on. and so we're not surprising anybody. it's going to be a terrific thing. it's for parents and kids, all with olympic aspirations. there's millions of them. we're going to show them. >> thank you so much, peter. we appreciate you taking the time. we'll be back here tomorrow for two special shows, "squawk on the street" and "street signs" live from sun valley with special guests. now, though, time for "the closing bell." okay, folks. a slow bleed continues. stocks are withering lower here today. the dow is down 35 points. with the big story is we've shed almost 700 points since the high in the market four weeks ago. hi, everybody. welcome to "closing bell." i'm matt nesto on the floor of the new york stock exchange. >> and i'm melissa francis in today for maria bartiromo. cnbc global headquarters. the markets right now, falling commodity prices putting pressure once again on the equity market. oil falling to $60 a barrel on ongoing concerns about the

health of the global economy. all weighing on the sentiment on wall street. as for the major indices, take a look where they are trading right now. the dow is down 31 points. that's about a third of a percent, a little more, we're heading to half a percent now. the nasdaq is also trading to the down side, down about half a percentage point. 1737 the last trade there. and the s&p 500 is trading down by a little more than 7 points. it's about .8%. 873. matt. >> all right, melissa, as they said, we're down for the third time in four days. we've shed about 5% on a week to date baasis. our market reporters are standing by and eager to go. let's start with bertha who's covering the nyse today. >> thanks very much. one analyst was saying maybe the green shoots were actually green shorts that we saw. and one of the things that people have really been watching today have been the levels on the s&p. if you take a look yesterday, when we moved down despite the low, the 200-day moving average, these are all technical things that people watch, but we were watching the s&p here at a better than two-month low. we hit a low of 869.

we've bounced a little from there. but that is playing to more weakness. and a lot of it today as we look at the markets in the last hour coming from that swoon in commodities. sense all the indexes below key levels, not least of which the commodity index. the vix spiking back up to a three-week high. volatility in this low volume environment. the successful 10-year action, that did cause a relief. it also sent yields on the 10-year to a three-week low, which can be looked at in two different ways as far as consumers are concerned. the next thing to watch, of course, is earnings. alcoa reporting today after the close. but we are poised for an eighth quarter of consecutive earnings losses. materials and energy stocks led the way higher as the dollar spiked and moved and firmed after that successful ten-year auction. energy once again for six straight days of losses in oil leading the way lower. we did see a bit of a move into some defensive areas. health care in particular, the

drug stocks. health care services looking well. but here's a surprise this afternoon. what's leading us a little bit higher off the lows? retail. family dollar was a standout after posting better-than-expected earnings as people trade down to those dollar stores. look at tiffany. look at jcpenney's. we get retail sales tomorrow p maybe some folks moving in ahead -- maybe some folks thinking lower gas prices, lower interest rates. maybe that will have consumers just a bit. it's a fascinating time, a fascinating market these days. brian schachteman, what's it look like? the nasdaq 100 turning positive. >> yeah, but right now that is true but the whole composite down about a half percent. 2.8% in two days. and to bertha's point, costco doing pretty well today. dollar tree as well. but generally speaking it's broad-based weakness, almost 3-1 in terms of declines to advances. where's the biggest weakness? let's start with the chip stocks. intel, applied materials, rambus

all to the down side as much as 6%. but intel down 2.1%. i also want to touch on research in motion. it's an interesti ining dynamic. cannacord adams came out at a buy. piper jaffray comes out and says listen, june sales at sprint and at&t was down, so they're a little cautious on the name. i also want to point out cisco's down 1.4%. google, microsoft the story of the day of course. google working on an operang system, probably going to see it someme in the second half of 2010 they're saying they're catered toward the lower end netbook but it's a straight shot at microsoft. we'll see if it can get some traction, get some market share there. it is definitely a dropping of the gloves, if you will. amgen has held up beautifully today in terms of gains, up 14.8%. it's basically been there the entire day. their breast cancer drug had a fabulous trial. basically, analysts saying it's the best case scenario for a market cap that big to move that much it's a big deal. other things that are in the positive territory right now in

terms of big names, amazon, apple, ebay. especially amazon seeing some pretty good strength. finally i want to point out two stocks. tractor supply. i always toned focus on the stock. i've been in the store once. they have all the toys at the bottom. they've upgraded guidance. and dryships got an upgrade too. and africa sharon epperson, the oil tried is what everybody is talking about. down to you at the nymex. >> the oil trade and commodities in general. commodities in a freefall today, and oil just one indication of that down almost $3, $60 a barrel, hitting that level today. keep in mind we are down about $13 just in the past six sessions. and a lot of that has to do with the weak forecast and the weakness that we are currently seeing in terms of demand. when you look at what has happened in oil, it's not only oil, though, where these concerns are highlighted. it is also in the metals complex. we see gold breaking below that 9, 10 level. copper sharply lower as well. silver lower also. and again, highlighting all of

this is the fact that we are seeing the weakness in stocks, we are seeing a lot of numbers come out about demand. that does not portend for any type of recovery in the near future. and that has a lot of folks concerned. and they're really not willing to take much risk right now. that is why the crb index also breaking below a four-month trend line. and you've got to look at what is happening, rick, with the currencies as well. the dollar-yen, that breaking below a key level of 94. that's another factor. commodities and currencies once again trading in tandem. >> all super important aspects. let's get into the nitty graty of all of those. first let's start at the top. fixed income story. whether you look at an intraday chart or three-month chart of 10s, you can see that the yields have fallen dramatically. we're at the best yields in terms of the lowest. should we close right here. since about the 20th of may. why? well two, reasons i'm hearing. a, the weakness in the equity markets is resurging the flight to safrkts especially with commodities down as well.

where are you going to put your money? and some traders saying that the trial balloon of second stimulus, at least mr. harwood's story today that maybe they're not going in that direction, also may have influenced the positive auction. if you look at the dollar-yen that we were just referring to on the day, you can see how the dollar has plummeted on a year-to-date chart, lowest against the yen in dollar terms since february, last chart, the yield curve hp hey-f yields go down in the 10-year, guess what. the yield curve flattens. it's also the flattest since the last time we saw a 10-year here about the third week in may. now let's go to the breaking news desk regarding consumer credit. tyler mathisen, what's the data look like? >> hey, mr. santelli. actually, the number for may is better than the consensus forecast. the decline, the fourth in a row, the first time we've had that since june to december of 1991, was 3.23 billion. now, according to reuters, the consensus was for a 9.5 billion number. that's the good news.

the less good news is that the april numbers were revised to show a higher -- a record fall in consumer credit of $16.52 billion. obviously, it suggests that the economy is not expanding at any pace but these numbers for may, which are better than expected, would say that perhaps the consumer is not retreating, sort of calling in debt as quickly as had been expected. revolving credit, by the way, rick, made up of credit and charge cards, declined 2.9 billion. that's a 3.7% annual pace. melissa? >> all right, tyler, thanks so much. taking a look at today's business headlines. the white house reaching a deal with hospitals to give up $155 billion over ten years in government payments. that money will then be used to help cover millions of uninsured americans. while announcing the deal vice president joe biden said reforming the health care system is critical to fixing the nation's economy. >> the status quo is simply

unacceptable. rising costs are crushing us. they're crushing families, crushing businesses. crushing state budgets. and they are crushing the health care industry itself. >> and the international monetary fund is raising its global growth forecast for the next year to 2 1/2% up from 1.9%. but the imf still has a negative outlook for this year, expecting global growth to shrink 1.4%, .1% worse than its prior outlook. matt. >> all right, melissa, thanks so much. i'm looking at the scoreboard. the dow's only down 15 points. so let's talk about this market day here. i opened up, gentlemen, by saying -- and i should introduce my guests here. i have scott jacobson of capstone sales advisor chief investment strategist there. and also jordan kimmel, national securities. he is their market strategist. so jordan, we're down 15 points on the dow. how can you be bullish on this market, and how can you favor something like small caps? and it seems like we're hitting lower lows every day, we're now down to levels that we haven't

seen since the beginning of may. >> lower lows for a couple weeks. you're right. remember, we had a historic bounce already off a generational bear market. that's the second generational bear market of this decade. so you have to remember, this is an auction market. when fey is this hi when fear is this hard, when people are afraid to own stocks you can go in and buy them on the chea you have to be very selective. but when the crowd wants a zero percent return in treasuries you know the crowd is wrong and in a couple years from now they'll be saying what were we so worried about. >> scott, since he brought up treasuries, you've been looking at the volatility of fixed income. we're all focusing on the vix. but what is that telling you? what are you seeing there? >> fixed income volatilities are actually the highest since they were last november. and that was when we wering having the stock market crash essentially. what it's telling me is the treasury market is nervous about the end game from the fed. are we going to have inflation? or how is the fed going to unwind their balance sheet?

what's that going to affect the market? but the fact that has diverged so much from equity volatility means that equities are a little complacent and treasuries are a little ahead of the curve in terms of ris ak head. >> that's the warning from the fixed income volatility market. >> yeah. maybe they're wrong and maybe stocks are right. but i think stocks are pretty fairly valued, looking at a rosy scenario, to the extent that that doesn't occur then you could see some volatility. >> it doesn't look so rosy ahead. people are talking second stimulus, trying to put out the fire. you're saying buy the fear. >> the fear is own securities instead of trading and getting out. everybody wants to make a quick hit and get out. the reality is you need to back up and take a look at a weekly chart and also not only bottom line earnings, you need to look at cash flow. so if you're looking at hapy story with the economy and real estate and employment, obviously you're not getting it. which is why the $4.5 trillion is in the money market.

if i could find, 20, 30, 40 stocks accelerating cash flow i don't have to worry about the fed or international moves. 5% of the world lives in america. even though there are business cycles, the rest of the world wants to live a little bit better. >> we're talking about the retailers today, they're getting a bid. family dollar comes out with a less worse than expected number. little git of guidance there. and retail's getting a bid. maybe this is the chief gasoline rally. this seems like -- is a paper tiger the right word to use there? it's pretty thin -- >> maybe. people are looking around for relative value and where it is. health care rallied a lot yesterday. selling off today. i think in aggregate the market is pretty fully valued. so there's trading around the edges and it's going to be on the news. the market is looking beyond this quarter and hoping that we don't have a downturn in earnings in the third quarter or the fourth quarter on poor guidance. but i don't think the market is nervous. it's been unnervous, but it's starting to get more nervous as

this earnings season comes in. >> let me tell you what i believe. i think the pillars for the next bull market are confidence and trust most importantly. the trust in the market, the trust in wall street has been broken. and again, this is not brand new. we've been here before. so the last time news was this bad and i was getting out of college, there were a couple companies showed up, kind of namely microsoft, oracle, and intel. don't count innovation out. i just read a story about lasers coming out, seven times the strength, it revolutionizes health care. >> i think everyone does believe in the shining city on the hill, but we've got to get there, man, and if we've got to go through a deep dark valley with some pretty serious legislative initiatives that are kind of ominous and looming right now. >> it's a very big thing to get over. we've got the biggest government ever, and it's getting bigger, and it's getting massive. >> and it has an absolute proven inability to ever shrink. >> the productivity of government is generally less than the private sector. so what are we going to get out of gdp for that?

couple that with the fed's balance sheet being as large as it is, and i think there's a lot of problems at the federal level. >> i apologize for my wandering eyes. scott jacobson, jordan kimmel. as we said, almost back to flat. the dow's down, what, 20 points right now. the s&p trying to cut back to even. melissa, it's been an interesting session but far from over yet. >> that's right. and consumer spending as we ju heard contues to be very weak. up next we'll break down the state of the consumer and tell you what needs to happen to get people to spend again. plus, oil speculators coming under fire again for volatility in the energy markets. they always get the blame. will new regulations actually be worse than any alleged harm from speculators? we'll get some answers from the head of the cme group coming up. and then after the bell maria bartiromo's exclusive interview with former aig chairman and ceo hank greenberg. he'll explain e significance of yesterday's big legal victory against aig and what he's doing to build up star international. but first, the most active stocks in the new york stock exchange led by bank of america,

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welcome back to "the closing bell." let's take a look at some of the research calls out there today. the latest upgrades and downgrades. key bank upgrading air products and chemicals to buy from hold. they have a price target of $80 a share. they are citing cost savings and a potential turnaround in the semiconductor business. also, jefferies downgrading consumer products maker chatham to hold from buy. the analysts there concerned about the maker of icy hot and gold bonds seeing slowing sales. and robert w. baird initiating coverage on truck manufacturer nav i star and paccar with a neutral rating because the commercial truck market is starting to show signs of improvement. melissa? >> thanks so much, matt. consumers continue to keep a lid on their borrowing. according to the federal reserve's latest report which we just heard, consumer credit declined 1.5% or $3.2 billion from april. economists were expecting a deep

cut of $95 billion. still the outlook isn't exactly optimistic especially with credit card reform in the works. earlier on "street signs" kenneth chenault shared his concern on this very topic. >> consumer spending is 2/3 of our economy. and i think what's very, very important is when we put in regulation the question needs to be asked will this regulation restore consumer confidence and in fact improve the economy? and i have a concern that this regulation, parts of it, may stifle the growth that we need in our economy. >> for more on the state of consumer credit i'm joined by adam levin, ceo of credit.com, and also charles ortel, managing director of newport value partners. thanks to both of you guys for joining us. adam, i want to start with you because your cite looks at people's credit and directs people to different products and gives out a lot of information. this report that you heard

today, a huge drop, especially a huge drop in april, $16.5 billion of less credit out there. does it mean people are initially borrowing less? i dare not hope it means that they're payingtuff off. righ it's not that. >> well, i think that in many cases people have begun the process of paying stuff off because they're conrned. theye concerned about whether or not they're going to have a job tomorrow. they're concerned about the fact that every time they turn around they see rates incrsing, credit lin being t, account being closed,nd also we've seen an entire spectrum of the subprime lending community just literally shut down access to consumers, to credit cards and other subprime products. so as a result we see consumers pulling back, in some cases not because they want to but because they don't have an alternative. >> charles, in some sense isn't excessive borrowing and racking up huge bills on your credit

card, isn't that how we got in this mess? i mean, we always cheer for the consumer to get out there and keep spending because we want the economy to move, but does th really make sense forhe lo-run health of our economy? >> ablutely not, melissa. and thanks for having me on. the problem we face in this country is really twofold. weave watoo much debt. and condly, we have a change inur demographic makeup. we have instead of the prime mover being people age 25 to 49, who rushed into the economy in the '80s and '90s, we now have the spectacle of an aging population that has changed its spending habits. so we have too muchebt and a changed set of consur preferences. and that is not supporting demand in the way that it needs to be supported. >> yeah. adam, what is your sense of where the consumer is right now? you said they're cutting back a bit. is this the low point of confidence, do you think, or do things sm to be getting woe? >> i think people are s very unusual. you see on a daily basis still

nouncements of layoffs coming. people still ope up creditcard bills to see rates rising. you see , you now, you see generapullback all ove the economy. so the truth is consumers are stilvery uncertain. we -- recent surveys we'v run at credit.com we'veeen an increase in what people consider negative event occurring to them with cred products as we as the fact that whewe've asked people about how they're aling with debt 47% of them are trying to deal with it themselves and oftentimes people may not be the most equipped to deal with that. >> adam says negative events, and i think probably what he's talking about is interest rates going up and balances, they have on cards they have already. but credit is a scarce commodity in society right now, right? i mean, it's harder to get a credit card. banks don't want to do as much lending. don't they have the right to charge more interest right now for lending that precious credit out? isn't that how business works? >> it was, i think, before september 15th, 2008. i mean, i think we've entered a new world where the market must

co-exist with politicians trying to regulate our behavior upand do the economy. if you go well back into history, i tnk demand was fued in the united states by the emergence of companies like erican express and the cred card companies a the c companieand mortgage companies that were wli to finance people and were enabled by lawmakers propping up demand. that world is over because we have way too much debt and not enough equity in this country. >> adam, what do you think about that? >> i think that in lot of wa he's rrect. the thing at concerns me, though, is tell meow it serves anyone's purpose to actually be able to raise interest rates on existing balances. it's one thingo be able to say i want to raise the rate on a prospective puhase or what you may be dng in the future as opposed to we ha a situation where consumers e working to get their debt down anyway because it's normal common sense to do so and then raising the

minimum payment not a problem. >> adam, maybe that customer is only workout something to you at a higher price. maybe you think that guy is kind of a bad risk if he's willingo pay more you'd like to keep m, if n you'd like him to pay off his balance and get lost. >> well, it' not a questn of that. t uld it not enab him to pay h balance off more quickly if you didn't raisehe rate on that balce but saidthat on a going forward basis all purchases that you make will face a higher rate. >> i hear your point. is getting the government involved a good idea at this point, do you think? i mean, you educate consumers. do you think that you need more education out there? is the problem tranarency, or is the probl jt people are borrowing too much and they can't afford it? adam. >> the problem was irrponsible lending, iesponsle borrowing,k of financial literacy, lack of financi literacy, educatn both on the part of business and government. government shouldn't be inere forcg education. it should be a collaborative,

corrorativeffort with businesses, government, public services ornitions, all to help to work together to raise the literacy, the financial literacy of this country. >> okay. we're going to leave it there. thanks for joining us, guys. we appreciate it. we've got 35 minutes to go here before the closing bell. the dow right now is down about 30. the nasdaq down about 6. matt? >> and up next, melissa, we have the chairman and ceo of wilmington trust, ticker wl, to give us his take on the financial sector and also talk about tarp payback. it's a "first cnbc" interview when we t back. you're the colon! diarrhea, constipation, gas, bating. that's me! can i tell you what a difference philps' colon health has made? it's the probiotics. the good bacteria. that gets your colon ck in balance. i'm good to go! phillips' lon health.

all right, folks. welcome back to "the closing bell." you can see we're down 35 points on the dow. joined on the floor of the new york stock exchange by the chairman and ceo of will mingtron trust, ted cecala. let me talk to you first and foremost about the tarp repayment. what are your plans in terms of giving the government its money back? >> we're going to watch how the next couple quarters develop, and as the recovery starts to take hold then we're going to start to accelerate our plan to repay the money. so we'll probably end up not at the end of this year but probably first part of next year. >> are you looking forward to that day? everything i hear from other financial ceos is like they're darn happy the day that's behind them to get the government out of there. >> we are. i think the government played a vital role when the financial system started to collapse. and it's beyond that but it

would be nice to see the economy starting to really accelerate before we go ahead and make those -- >> we just had ken chenault on from american express. and i wouldn't say he's bearish but he certainly wasn't displaying any optimism. what's your feeling for the economy and the recovery? >> well, i think the economy it seems like it's bottoming but i don't believe we'll start to see much in the way of recovery until we see a lot more consumer confidence. i think that's going to be key. >> we just heard from vice president joe biden, of course, wilmington boy, talking about misjudging the economy and the severity of it. do you think he was right or wrong? do you think it's worse? better? >> i don't know whether the economy's any worse or the stimulus package really hasn't taken hold at this point. >> there's talk about a second stimulus. do you think that would be a mistake? >> i think they ought to let the first one take hold and maybe accelerate some of the payments that they had talked about and get the money out there as opposed to having this come in on a delayed basis. >> you know what strikes me,

with every economy there's opportunities that maybe have been unseen before. maybe in your case it's working out some of these bankruptcies like lehman and gm and wamu, which is sort of a new business in bad times. >> we've really been fortunate because we are not big in syndicated lending. a lot of these organization that's have been lenders and companies that go into bankruptcy have to resign as trustee on the bonds, and therefore they need an independent trustee, which will mingtron tru ming-ton trust fills that role. >> good clean business. >> great business. >> do you see any write-ups coming in the near term at all? >> well, i wish the accounting profession could get to that spot because they're quick to write down. >> yeah, they are. >> they need to be on the other half of that. >> all right, ted cecala, appreciate it, chairman and cref wilmington trust. >> we've got about 30 minutes to go before the closing bell. up next the fms final call. find out if you should be buying the financial sector. following a sharp sell-off over the past two months.

we'll right back right here on "the closing bell." to look after my money."

tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 "theust might be settling... tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 "i guess i'm jusdone with doing nothing,ou know?" tdd#: 1-800-345-2550 tdd#: 1-800-5-2550 "oh, i'm not thinkg about moving my money. tdd#: 1-800-345-2550 i am moving it."

taking a look at today's business headlines, the mortgage bankers association reports mortgage applications jumped nearly 11% last week after hitting a seven-month low the week before. a more than 15% increase in refinancing helped to lead home loans higher even though rates on the 30-year mortgage held steady at 5.34%. general motors may still be struggling in the u.s., but things couldn't be better for gm in china. gm predicting sales in china will rise by more than 20% this year. some double of what the automaker was forecasting at the beginning of the month because the company's bankruptcy has not impacted sales in its second largest market. and nyse euronex says its nyse website has been the substance subject of a denial of service cyberattack but the exchange says the attack has nothing to do with the internal servers that handle daily trading. matt? >> all right, melissa, time now for the "fast money" final call. and financials are atop the loser board again today, down over 3%. they have now shed about 10%

since the 1st of june. is this a time to chase the financial sector? brian schaefer of vandermoolen capital, he is the ceo and he says yes, it is. he joins us to explain now. brian, you think it's time to chase financials? >> yeah, i don't know that you're chasing them. i think you're getting a chance to bient dip here. i spoke a little bit about it on the halftime report today. essentially what i'm looking at is a paradigm shift in that the a writedowns are slowly being backed off here. and so as we start to see these balance sheets stabilize and we see a lot of work being done by the federal reserve to help steepen the yield curve and a lot of other things they've helped to do to bolster these balance sheets i think this is an opportunity for you to buy these banks. >> now, it may take a quarter or two. i did a little piece yesterday on this program that showed how the regional banks are getting a jumpstart on this exact thesis. and it seems to be working again today. the giveback in the regionals is only about half as much as the banking index, the big bank index right now, and you can see

over the past week it's even -- it's still pronounced. >> correct. and i think why you're seeing that is the exposure of the big banks versus the regionals. and when you're talking about mortgage exposure and you talk about a lot of the failures that we're seeing, the exposure is really limited to those -- mostly of those larger banks. and where i think the concern is banks, you look at for a great example wells fargo, now, they took down wachovia. wachovia had golden west's portfolio. golden west portfolio is probably the most toxic debt in the history of the banking system. we're talking about no-document loans. california, as we all know, had a very, very poor system of background checks. and that's a huge part of the issue we're seeing now. >> so, i mean, financials were holding up yesterday in a weak market, and that was a sign of confidence, but we're concerned about technology, and then we look today, it's the financials leading us lower again. and that's unsettling. >> it is. but at the same time i think it's really a simplistic -- i have a very simplistic view on this, and it is basically that

there's earnings jitters. and that's what you're seeing now-s earnings jitters. and nobody wants to be ahead of the numbers. they've already seen a lot of profits. the market is still up 25% and a lot of these banks are up 25%. >> people want to be ahead of the numbers if they have confidence, but they don't have confidence for real reasons. >> i don't see it as confidence. i see it as unsefrnt. and uncertainty is the number one biggest issue for most investors. confidence and uncertainty is the difference. meaning they don't want to guess ahead of the numbers, they want to see what the numbers are. they're not chasing them. bank of america at $11 down from 40. >> brian schaeffer from van der moolen capital markets. he's the ceo. on after hours action cke restaurants closing 4% higher today on red tape. the ceo of the company joins the "fast money" gang to talk about his outlook for the second half of the year. all right. so we've got, what, 25 minutes to go, melissa before we close up shop here today. the dow is trying crazily.

it might go positive. >> trying to make a comeback. up next, a "first on cnbc" interview with the ceo of the cme group. find out if he is in favor of new regulation designed to curb commodities speculation. >> and after the bell earnings season kicks off with aa, alcoa. and i've got a little surprise in store for you as well as instant analysis when the numbers cross at 4:00 p.etirem with annuities frodelity. turn your savings into iome -- guaranteed, and get a retirement "paycheck" folife -- guaranteed. call. to get started, and learn how to secure retirement ince that won't gdown - guaranteed. for details about guanteed income for life and change the way y think about your retirement vings.

the oil futures market, it's a total farce. even i, someone who accepts that however awful it might be a certain amount of legal manipulation is always going to be inherent in the game because the regulators almost totally captured by the financial industry, even i am completely stunned and outraged by the phoniness of this oil futures market. which is a total travesty of a mockery eof a sham. >> the anger's back. "mad money's" jim cramer last night saying that continued manipulation of the energies

future market is inevitable without further regulation, and he's not the only one calling for action. cnbc's hampton pearson is in washington with the rest of that story. >> french president nicolas sarkozy and british prime minister gordon brown sounding the alarm in today's "wall street journal" saying, and i quote, "governments can no longer stand idle. volatility damages both consumers and producers." the two leaders trying to bring their ideas for controlling extreme price volatility to the g-8 summit. at the top of their list, greater global transparency. now, make no mistake about it. energy commodities trading is where the action is. look at these eye-popping numbers on the explosive growth of energy commodity etfs. in 2006 just two funds with about 836 million in assets. now 17 funds have amassed $8.3 billion in just two years. >> we have investors who are looking for the next game in town, who want to be part of the inflation play, who want to be

part of just a market that happens to be going up and have some volatility to it. now, this is not what the commodity markets were designed to do. they were never designed to be investment vehicles. >> federal officials define speculators as investors who don't use or produce commodities but are primarily interested in beth on prices. the new head of the cftc wants tougher curb limits on commodities market speculation. on capitol hill lawmakers who failed last year to get regulations through congress are set to try again. there will be opposition from the oil industry, major investment banks, and the exchanges, and it will be intense. now, momentum for trading restrictions could in fact take a back seat to issues like health care and energy policy reform. the other reality check, the congressional calendar. we are, after all, less than a month away from the august congressional recess. melissa? >> all right, hampton, thanks so much. for more on the government's attempted crackdown on speculators, we welcome in a "first on cnbc" interview craig

donohue, ceo of the cme group. also joining us for the conversation is rick santelli. craig, i mean, those are really harsh words. you heard them. cramer saying a travesty of a mockery of a sham. you know, you have brown and sarkozy taking aim at you. the criticism is that you see in a given day a billion barrels of oil traded, a million contracts, that's a billion barrels in a mark where only 86 million really ext. ú is the criticism ir? ú ú >> no, absolutelynot. ú and i take strong exception witú mr. cramer comments. ú firsof all, nobody isalking ú about manipulation of t ú rket. what people ve expressed ú concern about is quote unque, excessive speculation, not manipulation. and the speculation concerns really have to do with non-commercial hedgers and their involvement in the market. that's an area where these markets clearly function for the purpose of price discovery and to allow commercial hedgers to

hedge energy market risk. >> but craig, i mean, you say the focus is on the non-commercial traders. there has been an explosion in non-commercial traders. we saw all the hot money move to the nymex at the time that i was down there reporting. i mean, you just saw an explosion of hedge funds coming into this market because there was money to be made. and at the same time we saw price explode and then collapse. and i think the problem is that a lot of americans feel like they pay the price for that at the gas pump and now they want someone to blame. >> yeah, no, i understand, but the reality is that those market prices are being driven by ma o macroeconomic factors and supply and demand factors -- >> in part. only in part. >> if you look at all the economic analysis that's bn ú done, ev the vernment's ow ú analysis, it's clear thait's not being affected by the futures market, it's being affected by fundamental supply and demand characteristics. >> but craig, when you see oil go from 147 in july down to almost $30 a barrel, i mean, demand for oil hasn't fallen to

1/5 of what it was back last july. there has to be -- the moves are so exaggerated based on how much demand has shifted there's got to be something elsen the mix, don't you think? >> i don't tnk so. i ink if you look athe vt ú majority of energy market research and anasis what you see , you know, conrn over ú thglobal recsion, lessened demand for energy as a consequence of that, and these fundamental factors. again, if you look at the empirical evence and if you look at the economic analysis, nothing supports the idea that speculators are driving prices in futures markets. >> rick, do you agree with that? >> well, i like to keep things simple. you know, craig, i've been scouring the floor looking at trading cards, and i find a lot of them that have the blue side that says "buy," and they have another side that says "sell." but i can't find the one that only have "buy." can you kind of explain what you think i'm getting at here? don't all those index funds that supposedly only buy, don't they need somebody to sell it?

isn't there a sho established as we? ú >> well, that's ablutely right, rick ú of course, tre's a buy for ú every seller and a seller for every buyer. ú we havnonommercial hedgers ú that are not just, y kn, ú buyers, ey're also sellers and ú they're also executi a wide ú variety of diffent kind of ú trading strategi. i think it's itant to remember that these so-called speculators in many cases are legitimate large institutions -- >> like california teachers pension fund that governor pataki pointed out this morning? >> absolutely. and they're managing portfolios. they're looki for non-correlated returns. and they're looking to hedge against inflationary risks that would otherwise -- >> let me throw a couple of curveballs at you. let's take the first argument, that it's moving around, it doesn't really have a reality in fundamentals. what about green shoots? you know, we went through a 30% to 40% rally off the bottom. was there economic horsepower behind the s&p rally? no. but it was in the right

direction. do you think that's a fair way to look at what's going on here? the government's energy policy. we know that we're in a morphing stage. but if next week gas goes to $5 we're still hamstrung, don't those issues make volatility anú ergy markets as well? ú >> no, absolely. ú and obously we're very ú grounded in not only what e data shs, what thenalysis ú shows, what the economic view oú its, those are the things that are driving this market. you're absolutely right. >> craig, what is bad about the idea of the government coming in and doing more regulating? what are some of the negative externalities aswhat are poible as a result othe tc ú getting volved in your ú business, do you think >> great qution. ú let me just start ou by saying we alreadyhave,ou know, positi limits and position accountability levels and exemption predures in place for every one of o mkets. ú 've been doing thi with ú unparalled success for 150 years, and we have a stellar

reputation for market integrity. so all of that regulatory infrastructure already exists, and we do it extremely well. to your question, i think the biggest risk is these market users have a lot chois. ú they can ginto reign ú markets. theyan go into the less related or ungulated over-the-cou derivatives rk and they're stilloing to gain commodi markets ú exposure andhey're still going ú to trade but they're going to bú beyond the reach o ú well-regulated exchaes like ú e group and they're going t be beyond theeach of the cftc and the u.s. government. and i think thas the biggest ú concern,hich ithat we don actuallychieve anything, in fact we furthe exacerbate the problem by pushing more of this activity into markets where we really can't regulate it. >> craig, i look at the front page of the "wall street journal" today, and it says "speculators," in quotes, "oil speculators under fire." you know, it it feels to me like there's the beginning of a witch hunt out there right now. ú does that worry you? ú and do it feel that way, or am ú i overreacting?

>> well, i think that people have goo intentions, obviously. i ould say that we certainly are going to wor very ú collaboratively, as weays ú dowithovernment and with ú regulators. i thk this is aase of education and areness building an looking at the facts, looking athe data, looking at the maoeconomic factors and currency factors that e drivingrices in these markets. and i'm confide that as we go through that process a people are open-minded and oective we will come as a community to the right conclusions. but it's going to be about education. >> you said that -- >> greg, let me ask you one question. margin. there's been some out there saying, ah, just quadruple the margin, you'll take care of this. craig-f you did something like that, who would that actually hurt more in this equation regarding energy trading? ú >> well, ultimately, a of these things he the potential to really hurt t bona fid ú user of e market, the commercial hedger, because you need liquidity and you need

participants. in fact, you do need speculators to -- >> so the over-the-counter players probably have more financial wherithal than the people in the energy business, do they someone. >> well, early, people will ú look forther alternatives, and to the extent they can find more attractive, less costly alternatives they're going to use them. >> we've got to leave it there. craig, thank you for coming on. we appreciate it. this is no doubt a topic we'll discuss again. thanks to you, rick as well for joining us. eight or nine minutes before the closing bell. the dow pushing back into positive territory. >> she's added 100 points from the low, melissa, in about 90 minutes. up next, today's under the radar stocks. we're going to find out why ranch and farmetailer supply is a big winner at 10% hher. detailon thawhen we come back you have questions. who can give you the financial advice y need? where will find the stability and soces to keeyou ahead of this rapidly evving world? these are tough question tha's why we brought together t of the most

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taking a look at some of today's under the radar stocks, u.s. army awarding defense contractor dimecorp. and fluor a support services contract in

afghanistan worth $3 billion. the deal could be worth up to 15 billion if the army extends there for an additional four years. and farm and ranch retail tractor supply predicting its second quarter and full-year profit will beat wall street's estimates because of lower costs and inventory levels. that stock trading up by 11%. all right, melissa, just want to talk about alcoa. of course it's going to be the darling in the after hours. officially the first dow member to kick off second quarter earnings season. expectations are pretty low. 38-cent per share loss on $3.9 billion in revenue. that's a 48% decline. but this chart shows you what the stock has done. from the last time they reported earnings in april. it is both a hot stock and a cold stock. look at the giveback from that middle part of june, that second week of june to date. that's where it becomes a leader. it was a top five leader in the dow for the most part of the last three months. and now it is the bottom five laggard if you go back a year, it's the worst-performing member of the dow with a 75% decline. so there you go. this forecast, if they hit the number, it'll be the third

straight losing quarter. fyi my pal ariel nelson upstairs at headquarters tells me it is as likely to miss its estimate as hit it. 50% of the time it has missed in the past 12 quarters. it's also the smallest member of the dow not only by market cap, 1/35 the size of exxon, but it is also the smallest weighted based on its share price as well. so it's not a market mover in that regard. it is also the most shorted stock with about 7.7% of the float shorted right now. and then lastly as far as i know it's the only member of the fortune 500 that has its even theme song from 1976. ♪ she's big and she's free ♪ there's no place like her on this earth ♪ >> you always have so many good details. i love it. >> i have to -- we're coming right back with the closing countdown, melissa. >> and then coming up after the bell maria bartiromo's exclusive interview with former aig chairman and ceo hank greenberg.

here where he's nifth right now and where he's finding the biggest opportunities around the world. we'll be right back. ♪or all humanity ♪ t people at alcoa are

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