♪ >> announcer: this is "nightly business report," with tyler mathisen and sue herera. no one saw this coming. the s&p 500 has its best week of the year. the nasdaq its biggest gains in months. will the rally continue? and where should you put your money? security versus privacy. will we be safer if we make our communications less secure? a look at the issue dividing law enforcement and silicon valley. retail therapy. three small cap stocks you may want to consider as we head into the busy holiday shopping season. all of that and more tonight on "nightly business report" for friday, november 20th. good evening and welcome, everyone. sometimes the stock market is easy to explain. a company knocks it out of the park with an earnings report or

an economic number tells investors the coast is clear. but this week the market has been tough to figure out. there were the paris attacks exactly one week ago and a fresh terror siege in mali today. more on that in a moment. and add to those jolts increasing fed chatter this week, pointing to not ainterest rate hike less than a month from now. usually not the best of recipes for stocks. yet up stocks went today and this week, and by a lot. in fact, for the s&p 500 this was the best week in more than a year. for the nasdaq the best since july. here are the numbers. on the day the dow jones industrials gained 91 points to close at 17,823. nasdaq added 31 and finished at 5105. and the s&p 500 rose 7 to end the day at 2089. for the week the industrials gained about 3.4%. nasdaq was up 3.6%. and the s&p 500 rose nearly 3.3%. the dow and the s&p are now

positive for the year, joining nasdaq. mark luchini joins us now to talk more about this weex stock market activity and what we can expect going forward. he is chief investment strategist at janney montgomery scott. good to see you, mark. welcome back. >> thank you, sue. >> you know, ty so perfectly laid out what happened this week. are you as surprised as some others are that the market performed so well against a backdrop of terror and other issues? >> well, it was a little bit surprising. obviously, investors had the whole week to contemplate the economic ramifications of the tragedy in france that was friday night, and of course we also were able to take our cue from overseas markets opening up sunday night into early monday morning. and the muted effect i think gave investors some confidence that it would be an opportunity to continue to buy equities after the week before where the market was down about 3 1/2%. so it kind of set up for a bit of a rally and of course it was only compounded on by the fact that the news from the federal

reserve was that likely even though they may raise interest rates the subsequent glide path is going to be extremely shallo which gave investors confidence that it's not going to derail the equity bull market. >> from what you were just saying, mark, it feels like you think there is maybe more up side from here. of course we can never figure in headline risk of the sort we've seen over the past couple of weeks. >> absolutely, tyler. barring obviously the unforeseen, i think the bias is for the market to continue to work higher. i think we're in the midst of a seasonal time of the year in which equities typically do rally, particularly in a short holiday week like next and of course into christmas. but in addition to that i think investors look around and realize there's no alternative for risk-based capital in the equity markets. corporate earnings, while mixed, are pointing to improvement in 2016. >> all right, mark, have a great weekend. we'll leave it there. thank you for joining us. >> thank you, sue. >> mark luchini with janney montgomery scott. to the economy now and the

job market. the rate of unemployment fell in 32 states last month as employers picked up hiring. according to the labor market, california and florida saw the biggest job gains. the jobless rate rose in just three states and was unchanged in 15. and ty, the firming labor market is one of the reasons why many are predicting the federal reserve will raise rates at its next meeting in december. today the president of the new york fed said the economy is in good shape and that it may meet the criteria needed to hike rates in the near future. and now to paris, where one week after those deadly attacks the country of france deals with yet another terror crisis, this time in the northern african nation of mali. michelle caruso-cabrera reports tonight from paris. >> reporter: a hostage siege lasting more than nine hours left at least 27 people dead including one belgian diplomat and five attackers in the capital city of mali overnight. an unknown number of gunmen attacked a radisson blue hotel

at about 1:00 in the morning and at one point held 170 hostages. the news gripped france, still reeling from last friday's terror attacks. french troops have been in mali since 2013, when they invaded the northern part of the country to fight off islamic extremists who were trying to take over mali. under president francois hollande france has had an aggressive anti-militant military policy in north africa. back here in paris the french senate voted overwhelmingly to extend the state of emergency to three months and to give the state much more power to fight terrorism, including the power to conduct searches without a warrant, the power to block internet sites that are deemed to incite acts of terrorism, public demonstrations are banned and organizations considered dangerous can be fully dissolved. anyone suspected of posing a threat can be put under house arrest for 12 hours and can be electronically monitored to make sure they remain where they are. today marks one week since the

attacks on paris, and parisians continue to mourn. in front of the bataclan theater a gentleman arrived with a piano to play a song in honor of the dead. ♪ we also learned today the death toll has risen by one. 130 people died as a result of the attacks one week ago. for "nightly business report" michelle caruso-cabrera, paris. following the paris attacks, investigators are examining how the terrorists communicated. one theory is that they may have used devices with ultra secure messaging tools. and that is intensifying a standoff between silicon valley, who are in favor of strong encryption, and law enforcement. earlier this week attorney general loretta lynch addressed that issue. >> for us this is an issue in which we recognize not only the importance of encryption but the need to do everything we can to protect the american people. and as we stated, we are pursuing a number of options. we're in discussions with

industry looking for ways in which they can lawfully provide us information while still preserving privacy. >> daniel wiesner, director of m.i.t.'s internet policy research initiative, joins us along with eamon javers. gentlemen, welcome to you both. daniel, let me start with you if i could. the attorney general and others have called on silicon valley to give them access to some of these ultra encrypted areas. under the auspices that terrorists have an advantage over us. but push back against that argument. >> well, i think that any company that's providing a service to the public wants to cooperate with law enforcement and be as helpful as possible, especially in times like this. what we looked at from a technical perspective is the question of what's a smart way to do that. if we open up back doors for law enforcement, if we dumb down our encryption technologies so that it's easier for law enforcement to get access even with a warrant, what we found is that we're going to create

insecurities that are going to be spread throughout the infrastructure we depend on. so this is not really a question of privacy versus security. we have a lot of debates about how much authority law enforcement should have or shouldn't have to get access to private communications. this is a question about security versus security. if we open up a back door for law enforcement, criminals can go through that same back door and terrorists can go through that same back door. >> eamon, i don't intend for you to debate mr. wiesner, that's not your role, but do tell us what the position of law enforcement, most especially federal law enforcement, the fbi, would be in response to what mr. wiesner says. >> yeah, look, fbi director james comey has been talking about this for over a year now. he calls it the going dark problem, the problem that law enforcement has when they're going after a particular device and they suddenly can't get access to the communications inside that device and the company involved can't get access to it either. he says that the problem for law enforcement and to the point daniel just made, what the fbi

director would say to that, is they are confident there's a technological fix to that. silicon valley might say hey, we know a lot more about technology than even the fbi does. but law enforcement feels this is an absolute must have piece of access in order to get into these communications in a modern day and age where terrorists can strike very quickly. they want to be able to respond as fast as the terrorists are able to communicate. law enforcement wants to be able to get those communications. and this is just a fundamental debate in this country when you talk about the business concerns silicon valley has the fbi and others will say ultimately there's a cost of doing business in the united states of america and this maybe one of those costs. >> mr. wiesner, have you given some thought, and i'm sure you have, as to what might be the best approach at this juncture, given what we have seen happen in paris and given what we just saw happen in mali today, what would your best advicing, that perhaps is a middle ground between the privacy and security

or the security and security argument? >> well, look, the events in paris and in mali are terrible and everyone obviously wants to do everything possible to be able to respond at least in the future. i think you have to look at this from the position of the adversary. if we open up a back door in the products, for example, that apple or google or others provide, there is still nothing that will stop a determined terrorist from adding their own layer of encryption on top of that approved technology. no one, including director comey, is proposing that we should prevent people from installing their own software on their own computers and their own phones. we have enormous benefit that we get from the growing app economy. you feature it on your program all the time. and individuals get enormous social benefit from it. so we don't want to clamp down on the internet so it becomes like the old telephone system. and i think we just have to recognize that there may be some communications and some data

that law enforcement will not be able to get access to. that's always true when law enforcement does investigations. sometimes criminals destroy evidence. sometimes criminals are good at hiding. and i guess the advice i would give, and i'm humble in giving advice to someone like fbi director comey, but what i would say is for better or worse we know there are no systems that are perfectly secure and we've seen law enforcement and national security agencies be very clever about finding ways to conduct surveillance even in the face of encryption. i think they're going to have to learn how to do that more. and i think as governments we're going to have invest more money in helping law enforcement to develop more and more sophisticated techniques. >> quick final thought, eamon. whowhat would the rejoinder be to mr. wiesner's well-taken point, that even if you did have a back door that would allow law enforcement to decrypt things that the perpetrators would find ways around it one way or

another? >> law enforcement says that's a risk they're willing to take ultimately. and we know law enforcement and u.s. intelligence feel very confident this week they're in a good position to make this argument in the context of what's happening around the world. we know there was a meeting today here in washington involving technology companies and capitol hill aides in which they talked about a path forward on encryption. what that path is still remains to be seen. but negotiations definitely are going on right now on this issue here in washington. >> all right. thank you so much both of you, daniel wiesner. i know we'll be talking more with you about this. and eamon javers, as always, thank you so much. >> you bet. coming up, google making a big move and ramping up its rivalry with two other tech companies. we'll tell you what it's all about. ♪

♪ a class action lawsuit related to daily fantasy sports targets, credit card companies. the suit claims that visa, mastercard, american express, and others participated in a racketeering scheme that facilitated illegal gambling operations. the class action also names the banks that issued the credit cards. the complaint states that the parties should have known that draft kings and fan duel were online gambling sites under new york's law. the cloud computing business is firing on all cylinders and google recently made a big push into that area by making a big hire. potentially sharpening its rivalry with amazon and microsoft. and this comes as alphabet, the parent of google, saw its shares hit an all-time high at 777 on the button. josh lipton has the story. >> reporter: it's the hire that everybody is talking about in silicon valley.

google is bringing on diane green, one of its board members, to lead its cloud businesses. green is one of the most prominent women in the tech world and co-founder and former ceo of vm ware. twitter erupted with reaction, with aaron levy, ceo of cloud software provider box, noting "going'll hiring diane green is a brilliant move on their part. the cloud is about to get very interesting." for all the excitement, though, green will have her work cut out for her. while google has a lot of cloud products such as gmail and google docs, when companies want to run their most powerful applications they turn to amazon and microsoft's azure product and those products are growing fast. amazon web services, for instance, last quarter reported revenue of more than $2 billion. and microsoft ceo satya nadella has gone all in with the cloud. revenue in microsoft's cloud business, which includes azure, reached nearly $6 billion last

quarter. but green's hire sends a message to the competition. >> by hiring someone like diane, they are saying we are ready to get serious about competing with microsoft and amazon and the others who really exclusively target the corporate i.t. side of the house, that they're ready to go into that market themselves. >> reporter: and google does boast unique strengths. analysts say there is no company in the world better at extracting insights from data, a key advantage for a cloud computing provider. gartner says that cloyd infrastructure will be a $21 billion market next year, and analysts say much of that growth is still up for grabs, with google now in the position to claim a bigger piece of the pie. for "nightly business report" i'm josh lipton in san francisco. abercrombie & fytch sees its quarterly profit more than double, and that is where we begin tonight's market focus. the teen retailer posted results that easily topped estimates. despite the fact that same-store

sales fell. the company benefited from fewer discounts, but it did say it expects heavy promotional activity in the industry during the holiday shopping season. shares surged 25% to 24.37. chipotle's e. coli outbreak just got worse. the centers for disease control and prevention warned that the outbreak has spread to a total of six states, showing the problem is more widespread than just in the northwest. the cdc says 45 people have been infected, in california, minnesota, new york, ohio, oregon, and washington. shares tumbled some 12%. they finished at 536.19. and the health insurers anthem and aetna trying to reassure investors today that their affordable care act businesses aren't doing that poorly. it comes after united health warned of mounting losses in that unit, which we told you about last night. aetna rose 4 1/2%. anthem was more than 2 1/2%

higher. foot locker posted strong results and a big increase in same-store sales, increased demand for running and basketball shoes helped the retailer deliver. shares popped more than 5 1/2%. they finished at 65.02. and sprint announced it will get a more than $1 billion cash infusion by striking a deal to sell certain devices it has previously leased to its customers. the company says it will free up resources for network investments and operations. shares, however, slipped about 5 1/2% to $3.83. the hottest sector this year has been consumer discretionary stocks. made up of companies that sell non-essential goods and services. but will this group continue to do well with an interest rate hike looming? morgan brennan takes a look. >> reporter: in a rocky year for the market consumer discretionary has been the top performing sector. up 12% versus the broader 12347's 1 1/2% gain. gasoline savings at the pump

have translated into more spending on certain services and goods, propelling a number of these stocks to all-time highs. analysts say consumers are in recovery mode al bette-it a gradual recovery and they're being very selective about what they buy. >> there aren't a lot of trends that carry over from year to year, but we do see interestingly the first time consumer services has done well, it's performed well. that's an odd catchall. it includes durables, education stocks, some apparel stocks but that typically has done well. >> according to market data firm kensho there are some stocks that tend to outperform during the holidays from black friday to year's end. walt disney company is one of them, averaging a 4 1/2% gain over the last ten holiday seasons. and with a new "star wars" coming out in just a few weeks, a name to consider again. goodyear tire and rubber has also been a strong performer gaining an average of 8%. as people need new tires thanks to all that holiday travel and

winter weather. but this december may also be differe different. there are increasingly more signals the federal reserve could raise rates next month. if history is any indicator consumer stocks could sell-off. >> the consumer discretionary sector as a whole has high valuations. so it's vulnerable to a rerating, to a repricing when the fed raises rates. now, will it be traumatic? no. because again, we're coming off a very low base. but we do have to worry about vulnerability there. so really any names within the consumer discretionary space, and there are many, most are highly valued. they are vulnerable to seeing some deterioration in stock price as a result. >> according to kensho, since 1990 there have been three rate hike psych sxlz a one-month increase following each of those liftoffs. consumer discretionary sell more than 2%, largely in line with the broader market. among the worst performers, auto parts retailers like auto nation and o'reilly automotive. still, some names may provide

relief. mcdonald's tends to hold up and a few retailers. best buy and kohl's. but as the year winds down, the two biggest winners have centered around the internet. netflix and amazon have both logged twip'll-digit percentage gains in 2015 and many on the street consider these names to keep benefitting from recovering consumer next year. for "nightly business report" i'm morgan brennan. now to our market monitor who recommends three small cap retail stocks. welcome jay kaplan, performance manager of the royce small cap value fund. jay, welcome, let's start with g-3 apparel. i thought it was a coat company mostly and coats aren't really selling. why do you like it? >> i tell you, it is pretty warm in the northeast and you have an opportunity now like we had in 2011 where it was very warm. they're a leader in coats. they sell a lot of dresses. if you go to macy's, they dominate in macy's. macy's is having trouble. but we think it's a well-managed company. it's down big from its high. it's one of those opportunities where i think you have to sort

of hold your nose, jump in, look out 12, 24 months. it's going to be pretty good i think. >> buckle. it's mall-based and a lot of people are projecting that the mall is not where people are going to shop. why do you like the buckle? >> 9 buckle is very well managed. it has very high margins. they sell denim. denim's been a little out of favor for them. it's high-priced denim but it's great cash flow. it's a 2% yield. they pay a special dividend most years. that could be coming up. for the long term we like it a lot. >> you like unpopular stuff. clearly steve madden -- which is a great way to invest by the way. steve madsen a third choice. shoe company. is this company one that could be a takeover target at some point? >> it's hard to say if it would be a takeover target. at royce we don't buy companies with the expectation that someone will take them over, but it's a well-run business. there hasn't really been a fashion cycle in shoes in a while. boots are really important. there's not a lot of snow yet. no one's buying boots. we'll see what happens. they've been buying back their stock in a very big way. they're confident and we're confident as well.

>> all right. thank you very much, jay kaplan with the royce small cap fund. coming up, a grand experiment. why california farmers are planning to do something that was once considered unthinkable. ♪ lots of economic data to watch next week. especially as we inch closer to a potential rate hike from the fed. and those data include a report on personal income and spending, a read of gross domestic product, which is considered the broadest measure of economic activity. housing data's coming out, including numbers on existing and new home sales. and that, folks-s what to watch next week. the epa says the volkswagen emissions scandal is wider than

previously thought. the automaker has told the agency that the emissions-cheating software is on some of its larger vehicles dating back as far as 2009. the automaker also plans to slash its capital budget by more than $1 billion next year. the german carmaker will delay some projects and put a new design center on hold. the ceo has said that anything not absolutely necessary will be canceled or postponed. meantime, a long and high-stakes court battle between the sugar and corn industries has come to an end. those two businesses have reached a settlement but the terms not disclosed. sugar processors had been seeking $1.5 billion in a false advertising claim against corn refiners and agribusiness giants archer daniels midland and cargill. california's almond and grape growers use a lot of water and that's something they've come under fire for during the state's historic drought but now some farmers are trying something very different in an effort to protect their

livelihood. they want to flood their farms with the coming el nino. jane wells tells us about this grand experiment from helm, california. >> reporter: as california prepares for el nino rains, farmers are discovering a new market. flood water. >> before flood water was something everybody wanted to get rid of. now people are seeing it as a resource. >> reporter: no one has seen that potential more than farmer don cameron. >> this is the north fork of the kings river right here. and right now it looks like a des sxert it's looked that way for four years. >> reporter: but this is how the river looked four years ago, when cameron decided to do an experiment. he diverted some storm water to flood his vineyard. why? here in california's central valley where most of the country's fruits and vegetables and nuts are grown, many of them shipped overseas, depends on underground water. drought has decompleted that water, and farmers have been accused of overpumping. but even before the drought cameron figured if he used storm

water to flood his vineyard during the winter the water would seep underground, replenishing the ground water and costing him less to pump in the summer. >> it is a risk and a lot of our neighbors thought we were crazy. >> but that experiment in 2011 worked. the vines and the grapes were fine. now with el nino coming other farmers growing other crops such as almonds are also thinking about flooding the fields to try to replenish the ground water. but it only works in certain areas where there's porous sandy soil. >> i think you have to be a little more careful with the almonds. some growers are concerned if you have too much water and a big wind storm during the winter you could have trees blow over. >> still cameron is giving it a way in this new almond feel. he's spendsing millions to increase the size of a canal to capture more storm runoff using a grant from the government awarded to help divert flooding downstream. that leads to a whole new idea, farmers finding financial incentives to capture el nino's rains. >> that's a new discussion going on in the state capitol, what are the rights to flood water.

no one's ever asked that question. it's always been a surplus. >> all of this depends on one very important condition, that it actually rains. for "nightly business report" story.lls, helm, california. >> fascinating stuff. >> that does it for "nightly business report" for tonight. wa. and i'm tyler mathisen. have a great weekend, everybody. we'll see you on monday. ♪ ♪

morning, brian. aagh! knock it off, jack! bit early to be skulking around, isn't it? who's in there? wellthat's the point. i don't know. i got here ten minutes ago, and it was already sealed to the outside world. ( low chatter ) sandra, certainly. strickland? sounds like. there's someone else. yeah, who is that? ( loudly ) morning! oh! argh! oh! ow. brian, are you all right? what's happened? does he need a doctor? he's fine. just nosy. what's going on in there? nurse!