>> this is n.b.r. >> tom: good evening. i'm tom hudson, susie has the week off. investor worries focus on spain, sending u.s. stocks tumbling. facebook's banker defends its role in the stock sale as shares continue sinking. with lawsuits multiplying, could shareholders get any money back? and our summer travel series, where in the world will the rising u.s. dollar go the farthest. that and more tonight on n.b.r. if you hoped worries about europe would be on hold until greece's next election in june, those worries have shifted to spain this week. we learned today customers have withdrawn almost $40 billion from spanish banks, fueling concerns over the stability of that country's financial system. suzanne pratt reports.

>> reporter: you can't see it, you can't smell it, but fear is definitely the dominant emotion on the floor of u.s. stock markets. for the past few weeks, it's mostly been about greece. today it was a lot about spain and the banking crisis brewing there. >> they don't really know and we all don't know how to digest all this information. what's bad news today, can be perceived as good news tomorrow. >> reporter: may has been miserable for u.s. stocks. the dow is down about 6%. and, it looks like it may will be the first losing month for the blue-chip index since september. money leaving equities has been pouring into bonds, sending prices higher and yields lower. today the interest rate on the ten-year treasury bond fell to a minuscule 1.61%. that's an all time low. if bonds continue to pay so like, stocks and their potential for appreciation not to mention

dividends, might look more attractive. so, what's an individual investor to do? >> potentially the best answer is do nothing. there's a lot of risk in putting money into the stock market, and there's certainly a lot of risk of continually putting money into the bond market. >> reporter: with no end in sight to europe's financial mess, expect the stock market to remain fragile this summer. suzanne pratt, "n.b.r.," new york. >> tom: still ahead, oil prices keep heading lower. it's good news at the pump, but for how long? "nightly business report" is brought to you by: captioning sponsored by wpbt

>> tom: european regulators tried to calm fears around spain today by offering to give the spanish government more time to reduce its budget deficit, and use a rescue fund to loan money directly to banks. but the moves did not ease global concerns surrounding europe's financial system. the dow lost almost 161. the nasdaq fell more than 33.5. the s&p 500 closed down 19. the drop in global stock prices pushed money into u.s. government bonds, sending the interest rate on the benchmark ten yield note to historic lows, 1.62%. richard helps run the income fund as portfolio manager, he joins us tonight from boston. richard, you've been in the bond market a long time, you saw the highs in material 80s. how low could these rates go? >> the flight the capital, the concerns globally, tom, i think investors are looking for a return of principal

versus return on their investment. therefore right now it's a momentum trade. and although treasuries look expensive, in other words high price and lower yield, right now they could continue in this vein. we could see lower yields. >> tom: as a long-time bond fun manager responsible for mutual fund assets, how do you approach this market, are you buying more? >> well, we're buying judiciously. i think you have to be careful of where you're positioned on the yield curve. you have to look at the securities that you're invested in. and you don't want to take on a lot of credit risk. so that's why we've seen a lot of capital flowing into government funds. >> tom: we certainly have, in fact investors have poured money almost week over week month over month this year into bond mutual funds, the i. c. i. funds that $25 billion

almost in the month of april which is the lowest so far this year. how do mutual fund investors need to think about these investments, is there a big risk here? >> i think potentially there is. in the near term probably not. prices can go higher and yields can go lower. however, eventually the pendulum is going to swing, and we think that gdp in the united states, which is currently the shining star globally, that will continue to grow somewhere in the magnitude of 2%. and the employment situation is improving here. so i think there are other asset classes that offer better relative value than treasuries. >> tom: what might some of those be, richard, as you're looking longer term? >> longer term we like municipals, municipal bonds, because on a tax adjusted basis right now municipals are

cheap. they're yielding on a tax adjusted basis more than treasuries. they've got the second lowest default rate historically. and the supply demand imbalances should be evaporating going forward. they have a -- >> tom: i'm to try to get you to forecast an interest rate on the the 10-year benchmark. do you think it will hit 1.5%? >> it seems destined to in the near term. >> tom: all right, we'll let it go at that, great to hear from you, richard schlanger, with the peen near short-term income fund. >> tom: oil prices tumbled today, to their lowest level since october. in new york trading, benchmark light sweet crude fell almost $3 a barrel, settling at $87.82 a barrel. and that's pushing down prices at the pump just in time for summer. erika miller takes a closer look at the reasons behind the steep sell-off.

>> reporter: this was supposed to be the summer that gasoline prices surged back to record levels, but instead prices have been actually falling. >> over the past month regular unleaded has fallen 19 cents to $3.63 a gallon nation-wide-- that is a drop of nearly 6%. >> reporter: at the root of the decline is the worsening crisis in europe which is pushing up the value of the dollar over the euro. when the that are ralies that means the dollar is for valuable, and oil is cheaper. >> reporter: there are predictions that gasoline could drop another ten cents or so this summer. that's good news for anyone heading out on a road trip, but it would still mean prices above $3.50 a gallon nationwide. from there we could touch $80. >> reporter: there are predictions that gasoline could fall another 10 cents this summer, that's good news for anyone heading out on a road trip, but it would still

mean prices above 3.50 a gallon on average nationwide. erika miller. >> tom: morgan stanley c.e.o. james gorman says the firm followed all the rules when it brought facebook to the public. a morgan stanley spokesperson confirmed gorman told employees today speculation of "nefarious activity" is untrue.fnjj-xó a lot of cash.

>> i think what we are going to find is that the disclosures were not false or misleading. and then you start getting into shades of gray. >> reporter: gray, because securities regulations allow companies going public to give institutional investors more information than is provided to retail investors, says columbia law professor john coffee. >> there is a lot of reason to believe selective disclosure occurred and that should embarrass facebook and morgan stanley. but embarrassment is not the same as legal liability. >> reporter: because big investors were reportedly warned about revenue problems at facebook, they won't be able to sue claiming they weren't warned. law professor david lipton says institutional investors may also be wary of suing the underwriters they count on for hot stock offerings. >> i'm not saying that it would be out of the question, and particularly when they start looking at their fiduciary duty to their constituencies, i'm

just saying that there would be some hesitation. >> reporter: and rather than mislead investors, it's possible facebook and its underwriters simply misjudged investor demand. >> they really moved up the amount, the size of this offering so the supply of shares roughly equaled the demand. and that meant, when investors realized they were getting all the shares they requested, they knew there was not the usual imbalance and there was not going to be the same first-day pop or price run up and that led many of them to quickly flip or dump their shares. >> reporter: bottom line, legal analysts say investors who lost money on this i.p.o. may see a few pennies per share in recovery, assuming the suits are settled out of court as they usually are. darren gersh, "n.b.r.," washington. >> tom: americans haven't been using their visa cards to do as much shopping. the dollar amounts put on visa debit cards fell 3% in april, and was flat through the first four weeks of may. visa blames new rules regulating the way card network companies handle debit payments. the rules require banks to give stores a choice of debit card

payment networks. that's chipping away at visa's market share. earlier this year, visa changed its pricing to combat the regulation's effects, a move the federal government is now investigating. >> tom: over the past week we have gotten a number of updates on the spring housing market, and most of them have showed some encouraging signs this year. but not today's. an index of pending home sales fell unexpectedly in april, after hitting it's highest level in a year a month earlier. a pending home sale is when there is a signed contract, but

the deal hasn't closed. the national association of realtors uses it to gauge future home sales. but other research on the housing market has indicated some improvement. existing home sales were up 3.4%. sales of new home were also up more than 3% last month. so, does the drop in pending home sales signal a slowdown of the early signs of a housing recovery? analysts say the warmer winter helped boost sales earlier this year, and a sustainable recovery in housing will be helped by an improving job market. and on friday, we will get the may employment report. hundreds of striking union workers at a caterpillar plant in joilet, illinois say they're ready for a long fight. they rejected the latest offer from caterpillar, a month after walking out. diane eastabrook is in chicago with more. >> local 851 says it overwhelmingly rejected the latest contract proposal because the offer was very similar to the one it shot

down just a month ago. the union says the latest offer still freezes wages, increases the amounts hourly workers pay for health care benefits, and switches from a pension to a 401-k plan. cat says its latest offer was fair, reasonable, and comprehensive. since the nearly 800 union workers went on strike, managers have been filling in for them at this plant, which makes hydraulic pumps for cat machines. as of right now, there are no new negotiations scheduled between cater pillar and the union. tom? >> tom: u.s. stocks resumed

their trend this month, and that meant lower prices. the bulls couldn't muster much interest at all during the session as the s&p 500 spent the entire day in the red. the disappointing pending home sales report this morning only added to the selling pressure. the index remains above its mid- may low, but its been the worst month for investors all year. the s&p 500 is down more than 7% from its april high. volume during today's weakness, 767 million shares on the big board. almost 1.7 billion on the nasdaq. leading the sell-off: sectors closely tied to the global economy. the energy sector fell 3%. the financial sector was down 2.2%. and the industrial stock sector fell almost 2%. with sellers back in the stock market and with european worries building, we saw a pop in the market's fear gauge. the chicago board options

exchange volatility index measures options prices, the higher the index, the higher investor concern tends to be. this index jumped more than 14% today. fear has been building this month as stocks have sold off. u.s. stocks continue taking their cue from europe. this exchange traded fund tracks the biggest euro sector stocks. today's 3.5% drop brings the fund to within 25 cents of its 52-week low. research in motion didn't help out today's weak tone. last night the company warned of a first quarter loss and announced it has hired investment bankers to explore strategic options. volume jumped, but the stock certainly didn't. shares fell 7.8%, closing just a penny above $10 per share. that's its lowest price in almost nine years. its biggest competitor apple fought the weak tape to climb more than 1%, pushing apple to its highest price since early may.

at a conference, apple c.e.o. tim cook promised "some incredible things," from the company, without giving any more detail. the deal for auto parts retailer pep boys is no more. the company's $804 million private equity buyout has been canceled. the buyer walked away after disappointing results at the retailer. news of no deal sent pep boy shares into a tailspin, down almost 20%, trading below where they were before the deal was announced. according to regulatory filings, the buyer wanted to delay the buyout, but pep boys did not. retailers will likely be in focus tomorrow with many of them reporting may same store sales. department store macy's was among the first to turn in its results today. shares were down 1.8% even though may sales were better than expected thanks to its growing onlineusiness. in our e.t.f. "market flash", you get a sense of the broad- based sell off. the financial sector e.t.f. was the biggest loser among the actively traded funds, down

2.3%. and that's tonight's "market focus." thanks to market volatility and european anxiety, dividend paying stocks a popular place to be looking for some protection. our guest eric teal at first citizens bank with us tonight from research triangle park, north carolina. nice to see you. is this too crowded after a trade? is this an area where you're committing new money or just sticking with what you've got? >> well, tom, i think it's one of the best places to be in a market that's pretty challenging. we like companies that have high free cash flow, high return on equities in this type of environment. it's going to be challenging i think for all investors, but typically dividend paying stocks are a good place to be when the market becomes more cautious, as we see today. >> tom: certainly with interest rates being as low as they are hitting the yield and possible stock appreciation, nice one-two punch. you're looking in energy for one place, xle, the etf

following the energy energy sector, you see oil prices at 10-month lows, does this concern you? >> it's a little concerning, we think there will be a pickup in demand right now. a lot of the pullback in oil prices has been based on a slowdown in global growth, that although broader economic growth will be challenging we still think demand will pick up and in fact be quite strong. we like the energy sector, quality management in those companies, fairly respectful dividend yields, and we think in this environment late cyclical stocks, particularly energy, and the technology sectors are a good place to be. >> tom: i wanted to get to technology here again, looking at the technology exchange traded fund for the s&p sector, xlk the ticker symbol, we've seen a mixed kind of outlook for technology, certainly facebook has perhaps cast a big shadow over technology, hasn't it? >> yes, it has.

and the type of technology companies we think will be winners in this environment is where there's growth at a reasonable price, that companies that do pay a dividend yield that will particularly benefit from a cap x cycle that we think will take place really in the coming years. >> tom: looking for folks to replace the technology that they've got. meantime you're under weight or avoiding the financial sector. this is an interesting play, low interest rates have been an area of some degree of concern, but is this a global concern that you have with banking given the european worries? >> well, we think that certainly the european crisis will be a long shadow overhanging the financial sector. as you mentioned earlier the problems that we've seen with facebook, as well as the most recent episodes with jp morgan, which think these will continue to overhang the financial sector, regulation is only more forthcoming and

pressures and challenges on the margin. so at this point we like the valuation that financials have, but we think there will still be challenges on the earnings growth front. >> tom: okay, don't like them enough necessarily to go overweight. how about disclosurees, do you or the clients have positions in the funds? >> no, we do not have positions in these exchange traded funds at this point. >> tom: eric teal, our street critique guest with first citizens bank. >> tom: one consequence of all the european anxietys, a stronger u.s. dollar. if your summer travel plans

take you overseas that means you will get more bang for your buck. take a look. u.s. dollar index measures the dollar gets a basket of currencys has ralied 5% since march, out highest level since the summer of 2010. as we continue this week's look at summer travel, where in the world american, stretching their travel dollar this year, the editor of thompson reuters with us. lauren, is europe on sale with this dollar boom? >> it's cheaper, but it's definitely not on sale. if you're going somewhere like amsterdam, i was there recently, carry -- london is also expensive because of the olympics. >> tom: the polish, the dollar has gained over po land's currency. is that drawing american tourism over there? >> it's not like americans are going there gang busters, but they should, because krakow is a beautiful old world city, and the lati is under a lot of

pressure. >> tom: are prices good there if you're an american carrying some dollars with the currency exchange? >> absolutely, you can stay in top of the line hotels and they're a fraction of what they might be in a place like paris, so go live large in po land for a while. >> tom: latin america as been seen by investors as insulated from the european concerns. what about from a travel perspective, what they can expect in terms of currencys? >> places like argentina where there's been unrest the peso is down about 10% versus the dollars. it's definitely cheaper there, because they've been undergoing some interesting nationalization plans, and it hurting the currency there. but not only is buenos aires a great deal, the wine country, there's a lot to explore, and steak is very cheap in argentina right now. >> tom: there you go, steak is cheap.

thanks to the u.s. dollar to some degree as well as the other issues in that economy. looking worldwide with the stronger dollar, lauren young is with thompson righters. thanks, lauren. >> reporter: i'm diane eastabrook in chicago. tomorrow, the c.e.o. of online travel company orbitz tells us how he sees the summer travel season shaping up. >> tom: finally, the race is on, on wall street to get you to buy stock this summer. "fortune" magazine's allan sloan has seen this summertime sales pitch before. >> welcome to summer, wall street version. in the real world, summer starts june 20 or 21 and ends in late september, but on wall street summer starts the day after memorial day and ends the friday before labor day. so you're likely to start hearing about the prospects of a summer rally. wall street, of course, always wants to find a reason for you to buy something.

stock prices, in fact, tend to rise in the summer, but they tend to rise every season because wall street has more up years than down years. jeff hirsh of the "stock traders almanac," who studies market history, told me that catching a summer rally is an old retail broker's line to "gen up" business in what is typically a slow season. but in the last 40 years he says, spring and winter have way out performed summer, oh well, the streets other summer cliche. sell in may and go-away. so, what will stocks do between now and labor day? rise? fall? beats me. if i knew things like that i'd be a rich retired investor, not a business writer still trying to make a living. i'm alan sloan. the spacecraft will visit the space station, it's now preparing for its trourn

earth. it's scheduled to splash down hundreds of miles off the coast of southern california tomorrow. if the return is successful it will launch a 1.6 billion dollar space taxi contract with nasa. how do you like that? that's it from us this evening on the broadcast. we've got plenty more online, lots of video us as well, at nbr.com. we'll be right back here tomorrow night. "nightly business report" is brought to you by: captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org

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