tv Closing Bell CNBC July 1, 2014 3:00pm-5:01pm EDT
"closing bell." thanks for joining us, sarah. >> cookout tomorrow. >> "closing bell" comes up next. welcome to the "closing bell. "i'm kelly evans back here at the new york stock exchange. this is going to be a pretty interesting and postentially historic final hour of trade. >> i'm bill griffith at cnbc headquarters. heck of a way to kick off the second half of this year, not just all-time highs we're watching, dow 17,000 is also on the radar screen. we came tantalizingly close a couple of hours ago, i think it was about two points, pulled back a bit but we're still very close right now a gain of 147 points at 16,974, so the unloved
bull market continues right now, kelly. >> i think the up love is turning into hate as people continue to watch and try to figure out what to do next. that's the kind of question we'll pose to people. bill, a lot of people focus on the fact it's not just stocks, it's also gas prices looking here in the case of gas prices six-year highs for the fourth of july travel season it's an important one. it's not all quite coming up roses. >> that's for sure. let's bring our "closing bell" exchange in. we have a busy couple of hours lined up here. arob gibbs is with us, mark teper, todd salimony, todd liden from global investment trains and our own rick san tellie. todd, you're bullish in part because it is a relatively unloved bull market, isn't it? >> it is despite what we've been reading in various newspapers,
blogs, a lot of strategists and market participant also tell you there's a lot of complacency in the market. we're looking at the volatility init ex-to come to that conclusion. we'll argue with historical volatility so well the vix is relatively high but if you look at other measurements of sentiment, $93 billion year-to-date going into these alternative investments like hedge funds, typically people would go that route looking for different assets beyond u.s. stocks or looking for funds that have the flexibility and you look in the options market we're hitting 7 to 8 million contracts and versus the 3.5 million we were hitting ahead of the last 10% correction, short interest
popped and s&p and cube components. despite what you hear about the xla septembercy, we're not seeing it, complacency, we're not seeing it. >> mark tepper, you think we keep going here? >> we think the bull market will continue for some time. the bears talk about the pe multiples are 15.8, in line with historical averages or stocks are overvalued. we argue based on the fact there are no investment alternatives out there whatsoever that are going to produce any yield, we could see those valuations expanding up to maybe 17 or so, so yes, we think this bull market has plenty of room to run. >> aaron gibbs we'll get earnings pretty soon now that the new quarter has begun. if the rally continues it will put pressure on the companies to deliver. >> right now we're looking at about 6.5% growth for q2 and overall about 7.8 for the year
so actually the fact the s&p is up about 6% we're looking for maybe 10% by the end of the year for the market. it's not that different. there isn't a huge die firstification between earnings and where the market is. again, we're talking multiple, they're well within normal ranges, about 15 forward, 16 in the past 12 months >> earnings are up to 10%. you think that outpaces what the market does? >> i think for the year earnings is forecast about 7.8. i think the market will outpace it. look at forward next year's earnings, we're looking at 10%, 11% growth. >> if you that i gets priced in, that puts the dow at 18,000 pretty quick. >> yep and we're looking on target for the 1.500 is 2015. it's dependent can they deliver third and fourth quarter earnings? those expectations are high and that's a big question. >> just looking at the last year, we've hit a new millenial
mark every six months so the last three millenial marks have come every six-month period. tom liden this is a strong time for the market but does that continue through the summer which traditionally brings in doldrums. >> this week historically going back to 1950 has outperformed 72% of the time so that's great news. as you were talking about fun flows and giving a shout out to etfs, equity funds are losing money but et frkf continue to b on new money. three months ago the areas that got hit the worst, growth stocks, small, mid cap technology, biotech, they're leading it not ohm in volume but appreciation. if we see earnings continue to beat the way we did in the last quarter, two out of every three s&p stocks beat expectations, if if we continue to see that, i think we'll continue to go higher >> rick santelli, the only
cheers i heard from the floor came when argentina scored in its world cup match. >> you know, down here they didn't even cheer for that, so you know, it's one of these first day of a new quarter. to see bonds moving the way they are in terms of selling off of it, to see stocks moving where it is, we haven't had that many triple digit gains of late. i think it makes perfect sense and it's not only the end of the quarter and half year, it's a holiday shortened week. it makes a lot of sense. in terms of how long this could go on, i know this might be counter intuitive for those who watch me but i think the equity game is going to go on a whole lot longer than anybody thinks because there's many ways to look at whether it's overperforming or not and i would say that if you look at 2007 at 14,000 in the dow, seven years later up 3,000 points, that's roughly 2.5, 3% return so i look for the market to catch
up and not look at that hiccup and see stocks growth at a downsized rate of growth. remember when we took out the 2007 high in 2013, that's the year we had our 30% plus return so i think you could look at it in that way and it explains that the music could go on for a lot longer. >> you're reading my mind, rick. we're going to be on next hour to take an historical look at the market and i was thinking that same thing about this catchup phase where we went through 14,000 in 2007 and it took us six years to get to the next millenial mark here. i think we should be looking at the nasdaq, don't you folks? >> there you go. see, you're with me. so your negative return, anything from 199 on is negative return. >> if anything's playing catchup, mark tepper, don't you think it's the technology stocks? they hit their all-time high in 2000 at 5100 and we are at 5048,
still trying to catch that. >> the technology sector looks great as does energy. what we found is that history has typically told us that really at the onset of policy renormalization, that's a good time to shift into more of a barbell portfolio strategy. within the cyclicals we like energy and technology right now. we're starting to pull back and pull out of industrials and materials because they appear to be overvalued, and we're actually beginning to start to move in more of the defensive sectors again like utilities and also consumer staples. >> they're not cheap, mark. >> no, utilities have had a good year so far but they are beginning to look attractively valued again. they just recently retested a relative performance load that they tested twice at the beginning of the 2000s, and both of those times as well as this time turned out to be a good inflection point for some outperformance from that sector. they still look attractive, investors are chasing yield and
you can pick up good dividends and utilities. >> tom lydon, people will think they've missed it looking at this. the message from rick and others is get involved. >> that's right, kelly. you mentioned valuations. it might be getting a little pricey, so you look for other areas, if if our economies continue to move along here, emerging markets have been unloved, with the pi of a little over 11, compared to 17 in the u.s., relatively cheap and we can't forget about europe. europe's monetary policy will continue to move that economy along, continue to move markets along there as well, but watch out for the currency adjustment there. it's important their etfs that can help with you that. >> erin gibbs what do you think about the technology stocks? as rick and i are trying to play catchup, where do you rank them right now? >> they're actually fourth in line for earnings growth and as valuations, they're pretty much middle of the road. for us it's very much a stop
pickers market. we like some of the stocks they showed earlier, apples and intels, at the now old school technology stocks but we feel a lot of the higher growth stocks could prove to be a little highly priced. because consumer sentiment has been peaking recently and actually crossed over the 85 mark, that's where i'd be a little more willing, where we see that optimism come in, that's where i'd be more willing to come in and take riskier bets. >> guys thank you for now. appreciate it on this -- >> thank you. >> -- 17,000 watch, bill. we've got 50 minutes to go before the bell. 1:00 today we got close to the 17,000 mark. right now up about 150 points at 16 16,976. we only have to go above or hold above 16,978 for that to be above the prior intraday high. which doesn't make any sense
because we already passed it. carry on. >> that's fine, we get caught up in numbers here, that's our job. we have a lot planned including investing legend byron wien, hear what he's thinking about the stock market and what will happen next. >> if you think the market is hot it's nothing compared to gopro. shares doubling in four days, it's up big again today. we'll take a closer look at gopro and the markets straight ahe ahead. marge: you know, there's a more enjoyable way to get your fiber. try phillips fiber good gummies. they're delicious, and an excellent source of fiber to help support regularity. wife: mmmm husband: these are good! marge: the tasty side of fiber. from phillips. at every ford dealership, you'll find the works! it's a complete checkup of the services your vehicle needs. so prepare your car for any road trip by taking it to an expert ford technician. because no matter your destination
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withal come back. wall street beginning the second half of 2014 with a bang today. all three major averages with pretty good rallies under way, especially the nasdaq, up almost 1 1.2% with a gain of 51 points. the dow is up almost 1% and earlier was very close to 17,000. we're going to be watching to see if in the next 45 minutes, kelly, we can hit the next millenial mark here. >> we'll have to see what good harbors do. one amazing aspect of the rally is that it's happening in the face of higher oil and gas prices this year. jackie deangelis has the latest from the nymex.
>> good afternoon, kelly. oil prices backing off a little bit more today. west texas sbeer immediate yat close to 105, brent closer to 112. not that traders aren't paying attention to what's happening in iraq but without supply disruption they can't bid the prices up higher. it doesn't mean the recent spike in oil prices hasn't impacted the consumer in in terms of what they pay at the pump. the national average for gas lean $3.17, aaa also predicting we're going to see nearly 35 million people hit the road this holiday weekend and they expect to see gas prices at the highest level that they've been since 2008, so ouch, and there is going to be a point where this starts to impact the consumer, and gas prices tend to rise quickly and come down ever so slowly. back to you. you. >> like a rocket, down like a feather. that's what they always say. thank you, jackie.
>> sure. what is next for oil and gasoline prices and what would the impact be if we see a good spike down the road, what would it do the markets and market rally? >> joining us, cnbc contribute for matt kilduff and matt morris. >> hi, kelly. >> john how much higher can gas prices go before it does more harm to the economy and are you surprised it hasn't had more of an impact already? >> consumers are to the price that's the breaking point. there's some argument maybe it's a higher price point but from my experience that seems to be when they pull back on vacations to school closing and everything else, to pay at the pump. the one thing to watch is that with the higher and higher employment that we're seeing, folks will pay anything they have to, to go to their jobs. we're seeing some support on demand with that. i would just say one other
thing, prices have peaked because the iraq situation has been figured in, and hurricane or tropical storm arthur is working its way up the east coast, unfortunately, so a lot of folks who might have hit the road for the weekend probably might just hunker down at home and play ma mo no employee. >> especially in the southeastern portion of the country where it's probably going to be rainy there just at the wrong time for the fourth of july holiday weekend. ken, what do you make of the rise in oil? does this benefit the oil companies themselves or not? sometimes it doesn't. >> well it all depends on how you look at it, bill, from a regional standpoint. the longer the unrest takes place in iraq in general and baghdad in particular, and we had a couple of events today that were really disconcerting, that uncertainty will ripple through the market. what tends to produce a benefit is for those companies that actually have a security premium built into them, and by that i mean north american producers,
and producers that are medium and smaller sized companies. we have smaller companies now in the united states that are benefiting from the unrest abroad. they tend to be producing higher profit results than the bigger boys and this is likely to continue the longer the uncertainty remains. >> it isn't often you find an industry where the smallers are favored. we want to get a couple names in a second. john, which do you think exacerbates income inequality in the country, is it the rising stock market or rising gas prices? >> i think both. i'm not sure which one i could pick. significant amount of the population is without exposure directly to the equity markets, either through index funds or direct equity ownership but i think certainly and i was really wor bothered by the talk of higher gasoline tax, yet another aggressive sales tax on the working class folks that have no other choice but to drive to
work. that impacts or hurts the economy and investors more than say the rising stock market may necessarily help earn. >> john, the question i'm often asked and i'll ask you as well, does the oil market have any business being as high as it is right now? it goes up on the expectation that there's going to be a disruption of the oil flow out of iraq, because of what's going on over there, and now we're told it's coming down over the last couple days here, because maybe it won't happen right now. >> well, so the situation in iraq was a concerning one, right, bill? the isis forces ripped through about a third of the country in no time at all. it made some sense that 3 million barrels of iraq oil was hanging in the balance for this market. that scarcity premium quickly and rightly gets priced in, 10% of opec, oil that couldn't be picked up. things are holding together right now, so i think the market's been sort of fair mediator in terms of what the probabilities are and what the
value of a current barrel of oil is. >> okay, kent, what are your favorite plays in this market, if you could give us a couple of names and also do you think it's likely here that we'll go ahead and see some gas tax? >> i think the gas tax is figured in primarily because we have infrastructure that desperately needs to be prepared. we have a couple of cross-interests here. i also think the situation in iraq is about to deleverage and deleverage quickly. given what's occurred today and yesterday, we are looking at a virtual guarantee of the country splitting into three parts and there's very little that can be done about it. isis does not need to control oil fields. they need merely to par lies the central government. zwr we teased you had rather small companies you like, these will not be familiar names to most people and we showed the chart here, carrizo oil and gas,
goodrich petroleum and magnum hunter. you say it's because of the security issue these companies enjoy here >> these companies tend to be well managed, they tend to be leaner. they tend to emphasize basins they know well and they come in under the radar and tend to produce at a profit in a market that is secure. unlike foreign sources of crude oil. >> gentlemen, thank you both. appreciate it very much. >> great stuff, appreciate it guys. >> oil is something we have to keep an eye on for the economy and the markets. the markets are going higher, kelly, now the dow is about 30 points away from dow 17,000. >> are you driving, bill, this weekend? are you hitting the road? >> not in a long sense, no. >> not more than 50 miles. >> you drive a long distance every day so that doesn't matter. >> we hit the road last night and it is expensive out there. i'll be flying. hopefully that trip will go well. 40 minutes until the close. looking to see if the markets can try for 17,000 one more
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>> all right another push higher as we head for the closing bell, about 35 minutes left in the trading session. about 18.5 points, kelly a way from dow 17,000. we are in record territory by the way. we're watching this new millenial mark we could hit today. >> june auto sales almost 17 million, we're going to get more on that later. right now we have to talk about
something that's hotter than what we just mentioned, gopro. the stock that went public last week and four trading sessions has about doubled from its ipo price of $24. >> is the move justified for a company that essentially makes cameras, albeit very cool strategies. we're joined by david nelson and gene urkin with the progressive management group. david you said avoid it initially? >> i did. i blew it, doug. the truth is i didn't do my homework. i read the income statement and i didn't really dig into the story and what i missed is that investors obviously have gotten this potential hardware company could morph into a media company, and that makes it exciting. >> that's more of a story than the hard facts as you point out. >> just go to youtube and look at the view counts on some of the videos, 30 million, 40
million. views equals clicks, equals advertising dollars which eventually equals profits and if it's just from users that's gorilla marketing. >> here is what's unusual about this ipo. it's not the case where we've seen where some of the ipos like some of the food companies last year would double on the first day and then settle down. it has gained more momentum, double-digit momentum each passing day and seems to have to do with the story. more people hear about this and maybe want to get involved. is that ultimately a warning sign, gene? >> no, i don't think so. i don't see any warning signs at all. i think we shouldn't be short-sighted here. i think the company and the stock had some great days ahead. i think in the short term we may see some volatility in this stock, but long-term i just don't see any competitor dethroning gopro. >> did they sorely underprice the ipo? is that what you're saying? >> no, i'm not saying that. i think there's five key reasons
why gopro is doing so well. to piggyback on kelly said, it's hard facts. when gopro went published they issued 18 million of 12 million shares outstanding. this created a frenzy for those who want it post ipo which is driving up the stock price. any time a company goes public they do so with a business plan and gopro has executed that business plan and they're being rewarded by interest in the stock and a higher valuation. >> let me be clear, am i to understand in the four or five trading days since gopro priced and trading today, something about the details of this company's future changed so dramatically the price justifies having doubled? you're telling me that's what justifies this and not that more people have in the newspaper are interested in this? >> i don't think people understand or really did their homework. i'm one of them, raising my hand right here. look at this company, the valuation levels are not obscene here. yes it came public at 24 with a
$3 billion market cap and scooted up to 6 billion. you look at something like a twitter at 30 times sales it's not so bad. >> are you going to buy it now? >> i would even add, too, that i think a lot of times invests take a top-down approach to investing like we saw with gps technology and i think many are now seeing the start of a visual revolution. i think also with the expansion of social media, and an active lifestyle, gopro users are able to take full advantage of their videos and also you know, when you're as popular as gopro, you become very, very important to retailers with better shelf space and the like. for example, you have one of the premiere sporting goods retailers on the west coast, they cover and carry gopro products since the beginning and prominently display them in their stores. >> so david, are you going to risk putting a cap on this stock and buy it right now? have you bought it? >> i can't buy it here, bill. i would really like to.
>> you're going to be kicking yourself for months. >> give me a break. i need an entry port at some kind. there will be some pullback. the one thing to be concerned about the first quarter was down year over year, maybe it was part of the distraction of the ipo. i'm looking at the second quarter, maybe that will be an entry. >> gene a final point. if gopro is getting it right here, then who loses? or are they just expanding the category, and this is what i'm hearing from you, ultimately this is an advertising plot. >> i don't think anyone loses. i think everyone gains from retailers to gopro. i think even competitors that joined into the pond, i think they have nothing but market share to gain, and i think it's good for everyone. >> wow. thanks, guys. >> thanks, guys. david don't take it too hard. don't look at your computer monitor for a few days. >> okay, bill. >> thank you for joining us. kelly mentioned the strong auto sales. don hsu joins us to tell us how they looked in june. >> this is the data from auto
data coming out and we've had a strong month of sales, the light vehicle rate of sales for june of 2014 is nearly 17 million units per year, that's 16.98 million units. the same time ralast year, last june we were talking about 15.9 million light vehicle sales. now this is the highest reported seasonably adjusted annual rate or sar as people call it since july of 2006. back then it was almost 17 million vehicles so we're at the highest annual rate of sales since july of 2006, a very big deal especially looking for the auto sales as a possible indicator for the health, bill, kelly, of the overall economy. back over to you. >> when it takes us back before the financial crisis that is something to keep an eye on. >> gm shares are up 3% today. pull back a little bit, the dow up 151 points. that's record territory, isn't
it? you lose count of the old highs. >> today we set new intraday highs, we're close to the new intraday high, which would have been 16,997, 998, something reilike that. >> we got 30 minutes left, plenty of time here. >> as long as we're above 16,947 this will be a new record closing high, and as mentioned the dow near 17,000. we've got wall street's top money pros to weigh on whether you should buy, sell or hold. don't go anywhere. our clients need a lot of attention. there's unlimited talk and text. we're working deals all day. you get 10 gigabytes of data to share. what about expansion potential? add a line anytime for 15 bucks a month. low dues... great terms... let's close. introducing at&t mobile share value plans... ...with our best-ever pricing for business.
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welcome back. less than 30 minutes left, on the left is the previous all-time high close by the dow set on june 20th at 16,947. on the right is where we stand today, so we're in record territory, but we're not quite dow 17,000 yet. kelly evans? >> no, we still have 25 minutes to go. as the markets look to close at records, bob pisani joins us, simo modi at the nasdaq market site. we want to get perspective. bob, half an hour to go, less than, do you think we'll get there? >> it's a little doubtful at this point. i'm not that concerned about it. bill had the right
interpretation and bill usually does. it's about the intraday high and that's the important thing we hit a new intraday high. we'll hit 17,000, just a matter of time. what we ought to concentrate on is what is necessary to move the market further or should it deserve to move the market further? i think it does and the catalyst will be better economic news. >> sima, we should be watching the nasdaq, up 1.25%. >> up about 1.4% as you just pointed out but keep in mind it has been a volatile couple of months for tech stocks as investors question growth prospects, valuation also becoming a big concern. we've seen a rebound in technology over the past two months. the rise in m&a, corporate buybacks getting a lift. i think going forward earnings that will continue to play a vital role for wall street. experts always say that. more so this quarter than previous quarters.
remember the past two previous reports were clouded by bad weather so we didn't get an accurate view of how corporations are faring. >> rick santelli, if we had your version of u.s. versus belgium here, which driz' interest rates look more justified? >> honestly, i think all countries' interest rates are not justifiable based on the numbers. i think it's very difficult to have that kind of mall red dot you are here and this is where you're supposed to be. i would say no matter how this turns out and i have to disagree with bob a little bit, i only look at closing levels as a technician. i think by the end of this year that the 30-year bond will still have a better total rate of return than the equity markets and currently stands at around 14.5 >> it's interesting. we've gone through 36 minutes of this program and haven't mentioned the ten-year yield
yet. our attention has been taken away from that critical indicator we've been obsessing over lately to the stock market today. >> it definitely has. remember all the heavy lifting for the total returns, 14.5 for 30s, 6.5 for tens basically happened in the first six weeks of the year. february 3rd the low yield was 257, that was significant. it's still significant but doesn't alter the fact that it is part of 2014. i am sure the back half of 2014 will see stocks probably not nearly as stallworth or tight as they were in the first six weeks of the year. >> you aren't anticipating any backup in rates for the rest of the year, did i hear you right on that? >> i don't think that rates will close in negative territory and that would mean they'd have to close above 3.03 for a ten-year. i don't see that happening. >> it is on the back of the stability that we've seen in the ten-year. the mortgage rates are finally continuing to creep lower. zillow was saying they're below
4%, 3.98% was the average. that's something again that has important bearings on how the market broadly performs in the second half of the year. >> we go back to the interest rate scenario. we'll talk about this before, i'd trade higher rates and a lower stock market for better economic news, better employment, and more coin in the average man's pocket. i would gladly trade a lower stock market from where it is right now. >> bob pisani for head of the fed, please! yes! go bob! >> what will matter is whether or not if we get a slow move up in rates or not, and that's why i asked rick about his thoughts on that. if we are 2.5% now and we suddenly in the next because we get better economic news in the next four weeks go to 3.5% suddenly in a few days the market will have a lot of problems. if we go from 2.5% to 3.5% by the end of the year, i don't think the stock market will have a problem and rick, that's why i
was asking you about your thoughts on that. >> and it's very interesting, because if i had to say off the cuff not knowing what the data is, i would say stocks are going to have a hard time with a 50 baseis move in either direction for tens if it happens in the next six months. >> even with the jobs report on thursday? >> yes, i think a 3% ten-year is not going to auger well for equi equities. it might get used to it but it will be like natural gas, smell for a while, slowly disappears as the market gets used to it. >> remember when it comes to the state of the consumer, wage growth and housing, those are the two data points experts say are impacting consumers' willingness to spend. one of the reasons the s&p consum consumer discretionary sector as the lagging sector this year. >> it was one of the worst performing sectors in the second quarter, yes, as we saw the closing yesterday. thank you all. see you guys later. busy day still ahead of us. 20 minutes to go. the dow is up 151 points.
16,978 is the latest level. about 30 points above the prior closing highs. we will probably be starting off the month and the second half of the year at a record close. >> when we come back, dominic chu has a look at the dow's journey to 17,000. what a ride it's been especially since march of 2009. and also coming up, investing legend byron wien on the stock market and if he thinks today's rally has legs. tg faster than ever, we believe outshining the competition tomorrow requires challenging your business inside and out today. at cognizant, we help forward-looking companies run better and run different - to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work. because the future belongs to those who challenge the present.
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welcome back. we are 17 minutes from the close and 23 points thereabouts away from hitting the 17,000 mark, the dmg industrial average. all three indexes doing well today. the first day of the month, first day of the second half of the year, the vix bill is back sitting right around 11. >> no surprise there. the market kicking off the second half of the year on the high note, as the dow does approach 17,000. dominic chu joins us with a look back on this journey to the new millenial mark and how far we've come since the market bottom in march of 2009. >> going back to 2009 we put it graphically so you can see just how much it's bounced back every
time we've seen any kind of shock from outside the system here. now if you go back to what we'll call the financial crisis lows, the dow hit a low of around 6500 back, that's now 54%, that's more than half below the 14,000 mark we were before the financial crisis, so it went and hit those lows, back then, 6500 on the dow. you moved forward here to april of 2011. now we're at a three-year closing high just a couple years later, we're all the way back up to almost 13,000 on the dow, that's almost a double from where we were at the crisis lows. all of that inside a couple of years. you fast forward here to october of 2011. now the dip towards the end of 2011 here was the eurozone crisis. it seems like so long ago but it wasn't that long ago when we had the sovereign debt issues out of europe and we actually fell about 17%, almost 10,655, that was 17% from the highs that we saw just months before, and of
course, we bounced back from that and here we are back up to june of 2014, we're closing within about 100 points of 16,000, and that was just in june. all of a sudden we're knocking on the door of 17,000 right now. since 2009, the dow has seen a number of reasons to sell off, and it has, to a certain small degree, but every single time we've kind of bounced back and here we are again, knocking on that 17,000 level, it's pretty amazing how reresilient it's been. the question there's a catalyst built to get it going even higher. >> dom thank you for now. 15 minutes to go into the close here. we are watching the markets very closely, bill, and looks like we're about 15 points away. will we make another run towards 17,000 as we head into the final quarter hour? wither bea to find out. >> markets looking to shatter records but anything can happen in these final minutes of trade so stick around. that plus a special edition of the second hour "the closing bell" coming up. is a daily game of "what if's".
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us but pulled back since that time. decent rally to begin the second half of the year. >> it certainly is. let's get more perspective. jeremy hill from old black companies, matt will join us shortly from virtual financial as well. little bit of a scramble today. what do you think, jeremy? >> i think we'll go higher. this market probably has about 5% more through the year. i think we've seen some decent action in the last couple days and i this i that pour tends some good things going forward. >> we forecasted the second half of this year to be so strong so we're already, seems like we're picking up a lot of steam and we expected it to be stronger in the second half. if that's the case this market potentially could go higher. i think maybe we got ahead of ourselves. >> bill i should mention art cashin stops by, there is a buy-in program on the close that could help to lift markets toward that 17,000 mark these guys were just discussing. >> matt, this is new money
coming in to start the new quarter here but is it possible that when we get above 17,000 that that brings even more new money in or do people become a little more cautious because of that new level here? >> well i think they've been cautious all along, that's why they haven't gotten in. if they're getting in at 17,000 they've missed some run already. if the market has any retracement they may be quick to pull the trigger on the sell side. i wouldn't be really so excited to see them get involved right now as far as the retail side of it. >> jeremy, what about tomorrow? we're going to start to get the employment data for june with the adp report, the payrolls on thursday, and hear from janet yellen and what she says has a lot to do with whether we hit this mark and go substantially higher. today the dow rallied more than it did the entire month of june. >> i don't think yellen will say anything new. i think the fed is really on hold right now. the jobs number probably comes
in toward consensus. >> i don't want to equate this year to last year because that was a standout year, matthew, but this market again in 2014 has defied the critics or the cynics who didn't think we could continue hiring here. >> we've also had a lot of people that have been on board in this market the whole way. i've been one of the cynics all along. >> i didn't want to mention that but i'm glad you did. >> any time i can, i will. so again, i think there are so many people that are on board and they've made a lot of money. there is really no other alternative for people right now. stocks are going to trend a little bit higher but i don't think it's the broader picture people are looking at. that's the thing that worries me, we're so hyperfocused on stocks. when it does turn it could be very fast but it may not get
there for some time. >> that seems like the $17 billion question in the room. we'll leave it there for right now. good to see you. >> we'll take a break and come back with the closing countdown for what could be an historic day as the 17,000 watch continues. we'll find out if history can be made. you're watching cnbc, first in business worldwide. stay tuned. [ male announcer ] what if a small company
we have a pretty good rally to start the year, the dow a gain of 141 points. this would be a new all-time high, anything above 16,947 will be the s&p also in record territory and for the year, you look at this gain here as it continues to march higher, we're at, in the last little over a year we've hit three millenial marks, we hit 15,000 in may of last year. we hit 16,000 in november of last year and here we are, knocking on 17,000's door. back with jeremy hill and matt, and jeremy, you can, we all can itemize some of the headwinds that the markets will face as we go through the second half of the year, right? >> absolutely. i mean, the biggest risk in my mind is clearly a mismatch
between the fed policy and market expectations, and i think that's something that's going to play out over the next let's say six months, as perhaps we see a little bit higher inflation numbers tick pic up. listen when bullard comes out and says something very different than other fed members are saying, it makes me wonder whether sherry allen can get it together and come out with a cogent policy to dial down the fed's long-term monetary support, which is really still what markets are going on. >> matt, it was what, two weeks ago when fed chair janet yellen said she didn't think stocks were overvalued, a rather unusual public pronouncement by a fed chair. was that a green light to buy, in part do we see these rallies because somebody like the fed chair says i don't think we're overvalued right now. >> with an accommodated fed it's a green light for people to buy. they're not buying any other segment of assets right now. if you allocate your money to
stocks, the stocks keep going higher, why not be on board with the person in charge of it all. that's certainly a green light. it's funny to say that 29 or 30 stocks are up in the dow. it's a broad-based rally, not just one particular sector leading us higher and some of the stocks were the underperformers from last year are outperforming this year. >> we were making note of that earlier. ibm the top of the list there, that stock has been dragging the dow for a while and today it's the leader. same thing with visa, and some of the financial stocks. i mean, jeremy hill, are we starting to, i know one day certainly does not a trend make but you wonder whether we'll start to see a turn in the interest of the market toward some of those laggards that could be considered cyclical for this economy. >> you have to remember, right, the dow is up around 2% for the year. companies like ibm i think over the last 12 to 18 months have gone from being more growth value oriented to something that people are shorting on the back
end of going long, things like google, right? google growth, ibm not so much, old technology. so there are idiosyncratic restirisks associated with the dow constituents. the dow components make upwards of 40% of earnings offshore. we have to talk worldwide as well. >> matt, this rally bodes well for the ipo market. gopro has been on the go since it became public last week. you're getting ready to trade alibaba this summer. >> we had an upgrade from barclays.com. ipos have performed well from chinese markets so there's no reason to think that will slow down in the summer. we're ready for fireworks fourth of july. with gopro all systems are go right now. >> what could pop the bubble here? i don't want to say it's a bubble. that's a bad word to use.
what could stop this rally in its tracks, matt? >> is it going to be earns from the previous quarter or expectations of the second half being so strong and we'll not be able to meet the expectations? something like that. we've had geopolitical stuff, oil rallying and the gas prices and consumer slowdown. all of these things haven't put a blip into the market. i wish i knew what it was, bill. >> don't we all? doesn't look like we'll hit 17,000. jeremy hill, do you think we have to grind through for a little while at the 963 right now. >> i think we get there in short order. the headwinds facing the market right now, as matt just said, there are no unknowns. so i think we're going to get there and i think we'll get there soon. >> all right. very good, thank you, guys. appreciate your comments here. we're going out pretty good rally to begin the second half
of 2014, no dow 17,000 but still a healthy gain especially for the nasdaq up 1.16% on the close. stay tuned. i'll be back in the next hour as well as we get under way with the second hour of "the closing bell" with kelly evans and company. [ bell ringing ] . and well comment to "the closing bell" everybody. i'm kelly evans. the dow jones industrial and the s&p 500 today on the start of the month and the beginning of the second half of 2014 are closing in record territory. here is a look at how we're finishing up the day on wall street. green arrows across the board, echoing what we saw overseas. the dow adding about 130 points off the highs of the session and considerably so. the nasdaq adding 50 points, having a strong day over 1%. the s&p up 13 to 1973. let's talk about it with the panel. who better on the market day like this than bob pisani who is
here, welcome. danny hughes, founder and ceo of divine capital is with us. eunice yu in the house from beijing, sharon epperson to talk about markets, brian kelly, "fast money" trader. there's a lot to discuss. brian are you surprised instead of getting closer to retaking the 17,000 mark we gave up a little bit of ground there at the bell. >> no. we barely gave up anything and the 17,000 mark for me as a trader really doesn't mean anything. what's most important is that over the last several days, we've seen some pretty good economic numbers globally, europe pmi, china, chicago yesterday, all in all we're seeing a global economy that appears to be improving but importantly not too fast. because the big risk here is we have a big spike in interest rates and we choke off the recovery. we're far away away from that and that's what's important. >> eunice, the trading day starts before :30 a.m. eastern
time and had a lot to do with the data out of china. >> over there it's actually definitely improving. we saw manufacturing data that came in for the pmi and it looked better than people had expected and that is setting the tone for the second half of the year. everybody says look at the new orders. they came in very strong. that indicates there could be a better recovery in the united states and that's what everybody is hoping for. >> when does the average investor believe that? still the shanghai market down 3% on the year, it's been underperforming for years. when is it going to get to those -- >> because shanghai is more of a gambling den than it is regular marketplace. >> a gambling? i thought that's what we had. the truth is i a lot of it has to do with the central banks, that's where we owe all of this. >> the sort of elementary point that might be important, there is a difference between investing in a stock, a stream of future cash flows and doing things like betting with options, potentially betting on
commodities. if you want to talk, because people will look at the headlines, they'll look at dow 17,000 and talk about whether it's a castle built on sand or air or whatever. >> yes. >> is it or is it not? >> a lot of it has to do with the fact retail investors aren't necessarily jumping in this market. they're looking at the new highs and saying does it make sense for me to get in? that's not necessarily a bad thing if they're sitting on cash for the right reasons because they watch what happened in 2008. they want to make sure they have money saved for emergencies, want to make sure they're paying off debts. if they're not tying up money for investments, they can't get their money in and out that's a good thing. if they're totally missing out on what continues to be a run-up that's a negative. >> have we lost that many people since 2008? we talk about the investor on the sideline. almost 50% of households were invested in stocks prior to that. is it that far off now still? >> about 50% are still sitting in cash right now. but again that's not necessarily
a bad thing, if they're doing the right things with that cash at the moment. i think the good thing that we're seeing though a lot of folks are saying i want to be in the market but maybe in a different way. there's a new study that came out from fidelity showing what people want right now just as much as a 401(k), they want their company to give them stock at a discount. they want to get in the company stock purchase plans so those are things that are taking off and in addition to what they're doing with their traditional. >> it's great as long as it's not too much a part of everybody's investment. lot of people made that mistake in the 1990s. >> all their eggs, when your employer is also your biggest investment. you're probably putting all your eggs in one basket. what about the fact that, brian kelly, when, gauging what happens on the first day of the month, especially when it's the first day, second half of the year, this tells you something about positioning? do you think that's the case here? >> it can somewhat. you see some kind of window
dressing although i think that's a lot less than it used to be. we have plenty of buyers. whether people are on the sidelines or not it's irrelevant. ultimately if they come in, great. the longer term you have an aging u.s. citizenship and they'll ultimately not invest like they did in the '90s. i'm trading in the now, we're going high. >> danny i want to go back to something you raised and james macintosh had a short view, it's not unusual to see stocks rallying. all the stocks rallied at the same time and doesn't that tend to happen during periods right before there's a more troubling market, is it a sign perhaps of all of this intervention that we're seeing in the central bank? >> we've seen an actual war going on between the stock market and the bond market, because they're both kind of predicting different outcomes,
right, and of course i'm rooting for the stock market, that's kind of where i've placed my bet, and a lot of other people have done the same, but there's a lot of worry, and i think that we see that in the bond markets, and especially long-term yields, because you really don't know, because the central bank really controlled so much of this and i think that's a big concern. >> do you think the lower interest rate environment now that people are really betting on it, it will last for some time that that would emboden retail investors to come into the stock market more? >> it's emboldened corporations to buy back their stock. you see an awful lot of that. they see historically they'll never get the chance again so that's another risk. >> the obvious point the zero interest rate policies, why is gold up 9%, why is the bond market up, the stock market up, we're all at zero interest rate policies. the issue is in the second half of the year, can we see a
gradually improving economy, can we see interest rates go from 2.5 to end the year at roughly 3.5, and can the stock market hand tell? >> the thing that makes that difficult is people told to diversify is because of everything rising as you're saying. that makes it difficult for investors to figure out how am i going to diversify if everything's rising at the same time and the same catalyst is lifting off those. >> that's a good problem to have, isn't it? >> until it stops. >> a year and a half we've been waiting, how long has it been? >> at least a year and a half. >> but that's exactly the point, investors really shouldn't be waiting for the next shoe to drop or waiting for the back -- they should be looking at the long-term. long-term this is what always happens. we see dips but if we have the hindsight warren buffett had in 2008, this is a huge opportunity to gain value over the long run. >> you never hear warren buffett necessarily blaming the central banks or overly inflating asset
prices. obviously evaluations will fluctuate and he likes to go to work when perhaps because of intervention there's been a crash, but i don't think he today, and he's been quite clear when he talks of the market being fair value, thinks it's all some kind of giant, you know, to your point, is this just some sort of false construct or not? i don't think he's the guy who comes out and says it's all false. >> companies are doing better, there's real wealth being made here. this is not a ponzi scheme and when i said before that it is gambling, look at high frequency trading. they were investing in the stock market, they're in and out and that to me is gambling. >> it's one thing to say it's not false but the fed has had an influence on the stock market. all of the trading community believes this. i ask the average trader, how much higher or lower in the stock market if the fed had not intervened in the last four
years. average trader response the dow would be 2,000 points or more lower. >> whoa. >> that may be right. that may not be a crazy comment. i put a lot of stock in storage as average investors calling. >> brian kelly, does that sound about right? >> no. it's so hard to go back and prove that counter-factual. i would argue we might be higher if the fed didn't come back. maybe we would have flushed the waste out of the system and be able to rebuild. >> that's an interesting point. >> on the foundation. that's difficult to go back and try to say that's what's happening. >> we have to leave it for some news but eunice, before we go, i want to get to the two of you quick thought. brian we have payrolls and yellen here in the u.s. that are important to watch this week but also out of china, what is the number one thing people have to be aware of in terms of catalyst to go one way or the other? >> people are watching to see whether or not the government will come in with more stimulus because now a lot of people had actually hoped the government was going to stick with reforms and not necessarily pushing so much money but now we're seeing
more and more mini stimuluses, targeted stimulus but at the same time it looks like it could happen. >> let's get the news and get a quick response. it has to do with google. morgan brennan, what can you tell us? >> hi, kelly. the next round in the music streaming wars, google is acquiring songza. price undisclosed. songza says their 40-person team will be joining google according to the chief executive over there. songask a streaming music app has about 5.5 million users so it's relatively small compared to pandora or spotify. we'll bring you details as they come. >> morgan, thank you. brian, what do you think? >> i'd be worried if i'm pandora. everybody says they have a dominant share, part of the market but when google enters the marketplace it's kind of like when amazon enters the marketplace. they don't have to necessarily make money at it. trade on this is watch what pandora does. there's multiple streaming services that have come out over the last couple of months.
>> they're heavily cure rated market site. it's saturday morning, you're in the mood for mellow jazz. >> remember you may or may not wake up to britney spears. go ahead. >> it's not bad at all. i'm in an aggressive mood, a mellow mood, it's sunday, i want to listen to jazz and it's curated and you can pick it and it's very good. >> i think health insurance companies should underwrite this, psychological conditioning. >> brian's right the fact that google bought in, i don't know how to value the company at all. if google buys into t i would be concerned if i was pandora. >> brian, thank you for your perspective. this hour we'll watch companies and do traders think the rally will last and take us as high as 18,000 before christmas? the guys on the floor will chime in next and plenty more coming up on "fast money" with brian kelly. we'll be rig rige right back. cd something stronger.
as well. warren, what are your thoughts? >> first of all i'm hugely disappointed we didn't break through the 17,000 level. we got so close. all kidding aside, i think it's been a tremendous run-up as the market continues to go higher, set new records almost on a daily basis and this week in particular tends to be a very strong upweek anyway so i think we kind of had the perfect storm of expirations, pushing the market up and coming into a shortened week that tends to be upward i think we're poised for new records. >> okay and perhaps if it didn't happen today, kenny, what, tomorrow, this week, takes a couple weeks? >> listen, i think today was a little bit of a reaction from the end of the quarter, right? the market had been under kind of some pressure as we moved into the end of the quarter. today was the first day, there's three more months in the whole quarter. you could almost feel the pressure lifted off the market. we went up on not a lot of volume nor was there a lot of commitment. i absolutely think we'll go to 17,000. you could almost taste it today
at 998.70 is where we really got and it backed off. it feels like it wants to try. it has to do it one or two more times before it finally builds up enough momentum to get up and through. i think you'll run into some real natural sell side at 17,000 and above. i think that is going to draw some people out to raise some cash. >> is this kenny the market top? 16,998, what does that mean? when was that, kenny, exactly? >> at 1:30 this afternoon. >> who was on at air, whose face was there when we hit two points from 17,000? >> you and me? >> no, it was you. it was you. so i'm not superstitious. i'm just suggesting please don't come on the air, do us a favor for crying out loud, we've been waiting all day for this. look what you did. >> warren, would you like to say anything in kenny's defense? >> well, let's keep him off the air during the day.
and also to bob, i'm surprised you even saw that we were near records today. i thought you were home listening to soft jazz. >> thank you. >> there actually is -- >> something i know nothing about, thank you very much. >> i think the question today is going to come down to whether this was positioning, 'twas some of the data, the ism report which is a little bit soft, but markets took it it pretty well. is it anticipation of what we might hear from janet yellen tomorrow. what is the mick, guys, do you think between positioning sentiment and the fundamental data driving us higher, warren? >> i think it's a combination of a few things. first day of the new month, new money coming in. i think we would have been up today anyway but that pushed us to the levels we reached earlier. this tends to be an up week. we're coming off of that end of the quarter expiration. i would be a little concerned going into the following couple weeks on elevated levels and i think we're due for a little bit
of a respite on the upside. >> sharon? >> can i ask how much the 17,000 really matters? >> nothing. >> particularly on a holiday week, particularly when a lot of folks may be out of the market right now, and what is really the next driver that regular investors should be looking at, do you think? >> i don't think 17,000 means anything. it's a nice round number but in reality, what does it really mean? it means nothing, right? but the next couple of drivers are going to be don't forget, earnings will start next week. we'll fully expect earnings are going to come 4% growth is what they're looking for this earnings season, this cycle. we'll see 70% or 72% of the companies beat the estimates like they always do, we'll listen to forward guidance and janet yellen tomorrow talk about how rates will stay low forever. don't anyone get nervous and boom, the market will continue to move higher >> if that's her message. take your point, that's probably what she's going to continue to reiterate, danny. the risk is out there. you know the fed is looking at the extent to which markets have been on this record run and just
making sure it doesn't get too ahead of themselves. >> they have to be really careful and not say irrational exuberance and earnings don't happen for a little while so we don't really have that catalyst. we have summer, which traditionally means everybody's off the floor and often away from their desks. i'm actually looking at what's going to happen in the next couple of weeks to keep this going on, and new money is great. >> what is the biggest, i was going to ask what do you think the biggest risk is that would really scuffer the momentum? >> the geopolitical risks is the biggest one and there's an awful lot of potential for that to happen. >> it's easy to poopoo the dow 16,000, 17,000. it reminds us the market is creeping higher. that's why it's important. >> warren, kenny, good to see you, i think, on this big day. >> please, kenny!
stocks have been leading the rally from 16,000 to 17,000. number five, cisco systems, the internet equipment company stock is up more than 16%. coming in at number four, merck. the form ceutical giant's beganed more than 20%. number three on the list, intel, the technology company stock rose nearly 23%. coming in second, media giant walt disney, up nearly 24%, and the best performing stock since the dow hit 16,000? caterpillar. the construction equipment manufacturer stock is up nearly 33%. but what if you could see more of what you wanted to know? with fidelity's new active trader pro investing platform, the information that's important to you is all in one place, so finding more insight is easier. it's your idea powered by active trader pro.
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welcome back. the dow and s&p 500 closing at record highs. dom chu looks at the key stocks driving the market higher. >> the dow underperformance since that point if you look at where the nasdaq has come it's up about 12.5% since november the last year, the last time the dow hit 16,000. the s&p 500 is up 10%, even the russell 2000 with its ups and downs is up 8% and here we come to the end of line, the dow is only up 6% since the dow first hit 16,000 november of last
year. so if we were to have this conversation about dow 17,000, we would be talking about dow 17,600. dow 17,600 is where we would be right now if the dow had just matched the s&p 500's performance since the dow first hit 16,000. so it's been an underperformer. you can see that gap on the right-hand side, that's where the gap, that's the gap we're talking about, the idea that the dow is underperforming the broader s&p 500. now, before the break, we showed you the great clip of the stocks doi ining better, caterpillar, disney, intel, merck, cisco, all of them doing spectacularly, but here's what we want to call your attention to. this is what's been weighing the dow down, the reason why it's been underperforming, it's been big names on the consumer staple side, procter & gamble is down 6% during that time just since november of last giant pfizer .
walmart the biggest retailer in the world down 5%, boeing down 4%, verizon down 2%. the boeings and procter & gambles have weight with the overall dow because they're priced higher, they have bigger stock prices. if you're looking for why the dow has been underperforming since 16,000, these are the stocks that are doing it, and a lot of the reasons why we are still trying to get over that dow 17,000 mark. kelly, back over to you. >> goldman weighing on the index today. stand by we have breaking news ongoing insider trader case. scott cohn joins us. >> ranger rat234 am's younger brother rangan has been on trial. the judge is dismissing allegations involving insider trailing of clear wire which would seem to leave the case as just a conspiracy count against
ranlg aratnam. the case continues in u.s. district court in manhattan. more as we get it. back to you. >> scott so some charges dropped for now in this case, appreciate the update. let's get more on the big market trading day. richard is a little more cautious on the panel joins us. rich first to you. lot of people lately have been talking about the capitulation of the bears, about sentiment showing that everybody's looking higher for this market to keep going. you don't agree with that, still you're cautious here? >> i think the only thing we have to think about, kelly, is that in order for the dow or s&p to go higher, earnings outlook with conference calls is going to have to get better. right now the dow is trading at
15 times this year's earnings, 14 times next year's earnings, on 8.5% eps growth. the s&p earnings for next year 119. analysts are at $132 next year, that's 11% growth. so unless we start to see some really positive statements coming out, we think this market needs a rest. otherwise if things do continue to be positive, then investors will start to flick the switch to 2015 earnings and then we could start to look at maybe higher levels. >> what is your view? how much higher can corporate earnings go here? >> the numbers i use are s&p bottom-up operating earnings a little bit above 137 for next year. they're clustered around $120 for this year, so they're somewhat higher than your other guests. the strength right here though, kelly, should be of no surprise. since 1950 the s&p has been up, the two days at the end of june and the first five days of july, 72% of the time. so the strength here is no surprise. once we get into mid-july and
late july, i tend to agree with your other guest. i think that is seasonally when you have a chance to get some weakness. >> jeff, what about people who don't want to be trading on a couple weeks basis and want to take a longer term view? >> i think we're in a secular bull market. i've maintained that for years. i was on cnbc on march 2nd of '09 saying that the market bottoms this week. that was the nominal price low, we made the valuation low in october of 2011, we're five years into it. the history of these markets when they come out of a multiyear trading range environment is they usually have eight to ten years left in them. we have years to run left in this secular bull market. >> wow, great news for retail investors and folks with their 401(k) if they're staying in with what we have, dollar counts averaging in. i wonder how many people are sticking with it and how many people may be jumping into some of the perhaps the wrong stocks for their particular portfolio because they're looking at the momentum. >> rich, what do you see out
there? >> we invest for one of the large retail brokerage clients and we're seeing clients that have kind of missed this are waiting for the pullback, and our point is, you should be invested but with what incremental cash it does make sense valuation-driven. the utilities as an example in the dividend etfs now compromise 35% of that index, so a lot of money is going and looking for yield because cash is trash, so i think investors just have to be selective, stay invested but be careful with the incremental cash. >> rich, you made a very good point. lot of people waiting for the market to drop to get on the sidelines. is there a bit of a floor underneath the market? we've been talking about this for a year and a half. every time we drop 3% buyers come in. that's why we're not getting that 10% correction. >> bob, i think you're right. we think that the market could pull back to that 1900 level, which would justify again until
investors flick the switch, but there will be a floor in the market. what we've done at the firm is we put a little bit of a hedge on just to protect ourselves and we're willing to take a little bit less of the upside but not be out of the market completely. >> thank you for your thoughts this afternoon, appreciate it, guys. >> you bet. up next more insight on the rally from two guys, who have been taken cnbc through 14,000 points. they joined in 1991 quen twhen w was just shy of the 3,000 mark. which stocks have lagged in the run from 16,000 to 17,000? take a look. >> coming in at number five, verizon, the telecommunications company stock is down nearly 2%. number four, boeing, it's row space company's lost nearly 4%. number three on the list, walmart. the mega retailer's down nearly 5%. in second place, pfizer, the
. welcome back. we didn't close at 17,000 but the dow closed in uncharted territory. imagine what it would look like if retail investors got off the sidelines. >> what will get them into stocks web the economic news convinces the average guy that the economy is really getting better. that's what's going to do it. what would convince them of that? if the jobs report on friday for example would bring it closer to 300,000 jobs rather than 230 we're expecting and we got other data points over the next couple months that were above consensus. that would land the improving economy on the front pages of the newspapers and the headlines "economy showing signs of life" would follow from that, and then should you get back into the market? headlines would follow from that. this isn't going to happen overnight. it's a gradual process that unfolds over several months. the talk the average guy gets in at market tops and it's a bad
idea. that's a legitimate question but we should have that problem. i'm dying to address that. if rates creep up in a manageable fashion the stock market will not have a big problem. we could have a big problem if there's a sudden draumt dramatic spike in rates, to 2.5% to 3.5% in a few days on the ten-years, that's a big problem for the stock market but i would gladly trade a drop in the stock market from where we are now 10% even for an increase in jobs and more money than the average man's pocket. sharon, i'll bet you you would trade that, too. >> definitely. that's what people want to see. the problem is that they're not getting involved. they're on the sidelines and not, if they're managing their money because they have debt that's one case. the other case is they're terrified about 2008-2009. rather than getting in slowly over time, payroll after payroll, putting money in the market, they're not doing that. that's the easiest way to do it. >> with that historical perspective let's ask are we going to ask, yeah, take a
little, are we doing a little walk down memory lane here? let's do it. take a walk down memory lane. >> ask us anything. >> it is good to see you both. >> we started long before you guys. we were just sitting here chatting. >> possibly before you were born. >> i meant right now discussing all of this. by the way we both started at cnbc when the dow was around 3,000, but we started our careers before the dow was above 1,000. >> how does 17,000 ring to you? >> it's kind of nice. >> the market is playing catchup. we've seen this before, gold i think is a telling example, where it hit, what, 800 in 1980 and fell back and did nothing for decade or more, even though the inflation rate continued higher, and adjusted for inflation it was vastly undervalued. it had a decade of a huge rally
where it played catch with that inflation rate. the nasdaq is doing the same thing right now, it hit the all-time high in march of 2000, hasn't come close to that but now we're marching back to that as well. i think that's what the market, the stock market is doing right now, just playing catchup after the lost decade we had between 2000 and 2010, and the financial crisis that hit at the end of that period right now. we're just trying to play catchup to the economy here. >> ron, is that how you read it? >> that's pretty much how i read it, with respect to the fact also that listen everybody is complaining about valuations and yet the dow and the s&p are up roughly 175% from the march 9 flows of 2009. earnings are up about 180% in that period, interest rates are still at zero. you know, it's hardier in the d legitimate bear case when interest rates are not likely to go up probably until the end of 2015. inflation is not accelerating in a meaningful way, and not in an area the fed can control so i
think when you've got zero percent interest rate policy in nearly 60% of the globe the wind is at the back of the market and earnings are strong enough to support prices. >> we're showing a chart that looks like a two or almost three-humped camel. people look at that, i don't know if. i can stomach that volatility. >> that's what you were talking about. >> going back to what bill said we started when the dow was at 1000. when we spiked up in 1986 and 1987, the all-time high in august of 1987 was 2722, we had gone up 1,000 points in a year, crashed 30% in two months and again, listen, not everything is a buying opportunity. there are times you step to the sidelines, when there are, you know, signature events that would indicate a meaningful correction or a bear market. rates are not going up. >> the message from the whole period then, we want to get a quick thought from the panel, too, is what i'm hearing from you guys is stay involved, stay invested. >> easier said than done though, kelly, because my parents grew up in the depression. they very well remember the
market crashes of the late 1920s, and where it went after that, and they never bought a stock their entire life because of that. i think we have the possibility of a generation that will feel the same way about the stock market because of what happened in 2008 and 2009. will we get this tremendous public participation in the market? not right now, and i think it's because of this memory that people have. >> we're already seeing that with millenials. >> there's post traumatic stress in the retail investor because 2000 was the dow and the nasdaq went down 70%. >> to bill's point, i love this, bill, you know how long it took the dow to recover its 29 highs. >> 25 years. >> 1956. >> that's one thing when people are out of the market but in this case, the repound has been precisely the opposite of that situation. >> ron and bill, i was in 1990 hired by cnbc, i was the real estate reporter and when i got there these two guys were already market veterans. lot of what i learned from the early days becoming the stocks
reporter in '97 i learned by hanging out with these two guys, thank you for still being with us. >> we join those thanks as well and thank you for joining us this afternoon. >> you want something, bob. i don't know what it is. >> he wants to you buy a house. >> see you later. >> bill and ron, thank you. >> see you tomorrow. >> bill, see you tomorrow. up next someone who has seen records come and go, veteran market pro buyon wien, the vice chairman of blackstone advisory partners, when we come back. our clients need a lot of attention. there's unlimited talk and text. we're working deals all day. you get 10 gigabytes of data to share. what about expansion potential? add a line anytime for 15 bucks a month. low dues... great terms... let's close. introducing at&t mobile share value plans... ...with our best-ever pricing for business.
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welcome back. joining us is byron wein, vice chairman at black stone advisory partners. byron, it's great to have you here. what do you make of the performance we've seen thus far and how things look for the back half here? >> i said the first half would be more difficult, and i thought we'd have a pretty strong move in the second half, and maybe we'd started to do that now at the beginning of the year i said i thought the market could be up 20% for the year. it was up 6% for the first half. let answer see if it can make another 14% between now and christmas. >> are corrections extinct, byron? >> no, we're always going to have corrections from time to time but the overall trend is positive. market valuations are not at a bubble level. bubble level is 25 to 30 times, at most 17 times, the market can sell at 10 20 tim20 times the 1
500, operating earnings estimate is 2300, i think we can reach that level. >> it's interesting to hear you say that, that 20 times as a multiple is reasonable because we've had robert shiller on the network in the last couple of weeks saying when we get mull tips in the range of what we're now we're already flirting with historical highs. >> has a different way of looking at it. he looks at normalized earnings over a decade. i look at operating earnings on a trailing 12-month basis, and that's somewhat different. so he has within his formula or methodology the sharp earnings decline of 2008-'09. i think that's behind us. i think we're in a period of slow secular growth, and i think the market can trade at 20 times current operating earnings. >> and i would like on this note
to get your reaction something larry summers said on our show yesterday, have a quick listen. >> i don't think that we are yet in a bubble. i think obviously credit spreads are narrower and thinner than they used to be, certain asset prices have inflated. i think we have a real challenge, which is that it's not clear, given the way the economy is structured, what the long-term normal level of interest rates is going to be. and my suspicion is that it's going to need to be lower going forward than it has been in the past, and obviously when you have lower rates, that creates more capacity for people to overstretch themselves, for people to reach for yield. >> what do you think about all of that, byron? >> i think larry is, doesn't recognize that stocks compete with bonds, and when you have very low interest rates, that usually leads to a higher
valuation for equities. so these interest rates and even if interest rates were to go above 3, until they get to 4, the present interest rate level supports a higher price-to-earnings ratio for the overall market. >> that's to some extent what he was saying. i think one thing that i hear a lot from investors today is they've all kind of come to terms with this idea that rates may stay lower so stocks are going to be higher, and then perhaps we're not at the end of that move. the question that remains out there that larry summers was alluding to is what do you do or do you worry then about the market getting too overvalued? >> well the way larry was expressing it, he was troubled by the fact that people would reach for equity performance, and what i'm saying is that the market is not yet at a blow-off. it is true that investor optimism is pretty high, but i don't think portfolios reflect that optimism. i think a lot of people are
still cautious about the market. >> absolutely. just want to ask a weird question, not that these aren't all weird questions but in any case, is there a way in which this "ends" that doesn't involve the stock market sharply correcting, losing substantial amount of its value and repeating kind of the credit womb cycle that we've seen now play out the last time around? >> i think a geopolitical event of some magnitude could unsettle the market. i think that's something you have to worry about, but right now most of the things that could trouble the market, interest rates are likely to say low, as larry points out. europe is growing, it's out of its post recovery recession. it's moved away from us. i came back from two weeks in europe. i think europe is going to grow at 1%, could grow at 2% if they had a more expansive monetary policy. i think china is a problem, but i don't think they're going to
have a hard landing. i think japan is doing much better, and i think the middle east situation will stabilize. >> byron wien, it's good to hear your perspective this afternoon. thank you for being here. >> thanks for having me. not everyone is so bullish on this stock market. larry gl larry glazer is here with a warning, next. e more. because, for me, the challenge of the search... is almost as exciting as the thrill of the find. (announcer) at scottrade, we share your passion for trading. that's why we rebuilt scottrade elite from the ground up - including a proprietary momentum indicator that makes researching sectors and industries even easier. because at scottrade, our passion is to power yours.
whether it's for individuals or fortune 500, larry's worked with all of them on this bull run. larry, it sounds like you're not a. >> you know, in honor of our nation's birthday, july 4th, it's my patriotic responsibility to point out some of the problems we're having with this rally. it's not great when you see short-term interest rates at lows and it's certainly not great when you see volatility at historic lows. there's questionable economic data out there with first quarter gdp that's contracting and we have massive political
concerns all over the place. so because of that you have an eyes wide open market. you want to see the potholes and land mines. >> i want to get the panel first, but before i do, where are you putting all this money to work? >> you have to be careful. it's not game. people get a little sloppy when they start chasing the market and that's what's happening right now. valuation is determined by earnings. >> what are you telling people? cash? >> no question. look. there is some value overseas. >> what is the balance -- overseas? okay. >> emerging markets still look cheap. dividend pairs will give you support. >> they're not only expensive but they're volatile. >> they're volatile. look, everything's volatile. >> nothing's volatile. >> pick your poison. you should be concerned. >> larry, isn't the problem that
you've enunciated here well known to all of us? we make light of the fact that it's the bull market of all time. the professional investor hates the rally. there are people at ideological war with the fed dieing for the market to go down just so they could prove they were right after all. >> you're right. >> there's tremendous amounts of people who hate the rally. isn't that the best thing? >> when you look, if you're a bull, you actually want the 10% correction. you want the market to pull back to put the money to work. valuation is an issue. this market is as expensive as it was at the peak in '07. if you look at praise to ratio, it's not cheap. valuation does not matter. we want to conveniently check that. >> a lot going into the second half o the year saying now is the time to reallocate, now is the time to diversify.
what does that mean? where are you supposed to allocate the money to? >> where would it be? it's rebalancing. it's so simple but nobody does it. if you have small caps that led the market, that's the area. tame some money out of the names. the second half of this year may be a mirror image of the first half. you saw a rebound in the commodity names that were decimated. that's why you want to be rebalancing. financials, believe it or not, as a sector, have had a pretty good recovery. they can take profits. don't be afraid to take profits. look. you can rebalance. >> appreciate the pushback on all the hoopla. up next, we'll get the final thoughts. the dow pushed to 17,000. don't go anywhere. tdd#: 1-800-345-2550 there are trading opportunities
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crisis in the middle of it. since then it's been steady eddy. >> that's the last time we moved steadily up. second half of the year, let's get some better economic data. that's the number one issue. let's see the 2 1/2 percent yield. there's my wish list. >> we start to get jobs stuff through the rest of the week. what are you guys watching, danny? >> jobs is what we're watching. i also watch ipos. just some numbers real quick. this year 273 issues were announced. we raised $27.57 billion. that's compare that to 1999. 636 issues announced with $746 billion raised. we're not there at all. >> alibaba is coming but it won't get us there in terms of number, even close. >> but i have to agree with bob. u.s. economic data that's very strong. that's what all global investors are looking for because they want to say this economy is actually recovering. it's real.
and so that's going to put legs into the rest of the markets. >> it's so true. the conversation where you go is all about what's going to happen with the world. sharon? >> definitely true. a lot of folks who think they may have missed some of the run-up, they're not the big drivers like the dow drivers today, ibm and visa. well, you probably have ibm if you have a stock index fund but even visa. that's in major 401(k) plans. a number have that in their plan. so that means you won't too. sometimes when we're talking big drivers, a lot of people think they have them that. i likely have them in their 401(k) and mutual funds. >> let me say real quick, gas prices are going to hit people in the face while they're traveling. is that a big risk factor, bob? >> yes. we saw it seven times. i think it's definitely an issue. that's why let's get the issues in the middle east more control.
>> be safe when you are traveling this morning. good to see everybody. "fast money" is up in just a few moments with melissa lee. what's up, melissa. >> we'll give you top stocks to buy and top stocks to sell. >> over to you. >> thanks. at times square, i'm melissa lee. stoxx closing no at 17,000. our traders tonight -- and it's not just the broader market rallying. a number of individual names, netflix, 3-d systems. three of the sectors that led dow to 16 to within striking distance of 17k. can you still make money in these cases? brian, what do you say? >> i think you can. you let your winners run. if tomorrow morning we're talking about what do