>> they don't have the wherewithal because clearly jobs remain few. and, they don't have additional sources of purchasing power with regard to access to credit, and tapping the value of your house. >> jeff: we talk with consumers to see if they agree. you're watching "nightly business report" for monday, march 1. 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.

>> susie: good evening, everyone. jeff, it looks like americans are at it again spending more and saving less despite a lousy job market and skimpy paychecks for people who do have jobs. consumers are still spending according to new government stats out today. >> jeff: the report is surprising. in january income rose slightly. but consumer spending was up half a percent. that was the fourth monthly increase. the savings rate was more troubling: it fell to 3.3% after hovering above 4% for the past few months. >> susie: so are consumers returning to their spendthrift ways? and, does this help or hurt the economy? erika miller reports. >> reporter: today's data would seem to suggest the era of thrift is ending. but almost no one we talked to on the streets of manhattan would admit to spending more. >> oh no, i haven't been spending any money.

>> no way. >> reporter: that even goes for people carrying shopping bags. >> definitely less. i've actually been unemployed since february. and i have four kids. so things that are important are still important. but we just tone them down a bit. >> reporter: most economists believe the frugality that came from the great recession is still firmly in place. kathleen stephansen says even if consumers want to spend more, most can't. >> they don't have the wherewithal, because clearly jobs remain few. and they don't have additional sources of purchasing power with regard to access to credit and tapping the value of your house. >> reporter: but what about the sharp drop in the nation's savings rate in january? it now stands at just over 3%, half the level it was last spring. that has some worried americans are becoming less concerned about repairing household balance sheets. but economist julia cornado thinks january's savings decline is a fluke.

>> tax payments by consumers can sort of be jumpy from month to month. we saw a big jump in january, which really reduced their disposable incomes. and that led the savings rate to drop. it wasn't really that spending surged beyond where we've been. >> reporter: as a matter of fact, 99% of the spending increase was on non-durable goods; typically smaller ticket items. and economists say that's key. >> the fact that it was on non- durable goods as opposed to the big ticket items suggests, in fact, they are more cautious. that they are not going to get going on the major purchases, such as, for example, cars. such as, for example, furniture for their housing. and so on. >> reporter: that penny pinching raises questions about the outlook for the economy. if you can't count on consumers to drive growth, what will? economists are hoping businesses will pick up the slack by boosting investment and eventually hiring.

erika miller, "nightly business report", new york. >> susie: weak consumer confidence and a weak job market are just two of many concerns weighing on the stock market these days. joining us now to talk about that, and the outlook for the markets, bob doll,hief equity strategist at blackrock. hi, bob. how are you doing? >> hi, susie. >> susie: let's start out. we all know that the consumer is an important component to the economy. but to what extent does investor confidence hinge on consumer confidence? >> well, consumer confidence is important as we know the consumer is a huge part of the u.s. economy. i think what we're seeing is consumers feeling a little bit better about the jobs they hold as opposed to the fear of losing them. as a result, they're willing to spend a little bit more money. >> susie: even though we don't know how they're going to be feeling looking ahead, you're still pretty upbeat about the outlook for the markets. you're calling for the s&p 500 to increase by 12% at some point this year. give us your analysis on your

market outlook. >> surely. it's based on a view that global economic recovery, including the united states, is alive and pretty well. that is to say, we have an improvement in the business conditions. we have revenues improving. we have bottom line surprising on the up side. we think, suesy, we will generate some jobs between hours worked going up, the part-time workers increasing. business productivity strong and the earnings-- all of those are leading indicators to companies actually hiring some workers. we'll get there soon. >> susie: that all sounds good on paper. but the reality is that the stock market is pretty much, the dow and the s&p are at the same level on march 1 as they were on january 1. investors are sitting with a lot of cash in their pockets waiting for the right time. what is going to really trigger the buying? >> well, i think the first couple of months of the year. a lot of cross currents are

basically digesting the huge run in the back ten months of last year. i think we have to get past the concerns about, are the central banks beginning a tightening process? what about credit problems and greece? and, oh, yeah, there's the political issues out of washington d.c. these things are weighing on investors. that's why despite good earnings the stock market has been stuck year to date, susie. >> susie: i'm sure a lot of your clients are asking you about the impact of the debt ÷ and the ripple effect on our markets and our financial system. how concerned are you? what are you telling your clients? >> well, i think first we have to acknowledge is that there are more bad debts out there. greece is just a reminder of that. bad credit. and while we believe that the stronger countries of europe will come together along with perhaps the i.m.f., to give greece the band ates they need, there will be other problems that crop up from time to time.

and that means we're going to have a sub par recovery. a recovery but slower than usual. >> susie: what would that mean for the markets? >> that means the markets are probably going to be two steps forward, one step back. not the kind of straight-up pattern we saw in the back part of last year. it's going to take companies delivering the goods meaning that earnings have to come through, susie. >> susie: let's go down the rest of your list. you mentioned interest rates. what the fed will do about that. to what extent do you... do higher interest rates pose a risk for the stocks going up? >> well, first of all interest rates, meaning longer-dated treasury securities, actually moved up during 2009 as fear began to recede and confidence started returning. we'll get more of that this year in our view. interest rates moving up, if it's just a bit, the economy, the markets can handle that. the real fear, of course, is if we have a run on the dollar and rates go up.

i think the probabilities of that are not real high. >> susie: all right. and your other point about what is going on in washington. all this discussion about health care. do you think that there will be some kind of health care bill passed by congress? and if so, how will that play out in the stock market? >> well, markets hate uncertainty. that's what we've had for health care now it seems for months. i think predicting what politicians are going to do is a fool's game. i've learned that the hard way over the years. best guess is that the democrats will try to cobble something together, get it across the line so there's health care reform, quote unquote. but anything that passes will be a small piece of what we all were discussing not that many months ago. if anything gets passed at all. markets, they will react with a sigh of relief especially the health care sector, if we finally have some certainty that's good news. >> susie: real quickly, the last time you and i talked you liked health care stocks like

united health care and amgen. where do you stand now? buy, sell, snold. >> still like both of them. we think they're a part of this cloud being lifted and a revaluation upward of the health care sector. they're a couple of names to benefit. >> susie: any disclosures to name. >> we own them in our securities. i do not own them personally. >> susie: bob, great having you on the program as always. thank you so much. my guest tonight, bob doll. >> jeff: here are the stories in tonight's "n.b.r. newswheel". wall street came to life on this first day of march thanks to a host of deals: the dow jumped almost 79 points, the nasdaq rose 35, and the s&p 500 gained 11. a.i.g. unloaded another prime asset today, selling its asian life insurance unit to the u.k.'s prudential p.l.c. for $35.5 billion dollars. we'll have more of today's m&a activity in tonight's "market focus". goldman sachs' board of directors has shot down shareholder demands for an investigation into high pay.

in an s.e.c. filing today, the company said shareholders had asked the investment banking giant to revisit its pay practices. the board said no. >> susie: he has been called the institutional memory of the world's most powerful central bank. but soon, federal reserve vice chairman donald kohn will be a private citizen. kohn announced today he will be stepping down in june after 40 years at the fed. his retirement means president obama will now have three vacancies to fill on the board. former fed governor laurence meyer says replacing kohn will not be easy. >> right now, the board is extraordinarily weak, because it has just one economist on it, bernanke himself. so this is going to be a test of the president's judgment. is he going to fill at least two vacancies with outstanding macroeconomists that everybody will say that was a great appointment?

>> susie: who will fill those vacancies? fed watchers suggest dan tarullo, a current fed board member. also on the list, white house economist christina romer. no comment from the white house, but a spokesperson did say the president plans to announce a nominee in time for confirmation before kohn's departure in late june. >> jeff: still ahead, toyota's recalls have its u.s. regulator under the microscope. a look at how toyota's problems could lead n.h.t.s.a. down a new road.

>> susie: jeff, we have a nice start to the month of march with a little bit of positive performance on the stock market. thanks to a couple of deals going on that you're going to tell us about. >> jeff: that's right. it was about mergers and acquisitions activity and some interesting data today. let's get started with tonight's market focus. it seems as if everyone woke up monday morning and realized, hey, remember the idea of a global economic recovery? it's still on. let's talk about the guts of the 21st century economy: the chips that run our computers. here's a look at the semiconductor e.t.f., the highest price in over a month. the semiconductor industry association said worldwide chip sales rose by nearly 50% last month. that points, says the association, to an improving business environment for the

industry. and to put an exclamation mark on that, shares of the flash memory company sandisk rallied sharply, up nearly 12%. they raised quarterly and two- year forecasts sharply, signaling a recovery is underway in their market. some analysts wonder if tech investors are a little late to the party. j.p. morgan's chip analyst wrote in his report, "this is getting ridiculous." then the airline stocks took flight. delta airlines shares rose nearly 2%, as were many of its competitors. another sign of an economic recovery? the air transport association said passenger revenue rose nearly 1.5% in january. also, one of the runways at j.f.k. closed for a four month repair job. delta and others have been cutting back on flights to ease congestion on the remaining runway, but that could mean higher ticket prices because of fewer seats available. and there's nothing like a few mergers and buyouts to show the animal spirits are still

flowing. a.i.g., under pressure to pay back all those government loans, sold off its asian life insurance unit for $35 billion and change. the cash and stock buyer? prudential p.l.c., based in the u.k., and not related to prudential financial. analysts think the deal provides some credibility for a.i.g's c.e.o. they expect another deal soon, to sell another of a.i.g.'s non- u.s. life insurance divisions. next we have, m.s.c.i., the market indexing company. it agreed to buy riskmetrics group in a $1.5 billion deal. m.s.c.i.'s shares fell, but analysts applauded the deal. they believe riskmetrics' risk- management financial products should make a good fit for m.s.c.i. another buyout deal to tell you about: millipore. last week it was thermo fisher with a marriage proposal. today, it was germany's merck k.g.a.a. walking down the aisle with millipore. $7.2 billion for millipore's

filter and lab equipment expertise. again, no relation between the german company and merck here in the u.s. and talk about unrequited love. for 13 months, o.s.i. pharmaceuticals is badly wanted by a japanese drug firm, astellas. after being rejected in february, it went hostile today with a $52 a share, $3.5 billion deal. and as you can tell from the $55 settling price, wall street thinks the company's worth even more. boeing shares rose 1%, on speculation the company could, by default, receive a $40 billion contract to build the u.s. airforce's k.c.x. aerial refueling tanker. some believe the pentagon's new bidding rules issued last week vastly favor boeing over its arch-rival, northrop grumman. but don't shed any tears for northrop, the stock hit an 18- month high. northrop is going to join forces with europe's b.a.e. and bid on another defense contract to build the army's ground combat

vehicle. the army's budgeted $900 million project in its 2011 budget for development. and finally, copper prices rose more than 2% after the weekend 8.8 magnitude earthquake in chile. a number of mining firms saw disruptions, then reopened as electrical power was restored. this is the ishares chile e.t.f.; it opened 4% lower, then rallied through the rest of the session. the copper miners all rallies, and the chilean banks, like santander, held their own in today's action. and that's tonight's "market focus".

>> susie: toyota's c.e.o. today apologized to his company's other big market, china. in beijing, akio toyoda said his firm was too focused on profits and expansion. the toyota recalls have shined a spotlight on the automaker, and its top u.s. regulator. as stephanie dhue reports, the national highway transportation safety administration, or n.h.t.s.a., will be a key player as the third round of hearings on toyota begin tomorrow on capitol hill. >> reporter: during last week's back to back hearings into the toyota recalls, transportation secretary ray lahood portrayed nhtsa as a heavyweight not afraid to use its muscle to protect the public. >> we have been very aggressive, and if we need to use subpoena power we'll use it, but we have lots of enforcement mechanisms, and i would stipulate, on my watch we've been a lapdog for

nobody. >> reporter: but when toyota filed paperwork disclosing the sticky pedal problem, nhtsa allowed the company to skip calling it a safety defect. that move narrowed the scope of nhtsa's investigation. and toyota bragged the smaller probe saved $100 million. that's lead critics to say nhtsa relies too heavily on the automakers it regulates. former nhtsa administrator joan claybrook says its easy for manufacturers to stonewall the agency. >> if they hear about a safety defect, they don't know much about it. they've got to gather a lot of information, the manufacturer knows a lot about it, so they come in and try to persuade the agency to try to narrow the scope of the investigation. >> reporter: claybrook and other safety advocates want more funding for nhtsa. while car and truck crashes account for 95% of all transportation deaths, nhtsa's budget is just 1% of the overall department of transportation budget. advocates also want automakers to provide more information about crashes, installing event safety recorders or so-called black boxes in all cars. additionally they'd like to see

criminal penalties for delaying safety recalls. >> criminal penalties essentially tell the manufacturer, if you cover this up, if you withhold information about a safety defect and don't do a recall, then your executives can go to jail, and the executives then look at their obligations differently. >> reporter: michael stanton represents automakers' interests in washington. he says criminal penalties are a bad idea. >> remember these are people who head up corporations that are trying to do the right thing. we all want to improve the safety of our vehicles and highway safety, so that to us would be overkill. >> reporter: safety advocates say the toyota recalls are nhtsa's chance to reinvent itself. they think agency needs to be more proactive and research oriented as cars have become so much more complicated. stephanie dhue, "nightly business report", washington. >> jeff: did former enron chief executive jeffrey skilling receive a fair trial? the nation's top court will decide. u.s. supreme court justices heard skilling's appeal today; they're concerned about two

issues: juror bias and whether skilling was convicted using a vague law. several justices appeared concerned that law, the so- called honest services law, is so unclear that any employee who lies might be committing a federal felony. in 2006, skilling was convicted on 19 counts of conspiracy, securities fraud, and insider trading in connection with the fall of enron. he's serving a 24 year prison term. a ruling from the high court is expected in june. depending on the decision, all or part of skilling's conviction could be overturned and he could get new trial. >> susie: here's what we're watching for tomorrow. auto sales for february are released. heavy winter storms could hurt results at g.m., ford, and chrysler. and toyota sales are expected to tumble dramatically because of all those recalls. also, my exclusive interview with richard fisher, president of the dallas federal reserve bank. we'll get his take on the economy, the job market, and what's next for interest rates.

people who invested with bernard madoff and took out more money than they put in won't get a penny back. that's the ruling today from the judge overseeing the liquidation of madoff's defunct business. it's in agreement with the trustee in the case, and his "money in, money out" formula to decide claims. about 100 of madoff's ponzi scheme victims plan to appeal today's decision. >> jeff: if you have little or no equity in your home, you now have more time to refinance your mortgage. the obama administration is extending the home affordable refinance program. it was set to expire this june, but will now run through june of next year. the program lets borrowers who owe up to 25% more than their homes are worth refinance to lower interest rates. it was originally expected to help up to five million homeowners. so far, it's only helped about 200,000.

>> susie: "exceptionally low for an extended period". those few words have been the federal reserve's policy on interest rates. tonight's commentator makes a case on why that fed policy makes sense. he's president of woodley park research. >> ten days ago, the federal reserve increased an obscure interest rate-- the discount rate-- raising worries that more

aggressive actions lie ahead. and even though chairman bernanke told us in last weeks' congressional testimony not to interpret this as signaling any change in the outlook for monetary policy, financial markets are unconvinced. markets are now predicting a september increase in the bellwether federal funds rate. but, for at least two reasons, these worries seem greatly overblown. first, the fed has clearly identified three criteria for tightening monetary policy: resource slack, inflation, and inflation expectations-- not one of which signals an imminent tightening of policy. resource slack is conventionally proxied by the unemployment rate, which the fed reckons ought to be around 5%. but according to its own predictions from just one month ago, unemployment will still be around 7% by the end of 2012. those predictions also expect inflation to remain below its long-run trend for each of the next three years. as for inflation expectations, which fed officials continue to describe as well anchored, surveys of consumers and economic forecasters agree that no threats lie ahead, as do more esoteric forecasts implied by securities prices.

second, the federal reserve has gone to great lengths to signal its intentions well in advance. as such, the mantra of exceptionally low interest rates for an extended period, repeated just last week, is likely to end many months before any policy changes are forthcoming. so, while interest rates wont stay this low forever, a summertime rate hike just isn't in the cards. i am richard dekaser. >> jeff: that's "nightly business report" for monday, march 1. i'm jeff yastine, goodnight everyone, and goodnight to you too, susie. >> susie: good night, jeff. i'm susie gharib. thanks for watching everyone, 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