the u.s. economy, investors are anxious about friday's employment report. they are also anxious about wall street lore of the dangers of september, when the stock market has historically posted its biggest declines. and as erika miller reports, many market experts are forecasting another scary september. >> reporter: as summer draws to a close, change is in the air-- and we're not just talking about the leaves. if seasonal patterns hold true, september may also be a time of transition for the stock market, and not the good kind. according to the stock trader's almanac, since 1950, the s&p 500 index has tumbled an average of .07% during the month. september is also the worst month for the dow and nasdaq.

most investors haven't forgotten last september, when lehman brother's declared bankruptcy, pushing the market down more than 9%. but calendar aside, strategist doug roberts says stocks are ripe for a 5%-15% percent pullback. >> i think there's going to be some type of a correction. you came off of a long, prolonged rally. there's uncertainty, high valuations. people are concerned about that. there's going to be some type of a correction, which you're starting to see now. >> reporter: but others believe that if there is trouble, it will come in the second half of the month. that's when companies typically start to preannounce third quarter earnings. strategist craig peckham says revenues will be closely scrutinized. >> i think if we see an earnings season where you get a lot of positive surprises in the earnings line that are not accompanied by positive surprises on the sales line, then i'm not sure that's going to be enough to continue the march higher in equity prices in the main. >> reporter: there are big questions about where the market heads beyond september. some experts warn of potential

trouble towards the end of this year and into next, especially if the government's stimulus efforts fade. doug roberts says unemployment should be a good predictor of the direction of the economy and the stock market. >> the consumer-- even if you give him every deal in the world-- he may sit there and go out a buy a house, buy a car, buy a light, buy a washer if you agree to pay for half of his costs. but ultimately, long term, that's not going to change his behavior unless he feels some security with his job situation. >> reporter: change is inevitable, and not always a bad thing. it also creates opportunities. buy-and-hold investors can often use seasonal pullbacks to their advantage by buying shares of solid companies swept down with the pack. erika miller, "nightly business report," new york. >> susie: august turned out to be a bonanza for two big automakers, thanks to the cash for clunkers incentive. for two others, the news wasn't so good. still, "clunkers" may put the industry on track to post its first monthly sales increase

since october 2007. sales at ford motor surged 17%. its focus and escape vehicles were two of the top eight models sold in the government's rebate program. but general motors went into reverse, down 20%. sales at chrysler also fell, off 15%. cash for clunkers accelerated dealership activity for toyota; its sales jumped 6%. ed sheehy, president of southeast toyota distributors, sees that momentum continuing. >> because of pre-clunker momentum and now clunker surge, production has picked up, so dealer shelves will be restocked in coming months. so while we may anticipate that september may get off to a lower-than-average start, by mid-month and then going into october and the end of the year, sales rates will be, i would say, in excess of what they were in the same period last year. >> susie: sheehy predicts sales will pick up down the road as consumers deal with what he

calls a "new normalcy." he says americans think the worst is over for the economy. >> paul: and according to another measure of the economy, he may be right. pending home sales rose to their highest level in two years in july. they were helped along by that first-time home buyer tax credit. the national association of realtors' index of signed sales contracts rose 3.2% to a reading of 97.6%. that's a full point better than expected and shows the housing market is rebounding from historic lows. but that rebound could come to a grinding halt. analysts expect a big drop off in sales when the first time buyer tax credit expires november 30. those pending home sales and a solid rise in the nation's manufacturing activity helped wall street open with modest gains. and one note here: normally, we'd show you a chart of the day's trading, but we're having some computer problems. so, in any case, an hour into

trading, the dow posted a 25- point gain, with the nasdaq up 18 points. then came a steep sell-off triggered by computer sell programs and investors who believe stocks have gotten overpriced against the economic recovery. the selling persisted and stocks closed at the day's worst levels. the dow jones industrial average tumbled 185.68 points to 9310.60. the nasdaq lost 40.17 to 1968.89. the s&p 500 dropped 22.58 to 998.04. in the bond market, the ten-year note gained 8/32 to 102-4/32, putting the yield at 3.37%. we just had a power failure,

i'm afraid, we'll try and get it back. three senior republican senators criticized the obama healthcare plan at a forum in miami today, saying it helps the uninsured at the expense of seniors and medicare. senators john mccain and mel martinez, along mitch mcconnell, sponsored the session at a hospital. they told the crowd that cuts in healthcare funding would be needed in order to pay for the obama plan, which they claim would cost upwards of $1 trillion to u.s. taxpayers. the senators say healthcare reform is needed, but the current bill, written by democrats, also does little to help protect physicians from nuisance malpractice lawsuits. >> susie: president obama says americans should be prepared for a bigger outbreak of the h1n1 flu virus, or "swine flu." the epidemic first emerged in april, and since then, more than 2,000 people have died around the globe. health officials are concerned about a surge of new cases this fall.

one report suggests up to half the u.s. population could catch swine flu during a pandemic. a vaccine against h1n1 is in the works and could be ready by next month. >> paul: one other medical note tonight: accused swindler allen stanford is back in a texas prison after being hospitalized last week with a racing pulse. doctors say stanford has a circulation problem in his leg, which can be fixed by surgery. stanford took sick just hours before he was slated to appear in court in houston. he's accused of masterminding a $7 billion fraud involving certificates of deposits and an offshore bank in antigua. he says he's innocent of all the charges.

>> susie: ebay is cutting losses on its skype experiment. it's selling a 65% stake in the internet phone service to private investors. the price: about $2 billion. that's far less than the $3.1 billion that ebay paid for skype in 2005. the buyer: an investment group including silver lake partners and netscape founder marc andreessen. ebay will now be able to focus on its core online auction business and its successful paypal electronic payment service. ebay originally hoped auction customers would use skype's calling and chatting services to buy and sell goods, but, paul, as you know, that never happened. ebay shares closed the day down 46 cents at $21.68. it was trading around $17 a share in july when talk of a skype sale began. now let's take a look at our stocks in the news tonight.

>> paul: as we noted, it wasn't a good day for financial stocks. but in tonight's "of mutual interest" segment, we'll focus on a mutual fund that's done well by investing in the stocks of smaller financial companies: f.b.r. small cap financial fund. in the first eight months of the year, it is up 22%. over the longer term, it's been consistently ahead of other funds in its category, returning an average of almost 11% a year over the past decade. david ellison has managed f.b.r. small cap financial since its inception. and david, welcome to "n.b.r." >> hello, paul, it's good to be back. >> paul: one reason your fund

is doing well is that it was mostly in cash earlier this year when the market was crashing. why were you smart enough to sit on the side line? >> well, i guess i'm maybe not smart enough, but i went through the '87, '92, '95 cycle, and i think i learned back then that once nonperformers start to tick up it was time to start pulling back. so about six, seven quarters ago when the nonperforming assets of the industry started to rise, i started to cut back my positions. >> paul: so now you've gone back in to the market? >> yes, and i think what's happened is that we've seen stabilization in some of the markets, the housing market appears to have tablized. there's been a lot of capital raised in the industry. the federal government is involved. so the industry is starting to heal itself and now it's time to start to reinvest in the industry. >> paul: you're not fully invested yet? >> oh, i've got about less than 5% in both funds, so i've gotten back into the industry pretty heavy now.

but i think this is really a three to five-year psych they'll we're in now, going from fundamentally ugly to okay to good to great. as the fundamentals improve over the next knife to seven years. >> paul: smaller financial stocks have been much better than larger ones, but there are new worries this group may feel the impact of bad loans. are you concerned about this? >> well, there will be additional bad loans, there will be bank failures, some are predicting another two or 300. but there's five to 700 to invest in, so there's plenty of well-run banks out there that are come through this cycle that are doing the things to get better that i would invest in. plus the consolidation of the industry forced on us by the fdic will be a positive for those who survive. >> paul: what are some of the largest holdings in your portfolio and why do you like them? >> well, i like all of them generally because, again, fundamentals are improving, they've gone through a credit cycle, some names like webster,

like comerica, a bigger cap name, names like historia in new york, tcf out of minneapolis, i have about 80 names in the poif portfolio. so this is not a one-trick pony. i'm trying to give the refer a broad exposure to the industry. >> paul: do you personally own any of the stocks you mentioned? >> i certainly do through the funds, ask that's the way i've done it for a long time and plan to continue to do so. >> paul: so indirectly you do own them? >> yes, absolutely. >> paul: until today we saw quite a big runup in the financial sector with the s&p financials up more than 130% since march. do you think that rally is over or is this just a temporary pause? >> people always argue the stocks are ahead of the fundamentals, the fundamentals are ahead of the stocks. what i'm fgsing on is that we have an environment -- focusing on is that we are an environment where the fundamentals will be getting better over the next three to five years and you want to

balance in the group. so today is one group out of the many and it doesn't matter, the question is do you want to be here in the next three to five years. >> paul: very good, i appreciate your comments and sharing your views on the financial segment of the market. i want to thank you for being with us once again. >> you're welcome, paul. >> paul: my guest: david ellison of the f.b.r. small cap financial fund. >> susie: tomorrow, does the stock market charge like a bull or growl like a bear? we get some answers from street critique guest hilary kramer. american airlines is dealing with a downturn in air traffic by downsizing its roster of flight attendants. the carrier is eliminating 921 flight attendant jobs effective the beginning of next month. american is cutting flight capacity by 7.5% this year as it copes with lower demand for travel and volatile fuel costs. >> paul: newspaper publisher freedom communications filed for chapter 11 bankruptcy today.

the owner of california's orange county "register" has debts of more than $1 billion and assets of only half that. the firm has been struggling to cope with a huge drop in advertising revenue during the recession. freedom is the tenth newspaper publisher to go bankrupt over the past year.

>> susie: here's a look at now what's happening tomorrow: the july reports on factory orders and second quarter productivity are released, as well as weekly crude oil and gasoline inventories. this is perhaps the toughest job market since the great depression. more than six million americans are drawing unemployment benefits, and many others have seen their benefits run out. for the next three nights, we'll look at some of the people behind those figures. in part one of "once upon a job," diane eastabrook introduces us to an out-of-work sales executive trying to jumpstart his career with help from his family. >> reporter: it's 9:00 a.m. and dan leunig's at work trying to find work. >> i was a channel sales manager for toshiba, and i was given a 60-day notice on march 12. my goal is to find another position where i manage national

accounts and/or regional accounts. i usually go in right away and double check the jobs. and it will come up with 1,900 jobs. >> reporter: for leunig, job hunting is now his full-time job. >> if you're not spending at least six to eight hours a day, i would say four days a week, you're probably giving yourself a bad chance of getting a new position. >> reporter: leunig, his wife kat and daughter jennie have lived a comfortable life in this home in gurnee, illinois, for the past 12 years. leunig thinks his severance package will carry the family another seven to ten months, but still the job loss has brought stress and lifestyle changes to this family. >> hello. this is kat. >> reporter: wife kat is helping make ends meet with a part-time job at a small company. >> my paycheck really doesn't add very much to the bills, so what i provide is minimal.

i think it will pan out and he will go back to work, but it concerns me what could happen in the future. >> reporter: 12-year-old jennie is pitching in; she's trading clothes with her best friend instead of buying new ones and she's asking for fewer things. >> well, i have a lot of toys left over from when i was a little smaller, and instead of getting, like, new things, we just decided to repair some of the old things, like this elephant. my grandma just sewed her up. >> reporter: with his family's support, leunig presses on, >> i'm dan leunig, and i'm a sales professional, and i have about 20 years sales experience. reporter: ...taking his job search to a networking seminar for jobless professionals. >> my target companies are abbott labs, zebra technologies, u-line. >> reporter: leunig says

networking has gotten him some good job leads. still, the seminar's organizer cautions landing a job could take several more months. >> i would say our average length of time that someone is out in this group, in this category, is about 13 months. >> reporter: leunig knows his job search could take awhile, but he's optimistic he'll find a position soon. >> cup of coconut? >> cup of coconut, please. >> reporter: so, for now, he's making the best of a bad situation. >> i love to bake. with jennifer, it's a pleasure. we do it as a daddy/daughter thing. i'm a fan of chocolate chips. to some extent, i think she's going to look back on this summer and say, "this was the best summer i ever had because daddy had a break." >> reporter: diane eastabrook, "nightly business report," gurnee, illinois. >> susie: tomorrow, diane introduces us to a former technology professional who, at 54, is out of a job for the first time in her career. >> paul: employment is also a tough issue for young workers.

according to a new survey, less than a third of them can afford to pay their bills and save a bit of money. 40% of employees ages 18-to-34 say they are "worried and concerned" about achieving their financial goals. 55% of respondents use the words "hopeful and confident" about achieving their financial goal in the next five years. it's not just younger people who are impacted by the economy; a third of all young workers still live with their parents. the survey was conducted by the a.f.l./c.i.o. federation of labor unions. recapping today's market action: stocks take a pounding on continuing worries about the economy. the dow fell 185 points and the nasdaq lost 40. to learn more about the stories in tonight's broadcast, to watch our streaming video and to take part in our daily blog, go to "nightly business report" on pbs.org. you can also email us at nbr@pbs.org.

>> susie: and finally tonight, a tennessee company may have the silver lining when the cloud of disaster strikes. it's a portable shelter that can be assembled with the push of a button, complete with power, heating and air conditioning. the firm, adaptive methods, says the units unfold camper-like in about two minutes and provide a safe, secure, hard-walled shelter. they can be easily shipped by truck and used after a natural disaster, or by the military in war zones. and paul, i just know what you're thinking: these things would have made a big difference four years ago when hurricane katrina hit the gulf coast. right? >> paul: and when wilma hit florida, absolutely right. >> susie: and hurricane andrew, it would come in very handy. >> paul: it will just be a little while before you'll see big advertising posters on those things, i'm sure. >> susie: you're right about that. well, that's "nightly business report" for tuesday, september 1. i'm susie gharib. good night, everyone. and good night to you, paul.

>> paul: good night, susie. i'm paul kangas wishing all of you the best of good buys. "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