>> tom: i'm tom hudson. susie's off for the rest of the week. a miserable month for investors is finally over. may was the worst month for stocks since 2010. tougher rules could be on the way for big banks. we talk to gary gensler, one of the people in charge of making the rules. and our summer travel series: fewer americans may take vacations, but those who do will likely spend more money. we speak with the c.e.o. of online travel site orbitz. that and more tonight on "n.b.r." from stocks to gold, it's been a miserable may for investors. the s&p 500 fell 6%, once again giving credence to the adage

sell in may and walk away. but it wasn't just stocks investors were walking away from, gold also fell 6%. erika miller reports. >> reporter: stock investors are only too happy to say goodbye and good riddance to may. after all, the steep sell-off this month leaves the dow industrial average barely up for the year, after a record first quarter. so why was this month such a downer? >> once earnings season ended, people did not have a catalyst to hold onto stocks any more. they sold into it. >> reporter: and, of course, there are also growing worries the crisis in europe will slow global growth. it's not just stocks that had a terrible month. gold had its worst may in 30 years, suggesting investors are no longer viewing the precious metal as a safe haven. like stocks, gold has been hurt by worries about europe: >> as the euro crisis has intensified, the euro has declined. gold is positively correlated with the euro and inversely dollar. >> reporter: where investors have been finding safety is in treasury bonds.

the yield on the benchmark ten- year note, which moves in the opposite direction of price, is now below 1.6% for the first time. there are two things that could help investors regain their appetite for stocks. the first is reassurance that the european debt situation is not escalating into bank failures. the second is optimism about the us economy. erika miller, "n.b.r.," new york. >> tom: still ahead, our "made in america" series, we head to san francisco to meet a few women runng a custom hat company that's almost 100 years old. "nightly business report" is brought to you by: captioning sponsored by wpbt

>> tom: it wasn't so much europe today that hung over stocks, but the american economy. a set of disappointing readings on the job market, accompanied with a regional index of factories weighed on wall street. manufacturing slowed in the midwest for the third month in a row. the chicago area institute of supply management index showed was down to 52.7. any reading over 50 shows growth but this is the slowest growth since the fall of 2009. the dow fell more than 26 points. the nasdaq was down ten. the s&p 500 was off three. tomorrow, we will get an update on the u.s. job market. but ahead of the government's employment data, we saw three disappointing reports today suggesting hiring is still sluggish. sylvia hall breaks them down for us, from washington. >> reporter: the first piece of today's bad news comes from the private sector. payroll company a.d.p. found employers added 133,000 jobs in

may, soundly missing economists estimates. also, april's number was revised down to 113,000, suggesting the private sector added fewer jobs in april than previously thought. adding to the trouble, initial jobless claims hit a five-week high last week, rising to 383,000. that's up by ten thousand from the week before. now this number is volatile, but take a look at the four-week moving average, a more stable snapshot of the job market. it's nearly 375,000, up slightly from the week before. this is the first time it's gone up in a month. while hiring is slow, firing may be picking up. in may, employers announced plans to cut almost 62,000 jobs, according outplacement firm challenger, gray and christmas. it was led by thousands of announced layoffs at hewlett- packard. its the highest since last september. all this grim data sets a somber tone for tomorrow's may jobs report. unless the numbers really surprise, they'll show a job market that's become far less robust than it was last winter.

sylvia hall, "n.b.r.," washington. >> phil prakken is the chairman of macro-economics i have never st. louis. help us out, find a silver lining for the job market ahead of tomorrow number, is there anything? >> i wish i could find one, but i think there's not. the adp, national employment report today suggests the private sector added about 130,000 jobs in may, similar to the number last month. it reinforces and confirms that hiring has slowed down after some strong months in the winter that may have been boosted by warm weather. >> tom: let's take a look at the past year's worth of the data that your firm co-authors with aadp. you number these numbers wells showing job growth has slowed considerably since november and december it is half the rate it was at the end of the last year. why is that? >> part of it is that overall economic growth has slowed and employment is well-known to lag behind that. so when gdp growth slows as

it has early in the year, a few months later employment starts to slow as well. but i also think that there are other considerations that are weighing on businesses's decision to hire. some of that comes from across the pond where uncertainty about the resolution of the eurozone crisis is probably giving pause to employers before plunging into hiring. and of course towards the end of this year we had the concern that through some sort of political miscalculation the united states may fall off the, quote, fiscal cliff that is waiting for us on january 1st 2013. >> tom: of course that is the combination of tax cuts expiring, which could mean tax increases, and of course automatic spending cuts for the government. but joel, you know that c.e.o.s and companies operate in times of uncertainty all the time. what makes this time of uncertainty so different that they are so reluctant to add jobs even though corporate earnings remain relatively healthy? >> well, oftentimes uncertainty is balanced. there are risks to the upside and risks to the

downside. but here the two largest risks staring us in the face are both to the downside. for example, an exit by greece from the eurozone in a very messy manner followed by a speculative run against spanish banks that takes down the spanish financial system could really precipitate a dramatic slowdown in growth and a flight from all kinds of risky assets that would send ripple waves across the globe, deteriorating financial conditions that would be a very sharp force here in the u.s. okay, in terms of the fiscal cliff, the nonpartisan c.e.o. estimates that if we fall off the highest or jump off the highest of the fiscal cliffs we face at the end of this year t could put the economy into a recession in the first half of 2013, so two very large risks both to the downside. >> tom: i think it will feel more like we are pushed over the fiscal cliff than jump. we have to leave it there, ahead of tomorrow's unemployment number. joel prakken with us with macroeconomic advisors. >> thanks so much.

>> tom: crucial for how comfortable consumers are spending money t seems we are pretty comfortable it was a tough april but many stores reported customers came back in may. sales in stores opened for at least a year up 3.9% in may, according to those stores tracked by thompson reuters. those reporting stronger than expected sales, target up 4.4%, nordstrom up 5.3%, and discounter tjx company, t.j. maxx and marshals up 8%. dana telsey is the c.e.o. of the telsey advisory group with us in new york. dana, what worked for retailers in may? >> i think what worked for retailers in may is that you had a holiday in the month of march. you had the benefit of an earlier easter. april you didn't have that, and what you did have in may is mother's day. may 13th this year versus may 8th last year. coupled with warmer weather and the new colourful apparel that is driving traffic, that is what drove sales in may. >> tom: tell us about the roll of gasoline, though. gas prices had been moving lower in the month of may. i have to imagine that put more dollars in consumers pockets. >> we are beginning to see

customers spend a bit more on discretionary but in addition to high end, you need that lower to middle end consumer to maintain that level of spending. >> tom: so talk to us about the roll of discounting. we've seen retailers try to hold back on promotional pricing and hold back successfully. is that going to be sustainable through the summer months, do you think? >> it is still happening. we're seeing very rational promotional levels. we're seeing retailers who are ordering less this year than they did last year in order to be able to generate more full-priced sales. as we go through the summer season, back to school product, new fall product is introduced. we're going to see not as much merchandise as we did last year. in the hopes of maintaining full price selling. >> tom: put the retailing outlook together with the jobs outlook. we've seen hiring kind of tepid here but retail sales, at least this year have been trending pretty well it has been a bright spot really for the economic data, hasn't it? >> it has. we've had very good high end spending, certainly getting a little bit more caution in there now given the trends that are going on outside of the u.s. whether it's in europe or also in asia in

terms of growth rates. and one of the elements that has drive ten, accessory sales have been strong. we've had strong apparel sales. we've also had even home sales have begun to pick up. remodeling of homes has certainly been a little bit of a boost to retail sales. >> tom: what about favorites, you mentioned high end, is that expected to be the strong part of this market. >> it is still strong. not as strong as it had been. we are seeing strength in so discounters like in the off prices or like in target. we've also continued to see strength in so department stores like macy'. and we're seeing continued momentum in companies like limited where their dominant market share and intimate apparel is certainly working. >> tom: the look and view of retail tonight with dana telsey, thanks so much, with the telsey group.

>> tom: when is a bank trying to hedge its risks? when is it placing big bets that might tank the financial system, and calling that hedging? those are the central questions regulators are wrestling with following j.p. morgan's multi- billion dollar trading loss. the issue came up today as market watch-dogs met talking about toughening up the volcker rule that limits banks trading with their own money. one idea heard today ban hedging operations from making big profits. darren gersh sat down with one of those watch-dogs, gary gensler, the head of the commodity futures trading commission. darren asked him whether such a ban makes sense. >> i do think that go a hedging unit is really hedging, it will probably lose money on many days when the positions it's hedging are making money.

and vice versa, a bit of wall street for your viewers. so if it's a separate profit and loss center and people are being paid to make money every day, it's a little stretched to think that that is going to be really a hedging unit. >> one of the challenges is this idea of how do you control what happens in london? london seems to be a place where a lot goes wrong so how do you control an american bank trading in london take on huge risks? the banks don't want to you do this, how are you going to address that? >> well, the banks are clear. they want to say that if something happens outside of the united states, we don't have anyway to protect the american public. i think that's just wrong. i think that we know from history, long history that banks will organize themselves to get around rules. and they'll put themselves whether in london, whether in the cayman islands, whether some other off-shore haven. so we think that its rules

have to cover the branches of these banks, even if they are sitting in london. we can't send, you know, the jobs overseas and keep the risk here. i think we have to actually oversee its risks that are over there as well. >> reporter: one of the things we keep hearing about banks is they're complicated. >> they are. >> even jpmorgan was saying these trades turned out to be overly complicated. are banks just too complicated? and what do you do about it? >> banks sometimes have over a thousand legal entities, sometimes 2,000 legal entities. they have multitrillion dollar balance sheets. i think it's critical that we lower the risk because these banks have to have a freedom to fail. every other business in america can fail and the government didn't step in. >> reporter: you mentioned interconnectedness. a lot going on in europe right now. a lot of concerns about spanish banks. are you seeing any signs of strain in the credit default swaps and the international markets that are related to

europe? >> there's a flight to quality there are definitely strains in the system. the european debt crisis is something that i think is a reminder why we have to get these rules done. four years ago we had a crisis here. i think history will show that these crises are connectedded. that, and that if banks fail in europe, we have to guard against those risks coming back here, and they may, unfortunately, be very connected still. gary gensler, the chairman of the commodity futures trading commission, thanks for your time. >> thank you.

>> goog el won roar round, a judge ruled google could use part of auricle's programming code to create it's an droid operating system. these two companies have been fighting over google's use of auricle software. the judge today wrote copyright law does not cover all the ways java can be used. let's get to tonight's market focus. >> tom: stocks finished may in the same fashion they spent most sessions this month, down. on the backs of the disappointing jobs data ahead of tomorrow's employment report, the s&p 500 hit is worst level of the day just after 11:00 a.m. eastern. the losses were pared back, and the index actually popped into positive territory in the final hour, but it couldn't stay there, ending with a small loss. volume shot up on the big board, 1.3 billion almost twice yesterday's pace.

2.2 billion shares traded on the nasdaq. as erika reported earlier, may was miserable for stocks, nine of the ten major sectors are lower tonight compared to a month ago. investors ran away from the energy sector, down more than 10.5% this month. the financial sector was down more than 9%. and the materials sector fell 8%. the energy sector losses were led by a pair of coal miners, alpha natural resources and peabody. coal has been under intense pressure thanks to low prices for natural gas. two of the biggest financial losers were in the headlines quite a bit this month. j.p. morgan for its big trading loss, and morgan stanley for the leading role it took the facebook stock sale. today, morgan stanley announced plans to buy another 14% stake in the smith barney brokerage from citigroup. shares of morgan stanley and j.p. morgan fell almost 23% this month. in today's trading, though, the financial sector was one of only three sectors up, led higher by regional bank sun-trust.

shares gained 3.4% on heavier than usual volume. the company's mortgage business will settle a lending discrimination lawsuit, paying $21 million to 20,000 african- american and latino borrowers. federal prosecutors claimed sun- trust charged minorities higher loan fees. oil refinery tesoro is up against falling oil prices, and a possible union strike in california. shares fell 4.7%, as volume more than doubled. the union at its martnez, california refinery have voted to strike if there's no deal from last-minute talks. this refinery is the second largest in california. speaking of oil, it continues dropping. crude fell another $1.29. it began this month at over $105 a barrel. tonight it settled at its lowest price since october. the lower price of oil helped airline stocks this month as talk about further buyouts continues. u.s. airways shares are at four- year highs over speculation it is interested in making a play for the bankruptcy american airlines.

reuters reports u.s. airways may team up major private equity firm t.p.g. capital to bid for american. a global maker of mining equipment didn't help the mood of the market today. joy global said it expects revenue to remain flat and order growth to slow down as customers deal with a drop in demand for commodities. shares fell to a 52-week low on that forecast, shedding 5% as volume quadrupled. the company warned new orders were down 19% in the second quarter, pushing the firm to cut its earnings outlook for the year. in our exchange traded fund market flash, a mixed finish this last trading day of may. the two gainers, the financial sector e.t.f. up nine-tenths of a percent. and the emerging market's fund up less than a half percent. and that's tonight's "market focus."

>> tom: the prospect of lower gas prices has more americans thinking about vacations this summer. more than half the customers surveyed by online travel company orbitz say pump prices will affect their travel plans this summer. it could even determine how far they drive. we continue our look at summer travel this week with diane eastabrook. she spoke with the orbitz c.e.o. about how americans are planning to spend their summer vacations. >> reporter: this is the nerve center for orbitz worldwide. employees are tracking everything from weather to flight delays for customers. and this summer they're likely to be very busy. the company recently surveyed a thousand customers finding 77% plan to take a vacation this summer, that's down slightly from a year ago.

but more of those who will be traveling this year expect to spend over $1,500, compared to last year. orbitz c.e.o. barney harford says while consumers are spending more on travel this summer, they're still looking for ways to stretch their dollars and his company is capitalizing on that. >> buying your airline ticket and hotel at the same time will allow you to tap into savings that you wouldn't necessarily get if you were buying your hotel room or airline ticket on its own. our hotel partners, our airline partners when they know they are going to have excess capacity they want to be able to sell that capacity so the rooms aren't otherwise going empty. but, they don't want to signal quite how low they're going. if we're able to put that component into a package and hide the price of the individual hotel or airline ticket it's much easier for us to pass that value onto consumers. >> reporter: more people are going to europe this summer is that because the euro is weaker? >> the relative strength of the dollar versus the euro is certainly making europe more affordable and interestingly

we're seeing more people traveling from the u.s. to europe and we're also seeing people in europe maybe traveling less longer distances. we're seeing shorter haul being a more important mix in europe than long haul and absolutely currency and the economic condition is certainly a big driver of that. >> reporter: you have a campaign this year called "take back vacation back" or "americans take vacations back." why do americans not take the vacation time allotted them? >> we did a survey and we found 57% of americans actually take all of the vacations they're entitled to where as 89% of french take all of the vacation they're entitled to and by the way the french are typically entitled to more vacation than americans. >> reporter: why aren't they taking their vacations? do you think they're afraid they might lose their jobs if take a vacation? >> we haven't heard too many situations of people losing their jobs because they are taking vacation. clearly there are a bunch of economic challenges and some tough job figures out there, but

we believe that taking your vacation when you come back, whether it's a two day vacation or a week's vacation, you come back refreshed, rejuvenated and able to work much better, so we think it's definitely something americans need to be doing more often. >> reporter: mr. harford, thank you very much for joining us. >> tom: tomorrow, the cruise industry is setting sail on what could be a smooth summer of business. in the last part of our summer travel series, we'll give you an overview of what's happening with cruise lines. they are the life blood of the u.s. economy, small and medium sized businesses. and the fastest growing segment are those small businesses owned and run by women. "made in america" tonight, mike hegedus visits one such small business in san francisco that tips its hat to both history, and future growth. >> reporter: it has been going on at paul's hat works in san francisco's richmond district since 1918. the making of hats lineage that runs from its peruvian founder

over 94 years, to four young women from the neighborhood. >> we were kind of an odd bunch before, didn't plan to be hatters, as most people probably don't, and stumbled on it, stumbled on it, and the story and the ambiance, and that's what took us. >> reporter: the story is a familiar one, in 2009, battered by the down economy, the then owner needed to sell-- no one would buy. option, shut it down, walk away, hat in hand. except in walked a pre-school teacher, two costumers and a bookkeeper. saviors in bright colors, with passion. >> we did it, a: this place was going to evaporate it we didn't, nobody else was going to do it. the four of us are the makers of things, we love the craft and we love old crafts, and this is something that you can only learn how to be hatter by apprenticing, so this is a skill that they're not teaching in school.

>> reporter: what they will teach, in school, is how to run a business, classes they found and took, to learn about price points, niche markets, branding, sourcing, business plans. >> business is a different language, so i had to learn the language. >> reporter: the language they're speaking now is of success and expansion. one of only of handful of hat makers anywhere working in the handmade, custom-fit, on average $650 per, hat market. they source their straw blanks from ecuador, they are riding the resurgence in men's hats, both practical and iconic in the 30s, 40s and 50s. hats are back on the heads of presidents, yes that's theirs, and a younger generation. so now paul's hat works is headed... ...to the big apple. >> more people, more money, more style in new york. >> reporter: the language of the custom hat business. i'm mike hegedus, "n.b.r.," san francisco. >> tom: and then there's this tonight, you might not be able to get a supersized

soda in new york city soon if mayor michael bloomberg get its his way. listen to this, the mayor wants to ban restaurants from selling sugary drinks in containers exceeding 16 ounces. this proposal to amend the city health code will be submitted in the middle of june. it is expected to be approved and take effect early next year. a giant latte, big shake, diet soda, not included in the ban though, but restaurants caught selling the supersized soda would be fined $200 under the proposal. that's it for the broadcast here on the air, we'll see you on-line at nbr.com and right back here tomorrow night. >> nightly business report is brought to you by: "nightly business report" is brought to you by:

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