erika miller, "nightly business report," new york. >> susie: joining us now with more insights on this case? david rosenfield. he's a former federal prosecutor on securities fraud and is now a white-collar criminal defense attorney at herrick, feinstein. hi, david, thank you for joining us. >> hi, susie, thank you. >> susie: so 62 million in illegal profit, a lot of top money managers. how important is this case? can you put it in perspective for us? >> it's a very important case. based on the amount of money that was allegedly made, $62 million in profits, that's right up there with the amount that raj made. the number of arrests, seven people were either arrested, three pled guilty. this is a huge case. it's part of a continuing ongoing investigation by the government. you know, the train has stopped at this station, but the train is going to keep on going, there will be more stops. the government made it clear that this is going to go on and on and on, there are going to be a lot more insider trading investigations. >> susie: david, you've been on both sides of these kind of cases,

. >> tom: still, as erika miller explains tonight, the strong sales came at a hefty price. >> reporter: 50%... 60%... even 70% off. retailers know many customers won't even look at merchandise unless there's a "sale" sign. >> the customer is demanding "sale," and they are only buying when they do see "markdown" and "clearance". >> reporter: kohl's and j.c. penney lowered their fourth quarter earnings guidance today, blaming excessive markdowns. it didn't help that weather was warmer than usual in many parts of the country, making sweaters and coats a tough sell. >> i think there were unplanned markdowns that were being taken toward the end of the month on those items. i think that will continue and is continuing into january. and i think that's where you have the real margin risk. >> reporter: but in some cases, even desperate discounting wasn't enough to spur sales. gap and wet seal posted terrible same-store sales results, with declines of 4% and 3.7%, respectively. >> they were very promotional. they were very promotional and, still, that didn't help them as they expected. and there

erika miller reports from new york. >> reporter: if you want to know what's in store for the economy, it helps to come to this store. eneslow in manhattan does not just sell shoes, it makes them in a workshop downstairs. when the economy is doing well, shoppers splurge. >> when things are good, they're going to want that second color or they are going to want something for the other part of their lifestyle that they didn't have a direct need. >> reporter: but that's not happening these days: >> they are buying to need, not to want or desire. that's what i'm seeing. >> reporter: that means the 15,000 shoes in the back of the store aren't moving quickly out the door. when companies start building up inventories, it can be a negative sign for the economy. the more merchandise there is in the stockroom, the less need there is to place new orders. and if the trend is widespread, it can force factories to scale back production. but some economists hope the inventory build-up last quarter might actually be a positive omen. >> it does suggest to us that firms are feeling confident about futur

erika miller takes a closer look at what's behind this trend. >> reporter: you're probably wondering what i'm doing at a pizza parlor, when we're talking about stock buybacks. but an easy way to understand why they are growing in popularity is to use pizza as an example. imagine this pizza is a company and it's sliced into eight shares of stock. if a firm retires one of those shares, the remaining investors will own a bigger percentage of the firm. so, each share becomes more valuable. >> it helps the earnings per share, and makes up for some of the some of the growth they can't do on the top line. by reducing the share count, the earnings per share goes up. >> reporter: powered by nearly a trillion dollars of cash on hand, corporate america bought $118 billion of its own stock in the third quarter of last year. that's up about 50% from year- ago levels. and that may be a bullish sign for the stock market. >> companies respond to the market, when they see their share prices severely undervalued. they see the shares as a good investment. so you may seen an elevated level of repurchase

erika miller reports on how financial firms are likely to perform this earnings season. >> reporter: if there's one sector that's struggling these days, it's financials. >> where some of these companies are seeing weakness, generally speaking, is in anything related to capital markets, so revenues from m&a activity, i.p.o.s and so forth, trading revenues, and then mortgage activity. >> reporter: so why in the world are financials expected to post the biggest earnings increase of any sector with a whopping 70% gain? the answer? a quirk in the data. turns out, the financial sector's strength is due almost entirely to gains at one firm, a.i.g. >> the company reported a huge loss a year ago. it was $16 per share. they had some charges. as a result, because they are expecting a profit this quarter, plus their overall weighting in the index, it's just having an unusually large effect in this particular quarter. >> reporter: take out a.i.g., and earnings for the group are expected to be flat. but they may be worse than flat. estimates for financials have been falling steadily since the star

but as erika miller explains, higher sales don't always mean higher prices. >> reporter: the housing market is usually linked closely to the labor market. after all, people won't buy homes unless they have a steady paycheck and confidence in their jobs. but a pick-up in hiring nationwide may not matter much this time. economists say the missing ingredient is raises. >> growth in wages-- this is the gauge that we need to see start improving before we see any significant improvement in housing demand, and the wages have been falling. >> reporter: a even bigger problem is bloated housing inventory. according to corelogic, there is currently a shadow inventory of about 1.6 million homes for sale-- a five-month supply. and more homes are likely to come on the market if banks reach a robosigning settlement with state attorneys general. >> we are probably going to see a settlement soon this year to resolve that, which will result in a new wave of foreclosures, and so a lot of those homes that have been delinquent for a while, finally move the stage of foreclosure. >> reporter: that doesn't

erika miller takes a closer look at where prices are likely to head from here. >> reporter: this home in lyndhurst, new jersey, just came on the market. it joins an estimated seven and a half million homes currently for sale nationwide. experts say a healthy level is about two and half million. unfortunately for sellers, the outlook for the housing market is becoming more gloomy ahead of the key spring selling season. residential property values fell a steep 1.3% in november, according to the latest case- shiller report tracking 20 metropolitan areas. >> 1.3% over a month is really a rather large fall, and that's coming off two months of declines in both september and october. >> reporter: that's not the only bad news. home values around the country have fallen by a third since the housing market peaked in 2006. prices now stand at 2003 levels. home prices continue to suffer, despite historically low interest rates and improvement in employment. the big problem is the vast number of homes currently for sale. and another wave of foreclosures could further delay recovery in the sector.

erika miller, "nightly business report," new york. >> susie: speaking of prices, j.c. penney is simplifying prices and putting an end to nonstop promotions. it's all part of new c.e.o. ron johnson's plan to revive the 110-year-old department store chain. he's the man who built apple's retail store strategy. in full-page ads, penney's explained the changes, saying "no more pricing games, just and, "we want to be your favorite store." another change coming to a pennys store near you? new plans to redesign floor space into as many as 100 smaller specialty shops focused on individual brands. >> tom: j. p. penny shares slipped just a fraction, following though a four times average. let's go to tonight's market focus. >> tom: stock prices got a boost from the federal reserve in the middle of the day today. it was waiting and watching for the central bank this morning, with the s&p marking time with a fraction loss, but when the fed pledged to keep interest rates low for even longer, the market moved into positive territory, climbing to a gain of almost 1%. so, with the fed's

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erika miller, "nightly business report," new york. come as new sources of u.s. energy are feeling an increase in production. energy officials say development of renewable resources and the boom of u.s. share are all driving the potential for u.s. made energy. sylvia hall tonight reports on the outlook for this year's domestic energy. >> reporter: the u.s. imports nine million barrels of crude oil per day. industry experts say we don't have to. in fact, right now the untapped energy supplies in the united states far exceed demand. >> all the oil that has been consumed over the past 100 years doesn't come anywhere close to what oil is produceable in this country. >> reporter: but still, citizens for affordable energy c.e.o. john hofmeister expects conditions abroad to import volatile energy prices this year as america continues its dependence on foreign oil. just before the new year, iran bumped up prices when it threatened to close the strait of hormuz-- a major mid-east artery for oil tankers. >> i'm expecting a higher price outlook for 2012, unless and until we

erika miller, "nightly business report," new york. >> susie: joining us now to talk more about those ratings downgrades? john chambers, managing director of standard & poor's ratings service and chairman of the sovereign rating committee. nice to you have back on the program. >> thanks for having me. >> susie: well, tell us why did you do the downgrades today? why now? give us your analysis? >> well, we see rising systemic stress throughout the eurozone area. that lead us to put 16 of the 17 sovereigns on credit watch. we did that on december 5th. credit watch action is usually resolved within 90 days, usually much seen. and we see the systemic pressure coming really from several fundamental factors. and these include, and they are all inner related. these include tightening credit conditions, we see rising cost of refinancing external debt which is partly a function of a reversal of the globalization that we've seen and financial market integration. we see governments and households attempting to delever because their own level of indebtedness had reached very high historical levels