veteran market reporter and analyst mike santoli joins us now from the new york stock exchange. mike, welcome. good to have you with us, as always. who is doing the selling today, mike, and what triggered it? >> reporter: allesxcellent ons, tyler. it's not clear what specifically triggered the selling today. really, it w not about an economic headline, it was not about corporate earnings, it didn't seem to be from political news.ea it wasy follow-through from friday's decline. i think t os is a bit payback for one of the greatest rallies we've seen over several months in a long time. the dow was u 300 points since thanksgiving until a week and a half ago. we've given ovback a little ove 2,000 points fromthat starting this afternoon, you started to see a lot of mechanical hit the mark. it w fairly indiscriminate and seemed to be related to a rise in volatility measure that somehow really threw off a lot of these large funds that had been betting on the markets remaining calm. so, that's what we know for right now. obviously, the major index is down slightly on a year-to-date basi

mike santoli looks at why the two companies may want to become one.>ology continues to drive down the cost of investing. and it reflects the push for greater scale in an investing industry dominated by low cost index funds, zero commission trading and a multitude of digital start-ups vying for the investment dollars of younger consumers. schwab was a pioneer of low cost broke ramble from the down of the 70s. and it's bnd has been to make investing accessible abaffordable. the ameritrad the product of numerous mermgers had become a sizable competitor. gether they would house about $5 trillion in assets stocks, bonds and bk accounts. in recent months. charles schwab led the way to zero commissions, a move hurting shares of amerd trade more due to greater emphasize on trading volumes. t gettinher would possible position the companies better in a lowe interest r world. relying on collecting customer cash balances. investigative through a mobile app or allowing a software model toetermineortfolio allocation mean the companies must upgrade zolg offerings an

mike santoli starts us off tonight. >> en with aew year's eve rally, the most volatile december i more than a decade left investors with losses f y thr and confusion on global growth, trade elicy. don'tect the new year to bring much of a break from the gh-stakes market movin event. friday brings a crucial u.s. jobs report that will off hint about whether a feared u.s. slowdown is under way. jay powell will speak publicly with hisredecessors and any clues on his intention for further rate hikes in 2019 will be seized upon by investors. a fear that the fed has pushed rates up already too much given a softer global economy has been a major factor, tumble of s&p 500 fromts september high. focused on very strong trends as it pencils in perhaps two more lrcreases next year but the bond market hasdy priced out the likelihood of any further hikes. formal talks between the u.s. and china begin on potential trade further rounds by a march 1st deadline. fear of trade disruptions and chinese economic stumble have been another driver of recent market weakness. at one point last week nearly dropped

for "nightly santoli. >>> elsewhere, the president of the chicago fed sae the u.s. ec slowed, he does not sl the r risk of a recession. charles evans expects 2% growth this year and described the ec rebous primarily because of the strong consumer and labormarket. the fed held interest rates steady last week andat ind no more rate increases will be co this year. >>> with the fed on rest of the year and the mueller investigation behind us, what will the market turn its attention to at this point? joining o joe, chief investment strategist at blackstone. ce to have you with us. >> thanks for having me on the program tonight. >> even though we have those two kind of headline risks out of the way now, you still see some volatility for market ead? why? >> i think we will see it because we have this tug of war. on one side, we feds and the possibility that a trade deal with china and that's priced in. stocks have had one of their best starts to the year since i 1991 ahink that reflects the bullish sentiment on the fed. and the tug of war is a realizationco thaorate profits

for "nightly business report," i'm mike santoli. >>>to what is the mar expecting from the upcoming trade talks between president trump and china's president xi jinping. joining us, david liebowitz. thank you for coming in. >>hanks for having me. >> here we sit at the all-time highs as mike was pointing out e does that mean a deal with china is already priced in? we don't get much more up side if we get a deal and downide if we don't? what's going on? >> this is buy the rumor and sell the news. i think the market's assumptioni all along we will see a deal done with china. thinky at this juncture i the market would be comfortable with no escalation in the current state of affairs with china. as long as we don't put tariffs on the additional 300 billion of imports, i think the market will be able to handle that. s i don a ton of up side here stemming from a positive resolution to t talks, maybe if some of the existing tariffs are rolled back you wouldee markets melt higher. i don't think investors are expecting that. they're expecting

mike santoli starts us off tonight from the new york stock exchange. >> the stock market has held ono most of its gains for the year during a turbulent month of may, but over the past year, nds have been better to investors thanks in part to the trade war tha is unsettled equities. the drop in the ten-year treasury yield today to a 19-month low under 2.3% highlighted the powerful gain in bond prices which moved in the opposite direction from their yields. this bid for safe assets reflects worries over the global growth outlook which has grown more urgent on trade rules and tariffs. persistently low inflation has also encouraged the move into bonds and t return of government bonds in germany and japan deeply negative yield has likewise dragged treasury and u.s. corporate debt yields lower. as a result the total return for the barclays, aggregate bond index has been about 6% over the past 12 month, a fraction better than theurn of the s&p 500 index over that time including dividends. the bonds have delivered that return with farolessility in stocks which suffered a quick 20% loss in th

mike santoli has more. >> reporter: the marketwes its resilience towards a rush towards safer stocks and bonds as investors migrate away towards risk. the s&p 500 has managed to hold within about 3% of the recent record high thanks in part to treasury yields falling to 2019 dws. which has much t with the lows and the interest rates being cut to support a vulnerable economy. shares of stocks that act like bonds have been clear leaders. utilities have vastly outperformed industrial and small cap stocks. groups more reliant on a better economy. thisas led some economists to argue that they're sending a less up beat message than would otherwise be a market up some 14% less than five months into the year. investor sentiment similarly ses more subdued than usual after such a strong market recovery. aisurveys of r and professional investors show a sharp drop in optimism and cash has continued to o flow of stock funds at a pretty heavy pace, a sign of further investor caution. low bond yields cndtious investors already braced for bad news could continue to help support stock as a market of a

for "ghtly business report," i'm mike santoli. >>> the head of goldman sachs is reportedly planning to step down as soon as the end of the year. according to the "wall street jonal," of 3-year-old lloyd blankfein remains in control of the timing of his exit. and today he tweeted out a rye tweet about just that. quote, it is the "wall street journal's" announcement, not mine. i feel like huck finn to his own yule gee.ei blan has been ceo over the past dozen years and saw it through the financial crisis 's expected one of goldman's copridents willucceed him. shares of goldman rose today. since blank fine was named ceo in 2006 the stock is up t75%. ovt same time the s&p has more than doubled. >>> toys r us once considered the leader in toys may be on the verge of shutting awful its u.s. stores. it could mark a new chapter for the entire toy industry. >> it's been more than six decades since the first toys r us stores opened its door it may be just a matter of weeks until all remaining stores open for the last time. toys r us filed for bankruptcy in september and has been working througho

mike santoli takes a look. >> reporter: investors are increasingly willing to pay up shr quality in a turbulent market. es of high quality companies began outperforming even before the bro market hit a rough patch starting in late september. quality in this case means companies have stable businesses not dependent on a strong economy, little debt and strong cash flowis reference can be seen in the likes of mcdonald's, walmart,di walt ey, starbucks and merck. health care is the top perfo performing. quality stos are not quite t same as value stocks. cheaper looking companies are s and tendgrowth ra to carry a good deal of debt. wall street isncreasingly preoccupied by how much it might trail off next year after a 30 brand18 which makes name stocks more appealing. and with the fed's mr. interest rate increase it's making debt more interested they want to bet on a strong balance sheet. while it's never clear or predicti, this kindf rotation towards quality is something that tends to occurla r in economic cycles as it turns towards a tougher, more val volatile past. perhaps an encouraging

for "nightly business report," i'm mike santoli. ay>>> thoseo-day gyrations may not let up anye ime soon. hend manager paul tudor jonesho predicted the market crash said that investors should expect more big moves in the year. >> i think we're going to is he a lot more of what we just saw, which is a lot more volatility. you know, it's really say i'm really bullish,ri'm really b. i kind of see a two-sided market. i think in the next year we'll be wre w are today ten down and ten up. >> he did add that a potentialt decline i market could lead the federal reserve to hold off raising interest rates in 2019 and that in turn could boost equity prices. speaking of which, the fed funde fu markets which reflect traders sentiment about the future rate moves byerhe f reserve, it's gradually reducing the probability of a dember te increase. it now stands at 68%. that's a ur-month low. the market is also interestingly currently pricing ino rate increases for all of next year. that could change though. >>> as we mentioned at the top of the progr

mike santoli picks it up from here. >> rep the bull market set to reach its ninth anniversary ever whicheans investo who expect generous gains from here over the coming years are betting this bull run can become the greatest of all time. in terms of market gains, valuation, and the public exposure to stocks only the final years of the 1990s surge are higher than the climb that began in march of 2009. it might sound scary for those who remember the '90s market and the wealth destruction that followed but the comforting news is while today's market ranks number two it is quite a distance from the excesses of the one that closed the 20th century. the s&p gained just ove 300% from the lows set in 2009 compared to a 580% advance that ran from the 1987 crash to early 2000. while stocks are richly valued today they are not as expensive as at the 2000 peak. finally retail investors had 80% of financial assets in stocks and were feasting on public offerings 18 years ago. today they hold closer to 70% in stocks and popul investments are sober index funds. this explains why some strategists are exp

for nightly business report, santoli. >>> president trump today touted the success of the u.s. economy. in aed closely wat speech at the economic club of new york, the president discussed domestic growth as well as the fed and the trade war with china. here is eamon javers. >> president trump keeping the details close to the vest here yin nk at a speech at the new york economic club widely watched watched i the financial universe for any indication of what the president miedhiight say by trade. would he nouns a date or location for the trade deal? the answer to b of the questions was no, the president offering no new scifics here but did indicate that a trade deal might be in the offing here is what he said. >> wraer we're the onesid dg whether or not to want to make a deal. we're close. a significant phase 1 tradeea with china could happen. could happen soon. but we will only accept a deal if it's good for the united stes and our workers and our great companies. >> the president reserving his harshest criticism not for the chinese government in beijing bu for the federal reser

from e santoli joins us the stock exchange for more on this decline. i think you were the one who coined the term tariff tantrum. is that what's going on? >> i don't think it was all we were seeing today but i think that was the added element this morning right at e outset that came upon a market that also was nall thatad interest rates are going up, this fed is looking for opportunities to bring rates higher if they can, if the economic data allow for that. and then as bob was saying,ss t f leadership from the big tech group. which a lot of investo i think were hiding in because it seems seemed like they could grow a i almo environment. but the tariff issue is a eminder that policy across a monetary policy turned less t friendn we got used to last year. >> the volume, though, mike, didn't seem like y.ngckt wi he myhe prof tessione als wy ho were se? >> interestingly, you are solutely right, sue. it was not a feeling of panic or a mass luidation of stocks. people were pointing out that small cap stocks etperformed arge cap indexes so the more domestica

mike santoli explains. >> reporter: stocks and have a complicated relationship, and lately bonds haven firmly in control of it. the steep drop inond yields this month hasnocked the stock market off balance as investors do the rush of ten-year treasuries to three-year lows below 1.6% as a worsening sign. the recent pull back in the s&p 500, which at its worst last week fell mor than from the ate july record high, got rolling just as the ten-year cracked below 2%. even on aminute-to-minute basis, declines and yields have weakened share prices, while nearly the entire n3% bounce stocks over the last several days occurred at times when s yields havpped falling and lifted off their lows. yet it is not entirely the case that low yields are all bad for stocks. low rates act as supportquity valuations on a relative basis making stocks appear che compared to bonds than they have efnce the sharp sell-off in late 2018 ande that in 2016. a majority of large stocks now have dividend yields higher than the ten-year treasury as does the s&p 500 itself, which now has about a 2% dividend payout. very

mike santoli took a look for answers. every bull market needs a good story line. the one that started nearly nine years ago has followed several along the way. you have the depths of the bear market in early 2009. the bullish story was stocks were simply too depressed. as the years went on, the narrative shifted to central banks are supporting the market, the stocks looked cheap, and companies are buying back lots of stock. the happy store has centered around a global economic expansion and deregulation in corporate tax cuts. this combination has helped carry the major indexes to the best year since 2013, with the s&p 500 up 20% and the dow adding more than 25% to come within a whisper of the 25 thousands market. how might the extort shift again? analysts are suggesting the corporate talks cut is but amarket that constantly looks ahead. the benefits will be unevenly shared. te compa the market leaders for -- >> most helped by the tax plan. the theme no next year might be how the markets and the economy can stand the heat generated by a nicely -- tight labor market

mike santoli [ bell ringing ] >> reporter: after stocks' latest surge, a record high into what's often one of the strongest months of the year, wall street is asking if a market melt-up is under way. a melt-up has no set definition but it usually describes a market where investors feast on good news and traders face the rally on the fear of missing out on the upside. the dow jones industrial ave is already up 20% this year. good news abounds. third quarter gdp growth is higher, corporate profits are up more than expected. consumer confidence hit a 17-year high. wall street has become captivated by the chances for a corporate tax cut. after going most of a year without pricing in the effects of a lower corporate tax rate, the market has placed more days in recent days on companies that will benefit most -- banks, smaller companies and domestic businesses. it would not be surprising if a sturdy but sometimes plodding bull market became more general rouse for a while. yet an alternative to the melt-up scenario was hinted at. a rotation out of the huge global growth stocks that have done b

leaders for "nightly busine" i'm mike santoli at the new york exchange. >> taxes. and whether we will pay more or less under a new administrat in last night's debate, the issue came up it wasn't clear-cut. steve liesn t a look at what we know and what we don't about the candidates' plan >>> a debate overtaxes finding a sliver of air time amid the personal attack that dominated last night's meeting of the two presidenti candidat here's some of the controversial exchange. we're cutting taxes for the middle class, and i will tell you, we are cutting them big league f middle class. and i will tell you, hillary cl is raising your taxes, folks. you look at me. she is raising your taxes. really high. and what that's going to do is a disaster for. >> so it's true. trump is proposing tax cuts for the middle but it appears to be false that all the low and middle class will benefit. new york univers law prof and former obama aide, lily batchelder said 7.8 million mostly middle class single parent families with children will actually see tax increases, some because trump would

for "nightly business report," i'm mike santoli. >>> and ten years after the start of the latest bull run, one hedge fund manager is now forecasting a downturn in interest rates. kyle bass st d today t expects rates to head back to zero next year because ue believes t. and the rest of the world will fall into an n,economic recess forcing the fed then to cut interest rates. >>> so let's turn now to nela richardson to talk about where she sees interest rates heading and the market. she is a s investmentategist at edward jones. good to see you again, welcome back. >> thau. good to be here. >> you do not agree with mr. bass. you do not see a receson ahead, correct? >> no, we don't see a recession that's imminent. for evidence of that, we look to the labor market, which is strong. we see wages growing. we look to manufacturing and we're seeing an expansion. we look at a healthy consumer, as you preface t with,t is still spending. for these reasons we see that the economy willontinue to grow, albeit at a slower pace than what we enjoyed lastyore. >> but you have to advet, w been ten years w

ghtly business report," i'm mike santoli. >>> an 11th hour dealvert for now at least. the first federal trial related to the opioid crisis. the settlement sent shares of the nation's three biggest drug distributors lower. teva shares gained on word of a deal with fourtates though estions remain about that. meg tirrell went to clevelandrto on the happenings inside the crthouse but instead has the story of what happened outside. >> reporter: the jury was selected, theourtroom packed, but just minutes before the rst federal trial over thena on's opioid crisis was set to begin this morning, woror cae of a settlement. the trial was off. ut it's more of delay than a reprieve.four defens, three big distributors and teva reached a settlement with the t ohio counties that were plaintiffs in this trial. it's worth $260illion and adds to the $6 million settlements already reached with four other drug makers. but more than 2,000 cases against drug companies remain brought by cities, counties, tive american ibes, states and others. work towards a broad settlement was underway late

but as mike santoli tells us, some want to know if this is the calm before anothe >> the stock market's recent move to record highs has been unusually subdued. by some measures, the past month has seen the calmest market in 75 years. that's based o narrow trading range. in all but two days in the last weeks the s&p has gained or lost less than half a percent. and this is not just a pattern of late summer doldrums. august often seize erratic trading and has been among the weakest month for stocks in recent years. wh volatility now? several have turned at once. the vote by the uk in june to leave the european union was over done. u.s. economic data brightened considerably and companies began surpassing profit forecast, even as investors gained confidence the federal reserve would not lift interest rates soon. yields on government bonds have remained near record lows. the resulting slow-motion rally has confounded many markets of continues unsettled markets following the sharp wintertime downturn. the question now is whether this lull is simply the calm before another market storm. the odd

for "nightly business report," i'm mike santoli. >>> while the stock market is climbing, there's one stock that is not participating. valiant. earlier this week the company slashed its revenue forecast and delayed its 10k filing. the ankling of the stock began months ago on accusation busy a short seller and scrutiny from washington over drug price increases. this year alone shares are now about 70%. valiant's creditors are starting to get antsy. >> reporter: the uncertainty continues for valiant pharmaceuticals. the biggest immediate concern, the company's more than $30 billion of debt. because the embattled drugmaker hasn't filed its annual report for 2015 it risks triggering defaults with bondholders. the company says it will negotiate with creditors to extend the deadlines though some fear the terms may become onerous. bmo capital market estimates the company has about $6 billion of assets it could potentially divest, ranging from neurology business to prescription eye drugs and dentistry unit. the company has said paying down debt is a key priority for the year. finally investor

mike santoli takes a look. >> january was a dream for stock investors that almost fully reversed december's nightmare on wall street.af r december's brutal 9% drop, the s&p 500 logged the best january since 1987. in fact part of the explanation start powerful rally to 2019 is the extreme weakness late last year. e fourth quartermeltdown in the market depressed stock valuations and drove growth expectations so low that even the earnings progress the last few weeks has been enough to assure investors. fed chairman jerome powell in december spooked wall street by sticking to the expectation of further rate increases in 2019 but in january he has radically shifted toward emphasizing patience i considering further moves. a strong january tends to predict a strong move for stocks. an up january was followed by further gains the rest of the year about two-thirds of the time since the 1950s. but over t past 15 years, the so-called january barometer worked six times and failed the other nine. most recently yorear ago when the s&p was up 6% in january but endedhe year with a loss. the path ahead for

mike santoli found it out for us. >> are investors paying too high a price for the promise of certainty in the markets right now? what with global growth faltering and central bank policy shifting fast, investors haveushed into areas they believe offer a more predictable ride. these include bonds, the supposedly boring stable companies, and the dominant growth companies in technology. some quarter trillion dollars of fresh cash has gone intoond funds this year. the shares of consumer staples and other slow-growth dividend-paying blue chips are up even more than the s&p 500's 19% gain d toe and amazon and long-term with their growth outlook have powered large cap indexes higher by 24% this year. on the losing side are cheap stocks and banking, transportation andal pharmas that need the economy to quicken or policy shadows to lift. the powerful preference for in perceived certy right now is understandable given slowing growth and mixed messages about fed policy.s ther always a chance these trends could go too far. a s iilar trend 2016 after l the president election, for instance. it's tou

for "nightly business report," i'm mike santoli at the new york stock exchange. >>> nike gets hit ontock downgrade and that is where we begin tonight's market focus. bank of america, merrill lynch to underperform, essentially a sell down from neutral, citing an increase in competition from companies like adidas and under armo armour. the bank/ed its price target to $46 down from $55, saying it's not convinced nike has innovative products in its pipeline. to 50.18. >>> cost cuts helped turn a profit with results exceeding estimates. the company said its refer knew grew. williams' shares finished the day down more than 1.5% at 29.to 20. >>> southern company topped profit expectations thanks to higher retail revenue and strong performance in a company subsidy area. southern saw its revenue rise. shares rose 87 cents to $51.57. >>> pharmaceutical distributor, cardinal health, said drug pricing pressures caused profit to fall but still results managed to surpass estimates. the company posted higher than expected sales. however, cardinal cut its earnings outlook for the year, citing short

mike santoli takes a look at what might t happen stocks in the weeks ahead. >> stocks are heading into summer stuck right in the middle of their 2018 range. a swirl of opposing currents threatens tt keep the mar from making much progress as the weather heats up and the trading slows do. the s&p 500 has had an eventful first five months of the year, but theet movement has been slight. the index is up a bit less than 2% year to date and is almostal exactlyay between its late january peak and the february lows. just a bit mor than 5% away from each extreme. seasonal factorsuggest a choppy path into the summer with june being among the weaker months of the year. historical record of midterm election years also points t nervouback-and-forth trading in the coming months. this would fit with the interplay of fundamental factors that have been driving stocks so far this year. corporaterofits are growing briskly and companies are buying back their shares ag tessively. ye threat of higher interest rates and questions over the durability omi eco growth are constant. while wall street has tuned o

mike santoli looks into that. >> the stock market in 2019 is to the level where rallies failed three separate times last fall. now that the losses of the worst decembhe since 1930s have been recovered, wall street is asking whether thi rally could continue higher fromere. the market itself is encouraging to the bulls. the advance has been unusu ly broad with the vast majority of stocks up dramatically from the cember lows, pullbacks have been shallow and brief on the way to a nearly 12% climb in the s&p year to date. another point for the bulls,ve or sentiment is generally muted. surveys show only modest optimism and investors have more money from stock funds this year than they've contfrbuted to them. a contrary opinion angle, that's a netpositive. with the federal reserve emphasizing paence, corporate debt prices have firmed up. that helps to support equity valuations which are now right around their five-year average compared to forecast earnings. but those earnings estimates are a possible stumbling block. s&p cted earnings for the 500 companies have declinedn steadily iecent mon

tly business report," i'm mike santoli. >>> can a quintessential american brand ride out a political storm? >>> in kansas city, missouri, i'm morgan brennan. in the american icon cross hairs of the bigger global trade debate. we look athe rough road for harley-davidson coming up on "nightly business report." >>> listen to this. a s figure salary in san francisco is now considered low me. that's according to new figures from the department of housing and urban the threshold to qualify for low income assistance for a family of four is now $117,000. the highest in the nation and in may the median homerice in the bay area hit a record $935,000. >>> lyft is beefing up to bitter competethe likes of uber. the ride hailing company has now rais $600 million in new money from investors and get this, that now value that's company at $15 billion. that is double the value from just a year ago. uber plans to go public sometime next year, but lyft's ideal plans are less certain right now. >>> harley-davidson has come under fire from presidentterump announcing plans to move some production overseas.

for "nightly business report," i'm mike santoli. >> time to take a look at the upgrades and downgrades. the biggest bear on mattel is raising it from hold to perform. much of it is bakedth int share price. the stock rose 6.5% to 41$1 the iphone supplier synaptics saw its rating change from buy to hold. analysts there say more of amle's newes iph will use the older d technology. te price target was raised $55. the shares gains 8% to 47.68. ae aeroviro mrment was upgraded fr hold to buy. the shares were up t17%o 54.28. still ahead investment advisory fees. they are changing and it could hit your wallet. ♪ >>> facebook's ceo marker zurg testified on capitol hill for a second day. and it appeared as if today's session was a bit more diffilt th yesterday's. julia boorstin is covering the story for us tonight. >> reporter: mark zuckerberg fielding questions from 55 members of the house committee on energy and commerce over a five-hour hearing that was far moreus content than yesterday with today a number interrupting him and demanding yes or no answers lik this exchange with es conan that ca

mike santoli takes it from there. >> five weeks into t2019 and years since the last major bear market ended, the state of the market is confused, or at least more confused than one might expect given the strong rally of more than 15% in the major stoco indexer the past six weeks. this upturn came after one of the quickest 20% dro in years over the prior three months. the decline was all about a fear that a m recessionht be near and federal reserve on the verge of going too far with interest rate increases. the recovery looks like the rapid shift back toward the idea that the u.s. economic expansion is intact and the fed now emphasizing patience in considering further hikes. so which is it? on the one hands measure of consumer and business confidence have weakened. the housing market has stalled and corporate profit growth rates are being reduced toward zero for the first quarter. on the other, job growth has remained far stronger than expected. the government shutdown didn't seem to do lasting damage to consumers. and companies are still expected to expand earnings over the course of

mike santoli did some digging. >> brutal october selloff. has not only dropped the s&p 500 by man 9% and pounded the majority of stocks even haer, it has also place the market right on the line between a routine correction and more serious and lasting setback. the sharp retreat threatened te a longer market uptrend that stretches back to february of 2016 when the worldes ind were emerging from a six-month tailspin related to a global thdustrial slow down and oil crash. weakness recently has investors on alert for signs the market is detecting signals sharp tapering off of u.s. economic growth and corporate profits into 2019. at a time when the federal reserve seems intent on raising interest rates a few more times through next year. the mini market panic runs counter to optimism about sturdy economy and third quarter earnings growth of 20%. the fact that the stock marke tends to lead changes in the economic trend has heightened 'sll stre anxiety and yet it's also true that stocks experience nasty pullbacks far more often than the economy ski

for r "nightly busineort" i'm mike santoli. >>> certainly apple's rar earnings warning has left many wondering how bad it gets this earnings reporting season. and who could be next if any? the ceo of asset management company joins us at the stock exchange tonight happy new year. >> happy new year. >> do you sense if this is a specific problem tos apple or this a broader issue that other companies suffer from as well. >> remember, this is a bad movie second time around. in october when they did this it was the first sign that really the market was anchanging. it did. we sold off since then. then we got to the moment of capitulation at the end of the year and thought maybe okay. and apple does it again. for me this is still an apple issue. because there are two things going on. first they're transforming as a company going from a manecacture ofology to a company that's service oriented that's a slow painful transition. secondly the tariff issue attacking the cost of goods and impacting revenue specifically in china. >> and other companies which o we heard about le caterpillar or boeing

there are a lot of positives in this market, but as mike santoli reports, investors don't seem to care. >> for the past two months the stock market has been nearly immune to what seemed like good news. not only are u.s. employment and retail spending still strong, but several promised positive catalysts have passed without stemming the drop of more than 10% in the s&p 500. including corporate earnings growth, the resumption of share buy backs by companies in october, the passage of midterm elections with the grid lock result that wall street likes, a trade truce with china and a softer tone from the fed on interest rate plans. this run of upbeat or hoped for events has not been enough to rescue stocks from a fear of a 2019 global slowdown. the chance that the fed will hasten the downturn with rate hikes and continued uncertainty over china trade relations. as wall street entered the final two weeks of trading with the s&p down, the question turns to whether the market priced in enough negative possibilities to find support even if we get the feared slow down. some strategists calculate

mike santoli takes a look. >> the major stock indexes are poised to return to record highs lasting more than six months ago, and one criticism of the rally remains popular. is this true? or is the climb broad enough to support further upside to new record highs? there is some truth to the argument that the largest tech ock such as apple, amazon, alphabet and netflix has driven much of the market's gain. roughly half of the increase of the&p 500 index has valued this grier comes from those four stocks alone and the technology sector as a wle is up more than 16% compared to the s&p 500's 7% rise, but it's not true that those winners can explored pervasive weakness. majority of the stock are all down for the yore and each of the 500 stock has the same influence is up norly 5% for 2018. >> more than twice asany large stocks are up more than 28%, and it has to advance some 10%. while investors have become more elective than in last year's inclusive surge for the fast-growing technology giant, it is not clear that the mart is skewed toward a small handful of winners at the expense of the majo

for "nightly business report," i'm mike santoli. >>> time for a look at some of today's upgrades and downgrades. we begin with brazil januayabra company which was downgraded from buy to eyhold. cited the deadly collapse of the company's dams over the weekend. e cause of that is still unclear. price target is now$14 and shares fell 18% to $11.20. >>> amgen was downgraded at evercore isi. the analyst cited patt ncerns and increasing competition for certain drugs. the company reports earnings eomorrow, by the way. shares fell mhan 3% to $191.95. >>> grubhub was upgraded to outperform from neutral at credit suisse. the analyst cited the company's aggressive investments in its delivery network and newnt restauhain partnerships. price target now $130. it's about 60% above of where it closed toesy. shar rose a fraction to $80.99. >>> and credit we ssuisse also upgraded wayfair from outperform to neutral. they cited the blueprint for growth domestically and overseas. that price target is $130. that stock rose 2% to $104.47. >> still ahead, tax tips for the first filing season under >>> the j

mike santoli is staying le at the new york stock exc n that. you don't buy the notion that the faang era is comingo a close? >> well, i do, bill, think it's a lile premature to say it's coming to a close. what we have seen is a little fracturing of ang. if you look at facebook, to a lesser degree google's parent alphabet, those stocks underperformed for a lot of last year. facebook h has its valuation punished to some degree because of all these concerns. at the sone time, am netflix, these companies that are not really using your private data in a way to sell to advertisers but selling ayo service thaare purchasing and you wish to, they have performed better. so there's definitely been rethin exactly how durable some of these business models are. >> so if indeed we do see action against some of these companies or regulations, where do you see new leadership kind of emerging? >> you know, sue, it's very difficult to conceive of new leadership that is exactly asnt domis these companies, because i do think there's an argument to be made that thes

with history as a guide, mike s santoli takes a look at what might happen in the months ahead. >> reporter: not quite halfway through 2017, the stock market has already returned nearly 10%. equal to the long-term average gains for a full year. it would be a mistake to assume this means stocks are way ahead of themselves or due to stall for the next several months. it turns out the stock market only rarely produces an average return in a given calendar year. since 1928, only 6 years saw the s&p 500 index gain between 5% and 10%. what we've come to think of as the long-term average yearly performance. indexes declined more than 20% in a year, four times as often, in fact, and experienced outright declines 30 times in those 89 years. this is a good reminder that equity markets deliver their rewards in waves, not in metered doses. so if the market is unlikely to simply idle near this level for the next six months where might is go based on historical conditions and patterns? no one can say with much certainty, the weight of the evidence tilts toward the upside. the ongoing recovery in corporat

for "nightly business report," i'm mike santoli. >> time to take a look n at some of today's upgradesnd downgrades. we begin with video game take two interactive which was downgraded from outperform at bmo capital markets. the analysts there cites higor expectationsn up coming video game release which it ys uld disappoint. price point, $116. the stock fell a fraction to $113.26. >>> meanwhile, first solar shares were downgraded to neutral from buy at bank of americly the a cites china's decision to suspend construction of new solar farms and to cut subsidies. price target now63 and that stock fell more than 5.5% to $58.24. >>> and bank of america is also making a call on weight watchers,pa rating the c a buy in new coverage. theou analyst says the stock rise another 20% from current levels. the price target is $95. the stock was up 8% to $85.93. petroleum ccidental were upgraded to buy from neutral at citi. the analyst cites rising oilpr eds.to the closed up a fraction. >>> the woman who created an iconic accessories empire that made her name synonymous with trendy handbags was found

i'm mike santoli. >> tlet'sn to david kelly to talk more about what he sees ahead for the markets and tom ec in the second quarter. he is the chief global funds.ist at jpmorga good to see you. welcome back. >> glad to be here. >> let's start first of all with the economy. you maiain that it is slowing down a little bit, but not necearily going towards a recession. >> well, that's right. in fact,ther numbers we got today confirmed that. if you look at the n construction spending, retail sales, and inventories,ar those all actually pretty positive p and they've pushed our estimate for gdp up t 2%, not 3% of last year, but 2% is fine. this is moving forward slowly. 2% growth would be good for markets. >> what's imrtant to wall street right now? we saw this report out the manufacturing tht se to spark this rally. is the overseas economy for more impo? it's part of the story because is part of the risk. we've seen a global manufacturing vortex where the mafacturing numbers coming out of particularly big export to companies like iwan,korea, japan, china, they were getting verse and worse mo

mike santoli explains why. >> on the surface, the recent rise might seem like a good thing for stocksdon't rising yields mean the economy is improving and investors are willing to take on more risk? in one sense, this is true. and yields are still quite low, of course, with the ten-year treasury well below 2%. it is a pullback in equity since last week shows u.s. stocks are for now acutely sensitive to an bankrupt selloff of bonds which lifts their yields. investors have piled into sectors and dividend income, making these stocks less appealing as yields on safer government bonds go up. for these dividend sectors, utilities, telecom, consumer staples and real estate, together make up 18% of the s&p 500 index. the financial sector is only 13% of the index, once real estate stocks are excluded. another factor, rising yields add pressure to the stock market's overall valuation. one of the key arguments for stocks in recent years, low bond yields help justify stocks somewhat elevated values in the eighth year of a bull market. with the recent rise in the ten-year treasury yield, on this b

mike santoli has morerom the new york stock exchange. >> reporter: for most of this year stocks have bee stu in a box. the s&p 500 has been darting rapidly day to day, but within a sharpl dined range. the bad news is, the index is now about 8% below its late january peak. the good news the s&p i above the year's lows set exactly two months ago and has failed so far to breach that level despite several near misses. e market remains caught in no man's land by other measures. the s&p is almost exactlywe halfway b the high and lows and it's scraped against the 200 day ming average a few times which is essentially the line separating a continued up trend from a more damagin down turn. valuation is caught between expensive and cheap. the s&p 500 based o recast profit is downly significa from the lofty january reading but is exactly at the five year average. broader global economic conditions have gone from quite ho in the wakef the tax cut law to somewhat lukewarm as friday's more subdued jobs report showed. these mixed signals and jum volatility have understand bring weighed on attitude a

mike santoli takes a look. >> reporter: the stock market has made it through the toughest part of the calendar in fine shape. if history is a worthy gride, this bodes well for stocks until the end of the year. may through october represents the weaker half of the year, on average. this is the basis for the popular but not entirely reliable wall street saying, sell in may and go away. since the start of may this year, the s&p 500 index is up more than 7%. from august through october, typically a treacherous period for stocks, the index advanced more than 4%, with very little of the volatility that traders had braced for. in upbeat performance has much to do with the broad pickup in the global which i and brisk corporate profit growth. coming in a particularly challenging time of year, the gains are leading some analysts to wonder if the market has pulled forward some of the potential upside for the often strong final months of the year. past results say not necessarily the . in the years since 1950 when the major october period saw stocks climb 5%, the market continued hi over the next

mike santoli runs through some of the deeply discounted groups. >> 2016 has turned out pretty nicely for wall street with the average u.s. stock gaining more than 10%. that hasn't stopped the annual ritual of searching for the most beaten down sectors to play for a dramatic comeback in the new year. it's difficult to buck the market tide. buying stocks that have suffered extreme declines over a prolonged period can offer spring-loaded gains in years to come. a good example from the past year, coal stocks had lost some 80% over four years entering 2016. so far this year, coal stocks as a group have more than doubled. in hunting for such potential comeback plays, investors can start with sectors down more than 50% from their highs over two or more years. one group that now meets these conditions is specialty pharmaceutical stocks. makers of generic drugs have seen their shares drop by 50% to 80% since early 2015 on a litany of concerns over drug pricing and regulatory threats. names such as endo international, and mylan now trade at unusually depressed valuations. the pricing and polic

mike santoli takes us back a decade to remind us thaadeven if youhe stomach to buy stocks then, the road back was very bumpy. >> even before lman brothers collapsed and before the full financial crisis and bailouts unfolded, stocks were already in a bear market. by the friday before lehman' failure ten years ago this week, the s&p 500 had fallen more than 20% in just under a year. bank stocks were cut in half and a recession was underway. in other words, it was a time when disciplined long-term investors might consider investing more in stocks on the idea that they alrea rlected plenty of bad news. as it turns out, this idea would have been sou but the timing awful. the s&p since the eve of's lehmankruptcy is up 130% or an average of 11% a year including dividends. that performance is right in line with the market's historical rate of return over the past century, so in this sense after a decade an investor wasot penalized for buying stocks on the precipice of a global panic, but this move was afterwards. a long while the s&p gave way after lehman fell ultimately losing another 40% over

mike santoli takes a>> look. with a midterm elections past and the result largely as expected wall street has turned the focus to the chances for the stock market to continue the rebound from a nasty oxycodone with a year end rally. following the popular script as many stregists noted midterm election years have a tendency to finish strong. and the prevailing wmadom holds rkets do fine with d.c. gridlo and a power split between the two parties. it's important to note gnthat t major index rose more than 7 peppers from the october 29th low and investors have not been freed from the election by the ncerns weighing o the mechanic. trade frictions with china, qution base how aggressive the federal reserve will be in raising rates, and uncertainty he over how much growth in the economy and inon corrent profits might slow in 2019. the election had no direct bearing on the china tariff issue which has been an year hang on stocks. as for the fed, it meets and will issue a policy statement tomorrow. bu no move onates is ex

santoli explains what they e, ar and why they are suddenly getting so much attention. >> reporter: wall street's slide er the past two weeks has cast a harsh light on an obscure corner of the market, funds that invest in or bet against volatility itself. volatilityys simpl how much and how fast stock prices change. for decades, ethough, volatility index, known as the vix has provided a gauge of traders' expectation of future volatility. in the past seven years investment firms have ha concentrated ee traded products whose volume the bas whether this volility measure rises or falls during a given day. the most populare to v on volatility staying low, issued by credit swiss under the symbol ixvt l all of its value on monday's market route. for example, if the vix falls 10% in theday, the xiv goes up 10%. 17 as stocks rallied in a steady calm way, it delivered a 187% return. but when the vix surged by more than 100% on monday from 18 to 38, the xiv was effectively wiped out. not before, though, the managers of the xiv and many other investors using similar strategies were forced to buy fut

mike santoli has more.r: >> repor with a break to a new record high in the major indexes just ahead of aederal rerve meeting, wall street finds itself in pretty familiar spot. in fact, the past five fed meetings going back to march have come as the s&p 500 was approaching or was sitting at an all-time high and each time stocks began to dip or pull back anywhere from 2 to days surrounding that fed meeting. the st severe setbacks came after the mayay or july meeting which came in the thick of a reassuring corporate earnings season. investors are now asking whether this pattern will strike again with the fed widely expected to deliver its third rate cut in four months comg thiswe esday. but there are reasons to think the market is a bit less vol neshl leading up to this feded move. for one thing, the rally lately has been unusual broad and has beaten the beaten down cyclica sectors. this is a signar thet is no longer acutely fearful of a recession starting ver v soon ad investors are not seeking open-ended help from the fed the way they were in past months. treasury yields as well have be