alix: we are moments away from the closing bell. i am alix steel. joe: and i am joe weisenthal. alix: u.s. stocks closing down across the indices, treasuries rallied. joe: the question is what'd you miss? the day after stocks fall as markets react to the fed decision. the watch begins for a possible october rate hike. alix: dark forecasts. that stocks and bonds with both fall this year, something that

has not happened since 1969. joe: we take a look at europe involved in the refugee crisis and why it matters. alix: we begin with the markets. the dow, it saw things go lower. it really picked up some steam in the last half-hour. joe: we had the no hike yesterday. that could not lift stocks. they ended in the red. today they continued. nothing from the fact that looks like help. a bunch of things that do not look like what you would expect to see. alix: barclays came out with a note that lower estimates to 117 due to the global growth issue. that perpetuated the idea that yes it is a concern and will

trickle down to earnings estimates. joe: the global growth story has been known for a long time. janet yellen's comments seems to has refocused it a bit. she allowed it to influence the decision as much as it did. alix: one part of the story is about volatility. i want to take a dive into the bloomberg terminal. you can see the huge spike up at 21. let me put this into perspective. let's go back one week. look, higher volatility actually was. the front end was up by 8%. we can all freak out because markets fell and volatility has

picked up that in relation to seven days ago, we are calmer. joe: the market generally is not like what it was a couple of weeks ago when it felt like panic time. i want to dive into my terminal. we talked about this idea that we haven't seen the type of market reaction you would expect to see. here is a chart of the brazilian real. you expect them to rally against the dollar. that did not happen. new lows in the real. alix: which is it worth? the dollar being stronger, or those countries are so bad that they can't rally even with a dovish fed?

market selling off. our guest joins us now to break it down. what do you make on a day like today? eddie: we got the script. no one seems to follow it. i am struck by a couple of things. it is still pretty elevated. what the market is doing during the day, it has not been that volatile. we wanted to get over the home of yesterday. the vix should be way lower for the activity we have seen. also struck by the two-year which we talked about yesterday that has

been on a rollercoaster, just before the announcement. then it turns around and loses 12 basis points in one day. the two-year bond does not drop at this point normally. that was one of the biggest surges in here. alix: since march 2011. eddy: the fed futures have no idea what to do. they are discounting probably no rate hike this year, may be early next year and even the idea of one or two and done. it has changed how the market views the next 6-12-18 months. joe: there was this great quote this afternoon that i love. on the face of at the markets seems to have been janet coming around the corner with a tray of jell-o shots and instead of cheering it just started dry heaving. maybe the market is sick of the current environment and we want you to move on? eddy: there is a lot of that.

i love the forceful language. you don't normally see that. we will start to focus on earnings. earnings season will begin in three weeks and there has been so much pressure and attention placed on the september meeting. once we are past that we will start to look at -- we get this on reflexive relationship because what fed policy has driven what we've seen across the world and commodities and currencies and the fed is reacting to those same things. we see the plunging commodities. both on the court on the core and the headline. how can you raise rates when you have that? alix: what you think when you hear from barclays that they slashed estimates? they are looking at the stronger dollar. our companies pricing in the

risk? absolutely --eddy: absolutely. they saw the flaccid market. market.lacid what really changed is we were excessively placid and that is what people counted as those forward earnings lines going out higher. now they realize it is not going to be that way. this is going to be the fourth quarter in a row of year-over-year earnings decline. we are not exactly sure but it looks like 2015 will be slightly lower than 2014. joe: you have an interesting chart that shows the relationship between the dollar and large caps versus the s&p 500. what does this show you? eddy: it is dangerous as a semi-strong correlation because

it is not always 100% correct. the s&p 100 divided by the s&p 500. you see the stronger dollar that hurts the smaller caps, those are domestic manufacturers, then you see the s&p 100, it is the s&p 30, a small number of names. that is when you see a spinoff, active managers outperforming versus underperforming. that is when you see the dollar going up. that is how it lays across the stocks. all these markets were together. alix: where does that leave investors? where is the place you need to put your money that is not going to be the two-year or 10 year or the dollar? eddy: one is to focus on

dividends. alix: isn't that played out? eddy: not at all. look at this week. microsoft, one of the largest in the world. they raised their dividend by 16%. that is in a norm us increase. dividends are expected to be sticky. you don't cut it back. with the breakdown the dividend yield has been increasing in the market with environment where you are not sure what kind of rates you're going to get. you are getting microsoft -- the yield is 3.3%. joe: another chart is the two-year 10 year spread. what do you make of this? eddy: this is fascinating. it jumps off the two-year. this is one of the best forward-looking indicators of a

recession. we have lots of coincidence indicators. for the last few recessions the 210 spread has turned negative before a recession. and it is still wide. we see that being played out today with the past few hours. there is a lot of room to grow for the economy. joe: thank you for coming on. alix: when we come back it is one symptom of the great recession that has not gone away that involves our parents' basement. ♪

alix: we asked what symbol of the worst economic slowdown since the 1930's is around? joe: young adults living in mom and dad's basement. 15% of 25 to 34 euros were -- 15% of 25 to 34-year-olds were living with their parents. you keep waiting for this number to turn around. alix: how would you feel if you were in your parents basement? joe: i would be frustrated the economy wasn't better for me. alix: i would be sad. still with us, crossing wall street newsletter, let's talk more about earnings. the historical pattern you've seen with the dollar versus earnings. why isn't this -- we know the

dollar has been strong for a while. guest: we don't know exactly what the effect the dollar has been. it is one of these dynamic things because it affects -- if a company has markets in several different countries it affects all those countries in different ways. there is a lot of moving parts. if we look at the earnings with inflation we have headlines, we almost have to have that with the recent earnings because the staples, they are ok. they are not flat to somewhat positive. when you look at materials, you look at energy. it is a disaster. exxon will see its earnings drop in half. we got an earnings report from oracle, it is an off cycle. it goes through august. their business is difficult. they are in a transition. they were hit by the dollar.

wall street doesn't like to hear that. joe: you talked about how we have this streak of declining earnings. historically, what is the market do, can the market rally when we have this streak of declining earnings? guest: it can. 1994, we had flat earnings growth but then what was killed was the bond market. the stock market was basically flat that year. once the bond market turned around the stock market -- joe: we need the fed to hike to have that script. alix: what part of gyration do you think has to do with fundamentals? things like today you have witching, what is real and sticky, and what is just the intraday?

guest: the market has bought in a lot of people who have been burned. the ipo market is a telling indicator. they haven't been strong this year. you bring in these retail investors and that is what they go for and they have been burned. before they were doing well. what has changed, it has become much harder for inexperienced traders. alix: you will see the bloomberg ipl index didn't come inside my ipo index, it has done nothing, it is lower year over year. joe: you have all these companies. one area that has been getting crushed, that gets no high but has done well, tobacco stocks. the rally in the tobacco stocks

when compared to the s&p 500 makes the s&p 500 look like a straight line. alix: that is crazy. guest: do you realize how many hedge funds have their butts kicked by people just line and holding tobacco? that is the industry. the profits are 20 full over the s&p 500. -- 20 fold. it is understated because the dividends are higher. alix: when you look at the global markets what keeps you up at night? guest: north korea. they just restarted their plan. it is an outlaw regime. a bunch of gangsters. the regime is becoming increase ingly demented. the 70th anniversary of the communist party, it is expected they may launch something, have

something big planned. sanctions, they don't care. it is a dysfunctional regime run by war criminals. alix: on that note. joe: thank you for coming on. alix: forget $10 billion merger is, what interesting deals is exxon up to in west texas? ♪

alix: i'm alix steel. joe: i'm joe weisenthal. alix: we asked what deals exxon is up to in west texas. joe: acquisitions with -- hedge thrillers. exxon is driving a hard bargain.

alix: a huge scoop by the way. this was awesome. exxon it is changing the way it does deals. joe: we take a look at one call made by davis schall. negative returns for s&p 500 and the 10 year u.s. treasury, this hasn't happened since 1969, but i believe it will happen this year. david joins us now from raleigh, north carolina. is the year playing out as you expected it? david: i think it is. i think there is this belief that stocks and bonds are going to move inversely and that has been the case but since the crisis we are in on charted times. the fed has amassed a quantitative easing policy. i don't think they can necessarily be expected to continue in the future.

alix: how much of the 10 year yield has to rise to have a negative return and get to the level you think? david: you're asking me math on the air. probably around nine or so. i think what i calculated was 12 basis points or so to offset the income earned but i would have to go back and check. joe: [inaudible] alix: my point, i wanted to see how negative you would have to be on the global economy and how that would be reflected. that would be what i was asking. david: i think that is the point, i'm not negative on the

economy. the markets in the economy have disengaged and split off and when they are positive on the economy you are seeing the housing market, still a long way to get back to normal, i think wage growth is starting to come forth but that is not the market. it is not valuation. the risk of those stocks and bonds is not that great right now. as an investor you have to couch the probabilities of what can happen. those scenarios where both of them can continue to do well but both of them have had most of the juice squeezed out of them for the most part. joe: one of the things that was striking, the markets didn't behave as if we had gotten a dovish fed announcement. you saw stocks fall. what did you take away from janet yellen?

david: i think it disappointed a lot of people. from a lot of investors point of view, 25 basis points, we are seven years into a recovery, unemployment is down to 5.1%. why can't we get off of zero? janet yellen does not want to move unless she has to. i think with some of the things going on across the world, the risk reward of moving too late is actually not a bad proposition. you look back to what bernanke said about makeup inflation, how maybe that is not so bad. some inflation builds up and we get some extra down the line, i don't think that is a bad proposition. alix: there was an interesting point of view, unwinding qe.

loans and deposits and what that lines up telling you. if deposits are increasing but bank loans are staying steady, it means banks don't need few we anymore because they have enough to go around and there is not enough loans. david: what the charter showing his overtime deposits and loans move up in lockstep. as a new loan is made offsetting liability is the deposit. after the crisis when the fed embarked on qe is when they paid for the bond purchases they go on bank balance sheets as excess reserves. what has happened is the fed funds rate is the rate at which

they borrow from one another. when he has 2 trillion of cash reserves at the fed for all banks, they don't need any overnight funds. that market is essentially dead and that is a problem for the fed. for them to actually raise overnight rates, they are having to experiment with new plans for this reverse facility to have a great. my idea to start the runoff from reinvestment is less normalized the fund market and do that by creating a market where there is a supply and demand for fed funds and not one where we have to use blunt force trauma to get the fed fund rates up. joe: david schall, thank you for joining us. ♪

alix: i'm alix steel. joe: i'm joe weisenthal. alix: we have china manufacturing coming out, france, germany, it is going to be exciting. joe: everyone is going to be watching the chinese pmi number. i it's going to be very exciting. alix: speaking of janet yellen, she is speaking thursday. that is going to be a huge thing to watch, university of massachusetts at amherst. joe: another thing to watch, the greek election.

a very close race. the market's view is that it doesn't matter, both are these would execute the current bailout package but you have to watch it. alix: thanks for watching. have a lovely weekend. see you monday. ♪

>> from our studios in new york, this is "charlie rose." charlie: in a highly anticipated decision the federal reserve kept interest rates unchanged at record low levels. the committee cited global economic uncertainty and recent fragility in financial markets. the fed chair janet yellen address the decision at a news conference today. janet yellen: inflation has continued to stay below are 10% objective. partly reflecting declines in energy and import prices. my colleagues and i continue to expect the effects of these factors on inflation will be transitory.