>> tom: wall street rallies to five-month highs as investors prepare for a flood of third quarter earnings reports. the dow jumps nearly 200 points, and the nasdaq as 55. >> suzanne: from the sectors showing the most profit growth to where the disappointments are likely to come, we look at the developing earnings picture. you're watching "nightly business report" for tuesday, october 5. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by: 1f1f1c1c1c1c

this program is made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt >> tom: good evening and thanks for watching. susie gharib is off tonight.

i'm joined by suzanne pratt. suzanne, corporate america is on the doorstep of quarterly earnings season. and despite the slow economy, wall street is gearing up for another solid stretch for revenues and profits. >> suzanne: tom, the market seems to be anticipating pretty strong results with the major indices tonight at five-month highs. dow component alcoa kicks off the third-quarter reporting season on thursday after the closing bell. >> tom: expectations are for generally upbeat results. but as scott gurvey reports, the quarter is likely to include its share of surprises and disappointments. >> reporter: wall street expects to see better than 20% earnings growth when companies report third-quarter profits, and the quality of those profits is improving. sri raman of thomson reuters says that's because revenue is increasing as the economy recovers. >> top line growth is something that we've started seeing of late. we always knew that there were cost-cutting that was causing earnings to improve, and finally, we're seeing the top line join the cost-cutting that

was taking place to actually cause these solid numbers going forward. >> reporter: but with the economy growing only slowly, earnings improvements will be selective. positive surprises are predicted for autoliv-- an auto components maker-- viropharma, halliburton, and two insurance companies, progressive and ace, benefiting from the mild hurricane season. negative surprises are predicted for goldman sachs, lockheed martin, encana, kraft foods, and skechers. goldman, and to a lessor extent, morgan stanley, have already warned of lower profits due to a drop in trading activity. but this trend should not have a big impact on the retail financial services companies like citi and j.p. morgan chase. the predicted disappointments for energy companies follow a big run-up for the sector, a trend charles blood of brown brothers harriman says is now over. >> the commodity price gains tended to happen more a year ago, nine months, six months ago. commodity prices have been flatter during the current quarter.

so as a driver for energy profits or materials company profits, we don't really think commodity prices are the big story. >> reporter: one trend which is a big story for investors concerns the number of companies expected to give guidance on the quarters ahead. that number dwindled to a few during the worst of the recession. >> it was during that period of 2008, 2009 where you saw fewer preannouncements. but now we're seeing that trend pick up again with companies preannouncing more as they're getting more comfortable with their results and being able to predict what's going to happen looking forward. that's a key. there was a time when companies actually had no idea how the next quarter was going to pan out. so that clarity... actually, its nice to see those preannouncements come back. >> reporter: because the earnings recovery began one year ago, fourth-quarter comparisons will be more difficult. earnings are still expected to show growth, but not at double- digit rates. scott gurvey, "nightly business report," new york. >> suzanne: here are the stories in tonight's "n.b.r. newswheel." a strong reading on the services sector helped power stocks higher.

the dow jumped 193 points, the nasdaq rose 55, and the s&p 500 was up 23. trading volume jumped from yesterday's pace, with over a billion shares moving on the big board, and 2.2 billion on the nasdaq. as we mentioned, the services sector is expanding. the institute for supply management said its non- manufacturing index rose to 53.2 in september. that marks the ninth month of growth in services. any reading above 50 shows expansion. japan's central bank made an unexpected move overnight. it plans to buy 35 trillion yen of government bonds. the b.o.j. also cut its key lending rate to virtually zero. uncle sam revised the price tag on the tarp bailout program. it looks like the bank bailouts will end up costing taxpayers $50 billion. $700 billion was originally earmarked for the program, and only $388 billion was actually spent. ford motor says it will drop 175 lincoln dealers over the next two years as it works to

strengthen the luxury brand. the cuts will come mainly in big metropolitan markets where there are several lincoln outlets. >> tom: still ahead, this c.e.o. wants to turn a nation of spenders into savers. we meet the man behind online bank i.n.g. direct. >> suzanne: high unemployment could be with us for a lot longer than expected with the economy growing slowly for as much as half a decade. top economists meeting in washington, d.c., today are pessimistic about the outlook for the job market. those private forecasts run counter to estimates from the congressional budget office. it expects the unemployment rate to hit 5.5% in 2014. the event at the newseum brought together goldman sachs chief economist jan hatzius and harvard economist martin feldstein. both say it will be longer than 2014 before the economy returns to normal. >> my baseline expectation is that its going to be pretty bad. baseline is not another

recession, but slow growth, growth that's too slow to stabilize the unemployment rate. >> eventually, we're going to get back to normal. eventually, we're going to get back to an unemployment rate that begins with a five or a six, not a nine or a ten. but we could wait many years before we get back there unless something important changes. >> suzanne: both hatzius and feldstein cautioned against raising taxes or letting the bush tax cuts expire. >> tom: as school kids around the country struggle with pop quizzes and prepare for midterm exams, thousands will spend time after school with a tutor. decades ago, tutoring was just a cottage industry. but as jeff yastine reports, the quest for good grades and a healthy dose of government grants have added up to drive growth. >> reporter: it's 3:40 on a weekday afternoon. school is out, but the learning is still going on here at this sylvan learning center. the privately-held company has led the growth of what's called "supplementary education" for 30

years. it now has more than 900 centers here and abroad. along with hundreds of other national and local providers, sylvan is riding a wave of spending-- up to $7 billion a year-- that's turned professional tutoring into a big business. sylvan's ian schneider says a focus on the individual is key. >> we don't put them in a bucket or category. we actually test the student, find out his or her weaknesses, and prescribe a detailed plan on how to get from point a to point b. and that's what makes sylvan so successful and driven its incredible success over the last 30 years. >> reporter: what's also been beneficial is the influx of federal dollars for tutoring into public school districts around the u.s. the no child left behind act, in 2001, set the stage for the industry's rapid growth, allowing thousands of public

school children to receive free tutoring services. this is one of those classes at a south florida public school. >> its a huge misconception that only failing kids need tutoring. >> reporter: the tutors are hired and managed by berry lamy's company, j.f.k. tutoring. lamy started the business five years ago with one student. thanks to federal funding channeled through school districts, it now oversees tutoring for a thousand. he says the use of standardized testing, and competition for grades and college placement, are fueling the industry's growth. >> students take advanced placement courses, and one of the things they have in common is they need to get nearly a perfect score on the s.a.t. or a.c.t. exam. so that competition of who can get that scholarship offer to an ivy league school or even a state school-- there's still a lot of competition at that level.

so it's important that these kids and these parents, they understand that. >> reporter: the industry has come in for its share of criticism. there are no standards for measuring effectiveness, the quality of instruction varies, higher fees don't always result in better grades. and there's the recession. parents have become more price conscious. hourly fees can run from $30 to hundreds of dollars an hour. but executives at sylvan and elsewhere say their businesses continue to grow, at a slower pace. tutoring, they say, is one of those expenses parents are reluctant to cut back on entirely, as they focus on their children's future prospects for college. jeff yastine, "nightly business report," aventura, florida.

>> suzanne: tom, the stocks were pretty super charged, and a lot of it was about the dollar. >> as it continueed to drop, stocks got a nice uptake. let's get everybody updated in tonight's market focus. >> tom: the major indices are at five month highs, encouraged by the strong service sector data, the bank of japan trying to stimulate its economy, and hopes the u.s. federal reserve will do the same. with that in mind, the most economically sensitive stock

sectors, materials and industrials, led the rally. the basic materials exchange traded fund added almost 3%. it is now well above its may high, and is within 50 cents a new 52 week high. it was a gold miner, a steel maker and a fertilizer company top the gainers. the miner, freeport mcmoran, rallied 4.5% to more than a two year high. steel maker allegheny tech was up 4%. steel stocks have been weak over worries about global demand. and fertilizer firm c.f. industries jumped 4%. industrial stocks were moving nicely, too. the sector e.t.f. added more than 2.5%, but remains just below its may high of just over $32 per share. there was only one loser among the s&p 500 industrial sector-- iron mountain. it's a records management company. shares cratered today, falling 9% on four times average volume. as earning season approaches, it warned that its 2011 outlook is below analysts' average estimates.

speaking of outlooks, september sales at harley davidson were looking up according to r.b.c. capital. that got the stock revved up. shares of hog put in the best performance today among the s&p 500 components, jumping 9% on more than three times their usual volume. the analyst at r.b.c. calls the september sales growth "meaningful" and the first sign of improving demand since the spring. from two wheels to 18-- semi truck maker navistar inked an $18.5 million order from the navy. navistar trucks already are in the army, but this is the first deal with the navy. navistar also had a positive update on its manufacturing pace. shares were up 7%. as earning season begins this week, semiconductor stocks may be worth watching as a leading sector for technology. texas instruments hit a new 52 week high. among this trio of chip makers, it is the only one that has not cut its outlook. texas earnings are due in three

weeks. intel and a.m.d., meantime, both cut their guidance over weaker demand. they both report next week. a quick look at apple, rallying almost 4%. earnings are due in two weeks. investment house jefferies began coverage with a buy recommendation and a target price of $365 per share, thinking the tablet market is being underestimated by investors. from tablets to talbots-- the woman's clothing retailer cut its revenue outlook, calling shopper traffic inconsistent. after falling from its may high, shares had been trying to stabilize and move higher before today's warning and 15% sell- off. finally, japanese and latin american stocks were in focus with the japan central bank buying bonds and a billion dollar broadcasting deal. the japan e.t.f. rose 3% to a five month high. sony added 3%. the latin american e.t.f. hit a new high. grupo televisa jumped almost 14% after taking a $1 billion stake in u.s. spanish broadcaster univision.

and that's tonight's "market focus." >> tom: it might be said investing in gold has never been as popular as it is today. that's partly because its gotten much easier to buy and sell gold without ever touching the yellow metal. tonight's word on the street is "gold." alix steel reports for thestreet.com. she joins us from the nasdaq. >> tom: welcome back to "nightly business report," alix, nice to see you. >> it's good to be here. >> tom: we're referring to the explosion in the last five or ten years in

gold focused change traded funds. when you buy one, do you actually own gold? >> you actually don't. there are three physically boulder, colorado e.t.f.s in the u.s. you don't own the physical metal. it is very rare you would redeem your shares for the physical gold. it is expensive, and it is very hard. >> tom: i want to ask you about tracking the spot price. you mentioned the trio of gold backed funds, here they are. g.l.d. the spider gold trust, and the i.shares gold trust, i.a.u., and the most recent one is e.t.f.'s gold trust. what's the difference in these three. >> the g.l.d. is the biggest, the i.a.u.is the cheapest, and the other is the most diverse. it is worth over $55 billion. the i.a.u. is the cheapest and has the lowest expense

fee, and s.g.l l. stores theirs in switzerland. >> tom: if the gold is up $20 or so, will the same percentage be reflected in the e.t.f.s? >> the spot price and the 3e f.f.s are all up 19%. there are times when the g.l.d. will lag the spot price, and that's basically because the g.l.d. will be forced to sell some shares to cover expenses and pay their employees. that will decrease its value just a little bit. for the most part, it is pretty well one to one. >> tom: it gets to the pointer of know your gold fund and know what is inside of it. that begins with the expense ratio, nothing you've already mentioned. are the expense ratio higher than owning gold coins or gold bars? >> that's true. if you want to store gold, say, in a vault, it is about 18 basis points. and s.g.l. is 39 basis

points, and the i.a.u. is 25 bases points. >> tom: and you want to know about the audit of the physical gold, the quality of it and how pure it is? >> absolutely. and there are two independent audits. one is scheduled and one is a surprise audit. and every day you can go on their website and find the gold bar list, which basically tells you how much is allocated and unallocated. it is important to know how much your investment is actually worth. >> tom: just 20 seconds left. you want to know what the custodian is doing with that gold? >> jp morgan stores the gold, but both of the big banks have short positions in the gold market. you want to make sure your gold is in a safe place. >> if i remember from last time, you own gold jewelry, but no gold investments? >> you bet. >> tom: it's alix steel

with thestreet.com. >> suzanne: here's what we're watching for tomorrow: quarterly results from costco, marriott international, monsanto and wyeth, along with weekly mortgage applications. and our "street critique" guest will bring along some sectors that have a legislative leg up this election year. hilary kramer is the editor of gamechangerstocks.com. uncle sam is going green. interior secretary ken salazar and california governor arnold schwarzenegger have inked a deal to put solar power plants on public land in the state. the two projects involve miles of solar panel fields. both plants are in southern california, and could eventually power thousands of homes. separately, today, president obama said the white house roof is getting new solar panels. those will be in by spring. >> tom: symantec shareholders complained and the company listened. the technology security firm today said it has decided to hold at least part of its next

shareholder meeting in a live setting. that change of heart is seen as a victory for shareholder rights. last month, symantec's annual meeting was held online and only provided audio, making it impossible for investors to see what was happening. ó÷sñw=w÷o7ó÷m77ññ373l÷sñó77333l7

>> suzanne: what if we told you there's a bank c.e.o. who believes it's his mission to shake up the industry; somebody who wants to help main street, not wall street. he's arkadi kuhlmann, founder and head of i.n.g. direct. when the online bank opened a decade ago, few thought it would last. but as erika miller explains, kuhlman's unique leadership style is a large reason for the company's success. >> reporter: this is how arkadi kuhlmann arrives at work every day. the motorcycle is a symbol of freedom and rebellion for a man who revels in being the bad boy of banking. >> it's really about looking at things that are a little bit outside your comfort zone, looking at things a little differently. >> reporter: i.n.g. direct is headquartered in this renovated warehouse across from the wilmington, delaware, train station. from the start, kuhlmann has wanted to change people's perception of banks, adopting a fast food business model. >> you go to your drive through,

you don't get silverware and linen napkins. you get that at a sit down restaurant. so drive-through banking, which is retail banking, basically, in our world, electronically-- no frills, no advice. >> reporter: not having branches means the company can keep overhead low, and pay among the highest savings rates nationwide. that has helped the firm attract customers, growing to over $90 billion in assets since it's launch a decade ago. that makes it the 19th largest bank in the u.s. but from the start, kuhlmann's goal has been more than growing a business; he is on a personal quest to turn spenders into savers. >> we all go and do that hairdo to make ourselves feel better. we buy that new piece of clothing to feel better. we treat ourselves because we're down. my answer is, save some money and see how good you feel about that. >> reporter: to hammer home the idea that socking away cash is as easy as buying a cup of coffee, i.n.g. direct operates internet cafes in seven cities. more unusual than the cafes themselves is who you might see

behind the counter. kuhlmann says serving customers helps him stay in touch with their needs. the cafes are also a marketing tool. >> the more cafes we have, the more people think of us as retail. i don't want people to think of us as a bank. the name of the door says "i.n.g. direct"; it doesn't say "bank." >> reporter: kuhlmann also likes to pitch in at the call center, setting up new accounts and making customers feel valued. but let's be clear-- much of kuhlmann's day is spent in strategy meetings, like this one focusing on putting a bank in your pocket. one of his secrets of success is hiring the right people, often from outside the industry. >> the less you know about banking, the better, because i need you to find new gaps and new ideas, right, that you can apply here. >> reporter: in spite of its unique culture and strategy, i.n.g. direct has faced many of the same problems as other banks. a big one is differentiation.

i.n.g. direct's success has prompted a host of imitators. kuhlmann welcomes them. >> the more the merrier, right? if you want to get on this same pitch, right, and promote savings and be more efficient and so on, come to the party. >> reporter: but i.n.g. direct's future is uncertain. its parent, i.n.g. group, plans to spin off or sell the unit by the end of 2013, as morningstar's bill bergman explains. >> the dutch government gave i.n.g. significant financial assistance during the financial crisis, and i.n.g. has to pay that back. and over time, potentially, one of the best assets to sell is this i.n.g. direct u.s.a. operation. >> reporter: kuhlmann isn't sure what that means for his future. he keeps no pictures of his family on his desk for fear he might not be back. >> the ten-year leaders get shorter and shorter all the time. so you have to ask yourself, should maybe somebody else be leading this? you need to kind of live on the edge every day, and know that tomorrow it could be over. >> reporter: but that's okay with him; he enjoys taking the road less traveled.

erika miller, "nightly business report," wilmington, delaware. >> suzanne: that's "nightly business report" for tuesday, october 5. i'm suzanne pratt. good night, everyone, and good night to you, too, tom. >> tom: good night, suzanne. i'm tom hudson good night, 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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