>> today is a down day basically because of europe. we may still see an upwards push right towards the end of year here this week. >> tom: santa still is a no-show for investors as stocks tumble on fresh worries about europe and drop into negative territory for the year. it's "nightly business report" for wednesday, december 28. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:

captioning sponsored by wpbt >> tom: good evening and thanks for joining us. my co-anchor susie gharib is off tonight. u.s. stocks followed the euro lower today as the currency tumbled to an 11-month low against the dollar. the reason? fresh data show eurozone banks are holding more money on their balance sheets, fueling worries of a liquidity crunch. the dow fell almost 134 points, the nasdaq lost 35 and the s&p 500 was down 15 points, and that was enough to put the s&p back into the red for the year. the losses came on continued light trading volume, just 538 million shares on the nyse and

one billion moving on the nasdaq. so where's the much-talked-about santa claus rally? joya dass reports. >> reporter: since 1969, stocks have gained, on average, 1.6% in the last five trading days of the year and the first two days of january. for a number of reasons: there are tax considerations, americans investing their christmas bonuses, or maybe because all the pessimists are on vacation. with the exception of last friday, there's been little evidence here of the guy in the red suit. economist stephen guilfoyle says stocks tumbled today on saber- rattling in iran, a slide in gold prices-- on top of that, europe's debt crisis still looms large. >> just this morning, we saw the italian bond auction. the bill auction, rather. it went very well. now, tomorrow's auction is hairier. its a five-to-10-year, beyond

the scope of the loans. >> reporter: headlines continued to drive market action today, but stocks could get a much- needed boost in the new year if the federal reserve launches another effort to stimulate the economy. >> i think that as the fed evolves into 2012, the board membership will turn dovish, and we'll see q3 easing come january or february. >> we're looking for 1400 on the s&p 500 by the end of 2012. so, we do have an upward bias for u.s. equities. we think our economy will continue to exceed very low expectations. that goes for the job market, the consumer. >> reporter: it is important to note: as yale hirsch, author of the "original stock trader's almanac," penned in the 1970s, "if santa should fail to call, bears may come to broad and wall." at least for now, with four trading sessions left before the "santa claus rally" window closes, the big man from the north pole still may visit wall street.

joya dass, "nightly business report," new york. >> tom: while u.s. stocks are limping into the end of the year, the u.s. dollar has been strengthening, especially as europe has been unable to solve its government debt problems. a stronger dollar can bring down the cost of commodities such as oil, which are priced in dollars. it also can make it more expensive for u.s. companies to sell stuff overseas. lincoln ellis is the chief investment officer at strategic financial group. lincoln joins us from the c.m.e. group in chicago. >> tom: happy new year. growing u.s. exports have been a bright spot at record leveling. is the strengthening dollar a threat as we move into the new year? >> tom, it's good to be with you. it could be, and it certainly will put a pinch, particularly on the margins as we move through highs in the dollar index, and we know that the majority -- not the majority, but over 25% of our exports are centered towards the europeans. a fall in their currency and a

rise in our dollar does put a pinch in the margins and problems potentially for profits going into 2012. >> tom: 40 to 45% of earnings in the s&p 500 are out of the united states. does it bring down earnings expectation? >> it certainly has to, particularly given the fact that half of that number is focused in the emerging economies, as we know from past experience and even our more recent experience this year. when the developed economies have a cold, the emerging economies have a flu. so we found in the background, we should expect again, earnings expectation need to be reviseed and revised significantly lower for at least the first half of 2012 as we work through this debt crisis which is what has pushed the u.s. dollar north. >> tom: does that mean new lopes in twents 12 for u.s. stock priepss compareed to the end of the year? >> that's a good question.

i think we would continue to see the kind of volatility play out through the first two quarters of 2011, and if we broke through the sort of 1050 low intraday low on the s&p that we saw this year, that wouldn't surprise us too much. however, i do think as we move through the election cycle and get some clarity out of the euro zone crisis, i know we've been saying that 18 months -- that you will see that companies are in much better shape than 20 srp 8, and while a credit crunch will be a shock to the system, tell have less of an impact on the longer term outcome going forward. >> tom: you mentioned the dollar. we have to talk about commodities. >> stocks bonlds or commodities in the new year. where will money be made? >> i believe that you should be begin to look at nibbling in the commodity complex. certainly we've been talking

about that for the last three to four weeks, and particularly in the consumeable commodity complex where weather and limitations on yields and things of that nature have a much better potential for bolstering prices upward. in energy sector not so much, and vol have tilt in precious metals make people share away. >> tom: have a great year. lincoln ellis from the joox*ej xhnl group. still ahead tonight, more ideas for the new year, tonight's guests on bubbles, banks and builders. in the new year. hilary kramer joins us. >> tom: late last week, congress okayed a two-month extension for extended unemployment benefits. for some out-of-work americans, they can collect checks for 99 weeks. but as those benefits expire, more americans are turning to social security disability insurance to make ends meet. a study recently released by the white house suggests it's not a disability pushing some of these americans out of work, it's the economy.

sylvia hall reports. >> reporter: as the economy lurches along, some people are finding unemployment lasts longer than the benefits. for some americans, a disability helps bridge the financial gap. an ongoing study released by the white house is tracking the trend. for people between 50 and 65 without significant savings, applications for social security disability benefits spike just as their unemployment benefits expire. in the last week of unemployment coverage, nearly 10% of americans in that group apply for the disability program. economists say it happens during almost every recession. gary burtless of the brookings institution says this is a snapshot of a troubling long- term upward trend in the number of adults collecting social security disability benefits. once they start collecting, few ever re-enter the workforce. >> it means that the contribution rate that all of us are currently paying for social security disability insurance will eventually have to go up

unless there is some kind of a change in that trend. >> reporter: burtless says over the long run he hopes to see new ways to help keep the disabled in the workforce longer. sylvia hall, "nightly business report," washington. >> tom: the new year is for resolutions, and the federal reserve isn't alone. the central banks wants to communicate better. next month, chairman ben bernanke and his colleagues will craft a plan to help markets understand where the fed is heading. darren gersh takes a look at the federal reserve's plans for 2012. >> reporter: one way the fed might change its communications strategy is by releasing its forecast for short-term interest rates. fed watcher roberto perli says markets now expect the fed to begin raising interest rates around the end of 2013, but he believes the fed's forecast has rates rising a year later-- at the end of 2014. releasing that forecast would be an easy way to convince markets it's okay to keep rates low, and

maybe even lower, for longer. >> it is cheap because it does not require purchasing securities. it is not as controversial as doing that, but it's not cost- free. >> reporter: not cost-free because perli says clearer communications means investors will expect the fed to stand by its word. >> they don't want to be seen as committing to raise rates, say, in 2014 when economic conditions could change, so that's why they want to cast this in terms of a forecast, not a commitment, but a forecast, and a forecast, like any other forecast can change. >> reporter: after the fed sorts out communication strategy at its january meeting, analysts expect ben bernanke and crew will consider whether the economy needs more help. r.b.c. capital market's tom porcelli predicts another round of asset purchases early next year focused on mortgage securities. >> the bottom line, from the fed's perspective, is they are

already quite literally pushing on a string in as far as mortgage rates are already historically low, yet there is very little demand for mortgages. so we don't think more that another round of asset purchases will actually have any macro impact on the backdrop. >> reporter: i.h.s. global insight's nigel gault is also pessimistic buying up mortgage securities will give much of a boost to the economy. >> i'm not expecting that. if they do that, it would actually have a very big impact on the economy. i think the fed is really operating at the margins now. it's used all its main ammunition, so i think regardless of what the fed does, it can't make a big impact on the outlook for the u.s. next year. >> reporter: so the fed goes into 2012 hoping for a better economy, but knowing there are more risks ahead than easy fixes. darren gersh, "nightly business report," washington. >> tom: it was in august of this year when the federal reserve first pledged to keep interest rates at what it calls an exceptionally low level until at least the middle of 2013.

that makes borrowing money cheap, but it stinks if you have cash sitting on the sidelines. suzanne pratt has one strategy gaining traction with investors. >> reporter: a whopping 1%-- that's all you get these days when you park your cash in a savings, money market account or even a certificate of deposit. government bonds aren't much better. a 10-year treasury returns only about 2%. so, faced with this yield drought, what's an investor to do? financial planner stacey francis says it's a question she gets all the time. >> clients are searching for yield and it's one of the biggest challenges we have, because there's, to be honest, not a lot of yield out there to be had. the obvious choice for many investors is dividend-paying stocks. after all, the dividend yield for the s&p 500 index is currently higher than that on a 10-year bond. as a result, investors have been swapping the munis and treasuries in their portfolios for dividend stocks. in fact, dividend e.t.f.s have

been all the rage this year, with investors pouring billions into them. but experts say people make a big mistake if they think the investments are interchangeable. we still have to appreciate a very simple, a very pointed fact, and, that is that dividend stocks are still stocks nonetheless, and so you can have much greater principle risk than you would in fixed-income. vanguard's davis has been waging a campaign of sorts, blogging about the risk of dividend stocks. he wants investors to understand they move up and down with the broader market. >> whether a stock fund or a broad index fund is dividend- oriented, or conversely if it's growth, one or the other, they still have a very high correlation with each other, which means their returns, month-to-month, quarter-to- quarter, year-to-year, are going to move more in lockstep than say something that is by its nature much more conservative. still, financial pros like francis say stocks that pay dividends should be at least a

part of most portfolios. how much, however, depends on your stomach for risk. everyone has a different d.n.a., and that should be reflected in their portfolio. clients can be as little as 5%, they might be as little as 30% of their equity. not of their whole positions, not that whole 100% portfolio, but of their equity holding. interest rates are likely to remain low at least through next year. that means more investors will probably take a closer look at dividend stocks as the thirst for yield intensifies. suzanne pratt, "nightly business report," new york. >> tom: a broad market sell-off ends with the biggest stock drops in two weeks. let's get to tonight's "market focus." just two sessions remaining in the 2011 trading year and the s&p 500 stock index hasn't budged from where it began the

year. of course, we have seen plenty of ups and downs. today's session was entirely down. stock prices slipped from the opening bell, ending lower by 1.25%. an earlier graphic was mistaken in the direction. that drop puts the year-to-date performance of the index down for the year, and almost right in the middle of the range it has been in this year, from its april high to its october low. today's losers were led by materials and energy stocks, each down about 2%. more on oil in a moment. with european worries back in focus, the financial stock sector slid more than 1.25%. inside the material sector, it was a mix of steel industry players and agriculture stocks weighing on the sector. iron ore producer cliffs natural fell more than 4.25%. fertilizer maker mosaic dropped almost 4% and u.s. steel was down more than 3%. oil prices fell for the first time in more than a week.

there was concern about europe pushing the u.s. dollar higher hurting commodity prices while new tensions heated up in the mid-east over possible sanctions against iran-- the third largest oil exporter in the world. crude oil dipped below $100 per barrel, trying to find a balance between european worries hurting demand and iran's tensions threatening supplies. oil wasn't the only commodity falling today. precious metals also extended their recent losses to another session. silver again led the selling in the metal complex, falling to a fresh four-month low. gold also continued to see profit-taking into the end of the year. despite the worries in europe this fall and winter, gold has not benefited from a flight to safety. instead, investors have been raising cash by selling gold. speaking of metals, copper and gold miner freeport mcmoran shed 4%. a union at a mine in indonesia won't return to work after a three-month strike until a local contractor guarantees strikers won't be fired. this has delayed the world's second largest copper mine from

returning to full operations. finally, a securities and exchange commission lawsuit against citigroup has been put on hold by a federal appeals court. the s.e.c. and citi had agreed to a $285 million settlement over mortgage bond derivatives going bad, but a judge threw out the deal. it's the regulators appeal of that rejection that has been delayed. citi shares where among the weakest in the financial sector today, falling almost 3%. and that's tonight's "market focus."

>> tom: as 2011 winds up and the stock market is ending the year pretty much where it began the year, tonight's "street critique" guest thinks next year will be about bond bubbles, banks and home-builders. she's hilary kramer, editor of gamechangerstocks.com. >> tom: happy new year to you, hillary? >> thaufrk, and to you, tom. >> tom: talk about bonds. this has been a big winter for investors. exchange traded fund dlt the ticker symbol is close to the highs. you think there's a bubble here. why? >> well, the united states economy, although it might not feel like it to those who are underemployed, has strengthened. the consumer, a lot of economic data. and in order to maintain credibility, there's just no way that quantitative easing can continue. the u.s. has to stop issuing all thf credit out there. therefore, we'll see bond

yields start to rise, and of course, we're going to see the price of bonds drop. >> tom: with that in mind, you look at the broad market, pretty much where we began the year for the s&p 500. where do you think we wind up a yeerp from now? >> i'm ambitious. i have over a 20% plus projection in my predictions for 2012 that we're going to be at 1500 on the s&p. tell be the year of the market. 12 very lean tough years for those that have been investing. >> tom: it has been. and led by banking, obviously. the middle of the credit crunch. you like evr, which you first mentioned on the program in march of 2011 when it was above 30. but here you like it in the mid-20s. what d do you expect out of >> the bread and buttern mergers and acquisitions. bringing in billions in pension funds ready to invest

in hedge fubds and make up for some of their poor performance, and mergers and acquisitions. that's ever corps other great asset, and globally, trillions of dollars on the sideline. so private equity in companies. what are they going to do with that mon ?e eventually they have to sfend that money to maintain competitiveness, and ev rx*f is whether positioned. they've been in over half the top m & a deals this year. >> tom: and interesting. it's not a traditional financial hurt by rising interest rates. instead, this looks to take advantage of the situation out there. you also like home builders. toll brothers your choice. under $20 per share. are you forecasting a rebound in home sales? >> i'm forecasting a rebound in the home builders.

they're a forward indicator. the key with toll brothers is because it's nlt luxury business, the higher end, you have a lot of empty nesters, believe it or not out tl, who are not under water and can afford to move into the home that they want, that have the high end fixtures appliances and, upkeep of the home that they raise their children. and toll brothers earnings came out to 10%. we saw an increase across the board in units, revenue, and even the net income was a positive number. they're going in the right direction. there's still some people buying. >> tom: do you have positions in ever corps and toll brothers? >> i have a position in ever corps. >> tom: you can e-mail us throughout the new year. our guest is hillary kramer with gax*im changer stocks.com. here's what we're watching for tomorrow: we'll see if weekly jobless claims continue below the 400,000 level, as they have since the middle of november.

we'll also see whether the nation's realtors are signing more deals for homes, with november's pending home sales index. also tomorrow? holiday sales have been strong for cars and trucks. we look at how the holidays drive auto sales. >> 1600 positions from the payrolls by the first quarter of next year. now we're hearing 600 of those layoffs come at the new york city headquarters. insider expect them to come

from morgan stanley's bond fund. >> tom: more than 30 million retirees will get a pay raise in the new year. that's just one of the changes for retirement plans in 2012. in the "money file" tonight, karen gibbs of "the gibbs

perspective" on what to expect in the year ahead for retirement money. >> good news for retirees and those saving for retirement. as of the first of the year, social security recipients will see an annual increase of 3.6%, the first increase in three years. the average retiree will now receive $1,225 a month, up from $1,182 a month. for those workers participating in 401(k), 403(b) and the thrift savings plan programs, the contribution limit will increase by $500 to $17,000 annually. if you participate in workplace retirement programs, the i.r.s. will allow contributions to a traditional i.r.a. if your adjusted gross income is no more than $58,000 if single, $68,000 if head of household, up $2,000 from 2011. for couples filing jointly, the limit expands by $4,000 to $183,000.

for roth i.r.a. contributions, the income limits will grow to $110,000 if single, $125,000 if head of household. for couples filing jointly, you can earn up to $183,000 and still participate. and finally, low-income workers saving for retirement can contribute to a retirement account and claim a saver's credit if their adjusted gross income is no more than $28,750 if single, $43,125 if head of household and $57,000 for couples filing joint tax returns. i'm karen gibbs. >> tom: and finally tonight, that's "nightly business report" for wednesday, december 28. i'm tom hudson. good night everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by:

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