Be on the hook if the new federal insurance coops do not work out as planned . All that and more tonight on nightly Business Report for wednesday, february 26th. Good evening, everyone. Im gill griffith. Tyler is off tonight. And im susie gharib. Good evening from me as well. Well, you may not know by looking out your window or at the calendar, but the all important spring housing season has already begun. And today we got conflicting and divergent signals about the direction of the u. S. Housing market. Sales of new homes in january unexpectedly shot up by nearly 10 , reaching the fastest sales pace in five years. At the same time, Mortgage Applications last week fell almost 9 . Thats the lowest level in two decades. So how do investors make sense of the data . Which way is housing headed . And what does it mean for home buyers and sellers . Diana olick reports. Reporter it was last spring in an interview on cnbc that housing guru ivy zelman uttered these fateful words. I think were in nirvana for housing. Now after a sharp turn around in sales of both new and existing homes, zelman explained her thinking. I think nirvana took a pause during that time home prices were surging and we had very attractive affordability. A few months after i was on we had rates spike about 100 plus basis points and we saw a pause. The consumer was rationally respond together surge in prices, the backup in rates. Reporter now reports this week show home prices were up over 11 in 2013 from 2012. That and higher Mortgage Rates are making housing a far more expensive proposition today than just a year ago. While buying is still 38 cheaper than renting, according to a new report from trulia, that is down from 44 cheaper a year ago. Its still very cheap to buy compared to rent. Mostly because Mortgage Rates are still very low by historical standards. Theyre up over the last year, but Mortgage Rates the 4. 5 would be the envy of anyone coming to us today from the 2000s or 90s or 80s. Reporter Mortgage Applications to buy a home fell last week. But zelman is not concerned. She said credit loosening and spring will be stronger. I think were going to see things rip when we see the weather thaw and the consumers are coming out and theres not enough supply. Reporter that supply was eaten up by investors in 2013. Investors may now be turning their sites on new construction. Zelman says its still a small slice of the market but she doesnt dismiss the potential. Some largescale investors are already buying new homes, able to rent them for far higher returns. That new cash could change the landscape for the nations still beleaguered builders. For nightly Business Report, im diana olick. Carl rigadona joins us to discuss his outlook for the Housing Market, senior economist at deutsche bank. What do you make of the conflicting data on housing . Are we in recovery or not . I think we are definitely in recovery. But we have to be very disciplined at this time of year. Because this is the low season for the Housing Market. Activitys typically about 40 higher during those peak selling months of march, april, may, june and july. So what were looking at now is really just a trickle of data, trickle of transactions. And it can really be distorted by things like the inclement weather thats been impacting much of the eastern half of the country from december into january and again into february. So im trying to stand back and not really cast judgment until we get a better look at things in a few monthss time . That makes a lot of sense, carl. But when you look at the information we have now, as diana was just reporting, theres not much supply of homes on the market. And then on top of that we see Mortgage Rates are noctching up 4 for a 30year. Not bad but they anotching up. Does this keep home buyers away . I dont think so. We said 2013 was the nirvana year for the Housing Market, 2014 might be nirvana squared. I think the rate of construction in the gdp accounts will double this year compared to what we saw last year. I think home price appreciation is going to continue. Affordability while down a bit from where we were in the last couple of years which is no surprise given that Mortgage Rates are higher and housing a bit more expensive, affordability is still at record high levels going from 1971 when the data began all the way up to 2007, we are still higher now relative to that period. And even if we have a further back up in Interest Rates, lets say a 1 increase in Mortgage Rates this year, affordability will still be higher than at any point during that period. You anticipated my question. I know its a mugs game to forecast Interest Rates. But with the fed tapering, presumably eventually long Interest Rates which dictate Mortgage Rates will be rising. How much higher do you think we could see a Mortgage Rate be by the end of this year, and why doesnt that mean less affordability . Well, its all in relative terms. So absolutely i think Mortgage Rates will back up. Lets look at the tenyear treasury note, phones, which a lot of mortgages are based off of. Our view is that the ten treasury yield could increase by one percentage point or more by year end. A 4 ten treasury compared to now maybe 2. 75 or so. So significant room for backup. The same thing will happen to Mortgage Rates. On the margin, yes, that makes housing less affordabililafford. But it matters where home prices are, where Mortgage Rates are and also where Household Income growth is. If we have a creyear where the market finally turns over, thats going to provide a solid support to Household Income decree as a creation and enable the average household to be active in the real estate market. Theres always this debate about buy versus rent. A lot of people got turned away from the whole concept, the American Dream of owning your own home because of the latest financial crisis. What about now . Where do you see the trend and what does that mean for the economy if more people rent rather than buy . I dont think its a case or once bitten twice shy with respect to the Housing Market. Just as people didnt pull away from stocks after the double in the late 90 and early 2000s, i think people will be very active in reentering the real estate market. Whats interesting, though, theres a shortage on both fronts. So theres a shortage of rental units, theres also a shortage of homes for sale, either newly built ones or resales. So we have an inventory shortage on both fronts. That meanings that well see more rental inflation as the rental vacancy rate is back at 20012002 levels. It also means well see price appreciation in the housing sector for both newly built homes and resales. We were up about 12 in home prices last year. Given the lean inventory and on going increase in sales, im hinting of an inventorysales ratio, that tells us that home price appreciation should be up probably 8 to 10 in 2014. All right. A bullish Housing Forecast from carl ricadona, senior economist at deutsche bank. Thanks. On wall street today, investors were encouraged by the strong numbers on new home sales. Stocks rose early in the trading session with the s p 500 hitting a fresh record high. And the nasdaq reaching a 14year high. And although those mile stones didnt last, the russell 2000 Small Cap Index did close at a new alltime high. At the end of an up and down day, the dow rose 18 points, the nasdaq added 4. 5 points and the s p edged up a fraction. And while a major u. S. Stock average inched higher today, russias rts index fell another 1. 5 overnight. Thats after president putin ordered combat readiness drills for 150,000 Russian Troops near ukraine. Even without this latest sabre rattling from the kremlin, the rts index is down nearly 11 so far this year. And to update you with more about the ukraine where protest leaders named the former economy minister to head the new government following the overthrow of the president. And as Michelle Carusocabrera explains from kiev, formation of a new government is a key to stabilizing the countrys finances. Reporter thousands of ukrainance have returned to the square tonight called here by the acting leadership of the country so they can be consulted by a list of names for proposed new government. Forming a new government is the next crucial step for the country because it needs to begin negotiating a massive financial bailout as much as 35 billion. The multinational lenders say they need someone to negotiate with. This all occurs as the countrys currency continues to weaken due to fears about the economy and also amid rising tensions with russia. Today, a massive protest in crimea in the southern part of ukraine raising concerns about whether or not the country is drifting toward a civil war, and also as russian leader Vladimir Putin ordered his troops from the western part of russia near the border of ukraine to begin combat preparedness exercises. We wait to see tomorrow whether or not ukraine has a new government. For nightly Business Report, Michelle Carusocabrera in kiev. Late today, u. S. Secretary of state john kerry said the u. S. Is considering a 1 billion in loan guarantees to ukraine, but no decision has been made yet. Still ahead, j. C. Penney says it expects sales and gross profits to improve this year. But is it enough to turn Investor Sentiment . Some positive news from j. C. Penney after the market closed today and investors seemed to be encouraged enough to buy the stock at least for now. After the the bell, the struggling retailer reported a loss of 68 cents a share, but that was a lot less than analysts estimates. Sales rose 2 to 3. 8 billion, but that was below wall street forecasts. J. C. Penney says it expects sales and Gross Margins to improve in 2014. And thats one reason shares initially jumped as much as 10 in afterhours trading. But j. C. Penney isnt in the clear. Courtney reagan has more on the challenges ahead and what some analysts are advising investors to do with the stock. Reporter j. C. Penney seems to garner an outsize amount of attention every earnings season for the past few years. And with good reason. The 112yearold Department Store is now just a shadow of its former self. J. C. Penney has shed more than 16 billion in market cap since its 2007 peak, signature under 2 billion today. It was struggling before it brought in new ceo ron johnson though his turn around cost j. C. Penney a 15 stock decline in his 17 months at the helm. Former ceo returned to stem the bleeding in april of last year, but the stock has fallen a further 65 in just ten months. Cash is another concern. J. C. Penney closed 2013 with 2 billion in liquidity, but some think the Department Store wont register enough in sales to offset the cash burn and might need to raise capital at the end of this year or the beginning of 2015. Investors are losing faith in a j. C. Penney turn around. And analysts growing more pessimistic about j. C. Penneys fup. While the same store sales were positive in the Fourth Quarter for the first time in four quarters, wall street expected more. I dont think this is necessarily an imminent bankruptcy as i think a lot of people out there believe. But i think you have to come to grips with what is going to be the timeline and whats going to be the magnitude of recovery here. Reporter boss doesnt think j. C. Penney is a lost cause, but also doesnt think its likely it will ever be a 17 billion retailer again. Jpmorgan isnt recommending j. C. Penney to its clients, echoing the advice of majority of Analysts Covering the retailer on wall street. For nightly Business Report, im courtney reagan. And out earlier today, earnings from target showing that the discounter is paying a hefty price for last years massive credit card data breach. Fourth quarter net profit was cut in half with sales down by 5 . But the chain was still able to pull in 81 cents a share excluding certain items and it Beat Estimates by 2 cents. It even topped forecasts on revenue. That sent shares soaring by 7 in todays session. But targets troubles are not over yet. The chains ceo said that the data breach will continue to be a drag on future profits. Well, avatar gets hack attack, Cyber Security is becoming a top priority for executives of some big and small companies. Eamon javers is in San Francisco at the meeting of the top minds tasked with keeping our data safe from hackers. Reporter in the wake of the target security breach, the top mind in Cyber Security are gathered in San Francisco this week for the annual rsa security conference. This is a place where Companies Hire ethical hackers to figure out weaknesses on their own networking devices and fix them before the bad guys find the flaws. Neil himdocha of trust wave is one such ethical hacker. If you view this screen over here, when i enter my pin code in here, you can see that it is giving me information about the events occurring on the mobile device. So what this is is what the hackers actually going to see once hes cracked into your Android Phone . What you can see here is my pin code entering into the device. Reporter whats been bad for consumers and retailers has been really good for Cyber Security companies. Analysts predict a wave of mergers and acquisitions in this industry as companies consolidate and the big firms buy up innovative contenders. Its almost like a plum for these companies where on one side you have the natural buyers and the larger vendors, and on the other side you have the smaller advanced security technology. I think youre going see a lot of companies kicking the tires here. Reporter daniel ives says potential buyers include emc, microsoft, symantec and oracle. Fortu net, imperva. The other topic that people cant stop talking about is politics. Theres been enormous controversy here over the degree to which each of these companies has koocht has cooperated with the nsa and whether they should be doing that or not. Eamon javers in San Francisco. We begin tonights market focus on the Home Improvement retailer, lowes, which continues to benefit from a recovering Housing Market also issued a 5 billion stock buy back program. The chains earnings outlook for the year came in just shy of estimates, though, still shares rose by more than 5 closing at 50. 72. Abercrombie and fitchs product plunged by 58 but the struggling retailer relieved investors with eastean earnings. Cost cuts helped. The board approved a 150 million Share Buy Back program. That stock surged by 11 closing at 40. 04. Home goods and marshalls parent tjx reported an earnings miss, blamed it on the cold weather. The retailers profit outlook fell sort of analyst estimates. Tjx did announce a new 2 billion buy back program and said it plans to increase its quarterly dividend. But shares were off by 1 closing at 60. 29. Also from the retail sector, barnes noble reported a profit for the holiday quarter. Thats despite a decline in revenue. But losses in its digital Book Business continue to weigh down the book seller. Barnes noble also dismissed the offer it received last week from an Investment Firm for 51 stake. Shares rose 4 to 18. 47. Noodles and company reporting earnings after the closing bell today. And the results were weaker than expected. Both profits and revenue missed expectations, and that sent shares initially lower after the report, ending the regular session at 39. 55. And carl icahn and ebay took their battle to a whole new level today. The activist investor who owns more than 2 stake in the company is calling for ebay to sell off its fastgrowing pay pal business. In a letter to shareholders, icahn also called Corporate Governance at ebay quote dysfunctional. Well ebays reaction . Icahns claims are dead wrong. The scuffle boosted shares by 2 to 57. 34. We have an update now on a story we told you about yesterday that wall street journal report detailing the hostile relationship between pimco cochief executives bill gross and Mohamed Elerian which culminated in elerians resz egg nation. Now the New York Times are reporting pimcos Parent Company are concerned and they are urging the firm to act on personnel issues at pimco to make sure that there are no more executive defections. Delta airlines making some big changes to its frequent flyer program. Beginning next january, members of delta sky miles will rack up free miles and other rewards based on how much they pay for tickets, not how many miles are traveled. This could be good news for bigspending, firstclass flyers and business travelers who often book flights just days ahead of a trip when tickets are the most expensive. Well, we know flyings expensive. So is buying a new car. But theres a growing trend in the Automotive Industry with people buying their cars through third parties at a preset, for haggle price. And its the reason that auto sales are climbing at costco. Yes, costco. Phil lebeau explains why the warehouse retailer is where more shoppers are picking up a new car. Reporter from 1200 sheets of toilet paper to 50pound bags of rice, costco has long before the place to buy in bulk at low prices. But these days, costco members are checking out something else, new cars. On average youre probably saving 1,000 or more dollars off of what you might spend hours haggling trying to get to. Reporter mona bought her Volkswagen Passat through costco. Oh, i love it. I feel great. Reporter she did what 340,000 other costco members have done in the last year. She wanted a passat, so she went through costcos auto web site, which sent her to a local vw deal who are had the passat at a preset price. Within 48 hours, she had her car. I saved so much time. In the past i would hop from deal dealership to dealership taking several weekends, combing the lots trying to get a deal. Trying to bargain. But this was so much easier. Reporter auto dealers around the country pay costco for referrals. Even though they wind up selling below invoice. Why do they do it . Because the dealers will make money in years to come servicing those vehicles. And they know direct, prearranged sales is the new way consumers are buying cars and trucks. Those days of going going to six or seven dealerships to shop for a car are over. Reporter for costco selling cars and trucks is not a huge moneymaker but a way to offer members like mona what she was looking for, a quick, hagglefree way to buy a new car. Phil lebeau, nightly Business Report, carlsbad, california. And coming up on the program, federal insurance coops. They were born out of the new health care law. But could taxpayers be left holding the bag if things dont work out as planned . The time part of our Health Care Series is next. The Poor Condition of some Nations Railway is one of the reasons why a massive new white house Spending Initiative that president obama was in st. Paul, minnesota announcing a fouryear, 300 billion plan to create jobs by fixing the nations roads, bridges and rails. What companies are saying they intend to hire more people this year, we need to make that decision easier for them. And we can create jobs at the same time. Rebuilding our transportation systems, our power grids, our communications networks, all the things that commerce relies on. But about half that money relies on ending some federal Corporate Tax breaks. Finally tonight, in an effort to spur competition, the Affordable Care act provided government loans to launch nonprofit ensures known as coops that were designed to compete against established commercial insurance plans. In the final part of our series, insurance upstarts Bertha Coombs tha takes a look at the coops and whether they could end up leaving taxpayers on the hook if they falter. Created to give us control of our own health care. Reporter Health Republic or new jersey uses its nonprofit status as a selling point. Were proud of that. We found that message resonates with people. The whole idea of being a cooperate ive, consumer operated and oriented plan not for profit committed to innovating in health care. Reporter it launched with help from the nonprofit freelancers union, using federal loans under the Affordable Care act. Weve been granted a considerable amount of sovereignty dollars to make sure were able to cover any of the issues and concerns around you tillization so none of our members would have to be concerned would we be able to cover their hospital bill. Reporter under the aca the Obama Administration provided 2 billion in guaranteed loans to 24 new coops. One in vermont failed to win approval from regulators, prompting comparisons from critics to the administrations 2010 Energy Loan Program which saw the high profile default or Solar Panel Maker solyndra. This is what happens when the government takes winners and losers with taxpayer money. Reporter at a House OversightCommittee Hearing this month, democrats cried foul. As much as the majority would like to manufacture a scandal there simply isnt one. There is no smoking gun. This is no solyndra. Reporter then they walked out in protest, while republicans grilled the freelancers unions executive director about her groups dealings with the Obama Administration and about 340 million in loans used to launch Health Republic coops in oregon, new york and new jersey. We did everything we said we would do to help those coops launch successfully and to move them quickly to selfsufficiency. And it worked. The coops were sponsored im sorry. The coops we sponsored launched on time as independent entities. Reporter james martin chalks it up to politics. I know the number of attempts to derail the Affordable Care act. Reporter hes confident Health Republic will be financially sustainable. Though nearterm the botched health care. Gov rollout has meant a slow start to enrollment. We are not seeing the firsttime enrollees that was part of the target audience and the target segment for the Affordable Care act. Whether theyre the group thats waiting until the end of march im not sure. Reporter early enrollment has been mixed for the coops. Health republic of new york has garnered 16 market share, making it competitive with commercial carriers. While Minutemen Health in massachusetts has struggled. But aca gives them time to get it right. Up to 15 years to repay the bulk of their loans. Bertha coombs, nightly Business Report, new jersey. That is nightly Business Report for tonight. Im susie gharib. Thanks for joining us. Im bill aggressigriffeth. Have a good night. Nightly Business Report has been brought to youin part by the street. Com. Founded by jim cramer, the street. Com is an independent source for stock market analysis. Cramers action alerts plus service is home to his multimillion dollar portfolio. You can learn more at the street. Com nbr. [ music ] hello and welcome. I am beck carcinoma king reid. On this weeks special edition of this is us. Were devoting the half hour to one womans remarkable career. Belvar davis retired in 2012 after 50 years on the air. A child is poverty she became the first African American reporter hired on the west coast. Lets take a look back now at belvar davis. Her career in front of the camera. You have to follow what you really want