving straight answers to bail out the nation's banks. it is all covered in his new book," stress test, reflections on financial crises" and that book is out today. andrew ross sorkin spoke at length with the treasury secretary. it was a pretty wide ranging one. >> reporter: it was. thank you for that. i di sit down with him ahead of

the publication of this book "stress test." timothy geithner a polarizing figure in the country because he became face of the bailout, t.a.r.p. program and i started our discussion by asking about a criticism that senator elizabeth warren has made repeatedly about his efforts to focus what she believes are more on wall street than on homeowners. take a listen. >> if you want to protect the average person from mass unemployment, you have to make sure the system, the financial system doesn't collapse. you have to keep the lights on. what's the best way to think about it. you're on a plane. you're in the cockpit. the engine is burning. there's smoke filling the cabin. you got a bunch of terrorists on board. people who built the plane or messed it up and they want you to come out of the cabin and beat up the bad guys. but you got to make sure you land the plane first.

when you land the plane safely you can figure out how to make sure to bring a measure of justice to people responsible. your first obligation and the only way to prevent mass damage make sure you protect people most vulnerable. >> the second critique you landed the plane safely but when there was an opportunity for reform to truly reform the system, to fundamentally perhaps even change the system you didn't take it. >> again, i don't understand the perspective. we did transformative reforms to the system much stronger consumer protection, much better authority for the cops than we had before the crisis and instead of protections against risk taking that makes the system a much more stable system. >> today some people would suggest the banks are still too big to fail, they are bigger than ever. true? >> i think that americans should be much more confident today that we have a system again where we can be indifferent to, safe from the failures of

individual firms. we're much closer to that reality we were at any time in the last 30 years. banks are forced to run much more capital. we've limited the size. no bank can be more than 10% of the banking system through acquisition. that's a much tougher constraint that exists anywhere around the world. >> there's a point in the book where you go to visit bill clinton. talk about a couple of things. one being whether there's a way to persuade the public, perhaps that what you're doing is the right thing. what did he tell you? >> he said the basic reality and sort of the human thing is that people wanted blood. and you could -- you could take your pick. you could take out your favorite investment banker and slit the throat in the alley and the next day people would want more. >> part of your job on the political side is persuading the public that what you're doing is the right thing. >> hard for me. i wasn't successful at it.

>> if you could go back dynasty again is there something you could do differently on that piece of it. >> i don't know. it's not my natural talent. how do you convince people that something that was still so terrible, worst recession in our lifetimes could have been worse? it's hard to use a counter factual argument to convince them what we did was necessary in preventsing a great depression. this other burden, again, which the things you have to do to protect people from worst damage just are going to look terribly unfair. looks like you're rewarding the arsonist. >> tim geithner, his legacy still in question. he saved the system but some believe the system at least as it stands today maybe shouldn't have been saved. so there we have it. we'll see how history ultimately judges this man's legacy. >> the book is not without controversy, though, andrew. glenn hubbard took issue with some of the things that the former treasury secretary put in the book.

can you elaborate on that? >> there's been a number of controversies that have emerged over the weekend about this book, in particular the glenn hubbard piece. there's an anecdote in the story where geithner recalls he talked to hubbard during the elections when hubbard was working for mitt romney. apparently he said or geithner said hubbard told him after the elections if mitt romney were to win the republicans would have to raise taxes. hubbard has since came back and said geithner is a liar and in fact he never said any such thing. geithner said he remembers it crystal clear, so it's going to be a bit of a he said/she said. >> let's go back to that passage there in your interview with him we said very carefully we are closer than we've ever been in the past three decades to a place where we're sort of in0

culated from a big bank. that's very careful word choice. about bank of america or citi or chase ran into a cataclysmic problem we're close but not. >> i've been interviewing him over the past month was i went to visit him -- he taught at a class at harvard with larry sommers and asked about too big to fail and he said too big to fail very much still existed and that's a different response by the way that he said when he had the title of treasury secretary he publicly said prior to dod frank being passed too big to fail would be eradicated by dodd-frank. in this class he said something very different. his view is that you will never really be able to take the fire department away and he would even argue it's misguided to

take that fire department away because there will be another crisis in the future. >> andrew, terrific job. thank you so much for joining us tonight. andrew ross sorkin. a new study says medicare spent $2 billion on patients back in 2009 for tests and medical procedures that had little or no health benefits. in the first large scale study to directly measure wasteful spending in medicare harvard researchers at the medical school there found at least one in four medicare recipients received one or more unnecessary or ineffective tests or procedures that year. the study results were published in today's journal of the american medical association. >> here's something you don't often series, federal budget surplus. washington ran a $107 billion surplus in april thanks to all of those individual and corporate tax receipts coming in last month. more good news. seven months into the 2014 fiscal year the federal budget short fall is down 37% from last

year. still ahead ibm stock has been stagnant basically and the ceo admits this is a rocky patch for the company. but he has a plan to get big blue back on strak s-it enough to start there? >> first quarter earnings out from chrisser and fiat. even though chrysler saw gains i want lost a ton of money. fiat said the deficit was due to costs related to the merger.

if you take those out net income for chrysler was nearly half a billion dollars. chrisser, ford and general motors all faring poorly in relationships with auto parts suppliers. more than 400 suppliers were asked about their overall relationship with the six biggest carmakers in the united states. toyota, honda, nissan top marks followed by ford and chrysler. general motors was that's. meantime attorneys for the parents of a georgia woman killed in a car crash linked to general motors faulty ignition switches are refiling a lawsuit against the automaker even though they already settled the case with gm citing the admission by gm's ceo that an engineer in the case may have lied under oath. some of the nations biggest retailers are out with earnings later this week including

walmart, macy's and jc penney. some are warning the steep discounts and other promotions may have a big impact on their bottom line. courtney reagan has more. >> reporter: not everyone loves sales. it helps drive traffic. it squeezes profit for retailers. this past holiday season was one of the most promotional in recent history. retailers are still offering larger than normal discounts. the harsh winter crimped retail foot traffic so the sales were deep as stores hoped to clear inventory. but with 40% off less the exception and more the rule for some retailers investors are starting to worry. >> last year the norm became 40% off. why is that important? because it comes out of gross margin and, therefore, right out of the bottom line. so if you don't have some way to offset this and that's what's happening and i believe it will

be going on for a long, long time, i don't think it was temporary, then you're getting less return on your investment than you expected to get. >> reporter: according to the sale tally promotion index, discounts across department stores and specialty stores are 5% to 10% larger this year than in 2013. ann taylor, express, j. crew, old navy are all offering promotions above last year's levels. ann taylor, gap, old navy and j. crew's promotions are deeper than the index average. which suggests profit margins will be impacted more at those retailers when earnings are announced in the coming weeks. but a former department store executive isn't concerned about gap and old navy's bottom lines. >> they are big, powerful, they have a loud voice, they are a large company. they have great clout with the

factories. their ability to offset is better than other people trapped inside the mall. >> reporter: specialty retailers aren't the only ones offering deep discounts. macy's is doing it too. but macy has more opportunities to soften the hit to the bottom line. what about the long run? something retailers are inadvertently training shoppers to only buy when there's a 40% off sale, a costly habit to break for both sides. for "nightly business report," i'm courtney reagan. the reported deal between directv and at&t may be heating up and that's where we begin tonight's market focus. we told you at&t reportedly approached direct tv about a possible takeover. now there are reports that the two companies could strike a deal as soon as two weeks from now. that sent shares of direct tv higher after the close during the regular session. the stock was off a fraction to

$87.16. shares of core laboratories got hammered after the company lowered its guidance. it cut its second gaert 2014 outlook and the stock tumbled 11.5%. shares of tesaro surged. the stocking speck 21% to close at $29.05. >> gogo shares were on the gop. the in flight internet provider post ad better than expected 35% jump in quarterly revenue as more travellers used its services. the company saw an increase in the amount of commercial aircraft providing gogo. the stock rose 6% to $12.67. elizabeth arden reported ugly third quarter results. the cosmetics company saw

revenues decline by 27%. the company says it is exploring strategic alternatives. the stock was initially halted after the report but then it re-opened down double digits during the regular session. shares were up almost 2% to $35.63. rack spaces first quarter beat the streets's estimates. the cloud company saw higher demand for its web hosting services. shares speck after hours up as much as 11%. during the regular session shares were almost 5% higher to $27.53. ibm is getting a lot of attention. its ceo telling the "new york times" big blue is facing a rocky time. but that the tech giant is poised for growth. how much growth might be in ibm's future? let's get some answers from the managing director of enterprise hardware with clsa america. welcome. good to have you with us. do you have a rating on this

stock? do you like it at these prices? it's been basically flat or a little bit down for the past 12 months. >> it has. we have a buy rating, $225 price target. we're looking out to the end of the year where the investments that the companies are making will start to kick in and expect their business to start to turn by then. >> lou, what's wrong with big blue. is it one major aspect of the company that is not firing on all -- you know what i mean. >> cylinders. >> thank you. or it is many things? >> it is a number of things. it's a number of things that actually hit all at once. in the hardware sector which is about 15% of revenue, they are not in the good cycle, which is an eight quarter cycle but that should come back either at the end of this year early next. their power business has been weak. that's dragged them down. from a geographic standpoint the emerging markets also hurt them.

but europe is starting to come back a bit and we expect by the end of the year the u.s. should return. geographic thing and product thing. we believe they are making a lot of investments to offsheet these issues. >> do you like what she's doing and is she doing it fast enough >> there's a little bit of a perception she's not doing it fast enough but she's made quite a bit of investments. they did software that was 2 billion and invested additional billion on top of that to compete with amazon and google and microsoft web hosting. they are investing in some of the hardware business in flash computing, in the power systems. so we think that she is stepping up and as you know on wednesday we expect her to highlight these opportunities. >> is acquisition and investment the way to go or do they have to fundamentally basically shake the tree and change the way a lot of the different units in ibm function or maybe it's both?

>> a little bit of both. the software and services area, 80% revenue most of the profit has been doing okay. software been doing okay. service is growing slow. action with very good margins. so don't really look for huge changes in those areas. but they are taking all their middle ware a good portion of it investing a billion and turning it into applications for the web. we think they are looking forward the future and actually starting to react and invest in it. >> this is a multi-faceted company. that's an under statement. who do you consider their principle competitors to be and how do you rank them as a performer and as a stock against those competitors. >> when you look at their traditional competitors the other big companies which they compete with, many of them are actually having difficulties growing now and i'm sure you've talked on this show many times

about the cloud. the real competition is the changes that ibm is trying to change and reform themselves with the investments they are making. i wouldn't say there's any one large i.t. company that's hurting them it's more the changes in the i.t. industry. >> lou, thank you. bring on the heat. why a small factory that makes a spicy sauce is turning into a very hot commodity. >> reporter:

a popular asian hot sauce is the latest battleground in the war between california and texas for jobs. it's proof that for states seeking a competitive edge no potential victory is too small. scott cohen reports from california. >> reporter: everything you need to know about the war between the states for jobs is in these 28 ounce bottles. they are filled with sr ira cha sauce. as many as 200,000 bottles of this stuff come out of this plant in los angeles every day. today a state representative from texas is trying to convince the plant's owner to move the whole operation to his state. >> we got a low tax environment, we got a low are regulatory environment, a fair legal system. >> reporter: he sees an opening because the company and its owner are in a dispute with the city. residents say the odors from the plant are unbearable. >> my sister has a toddler and

we don't bring her out because she will start coughing. >> reporter: the city has declared the plant a public nuisance sued in court and won. tran suggested he may have to move. that mere suggestion fed off a feeding frenzy heavy on the sauce. as many as 15 states and cities have come calling promising to be more hospitable. remarkable since this plant represents only 80 full time jobs. >> this is texas governor rick perry and i have a message for california buses, come check out texas. >> reporter: texas governor rick perry has had much bigger successes in his campaign to poach jobs. texas has no corporate or individual income tax. welcoming business climate. and neighbors with less sensitive noses. david tran said he's staying put in california for now. >> i need to keep this her.

>> reporter: he may expand in texas, a pungent reminder in california competition for every single job is hot, hot, hot. scott cohen, "nightly business report". >> have you ever had that? >> it's very good. >> wherever they end up or wherever they stay it's really good sauce. give it a try. that does it for "nightly business report". >> i'm tyler mathisen happen have a greet evening, everybody. we'll see you back here tomorrow night.

[seagulls] >> see those three houses there, left? there used to be a lovely old fellow who lived there. and he had this pretty little green finch. it used to sit on his finger and sing to him. it was the most beautiful thing i ever saw. [rumbling] [glasses clink]