Our guest says hes investing in a blue chip, a value stock and a cutting edge tech company. All that and more tonight on nightly Business Report for friday, january 17th. Good evening and welcome. Stocks continue their somewhat tentative start to 2014 today. It was as has been the case quite often this year, a classic mixed market. The dow was the only one of the three major barometers to end the session with a gain and that because positive showings. American express, visa, Goldman Sachs and ibm. Only eight of the dow 30, but that was enough to pound the weekly gain of the year. And so far in 2014, the dow is off about three quarters of a percent. Todays soggy trading was marked by worries over earnings and outlooks. Manufacturing margins, ups, flat out profit warning. On this friday, the dow gained 41 points. The nasdaq down by 21 and the s p lost seven. Well turn to Chris Gaffney for his analyst. Senior Market Strategist with ever bank. Chris, you heard at the top of the program, the saying on wall street is as goes january, so goes the year. So, should investors be bracing themselves for a down year . I dont think so. We certainly have had a bit of a rocky start to the year. Its been a short time period so far and i think theres a lot of things that will support the Market Going Forward. Namely lower Interest Rates and i think increased Consumer Confidence. I was speaking earlier this week to a Portfolio Manager who said we had a market up about 30 last year on earnings gains of about 6 . You do the math. This gives me the sense that maybe the market is getting very close to fully value. What do you think . We are fairy valued. Its going to be all about earnings in 2014. Its definitely going to be depending on companies having earnings catch up with those price earnings multiples. You know, they say on wall street its all about expectation and weve gotten a lot of warnings this week. Our guidance thats weaker than expected. Should investors just ignore this information . What are you seeing . You certainly shouldnt ignore it, but i think its become almost common place for companies to you know, get some guidance as far as negative guidance and then you know, earnings have traditionally been better. Some people on the desk that always say the key to happiness is reduced expectation. Six of the ten s p 500 sectors so far this year are actually in negative territory, but obviously, weve been traping for what, two and a half weeks and thats not much to go on, but what sectors do you think will be the most positive contributors to Market Performance this year and which will subtract the most . Well, i think the financial sector, obviously, is already showing that its going to be one of the better contributors to the Market Going Forward in 2014. On the negative side of things, the tech sector, as weve seen again, weve seen what i think well see Going Forward. Some of the tech sectors is certainly going to be a direct. So, chris, we have more earnings coming up, obviously. Theres going to be some important economic numbers coming out over the next couple of days. What are you looking for . Some of the sign posts that are going to guide you in your Investment Strategy . Its going to be all about the earnings. And again, i think that weve got shortened week next week. The jobs numbers, the weekly jobs number, we get on thursday, then the housing numbers we get on the end of the week. If the housing can continue to do well, i think that trickles over to Consumer Spending and Consumer Confidence and i think that is whats going to drive the market higher. All right. Well, thank you so much. Have a great weekend. Chris gaffney with ever bank. More on the troubles at ups, which delivered some bad news to shareholders today about its earnings outlook that despite a Record Number of shipment, morgan brent has more. Investors getting an unexpected welcomed delivery from ups. Warning that the end of this month, its Fourth Quarter profit will be smaller than expected. Its also forecasting full year 2014 guidance below the streets expectation. Ups blaming the level on an unprecedented level of shopping that caught the company off guard. Particularly, a surge in last minute orders as retailers like amazon extended offers. They say the strain on its system forced them to spend more money. Operating in terms of extra overtime and significantly larger temporary employment than the company would normally use. To the tune of 30,000 more than they would normally use. The biggest delivery day came later than the Company Expected and it was bigger. Representing a 13 increase from 2012s busiest day. That coupled with bad weather and a shopping season almost a week shorter than last year, meant some packages didnt arrive in time for christmas, causing the company to refund shipping costs for many customers. Todays news wasnt welcome for investors. Analysts do see a silver lining, saying last Holiday Season could lead to a longterm growth opportunity. I think this actually bodes well for ups because it maybe validates or amplifies expectations for continued online fulfillment that benefits all of the integrated shippers like ups and fedex and in europe. Still, the shift in Consumer Behavior the likely to result in more lodgist cal planning and higher expenses for holidays in the future, but for a company like ups, analysts say the cost should not be hard to absorb. In fact, the shippers still expect to see as much as 15 growth in 2014. Intel is slashing jobs. 5 of its global workforce. 5,000 workers will get pink slips. The announcement comes one day after disappointing Quarterly Earnings and a lukewarm revenue forecast. Intel says its shifting away from the computer chip, giving weak demand for personal computers and it plans to focus on faster growing areas. Despite that, there is good news today ab the job market. In its latest survey on job openings and turnover, the Labor Department says advertised jobs rose to 4 million in november. Thats the most in five and a half years and the number of people who quit that job to take on a better one was the highest in fyfe years. An update on the Security Breach at target. Says its uncovered six ative attacks on others. Infected with the same type of mall ware that has used to access 40 million debit and credit cards. Were learning more about the attack on nieman marcus. The New York Times reports that payment cards and Customer Data may be gone as far as back as july. And fully contained until just this past week. In washington today, president obama announceded some big changes at the nations Top Spy Agency while defending some of its controversial surveillance programs. The president compare ed the electronic eves dropping into our private lives into what some companies are already doing to find out who their questions are. The challenges dont come from government alone. Corporations track what you buy, store and analyze our data and use it for commercial purposes. Ads pop up on your computer and smart phone periodically. But all of us understand that the standards for government surveillance must be higher. Those Higher Standards involve changes about who the nsa will no longer spy on and about storing all that internet phone and email data. Eamon jabbers joins us now with more. Theres a lot to talk about, but let me start with many telecom and tech firms were upset. Theyre krit kl of the report of unknown surveillance. How is that going to change . Put out statements today interestingly they were identical word for word calling this a positive development, praising the president today for what we dont know is what is going to happen, doesnt call for the attorney general, the director of National Intelligence to get back with him on some ideas. So, eamon, as i gather, the government is no longer going to collect and store and analyze this telephone megadata, but who is going to store that stuff . Are the Telecom Firms going to have to hold on to all of those records . That is the big question here. The president said he doesnt think the government should be in the business of collecting and storing all that data itself. But the question is who is going to do it. The Telecom Companies have been resisting. They dont want to hold it either. Its become a bit of a hot potato, another proposal that created Third Party Entity of some kind that would be in charge of holding all of that data. Of course, if such a repository was created, it would be a huge target for hackers and Intelligence Services around the world. But the question is whether that would create more problems. Some real unknowns here Going Forward. The president said he wants to get out of this business, but as to where its going, its unknown. Still ahead, Airlines Start reporting earnings next week and some say the results could be among the best the industry has ever seen. The iphone finally went on sale at china mobile stores today, so will chinese cust mes pay more just to have an iphone and will apple stockholders see any benefit . Eunice yun has the story. The chiefs of two tech titans celebrate their newfound friendship. Tim cooke and the chairman of the worlds biggest cell phone carrier, china mobile, are at the store, handing out autographeded iphones to some of the first to buy one through china mobile. Today, were bringing the best smart phone to the fastest notework and the Largest Network in the world. For six years, the two have been courting each other, unable to see eye to eye on commercial terms in text messachnology, bu theyve overcome those hurdles. This is what the fuss is all about. Iphone. China mobile can earn more as customers spend on data. Apple could potentially sell millions more gadgets to Chinese Companies 760 million subscribers, twice the size of the population of the united states. China is apples biggest market outside the u. S. , but many wonder if its new partnership would be enough to fend off cheaper competition and maintain its iconic status here longterm. The bottom line is its going to help apple to sell more phones in china at a time when apple started to globally, sell a lot of phones, so theres no doubt its good for them. For now, these customer rs happy to get a 5s or 5c, just as investors will have to wait to see if this pays off. General electrics Quarterly Earnings were right on target, but investors werent impressed and thats where we begin. Fourth quarter income was up nearly 5 as revenue increased, but the company has been able to grow profits by cutting costs and increasing productivity, but product margin came in below. Shares fell to 26. 58. Legal bills weighed on Morgan Stanleys profit, but investors didnt seem to mind. Mortgage securities topped 1 billion, but the firm says strong Investment Banking performance helped give a big lift to earnings. Shares rose to 43. 40. Capital ones profit missed estimates because fell in the credit card and Consumer Banking franchise. Revenues fell more than 5 . Finishing the day at 72. 39. Ibm will invest more than a billion dollars to expand its cloud services. This will include building 15 new data centers around the world. This isnt the first cloud investment in soft layer, a computing business last year for 2 billion. Shares rose today slightly to 190. 09. Maybe airlines will also be reporting their Fourth Quarter results next week and profits are expected to be among the best the industry has ever reported. Phil lebeau has more. After years of struggling with soaring jet fuel prices, costly labor contracts and the inability to bring in more revenue, the Airline Industry is finally soaring. By and large, the airlines are indeed finally getting it to where theyre operating as a business rather than as a market share entity. What lifted the airlines in the Fourth Quarter . For starters, they filled a higher percentage of their seats. Uniteds load factor jumped 3 . At the same time, airlines have been gradually adding capacity. Couple that with the airlines continuing to bring in more ancillary revenue from fees for checked bags or Services Like boarding early and you have airlines bringing in more passenger revenue. The airlines generally lose money or break even on actual ticket sales. Where theyre making all of their money, their profits right now, largely comes from these fees. Finally, the fact that jet fuel prices have stayed in check means airline costs have done the same thing. Put it together and you see why Airline Stocks have climbed to multiyear and in some cases, record highs. Delta is the first carrier to report earnings next week with a profit that is expected to be substantial and thats just the beginning. Later in the week, well hear from united, alaska and southwest airlines. Phil lebeau, nightly Business Report, chicago. Our market monitor has something tr everybody tonight. A classic blue chip of value play and a sexy tech stock. Larry, welcome. Good to have you with us. Our earlier guest said stock Market PerformanceGoing Forward is going to depend on earnings and so far from where i sit, earnings dont look that great. Do you think they are all that great . Do you think they justify prices at current levels . Well, when you take a look at first of all, thanks for having me this evening and earnings is coming in just as we sort of thought they would. We keep a very close eye on earnings. Coming in in a mixed bag and thats what were going to get in a moderate growth economy. But when you look at the earnings yield on the s p, its a little north of 6. 5 and you put that over the top of a tenyear treasury, we have a risk premium there of about 3. 75, 3. L . You were telling us earlier that you like these normal kind of earnings season rather than shock and awe. You know the rolle hot earnings. Why . Absolutely. When earnings coming in and theyre shock and awe to the miss or exceed expectations, the markets get jittery. We like to see a more normal earnings type of a season. Where were coming in with a mixed bag and again, thats to our expectation right now in a moderate growth. Another quick follow up on earnings. You said theyre kind of consistent with a choppy economy. A slow growing economy. But stock pricing have been anything but over the past year of a slow growing choppy economy. How do you square the two . When you look at the backdrop of monetary policy, the markets going to continue to punish savers and reward risk takers. Thats my point of the tenyear hovering at 2. 28 with an earnings yield of 6. 5 in the marketplace. And the markets still carry a pe of in the 15 range. We think the s p can get up to 1900, 1950, before we start to see some lofty ranges, if not even higher than that. Lets start with the first one. Dow chemical. You say this is a classic blue chip. Absolutely, it is. Lets take a look at estimates on gdp in 2014 of about 2. 5 . The Earnings Growth estimate in dow is 3. 8. So, here we have a company thats going to earn more and you take a look at the treasury at 2. Hi84 today. It has a pe in the low 15s with earnings yield on it of over 6. 5, but the true underlying value of dow chemical here is you know, it delivers, its products and services are plastics and chemicals and dows march Cost Component is the use of natural gas. Sort of the renaissance of the new natural gas explosion here in the u. S. Dow is going to be able to widen its margin and deliver its products and services over a worldwide stage. We think dow is a very attractive buy. Only got about 60 seconds left, so im going to ask you to cover your next two, the value play, sign o pack and the tech stock 3d systems in about 30 seconds each. Lets see if we can handle that. Sin o pack, great value by a Warren Buffett type of a longterm buy and holds. It delivers oil to mainland chain and one of the beautiful things about it now, we know that the class are going the use energy to consume as gdp goes well. And 3d systems. A great technology, products and services to the marketplace much faster. The number chart right now underneath of it and enjoy the ride with it. Do you own any of these guys personally or does your firm invest in them . The firm owns sin o pack and 3d systems. And coming up, 20 years ago today, a massive earthquake shook los angeles. Lives were lost. Homes were destroyed. So, why do fewer people have quake insurance today than they did back then . Thats next. California is in a state of emergency. The entire state is experiencing the worst dry spell in more than a century and there is no rain in the forecast. This comes as firefighters battle wildfires and fierce winds in the Los Angeles Area to force thousands of residents from their homes. As if californians dont have enough to worry about, theres also the ever present threat of earthquakes. 20 years ago today, the north ridge quake struck, killing 57 and causing tens of billions of dollars in damages. Still, most californians dont have earthquake insurance. Whats being done about it