tv Closing Bell CNBC July 10, 2013 3:00pm-4:01pm EDT
no, no, no -- >> yes, the australian accent. >> and did you get one. >> we were allowed one for the prop. they only make 300 -- >> i've heard of crony capitalism, but not cronut capitalism. >> and the flavor this month, coconut. thanks for watching "street signs." hi, everybody, we're in to the final stretch. welcome to the "closing bell." i'm maria bartiromo. >> what do you say we open a cronut franchise? >> i like it. >> we could buy one of those. make more than 300 a day. i'm bill griffeth. today, the markets are on hold, until next hour. and then, who knows what will happen? we had the fed minutes come out last hour. and they're still trying to make sense of them. it seems the fed officials are ready to begin tapering, but they're not convinced that the economy is ready for it. they don't think the job growth
is sustainable enough yet. >> that's really been the talk anyway. yes, we know at some point the tapering will begin. but will the economy be strong enough to actually allow for that september beginning? we're going to get more on this market-moving news later in the program. ben bernanke will be speaking live, about an hour from right now. he'll be taking questions, as well, including when the tapering might begin. something, of course, of keen interest to investors, it seems. you will see it here live when that begins after 4:00. >> also, the eliot spitzer saga continues, believe it or not. before you discount what his role would be as new york city's comptroller, it is becoming clearer now that the power of that office could be much more vast than anybody ever thought. including the power to subpoena. is that why he wants the job? the banks certainly want to know what the answer is to that question, and we'll be looking into that coming up in today's program. >> you can look at what he did as the attorney general, and remember the use of the martin act, which had not been used as
expressly like that. >> exactly. >> let's look where we stand on wall street. >> can you guess, the fed minutes came out. >> so clear when the fed minutes came out about an hour ago, because the market really kicked off some real volatility there. we're now down 18 points at will 15,282. a fractional loss there. nasdaq composite in the green, actually, although it, too, has seen volatility after the minutes came out. nasdaq up 11 points, .3% at 3,515. the s&p 500, a similar chart pattern intraday, about 1.5 points. >> so some confusion of at release of the fed minutes. markets rise modestly, and then they fall. they disappear -- the gains have disappeared. let's talk about this and what to anticipate from bernanke coming up. joining us on the "closing bell exchange," peter and rob, david from mainstay capital management, and our own rick. rick, i'll start with you because of the markets and the
anticipation. what did you think of the response to the fed minutes? it seems the ten year is calling the shots now. what do you expect to hear from bernanke? >> you know, i have no idea what ben bernanke's going to say, and i'm not sure he'll get into the granular issues that traders are most interested in. but i think it's very fascinating that as you look at the intraday chart of 10s, wire now at 2.68. we got down closer to 2.60. this will be the second-highest yield close in close to two years, and next to the 2.74 level. if you look at the s&p, boy, it had its brief moment, but it made sense. stock players wanted to find something to buy on. treasury traders that have been long and getting hurt, wanted to find some reason to bring rates down. but in the end, you're right. the 10-year is still calling the shots. but there's one more chart here. and this is the one i find most interesting. it's just after tax profits, okay, by companies, for about 10 years. you see how it's basically at
record levels? okay. one hand, we have the fed, and basically what the minutes said is, listen, we have to wait for bigger confirmation that the economy is doing better, and for that, we're going to look at the employment side. we have the fewest people working that can work in 30 years, and record high profits. now, does that strategy sound rational to you? >> mm, well, certainly the employment situation persisting for years now. rob, let me ask you your thoughts on the minutes. you can't look at the minutes as dovish, can you? >> certainly not. i think it's likely that when we get a talk from the fed chairman in september, he's going to push back a little bit more than people are thinking today. so i think this pushes things back a little bit. and i think the markets are going to rally on that. >> david, we cannot ignore oil either. i mean, the dollar has fallen since the fed minutes, but oil's been climbing for the last few weeks. one of the biggest gains in the last few weeks here.
we're about a year's high for wti crude at $106. what do you make of that? and at some point, that has to put a crimp on the stock market style, don't you think? >> yeah, we've got oil rising because of a problem on really a supply -- potential supply problem, supply disruption with egypt and demand increasing, because we're expecting the economy to improve. we think that's what this is pointing towards. but with wti well above $100, that starts to become a headwind for the markets, and is essentially a tax on the economy. so that does bring in some concern for the markets, but we think with underlying fundamentals and depending on how tapering and taper talk goes, we think the markets can still work through that. >> and to those who point out that egypt doesn't export oil, that's correct. but they do have that little body of water called the suez canal. >> the critical issue there. 106, you would think that is a problem for equities.
the last time we saw oil above $100, we saw real volatility and nervousness. when does oil become a problem with equities because of the idea it's a tax on the economy in. >> we haven't seen it yet, maria. the fact is we're concerned that, you know, if the consumer is sapped with $4-plus gasoline, if, in fact, retail sales get crimped, which we're not seeing yet, they may detract from the fed's mission. but the fact you look over the past 12 months, we've seen the average job gains of 190,000 per month, go way back in the way-back machine, to july 2012, the fed minutes there, the june meeting, the fed was looking for unemployment rate between 7.5% and 8%. they were spot on in terms of the 2013 forecast. the fact is the economy is looking very fragile in the sense we had 1.8 in the first quarter and the fact that we look at the second-quarter numbers, we're not sure we'll have a 2 handle or a 1 handle. look at the corporate profits. the fact is, as rick said, we're
very strong, looking for, like, at present a 3% gain in terms of s&p 500 numbers for second quarter, which may, at the end of the day, be 6%. >> so far, that's what you're getting, the 3%. >> correct. and where we're seeing the gains really is the financials, consumer discretionary, telecom, weakness is in the materials and information technology. >> rob lutz, our next big group to report, is the financials, waiting for the big bank numbers later this week. what are your expectations? do you like financials here? where did rob go? david? >> i'll take that. >> you want that question? >> i'll take that, yeah. we like financials here. it's been one of our most favorite sectors this year, was unloved a while back, but more people are coming to it. and we look specifically at regional banks. and with the steepening of the yield curve, one benefit of the high rates is profits for the banks. with their wealth management divisions, a higher stock market, the revenue coming from
that -- that channel, as well, we think the regional banks continue to do very well, and financials overall as a sector, we think will be a star performer for 20 -- >> in terms of -- you think they'll be a star performer, but i was talking about this just this week, and people were worried given the new basel regulations, and really in some cases putting the u.s. banks at a little bit of a disadvantage to the global banks, and this money manager said you need to short financials with the earnings. >> i am expecting a strong quarter for the financial second quarter and through the remainder of the year. there are regulatory headwinds that the banks and financial services industry face. if we look at the benefits -- again, the wealth management divisions, what they've been able to -- what they'll be able to accomplish in terms of net interest margin, with the steepening yield curve, we think that outweighs these regulatory headwinds and the financials continue to do well through the
balance of 2013. >> and, maria, you know, one word about financials. here's an arcane indicator. the number of qsep requests in the months of may and june, had over 2,000 requests per month for corporate securities, corporate debt, equities, for identifiers. that was the first time since april, may of 2008, the volume of the qsep request, the issuers, the borrowers, going out into the capital to raise. >> all right. you think we'll see that. >> i do. >> all right. thank you, gentlemen. >> the markets, of course, really waiting for the fed minutes. bob, is it still all about what ben bernanke may or may not do? the market down 40 points now, really worsening in the last few minutes. >> reporter: yes, it has. we'll move to earnings very quickly. what everybody wanted from the fed was more clarity on the asset purchases. the fed said, yeah, we need to provide more clarity, but they didn't tell us what we wanted to know. what we wanted to know was more information on exactly when they
would start fed -- the tapering, and under what conditions exactly would they end it. that's what everybody wanted. we really didn't get much more clarity. and that's why i think the markets are a bit disappointed. i know a lot of people down here are. the dow, we were up about 50 points on the announcement initially, and as maria noted, back down essentially where we were to just prior to when the announcement came. slightly risk off-day, so healthcare stocks, staples, utilities, all of them have been the market leaders. this is pretty much the way it was earlier in the day. one sector i want to continue to highlight. i know we haven't talked about it in a while. emerging markets are just continuing to drop. it's not like there's an awful lot of news. real disappointment on china on some of the data today. and you can see, there's a new low in peru, turkey, thailand. again, exchange-traded funds. you can own them. they've been selling off every day, and really in the prior month. and finally, oil up. but something odd. we don't have energy stocks up. in fact, all of the major energy stocks are to the downside. i think it may be concerns here
about growth issues for some of the oil stocks. bill and maria, remember this time last year -- i think it was march or so -- when oil was over $100 for several months. president obama came out and started talking about tapping the strategic petroleum reserve. a lot of people are down here wondering if the president might come out and make similar comments if the oil stays up where it is right now. >> that was a year devisible by four when he did that. >> reporter: that's right. i think it was march of last year, as i recall. >> that was it. you know, a good point to bring up. i wonder if that will be the conversation. thank you, bob. >> all right. don't look now, but oil is topping $106 here in new york. bertha, what is going on and should people soon expect to see that reflected at the gas pump, as well? >> reporter: most likely. we are seeing what essentially is a real shift in what's going on in terms of supplies here in the u.s. it seems that bottleneck in cushion has been unstopped, and we're starting to see big outflows. we've seen now another week of
near 10 million barrels' decline in crude stocks -- week over week. 20 million over two weeks. that's the largest in over 30 years. as production in the u.s. has increased and we've seen imports decreased, and we've seen the refineries, like the whiting, indiana, refinery come back online, and demand is higher. gasoline futures, above $3 for the first time in three months. as we saw surprisingly large draw-down of gasoline stockpiles, as well. over 2.5 million barrels. the expectation has been for a build of 1 to 2 million barrels. we are seeing more demand for gasoline, up 2.5%. the implied demand from a year ago. and we are seeing the prices starting to reflect that at the pump with this sharp move higher. up a couple of cents over the last day, andy lippo thinks we could see another 7 to 10-cent increase, up to 3.60 on average in the next seven to ten days. but the eia is forecasting we'll
be back down to $3.25 a gallon. >> and we're grateful for that price. i just think that's astonishing. thanks bertha. see you later. heading toward the close. we're in wait-and-see mode, kind of an unusual day here as we wait for fed chairman bernanke's speech next hour. you'll have that at that hour. but right now, the dow is down 24 points. let's see. the range today has been about 75 points. we were up 36 at the high. down 40 at the low. so we're sort of in between right now. he said he would talk about fed policy. seemingly explaining qe from when it started, but then they're going to take q&a, no doubt that will mean tapering talk. >> exactly. >> that's what we want to focus on the next housh. bill, rising mortgage rates are threatening to slow down a hothousing market, but could changing of the deduction set in fear? also, hewlett-packard has been the best dow component this year, by a mile, but citigroup apparently just noticed. they've upgrated the stock to a
buy from a sale. >> today. >> is it too late for you to jump on the bandwagon? and it may be the ultimate vacation destination for most of us, but hawaii coming in dead last in our top states for business ranking. find out why this paradise is so heldish for business. coming up on "closing bell." mine was earned in djibouti, africa. 2004.
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rising interest rates continue to take a toll on mortgage applications, and now maybe a bigger threat over the housing recovery. diana has the details for us. >> reporter: that's right, bill. rising rates continue to turn more borrowers away. mortgage applications fell 4% last week from the previous week as the rate on the 30-year fixed rose yet again. take a look. applications to refinance down 4.4% to a two-year low. that continues to take away from consumer spending power. and purchase applications were down 3.1% last week, down 28% in just the past month. this as the average rate on the 30-year fixed jumped to 4.68%, the highest since july 2011. this is taking away from the
purchasing power, just as home prices are really taking off. the prices are up over 12% from a year ago. now, we've talked a lot about rates and about home prices. but one thing that's kind of been flying somewhat below the radar is the possibility of changes to the mortgage interest deduction. house ways and means committee dave kemp, a michigan republican, tells cnbc.com, he is carefully looking into revising the deduction as part of the total tax reform package expected later this year. obviously, those in the real estate business are lobbying heavily against any changes. they don't like that, especially now in a rising-rate environment. maria? >> all right, diana, thank you so much. is the mortgage interest deduction really that important to the housing market? >> let's talk about it with mark goldman, a loan officer for c 2 financial, and also a lecturer on real estate at san diego university. he doesn't think this is a problem. he said most people don't factor it in when they buy the home. but then there's fred glick, principal at u.s. loans
mortgage, who says getting rid of it will kill the market. mark, explain why eliminating the mortgage interest deduction wouldn't hurt the real estate market. how could it not? >> well, the market prices have gone up quite quickly. we've seen just in the last month how an increase in interest rates is causing kind of a softening effect on pricing. but people, in my experience, who are purchasing homes rarely even look at the mortgage interest tax deduction as part of their analysis. further, the analysis that underwriting uses to determine somebody's ability to borrow does not include the after-tax cost of the mortgage. so don't get me wrong. i don't want it to go away. but i don't think it'll be the end of the housing market. people will still be able to buy homes and afford them with the same approach and analysis that they use currently. >> fred, you see a dampening of the market. >> oh, absolutely. no doubt about it. the first thing is, what we're not taking into consideration is
the deficit has been down. and if we keep the economy going, the deficit will keep going down, because we'll be getting more tax revenue. i mean, 36 million people have that deduction right now. two-thirds of them make under $100,000, and a few dollars here and there a month means a lot to them. and, also, rents would increase, and the worst part of this is, state and local taxes will actually have to go up, because what you're doing if you're taking away these deductions, they get less income. >> what do you think -- >> all around, it's a nightmare. >> what do you think of mark's contention -- you're a broker. you work with people when they're taking out a mortgage. he says they don't really take that into consideration when they're buying a home. >> well, here's what will happen. say they're looking at a $200,000 house right now, and we go and do their numbers based on their ratios and they qualify. if you take away the deduction and then you say to them after
tax, this is all you're going to have left to pay, they're only going to be looking at the 150 or, you know, less house. you're going to see a 17% price decline in all of the houses because of that going away, and a $32 trillion hit to the economy. so this is insanity by taking this away. >> well, mark, let me ask you what the alternative is. i mean, if the question is, that this deduction may very well go away, is there something else that is as equally impactful? >> yes, yes. yes. in fact, one of the options that's under consideration right now is a tax credit that would reduce a tax obligation, that would help people to afford a home. and that would actually help the people in lower-income brackets. in fact, you know, the $150,000 price point would probably be occupied by a family maybe in the $50,000, $75,000 income
range. right now, that income range does not receive very much benefit from the tax credit -- or from the tax deduction. >> how would the credit work? >> well, what's been recommended is a credit of 15% of the interest that would actually be a reduction in the cost of ownership. and that would have a greater benefit for somebody with a lower income. in other words, let's say somebody has a mortgage payment with $1,000 of interest. they would get a tax credit of $150. and that could help them to qualify for an even larger home. plus, it would help people who are making less than, say, $100,000, $125,000, to afford even more home. >> what about that, fred? >> right now the -- >> what do you think, fred? >> credits don't work, because, especially people in the $150,000 range, it's that monthly payment that they have to make. they can't wait till next april when they get the credit on their tax return.
so you're just trying to change an entire system that's been around for years. just because it's been around doesn't say it's good, but it works, and it works really well now. and it would be crazy -- put the whole real estate market completely upside down. >> one thing i would ask fred to consider is that the timing of the tax benefit from the tax savings now still occurs at the time the tax is paid. some wage earners do increase their exemptions to improve their monthly cash flow. >> right. >> and they could do the same thing. don't get me wrong, fred. i love the tax deduction. i'm in the range where i get the most benefit, and i don't want it to go away, and tax expenditures in general are about 20% of our national budget, and there's a lot of place to look to eliminate tax expenditures. on the mortgage market, i hope that you're not right in that i hope it does not devastate the housing market. we need the recovery. >> i mean, is the market that vulnerable?
i mean, you know, for the last several months, all we've been talking about is how strong the recovery has been, probably the best part of the economic recovery overall. is it that fragile that taking away a housing deduction will make that big of an impact? >> you think it is, fred? >> oh, absolutely. psychologically, in addition to the realities of it. you're trying to tell every real estate agent and every buyer, okay, this is the new mathematics you have to do. why would you do that? just keep it as it is. it's fine the way it's working. let's keep building new houses. let's keep selling houses. we'll get more income. the deficit will go down. and basically go get it from somewhere else in the savings. there's plenty of fat in that national budget, and we could all agree on that. >> all right. gentlemen, thank you both for your thoughts today. appreciate it very much. >> pleasure. >> thank you so much. we have 35 minutes before the closing bell sounds for the day. we have a market off of the lows, down about 18 points on the dow. >> is there any stopping
hewlett-packard stock these days? it's up more than 80% just this year. and it has been the best performer among the dow components in 2013. when we come back, we'll hear from somebody who says hp is just getting started. meanwhile, tensions in egypt showing no signs of cooling down. coming up, one of egypt's richest mens explains how the turmoil is impacting the economy and the world. what might happen in his company. don't miss it as we navigate the happenings in cairo. ♪ build! we're investing big to keep our country in the lead. ♪ load! we keep moving to deliver what you need. and that means growth, lots of cargo going all around the globe. cars and parts, fuel and steel, peas and rice, hey that's nice! ♪ norfolk southern what's your function? ♪ ♪ helping this big country move ahead as one ♪ ♪ norfolk southern how's that function? ♪ trust your instincts to make the call.
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some big movers on wall street today. josh lipton, what are they? >> reporter: bill, heading into the close, let's break down some of the notable movers in today's trade. best buy, in the red. cleveland research reportedly saying that the chain's domestic comparable store sales appear to be slowing. fundamentals remain challenging. it's also been on fire, up triple digits this year. family dollar another one to watch. sales open at stores more than a year expect to increase 3% to 4%. all scripts, the forecast of first quarterly growth in bookings in six quarters. analysts rate this one a buy, calling the news a validation of the company's long-term turnaround plan. and we'll end here on hewlett-packard. analysts at citi upgrade this one from buy saying it has a
positive inflection and say the cost cutting is underappreciated. maria, back to you. >> all right. let's look at hewlett and is it time to buy? we're looking at the technicals and the fundamentals. carter is chief technician with oppenheimer, and the fundamental side is anis. gentlemen, good to see you. carter, the charts here. how does it look to you? >> a great winner here today, up to date 80%. the long-term chart is important. the strength of the past six, seven months, it took place exactly at the '02 low. this is a dot-com darling that plunged from 70 to almost 10 in '02, and it found that low again just six months ago. and it reacted perfectly to that low, bouncing from the 10, 11 level to where we are now at 26. if you look at the day-to-day chart, this is what's really very impressive, too. how persistent and orderly this has been. the recovery of the past six, seven months is the symmetrical move to the preceding weakness.
most people are bearish. lots of sales, holds, no one likes it, and it works. >> are you a buyer then? >> buyer. >> i think carter is one of the best technicians around, but i disagree with him on this stock. the issue for hewlett-packard on the fundamental basis is the biggest problem, if you look at the stock, is they're sacrificing future earnings growth by taking from current cost savings. so obviously, the restructuring they've done is helped the stock in the short term, but in reality, printing and pcs are two areas for growth in the future and the cost cutting is going to hurt them on top of that. they're exposed to the weakest parts of the technology sector. i don't see future growth, and the valuation now is not nearly as compelling as it was to start the year, when citigroup had a sell on it. >> right. the issue is the fundamentals of the business, the fact that mobility really is ruling the day. >> sure. >> and not pcs.
>> -- well, there are no fundamentals in the sense that what's it worth? how can a stock drop from 70 to 10, jump back to 26? nearly no one knows what it's worth. >> i agree -- >> we know there's momentum. >> i agree with carter the valuation story has changed significantly. the issue to me is it's now trading 8 to 10 times its 2015 number, which is in line with other slow-growing technology peers. so on top of that, it's in a secular decline industry. i think it's much, much worse value on a relative basis than it used to be. >> all right, guys, great insights. thank you very much. carter, ennis, we'll see you soon. >> we'll call enis the man of steel. he sounds like he was in a phone booth somewhere in new york city. and this is a market that's just waiting. down four points. waiting for chairman bernanke's speech next hour. hopefully, we'll get more clarity. but maybe not. >> and the word on the street today is the federal reserve is not going to be aggressive in terms of slowing down the bond
buying until it sees the jobs numbers it wants. this is not new information. >> right. >> however, new details emerging today in the asiana flight 214 plane crash where the pilots depending too much on the plane's computers. up next, we're looking there. taking you live to san francisco. we'll get the latest details on this story. and as we said, chairman bernanke set to speak about the fed. will he give new clues about the central bank's tapering plans? we'll bring you the q&a session live later on the "closing bell." do stay tuned. i've been doing a few things for a while that i really love-- tdd#: 1-800-345-2550 playing this and trading. tdd#: 1-800-345-2550 and the better i am at them, the more i enjoy them. tdd#: 1-800-345-2550 so i'm always looking to take them up a notch or two. tdd#: 1-800-345-2550 and schwab really helps me step up my trading. tdd#: 1-800-345-2550 they've now put their most powerful platform, tdd#: 1-800-345-2550
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welcome back. more clues are emerging now as the investigation into the deadly crash of asiana flight 214 continues. the pilots are apparently pointing the finger now at the computerized speed-control feature. >> yeah, nbc's john yang is in san francisco now with the latest on the investigation. john, what can you tell us? >> reporter: well, maria, the speed control is called auto throttle. it's like cruise control on your car. you tell it what speed to maintain, and then given the variations that adjust the accelerator, adjusts the engine to maintain that speed.
the pilots are telling the ntsb they assumed the auto throttle was maintaining the speed at 137 knots. actually, the plane was dropping to about 30 knots below that. now, the ntsb says that the switch settings they can see in the cockpit say that the auto throttle was activated. it was turned on. but they don't know whether it was engaged, whether it was actually engaged and working. that depends on other settle'insettle'ing -- settings in the cockpit. they're digging down to find that out. they've spoken now to all four of the pilots on board the flight. they've talked to the flight crew. the cabin crew. today, they're talking to the first responders. not only looking at what happened before the crash but looking at what happened after the crash. looking at the evacuation. seeing what went right, what went wrong, what they can perhaps learn from it. another aspect of the ntsb investigation is to look into whether or not one of the
victims was struck by a fire/rescue truck responding to the scene, and if that was the case, did that contribute to that victim's death. bill? >> nbc's john yang in san francisco. thanks, john, very much. heading to the close, 25 minutes left in the trading session here. the dow, wait-and-see mode, as the whole market seems to be waiting for fed chairman bernanke. down 20 points now. >> yeah be relatively mild reaction to the federal reserve minutes out earliery. did we get any more indication about when we could see the beginning of the tapering of the economic stimulus? or maybe stocks are trading on fundamentals again? we'll look at both next. and would eliot spitzer really have the power to subpoena big banks if he were to win new york city's comptroller job? wall street may not like the answer. we have it for you coming up later on the "closing bell." before global opportunities were part of their investment strategy... before they funded scholarships to the schools that gave them scholarships...
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we seem to know what we want to, the fed will scale back bond purchases, but we'll do so when the job market and the economy is sustainably strong enough. and fed members seem concerned about how that message is conveyed in this market, as well, right? >> so what should investors take away from the federal reserve minutes? with us now with reaction is greg, the cnbc contributor from "the economist," david jones, and mark olsen. mark, let me kick it off with you. what was your reaction to the fed minutes? how do you think it read? >> well, to me, it read -- they'd gone from the previous minutes where they talked about the possibility of making an announcement in june, to these meetings where they're actually describing the process by which they would communicate that decision. and we had a lot of more background on it. i think that the key communication that they were trying to make is that there's a difference between scaling back in the bond purchase and raising interest rates. we're still two years away from a raising of interest rates. even though the bond -- the bond purchases will scale back as
early as the next couple of months. >> david jones. how have you been? i haven't seen you in a long time. what do you expect? yeah, go ahead. >> we go -- we go way back. >> paul vulkar days, i think. >> yeah, that's true. i think the fed is -- it's thrashing around a bit here. it was correct, as just mentioned, that the fed has two decisions. one is how much to scale back the monthly bond purchases. the other one is when to raise rates. i think the market has trouble with those two things. my guess is that the fed chairman is simply looking for evidence that private sector, nonfarm employment, is going up at a rate of 200,000 a month. and that will be good enough to get him to scale back probably in september by, let's say, 20 billion from that 85 billion total in bond market purchases. i think we've got the evidence
of sustained improvement in the labor market conditions. and i think it's inevitable we'll see that scale-back in september. >> well, i mean, do you think the same marker is 7%, 7.5%? what's the fed marker in terms of what would be the right employment number, or unemployment rate, to begin the tapering? >> that's part of the confusion. and the fed has not been as clear as it should be on this. we know one thing -- >> first, it was 6.5%. right? 6. >> yes, yes. >> 6.5% was the target. then people started talking about 7%. has it sort of gotten in quietly? it's a different story. >> it's a confusing story. let's start with what we know. we know they're not going to raise rates until that unemployment rate falls below 6.5%. but i think bernanke's decision on when he starts scaling back these monthly bond purchases, and by how much, is going to be based on sort of general labor
market conditions. and i tend to look more at the monthly average increase in payroll employment than i do at the actual unemployment rate. and we've had six really good months of solid private-sector employment growth. i think the fed chairman's ready to move. >> greg, are we kidding ourselves if we expect ben bernanke to come out publicly and say when he expects to start tapering? i mean, i'm sure he doesn't even know. as they suggest in the minutes there, they're waiting to see the growth in the economy is sustainable, and we don't know if that's the case yet, right? >> well, i've got to tell you, bill, he's already told us more than i ever expected him to. >> yeah. >> that's true. >> the last press conference, he was unusually explicit. >> right. >> he said if everything goes according to forecast, we'll start by the end of the year and we'll be done by the middle of next year. given that, i was surprised by the minutes. i do not see the degree of consensus about that quick of an exit in these minutes that he conveyed at that press conference. until today, i was firmly in the
camp that they would begin this process at the september meeting. that's still my best bet. but having read how many members are still concerned about the labor market, very concerned about the low level of inflation, i think december is still in play. there's more uncertainty about the date than i would have thought. >> so what do you think we hear in about half an hour here from the federal reserve? they're going to do this press conference on fed policy, but, of course, the q&a opens it up to so much more. what's your expectation? >> i think that -- first of all, the topic of the speech the last 100 years of the federal reserve, as he gets to the end of his career -- >> oh, boy. >> -- as he gets to the end of the career, bernanke returns to the stuff where he started all those years ago as an academic. of course, if i was in an audience, i would say, forget about the last 100 years, i want to know about the next two months. unfortunately, they didn't invite me. they'll mostly get questions from academics. i don't expect to learn a lot this afternoon. the big event is next week when bernanke testifies to congress.
>> all right. we'll leave it there. >> so much to look forward to. thank you. >> appreciate it. we have breaking news on the smithfield food hearings. jane wells, what's going on there? >> reporter: we have been monitoring it as smithfield food ceo is getting pretty tough questions about the takeover by the company in china, what that will mean to the world and the nation's largest pork producer in terms of food safety, food security. lots questioning the practices in china, even though smithfield is saying no morning -- pork will only leave the u.s. for china. no pork will come to china. the government pretty much ends up running everything, and kansas republican senator pat roberts took that as perhaps a little sarcastically. listen. >> did you realize you were the victim of a chinese communist plot? >> senator, i did not -- to this moment, i'm not sure i understand i'm the victim of a communist plot -- >> and the control of your company somehow to allow china to control the pork industry,
were you aware of that? >> senator, i was not aware of that. >> well, the owner did, so, you know, you have to be careful here. >> that's the only time he smiled, larry pope, that is. of course, once smithfield, it is approved and it is acquired, he will become a private company and only reports about going on with it will come from china, according to critics. bill and maria, i have to tell you it's interesting when you watch a hearing about pork producers and the witness is dr. slaughter and commissioner sling. >> nice. >> yeah. >> maybe they would take some of the pork out of washington and send it to china. >> oh, let's hope. >> more pork jokes. thank you, jane. >> okay. >> i'm sure jane will be tweeting those soon. >> here all week! >> thank you. 12 minutes before the closing week for the day. we have a market that really is heading into the close, flat on the session. we did see some buying interest earlier, lower than when we started the day, but
nevertheless, we're on wait-and-see mode ahead of the fed speech. and chris says forget tapering fears. when we come back, he'll tell us why he thinks the s&p 500 could hit 1,800 next year. and it's the state that brought the world don ho. ♪ tiny bubbles >> oh, come on, play the whole thing. >> don ho, "tiny bubbles." >> the aloha state coming in dead last in the annual stop states for business rankings, because you get distract theed there, right? plus, more don ho on the "closing bell." clients are always learning more to make their money do more. (ann) to help me plan my next move, i take scottrade's free, in-branch seminars... plus, their live webinars. i use daily market commentary to improve my strategy.
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all right the last ten minutes of trading here. and the bias is to the upside. we had -- >> that's not a bad number. >> the bias of about $400 million to the buy side as we enter the close. even as art cash was pointing out, probably pare it off, as we close. we're all waiting for bernanke, right? >> yeah, and joining us is mark and chris.
good to see you guys. >> welcome. >> is it all about the fed once again? >> i don't really think so. >> no? >> i think today is pretty much as expected, and tomorrow it will be earnings, earnings, earnings. we're in what's perceived to be a slow-growth quarters. i think it will be earnings for the next five, six weeks. >> that's good. >> the last few times bernanke has spoken publicly, we've rallied into that and it sells off. >> i think it's the typical exhale as to you get excited about what's about to be said and then the realization, "okay, we kind of understand it's a little bit about economic data," and then the economic data traditionally, recently, has been cloudy, and it's getting better. so the point here is that the fed is not the only engine out there. as mark said, it is earnings. it's the private sector. that's the key. the private sector is what's driving the assess prices. >> yeah, the private sector is doing as well as it has in how many years? >> right. >> a long time. >> yeah. >> you still think, regardless,
fundamentals, you think the s&p 500 is going much higher in. >> it is. the back half of the year is not about the back half anymore. it's about 2014 and '15. if you want to look out that far, so think about a 1,775, 1,800, end of 2014. and 1,950 in 2015, and between that timeframe, the fed's going to have to make a decision to tap on the brakes at the short end. >> 1,800. we're at 1,652 right now. >> yeah. what are your expectations for earnings this time around? >> i agree. but i would say watch that first step. it could be a doozy, because i do think this quarter will be choppy for a lot of companies. we've raised about 6% cash. the intention is to redeploy that cash into stocks. next week, you're going to get tech earnings, which i think are not going to be good. i look back at a censure a couple of weeks ago, stock down 13%, because it was not quite up to expectations. i'll use those opportunities to redeploy cash. >> what about the banks?
you have jpmorgan, wells coming out this week. a lot of noise around, the capital levels, the last week. >> i think they'll be fine. the valuation levels still support it. and capital one is still on top of my list. i still like jpmorgan, as well. >> what do you think bernanke is going to say? >> again, this is a q&a session we're waiting for. the speech is about the 100 years of the fed in the past. fascinating, right? >> absolutely. >> and the q&a will be all about repairing the nonclarity from the last speech. it will be creating an umbrella about the future economic developments, and we will act accordingly. that's basically what every single answer will be from the q&a. >> i'm just trying to figure out why every day something else comes out, the minutes, commentary from different fed governors, and we're surprised? it's the same thing that we knew a year ago. it's going to be unemployment, and if it improves, they will, listen, beginning the tapering. and if it doesn't, they won't. >> they won't.
>> to your point -- the market kind of yawns, because that's exactly it. >> yeah. >> we whittled away what the issues are. it's unemployment. we know that. that's what everyone will be keying on. >> and you get the tug of war of whether or not removing the accelerated acceleration of qe is tightening or not. >> yeah, real quick. your clients. upper-end clients. bond funds. taking money out of funds? >> absolutely. >> putting it in stocks? >> a slow train. we've been rebalancing for a while. as mark said for a while, you do pick your spots. it's not any one day. but if we get weakness, you will see that constant recycling out of fixed income continuously into equities. >> all right. thank you so much. good to talk to you. heading toward the close. >> moments away from the fed speech ben bernanke. find out whether he will give any new guidance on the tapering to investors. you're watching the "closing bell" on cnbc, first in business worldwide. make a great team. it's been that way since the day you met. but your erectile dysfunction - it could be a question of blood flow.
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we're back to the highs of the session right now. the yield at 2.68%. but ben willis is really waiting for ben bernanke's speech of the 100-year history of the federal reserve, aren't you? >> oh, with bateed breath, yes. >> what is your expectation for down the road? we had the four strong days. today, zippo. >> i think we finally bounced into some resistance. a bit of a pullback. a buying opportunity in equities for long-term investors. if you haven't sold your bonds, you should start looking at doing that. >> you wouldn't buy at these levels? >> i wouldn't go near bonds. i wouldn't put my grandmother's money in bonds. >> but stocks? >> absolutely. you need dividend, look at dividend stocks, a lot of them are beaten up. you'll see bargains in the real estate investment trust. maybe not the mortgage ones. the limited partners. we're seeing money going into the tech sector and you see that in the nasdaq today. >> all right. very good. thank you, sir. always nice to see you. ben willis checking in here.
we're heading toward the close, and the dow will -- the tone will be set for tomorrow. let's put it that way, after chairman bernanke speaks. [ bell ringing ] during the q&a, maybe we'll get more clarity, and then maybe, again, we won't. at any rate, going out with a decline of about 10 points on the dow. stand by for 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. the market is in a holding pattern as investors await federal reserve chairman ben bernanke and what he may say in a few minutes. a lot of applause for the new york stock exchange, veteran associate program who rang the closing bell. it did end mixed as we are in a wait-and-see period. the dow down about 7 points. we had been down about 40 points at the low. up about 25, i