hi, everybody. welcome to "the wall street journal report." i'm maria bartiromo. earnings, earnings, earnings. what's the bottom line on america's bellwether companies? how are they doing, what does it mean to the markets and your money? the new health care plan passes a big hurdle on capitol hill but it could have a big impact on your wallet. your tack asks your doctor. we'll talk to dr. howard dean. the new harry potter movie. how many awards it could get and what it may mean to the movie bottom line. how is hollywood doing in the middle of a downturn? "wall street journal" report begins right now. >> this is america's number one financial news program. "the wall street journal report." now, maria bartiromo. >> here's a look at what's making news as we head into a new week on wall street. we are in the thick of the earnings season. one of the most crucial in recent years. focus once again on the financials. beleaguered bank citigroup,

which got a $45 billion capital injection from the federal government, showed a loss. not including gains from the sale of its stake in the smith barney business. many other companies have beaten analysts' expectations, including general electric -- ge is the parent of the company that produces this program. search giant google, bank of america, and ibm all beat analyst targets. also beating targets, pharmaceutical company johnson and johnson, investment bank goldman sachs, and financial giant jpmorgan chase. computer chipmaker and dow component intel had revenues of $8 billion and sparked a rally for stock prices on wall street. the market soared this week, the dow up 180 points on monday. mostly the good earnings news. more than 2 50 points tuesday. friday the markets were up once again. former treasury secretary haung paulson was on the hot seat on at a capitol hill hearing, saying he pressured the ceo to

acquire assets last fall and he'd have lynch fired if the deal did not go through. he said he behaved appropriately in the matter. convicted swindler bernard madoff arrived at a federal prison in butner, north carolina, where he will likely spend most of his life. he was escorted from a bus in leg irons. madoff was sentenced to 150 years in jail after bilking investors for as much as $50 billion. it's been a busy week. turning to help sort out what happened, what's likely to happen, david kelly, chief market strategist. great to have you on the program. thanks for being with us. >> you're welcome. >> we're seeing a lot of companies beating earnings expectations particularly in the financial services sector. jpmorgan included. a lot of them doing so by cutting costs. not necessarily by revenue growth. should we be as optimistic as the market has been this week? >> well, yeah, i think the market does -- first of all, the market is still very, very low in terms of valuation measures. if you believe the economy's

ever going to recover the market has to go a lot higher. also if you take a broad look at earnings we are seeing revenues beating expectations, and in fact rising a quarter of a quarter. if you look at the market overall. so i think companies with more exposure to the rest of the world, particularly companies with more exposure to east asia, are seeing revenue gains. overall i'm pleased with the earnings reports this week. >> based on what we have seen so far, where is the growth in this economy? >> the first shoots here are in technology. i think technology companies are benefiting from the fact that east asia is already rebounding. we're seeing a very strong rebound in china. in korea. even in japan, which has had a terrible recession. we're seeing a rebound in growth. that's helping a lot of the technology companies. also on financial services. we are seeing companies reporting good numbers. companies are benefiting from the fact that the federal reserve is keeping short rates very low. that's reducing the cost of funding so they can make good spreads on their normal bread and butter business.

we're seeing some improvement there too. >> as far as the broad economy, then, where would you say we are? the federal reserve released those minutes from last week, the last meeting, and they revised the gdp projections upward. they said unemployment will rise as well. are we in a jobless recovery? >> no, in the end i don't think it will be a jobless recovery. i think it's important to realize that economists talk about recessions starting at the peak and ending at the trough. i think we're just turning the corner at the trough right now. so it still feels very bad. but we do expect to see positive gdp growth. i think we'll begin to see unemployment come down early next year. we have a few more months of rising unemployment ahead of us. >> pretty good market activity, positive earnings news sent stocks higher. where do you think we go from here, from an investment standpoint? do i want to put money to work in equities? >> yes, particularly if you're a long-term investor. if you believe the economy is going to gradually pull itself together, like it did in the 1980s and '90s, if you believe in the long expansion, the stock

market's up about 40% from its low. but it would have to go up about 65% from here just to get back to its old high. i think it's quite capable of doing that in an economy where we see recovering economy and higher earnings. so i think there's still a lot of room to grow here in the stock market. >> what about what we saw this week as far as cit group? cit, not to be confused with citigroup. cit, a major lend tore small and mid-cap businesses in america, teetering here, could go chapter 11. it's obviously in financial trouble. the government is not going to rescue cit. what does that mean to the economy? is that a big blow to small and mid-cap business or are there other companies that would pick up the slack in terms of lending to some of those companies that trulneed it? >> well, we can't be sure about that. of course, this is the other side of the thing. i do think that if everything goes okay, we will gradually move into a long expansion. but there are plenty of things to worry about. i think one of the problems still is the availability of creditors to small businesses,

to consumers, anybody who doesn't have sort of a hhh rated credit rating i think is going to have some problems here. that will slow the recovery. it's a real battle between normal cyclical forces pushing us back into expansion and things like cit which will restrict credit somewhat. the question is can the rest of the financial industry move in to try and fill that gap. >> if cit goes away that's the major lender certainly to the industry, their biggest client is the garment center. you wonder if we're going to see that ripple into a number of other bankruptcies, particularly in retail. >> obviously there will be some effects. it's very hard to know beforehand. obviously this is not a lehman brothers situation like we had last fall. i think the government is right in saying, the reason that systematic risk to the financial system -- but we don't know how easy it will be for all of these borrowers to get funding elsewhere. that is a real risk. >> do you think the stock market is higher than where it is right now at the end of the year? >> yeah,i think it probably is.

i think it should be substantially higher, in fact. a lot of people are very skeptical of this idea of recovery. if you look at housing starts which came out this week, they're up 18% on single family housing starts in the second quarter, relative to the first quarter. we're seeing a rebound in global manufacturing. most of the job losses we've seen in this recession have been in manufacturing/construction. if those industries pull together ill we'll see a healthier economy in the second half the year. i've got to believe that will be reflected somewhat in the stock market. >> great to have you on the program, we appreciate your insights. >> any time. >> see you soon, david kelly. up next on "the wall street journal report", major health care reform. we'll talk about the impact to the american economy. your own care with former vermont governor dr. howard dean. magic at the box office. the sixth harry potter film and other blockbusters. is the summer movie season heating up? as we take a break, take a look at how the stock market ended the week. (announcer) this is nine generations

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make no mistake, the status quo on health care is not an option for the united states of america. it's threatening financial stability of families, of businesses and of government. it's unsustainable. and it has to change. >> congress moved forward this week on legislation to reform the american health care system and cover some of the 50 million people who are currently uninsured. the scope of the proposed change is the most dramatic since the formation of medicare 40 years ago. it could carry a price tag of more than $1 trillion. joining me is former democratic national chairman and physician, howard dooeb, author of "howard dean's prescription for real health care reform." governor dean, great to have you on the program. >> thanks for having me on. >> we're expecting bills from congress that will require americans to obtain insurance, offer subsidies for those who cannot afford it, and require employers to provide coverage or

pay a fee. broadly speaking, is this enough to actually stem the growth in health care costs, in addition to getting those people -- >> it is because you left out the most important part. they have an option for people to choose a public plan if they want to. the option to choose the public plan is all the difference between real reform and not real reform. allowing the public to essentially get into medicare before they're 65 means insurance companies are going to have to start to dial back on costs and that is critical to this thing. >> that is why initially we heard noise from the ama, american medical association. now we just talked a moment ago that this is dramatic, they're actually endorsing -- >> this is the interesting thing. the most underreported story of the week in terms of -- it's a big deal that the house came out with -- the committees came out with their bill, the senate health and education labor and pension committee came out with their deal. a very conservative group, the ama, has endorsed the house version which requires a public option. that's extraordinary.

it's very smart on the part of these -- this conservative group of doctors. because what they got something in exchange, adequate medical reimbursement for primary care physicians. >> of course there's also pushback as far as how to pay for this. >> right. >> the overhaul could cost upwards of $1 trillion. we know that. the president reportedly opposed the taxing of employer-provided benefits in favor of shifting that burden to the wealthiest americans in tax surcharges. >> first of all, let me say this. a lot of things that i think about this bill, opinions that i have about the bill. but i avowed i would focus on one thing only, public option. that's all the difference between real reform or just throwing money out the window. i'm not going to be critical of other ways of financing the bill. my preference is a carbon tax which i talk about in the book. that if you pay for this by increasing the gas tax 10 cents, it's regressive but the people who pay the most in gas taxes also have the least likelihood

of having insurance. most people would gladly pay 10 cents in gas tax to have an insurance policy that would never be taken away and would follow them wherever they went, whether they have a job or not. >> a very important point. what's on the table right now is proposed taxes. 1% for couples earning $350,000 to $500,000. singles to $400,000. then 1.5% to couples earning $500,000 to $1 million. singles, $400,000 to $800,000. the highest income earnings, beyond $1 million, singles beyond $800,000, 5.4%. do you think that's going to fly? >> it might. the american people support it. in the polls. and i don't -- again, i'm not going to fight with congress about how they want to fund this. there's going to be lots of changes over the years to this. the critical thing is can we make the jump to real reform where we put the american consumer in the driver's seat for the first time, or more of the same?

you make that initial reform jump, then you can start controlling costs and arguing how to pay for it. >> in your book you contend a gas and carbon tax can raise sustainable and substantial revenue, obviously, to pay for that reform. what kind of reception are you getting? >> i'm not pushing it. you know, and i think what the hassle over cap and trade, it may not fly. on the other hand, there are those who argue -- i'm not necessarily one of them -- that a carbon tax is much superior to cap and trade because it's easier to administer. i think you could do better with both cap and trade and a carbon tax. but we are so undertaxed in the area of fuel and carbon compared to europe. and yet this is a tax that's easy to collect, it helps -- has a great environmental consequence. unlike the oil industry, it claims it's not a job killer. in europe their economy's a little stronger than ours. and they have much higher carbon taxes. and you can pay for health care reform without raising income taxes or any other kind of taxes if you use it. again, i'm throwing this out

because in the best of all possible worlds. it's not the focus of the book which is, what can you do to fix our broken health care system, which the private sector has failed to run right. >> for months the white house has been pushing for true bipartisan support for health care legislation. we're still at that moment, though, in time where we're wondering -- >> that's not going to happen. it's not going to happen. the republicans have no interest in this, in passing this bill. they think it's bad for president obama if he doesn't get health care done and that's their mantra, just -- they'ribled in what they think is good for the republican party than what's good for the country. >> we know that preventive care is the best way to cut the curb in terms of rising health care costs. give us your sense of what can be done realistically to get the cost of health care down. >> you could do one of two things. regulate the insurance industry like a regulated utility, which is not going to happen, it's not on the table. or have a public sector, which is fully integrated, so that whatever money you save flows through to the bottom line.

that doesn't happen in the private sector. there's no integration. whatever you invest in prevention, there's no savings to the people who make the investment. >> what about policies on the table that actually help people make the right choices? so that we can prevent some of these diseases that we are spending so much money on? obesity, diabetes. these are the types of things that are preventible. but we need policies in place so that people can make better healthy choices. nothing works in life without financial incentives to make them work. in a more closed, real integrated system which you have with a public option, you can then begin to get people to change their behavior early by giving them financial incentives. simple things. if you smoke, you've got to pay more for health insurance. if we put a monitoring system on people with chronic medical conditions which cost an enormous amount of money, we can find out way before they need to go to the hospital they're out of balance. there's no incentive to do that stuff now because the people who have to pay for prevention don't realize the savings on the other

end. a fully integrated insurance system, like medicare, could benefit. a fully integrated private system, like kaiser, could benefit. the system we have now doesn't benefit at all from that. >> very smart. howard dean, thanks for your insights. we appreciate it. governor howard dean joining us here in the studio. we'll see you soon, thanks very much. up next on "the wall street journal report," did a boy wizard make movie studio magic on a big opening day? what the latest harry potter movie means for this summer's box office.

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a boy wizard, an austrian supermodel, and alien robots are battling over consumer dollars at movie theaters this week. "harry potter and the half-blood prince" earned $58 million on its opening day alone, up to $80 million in two days. paul garabedian with hollywood.com. great to have you on the program. thank you for joining us. the sixth harry potter film opened wednesday. warner brothers delayed its planned release from last november to this summer to try and boost revenue. how did that pay off? >> i think it totally paid off. obviously. they had midnight screenings wednesday, 12:01 a.m., that earned $22.2 million. just at midnight. that's a record. that beat "the dark knight's" midnight screenings of $18.5 million. this is the same week that warner's opened "the dark

knight" last year to great success. this is a magic, no pun intended, a man i guess date for warner brothers and harry potter. >> what a franchise. >> it's amazing. 2001, these films started out. j.k. rowling, the books, the whole thing. i wasn't a huge fan of those earlier movies. now, $4.5 billion worldwide in box office. not even including harry potter vi. >> unbelievable. like you said in the commercial break, she doesn't have to do anything for the rest of her life, j.k. rowling will maybe do more? >> i think warner would love it if she did. what they've done is now there's one more book, but there's two more movies. they wisely split it into two. now they get more bang for their buck. and potentially by the time this franchise is finished, all eight movies, they could be looking at over $7 billion in worldwide revenue. >> unbelievable. "the half-blood prince" had a budget of $250 million. another $155 million to market. what about other releases this

summer? "burnout" took in a lot. not all the buzz is positive. >> that's the thing. "bruno," it's such an acquired taste. $30 million its opening weekend. it opened with 14.5 million on friday, dropped to $8.8 million saturday. people were saying, word of mouth or twitter affect that movie? "transformers" which revived the box office. the summer box office was running even with last year until "transformers." that boosted us to 5% ahead of last summer. >> are the big money movies, the big event movies, the best bets for movie studios in this economic environment? or a better bet to make $5 million, $20 million movies, on the low side? >> your best bet is to make a movie like. >> the hangover" which cost $35 million to make, another $15 million to market that film. it's up to $200 million. that's what you want. a film like harry potter, spend big bucks to make the big bucks.

then probably earn close to $1 billion worldwide. that is definitely worth the investment. otherwise it's a very tricky business. it's very expensive. you can lose your shirt on a movie if it doesn't do well at the box office. >> you have "harry potter and the half-blood prince," you think it has oscar potential you wrote? >> on my blog i wrote about that. >> the number of best picture nominees increased to ten next year. what's important about an oscar win? >> well, it's vital to a film's legacy. first of all. beyond that, in terms of dollars, a film can get a big box office boost from getting an oscar nom, assuming it's still in the marketplace. also, it's going to boost the ratings for the telecast because with ten best picture nominees there's a lot more films out there that are going to have the fans that are going to have a vested interest in watching the telecast. >> i'd say. so you get that much more business after an oscar. >> that's right. >> great to have you on the program, thank you so much. >> great to be here.

>> we appreciate it, paul. up next on "the wall street journal report," take a look at the news that will have an impact on your money, moving the markets perhaps. and the long, strange trip to wall street, from a pineapple under the sea. a talking sponge celebrates his birthday in style. a heart attack at 53. i had felt fine. but turns out... my cholesterol and other risk factors... increased my chance of a heart attack. i should've done something. now, i trust my heart to lipitor. when diet and exercise are not enough, adding lipitor may help. unlike some other cholesterol lowering medications, lipitor is fda approved to reduce the risk... of heart attack, stroke, and certain kinds of heart surgeries... in patients with several common risk factors... or heart disease. lipitor has been extensively studied... with over 16 years of research. lipitor is not for everyone, including people with liver problems... and women who are nursing, pregnant, or may become pregnant. you need simple blood tests to check for liver problems. tell your doctor if you are taking other medications,

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investors alleged. a look at the stories that impact your money this week. 12 dow components will report their second quarter earnings. caterpillar, coca-cola, pfizer, microsoft, mcdonald's. also reporting this week, apple computer, starbucks, morgan stanley, and ford motor. this week is the height of an important earnings season. on tuesday, federal reserve chairman ben bernanke will testify on monetary policy before the house financial services committee. then on thursday, existing home sales for the month of june will be released by the national association of realtors. finally, if nautical nonsense be something you wish, the trading floor of the new york stock exchange was the place to be this week. spongebob square pants celebrated his birthday by ringing the closing bell. the optimistic yellow kitchen sponge has generated viacom $8 billion in revenue since debuting in the summer of 1999. still has a lot of years of

earnings power left, you know. underwater sponges can live to be 500. that's the show for today. thanks for being with us. my guests next week, harvard professor elizabeth warren. chair of the congressional panel overseeing the bailout. hope you'll join us then. each week keep it right here where wall street meets main street. have a