. this is "nightly business report" with tyler mathisen and susie gharib. touching a record. the blue chip dow index rises to an intraday high and they place their bets on a crucial two-day meeting of the federal reserve. calling it quit. calpers, the country's biggest investment system will get rid of its pension funds, will others follow? and used by what some call immoral and illegal, september 16th. and good evening, and welcome, i'm tyler mathisen in our nation's capital where the federal reserve kicked off the two-day policy-setting meeting. and tomorrow we'll find out what the fed said about its next

moves. and i'm susie gharib, and on wall street, the focus on investors was also squarely on the central bank, they reached a record high, the s&p 500 index posted their biggest gain in a month. now, investors brought up stocks on reports for tomorrow when the policy makers wrap up their two-day meeting they will signal they're not in a hurry to raise interest rates. with that, the dow shot higher closing more than 100 points, nasdaq rose about 34 points, the s&p up by nearly 15 points. we have two reports on this fed-fuelled rally starting with mary thompson on the reaction at the new york stock exchange, and steve liesman, with what exactly they're hoping to hear from the fed. >> reporter: amid the blue chip index, they failed to close at a record. after moving along in the

morning the markets took off right afternoon on the reports that said the federal reserve is not likely to make changes on the outlook for interest rates when they conclude their two-day policy meeting on wednesday, this amid the market reports that china looked to juice its economy with the central bank n inrejecting. energy stocks respond to an increase in oil prices, oil prices rising on reports that opec will likely reduce when they meet. i'm mary thompson for "nightly business report." the fed is in play with markets ready to slice, dice and otherwise scrutinize the policy for any interest in raising interest rates, two phrases will get particular attention, the first says there is significant

labor market under utilizization, the rate hikes could be nearer since they suggest the feds believe the job market is healthier. the second says there will be a considerable time between the end of bond buying under quantity tafb easing, the fed may want to be more dependent on the economic data rather than dates. they suggest there could be a possible earlier rate increase. >> i think they will move considerable time. i believe there will be a bump on wednesday. when that happens, remember, if you take a look at the fed fund's futures market they are below the rates that the fomc members believe are going to prevail at the end of 2015 and 16. >> markets are to some extent already planning on earlier appointments with higher rates, the cnbc fed survey showed the

37 economists strategists fund managers, seeing the first rate hike coming in june of 2015. the second survey in a row that they brought nearer for the date, the first hike. they see the fed hitting the higher rates in 2016 than the prior survey. whatever the outcome it seems the market has new faith in the new fed chairman janet yellin. 30% think they can execute the monetary policies smoothly, up 10% from the last poll, just 7% believe it will end badly with the stock market. half the surveys. and the fed chair gets higher marks for being clear, even better marks then her predecessor. will it last? yellin has a tough month to go, and she will need every bit of market faith she can gain to be successful. for "nightly business report,"

i'm steve liesman. he is an economist at the center for policy priorities and former chief and economist economic policy adviser to vice president joe biden. jared, good to see you again. is the economy good enough in your view for the fed to stop buying bonds and raise interest rates? >> well, definitely low on the latter. i think that the tapering off on the bond buying program, we should get to the end of that in late october has been going along steadily and has not shaken the economy much at all. however, it is too soon to raise interest rates. so the discussion is well, when will it be the right time? and janet yellin is certainly not giving up on a labor market, that she still believes its too slack. >> let me ask you this, what would it take for you to say go ahead, raise my rates? >> i would like to see that --

the unemployment rate come down, well within the fed's full employment range which is below 5.5%, at not because the labor force has declined but because people left unemployment to get jobs. and also, by the way, here i am parroting janet yellin, i would like to see the long-term unemployment rate come down, it has been historically elevated for years. >> so you would much prefer for the fed to become more data-dependent rather than time-dependent. do you think the data will drive the fed to raise rates within six to nine months? will we be there? >> well, you're talking about a lot of people. but the people who matter the most, certainly janet yellin are much more data-dependent than time-dependent. and it is not just a matter of what the labor market calls the

quantative job, i think chair janet yellin wants to see wage pressure in the ec has been lacking for years before she starts talking about tightening. >> now said what you would prefer to think the fed would do. what do you think they will say and do tomorrow? are you in the camp that believes they will drop the two magic words, considerable time -- significant -- >> i am in the camp that says they will not. and here is my reasoning. i don't think the fed likes to have its forward guidance pushed around by outsiders. when you think about this, take the considerable time, those two words, take that out of the statement. that really comes from people outside the fed who pick up something more hawkish going on. and they have kind of created this buzz. i believe this fed has shown before, and under ben bernanke, as well, that they don't like to be moved by forward guidance as kind of the chattering classes

outside. i expect them to put their foot down and say we'll let you know when it is time to move guidance. very quickly, what is the stock market saying today about the federal reserve, has it already priced in whatever they believe the fed can do, because we had another day high. >> yes, i think that is probably part of the solution -- part of the reason. but i believe in fact if the fed takes the more kind of dovish data dependent tone and hope that the market will, they could go either way, get a bit of a bounce. i believe the expectation is for the fed to be more hawkish to tighten, i expect you will see more of an up-tick. >> all right, thank you very much. jared bernstein. and today's latest inflation subjects is sure to be a topic, it inflation is in check at least at the wholesale level,

producing prices were unchanged, a drop in food energy prices helped to off set transportation and shipping prices, consumer data comes out tomorrow. now, prices may be stable but the outlook on the u.s. economy from the top ceos is a bit weaker. a survey out today of 135 chief executives by the business round table shows less optimism about the economy, with more of them expecting to see more by the end of the year, more on why the economy is performing below its potential. >> the gdp is still limping around, we'll come in this year 2%, a little bit above. maybe. compared to past recoveries at this point we're way below where we should be. work force participation still way down, especially down when we look at younger age workers. and we have 4 million jobs that we can't fill because people

don't have the skill. >> but the findings were not all bad. most of the ceos expect their companies sales to increase over the next six months. there was good news also about the nation's poverty rate, it declined for the first time in almost ten years. the census bureau reported the poverty rate for children went down, but household median fiscal fell at just under $52,000. and more from calpers, the nation's largest pension fund which stands for a retirement system, will pull out $4 billion in investments over the next year after saying that hedge funds charge too much in fees and are too complicated. joining me now is amy resnick, executive editor at investment magazine. this was really a shocker for a

lot of people to hear that calpers, which is considered sort of like a bellweather for the pension fund, is dropping out. do you believe it will affect other institution managers? >> i think any time a big corporation like them make a change, the sudden change was a big price yesterday. but i think their decision will make everybody think about what they're doing and maybe go back and reconsider or review their own internal allegations. >> the big complaint was that these hedge funds were too expensive and complicated and didn't get the kind of performance they wanted. >> i think that calpers said with the pension fund their size which is nearly $300 billion and the allegations to hedge funds

that they had, which was only $4 billion, that their investment they paid was not significant enough to get their returns and the results they wanted. so they have made other choices. i think those numbers, the a allocation and size would be something everybody has to evaluate for themselves. >> you know, the critics coming from the hedge fund industry, saying there are hedge funds and there are hedge funds, and maybe they just didn't get into the right one, what is your take? >> i think that is certainly something worth reviewing, calpers made their decision based on their objectives and policies and i believe it is doing what they hoped it t is is d do sto the message here for individual investors who are always looking for ways they can kind of

emulate hedge fund strategies, ways to support their hedge funds. is this kind of a red flag to investors to maybe say this is not a good idea to go into hedge fu funds? >> i think maybe the bigger issue is to know your portfolio, and perspective, and do what you're expecting to do. in calpers' case, they said the properties of the hedge fund were not substantial enough because they could not get a large enough investment there to get that quality for them. but in an individual portfolio the size and scale are obviously different. >> and the other side of that discussion is this the right time to get out of hedge funds because there are all of these predictions that the stock market will go to a corrective phase and you want to hedge during a time like that. so what are you hearing on that? did calpers maybe move too soon?

>> well, at the start of the year they changed across the board and started reducing and changed their outcome to fixed income and private equity. so they clearly believe that will give them the stabilization in their portfolio that they want. >> all right, amy, thank you for joining us so much and explaining it. >> thank you. >> and we have been speaking with amy resnick at pensions and investment funds magazine. and one item that came out today, virginia's attorney general filed more than a billion dollar lawsuit today against 13 large banks and financial institutions saying they defrauded the state, regarding retiree systems. and still ahead, unethical and illegal. that is how the attorney general explains how a drug maker does with a widely used treatment for

alzheimer's. that story is next. summer officially ends a week from today and there is already good news for drivers this coming fall, even though oil prices spiked nearly two dollars a barrel, gasoline prices are the lowest in years, how low could they go? >> well, fall is about to officially kick off and there is some good news for consumers. retail gas prices could potentially fall to their lowest levels since fall of 2010. the currently average for a gallon is $3.37, but we could see them as low as 3 to 3.15, and some states could see it go

below $3 a gallon, now whatever the analysts' predictions are, the feds say they will spend $2 and a half billion less than gas this year and that could help the economy. the few reasons gas prices fell so low. the first is the steep drop between international and domestic crude prices. also the switchover from summer blend to winter blend. the latter is cheaper. and demand decreases in the fall, so when demand drops the prices drop as well. and cheaper fuel could be a big help for boeing, the aerospace giant just secured a massive multi-billion dollar contract with nasa to build tax seats. they will bring astronauts to and from the international space station instead of relying on russian space aircraft. and lifting off into

retirement with an extra $100,000. that is how much united airlines will offer in buyout packages to some flight attendants if they agree to retire early. two giant drug makers teaming up to make a huge drug acquisition, astrazeneca signed with eli lilly to receive half a billion in funding if the experimental treatment they both poin astrazeneca, down a fraction. and news about an existing drug prompted a lawsuit from the new york state attorney general of accusing the drug maker of switching to make more money. >> reporter: in the drug industry it is known as a hard switch. drug maker activist is discontinuing their older alzheimer's medicine namenda

before the patent expires next year and focusing instead on a new version. that has a patent to 2029, it brings in billions in revenue, so the strategy could save the company billions, by leading customers to switch to the new drug before cheaper generic copies hit the market. benstein analyst says that it is an increasing competition in the drug maker industry, the new york attorney general is not having it, filing a lawsuit against activists saying that the practice is manipulative and illegal. >> the hard switch, i believe is fundamentally unethical, forcing people to pay more for their pa this case, the taxpayers who pay

for this drug through medicare/medicaid. >> activist declined to comment, but said that they have significant advantages over the twice a day drug, particularly in a situation like alzheimer's with a high burden of care. they cite that it is precisely the vulnerability of patients that makes the strategy even worse. >> one of the particularly more pernicious issues is you're doing it with a moderately impaired person. the stocks traded up today, despite the attorney general's suit. the spokesperson said they may want to take a closer look not just for activist's future, but for the whole drug industry. >> this just goes to the strategy of the hard switch, and to the extent it becomes illegal it will be difficult for them in particular because they have been using it quite often. so this is something that the

pharma industry will clearly object to, and the payers will support. this will probably become a pretty big fight within the drug industry. >> for "nightly business report," i'm meg turrell. and we talk about humana, they announced a new buy back program that replaces the other program. shares jumped to 132.37. shares of soda fizzed regarding talks with a buyer. a british investment fund is talking about a possible buyout of soda stream. the news pushed shares to $31.79. and sears has tried closing stores and spinning off assets to fix its finances.

now the company's ceo is coming to the rescue. the department store owner has borrow for the holiday season, shares fell to almost 9.5% to $30.37. and the package delivery plan to hire 30,000 seasonal workers, an increase from last year when it was caught unprepared for a boom in on-line ordering. shares up slightly today to $97.96. meanwhile, fedex is hiking shipping rates for express, ground and freight services, the increase of about 5% will go into effect in january of 2015. shares up slightly today to $154.66. and through the years, after it opened for business, the trump plaza casino in atlantic city, new jersey, shut its doors today. the fourth to close in the

gambling city this year, one more, the trump taj mahal is set to close in november. we're still three days away from the initial stock offering of the chinese ecommerce giant, aliba alibaba, the company will open its first ever lobbying office in washington, hopes to work closely with u.s. trade officials on intellectual property and trade secrets rules. alibaba hired jim wilkins as the head of the strategic communications. he will work out of the san francisco office. also in washington today, a congressional report is blasting federal safety regulators in the gm ignition switch fiasco. one spokesperson said that the national highway safety administration played a signal role in gm's failure to recall the millions of defective cars in a timely manner, they say

that regulators failed to identify the ignition switch problems and should have acted more quickly. coming up, rewrite the future of the classroom, the second part of our education series is coming up next. a federal watch dog group is suing corinthian colleges for alleged profit lending, they are accused of luring students to take out pricey private loans by touting bonus job prospects and using illegal debt collection methods. they want the group to pay half

a billion dollars for relief in tens of thousands of students. well, traditional education is typically a one size fits all while the teacher lectures at the front of the room. a few years from now, the new method of teaching will turn the classroom on its head. sharon epperson takes a look at the classroom of the future. >> reporter: the classroom of the future will look a lot different than the classrooms of today. gone will be the rows of desks with teachers at the front of the class, the redesign of the class will look more like a working, living play space. >> if you think about the traditional classroom we have the image of the turteacher telg the students to be quiet and waiting for their turn to talk, the new design, we want them to talk. >> with the schools filled with

interaction, the teacher's role will also evolve. >> the teacher may be sitting observing silently or working one-on-one with one child on the floor or giving a lesson to a small group of students. there is an ebb and flow that happens in the classroom. >> reporter: as for lessons, they will be entirely virtual to be accessed on line and in demand outside of school. >> the real part of technology is to allow them to work at their own pace and personalize education for them and then free up class time. >> reporter: educators are already experimenting with what is known as the flipped classroom model. it is a look at what is to come and will radically change the classroom experience. for "nightly business report," i'm sharon epperson. and finally tonight, some surprising results in a new ranking of the top universities around the globe. here is the list from qs world university ranking, fifth place, california's stanford, fourth, university college, london, and

the university of oxford, both in london, and in first place, the winner? m. i. t. the massachusetts institute for technology, all great institutes, tyler. and that is "nightly business report," tyler, thank you for joining us. and thank you from me as well, i'm tyler mathisen, have a great evening and we hope to see you right back here tomorrow night.

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