Closed lower for the first time in 2018. Some are attributing the decline to good Old Fashioned profit taking. Others pointed to nervousness that higher inflation could force the fed to be more aggressive when it comes to hiking Interest Rates. The result was a drop in stocks. The dow fell 16 points. The nasdaq was off ten. And the s p was down three. Investors are paying more attention to the bond market these days. Yields have been rising. That could usher in big changes for stocks and the economy. Steve. Reporter Interest Rates are rising, presentin a challenge to Economic Growth and to the stock market. But some look at the recent rise and ask, what took so long . The fed hiked Interest Rates three times last year. Budged. Tenyear bond yield if fell through much of 2017. It comes amid a report that china is rethinking how much it buys. It comes amid better growth, rising expectations, and a coming boost to the deficit bill, the tax cut bill. Yields are low. They should be higher. Theyre nowhere near where they ought to be given the economic environment, given the Global Central Bank pressure on keeping rates low. Reporter the rate increase represents a modest problem for companies. Corporate bond yields have risen so some of the tax cut benefits could be reduced by higher rates s have been modest and rates still seem to be available around the 4 rate for would be probl for the market, some investors think a yield of around 2. 6 is a better bet than buying stocks, meaning they pull money out of the equities. This does solve a problem for the Federal Reserve. Some officials were starting to be concerned that rates in the y were failing to re it was hiking the short term funds rate and reducing its balance sheet. For nightly business r the great bond bull market that began 25 years ago may, may, be coming to an end, so says janice hendersons bill gross, often referred to as the bond king. Its not a strong colombian bear market. Its a decaffeinated bear market where yields rise 25 to 30 basis points for the year. But rising rates dont necessarily mean falling stocks, at least not according to bill miller who is known for beating the market 15 years in a row when he worked at legg mason. Those tenyear yields head towards 3, we could have the meltup we had in 2013. Rising Interest Rates are sure to be a theme this year. What impact might they have open companies and their stock price . Thats up for debate. On guests says rising rates pressures stock valuations. Here to talk about how rising rates might hurt stocks is christina hooper, Global Market strategist at invesco. And steve dudash joining us to take the other side of that debate. Welcome, pleasure to have both of you here. Thank you. Christina, you think it might put pressure on profit margins. At current Interest Rate levels, or if they move decidedly higher . If they move decidedly higher, borrowing costs will increase. That will definity put pressure on profit margins, in addition to other precious were likely to see like an increase in wages. Let me turn to you, steve. You say among other things that on the whole, rising rates are going to be a net positive for equities. I can see where its going to help financial companies, their net interest margins will expand as theyre able to charge more because, by the way, they usually charge more for loans than they pay you in deposit accounts. But how else is it going to help stocks . Umm, well, okay. Let me take a slightly different approach. If were not going to raise Interest Rates, when are we . We just came off a year when the market is up 20 , 3 gdp, unemployment very, very low right now. What else do we need to do in this goldilocks period to make people comfortable with a rate hike . Our economy is better off if we im not talking a where they are in the 70s or 80s. We all know something is going to happen sooner or later. It gives us some protection for when something bad takes place. If something happens today, we dont have a lot of wiggle room to protect us or help out on that. So get rates up there. Again, were at 500year lows in rates right now, a little bit more of a rate hike isnt going to really hurt things in the long term that much. Christina, lets talk about the point steve just made, about the fact that in indeed we do have a market event, that it gives the fed more wiggle room. Others say rising rates complicate this for the fed. What do you think . I think hes absolutely right, that certainly you get some dry powder by raising rates. But th doesnt dismiss the fact that it does put pressure on valuations. When you think of major valuation models for stocks, the inputs are earnings or expected earnings, and Interest Rates. And youre discounting the earnings by the Interest Rate. So if Interest Rates are higher, typically that will put pressure on valuations. Now, if you have modest rate increases, it wont have a very material impact. But it does have some, and it certainly has an impact on the bond market as well. Having said all that, it doesnt mean that its not healthy to have a few rate hikes. We just have to be prepared for the fact that we could see some valuation compression if earnings dont deliver. Address that, steven. I take your point, the idea that if not now, when are we going to raise Interest Rates with them this low. Right. But my initial question was explain to me how these higher rates are not going to hu but i indeed actually help them but higher. Your guest is 100 right, its going to hurt valuations a little, no doubt about it. But we dont need another 20 market return. Dont get me wrong, everyone is happy, but thats not healthy. Bottom line profits didnt go up enough to justify what took place. If it happens again next year, we might have an issue. Valuations might bring down what the total returns might be in the market, shes right on the math on that. But if the grand scheme, if the garago do this long term, grow this economy the right way, we dont want 20 returns over and over again. If this hurts valuation, fine, who cares . Were better off in the long term if we have a single digit year. Shes right, its going to hurt bonds. But that actually ends up helping the stock market because people arent making money on bonds will rotate into the stock all right. The conversation is not over yet, certainly. It will continue. Thanks so much for joining us, christina hooper, steve dudash. The Federal Reserve delivered more than 80 billion to the treasury department. The central bank remits its profits to the treasury every year. And while 80 billion sounds like a lot, it was the second Straight Year of profit declines primarily due to rising short term Interest Rates. And speaking of billions, Warren BuffettsSuccession Plan is getting a bit clearer. For years many wondered who d f shoes. No. Betsy quick is in omaha t. Reporter the news today is the closest weve ever gotten from Berkshire Hathaway in terms of a succession announcement of who would take over when Warren Buffett leaves. The news is greg abel, who has been running Berkshire Hathaway and energy, and g. James, will each be taking over as vice chairman of the company, in addition to the existing vice chairmanrllie munger, who at 94 years old is going nowhere. Theyll be joining the board of Berkshire Hathaway, moving the number of directors from 14 to 12. Warren buffett tells us that will be very good for each of them to get that expedience. Theyre bo have berkshire in their blood. They know the company, they have the operations like the back of their hand. Its good for berkshire and even better for me. Reporter we asked about some of the individual holdings, major Stock Holdings that berkshire has. They dont hav to tell us anything, they dont to file with the sec what theyve been doing in the Fourth Quarter until february 15th. He was coy on what he thought about apple. Weve added to our holdings consistently up through all the published reports. And well publisher some more on see, the market does not get saturated, i want to point that o when tim cooke sent me a Christmas Card this year talking about the i phone, when i actually buy it, its all over, folks. Reporte buffett still has a flip phone made by samsung that he keeps with him at all times. Well see if he buys an iphone. We asked him about shares of general electric. Berkshire is not a shareholder in general electric. But would it be something he would see and like at some price . The answer is yes, at some price. The quest is what. Diffee have diff views on what that price would be. But if you came to me and said well sell you the whole general electr at x and x was the right number, we would like to buy it, and if we buy little pieces in the market, we would think about it. R he did say ge is a big, strong economy. Im becky quick in omaha, nebraska. Concerns about the future of nafta reverberated through parts of the stock market today. Reuters reported that canada is becoming, quote, increasingly convd that the u. S. Will exit that long standing trade agreement. That sent shares of a canadian and mexican etf lower. Gm also under pressure you s yo see there, since it imports from mexico full size pickup trucks, which are among its most profitable products. Kansas city southern, which has an Extensive Network in mexico, is off 3. 5 . The clock is ticking for the trump administ to defend american manufacturers priced out of the chinese market. As Kayla Tausche reports, that action could include some tariffs. Reporte in his first 100 days, President Trump launched an investigation into steel and aluminum dumping under a rarely used National Security statute. The hypothesis, chineseowned Companies Flood the market with cheap commodities and put American Companies out of business. Commerce secretary wilbur ross must now decide whether such actions imperil American Industries and if so, how to penalize them. In the last nine months, the issue caused friction among advisers with varying viewpoints, some whom have now left the white house. I think theres a great struggle with whats going on inside this administration. Reporter tom conway represents the united Steel Workers union. Were going to rely on the president to do what he said, because we dont kn whos working there anymore. Reporter the president has 90 days after the commerce reports are due this month to make a decision. Industry observers expect it to be a tough one, citing his rampedup criticism of china following his november visit. We will not remain silent as American Companies are targeted by state affiliated actors for economic gain. Reporter in a december National Security strategy describing china as a dangerous competitor, Companies Like century aluminum want to fight the imbalance with tariffs. The ceo supports a levy of 20 . Theres a million tons, a million tons of u. S. Capacity representing thousands of jobs thats ready to restart as soon as a comprehensive relief is granted in the Playing Field and its made level. Reporter relief may have its limits. U. S. Allies would likely be excluded from tariffs and it may be temporary in nature. It could cause china to retaliate against u. S. Farmers, throwing anoth industry off balance. For nightly business r still ahead, more issues for apple over its older, slower iphones and two japanese automakers will build a 1. 5 billion plant in alabama. Toyota and mazda will together build a factory thats expected to employ about 4,000 people, producin cars each year. That plant could make alabama the fourth biggest state in the u. S. When it comes to auto manufacturing. Get this. The lights went out at the Worlds LargestConsumer Electronics show. Literally, they went out the conference at the Las Vegas Convention centers main hall was dark for about who plugged in t hr dryer . The outage impacted hundreds of companies includi samsung, sony, and lg, one day after it rained in the desert city, flooding the streets. The cause of the outage was a faulty transformer. Apple last month admitted to deliberately slowing down iphones with older batteries. That resulted in lawsuits, customer complaints, and now some questions from a u. S. Senator. Reporter apples ceo tim cooke made a decision last year that is now attracting a lot of attention. His company introduced new software which can slow the performance of iphones with older declining batteries. Apple says that was necessary because of a very real technical challenge. Batteries decline over time. As they age, they can have a tougher time handling the power demands of devices, and can unexpectedly shu down. But cooke now finds himself fielding questions about his decision from powerful politicians on capitol hill, including senator john thune, chairman of the Senate Commerce committee. Senator thune questions whether apple has been as forthcoming as thing we want to. Get at is the transparency issue. If they deny theyre trying to force people to buy the next phone, we want to make sure that thats true. Reporter senator thune sent cooke a letter demanding to know whether apple tracks consumer complaints about processing performae and whether the paid full price ing whether for a replacement battery before the price cut should now receive a rebate. What happens if apples answers arent satisfactory . Senator thune says he could call a hearing and elevate this further. Apple counters its critics are wrong, saying first and foremost, we have never and would never do anything to intentionally shorten the life of any apple product or degrade the User Experience to drive customer upgrades. Our goal has always been to create products that our customers love and making iphones last as long as possible is an important part of that. Apples point is that its not trying to force consumers to buy new iphones by crippling older ones. Its just the opposite. Its taking steps to make those older iphones last longer. Still, cookes Company Finds itself facing questions on both sides of the atlantic. In france, the Paris Prosecutors Office has also reportedly opened an investigation into issue. For nightly business r im josh lipton, san francisco. Lennar says demand is strong, and that is where we begin tonights market focus. The nations second largest homebuilder said buyers were eager to purchase new homes in the latest period at hire price points. The company beat revenue expectations but missed the market when it came to market, saying the delay of a strategic transaction caused that miss. Still, shares finished the day up 2 at 68. 26. After the bell, rival kb homes said profits were helped by an increase in average selling prices and an uptick in deliveries. Sh initially rose after hours and finished the day up a fraction to 34. 35. Medical device maker Intuitive Surgical excited wall street today with the release of its Fourth Quarter preliminary results. The Company Expects to report revenue that tops its own guidance as well as analysts expectations. Shar up 6 to finish the day at 423. 76. Ss g technologies, a software company, is reportedly in talks to buy dst systems. Lawyers say ss g is interested in a potential deal so it can expand its reach and enter the health care techn markets. Shares of dst popped 22 to 79. 89. Ss g shares rose nearly 13 to 47. 69. 21st century fox is reportedly close to finalizing a deal that will give it ownership of ten tv stations operated by sinclair broadcast group. According to reuters, sinclair made the move to win Regulatory Approval for its nearly 4 million acquisition of tribune media. The deal gives fox more markets potentially giving it more revenue. Shar of sinclair jumped almost 9 to 38. 75. Banks have always been wary of working with the Legal Marijuana business, mostly because it is still illegal federally. Now one week after the attorney genera announced a bit of a crackdown, that problem could be worsening. Reporter reaction to the crackdown has been mixed. Some in the pot industry have been fearful. For others, its business as usual. One thing is certain, the industrys relationshi with banks will be even more stressed. A recent report estimates that just 5 of all Financial Institutio are working with cannabis businesses but only 1 are actually servicing them. That means that pot businesses cant easily deposit money theyve earned. Before, banks were very reluctant to do any business based upon the loosely defined guidance. Now it just raises more uncertainty. Rep that memo was issued by the obama administrati to ease some of the stress between banks and the pot industry. Banks were wary then and now could be even more so. Uncertainty could create an opportunit for the security industry. Mo cash not in banks requires more protection. One Company Offers valuating and security consulting. Hes re