Nightly Business Report for wednesday, may 7th. Going, everyone, and welcome. Federal reserve chair janet yellen went to capitol hill today. She told Congress Joint Economic committee that the u. S. Economy is turning up after a winter of virtual standstill. But she pointed to several areas that bear watching, among them, housing. Steve liesman has our report. Reporter fed chair Janet Yellens testimony before Congress Joint Economic committee today blamed the first quarters economic weakness solidly on the harsh Winter Weather saying she already sees a rebound in spending and production in the first month of the spring. And that leads her to be optimistic about growth this year. Looking ahead, i expect that Economic Activity will expand at a somewhat faster pace this year than it did last year. That the Unemployment Rate will continue to decline gradually, and that inflation will begin to move up toward 2 . Reporter behind yellins optimism she sees less fiscal restraint, that is, a small er decline in government spending, gains in home prices and equity leading to increased spending, increasing confidence among business and consumers. Yellin cited geopolitical tensions and possible Financial Stability in emerging markets as the biggest risks to her forecast. Shes also clearly concerned about recent housing weakness, suggesting its a serious risk to the feds outlook. The new fed chair, though, gave no hint that rates would rise any sooner than the market currently believes, about the Second Quarter of 2015, and says the fed remains on course to end its bondbuying program for quantitative ease big the end of this year if the forecast for strong growth pans out. Several representatives peppered the chair with kes about whether the feds policy of keeping Interest Rates so low for so long are creating financial bubbles. Yellin said its not a concern at this time. Valuations are in historically normal ranges. Now, Interest Rates, longterm Interest Rates are low, and that is one of the factors that feeds into equity market valuations. So there is that linkage. So there are pocket where is we could potentially see this valuations in smallercap stocks, but overall those broad metrics dont suggest that we are in obviously bubble territory. Reporter yellin said there could be bubbles in highyielding corporate debt or junk bonds, but overall she said the Financial System did not appear to be overleveraged. For nightly Business Report, im lease leels. For more analysis, lets turn to josh fineman, chief of xwroeglobal economist at deutsch wealth and asset management. Josh, twhafs key message from your point of view from janet yellen and translate what her message means if youre an investor, a business owner, or someone looking far job . I think its couple things. One is she reiterated the point that the economys weakness earlier this year was largely transitory. She expects the momentum to pick up as the year progresses. And the recent indicators have been supportive of that. But the other thing she stressed is that, while weve made a lot of progress, theres stale long way to go to repair the damage that was done, particularly in the labor market, that theres still a lot of slack out there. With slack still persisting, wage pressures and inflation pressures very, very dormant, its not a recipe for the fed rushing for the exits. Why is she worried about housing, josh . Well, recently, say the last six months or so, the recovery in housing seems to have stalled about at bit, and that is a bit of a worry, but i think part of that is the weather, part is a response to the backup in Interest Rates we saw last year. I think Going Forward were likely to see housing continue or resume, i should say, its recovery. But if it doesnt, we get to the summer and its not happening, i think that would be a concern. So, josh, i know the years of forecasting 4 Economic Growth for this Current Quarter that were in right now, and yet youre talking about problems in housing, problems in the labor market. Wheres that growth going to come from . It is for the winter. It is you know, we have no growth in the first quarter, so if we get 4 in the Second Quarter, that shouldnt be extrapolated forward the underlying trend. Some of it is the makeup. What i think is happening, though, is the underlying momentum in the economy is picking up and well start to see that more clearly as the year progresses, but the important point is that progress is being made, the labor market, as i said, still has a ways to go and theres still a lot of slack. I think thats why fed chair yellin was reiterating the point that theyre not likely going to be moving quickly to start renormalizing rates. Where has inflation gone . Nowhere. I mean, inflation has just been largely kauai e lly quiescent, feds target, another reason the recipe is for patience, because, you know, theyre missing both sides of their dual mandates still. Inflation is below target and were below full employment. Both those things would argue the fed should move quickly to start renormalizing rates. To use an overused word, the new normal. Where do you see the Unemployment Rate going . Will we ever get back to full employment, roughly 5 . And where do Interest Rates ultimately go . Whats the new normal on that . I think well ultimately get back to something close to full employment. Its just going to take a while. Weve gone that 76 months with no net job creation. Even using a conservative estimate, you probably need to create about 80,000 jobs a month to keep up with the trend in the labor force. Weve created zero over the last 76 months. That means its about 6 million jobs shy of what i would consider full employment. If we continue to create jobs at 200,000 a month, it would still take us more than three years to get back to full employment. Amazing number to think about. Josh fineman, thanks for coming by. Great to be here. Chief global economist at deutsch wealth and asset management. The major averages began the day sharply lower, disappointing earnings, and now with the help from janet yellen and signs that puten may be looking to ease tensions over ukraine, the dow and the s p 500 battled back from the those early losses to notch their biggest gains in three weeks. The nasdaq, though, well, it was lower throughout the session on a selloff in internet, technology, and social media stocks like twitter. It lost another 3. 7 today. At the end of a choppy trading day, the dow was 117 points higher. Nasdaq lost 13, but at one point it was down 50, so it, too, came back but just not enough to go into the green. The s p added 10. While most stocks did end higher, some names you know got hit hard. Dominic chu takes a closer look. Reporter for weeks now, investors have been taking money off the table when it comes to stocks and have had tremendous upside runs. Theyre also known as those momentum stocks. Today we saw some dramatic singleday selloffs. Take upscale Grocery Store chain whole foods. It said that stores and sales open at least a year grew at a slower pace than expected as Competitive Pressures picked up. As a result, they cut sales and profit forecasts and the stock lost around a fifth of its value. Then theres Cybersecurity Firm fire eye. The once highflying company said that losses for the Current Quarter would be worse than previously thought. The stock lo a quarter of its value. Then theres aol, the online media and Entertainment Company reporting a bigger drop in profits than wall street had been expecting. Aol is in the middle of a turnaround effort and has been shutting down underperforming units and investing in its advertising business. The shares lost around a quarter of their value as well today. Of course, when stocks drop that much in value in such a short period of time, some investors use it as a buying opportunity. A lot of these companies importantly are reinvesting aggressively in businesses which is holding back earnings and cash flow, and i think in a lot of cases making them look even more expensive than they are. A couple that are kind of cases in point there are amazon and linkedin. Reporter the bigger concern whether or not this kind of sell willing carry into other parts of the market. Theres no need for the Retail Investor at home, whos invested in nonhighbeta momentum type of names to have significant concern. Some investors are taking comfort that while there are selloffs in certain stocks, i woulds not happening across the entire market. And theyll point to the fact we still remain near record highs for the dow and s p 500. For nightly Business Report, im dominic chu. And yahoo is another stock that got slammed today, down more than 6 , and thats despite encouraging news that the company will be one of the biggest beneficiaries when alibaba goes public later this year. Yahoo owns nearly a quarter of the chinese ecommerce giant. So what does yahoo stand to gain from alibaba going public and what could that mean for yahoo shareholders . Josh lipton takes a look. Reporter jack mott is bringing his company public, but what alibabas public debut with will mean for yahoo shareholders is still an open question. Yahoo owns 23 of alibaba and will sell 9 of that stake in alibabas offering. Exactly how many billions of dollars that will net yahoo depends on alibabas valuation and various tax considerations. Estimates range from 7 billion to 11 billion. But what will yahoo do with all that money . Ceo Marissa Meier was asked that very question today at a conference in new york city. She said the company will act as a good steward of capital. We had previously sold part of our stake in alibaba and gotten proceeds. We returned some of those proceeds to shareholders, a majority of proceeds went to shareholders, but we did make some Smart Investments in the company in terms of building out talent, technology, and platforms like tumblr. Reporter analyst sas yahoo could use the capital to pay a dividend or increase its buyback program. That would provide support for the stock price and send a message to investors that their stock is a smart investment. It does convey to investors that management, this new management team, is is putting their money where their mouth is. Reporter yahoo could also use the money to do acquisitions. The ceo has completed multiple acquisitions including a mobile news app and tumblr, a blogging service. Analysts say she should now be on the hunt for bigger acquisition targets. An acquisition like aol makes sense because its stronger than yahoo in video views. They do about 1. 3 million videos per month. Yahoo does about 600,000. If you combine those two companies together, not only is there a lot of cost synergies, but to get that knew growth, you get that positioning in video that yahoo seeks. Reporter meyer would have to be careful choosing acquisition targets. Unlike facebook, yahoo remains a turnaround story. Investors might not give mayer the same leeway to make risky bets as they do for facebooks mark zuckerberg. The bottom line, the jury is still out for shareholders and where whether to stick by her strategy for yahoo or sell alibaba shares as well. Still ahead, heading off to college this fall . It just got a lot more expensive to take out a federal student loan. Weve got the details just ahead. Another sign of life in the housing market, Mortgage Applications rose more than 5 last week as Interest Rates dipped just a bit. Both refinancings and any home loans were up. Last week, applications for home loans fell to their lowest level since december of the year 2000. Higher mortgage rates, a spike in home prices, and tougher credit rules have all combined to stall the housing recovery, especially for younger wouldbe buyers. Now more of them are becoming renters and doing so by choice. Heres the story. Diane olick has the story. Reporter the dream of Home Ownership isnt exactly dead. Its just being postponed, especially for younger americans hit hardest by the recession. Younger renters have told us by a vast majority that they eventually want to own a home but the road to get there, to get the mortgage financing is going to be pretty difficult. Reporter housing began to recover thanks to allcash investors. But as they now slow down, younger mortgagedependent buyers are not picking up the slack. Readings on housing activity, a sector that has been recovering since 2011, have remained disappointing so far this year and will bear watching. Reporter employment for younger americans is still weak, but its not just jobs. A new survey by fannie mae found big changes in why younger renters choose to stay renting. In 2012, 35 said they were renting in order to make themselves financially ready to own. That dropped to just 26 in 2013. More rerns now say5 they rent because its a more affordable option. There are also social changes afoot. Unlike their parent who is prefer gated communities, todays younger millennials are more social. They want to be here, downtown, close to work, close to amenities, and that usually means renting. The rental market is so hot today that the rental owners are really building sort of places that renters want to live in. Like you can get a pool, a movie theater, you know, concierge at your apartment complex. If you bought a house at 23, you wouldnt get any of that stuff. Reporter jonathan, ceo of ravpad, a new app designed to make every facet of renting easier. Also a millennial renter. Last thing you want to come out of college when you have that is all debt is fork out more debt far house. Reporter the majority of renters said they did not have sufficient funds to cover eve an 5 down payment plus Closing Costs on a typical starter home. So while the Monthly Payment for owning a home may be chapper than rent in some places, buying that home is the barrier to entry. For nightly Business Report, im diane olick in washington. To read more about millennials and the housing website, go to our website, nbr. Com. Another big challenge for the millennials, the more than 1 trillion in outstanding Student Loan Debt. Today Interest Rates on most federal undergraduate Student Loans rose for the Upcoming School year. Most of those loans are now pegged to the yield on the tenyear sold at the last auction in may, and that happened today. Yields rose and as a result rates will go up and kick in on july 1. The chairman joins us now. How much are they going to go up . Whats going to happen . Were talking about rates for 20142015 school year go up less than a percentage point but its still going to be a significant gain for some people. Were talking about what most borrowerers take out, which is a stafford loan, going up to almost 5 , 4. 66 , then were looking at the plus loan, which you can take out as a graduate student or parents can take out, over 7 . The graduate stafford loan flb the middle, over 6 . That a big hit. I guess if youre a senior going into senior year, not a big deal. But a freshman month to month, its only about 4 a month if youre talking about 10,000 in Student Loan Debt and a tenyear repayment period. Youll be paying an extra four bucks or so a month. Does it make more sense to take out private loans . A lot of people look at the federal rates and think i should just go to my bank, credit union. Right. Still likely pay more over the life of the loan. Stafford is cheaper than many of the private loans you can take out. Looking at sallie mae, their fixedrate loans range anywhere from 5. 75 above 12 , as much as that much, and a variable rate loan, yes, if if you have outstanding credit, maybe you can qualify for one around 2 , a little more than that, but its going to fluctuate and could go um more than 10 . Talking about fluctuating and high numbers, elizabeth warren, senator from massachusetts, is proposing some kind of refinance bill so you could refinance your Student Loans like we refinance our mortgages. Do you think this proposal will go through . Theres a lot of merit to it. Anyone with a big loan balance and not a lot of income, this is supposed to help them. And so bringing those rates down, and shes looking at the rates we currently have, under 4 for that stafford loan, refinancing at that level would be a great idea. But its very unlikely that this is going to get through with all the different hurdles that well have to go through in terms of how divided congress is right now. Theres not a lot of likelihood that people think its going to pass, but there are pars of this bill that could have merit and be incorporated. Are there any tax wrinkles that borrowers ought to be aware of with respect to Student Loans . For example, is the interest tax deductible . If my mother or phat rer paying for it, is it a gift to me or what . The borrower, the student Loan Interest deduction is for the borrower so, the parent doesnt have the tax writeoff but the borrower does. Thats something very important to point out and very important for borrowers who Pay Attention to other tax credits they could get in terms of paying for college. One of the important things to look at. Sharon, thank you very much. D. E. Master blenders is joining forces to create the worlds biggest coffee company. The two will combine coffee assets creating a business expected to have annual revenue of more than 7 billion a year. It