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tv   Closing Bell  CNBC  July 31, 2013 3:00pm-4:01pm EDT

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in the f-150 if they did not feel confident they could say to people, listen, everything you can do with a standard engine can you can do with a nat gas engine. >> i'm sure boone pickens is smiling. thank you for watching. more analysis on the fed coming up on "closing bell." we have something cool for you tomorrow. tune in to "street signs." hi, everybody. record-setting territory. welcome to the "closing bell." i'm maria bartiromo at the new york stock exchange. >> i'm bill griffeth. there's the high. 113-point gain at one point on the dow, but we're off those highs. what a day it's been. the economic data this morning, positive, gdp report was a good one. what was the other one? there was another one so good. the jobs report. >> the jobs the adp numbers. >> much stronger than expected as we get ready for the government report. of course, the federal reserve this afternoon.
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>> today's statement looked very much like the last statement. after that statement came out, money did move into stocks. even though we know we've got some stocks for sale going into the final hour, we are -- we are pretty strong and in record territory in the s&p 500. >> and for the dow as well. >> and for the dow jones industrials. >> so this would be the second-best month of the year if -- >> you like that. >> -- to stay tuned. all kinds of statistics to throw at you like that. >> real good stuff. for more on how the fed has impacted the market, we're joined by edward from jhs capital advisors, michael from destination wealth management, michael from panto portfolio and our own steve liesman and rick santelli. let's kick it off with you, steve. what did you hear from the fed? >> reporter: i thought two things happening, what was in the statement and what wasn't. let me do what was in the statement real quick. the economy was changed from being moderate to modest. a very slight downgrade to the economy. inclusion of the notion that mortgage rates have risen, and then, also, finally, concern about inflation, saying the low
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inflation is a potential risk to economic growth. now, here are some of the commentary that came out. there are the three things in the statement. low inflation could pose a risk to the economy. now, ian shep hardson saying, in short, the data matter but september's tapering is a good bet. dan greenhouse, for investors, all that matters is whatever you thought before, holds after. and this is the interesting comment from credit suisse. the fmoc refrains from mentioning possible tapering. credit suisse, the only one who mentioned that, but it is true, and there's a bit of a controversy about does what the fed chairman say after the last press conference, does that stand? my best guess is that it does. however, they are right at credit suisse, it was not included in the statement today. >> before we get to our guests, rick, what did you make of the market response? the yields on the 10-year came back a bit. the dow, modest gains here so far. other markets, what did you think? >> i thought it was very fascinating. maybe we can put up the chart. if you really look at it
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minute-to-minute, and everybody on this floor does, the 10-year -- and most interest rates started to come down -- many minutes before the stock market ended up turning around. so i do think that the stock market took their queue today from dropping rates. and i think the rates dropped for all the reasons mentioned before i spoke, and that is not a lot's changed. the taper really wasn't mentioned. and i think that the market from the standpoint of the fixed income is now continuing to try to price to data. and you were right. the gdp data was better than expected, but nobody's going to celebrate a 1.3 average for the first and second quarter. >> you're right. yeah. >> now, edward -- >> still treading water. >> -- your opinion is this can't end soon enough in terms of the stimulus and the tapering beginning. why? >> it was almost like the statement was written before the economics came out -- economic numbers came out this morning. the numbers were much better expected, especially the export numbers. we are exporting a ton of oil and gas out of texas, out of
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oklahoma, all over the world right now. at big prices per barrel. we're making a lot of money in that area. and our numbers are better than i think what the fed expected they would be. i thought the letter that was -- the statement was more of a love letter to the stock market than anything else. basically saying, the market's going to higher, we'd like to see it go higher and we'll do everything we can to keep it going that way. >> why is our trade deficit at over $40 billion if we're exporting so much stuff? i think we've entered the "twilight zone." let's look at what's going on -- the whole global economy is slowing. we have a gdp print of 1.4%, if you average the last two quarters. that's only if you can imagine inflation was rising at 0.7%. gee, home prices are up 12% year over year. oil is over $100 a barrel. stocks at record lies, no inflation. what a miracle that's become. it's a joke. it's an absolute joke. >> the patient is getting over a life-threatening disease -- >> five years of quantitative easing! four and a half years of qe -- five years of 0% interest rates and we're getting over 1.4%?
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by the way, gdp -- double counting gdp and pretending there's no inflation. the best thing we can do is 1.4%. it's a joke. >> i've missed you michael. where have you been lately? >> the point you're missing is the world has not come to an end. >> i didn't say -- [ overlapping speakers ] >> -- the fed is building another dangerous bubble in housing and stocks and they don't care, because that's what they do best. >> that's what i'd like to see the tapering end. the world is not coming to an end. our economy is not going into a recession. >> you think the fed could begin the tapering and everything will be fine. -- persistent unemployment story. talking about an economic story that is under 2% at best. we can't break out of the 2% range. you really think the fed can walk away and begin this tapering and it will be fine? it doesn't impact earnings? >> the thing is they're tying interest rates to the unemployment rate. as long as they keep interest rates at zero, until the unemployment goes below 6.5%, that's the most important thing. >> hold on. they don't -- control long-term rates.
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>> what do you mean they don't control long-term rates? that's the whole point of qe. >> in june, they said they would taper, right? and then, four days, the s&p lost 80 points. the 10-year went to, oh, my god, 2.7%! and bernanke did the moonwalk. and he paraded out the whole fmoc -- >> and it went back down again. >> -- raise interest rates -- >> let me bring michael in. he's too polite to jump in at this point. what do you make of -- >> no, i'm in shock. >> -- are you still positive on this stock market here? >> i am still positive on the stock market. i do think that what the federal reserve has done today is essentially tried to come out with a statement that locks in the rate increase they got from the last time they released their statement. so i think they've actually started to nudge interest rates up, again with their vocabulary. so i think the tapering is going to be on a slower basis. i'm not one that thinks that it's a disaster that quantitative easing is in place right now. and i think it is going to drive capital assets higher. down the road, inflation's coming, that's why i think you have to be in capital assets.
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>> so you want to put money to work in the market, with the market up 61 points here, michael? what do you want to buy? >> i think what you buy is the stuff that went down last month. dividend-paying stocks got killed last month, because everybody was so afraid of interest rate increases. i heard a previous guest about 20 minutes ago predicting he thought yields on the 10-year would be lower than they are today by the end of the year. i think that's probably right. so i think if you buy yield-oriented assets and don't buy the bottom 10% of the s&p, which is what's really driven s&p performance, i think that's where you're going to be able to make sustainable, conservative, core, long-term gains. it will help you eliminate all of this noise that you hear about things going up, things going down. it gives you more stability. >> steve liesman, somebody said today -- and i can't remember who it was -- maybe it was you -- that maybe the fed doesn't do anything about tapering until ben bernanke's term is up, leaves it to the next guy. what do you think? >> i didn't say that. i don't think that's a reason why the fed would or wouldn't taper. i think bernanke probably would
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like to get it started. but unlikely to do so, because he's leaving or not. i think that's really going to be dependent upon the committee, what the committee wants and also -- >> yeah, i don't think you're suggesting he would do that, but that it's somebody else's problem, just the timing of it. >> yeah, maria, but i also think that the committee kind of had to really fight hard to get the flexibility to reduce the purchases. i think having fought that -- and essentially won. and what i mean by won, is they have relative stability across the markets. i think they're going to avail themselves of that opportunity if the data is reasonable enough to allow it to happen. i think they'll bring it down from 85 to 65, and maybe sit there and maybe give the soft to the market on the interest rate side, maybe try to lengthen that guidance or soften that guidance on what happens to raising rates. but i think they fought hard for this. and i think they'll probably take advantage of it. >> all right. >> michael, how do you want to invest, given your position, where you don't think the economy is doing much and that the fed is required --
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>> michael pinto? >> yeah, it's a very dangerous area we're in. i'm short treasuries. i own a little bit of gold. i have healthcare stocks and moving in and out of the market very, very carefully. because like i said, we have become an economy 100% addicted to artificially produced low interest rates and inflation, and when it ends, we'll have the same condition where you had in the fall of 2008, and you don't want to get caught in that downturn. >> how much high can yields go -- >> the interest rate -- the average interest rate on the 10-year is 7%, going back to 1971. it was 4% in the spring 2010. before we had the collapse of europe. >> we are not going back to 2008. that's not going to happen. that was a different situation. that was a housing bubble, that was a credit crisis bubble. >> let me give you my facts, okay? we have a total amount of debt in the economy of $54 trillion. it was $49 trillion in december 2007. all we have done, is able to push down artificially our debt service payments, and when they rise back, it will reveal the
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insolvency we have on the private and public sector. >> see, i have two more questions i have to ask before we go away here. ed, how are you making money now in. >> i have to say first, i disagree with every single thing michael say. >> yeah, but that's over, so move on. >> making money buying growth stocks. there's been a switch from value stocks, from stocks that pay a dividend to stocks that have growth. and i think you see that in the last earnings report. >> where's the growth? >> well, there's growth in obviously oil and gas, technology. old tech did very, very well this earnings season. growth in healthcare. those are the areas you have to look at now, there's real good growth prospects going forward, and the dividend-paying stocks are in, a lot of the investors don't want to sell them, because they don't want to take big capital gains. but the rotation is on. >> i agree with him, but there is no revenue growth. >> a stock picker's market. >> steve liesman, the president met with house lawmakers, democrats today, and carolyn maloney came out of the meeting and said, maybe we're a little
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getting ahead of ourselves if we guess it's either janet yellen or larry summers as the next fed chair. what are you hearing? >> i heard a third name mentioned, don kohn, under alan greenspan, worked under bernanke for a while, and i think 37, 40 years at the federal reserve. if that name was mentioned -- and i think the fed -- the president let this process get out of control and didn't -- and really let the whole thing spiral to the point where both of his top candidates, if it was janet yellen or larry summers, have been sort of damaged by the process. so maybe injecting a third candidate here might take some pressure off of both of the other candidates. let the process simmer for a little while. he wants to make this decision, or tell us it's happening in the fall. but the understanding is that summers is still the lead candidate, but i heard he got a lot of pushback on that. >> hey, steve, steve! i have to tell you, don kohn has been the wild card on this trading floor -- ira harris three months ago had a discussion. that name kept coming up.
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floor traders, especially the old-school traders, have great respect for donald kohn. >> yeah, you're right. that is a name that is sort of consistent. >> old school. >> my guess would be don doesn't want it. i know don a little bit. my guess is he's happily retired after being through the wringer, through the financial crisis. but my guess is, also, don would come in and serve if called by the president. >> if the president calls -- that usually happens. >> right. it's a hard -- it's a hard conversation to end with, "no, mr. president." >> yeah, "let me get back to you." >> thanks, guys. >> i'll get back to you, bhill. [ laughter ] >> thanks, guys. a lot of fun today. heading 20 close. about 48 minutes left in the whole trading month, and the dow is in record territory, still, i think. >> just barely, bill. up 45 points here. >> yeah, actually, just out of it right now. and the s&p is knocking on 1,700's door. we'll see if that continues here. amazon, meanwhile, up 30% over the last year. but bob ole teen continues to say the company is poise for a
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huge decline. he has said it on this program before. he is back today. he said he is sticking to his guns. and keep an eye on these stocks. they report earnings after the bell tonight. we'll have all of the instant market reaction and analysis for those of you listening on satellite radio, talking cbs, dreamworks, and yelp. back after this. "first day of my life" by bright eyes
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you'll never find an interest rate lower than sleep train's interest-free for 3 event, on now! superior service, best selection, lowest price, guaranteed! ♪ sleep train ♪ your ticket to a better night's sleep ♪ welcome back. we're closing out what would be a memorable month again, but right now, we're losing altitude here, bob pisani. what's going on? >> look, i think the fed did a perfect job. all they wanted to do was make sure that they didn't change the 10-year yield by saying something that could be misinterpreted. and in that sense, they succeeded, whether you like it or not. i think that's what they wanted to do, and they did it. you couldn't ask for a better month, bill. when you put up the leaders, you get healthcare moving up as much as you have materials and industrials and financials, boy, what more can you ask for? the s&p 500 overall up about 5%. that's broad-market participation. if you look at the leadership groups going into july, it was biotech stocks, it was airlines, it was retail.
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and it was housing. and three of the four hit it. i mean, housing, all right, did not have a great month. perhaps because they were a bit overpriced there. they slowed down in response to lower -- the higher interest rates. commodities is the one section where you can't get much traction. yeah, gold had a pretty good month. copper, aluminum, zinc, they're all sitting near multimonth lows, and you guys were talking about amazon. they had the numbers out the other day. slower sales, 22% still strong. but it was below expectations. i don't think amazon cares about any of that stuff. they just want to keep bringing in that cash flow and look at that stock. $300. i don't think they're worried at all by -- barely paused on its way to new highs. the stock is up 400% since the bottom in 2008. >> wow, bob, thanks. despite the major gain for amazon, our next guest says that the service it provides is great, but the stock, well, it is overhyped, overvalued and bound to have an ugly and dramatic fall. >> according to one robert olstein, chairman and chief
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officer at olstein funds. he told our viewers to get out of the stock, but since then, it's up nearly 17%. bob, i'm guessing if you didn't like it in february, you must hate it now, right? >> amazon is my favorite nonprofit institution. it's the first public nonprofit institution. this is one of the worst overvalued stocks in my 45-year career. you know the olstein funds, we care about free cash flow. no evidence of it. they're trying to conquer the world, now in supermarkets. this will be an ugly end. >> yeah, but, bob, the company has been more focused on revenue growth than earnings. we know that. >> reinvestment. >> and they are growing revenues every quarter. and it's working. investors are buying into it. why do you find that strategy the wrong one? >> how do you spend revenues? i don't know how you spoeend revenues. the costs are higher than revenues. they're losing money. if you don't have free cash flow, it's like pumping air out of the room. you can't breathe. they don't produce free cash flow. it's a flawed strategy.
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it's going to come to an ugly end. >> you know that -- i mean, that's been jeff bezos, that's the way he rolls. we take so many companies to task for not reinvesting, for not investing in their future. and that's what he's been always about, whether it's about going after the cloud, you know, other initiatives, introducing the kindle. i mean, those aren't always money-making opportunities, but they speak to the longer-term, which so many ceos avoid, because of the pressure from wall street. >> i'm not against cap ex, but i'm for profitability. how do shareholders get rewarded? by higher and higher prices? that's the way they get rewarded. but you eventually -- >> they have been, right? >> yes, they have, because it basically keeps going up. eventually, you will have to produce free cash flow. if this wasn't a public company, how do you make a profit? this man has a strategy, he tells you to become a customer. he's very adequate at producing revenues. you cannot spend revenues. it is financed by payables. and eventually, it's going to
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come to an ugly end. i said the same thing about -- said the same thing about boston chicken. they have to produce free cash flow or it's not going to work. >> well, boston chicken, to compare to amazon, i don't know about that, bob. what kind of a dramatic fall are you looking for? how bad can things get? >> let's assume, maria, they get the 6% profit margins, and they get to $110 billion in sales. very lofty goals. well, basically, then you're earning $6 or $7 a share, what is the retail? this is a retailer. they're in everything. they're in supermarkets now. they are in tablets. so even a $6, $7, $8 a share, it's a flawed strategy. this stock may be worth $160. it could shoot -- fall -- >> wow, $160. >> it should fall at least 50%. you heard it here. you can own macy's today, you can own ebay and even get 5%, 6% free cash flow. why would you amazon? they -- you're
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saying, but, i working, okay? >> have you ever had a custome bob?" >> well, i wish i had owned amazon. but i'm not going to take the chance of playing russian roulette, bill. it's russian roulette you're buying. no cash flow. it's going to be no price. that's my prediction. and i'm stickin' to it. >> what do you like right now? i mean, do you like this market? we're sitting at all-time highs. we've had incredible gains. we keep setting new benchmarks all the time in terms of historical valuations and things. what do you think of the market overall? >> well, we're raising cash not because of the market, it's getting harder to find value. but we still have -- we have about 10% cash in the fund. we're up 24% with very boring stocks. we still like an ebay. we still like a macy's. they're producing 5%, 6%, 7% free cash flow run by great managements, and we're continuing with companies that have 6%, 7%, 8% free cash flows and selling the ones fully
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valued. >> so looking as 7%, 8%, free cash flow. are you looking for different donalds? what are the other screens you look at to find winners? >> the only thing we care about is effectively using the free cash flow. we still, in fact, just believe that apple rather than paying a dividend was much better off buying back their stock, because it would have been a better return to shareholders. so whatever method companies use their cash flow, whether it's higher dividends or whether it's to buy back their stock, the 7%, 8% free cash flows should not be raising the different donald. they should take this opportunity to buy back their stock, which would be a better return to shareholders. >> did you say you like apple here? >> i think apple's still cheap. i think apple's probably worth about $550 a share. not worth the $1,000 that people thought it was. but i think that basically apple has some really different free cash flows, great cash, good balance sheet. i'd rather own apple than amazon. >> i know you're a stock picker, bob. and it's selective. but what did you think of the
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fed today? did you learn anything? does it tell you anything about where this market goes on a broad status? >> you know, maria, i'm a contrarian here. i believe that interest rates, if they don't go up, the market's going down. now, initially, if they raise -- when they changed their policy, it's going to go down. we need a correction. there's been 100 corrections in my career. but i believe if rates don't firm, then, in fact, the market is going to be in trouble. so i want the market -- the rates to firm, because that's indicative of the economy getting better. and if the economy doesn't get bet, then the market could be in trouble. >> all right. >> good to see you, bob. thank you for your insights. >> thank you so much. >> thanks, bill. thanks, maria. >> bob olstein joining us. we have about 35 minutes before the closing bell sounds. we have a market well off the highs. we had been up better than 113 points earlier. we're looking at some sellers coming into this market approaching the close, up just 42 points. >> we are not in record territory right now. the dow's 4% gain, though, for
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this month is nothing compared to the 7% rally by the russell 2000, the small caps. when we come back, we'll find out if the small caps can keep delivering the huge gains for the rest of this year. also, find out why somebody here says this red-hot july for stocks will continue to heat up in august. back in a moment.
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the stock market is still kind of treading water right w now, as we continue to watch it respond to the fed's announcement a little while ago that they're keeping interest
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rates right where they are. no talk of tapering. the dow is up 45 points. the s&p is up about 8. both just below their closing all-time highs that were set a week or so ago. and we'll watch that as we head toward the close with about 30 minutes of trading remaining. maria? bill, the little engine that could, in a big way. the russell 2000 index continuing to make all-time highs. it is now on pace for the best monthly increase in more than a year. it has outperformed the dow jones industrials, the nasdaq, and the s&p 500. so is there still big potential in small caps? we start talking numbers looking at the russell 2000 today. on the technical side, jc, and on the fundamentals side of the story, ennis, with risk reversal. gentlemen, good to see you. jc, you're looking at the iwm. that's the russell 2000 etf. how does the chart look to you? >> well, maria, the chart looks very healthy, and it's actually sitting very pretty at close to all-time highs. now, if you look at the chart going back to the november lows, you can see a very well-defined
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trend channel, and we've been in that channel over the last few months and i think that's suggestive of higher prices here. now, yes, you may say we're a little stretched to the upside near the upper boundary line. but if you look at your technical analysis playbook and you find what do you do in an overbought condition in an uptrend, you don't sell it. you hang onto it. you buy oversold conditions here. so right now, i would get worried if we start breaking below 102, which was the july 11th price, as well as 100, which was right around the may and june resistance levels there from the highs. but right now, i'm hanging onto it, and i think it has room to go on the upside. >> all right. ennis, you share that view? >> not at all. part of the reason that small cap stocks are doing so well is because the u.s. has been outperforming other economies. small caps are more domestic. what price are you paying for that small cap outperformance here? if you look at any historical valuation metric, the past ten years, price to earnings, to book, to sell, on all of the metrics, it's near the high of the 10-year valuation range.
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on top of that, if you look at reward, i bet you many people are feeling good about having small caps overweight. if you have small caps overweight at valuation highs, you're probably making the wrong decision as opposed to when their valuation rewards two or three years ago. it doesn't make sense when valuations are so stretched. >> isn't one of the issues that the u.s. is the best game in town when you look at the global slowdown and maybe the russell 2000 companies much more exposed to the u.s. economy than the rest of the world is a good play in this environment? >> right. but the news is priced in. the good news, in my opinion, is priced in. especially relative to the rest of the world when you look at european stocks or emerging markets stocks that are getting crushed on a relative valuation basis. that brspread is as high as it' been over the last decade. >> i see continued demands here. with the entire rally, you have to give the benefit of the doubt to the bulls. until support levels have to break, you have to be long this trend here. >> i don't know where the
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russell will go, as much as jc knows or the viewer at home knows, but i know the risk/reward is much greater risk rather than reward. >> all right, gentlemen, we'll leave it there. thank you so much. great conversation. you both make great points on the russell. meanwhile, we still have money moving into that index. we'll see you soon, guys. the answer, can we still close out at all-time highs, the second best month of the year. going back to record highs? at 15,573. >> it's been dictated by the yield on the 10-year. and it spiked nearly 8% this month. up next, mike the crofton is with us, saying the fed is about to lose control of rates, which will send them skyrocketing to 6%. then, later, a federal court ruling against video game maker electronic arts in a landmark decision that could dramatically reshape the future of college sports and the business model for companies like electronic arts. in fact, look at the intraday
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stocks moving all over the map today. josh lipton, last trading day of the month. what names are standing out to you right now? >> reporter: yeah, bill, wrapping up the month. let's recap some of the big movers in july. some of the best performers in the benchmark gauge include fi networks, providing products to help manage network traffic, and alex onpharmaceuticals. and also worth noting, the biotech names would,ing well. names like celgene, up 90%, as well as gilead sciences. and facebook, which announced today it will allow people to easily add public posts from facebook to outside blogs and websites, that stock up some 50% in july. charging back toward that offering price of $38. a long road back. remember, the intraday low here, $17.55 back in september 2012. in the red, many of the tech names. broadcom, micron, sandisk, though stx still up some 35%.
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and pulte, lennar, the group has been nailed on worries about how higher mortgage rates will impact the industry, and we'll end here on bud, the beermaker, moves sharply higher today, up some 6% this month. making more money than analysts forecasted in the second quarter. fans trading up to the premium suddens. bill, back to you. >> all right, josh, thank you. yeah, the facebook move back to $38 today. i know you have a debate on that the next hour, on whether or not that can continue. or that's the peak for right now. >> we'll see. a big victory for facebook. no doubt about it. and after that earnings release, people saw it as a game changer. so you have money moving into facebook. that's the question. what is the next move? we'll debate it at 4:00. meantime, interest rates, most agree, that they are going to go higher. the fed will have to taper at some point. it's just a question of when or how much. michael crofton, philadelphia trust, says the fed could lose control of interest rates as the great rotation out of bonds and into stocks hits high gear at some point. >> yeah, he says we could see the 10-year go all the way up to
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6% in the next 18 months. wow. jeff rossenberg, though, of blackrock, which oversees over $1 trillion in fixed-income asset, sees it playing out a bit differently. both joins now to talk about the future of interest rates. good to see you both. thank you very much for joining us. michael, i'll get to that prediction in a moment. 6% is a -- >> okay. >> -- a big move from where we are right now. jeff, you don't see that happening. what's your assessment? >> i don't see that happening. clearly the debate, as bill pointed out, is the pace of increases in interest rates here. the question is, how much can the economy really support those types of increases in interest rates? and clearly, the gdp figures, while better than expected, 1.7% headline, this is still a very weak recovery. we can't afford that degree of increase in interest rates, it's as simple as that. >> michael, what do you think? why do you think they'll lose control at some point? >> because we're at a massive inflection point in terms of both the economy and interest rates. the economy's inflection point, we're really beginning to build
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momentum, first quarter gdp growth of 1%, second quarter 1 maunt.7. i expect it to get to 2%, maybe 3% next year. i think the rotation out of bonds into stocks which hasn't yet occurred will eventually happen. you combine that with the increased demand that comes with the expanding economy, the expanding economy, and with the eventual tapering which i believe will start in september, and there will be a time when people are fleeing interest-sensitive securities and trying to get back into the market. i think 18 to 24 months out we'll see 5% 10-year rate, steeper yield curve, getting out to 6% in 24 months. >> 6% in 24 months? michael, what are the catalysts to actually make that happen? we see the economic data. it's flat. i mean, there are a couple of bright spot, but for the most part, what's the catalysts? 24 months, short term, period, to get higher from where we are right now. >> yeah, well, look, we have a consumer confidence, which is fairly strong. a housing market which is strong and getting stronger. you have a stock market which is continuing to move higher.
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and you've got the fundamentals that underpin the stock market in very good shape. you couple that with the fact that i believe the economy is going to continue to expand, monetary policy works with a lag, we're at the very end of a long policy of monetary policy, at a point where the policy is beginning to take effect, and i think the momentum will go on the side of a much stronger economy than most people have -- most people would have expected coming out of this period. that's going to drive interest rates much higher. couple that with increased credit demand, and you'll have bigger rates. >> what's going to keep rates spiking the moment the fed does signal the first time it will taper? we saw a hint of that this spring when they started laying out a timetable. >> we saw a hint of it. and there's nothing to keep it from spiking. the issue is, is there a persistent rise in interest rates? what keeps that from happening is the dependency of the economy on financial market conditions. what drives the economy is consumption. what drives consumption is confidence, confidence, and
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wealth, from housing and stocks. and so, if you have really big increases in interest rate, the bond market overreacting, that wemt effect begins to pull back, and if you don't have the strength in the economy to offset that, right now, we're too dependent on the financial market conditions, that's what limits the rise in interest rates. we'll have higher interest rates. the issue is, we can't have that quick of an increase in interest rates, because you don't see the strength in the economy. away from consumption, necessary to bolster that kind of increase in rates. >> so what's the investment play, then, in that scenario? >> it's an important point. and michael talked about the great rotation. we are seeing many types of great rotations here. but it's not the great rotation that people are talking about. and expecting, out of bonds into stocks. we're seeing rotations out of interest-sensitive bonds into floating-rate bonds, into credit-sensitive bonds, the short-duration bonds. >> is this something the stock market should worry about? >> the overoptimistic viewpoint that stocks will be bolstered higher, because of the plonmone
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hanging out in fixed income is misplaced. it's rushing out of traditional bonds, going into flexible income. the idea a generation of investors have suffered 40% declines in 2008 are going to rush right back into stocks when they're 70, 75 years old is a little misplaced with regards to how short-term memories are. >> all right. we'll leave it there. thank you very much. >> thank you. >> appreciate it. we want to point out jcpenney here, because the stock is selling off midday, take a look at what's going on. this is happening as we speak going into the close. down 7.5% on jcpenney. there is a report that cit is tightening the screws, stopping supporting deliveries from smaller manufacturers, to stores. we'll check on this report. this is a pretty sharp move in just really very quickly. >> we know the travails that this company has experienced the last couple of years. a change in leadership a couple of years ago. it didn't work out. they lost that ceo. they brought back a previous ceo.
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they tried to get back to their core audience. but, you know, it comes down to whether that core audience comes back to this company and is willing to give them a try again. and maybe we're getting signals that maybe sales haven't been what they should be. so if you don't get the sales, you can't make your payments, and your creditors start to step in and take a -- a move of some kind. maybe that's what cit is doing now. >> a pretty sharp move. 8% lower. we'll take a short break. 20 minutes before the closing bell sounds on wall street. we have some sellers on the broader market, too. look at this market. we are down from a 113-point rally, now a gain now of 9 points. we have about 20 minutes before the close. >> a lot of selling pressure among the big-cap stocks into the last hour. >> bank of america, ge, millions for sale on both of those. >> be that as it may, july was a huge winner for the bulls. can the stampede carry over into august, he said, looking ahead? top strategists ahead. and when will the fed begin the tapering? were there any hints today?
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and costs 77% less. it's called hp moonshot. and it's giving the internet the room it needs to grow. this going to be big. it's time to build a better enterprise. together. it's the talk of the floor now. jcpenney down sharply at this hour on word there's a report in "the new york post" that cit,
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the bankholding company that's known for the so-called middle-market financing for commercial loans may have pulled -- reined in the horns, and not supporting deliveries to jcpenney right now, which may be an indication of the difficulty they're having with sales. it's down almost 9% right now. and it's not lost on us, by the way, maria. bill ackman has had a big position in jcp and be a champion of the company. it's losing ground, even as herbalife, his great short, has been moving higher as it gets more support, as we learn george zoros has taken a position in hea herbalife. >> jcpenney traded lower in march, after cit place add 1% surcharge on jcpenney invoices. if, in fact, cit is tightening the screws, this is -- this gets worse here. jcpenney now down better than 9% as we approach the close. >> and it is -- yeah, the lows of the session right now, pushing the markets lower perhaps, as well, just in terms
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of mood. but the dow is down 12 points as we head toward the close. but even with that, july has been a red-hot stock for both -- month for both stocks and commodities. we want you get you a recap of this month. we have seema looking at the red-hot technology stocks. we have bob pisani with the overall market. let's start with bertha coombs with the energy and metal sectors. >> a big reversal when it came to gasoline. you may have felt the pain at the pump as a result. gasoline snapping a three-month losing streak with a double-digit gain. traders, though, say in august, continue to watch wtimx crude, the structure, the front-month contracts trading at such a premium to longer-data contracts points to momentum. as far as the metals, big winner continues to be palladium and will likely be in august, as well, because you have a situation there, maria, where you have tight supplies and continued strong demands from automakers for catalytic converters. >> all right, bertha, thank you
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so much. the nasdaq hitting a 13-year high. seema is breaking down the stocks driving that rally. >> reporter: hi, maria. the biggest winner on the nasdaq 100 is facebook. shares up 48% after the social media firm indicated in its latest earnings report that it is monetizing mobile. july was also a strong month for apple. the tech giant outperforming amazon, google, among others. for august, the street will be watching to see if apple can continue its move to the upside. reuters today reporting that ceo tim cook met with china mobile, the leading mobile carrier in china, which does not offer iphones, a deal between the two would be considered a big plus for apple. bill? >> all right, seema, thank you. to bob pisani on what's moving the broader market this month, robert. >> and the important thing is about as broad advanced as you could ask for, perfect. the dow leaders here. when you get healthcare stocks moving up with the same as industrials, put up the dow leadership here, the same as healthcare, industrials, financials, it's a perfect
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advance overall. how about the losers? well, look, you have two legacy companies, microsoft and intelment legacy, because they're tied to the pc business. that's what's dragging the dow down. not a bad month at all. as for the supposed pullback we have all been waiting for for the last three weeks in the s&p? what pullback? there hasn't been one. we moved sideways and now poised to move higher. if we get 225,000, 250 on friday, on the jobs report, my bet is the market will interpret that as good news and not as bad news. guys, back to you. >> all right. thank you, bob. >> yeah, heading toward the close, 12 minutes left. the market -- maybe it's trying to come back. i don't know. down five points on the industrial average with the s h. we were in record territory. up next, why some feel we have a lot of room to rally. and can facebook close above the $38 and the fabled ipo price of last year? stick around. and we'll hear from one bull
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on facebook who says the company's shares look cheap at this level, after a more than 40% gain over the past week. stay tuned. ♪ [ agent smith ] i've found software that intrigues me. it appears it's an agent of good. ♪ [ agent smith ] ge software connects patients to nurses to the right machines while dramatically reducing waiting time. [ telephone ringing ] now a waiting room is just a room.
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before we get to our guests, moments before the bell's ringing, we want to bring you
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some information. >> i didn't bring it. >> $3 billion of stock for sale right now. >> that's a lot. >> it's a big number. a lot of it will be paired off. you have to be concerned when you see a number like that. >> it could be the owned of the month. >> probably. >> maybe the unemployment number on friday. we have larry cantor from barclays to give us a sense of, you know, we're still at close to record highs right now. >> yeah. >> and particularly at the close here, we have sellers in the big cap stock, bank of america, general electric, things like that. what's your take on what's going on today and broadly speaking in this market? >> you know, the last time i was on, last week, we were talking about fed tapering. everybody has been talking about it. people forget. they're not doing that yet. they're still filing $85 billion a month in -- >> no sign of the pullback. >> and said it today. >> exactly. you saw no change there. you know, so i think this market -- try to bet against the market in the short term here, i think once we get into tapering, we better see the stronger growth. i think we will. and then you'll see a little
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more sell-off, but i still think the stocks -- the stock market -- >> still reminders of softness. we are seeing this move in jcpenney right now, i don't know if you heard. >> yeah. >> 9% sell-off. >> cit is pulling back, not going to support deliveries to jcpenney right now. maybe softness in sales. they're not able to make their payments. >> right. >> stock is down 11.5% right now. >> so still soft spots in the economy right now. >> it's soft overall. >> yeah. >> i mean, the amazing thing -- first half growth a little under 1.5%, last year, 2%, and the shining light, massive fiscal tightening. that's what the fed is hoping for, seeing the stronger growth. it is still weighing on the economy. you're right, very weak. >> what do you want to recommend then? we have the market down 18 points, had been up 113 earlier. do you want to buy on the dip again? >> still? >> as long as the fed keeps pumping in, i do. you know, we are in very high territory here, tremendous --
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>> record highs. >> -- for july. would i be -- depends on the time horizon. long-term investor, absolutely. am i nervous about some kind of correction, you have to be. >> i said to maria in the commercial break, it's becoming clear it's tougher for value-oriented investors to buy into this market right now. right? >> right. >> we made that argument at the beginning of the year. 14 times earnings, still a cheap market and so forth. but even the value players are starting to get skittish about this market. >> right. >> because we're at such lofty levels. >> that's what olstein said earlier, a value player. >> exactly. the problem is where do you want -- do you want to put it in bonds when you know the fed will be reducing its stimulus -- >> you have to be a growth player. >> put in cash, forget it. what we're going to see -- the question is, do you believe in a stronger economy or not? if you do, you probably want to start moving into more cyclical-type sectors, because the economy -- >> investing in growth. >> if you don't, i'd be very -- i'd be reducing stock market exposure and even buying some bonds here, because if you get the weak growth, then you're not
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going to get what you expect from the fed and bonds are -- we're in the camp that growth -- it will take a while, though. we think it's another couple months of weaker, the economy will take off, though, because of housing, because of fiscal tightening being less, the wealth effect, and so forth. >> goldilocks. >> yes. >> goldilocks. thanks a lot, larry. good to talk with you, as always. >> we'll come back with the "closing countdown" and close out -- will we get an all-time high? it doesn't look like it now. >> no, cbs, dreamworks, animation, yelp, all of them set to reveal their earnings. we have instant analysis coming up. you're watching the "closing bell" on cnbc, first in business worldwide. [ dad ] so i walked into that dealer's office
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♪ all on thinkorswim. from td ameritrade. two minutes left. let me show you jcpenney right quick. again, if you haven't heard, talk in "the new york post" that maybe cit -- we're trying to confirm it, as well -- cit not supporting deliveries to jcpenney, could be a signal they're not making their sales, not being able to make payments. the stock is down 10%. worst performer in the s&p right now. having said that, though, let's look at the month we're closing out. it's been the second-best month of the year for the dow, going back to that great month in january, with about a 4% gain here. we're starting to lose altitude, which we'll talk about in a second. as for the 10-year, even as stocks were rising, yields were going up, as well. the yield on the 10-year for the month -- look at this -- the
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spike when they were talking about tapering at that point. but here we are up 3.7%, in terms of the gain in the yield for the 10-year. allen valdes, $3 billion for sale on the close here today. does that signal something? that's a big number. >> you know, it's the last day t billion, today $3 billion, closed up yesterday, i don't think we'll close up today. but it doesn't mean much. >> somebody is not expecting this to continue? >> i think a little profit taking. you make money, take it off the table. >> yes. >> starting tomorrow, first three days of the month, new money comes into the market. we're going to test 1,700 in the s&p. >> so you feel that momentum is still there, to continue higher here? and how much of that is laid at the fed with the announcement today, they are not signaling any taper in the near future. >> that was great. that's what the market wanted to hear. a month ago, we'd be down 400 points. the way they said it today, great, perfect. >> all right. thank you very much.
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we close oun, down in pricing, selling pressure here, because of all of the high-cap stocks that are for sale. [ bell ringing ] but still a very good month of july. we'll recap it and a lot of earnings to come on the second hour of the "closing bell" with maria bartiromo. i'll see you tomorrow. and it is 4:00 on wall street. do you know where your money is? hi, everybody. welcome back to the "closing bell." i'm maria bartiromo on the floor of the new york stock exchange. stocks wrapping up a big month for the bulls and all of the drama at the close with the $3 billion for sell in stocks, ending really flat on the day, down about 13 points on the dow jones industrials average, but a big win for the month. the dow, tonight, at 15,507 as things settle out on the street. the nasdaq, off of the best levels of the afternoon, but nonetheless, a gain of 10 points. at 3,626. s&p 500 positive, even barely, by about a quarter there. the dow wrapped up the best month since january.


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