this is "nightly business report" with sue herera. the fed's dilemma. consumers pay less for a lot of things and that makes the central bank's decision on when to hike interest rates a lot more complicated. steve liesman reports. aftershock. the surprise surge in the swiss frank is still reverberating around the world and today it brought one brokerage firm to its knees. and taking control. our market monitor guest says this is not the year for passive investing and he has a list of stocks he says are worth owning. all that and more tonight on "nightly business report" for friday january 16th. good evening, everyone and welcome. it is friday and for many of us the start of a three-day weekend. after a weekend of whip saw moves in the market and a

disappointing start to the new earnings season this weekend couldn't arrive soon enough. but today was different. stocks snapped a five day losing streak. by the close, the dow was up 190 points. the nasdaq shot up 63 and the s&p added 26 closing back above the 2,000 mark. today's gains however were not enough to overcome the string of losses this week with each of the major averages down more than 1%. and that steep plunge in oil prices we've been telling you about for a while now, they helped send consumer prices sharply lower in december down four tenths of 1% the largest drop in nearly six years. evidence of falling inflation pressures. so what could the return of market volatility, low oil prices and no inflation pressure mean for the federal reserve and its timetable for raising rates? steve liesman has more. >> reporter: the nation's inflation rate fell to the lowest level in more than five years propelled by crashing oil prices. that was expected. what's more interesting is that

when you take out food and energy the so-called core index, inflation still fell and that presents a challenge to the federal reserve. headline inflation falling 0.4% making a year on year change of just 0.8%. the core unchanged on the month and the year over year rate a low 1.6%. gasoline prices plunged 9.4% and airfares also fell 5% according to the report. apparel, apparently there were some sweater discounts over christmas falling 1.2% but prescription drugs rising nearly a percentage point. the fed is watching the core rate very closely looking beyond the oil price decline for signs whether inflation is moving further away from its 2% target. a target it hasn't hit in about two years. the puzzle is that unemployment is fallen and yet there is no sign of inflation. in fact low bond yields are assigned at the market sees little or no inflation on the horizon. wage gains have been muted as

well even falling in december and there are concerns that overseas economic weakness and outright deflation could end up affecting the united states. >> we can't keep the rest of the world afloat. the rest of the world is probably what's going to bring us down. >> reporter: unless there's some sign that the fed rate is moving towards the 2% target or wage gains are accelerating the fed could put off rate hikes planned for this year. >> the fed is going to pull a trigger when you start to see wage increases. if things continue to slow they're not going to hire and if they're not going to hire wages are not going to go up. if wages don't go up the fed is on hold longer than people think. >> reporter: consumer soared and there is an upside to the lower price increases. >> low inflation is terrific for consumers and now we're getting a free stimulus plan called a 50% plunge in oil prices. >> reporter: one more bit of news. the social security waits for the december number to calculate the cost of living increase for 2015. the 64 million americans who receive benefits will get a 1.7%

hike because of the cpi and that's equal to last year's rates. for "nightly business report," i'm steve liesman. the stock and currency markets are still grappling with thursday's surprise move. some would say shocking move by the swiss national bank to unhinge the currency from the euro ahead of an expected massive monetary easing plan for the euro zone. and the impact for some companies has been devastating. sara eisen has more now. >> reporter: markets and companies are still reeling from the swiss shocker. among those feeling the fallout most acutely, non-bank foreign exchange brokers. companies that let retail traders buy and sell currencies. fxcm is the largest in the united states. it said due to the unprecedented volatility volati incured massive loss for clients. $225 million. later in the day, financial firm

lou kadia to rescue fxcm. it's reviewing the matter but former cstc commissioner said these retail plot forms can be a risky business. >> there is not an insurance fund like there is for stocks for futures. so these guys could ultimately and i hope this doesn't happen be left high and dry because no insurance funds exist for futures positions. >> reporter: other firms like interactive brokers traded lower on the session as well. that's because many traders didn't consider the policy reversal from the swiss national bank or smbnb as a real competitor. but said the warning signs were there. >> this is way out on the probability curve but as i said they were actually the snp was

developing a situation. not zero. >> reporter: the topic came up during the goldman sachs earning call this morning where schwartz called the move quote pretty extraordinary. though he did say it wasn't material to goldman financials. while the retail for the exchange market may be a tiny piece of this $5 trillion a day currency trading, it could be the first shoe to drop. for "nightly business report," i'm sara eisen. well some of the world's biggest banks also reportedly took some big hits after switzerland removed its cap on the euro. according to reports, citigroup and germany's deutsche bank both lost upwards of $150 million in the currency markets in one day. well paul alarian joining us now about the swiss national bank. he is the chief economic advisor at alian's. mohammed it's great to see you

again. >> thank you. >> let's talk about the ripple effect and the implications of this. you maintain in a piece you pinned today they are pretty far reaching. tell is about that. >> yeah there's a direct impact we heard about it mainly on fx brokers and also on swiss exporters. this is devastating for swiss exporters. remember switzerland exports up to 50% to europe. so that's a huge hit. but it also speaks fundamentally to two other things that are relevant for the global economy and the first one is the return of volatility in a big way. we are exiting the world of low volatility and entering a world that is going to be much more volatility ahead. and that important in terms of economic consequences. and the second issue, even more fundamental, is the extent to which central banks are diverting from each other, doing different things and the exchange market the foreign exchange market cannot be the

sole shock absorber because you get accidents. i think this is a fundamental move. it highlights what's ahead in terms of volatility and it will have an economic impact on the global economy. >> mohammed you wrote this morning that large currency moves tend to break things. you just mentioned one thing they tend to break in this case and that's swiss exporters. what else could be broken here? >> so what i worry about most is it breaks this notion that we are in a goldilocks world. it breaks the notion that everything is fine the central banks are going to be predictable, markets are going to be low volatile till. people are going to be willing to take more risk that somehow we shake this paradigm of low volatility goldilocks economy and the result of that is that people become more risk averse. that's my major concern. >> has the swiss central bank lost i guess, credibility for lack of a better word? it used to be the most transparent central bank on the

planet. very predictable, very measured. and this shocked the world, certainly. what do you think about that criticism? >> so i think it's correct. i myself am puzzled. why didn't they wait for the weekend? normally central banks wait for the weekend. you have to communicate such a move. you have to be able to interact with your financial institutions with other central banks. why did they do it on thursday in the middle of a trading day? that for me is a huge puzzle. i actually put it out on twitter and got some pretty interesting responses as to the possibility, so i do think they mishandled it. >> what did the twittersphere say to you? >> i got a whole range. those who said they wanted to get ahead of the ecb next week and get ahead of other central banks. i got others that said once they took the decision a leak. and then a third view that they

want to discourage further speculation in future. and then i got something that made me laugh a lot. the dow is coming up in terms of maybe the s&p wanted to concentrate on doubles preparation over the weekend. but it is strange they moved on a thursday in the middle of the trading day. >> what is the chance that the ecb disappoints? there is such high expectations they will do a massive easing in some way, shape or form. it is already a crowded trade out there and there is the chance they could disappoint. what happens then if that happens? >> so if they don't deliver at least 500 billion in terms of a new program and if they don't deliberate pretty clean loss sharing mechanism, so if they disappoint on these issues then you will see a selloff in markets. the market has priced in a significant ecb qe. if the market doesn't get that,

then it will sell off. >> mohammed thank you so much. mohammed ailarian. oil closed higher get this for the first time in eight weeks after the international agency said there were signs that lower prices finally prompted some producers to cut output and quote, the tide will turn on tumbling prices. domestic crude up $2.5 per barrel. benchmark brent $1.90 settling at over $50 a barrel. steady oil prices prompt energy companies to scale back not only on production but also on their workforce. morgan brennan has more. >> reporter: the job losses are beginning to mount as oil's price collapse wreaks havoc on the energy sector. the latest in one of the biggest examples so far, schlumberger. recorded better than expected earnings this week but still cut

9,000 positions in the fourth quarter. a 7% reduction of the global workforce. and given the challenging year ahead, warned that more could be in store. analysts think the worst has yet to come for the entire sector. >> i'd expect more pretty much across the board from the big companies down to the smallest. with emt capital expenditures likely to come down in the u.s. 30% to 35% over the course of this year there will be job losses. you see announcements out of the big producers. apache and others. >> reporter: apache said it would eliminate 5% of its workforce this week. and em bridge also recently announced layoffs as well. schlumberger's competitor halliburton cut 1,000 positions with more potentially in the works. something to watch for in its earnings next week. and some investors think it will get much uglier for oil majors

that spend billions of dollars on long-term projects. >> the fracking industry a revolution was propelling us to be the largest oil producer and in a way that i thought was uneconomic and still is uneconomic for the drillers. but it was going to be enough supply to really disrupt the markets. more importantly, the big oil companies. the exxons world dutches and petro process. the day of finding easy cheap oil is over. >> reporter: the dow's federal reserve bank estimates 140,000 jobs could be lost this year in texas alone. including industries and directly tied to energy like construction. and that too is begig to materialize with the u.s. steel layi off 750 workers and idling two plants that make drilling products including one in the lone star state. for "nightly business report," i'm morgan brennan. and still ahead, when an index fund isn't enough. our market monitor guest has a

list of individual stocks that may be worth some cash. a potentially historic ruling may be on the way for gay marriage. the u.s. supreme court, the highest court in the land announced today that it will decide whether same-sex couples have the constitutional right to marry everywhere in the u.s. cases before and against will be argued in april and a decision expected by late june. many companies already recognize same-sex marriage when it comes to health care and other benefits. maryland taberner who saw the rocky rollout of the

affordable care act announced she's stepping down in the next month. although she's credited with helping millions of americans get health insurance for the first time she joins hhs secretary kathleen sbail yus as the second to resign in the botched health care. prime minister david cameron both urging patients over negotiations with iran and russia at a white house news conference today. president obama stressing diplomacy and vowed to veto proposed bipartisan legislation to impose new sanctions on iran. >> we agree that the international community needs to remain united as we seek a diplomatic solution from iran obtaining a nuclear weapon and i'd add additional sanctions on iran at this time would undermine the international unity and set back our chance for a diplomatic solution. >> both leaders took a harder

line on russia expressing continued support for ukraine and continued pressure on moscow. we begin market focus tonight with a slew of bankers. that's a lot, a slew. first, goldman sachs out with numbers today. the results topped estimates but the firm reported a 7% year to year drop in fourth quarter profit citing weak income trading the main reason for the decline there. shares off slightly today. $177.23. next pnc financial. said its profit and revenue slid. despite that quarterlies before than expected as the strengthening economy bolstered commercial lending and company set aside less money to cover losses. shares up $2 and up $84.44. up by almost 10% as revenue and net income growth set new records. the company said despite low interest rates, it was able to deliver some of the strongest results in history. shares there up slightly to $26.90. sun trust banks earnings fell

because of a mortgage related legal spens. beat estimates as loans grew in the fourth quarter. shares up 4% to $38.19. shares of precision cast parts slumped after it issued a weak outlook. the metals component and product maker said the third quarter results would be lower than expected expected citing falling sales. downgraded the stock to hold from buy. shares tumbled 9% from $199.63. amazon is regulated because of tax arrangement in lux em bourg. the deal the retailer made seems to have resulted in unfair state aid that may have allowed that company to underpay its taxes for a decade. shares nonetheless were up 1% to $290.74. and shares of act vision on call

of duty selling warfare the top gain. top selling u.s. franchise for the sixth year in a row while sky landers trap team was the number one video game for kids globally. shares spiked 9% to $20.20. our market monitor said tonight this year is an index fund that just won't be sufficient. he's john trainer, chief investment officer at people's united banks $5.5 billion wealth management division. welcome. good to have you with us john. why do you think this year particularly is the year when indexes will underperform or better off with a stock picker? >> well first of all, we would agree with your prior guest, mohammed alarian with volatility increase this year which will be good for active managers but we would take that even further and say the divergence you're going to see, the divergence between the u.s. and europe. the divergence between the fed and the ecp and the bank of

japan and the divergence between the oil winners and losers in our own economy and around the worl the divergence will create opportunities for money managers. we think the opportunity set will increase this year. so active management should do very well this year. >> but how important is it for the individual investor to really know what is in that portfolio and how it's weighted? >> that's critical and i'll give you an example. when you take a look at the emerging markets, you can buy an emerging market etf which can be very good. we're not against etfs, but if you take a look at that we'd believe there would be a big divergence this year between the commodity oriented countries and the the commodity consuming countries. we suggest to look at the mutual fund that you own anderer err

toward. it's very critical. >> stock picks, they are u.s. stocks beginning with one of the big megacaps in tech oracle. why do you like it? >> we like oracle. if you think about the headlines last year the data breaches we saw for large companies and the twitter feeds and social networks that was about data security. oracle is the leading company in data based management. they were a little slow to get to the cloud. we think they're catching up. we think they're making the right moves but data-based security is going to be critical going forward and oracle is the leader in that industry. >> you also like express scripts because of their efficiency. >> we like their efficiencies and one of the things we're looking at as your viewers know there's a very important supreme court decision that will come out later on this year that will determine whether or not the state exchanges can continue

functioning. we're looking for companies that will do well whether the supreme court rules in either direction. express scripts brings cost control to the industry. we like it no matter however the supreme court rules. >> your third choice was a stock really beaten down over the last couple of years. it's come back a good bit. why do you like it at this price and how high do you think it can go that is whole foods. >> whole foods is a company we liked for quite a while. we like the story, we like the management but it was just too expensive for us. we started looking at this back in early 2013. the stock traded off. it really came down last summer. we took another look at it. and we actually addedfolios in september at 39. the key issue is they lost track of their value proposition. what the company did is focused on good food at good prices. they had great earnings really surprised us in their november earnings report and we think that business model is back on

track and we're positive on whole foods. >> very quickly, your comments on the economy. how does it feel to you, john because there's some talk of deflation out there that could be worrisome for the stock market as well. >> we don't think you'll see deflation, actually inflation declining but low inflation in the u.s. and again, one of your prior guests talked about wage inflation. we think that's the key. that's what we're focusing on. we don't think that you're going to see the fed really make a move on interest rates until they see wage inflation and that's good for the economy and that's good for the stock market. >> john, thank you very much, great weekend. >> thank you. >> john trainer with people's health united management. coming up the big jump in demand from very small houses and the prices that people are will.

stock component at&t said it will take a $10 billion charge in the fourth quarter. the company said the charge is related in part to pension and postemployment benefit plans. at&t said the charge will not impact its operating results. despite the six month standoff between west coast dock workers and their employers, the port of los angeles just reported busiest year since 2007. container volume at the port the second busiest on the west coast after the nearby port of long beach saw container volume rise 6% in 2014 and just today in an effort to end the standoff between the port and the dock workers, 174 industry groups sent a letter to both sides telling them to quote, get it done. good news about investing in new businesses.

a new report led by price water house coopers said that u.s. venture capitalists invested $48 billion in enterprises last year most since the year 2000 around the dot com boom. good things come in small packages. well when it comes to real estate in silicon valley, small homes and i mean really small are coming with some gigantic price tags. josh lipton has the story. >> reporter: in the heart of silicon valley there's been a big jump in the price of small homes. pau alto is one of the most sought after communities in the bay area with elegant downtown respected schools and proximity to the headquarters of tech giants such as facebook and google google. in fact demand is so strong in palo alto and inventories so lean homes that look like bun ga lows sell for millions. this one at 151 kellogg.

two bedroom one bath. only about 990 square feet and it just sold for $3 million. that's not unusual. in 2014 the median price of a home in palo alto was less than a 1,000 square feet of living space surged 40% to $1.7 million according to delio realty. it can be explained by the new tech money in the area driving prices higher as well as the influx of international investors looking to capitalize on a red hot real estate market. >> about 40% of these buyers would be investors from overseas. particularly the chinese really want brand new homes, so buying these small homes with larger lots tearing them down and then building their dream home. >> reporter: of course such a surge in home prices is asking whether there is a housing bubble in palo alto.

economists don't think so. they think the income growth will support home prices in the area at least in the near term. for "nightly business report," i'm josh lipton in sill vonicon valley. >> makes new york city look cheap. >> i'm feeling blessed here. you're a california girl you're used to it. >> not that. not quite that. all right, that does it for "nightly business report" for tonight. i'm sue herera. thanks for watching. >> thanks from me as well. i'm tyler mathisen. have a great long weekend everybody. we'll see you monday.

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