Takes to keep your portfolio well diversified. We have all that and more tonight on nightly Business Report for monday, july eighth. Good evening, everyone, and welcome back from the long weekend. We begin tonight with a history lesson. 81 years ago today stocks hit rock bottom, on july 8, 1932, the dow sat at 4122. Not 4,000 but 4122. A nyse low. Today stocks turned in their third winning session in a row. The dow closed at 15,2 4. Share volume, 3. 5 billion shares. There wasnt much news to propel stocks today. Members conjured members of fridays jobs report. And the dow off its high for the session shot up 89 points, the nasdaq added 5, the s p 500 was up 8. The russell 2000 index of smaller stocks closed at a record today of 1009. Excluding special items, alcoa beat analysts estimates. The edged forecasts by a penny, it saw a slight beat on revenue two. Even though sales were down a little bit compared with last year. Despite a weak aluminum prices, alcoa benefited from increased demand from its metals. How do things look for the aluminum giant for the rest of the year . That was my first question to alcoas ceo when i talked with them a short while ago. We see there are bright lights in the world, i mean if you want to talk about region, i mean, we see that the u. S. Has continued to roll. I think were talking about a gruj of 2 probably accelerating in the second half of the year, bright spots in some areas like aerospace, automotive, and potentially building and construction. Also then we saw that before. The u. S. And europe is muddling threw, and china, i continue to be optimistic, around 7. 7 gdp growth. Thats the world view. Despite those bright lights, you have been forced to cut back on some of your capacity. We announced two closings in this quarter. Are we going to hear more of those closings to come . On the upstream side, were taking the respective steps, and curtailing restructuring and closing plants, at the same time were growing our value on our businesses. The second expand were doing in tennessee, the first one was in tennessee. The owner is already there. We are expanding on the aerospace side with three investments, one in pittsburgh, the second one in england and the third in indiana. Theres a lot going on on the dwroej side. Claus, theres been a lot of talk, and im sure you heard it, about the Federal Reserve cutting the stimulus out of the economy, when that happens, would that help or hurt alcoas business . Well, look, thats a complicated one, because i believe it will only happen as bernanke and other fed president s have said, if the recovery of the economy is stable and strong, the stable strong recovery of the economy, will help alcoa on the upstream as well as on the down stream side. In light of that, i think in the end it will be the right thing if done with the respect of moderation and not leading to a disruption in the market miss. Let me put it this way, looking at Business Conditions under that scenario with the Federal Reserve moving out of the economy. Will you feel comfortable about adding jobs, because alcoa has been adding jobs over the last year or two. We have been adding jobs, those businesses that grow. Automotive aerospace, we also have to restructure on some other end around the world. So we see this mixed picture there, if you look at the u. S. Recovery, its underway here. I want to ask you a little bit about alcoa stock, its been a tough time for investors, theyve seen the stock drop sharply, and it has been the worst performer in the dow, im sure you dont like hearing that, what do you think its going to take, whats going to be the catalyst to get this stock to move higher . I believe we have to concentrate on the things we can control. Were growing our value at businesses, putting a lot of innovation in there, if you look at the year to date, the value at business already makes 57 on our revenues and accounts for 80 off the profitability of our core, so its a major driver of our core, and it has a lot of prospects. Eventually when we create this value, i think the shareholders will also recognize that. A little later in the program, well have more on what to expect this earnings season, as we look at which sectors may surprise investors with strong growth, and which are likely to disappoint. Well, the fdic is gearing up to announce higher capital restrictions on banks tomorrow. And some of the nations biggest lenders are not happy. Theyre expected to raise a key ratio leverage from banks and will include offbalance sheet items. And will not be adjusted for riskiness. The new requirements will be stricter than the International Banking rules known as bazal three. Just days after delaying Health Insurance requirements for companies, the white house is rolling back some more requirements for the new health care plan. The Administration Says its relaxing Income Verification and insurance status rules for people applying to statebacked insurance exchanges. Theyre slated to be in place on october 1st. Shares of some of the nations Largest Health insurers hit 52 week highs today including health group and santine corp. Members of congress were off spending the week in their own districts. Now theyre back and they have a lot of major legislation to work on before their next break, which is just four weeks away. Hampton pearson has more. As Congress Returns to work on capitol hill, july could be a make or break month for Immigration Reform, Student Loans and the fate of the fiveyear farm bill. Fixing student loan problem has the most real world impact ranked double in july for Student Loans. Just as 7 million College Students began filling out applications for the fall. Harry reid and john boehner squared off again on Student Loans. The house has done its job. Its students that are going to pay the price when they see the Interest Rate on their loans doubling. Balance the budget on the backs of struggling students. How republicans hold the keys to the fate of both Immigration Reform and the farm bill. On immigration, the senate plans that couples who promise a path to citizenship with increased Border Security is a nonstarter with house conservatives who favor a piecemeal approve. The speaker, john boehner is in a very weak position with his band of very extreme conservatives who have little interest in making concessions. The fate of the fiveyear half a trillion dollar farm bill is uncertain. Conservatives want cuts in the almost 80 billion a year food stamp program. Which along with farm subsidy programs expires at the end of september. A large part of that bill, and its been estimated as much as 80 , may be allocated to funding food stamps. Republicans are saying some of the house is saying that that isnt going to benefit people in my district. Growth for political and economic price over the budget and raising the debt limit to continue. The two deadlines that matter most. The august recess, and the september 30th end to the fiscal year. And the clock is ticking. For nightly Business Report, im Hampton Pearson in washington. Heres something lawmakers probably wont argue about. The federal budget deficit for the current fiscal year is shrinking. Before you start celebrating, the white house also said theres still a shortfall of 759 billion. Credit goes to the improving economy and those across the board, federal spending cuts in the sequester legislation. Uncle sam may have been spending less money, but the rest of us did a lot more borrowing during the month of may. The americans increased their debt that month. The fastest pace in a year with total borrows reaching a record 2. 84 trillion. Credit card use or its biggest gain in a year while borrowing for new cars and Student Loans also saw big increases. No more special treatment for high priced clients. Thats the word from reuters today. The Financial Information giant has agreed to end the practice of providing high speed traders early access to its important Consumer Sentiment data. The company allowed those traders to get the information two seconds before it was distributed to other subscribers for an additional fee. Regulators said those two seconds can give those clients an unfair advantage. For more on this story, go to our website. Corporate earnings season kicked off today, and will kick into really high gear this weekend and next. Expectations relatively muted but right now the market doesnt seem to care much. Here to talk about what to expect is mr. Butters. What is the overall Earnings Growth you expect for the Second Quarter, and why do the estimation seem to be coming down rather quickly . Right now were expecting Earnings Growth of 7 10 of a from the Second Quarter, thats down from the start of the quarter, one of the reasons we saw a sharp decline in expectations was the unusually high number of Companies Giving guidance, we saw 87 companies in the index give negative guidance for the quarter. Those are the three sectors we saw the largest cuts, as a result, the growth rate has come down to 7 10 of a of expectation as of today. When you see those kinds of cuts in materials, which would be mining, resources, industrials, does that tell you the overall Global Economy is slowing 1234. Well, i think theres some concerns there, last quarter we saw Companies Give mixed commentary in terms of what theyre seeing from elearning markets. We saw mcdonalds and cocacola say the conditions were weak in emerging markets. Other companies saw strength in emerging markets. I think thats a key theme to watch this earnings season. How are Companies Performing this quarter. I think the earnings have slowed, but its largely attributable to one company. Or a big hunk of it is one company, apple. The expectations from the technologies earnings to be down about 6 opinion 59 . Apple is the largest contributor to this decline. For many quarters, apple was the largest contributor, starting last quarter and continuing this quarter, apple is now a detractor in Earnings Growth. Its expecting sales to be down for the ipad and iphone. If you exclude apple, the decline would be cut almost in half, we would only have about a 3. 4 decline. Apples responsible for a large portion of the decline were expecting in the technology sector. There are lots of ways to play with numbers. But fewer ways to boost your numbers with respect to revenues 37 what do you expect on the sales front this quarter . If we look at revenue growth, its even with Earnings Growth, were expecting about 1 growth. However, most of the sectors are expecting growth eight out of the 10, a lot of the weakness is coming from the energy sector. If we exclude energy, revenues would be up above 3 overall. Not great growth, but a little better than the 1 expectation were seeing now. Give me artful speculation john. If the numbers are so muted, so soggy, why is the stock market moving up as well as it is. Well, it could be a case that the market is already discounting the Second Quarter and looking ahead to the second half of the 2013. Expectations for growth are projected to improve quite a bit. In a Third Quarter, analysts are looking for growth to improve to 7 . In the Third Quarter its expected to jump up to 13 . We talk about it quarter after quarter, you want to watch the guidance the companies are giving for q 3 and for the second half of the year, again, there are lofty expectations for Earnings Growth for the second half of the year. It will be interesting to see what companies are affording that growth, and which are ratcheting their numbers down. Still ahead on the program tonight, there are over 8,000 mutual funds and etfs out there, you may need to only have three to have a well diversified portfolio. First, lets take a look at the stocks that hit all time highs today. Former treasury secretary is building a nice nest egg after so many years in service. Hes hit the speaking circuit. Geithner recently made 400,000 for just three speaking engagements. One at deutche bank in june and two private Company Meetings in april and may. Computermaker dell shares rose 3 today. Dell shareholders accept the 224. 4 billion buyout offer from michael dell and his backers, silver lake partners. Dells offer was countered by a competing offer from carl ikon, that would keep part of that pc maker public. Accepting dells offer wont be easy. One of dells major shareholders called dells bid unreasonable and says it exploits the companys weak share price for the personal benefit of the ceo. We shall see. Turning to our market focus, we begin with intel. This is a stock that dragged down the dow today. Evercore partners, marked intel down to underperform citing unfavorable risk reward at current levels. Investors sold intel at double the usual volume, and the stock closed more than 3. 5 lower at 23. 18. Facebook was a winner as it expanded access to graph search. This is a tool to find anything indexed on members pages. Facebook posted information for users on how to restrict graph search on their content. Facebook gained almost 1. 5 to close at 24. 71. Price line. Com reached a high, 1,010 a share. Priceline has an improved competitive position. Investors seem to agree, driving the stock up almost 4 on more than unusual volume. Price line, 888. 63 at the close. Mastercard touched an all time high. Kbw said credit quality appears to be on pace to outperform for the year. Raising mastercard to a 691 a share target price. The stock has gained more than 20 this year, but after the open, mastercard closed down about 1 . And the jones group has reportedly hired city group to explore a sale, boosting shares of the retail brand owner, in addition to jones new york clothing, its home to anne klein, nine west and more than two dozen big retail brands. Shares of jones gained more than 7. 5 on six times the usual volume. When it comes to your portfolio these days, believe it or not, experts are saying it doesnt have to be complicated. All you need are three funds for a diversified portfolio. Here to talk about how you could do that, is anna prior, shes a reporter at dow jones news service. You know, anna, just three, that seems to go against everything we have been told about diversification. Tell us what the thinking is behind this new back to basics approach. The thinking is that basically, there is such a thing as too many choices. The idea is to simplify, get people going back to basics and to focus on getting a handle on what investments they have, you can get great diversification in a portfolio with just three funds. If you have 20 or 30 or 100 funds, it doesnt mean you are diversified if you own 100 of large cap funds youre not diversified. So your funds may overlap. Im dying to know, what are these three funds that will do the trick for me . For the average investor, what theyre going to want to look for is exposure to the u. S. Stock market, exposure to the International Stock market and exposure to bonds. What a lot of people talk about as kind of three key ones, large u. S. Diversified equity fund as well as an International One and a bond one. Vanguard funds get talked about a lot in this context. You can also kind of put together portfolios from ishares as well. If you want to go with the classic 60 stock 40 bonds. 40 bonds right now sounds so risky, how do you choose these funds and how do you know which bonds or stocks to go to . You want to look for something that is very well diversified, tracking a lot of different securities. You want to look for things that are low cost, so again, vanguard, ishares, spider also has finds as well. Theres a lot of low cost index funds and etfs. That being said, for some people, maybe active management makes sense. Youre going to want to get to your adviser and talk about what makes sense for you. So much will depend on your time horizon and your risk tolerance. I assume the classic way to do this, would be a total index fund that covers all the stocks that are traded in the u. S. A smattering of all the stocks that are traded internationally, and a collection of all the bonds that are traded in the u. S. That would be the classic way to do it, right . Exactly. That would be kind of the classic way, but you know, some people talk about, you know, getting one fund thats global stock market exposure, it combines the u. S. And international, and breaking up the other two funds into a u. S. Bond and International Bond. Vanguard has an International Bond fund out there. How you divide it up is up to you based off of your objectives. All right. Sounds like a lot of homework to do there, but of a different kind. Thank you so much, anna. Anna prior, reporter at the dow jones news wire. Coming up, the boating industrys making a comeback, but will it be smooth sailing ahead . Also, a look at how commodi commodities, treasuries faired today. Barnes noble says its ceo William Lynch has resigned effective immediately. The company has been struggling to gain market share in the tablet and e reader market. Fiat is looking to own more of chrysler. Fiat already owns more than half of the u. S. Automaker. With the remaining stake held by a trust that pays medical bills for retired united autoworkers. Meanwhile, fiat is in a hurry to fully merge the two companies so it can benefit from the booming u. S. Car market. While chrysler has battled back, the boating business has seen a big turn around, and if a rising tide does lift all boats an improving economy appears to be lifting boat sales. Mary thompson has our report. This summer its estimated 88 million earn manies will hit the water, many of them in new boats. We actually are anticipating following this past year, which was up 10 with a 5 growth this year, and hopefully if the weather gets a little better, it will be higher. Smaller boats leading to surge in sales, carl black well credits higher prices on land. The primary reason for increased boat sales is peoples home values have come back. As home values increase, boat sales are going to increase. The engine of the boat industry, power boats less than 26 feet. Accounting for 82 of the market, sales rose over 11 last year. Sales of big boats or yachts, improving but at a slower pace. Marine max sells 30 to 60 foot boats. Northeast regional president Matthew Barbera says sales are good, but not great. Financing is tougher for clients and an anticipated bump in sales has yet to materialize. People still working on their boats getting insurance checks, i think that it hasnt hurt us, it hasnt helped us, but eventually it will create a lot of business in the service department. Sales have been steadily earn creasing off the lows of 2010. Viking makes custom made yachts, the average price, 3 million. Whats behind their increase in sales . A better stock market. Viking coo Patrick Healy sees sales accelerating in 2014. We have a 60 higher backlog today than we did 12 months ago. Thats the exciting thing, our growth is going to come next year, big growth will come next year. A forecast you could call a sailors delight. For nightly Business Report, im Mary Thompson in new gretna, new jersey. Finally tonight, members of the clergy dont need a boat to get around vatican city, they may need a car. Pope francis is urging priests and nuns to exercise austerity and avoid flashy or expensive cars saying a car is a necessary, but please dhuz a more humble one. If youre wondering what the pope gets around in, its a ford focus. Thats a humble car, but a nice car. Log on to our website, nbr. Com to submit your question and include where youre from. Thats nightly Business Report. Thanks so much for watching. Thanks. Have a great evening, everyone, well see you here tomorrow night. Vo geico, committed to providing service to its Auto Insurance customers for over 70 years. 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