captioning sponsored by wpbt >> tom: bernanke's blueprint, the federal reserve chairman outlines plans to pull back the trillions of dollars the central bank has used to prop up the economy. >> suzanne: the exit strategy includes eventually removing cash from the financial system, then raising interest rates. you're watching "nightly business report" for wednesday, february 10. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:

this program was made possible by contributions to your pbs station from viewers like you. thank you. >> tom: good evening, everyone. a huge winter storm closed the federal government again today. that didn't stop federal reserve chairman ben bernanke from making news. >> the weather postponed the hearing. >> tom: the central bank oh could take to prop up the economy. erika miller has the details. >> reporter: investors did not hear the fed chairman's testimony today, but they still could read it. all 3,496 words. economists say the most important sentence is here, on page ten.

"the federal reserve could, for a time, use the interest rate paid on reserves, in combination with targets for reserve quantities, as a guide to its policy stance." that fed speak may be hard for most people to understand. but economists say it's a major change in how the fed plans to influence interest rates-- at least for now. traditionally the fed has used its federal funds rate as its primary tool to raise and lower borrowing costs. but now it appears the central bank will be focusing on a relatively new strategy; changing the interest rate it pays banks that store money at the fed. lord abbett economist zane brown says this a smart move. >> i think that they've just found a much more effective way of doing things. it certainly gives the fed more direct control, and perhaps more power, than it had before. it's consistent with what other central banks in the world have had. >> reporter: that's just one way bernanke said he might push rates higher once he thinks the recovery is strong enough to worry about inflation.

he also mentioned three others: repurchase agreements, the equivalent of certificates of deposits for banks, and asset sales. economists say having those strategies spelled out should be reassuring to investors. >> it really ought to be very calming to the markets. it ought to give investors a lot more confidence that what the fed has created temporarily to help solve some of the financial crisis is not going to lead to inflation. >> reporter: interest rates rose a bit today. some bond traders think that's because bernanke reminded the markets higher rates are coming. others think it was a tepid ten- year note auction. barclays economist michelle meyer says there's nothing in bernanke's comments that changes her outlook for rates. >> bernanke maintained the language that they think conditions warrant exceptionally low levels of interest rates for an extended period of time. so, i would say that we still feel comfortable with our view that the first interest rate hike won't occur until september.

>> reporter: the fact that bernanke released his remarks today may itself be significant. some economists believe the fed chief wants to call attention to a significant policy shift and give the markets a chance to digest it. erika miller, "nightly business report", new york. >> suzanne: the top republican on the house panel investigating toyota's recalls, darrell issa of california, wants the company's president, akio toyoda to appear before congress later this month. that hearing was set for today, but postponed because of bad weather. the storm also forced toyoda to delay his planned trip to the u.s. because of the recent recall controversy, toyota executives in the u.s. thought about canceling an appearance today at the chicago auto show, but as diane eastabrook reports, the company used the event to calm consumers. >> reporter: at the chicago auto show, toyota's redesigned avalon took a backseat to the company's recent recalls. vice president robert carter said restoring consumer trust is the company's top priority. >> we are completely focused on fixing vehicles and working with

our dealers 24/7 to handle it as quickly and as efficiently as possible. >> reporter: in the last two weeks, toyota has been hit with two highly publicized recalls: one involving sticky gas pedals on eight models, including the popular camry; and another recall involving a braking glitch on the prius hybrid. morningstar auto analyst david whiston says toyota needs to get its act together and quickly. >> this is just bringing them down to the rest of the pack level now, and they need to make their vehicles more exciting after this and after they fix the quality. >> reporter: recalls are not that unusual in the auto industry, so many of toyota's competitors hesitate to criticize the company. still some of those companies realize there could be opportunity in toyota's troubles. experts say ford has perhaps the best shot of luring customers away from toyota.

last month, the company increased both sales and u.s. market share. president of the americas mark fields thinks products like its redesigned edge crossover easily competes with toyota's venza crossover. >> our products are really resonating with consumers. if you look at our sales the last month, we were up in every category. >> reporter: industry watchers say honda also competes aggressively with toyota on quality and safety. assistant vice president vicki poponi says honda will be emphasizing both with the rollout of the new odyssey mini van this fall. >> we're sorry that toyota is having these issues. we wouldn't wish those on anyone, but we still have a good product lineup, and if people would like to look at hondas, we'd be happy to host them. >> reporter: still, toyota buyers have traditionally been a loyal group. the automotive website edmunds.com tracks customer purchase intent. it says interest in toyota fell off after the recall for sticky gas pedals, but has been improving. still senior analyst jessica caldwell thinks toyota needs to be concerned about its reputation. >> there are people who are scared, and what they're going through is bad. and i think a lot of people, when the word safety recalls

pop up, they may never return. >> reporter: toyota is repairing about 50,000 gas pedals a day and repairs should begin next week on prius brakes. carter says the company is doing all it can for its customers and may consider special incentives down the road. >> we're back in business and we'll look at it after we get >> reporter: experts hope toyota has learned a lesson from its recent problems and will be more transparent with consumers in the future. diane eastabrook, "nightly business report", chicago. >> suzanne: tomorrow, a different side to the toyota story. we'll see how the automaker's recall has stunned japan. not only is toyota a major employer there, but also a source of national pride. >> tom: here are the stories in tonight's "n.b.r. newswheel". stocks edged lower after those comments from ben bernanke. the dow lost 20 points, the nasdaq fell three points, and the s&p 500 dropped two points. speaking of the dow, the 114- year-old index has a new owner: the c.m.e. group.

the chicago exchange is joining forces with dow jones, for dow's stock indexing business. the deal's worth $675 million and gives the c.m.e. a 90% stake, with dow jones and its owner newscorp keeping the rest. german politicians, euro zone finance ministers, and french president nicholas sarkozy spent the day working on the greek issue. so far, no decision on how to handle greece's debt. the issue tops the agenda at tomorrow's summit of european union leaders in brussels. treasury secretary timothy geithner says the u.s. financial system is healing, but there's a lot of repair work ahead. his comments came from a prepared statement summing up how the administration worked to stabilize financial markets over the past year. still ahead, will airlines stocks soar higher this year? we ask our "street critique" guest julius maldutis, chief airline analyst at aviation dynamics. >> suzanne: wintry weather is slamming the mid-atlantic and northeast tonight. it's the second massive

snowstorm to plow through the region in less than a week. in washington, d.c., the severe weather has forced the federal government to shut down for three days, at a cost of roughly $100 million in lost productivity a day. the snow has also postponed the release of economic reports which have been pushed back to friday at the earliest. scott gurvey takes a look at other ways mother nature is weighing on the economy. >> reporter: the double whammy of snow which has pounded parts of the nation is playing havoc with lives and budgets in the areas hardest hit. many state and local governments have run out of money for snow removal. but davis wyss of standard and poor's says for the private sector, the economic impact of the storms is minor. >> we're going to lose some retail sales because people can't get to the mall. we're going to lose even more in service sector sales because they're not going to be going out to eat. but, you know, past history suggests people make up for that

fairly quickly. similarly on the production loses, you may not get to work today or tomorrow, but they'll probably get back to work next week and you can make up the lost production relatively quickly. >> reporter: federal workers are also expected to catch up on missed work. but as bob brusca of fact and opinion economics explains, the storms may have a noticeable impact on the next series of government generated economic reports. >> the employment data center on the weekend, on the pay period ending on the 12th. and if we've got a storm covering that day, then we could wind up with people who are temporary workers not able to get to work, not being counted as working. people who make an hourly wage might be still on the payroll, but they might make one day's fewer wages so their weekly wages would be down. >> reporter: the transportation sector is one place where lost business can often be made up, although weather related delays can be costly. but sometimes lost transportation is lost forever. and it can take a bite out of the leisure business as well. >> shipping gets caught up. there's not much problem there. air transportation, however, can

be a problem because people can't get out to go to disney world. and if you can't get out to get to disney you may end up canceling your vacation because by the time you can get out, two days later you know, what's the point. >> reporter: the point is to blame it all on that groundhog. he says there are five weeks of winter left. scott gurvey, "nightly business report", new york. >> tom it felt like a ghost town this afternoon when we

cam into the exchange. >> tom: almost a snow day there in lower manhattan because of the snowstorm. still the markets were open, so let's take a look at that market focus. >> tom: the major indices put in a quiet day after the volatility we've seen lately. one of the most active big board stocks today, as you saw, was sprint nextel. sprint got crushed in percentage terms after its earnings report. it now sits just above its november low of $2.83 a share. the volume today was over 250 million shares. that's four times normal and enough to make it the most actively traded issue. investors were reacting to a disappointing quarter. the company was able to lose less money compared to a year ago, but it was a bigger loss than predicted. the company has been fighting the trend of fewer long-term contract customers by attracting cheaper pre-paid customers, but competition has been fierce.

the growth of that pre-paid business was a disappointment. and three of the biggest pre- paid competitors were down in kind. there's been market talk this month about the possibility of sprint buying metro p.c.s. or leap wireless. last week, the "wall street journal" reported leap has approached both at&t and verizon. america movil runs tracfone, another pre-paid wireless service. a new high tonight for an internet search giant, and it's not google. chinese search engine baidu rallied more than 10% on twice its average volume to fuel a big breakout to new highs. the stock is now up more than 250% over the past 12 months. big profits in the past quarter and a solid outlook helped. the company easily beat street expectations and its first quarter revenue guidance was above what wall street had expected. and that's without any positive

impact from the possibility of google leaving the chinese market altogether. and speaking of google, the stock saw light volume and a fractional loss today even with three news items for the company. google's share of the u.s. online search market slipped in january while microsoft saw a gain. this week, the company announced buzz, its offer to compete with facebook, twitter, and other online social media sites. and iran says it will permanently shutdown google's email service there. a.i.g. will be one to watch tomorrow after today's double digit percentage gain. it was the second biggest gainer on the big board with the buying coming on four times normal volume without any new significant company news. earlier this week, there were reports a.i.g. was nearing a deal to sell its alico life insurance unit for $15 billion to metlife. others speculate it may be a short squeeze, driving the price of the stock up, hoping to force those who are short the stock to have to buy it in order to avoid future losses, and that helps push the price higher. a new 52-week low tonight for dean foods, the biggest dairy

processor and distributor in the u.s. an earnings miss of six cents is bad enough, but accompanied by a weak first quarter and 2010 profit projection, and that's the makings of a sell-off. and that's exactly what we saw. the stock falling below its late november low of $16 marking its lowest since december '08. after hours tonight, boston scientific beat the street by a healthy margin. its conference call is tomorrow morning, but after the earnings release, b.s.x. shares were up about 2%. some buyout activity helped push micron technology onto the most active list on the nasdaq. with a 6% drop on merger news, you may guess that micron is the buyer. and it is, offering $1.3 billion to by memory chip company numonyx. that's jointly owned by intel and s.t. microelectronics. the two sells saw fractional gains. among those to watch tomorrow may be auto nation. it's toyota's single biggest u.s. dealer and a spokesperson tells me they will focus on the

toyota situation, quote, "big time". that's tonight's "market focus". >> suzanne: the f.a.a. appears to be ready to slap a huge fine on american airlines. the associated press reports the agency is wrapping up a probe of american's safety records, and could fine the carrier more than $10 million. the agency wouldn't comment on that report, and the airline said it wasn't aware of any pending fine. in april of 2008, the government grounded hundreds of american planes to fix safety problems in their electrical wiring.

>> tom: despite the possible fine, american airlines is one of the favorite airline stocks of tonight's "street critique" guest. he's julius maldutis, president and chief airline analyst at aviation dynamics. we began our conversation talking about the environment for airlines. >> i think everybody was very negative over the last year. but the fundamentals are improving. we've got an economy that's improving. we've got very low capacity levels and bookings are picking up. and the airlines are going to be able to raise ticket prices. so i think clients are going to have to start really booking to get some of those cheap tickets. >> tom: how far and how fast on those air fares, do you think, on into the summertime travel season? >> oh, absolutely, because i think there is no capacity increases this year and that's going to be the critical factor. obviously the other factor that's going to determine airline stocks is what happens to oil prices. in that area i think also we're going to see either flat

oil prices or they will decline. >> tom: and the other ingredient in terms of profits are all those fees that the airlines have successfully put in place, making the traveler pay for everything from the first bag, first piece of luggage to even pillows and blankets these days. >> absolutely. except for one airline, southwest airlines, they're just making an absolute ton of money by enticing people to fly with them because they don't charge you anything for your baggage. >> tom: when you take a look at the airline industry here into the second quarter and second half of the year, which ones do you like the best from an investors standpoint? >> well, i think southwest is one and i think another one is american airlines that have basically won out and has gotten japan airlines to stick with it. so i think those two are in very good shape. on the weak side, on the stock prices is because the stocks are so highly valued and that

is, for example, alaska airlines is one that's very highly priced, and also you've got the other issue and that is u.s. air, which i think is in somewhat of a trouble. >> tom: let's peel back these he. u.s. airlines on a 52-week high and alaska has raleigh nicely. you don't think there's much more of a catalyst to take for those, even with higher air fares in the forecast? >> i think it's going to be much more difficult for the stock prices to go up for those two. >> tom: and in regards to those picks that you do like here, american airlines, why is japan airlines such a key holding to have that alliance considering that that's a bankrupt carrier? >> well, because japan airlines is so critical to far asia travel, and i think it will be of material aid for american airlines longer term. >> tom: and what sets

southwest apart, outside the avoidance of baggage fee ohs, and where can it grow its routes in the united states and continue to beat profits? >> it is now one of the largest airlines in the united states. and i think it will just continue to grow, they have one aircraft type, they've got enormous loyalty from their employees. and just look at the last two decades how this company has grown. it's been an extraordinary success story, and i think it will continue, because they've got fabulous management at southwest. >> tom: of the four stocks mentioned, any disclosures to make this evening? >> in terms of the disclosures, what i have is delta airline. >> tom: fair enough, our guest tonight, julius maldutis, president and chief airline analyst at aviation dynamics. >> tom: here's what we're

watching for tomorrow. our appetites, cheesecake factory, chipotle mexican grill, and panera bread report quarterly results. we'll also see the weekly numbers on jobless claim benefits. also tomorrow, we're one-on-one with klaus kleinfeld, c.e.o. of aluminum giant alcoa. we'll talk about job creation in the manufacturing sector, and where does he see growth. >> suzanne: some bad news today from one of the nation's leading newspapers. the "new york times" says it believes print advertising will continue to fall despite an improving economy. printed ad revenue at the "times" and its sister papers fell 15% in the fourth quarter when compared to a year ago. but online revenue for the group is actually growing due to the fact that more and more americans are getting their news on the internet. >> tom: mortgage giants fannie mae and freddie mac are going to buy back some loans they've already sold to investors. the reason? buying those loans back will be cheaper than making payments to guarantee them. between them, the two mortgage agencies now guarantee almost $200 billion worth of loans that are delinquent. fannie and freddie remain on a tight rein held by the

government after nearly collapsing in september of 2008. >> tom: the economy is showing signs of life, but its still tough out there. and, we want to help by getting

answers to your personal finance questions. use our video sharing site to send in your thoughts, experiences, and inquiries, you can go to our website, pbs.org/nbr. look for the "riding out the storm" logo. you'll find instructions on how to upload your videos so we can get experts to answer them. >> suzanne: this year, the i.r.s. is letting taxpayers convert traditional i.r.a.'s to roth i.r.a.'s regardless of how much money they make. in tonight's "money file", reasons to be careful before you make that conversion. here's eric schurenberg, editor- in-chief at cbs moneywatch. >> 2010 is supposed to be year of the roth i.r.a. a change in the law makes it possible for anyone with a regular tax-deferred i.r.a. to swap it for the tax-free version known as a roth. brokers want you to swap so they can capture your business. but the decision isn't the slam dunk they make it out to be. just to review, you can convert

your regular i.r.a. by taking your money out, paying taxes on it, and rolling it into the roth. once that money is in the roth, you'll never pay tax on it or the earnings on it again, that's the beauty of the roth. so the argument goes, convert your i.r.a., pay taxes at today's low rates, and avoid taxes at higher rates when you're retired. higher rates? well, look at the budget deficit. isn't it obvious uncle sam will have to raise taxes? yes, maybe he will. but even so, your personal tax rate may not go higher. first, once you stop earning a salary and retire, you may drop into a lower tax bracket. second, even if income tax rates do go up, they'll likely be focused on people in the top brackets. that might not include you. also, remember that uncle sam might raise taxes by starting a national sales tax and holding income rates flat. a roth wont help you then. in short, don't jump to convert to a roth.

death and taxes are inevitable. a roth, not so much. i'm eric schurenberg. >> suzanne: that's "nightly business report" for wednesday, february 10. i'm suzanne pratt, goodnight everyone and goodnight to you too, tom. >> tom: good night, suzanne. i'm tom hudson. goodnight everyone, we hope to see all of you again tomorrow night. "nightly business report" is made possible by:

this program was made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org

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