this is "nightly business repo" with tyler matheson, brought to you by the street.com. interactive, multimedia tools for an ever-changing financial world. our dividend stock adviser guides and generates income during a period of low interest rates, real money helps you think through ideas for investing and trading stocks. action alerts plus is a charitable trust portfolio that provides trade by trade strategies. online, mobile social media. we are the street.com. korean concern. the defense secretary says the u.s. sees a real and clear

danger from north korea and stocks suffer a triple digit sell-off. >> housing blueprint. is there a plan afoot to make home loans more available to customers with weaker credit. the pros and cons for such a move. the refund fraud, the $5 billion problem that targetious and why it's getting worse. all that and more coming up tonight. good evening, everybody. welcome. i'm tyler math son. i'm sue herera, i'm filling in for susie guerra. she has the evening off. politics rattled investors today. >> absolutely they did. stocks retreated broadly today in the worst day for equities since way back on february 25. two economic reports get a share of the blame. a gauge of service industry activity came in lower than expected as did a widely watched private measure of payroll gains. those rising tensions on the korean peninsula compounded the worries and the sell-off especially from midday on. those fears of a weaker than

expected economy also hit oil and metals. gold, by the way, touched its lowest level since last june 28. at the close in new york today the dow industrials were off 112 points at 14550. the s&p 500 was down 16 1/2 at 1653 and change and the nasdaq, the biggest percentage loser here was down 36 to 3218. an interesting trend developing in the market if you believe as goes the dow transports so go the dow industrials. you may want to take a look here. for the first three days of april, the transports are down about 4% while the dow industrials are roughly break even. this is significant because, as you can see on this graphic over the past 20 years or so, the two, the transports and the industrials tend to move pretty much in lockstep, and two points of divergence of note here on this chart, the first from 1999 to 2002 and the second between

'07 and '08 did coincide with major stock market downturns. something else with the barclays aggregate index which is akin to the s&p 500 and that is rare. here to give us his take on the picked income market ando is the head of fixed income at vanguard. welcome, bob. nice to have you here. >> good to be here. >> tell me what you read into this very rare decline in what's called the ag index. >> what happened in the past three months is there were yields and 15-year and longer treasury and corporate securities just backed up a little bit. shorter and intermedia yields really were unchanged and it was a relatively small change which resulted in a negative performance. >> a fair number of market watchers are worried about the iment of money that remains in

bond funds particularly in long term bond funds and particularly in treasurys. they worry there may be a bubble or that a big bear market may be coming. do you worry about that? >>. >> i think it is certainly a concern given the yield, but the federal reserve by keeping short rates low and by buying a lot of longer term treasurys that they want yields to remain low and they're acting as very powerful depression on the market and really i don't see any sign says that they'll be moving off that policy unless we get a pickup in inflation and i would defy anybody to tell me what sector out in the economy has pricing power right at the moment. >> given that, then, if you want to go into the fixed income market, where do you see continued opportunity given the rates that will be on the low side for so much longer? >> sure. >> that said, the rates could

move up and i would stick to short and intermediate maturities in terms of particular sectors that we like right now are banks that are investment grade that are high income tax bracket investor and unfortunately, many of us are with the changes in the tax rules. the rate of munis look quite attractive and finally, this is more for institutional type investors. aaa-rated commercial securities and has a good combination of yield. a fair number of people have moved into high yield bonds had reported reasonably well and default rates are done and it is a place where you have high yield, any that's why we call them high-yield bonds. are there risks there and is the trade getting started? >> definitely think it is and if you look at the absolute yield for maturity or yield the worst

that you dcan buy. i'm beginning to wonder if they're looking for yield in all of the wrong places, particularly the junkiest of the junk, the ccc-rated bonds have had a very powerful quarter. so i agree with you. i'd be very cautious. the same time that we have a stock market hitting new all-time highs in this latest quarter. we also have the ten-year yield down at very, very low levels and usually you don't see that. these are very unusual times and can that dynamic continue? >> i think it can because of the federal reserve and the chairman bernanke turned to last through january of 2014 and there's speculation about his successor. i personally think it will be janet yellin and she is definitely onboard with the same type of monetary policy until

the unemployment rate drops significantly, and i think we have a long ways, and it will take a long time to get down to unemployment rates to tighten monetary policy. >> i appreciate you being with us. head of fixed income at vanguard. >> the u.s. is sending a defense battery to guam in the latest response to escalating tensions in the korean peninsula. chuck hagel using tough language in response to the north korean threats today. >> some of the actions they've taken over the last few weeks present a real and clear danger and threat to the interests certainly of our allies starting with south korea and japan, and also the threats that the north koreans have leveled directly at the united states regarding our

base in guam, and threatened hawaii and threatened the west coast of the united states. >> u.s. officials have not said when the missile battery and new system called terminal high altitude area defense will be operational on guam. >> john harwood has been following the developments today and for the past weeks in washington and he is here now with the very latest. hi, john. what have you got? >> this is an interesting balancing act by u.s. officials and on the one hand we're trying to not let north korean threats and provocations go unresponded to, but they're also trying not to overreact and give the indication that they regard these threats as reflective of imminent conflict or anything of that kind. jake carney, the white house secretary said on air force one said the president was flying out west for fund raising and gun control, ven events and thia pattern of north korean officialsing to obtain the

provocative language and that we have the new young north korean leader you have a temperature tagz for him to try to prove his toughness and prove his worthiness to lead that country, but the administration also can't ignore the things that he's saying. the reports that i've seen indicate that the missile defense battery will be operational within about two weeks, but i don't think the united states officials expect to use that soon, tyler. >> you know, john. i guess we really haven't heard from the president very much. i've heard late today that john kerry, the newly installed secretary of state will be traveling to the region. what can you tell us about that, if anything? >> secretary kerry had announced that visit several weeks ago. he will be going seoul. that's part of laying the groundwork for the visit by the south korean visit park to washington in may and certainly at both of those events, the kerry visit and park's visit to the united states you will hear

the president address the issue and he's addressed it to some degree by saying that the united states takes this seriously both through his white house press secretary and other administration officials, but you know, the administration is trying to manage a relationship with an adversary that hasn't always shown itself to be rational or calculating inhat it said and part of the problem is, tyler, that we just don't know what the north korean leader will do. their capacity to hit the united states mainland is not believed to be there. they potentially have the capacity to hit hawaii and guam, but i don't think people expect that that is going to actually going to happen and jay carney noted yesterday that they have not seen a movement of forces by north korea that indicates that they're preparing to strike. >> john harwood in washington. thank you very much. >> in addition to rattling stocks. those worries about what's happening on the korean peninsula is one of the factors

drivering oil lower today. west texas crude, suffering the one-day decline since november 20th and there's in light with the tensions in north korea. >> as more and more investors rebalance their portfolios, tilting away from bonds, exchange-traded funds that own u.s. stocks are picking up a good portion of fresh money and the cash is coming from individual investors and traders alike. seema moti is here tonight. >> good evening, tyler. the most recent index shows traders are using exchange traded funds or etfs as a way to play the rally on wall street that we witnessed this year. investors allocated $14.7 billion into equity etfs in the month of march and during the same time, international equity etfs saw a net outflow of $1.7 million indicating that not only are traders long u.s. equity, but etfs indexes that represent a basket of stocks are being

increasingly used by traders. f activity was also manytimes seen as a good barometer of retail participation in the market and the dan greenhouse telling me that the proliferation ever etfs has given the retail investor a low-cost way to invest and skip the middleman. another interesting trend is the strength of equity etf inflows versus mutual funds from 2007 to present day. now, the divergence between the two continues to widen. deutsche bank says investors have reallocated out of higher fee, less liquid mutual funds and into lower cost equity etfs and the spread could continue to widen and the analysts at deutsche bank writes that given the lackluster performance of active managers, etfs will continue to garner the higher share of u.s. equity inflows going forward as well. >> sema moti, thank you very much. hyundai motors and its kia affiliate issuing two recalls on

more than 1.8 million vehicles sold in the u.s. first a switch that could cause the brake lights to fail. that recall affects some 1.6 million models sold between the years 2007 and 2011. you can find the full list posted at nbr.com. secondly, more than 186,000 elantras from model years 2011 through 2013 to fix a flaw that could cause injury if the side air bags deploy. the deterrelails are available nbr.com. the dow pulled it down after dropping further on those korea headlines. dow components bank of america and j.p. morganach down more than 2% and citigroup and morgan stanley also lower today as you see right there. abercrombie & fitch, the teen retailer led the s&p 500 on optimism about the overseas expansion plans and the company's target of 15% growth

in annual earnings. shares of abercrombie up 4% on the day. facebook holding an event tomorrow to unveil its new home on android and it got a vote of confidence from a jp analyst who said we'd be buying and repeated an overweight rating. shares were up over 3%. zynga is going a new neighborhood, launching zynga plus poker and zynga plus casino. real-money betting for gamblers in great britain. investors see those as positive for springa right now and positioning for online gambling down the road. the shares changed hands at five times their average volume gaining more than 14%. >> and the 2013 corn crop forecast is the biggest, you may have heard in 70 years and corn accounts for three-quarters of monsanto's seed sales. the company repted higher tn expected earnings today and boosted its full-year guidance. shares, however, little moved here up about .1% at $104.51 on

this otherwise down day. conagra also reported today and missed analyst expectations on both revenue and earnings, but it maintained its full-year guidance. conagra sells familiar brands like wesson, ready whip and heinz ketchup. shares down nearly 2%. >> coming up next, the obama administration reportedly pushing to make it easier for people with weak credit to get a home loan. will this repeat the mistakes of the past or will it help the housing market take off? we'll hear from two sides, but first a look at how the international markets fared today.

the white house is reportedly pushing to make more home loans available to people with weaker credit. that's according to today's "washington post," housing officials including the federal housing authority are encouraging lenders to be subjective in loan approvals taking into consideration, for example, a borrower's savings. the post says the administration wants to make it easier for people to refinance. while the fha would not comment want to dig deep or this. michael barr, former assistant treasury secretary and is currently the professor of the university of michigan law school. joe lavorgna, chief u.s. economist at deutsche bank. welcome, gentlemen. >> let me start with you. as i bdz understand it, you are generally in favor of this with some exceptions. detail how you would find this a good plan. >> i think the important thing is to get the balance right. nobody wants to go back to the irresponsible lending of the last decade that really crushed

the american economy. the problem now is that credit has gotten very, very tight and there may be room to find credit worthy borrowers in a larger pool, at least as i understand it, how the administration is talking about is providing clarity to lenders about the rules under which they put back mortgages in the event of future default and clarity and transparency on that is good and then secondly, to make sure that the loans that are being guaranteed by fha are reaching borrowers who have good, strong credit, but who may not fit the existing parameters fully. and i think getting the balance ready is important and nobody wants to go back to the decade of excess that we're finally coming out of today. >> joe, you're a little bit skeptical, why? >> i think tyler,a i few things. one, rates, part of it is the banks have not been willing to lend in part because of the litigation and regulatory issues

that they face. so it's not necessarily -- they're tight for good reasons and i think as they're trying to figure out what their capital needs are, having perhaps finally gotten past the mortgage putback, things are probably going to be more in a mood to lend. we have seen the senior loan officer surveyed show a couple of quarters in which prime mortgages are seeing some easing of standards and we're also starting to see a little bit less tightening to the non-traditional mortgages of which some of these people will be a part of. part of this, tyler is this has been a deep problem of economic recovery and i would argue that as home prices continue to improve, the system effectively is healing itself and will do okay and i think as we've learned we don't want homeownership rates up around 68%, 69% and they probably belong in the low 60s and therefore, the people aren't getting access to credit and are generally the ones that aren't supposed to have access to credit. the system is healing on its own

at this point and i would leave well enough alone and that some of these rules get codified for banks and they'll be more in the mood to lend. >> the trickledown effect when someone is able to get a home loan and is able to buy a home, the trickledown effect into the economy can be quite significant. >> yes. i think if you go back and look at what the administration has been doing over these last few years, it's been quite an important effort in bringing back the housing recovery that the guests were describing fannie mae and freddie mac account for the most mortgage lending in the country, and it is that effort, the effort to give people the chance to refinance their homes and people are under water and not able to access today's mortgage rates and getting them into the system so that they can refinance their home. they'vbeen paying on time and they need access to the lower rates and providing clarity of the kind that is necessary on putback risk and on the rules of

the game going forward are all critical. to my mind that's the path the administration has been on for quite some time and it's bearing fruit today with improve ams in the housing sector. >> i want to get you to react to the spirit of what joe lavorgna was saying there that maybe we don't need to have homeownership rates in the hig60%, but maybe in the low 60%, and as i read "the washington post's" reporting and i can't necessarily vouch for them, but they're pretty good on these couple of things, you can get an fh alone with a credit score as low as 500 and put 20% down. does that strike you as responsible, that ultimately the taxpayer could be on the hook if somebody defaults? >> i think that's exactly the right question and getting the balance right is critical. if you look at who's getting a loans now it's nowhere near the

numbers that you described. the average fico score for an fha loan today is around 700. so really the question is is there room to expand among a slightly larger group of credit worthy borrowers? i think going to no-docloans or low-income loans or the kind that the financial sector engaged in over the last decade would be a huge mistake and i don't take that to be anything close to what anybody is proposing. the key of gettinghe balance right and the credit conditions right now are probably tighter than they need to be. how do you get them organized moving forward? through better programs for refinancing and through better clarity and going forward with the kind that fha is describing and further movement to refinance and modify mortgages that are out there already. >> gentlemen, we'll leave it there. thank you both, very much. >> coming up next, as the tax

deadline closes in, we'll tell you how identity thieves could be filing fake returns in your name, getting fake refunds and you might not know about it. >> gold hit a nine-month low today. a look at that and the rest of the commodities and how treasurys and currencies fared today. >> coming up tomorrow on "nightly business report," we'll see the weekly data ahead of jobless claims and the chain stores will report their sales for march. >> matthew taylor, a former goldman sachs trader pleaded guilty today to defrauding the bank -- excuse me, with unauthorized trades. taylor told the judge his

multibillion-dollar trading exceeded risk guidelines on the order of ten times, that he was trying to increase his bonus. taylor could be sentenced to as much as 20 years. if you haven't filed your taxes yet, beware. millions of returns are getting caught and collecting the refunds as well. the is is paying an estimated $5 billion in fraudulent refunds last year, but that's just the start. as scott cohn reports the crooks are hitting the states as well. >> vincent and darlene have always been careful about protecting their identity. >> we need to be really proactive. >> so careful now they asked us not to use their last names and that caution was no match for the crooks who broke into their accountant's office in december. >> her computer was stolen and all of our irs tax return information was on there. >> you have those sick feelings of anger and all of that. the dread, the worry, the work,

you know, to repair and restore things. >> because not only did the crooks file a fake federal return with their id, they filed a state return, too. maybe lots of them. >> we're going to probably have to be careful for the rest of our lives. >> for crooks, it doesn't look like it could get much better than this. after all, why file one federal return when you can file in state after state after state? >> vincent and darlene can be thankful they live in georgia, where it turns out the state revenue commissioner knows a thing or two about this crime. >> a couple of years ago someone got a hold of my wife's name, social security number. they filed a tax return in her name and got a refund and it got processed through the irs and got processed through the state of georgia. >> georgia has beefed up its enforcement and teamed up with lexisnexi lexisnexis, and if something doesn't add up, the filer has to answer some questions. >> for example, here's four

addresses, which one didn't you live at? here's four cars. which one do you own? >> they say it's working. last year nearly $100 million in fraud stopped before the refunds went out the door. but georgia is just one of 43 states with an income tax, so even if the crooks can't file here, they could just try some place else. for "nightly business report" scott cohn, atlanta. >> have you ever been a victim of identity theft? >> knock wood, i have not, but very fearful of it. >> i was, and happily it was not a bad case and i was able to untangle it quickly, but if a thief gets a hold of your social security number it could take months. >> if not years. absolutely. >> it was 40 years ago today that the very first cell phone -- look at that thing, the cell phone call was made and marty cooper, placed the first call to a friend at bell labs. according to a pew research new, 87% of american adults have a

cell phone. the first cell phones cost nearly $4,000, weighed more than two pounds and were the size, if you can recall, of a brick. >> that's it for "the nightly business report" for tonight. i'm sue herera and susie is back here tomorrow. thanks for watching. >> have a great evening, everybody. we'll see you back here tomorrow night. "nightly business report" has been brought to you by -- >> the street.com, interactive multimedia tools for an ever-changing, financial world and our dividend stock adviser guides and helps generate income during a period of low interest rates. options profits and helps educate beginning and seasoned options traders. action alerts plus is a charitable trust portfolio that provides trade by trade strategies. online, mobile, social media. we are the street.com.