our guest host, financial analyst meredith whitney. we don't have much time left. i just want to tell you i'm glad your husband beat the bulls. ran with the bulls. >> at 2:00 a.m. our time he ran with the bulls this morning in pamplona. he really did. he's pigeon toed and not a fast runner. >> you were a little bit worried. that all came to pass.

he called and he's fun. >> i was worried only because i've seen him try to run. it's not pretty. >> meredith, please come back. that does it for us today. make sure you join us tomorrow. ""squawk on the street" is next. live from the financial capital of the world in the heart of lower man matten. this is "squawk on the street," everyone. a very good monday morning to all of you. i'm erin burnett. matt nesto is in. we're looking at a lot of things. earnings first and foremost. key reads on the banking sector coming our way. this morning you saw her, meredith whitney comments on bank of america. that is sending that stock higher. >> we are watching treasury secretary geithner. he's off in london. he's talking about the effects that are being taken and the efforts that are being taken to stem the financial crisis. he says there's a good chance the u.s. and global economies will actually start growing again in the next two quarters.

there's an asterisk next to that. the maximum impact of stimulus spending is just beginning to be felt now. >> that's right. we'll show you futures. by the way, what matt's referring to, if we can't get growth on a year on year comparison in the fourth quarter when it was armageddon last year, we really have a problem. real growth and a healthy economy perhaps much fairer to say would be further out. we should be getting gross in the fourth quarter on a comparison basis. this morning it is banks. anticipated earnings this week sending futures at session high. we're going to open higher across the board. we talked to meredith whitney. more on the banks in a couple of moments. some names here. all the markets covered out here. we're bringing our market reporters. we start off with mary thompson. >> as you and erin both said, futures are pointing to modest gains at the open in the wake of

weekly declines. all coming on the back of slight gains in the european markets. earnings in focus this week. 31 members of the s&p report their numbers. among them a number of key banks. bank of america and citi on friday. ahead of this we have bank of america up 5%. wells fargo also stronger up 4%. second quarter profits expected to be dismal. expected to be down 35% from last year's second quarter. also today we have comments from larry summers who's the director of the president's national council of economic advisers saying that things are likely to get worse. nevertheless, we are seeing gains of financials today. goldman sachs up 5% in the free market. analyst meredith whitney -- the company is expected to report profits of $2 billion.

also philips electronics up 5%. lastly, cit, the blender to the small and medium sized business down 18%. let's go to check on the energy markets. we go to sharon epperson. >> thanks. we have oil prices holding here around $60 a barrel. keep in mind, remember last week, we saw that 10% slide in oil futures. the biggest percentage drop since january. and part of that was long liquidation. a report released friday showed it fell by 62% last week. another militant attack. keep in mind, even nigeria's state-run oil company has said production there is above the quota. the dollar, well, it's holding pretty firm right here. slightly weaker. that could offer some support to oil prices.

metal prices within a very tight range. we're likely to continue to see this tight range and maybe some selling here unless we get some really positive economic numbers since we do have ppi coming out tomorrow, jobless claims on thursday, erin. so a lot of that will be watched very closely by the commodities and the currency market. >> sharon, thank you very much. let's look at what happened overseas. we did have a selloff. as we've been emphasizing we're going to open higher here. red arrows across the board in japan, hong kong, south korea as well as in shanghai. find out what's going on in europe where it is midday. good morning to you. >> good morning, erin. we're playing host to secretary geithner. that's certainly one of the main events in london. the s&p market, a nice and positive bounce. the whitney effect is being held on this side of the pond as well. financials very much in focus. also watching what is happening with ubs.

we're up quite nicely, 1.45% in london. the paris market is up by 1.6%. let me just show you what is happening for the stox 600. as you can see, we're getting up to sort of mid-range now. not that far, really, to go. we need to push up into the second half. ubs is trading up quite nicely. 15-day delay related to the court hearing that was supposed to take place this morning in florida. that is boosting the stock. settlement more likely. turning to one of the big consumer electronics companies reporting numbers today, better than expected. some signs of stabilization. health care where it competes with ge is definitely showing signs of stabilization. such a tough business for such a long time, really we have to come out of the dark cloud at some point. we're beginning to see some

evidence of that. mr. matt nesto, back over to you. >> let's get back up to midtown and rebecca alt the nasdaq to give us a premarket look. >> a number of these big tech names are fractionally higher this morning. google up 0.07%. a lot of analysts saying the estimate, the consensus is a little too conservative at this point in time. microsoft up 0.05%. google-microsoft battle heating up. microsoft later this week potentially will be putting more software online. of course, google wants it on the computers. yahoo! meantime up 0.5%. one of the things we've got analysts' estimates coming out showing at least on one or two days bing has beaten out yahoo!. still yet to come as far as the overall market share. meantime, osi pharma up.

erin, back over to you. >> thank you very much, rebecca. next, we're going to head over to our brand-new earnings central nerve center. we've got big banks. general electric this week. of course, david faber's turn at bat. he has an exclusive for us this morning. the ceo of nrg energy. the first ber view since they rejected exlon's take over bid. the word on the street and the buzz behind the trading as investors position themselves for earnings central and the onslaught that's coming. mpanies on the planet most l

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it's going to be a really interesting earnings season. because while the core earnings numbers may be not so good, good, the underlying, the below the line numbers are going to be huge. it's going to be the mother of all mortgage quarters. so you may have, you know, a nebulous earnings number.

>> price target $286 a share. goldman's one of the big names on tomorrow's stock. earnings season crucial. the stakes especially high for the market as it begins this week. companies in the s&p 500 are expected to post 17% drop in earnings compared to the same three months last year. and when you break the market into ten industry sectors, only one, consumer staples, is actually expected to report an increase. joe and becky, our earnings central this morning. hi, guys. >> good morning, erin. good morning, everybody. welcome to earnings central. this is a brand-new location. >> whoa, whoa, why! becky why are you so far, far, far? >> we're getting used to this new setup. >> is it only going to be two chairs all the time? >> we're going to be swapping in and out. manning the earnings central

desk we've got the computers behind us ready to go. >> maybe that's why. we want to show those. the way most networks do it now, people are touching they're so close together. >> feels like we're really far apart. that's because we're really about the data, earns binings. >> we don't need the tricks to show the comradery. >> we have a busy week. financials front and center. tomorrow morning goldman sachs. thursday jp morgan. friday we have citigroup and bank of america. joe, you know, meredith whitney this morning said she's looking for a much stronger number from goldman sack than expected. the street said $3.48. she's expecting the goldman will come in with $4.65. >> i saw her preinterview notes on this mortgage case she's making after this may 28th legislation went under the radar. i knew yesterday and over the weekend when i read it, this is

significant stuff and her saying it that did turn the futures around. >> it did. erin pointed that out, too. wasn't just goldman sachs that was higher on the call, bank of america, other financials trading higher, too. >> then she said just awful stuff about unemployment. >> kind of diverging cases here. we get to all those big banks. a slew of the regional banks and smaller names as well. we talked about what goldman's is expecting. they're looking to the street to profit more than $2 billion driven by a trading business. also one of the groups that has done really well, at least relative to the rest, has been technologies. we go from finances to technology tomorrow after the close we have intel. thursday ibm and google. analysts expect intel to earn 8 cents a share on $7.3 billion in revenue. ibm is seeing earnings $2.02 a share. revenue year over year is expected to fall 12%.

analysts predict search giant google will post a 9% increase in profits to earn $5.06 a share. revenue is seen rising 4%. >> that's right. among the parade of other names this week, we have a couple more dow components. johnson and johnson is coming before the bell tomorrow. general electric is before the bell on friday. and with that, david, we will send it back over to you. >> do not bother. >> do not bother? okay. never mind. we're not. we're not. >> are you talking to me? >> yeah. your mike was hot. we said let's send it over to david and we heard you say do not bother. >> we were talking about the book that i won't name in terms of whether it's -- reading. you don't even know who i'm here with. >> and the room caved in? >> we were talking about that being number ten, yeah. thanks, joe and becky. becky, you left a lot of your stuff over there, by the way.

>> they made me change places, just running over here. >> they said you left in a hurry. >> do not bother. >> exelon continues. exelon continues to pursue atop the bid for nrg. exelon recently urging them to replace nine new directors on the board of nrg. this morning we're joined exclusively by nrg ceo david crane. give us some insight ahead of what you've got the vote coming up. investor meeting today. >> a series of investor meet zblgs what are you going to be telling investors this morning? >> we'll be answering the questions they have which is about the offer and, you know, it's basically all about value. and what share of value nrg shareholders will get under the exelon offer. >> 0.545%. that's per exelon share for yours. not a value you consider worth even having a conversation about at this point?

>> in a sense we're actually having a conversation. we put out a letter last week. we acknowledged that 0.545%, whatever it is, is better than 0.485% which was their previous offer. it fails to compensate nrg shareholders for either our original value or for the value we've created since they launched their offer last october. >> they say, well, of course, that you would say something like that. they, of course, take issue with it. they say nrg taps numerous growth opportunities. a closer look reveals what they call minimal value. for example, your ownership of reliant and the benefit that you say is going to accrue from that both to your shareholders and conceivably if you were to get together with exelon. they say it appears -- why do you disagree with that? >> you have to look at what exelon's saying. they're saying our reliant acquisition is worth $270 million. one dollar a share.

we just announced last week our reliant acquisition is going to make $400 million in the last eight months of 2009. you have to ask yourself, is something that makes $400 million in eight months really worth only $270 million for the entire franchise? i think the answer to that question is pretty clear. it certainly is clear to nrg shareholders. >> they say, however, in the market, for example, these kinds of retail businesses are valued far lower than that. that ultimately there's a great deal of volatility. >> well, there is some volatility in the business. the great thing about the volatility is that it's a countercyclical business. right now while we're mired in the depths of this great recession, they're doing the best they can possibly do. for nrg's business they've allowed us to increase in 2009 from $2.2 billion to $2.5 billion which is a pretty good

result in this environment. >> how is it they're valued at $3 billion? i don't understand. what am i missing there? >> i think they're $3 billion value is their synergy value. they're saying $3 billion of synergies in the transaction. it's a tough number to come up with. >> i was confusing overall with enterprise value. let's get back to some of their criticism or at least what they contend. i don't have time to go through all of these. in terms of the environmental capital expenses you are going to face, the industry is going to face as a result conceivably with new restrictions on carbon and the like, exelon maintains it will result in significant costs for your coal fire generation assets. a good deal more than they would face and you're underestimating those costs.

>> well, first we have the split between carbon and the tradition traditional pollutants. it's not an insignificant number. it's spread over the next ten years. they're failing to point out for the biggest spend in the plant in louisiana, we actually get compensated for that from the people who buy the power from that plant. actually adding that back in controls and sort of traditional utilities will increase. that's not a fair comparison. on carbon, u.s. senator grassley on earlier, the carbon legislation has to pass. i think that this -- this group of eight, the decision in china and india sort of saying no about a global approach puts the whole thing and waxman-markey into question. which is unfortunate. because we think waxman-markey or something like it should pass congress. >> you do? >> we do.

>> we're going to hear from top advisory firms which have an influence in a battle like yours. i'm hearing -- back your directors, not exelons. nonetheless, what if they do get, say, four of the nine that they're seeking? would you feel as though your shareholders have said you've got to -- >> again, i think we're having a dialogue with them now. it's just happening in public through letters. >> you're not getting on the phone and talking with their ceo and negotiating. >> we're negotiating in letters. but i would say of the three potential outcomes, if they get nine that's paralysis for the energy board. if they get four it's confusion. the nrg shareholders have a win/win outcome in their grasp, which is to vote for all of our directors. then either exelon will increase their offer by a significant amount or they'll go away. that'll unleash the power of nrg. >> you don't believe that power's been unleashed as of yet? >> i think we've done a pretty good job over the last eight months with the things we've

de done, the reliant transaction. i think we've done a pretty good job. to be able to focus 100% on the business at hand, i think you would see what nrg can do. >> david, i didn't ask you about a lot of things. unfortunately we're out of time. why don't you come back. we can talk about nuke lcleanuc. a lot of important things for your industry as opposed to this actual fight. >> i'd love to come back any time you'll have me. >> david crane, ceo of nrg. it appears a settlement could be in the -- a dispute between the u.s. government and ubs. a judge has granted a motion asked for by both sides for a delay in the court case giving the two sides more time to continue settlement talks. the government has been trying to get ubs to reveal the names of thousands of account holders who they think are dodging taxes. ubs and the swiss government are

fighting the effort. the trial was scheduled to start today in miami. up next, stock futures are higher. just off the highs of the session right now. oil right now is -- well, oil is now below $60. >> can you believe that? >> we're going to get the word on the street. the mood from beyond the trading floor as well. >> mood from the dude. later, peru's benchmark. we're going to talk to peru's minister of the economy and finance and the ceo for i shares for latin share. that's first on cnbc. atirst i was afraid. i was ified.

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hi, folks. i'm joined here by art cash. he is, of course, the director for operation. i wanted to get the title right. what's on your mind today? a lot of earnings. meredith moving markets, meredith whitney on cnbc. she trhrew out a disturbing number, 13% unemployment. >> everybody's focusing on goldman and the financials. it's going to be interesting to see how long the shelf life is for this thing. they're going to open better, if they can sustain it on the charts, the cocktail napkins, the market looks quite vulnerable here. we're concerned that broken down out of a so-called head and shoulders formation. i would be a little wary. we've got housing down and other

things. >> what about geithner kind of keeping an eye on cit, the second smallest stock in the s&p 500 has been beaten up. but it's causing ripple effects, it seems. >> it's the lifeline to a lot of small companies. even though they are walking around saying it doesn't pose systemic risk, at a time when they're talking about taking t.a.r.p. money to help small businesses, it would be ironic to let cit go under since they do help small businesses. >> right. all right, art. thanks. always appreciate your insight. erin, back to you. >> thank you. final countdown to the opening bell is coming up right on the other side of this break. we will open higher. off session highs. again to emphasize, oil trading below $60 a barrel at $59.28. could soone toss me

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is the advice you've been getting helping or hurting? are the fees yo're paying really worth it? ameritrade's fees arefair . getting helping or hurting? their research is independent and unbias. their investment consultante and there when yoneed them. so why not talk to one announcer: caltoday to schedule a free instment check-up, or v a td ameritrade branch. welcome back, everyone. this is "squawk on the street." it is a monday morning, mid-summer. the sun is out. the world is feeling all right. and futures are indicating we're going to have a higher opening in a couple seconds coming our way. earnings, earnings, earnings. >> next week's even busier. this is a warm-up week. it's busy. it's big.

>> all these banks coming out so. the american public has never cared so much before about the banks' earnings. the ceo for i shares latin america. matt talks about how peruvian shares surged. 80% for the year. we'll talk about that trade in a moment with them. at the nasdaq, independent broker dealer bay crest partners. >> let's get it done. our market report. covering the markets all over this country of ours. mary thompson at the big board. >> as expected a higher open for the dow jones industrial. up 21 points in early trade as investors await a big week not only on the earnings front but also on the economic front. keep in mind, we have data. the producer price index, consumer price index, retail sales, industrial production and housing starts all throughout the week. starting with ppi and retail sales tomorrow. financials this morning higher ahead of a big week of earnings.

goldman sachs tomorrow, jp morgan, citi and bank of america later in the week. meredith whitney expects investment banks to report earnings well ahead of street estimates. whitney also on cnbc earlier today saying bank of america is the cheapest among the big banks. that has given a lift or gave a laft to its start in the free market. it was up just about 4% or so. keeping with the financial scene, we also are watching shares ubs trying to reach a settlement of ubs turning over names of u.s. citizens that have secret swiss bank accounts with that bank. the two of them delaying a trial that was supposed to start today. again working on the settlement right now. lastly we just want to add with philips electronics, the duj electronics company surprising the market with a second quarter profit ahead of the opening bell the stock was higher in the premarket. let's get a check on tech with rebecca jarvis. >> thank you so much were

marion. a number of big tech names on deck to report this week. the nasdaq composite opening to the positive side two-tenths of a percent higher. 1.6% higher. the important thing here, folks, they make the machine that makes computer chips. that will say a lot of things about demand for pcs, a lot of things about demand for chips in general. intel, meantime, chip maker on deck to report tomorrow. they're up 1% at the open. google, meantime, the battle with microsoft continuing in the operating systems. google shares up about 0.5%. they report thursday of this week. meantime, i told you the battle is heating up between microsoft and google. it's also heating up between microsoft search engine bing and yahoo! search engine. this morning analyst data showing at least on two days, two days bing beat out yahoo! as a search engine. yahoo! shares to the downside.

osi pharmaceuticals in focus today. 6.8% higher. their lung cancer drug phase three trial shows it helps extend lives after chemo. sharon epperson on the oil trade. >> we're looking at oil prices in london trading once again at a premium wti to nymex. some folks wondering what happened to oil prices in the last few minutes? it's not the dollar. we are looking, though, at a flood of fuel that is in this market. by that i mean particularly fuel weighing down the crowd market. the oil futures leading the way down. keep in mind, about 50 million barrels of floating storage of refined fuels around the country on oil tankers. add to that here in the u.s. we have fuel supplies at a 24-year high. lack of goods being shipped by

trucks or ship that use diesel, really impacting that part of the market. we also saw that huge selloff in crude futures last week. that continues this week. a lot of long liquidation. some new shorts coming into the market. interestingly enough, looks like some index funds were buying on that. back to you. we appreciate it. we've got our special guest here to talk about, well, latin america. last year it was the worst market in latin america. this year coming up to be the best. the mining heavy peruvian stock exchange. exchange traded funds launching today. the ceo for i shares latin america. he is with barclays global. and peru's minister of economy and finance. great to have both of you with us. let me start with you, daniel, since you're launching the exchange traded fund.

it's very mining heavy. if you get into this exchange trade fund it's safe to say you're betting on mining stock. >> you're betting on the fastest growing economy of latin america. peru has been sustainable over the past ten years. the fastest growing gdp and economy. it's been on average over the past seven years peaked 7%. >> one thing i remember from peru, you do see mining everywhere. you see it along the edge of the rivers, as you're flying over. it is a big part of the economy. what else does peru rely on outside mining? >> well, not only mining but construction, manufacturing. it's a very dynamic economy. as daniel said, it is the fastest growing economy in the

region. and right now in the middle of the crisis, peru is expected to grow. >> most of the focus of latin american investment right now is on -- brazil. do you find that to be a positive? you raise your hand and say we also have a mining story? we have a big materials story as well or does it work against you? >> that is exactly right. peru is -- in the past ten years. we didn't have an instrument to attract investment. so we are doing that right now. lifting the instrument to attract investment to peru. >> maybe you'll become some other acronym. >> i hope so. >> we are going to be busy president i shares coming out. >> i talked to presidethe presi.

there's been a hesitation on the part of the united states to sign a free trade agreement with colombia. is the united states providing what it needs to peru for you to move forward, or are you worried that colombia is -- if that can't get done, nothing else can? >> we believe in integration. we believe in globalization. that's why we have agreement with u.s., with canada, and we're signing free trade agreement with europe, with japan, with korea, with china. >> how much of an influence is china in peru? united states and china? who is bigger and where is china stronger? >> china is the second trade partner of peru right now. >> that's pretty amazing. >> it is -- and the united

states? >> peru is a distant second. >> latin american -- we have brazil, we have mexico, we have chili chile. we are exploring other markets. there's markets we haven't yet launched anything yet. we're looking into markets like colombia, argentina, other countries that can also be attractive because of the growth of latin america. >> thank you so much. >> thank you. >> thank you, guys. bull/bear today coming up after the break. really focusing in on earnings here. may be a risky time to get in, risk can mean great reward. someone thinks the name bottom is in jeopardy.

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all right. don't flip out. i'm just saying, dow is up 45. we're calling it the slow bleed. looking for the cataclysmic -- this tension in the marketplace. the reality is that really for the past four weeks, it's the middle of june, i think it was june 12th. it was a monday. if look on a weekly basis we have been dribbling away and away and away. if you look at the s&p 500 during that period of time, they've given back about 7%. 880 we seem to be holing at e h

technical basis. pick your technician. the truth of the matter is this four-week decline has almost approached the double digit level. if you look at certain indexes within it, it definitely has. particularly energy and the price of oil has been really volatile during that period of time. so just pay close attention. keep it tuned in here. >> so let's talk about where we go from here. earnings season obviously could be a big part of determining what is next. how do you position yourself? on the bullish side or bearish side? do you go for a cataclysmic collapse or slow bleed. good to have both of you with us. >> good to be here. >> let's start -- i know you're next to me, craig. i have to start with dan. the reason being i know where mark haines is right now. if he is listening, you must make the case of why the bottom is going the way of the do do.

>> i have a gift for mark i was going to provide him today. he's not here. i'm going to save it for next time. when i was with you on april 14th we were talking about the economic recovery. he loved my tie. he and i were headed for washington to talk to the defense department after the snipers took out the pirates. remember? >> uh-huh. >> in certain asian cultures when you're complimented on your tie, you give that tie to the complimenter. >> oh, so mark is getting the tie. he'll be very -- now you're going to make nice to him after you say is bottom is going the way of the do-do. >> i think his bottom is about to get -- frankly. i think that because recently i was on a tour in the carolina mountains with some clients at their summer home. and i always ask them questions. how do you feel about certain things? what's going on in your tummy? what's going on in your heart? they're afraid. they're really scared. i had one client tell me that what really scares her is that she is economically and fiscally conservative, but socially she's

liberal. and she's finding that with all the change that's being proposed and all the massive spending that's being proposed in washington, it's scaring her. and she's becoming more moderate liberal socially as opposed to liberal. and becoming more conservative economically and fiscally. so we've got to slow this thing down, what's going on in washington. >> good luck. >> no. i think obama is going to start -- president obama, rather, is going to start listening. colin powell is talking about slowing this change down. this morning on "squawk" congressman paul con jor ski was on. he was saying the same thing. before we operate on the patient and do massive corrective surgery, reconstructive surgery, we need to look at the x-rays and mris and test results and see what the problem is. >> let's get craig in before he blows a gasket. he's a bull. >> yes, i am. >> we'll lay it out there. meredith whitney is talking 13%, 14% unemployment. she's positive on financials. financials are carrying the day.

>> it all starts with value. we measure the market right now to be well over 20% below fair value. not quite as cheap as in march but still good value. the corporate bond rally is the best bond rally i've seen in decades. and that's very supportive of higher stock prices. and many times we've seen the bond market just pull stocks along with it. i would expect it this time. we think this is just a pause, first leg to recovery. next leg will start soon. >> where does that come from? because to your point, that was exactly what i heard at the sun valley conference. consumers really don't know where the economy is going. nobody can answer the question of what will be the catalyst for growth other than last year's comparisons were so horrible? >> we do not need a robust recovery. we just need the world to not be as terrible as was believed a few months ago. and the market did overreact. the world's not as bad -- people were talking depression back then. we're obviously not having one of those.

stocks are just trying to get back to fair value from a time period when people thought that it was just a horrible setting. >> so you think stocks can go up without any catalyst from where they are now? >> yes. >> from 8175? >> yes. we see them going higher. >> how low do you see them going? you're saying below the march 9th bottom? >> i see them going below last fall's lows. as low as 25% to 50% below that. i'm looking at bond issues a little bit differently than craig is. that's what makes this stuff engaging and fun. >> you said 25% and 50% below. that is a great depression scenario. >> it's huge. >> where do you see unemployment? >> i see unemployment getting to 12%, 13%. >> you think 12%, 13% puts the market down 50%? >> not necessarily 50%. but 25% to 50%. >> that's a statistical error. the real number and implied number is going to probably be closer to 20%. >> we're already at 16.5% on that basis in the federal numbers? >> that's right. another thing that's thrown into

that that we don't always equate in that employment is with the losses that occurred in the markets, there's a lot of people that were retired or looking at retiring that aren't going to now. and so there's more people that want to be employed than were before. >> i want a best trade from each of you. let's start with you. >> well, coach. apparel. purses. >> i thought you were calling her coach. >> aspirational buys. >> the third best this year has been consumer discretionary. >> okay. >> dan, you? >> i don't have one. i don't have any buys right now. >> in your case it better be a sell. >> exactly. >> that would be only consistent. >> i think i would sell anything that is -- again, this is a different view. i think anything that is discretionary based on discretionary spending i would sell. i think that's about to adjust and ratchet down even further.

on main street, i'm a main street guy. i bring main street to wall street. and i'm seeing main street people are really, really concerned. they're worried about going back into a market that caused a lot of losses when -- >> we all say that on some level. craig, dan, thank you very much. we'll have you both back. because if you are going to take such an aggressive, you're not just talking about a slight violation, you're talking about a massive violation on haines' bottom. david has much more on the crisis at cit. actually a really crucial story. later, we have a group of lawmakers pressing president obama to investigate the fed. find out why and what it could mean for regulation and reform. "squawk on the street." keep it here. (announcer) its the most advanced automile we hav. a car that can help awen its driver if hbegins to doze... keep him in his lane he starts to wander...

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welcome back.

cit, talk about tpain. shareholders, bondholders sharing pain. liquidity problem. not a solvency problem, perhaps. certainly one can lead to the other and generally can very quickly. cit, of course, they fund receivables. they provide financialing to sm and mid-size businesses around the country. the problem is the value of the collateral they have, assets they're funding for other people, for example, is going down. and they have yet to be able to access the private market in a significant way to fund those assets. so they can lend against them. that's the problem. simple as that. at this point, the key is the fdic has not come to their aid. is not willing to say, we will back any debt issuance that you do. they're still talking to the fdic. we got a press release late last night from cit saying we're still applying to this fdic

program. they only became a part recently and did so in part to access some of these fdic programs. we may be seeing the government say, you know what? we're not that worried about you if you fail. that being said, failure may be some time off. here's what we heard from the treasury secretary speaking in london to reporters very shortly ago. the u.s. government has the authority and the ability to address the crisis at cit group. that's not really saying too much, is it, at this point? so cit finds itself in a position where it's got to figure out a way to gain funding. it has maturities of significance coming up in april, essentially up next year. at which point if it can't find private funding, it's going to run out of money. and when you look at april now, the question is, will people start to pull? will people start to pull

accounts or depositors that have a deposit base begin to do so? will businesses start to cut off their business with cit? those are the questions. you see the stock press. should mention the bonds while trading off are certainly not trading at levels one would see in a company that was in dire, dire straits or about to file bankruptcy. but cit was reported over the weekend to have hired a firm to advise it. they do a lot of m & a. they have a bankruptcy practice. they're trying to calm nerves, continue to talk, figure things out as we -- i believe we're seeing -- yeah. judge sotomayor sitting down about to take her seat for potential -- well, her confirmation hearing. let me send it now over to erin. >> that's right. and we are, as you can see, looking at sonia sotomayor. confirmation hearings are beginning in just about four minutes, the top of the hour. everyone will be watching those very closely.

you can watch that hearing live on our website, cnbc.com. everyone will be very curious to see exactly what the details are that we will learn, particularly on issues such as affirmative action. >> oh, yeah. the dow is up 11. is s&p is up one. earnings season kicks into top gear this week. the economic data pocket is plenty full as well. to matt's point, we were up 40, still up 13. where will you fdt the stability and resources to keep you ahead of this rapidly evolving wor? the are tough questions. that's why brought together two of thst powerful nam in the industry. introducing morgan stanley smh barney. here to rethink wealthanagement. here to answer...yo que. morgan stanley smith barney. a new wealth management fir with over 130 yearsof e.

a judge grants a motion to delay the tax trial involves ubs and the u.s. government. they're trying to solve a dispute involving u.s. account holders that may be trying to dodge taxes. goldman sachs higher after being upgraded by analyst meredith whitney. treasure secretary tim giter s geithner says there's a good chance the u.s. economy will -- i'm courtney reagan. live from the financial capital of the world. this is the heart of lower

manhattan. the life blood of the global financial market. this is "squawk on the street." i'm erin burnett. s&p did just for the second time go into negative territory. cit a big story. down 23.5%. a leasing company is lower. that stock is only at $1.17. the other big headline at this moment is on capitol hill. you are looking at the hearings of the senate judiciary committee. now, these are the confirmation hearings for potential supreme court justice sonia sotomayor. she is the nominee to replace justice souter. you can watch the hearings live on our website, cnbc.com. the main headline, perhaps this. justice souter often sided with perhaps the more liberal side. even her approval would not change the balance in the court. she is expected to receive confirmation. >> what a great pleasure to be

on the floor with mary. the s&p flirting with a negative day. what were we, down four or five days? looking at the financials, which is funny. that turned things this morning with meredith whitney. now it seems to be a reckoning. >> people coming into it were saying, just keep in mind what we're seeing before the open today may not play out through the rest of the day. there's not a lot of real news to trade on today. we do have the upgrade for goldman sachs. financials are higher ahead of the earnings due out from bank of america, city as well as jp morgan. they're helping to give a little boost to the dow jones. we're starting to see weakness in the energy sector. >> i'm seeing $58.65 in oil. >> exactly. a little strength in the dollar index. weaker against the yen but looking higher against the dollar. that's playing up not only with some of the energies but some of the commodity sticks as well. techs are also a little bit weak. again, here's another key earning couple of reports coming

out later this week with intel and google. ahead of this they are pulling back. unable to hold on to earlier gains. i also want to point out transports are down about 77 points, off 1.5% last week. even the weaker energy prices not help ougt. truckers week, airlines supposed to have a weak second quarter as well as the railroad company out after the bell today. a number of factors at play here. without any strong news to trade on ahead of a lot of economics reports, earnings reports, et cetera, markets not able to hold on. >> the big economic data we're going to get this week is going to be inflation which will probably prove, once again, when you look at the core, it was exactly a year when oil hit $147 or whatever it was. let's get up to rebecca now. we talked about tech. tech is in a tug of war here today as i understand it? >> absolutely, matt.

a lot of these big tech names have turned around since starting higher off the open. intel we know one of the biggest names going to be reporting on tuesday. in fact, in the last couple of minutes here, tuesday as in tomorrow, in the past couple of minutes here it did turn negative. these minute to minute moves not as important as sort of the overall picture here which is that tech, as it haseen throughout the last couple of weeks, continues to sort of be an outlier. continues to buck the trend. dell got a big upgrade last week from goldman sachs. that certainly helped the investors last week. today we're seeing a major pullback. 3.9% to the downside. cisco, microsoft a couple big names also here that have turned around. that energy trade, the commodities name, dry ships has been in the red all day long. 5.5% to the downside. the cost right now, matt, of shipping dry bulk is going down. it continues to drop. that certainly has an impact on these guys.

back over to you. >> there you go. transports, oil. people are saying now that the price of oil is a better proxy for the stock market direction than maybe economics. erin, there you have it. >> thank you very much, matt nesto. just to highlight here, the dow has now turned into negative territory along with the nasdaq and s&p. dow down six. the reason for that primarily now, energy shares. oil is the big headline with a big drop. it's accelerating at this moment. straight to the new york mercantile exchange and sharon epperson. what's driving it lower, sharon? >> a perfect segue. we are looking at a continuation of a selloff from yesterday. just the inability of the bulls to hold up around that $60 range as we see oil prices now almost down $1.50 below $59 a barrel. you are absolutely right that oil has really played a big role in the decline in stocks over the last several weeks. as we've seen stocks go below that 880 level. in june it was commodities helping the stock market. so far the last three orou weeks it has been commodities

dragging stocks down. particularly oil as you look at oil prices in the slide we've seen since about june 12th or so. keep in mind, this level of $60 is very crucial for the bulls. the inability to be here around the $60 market really -- the next support level around $50. we'll see if we'll be able to hold that level this week. >> thank you very much. next we're going to head over to our brand-new earnings central nerve center for everything you need to know about earnings season. you can clearly see nerves are on edge around the earnings seasons. markets all in red across the board. >> house lawmakers calling for a federal investigation of the federal reserve. what could it mean for the regulatory environment? plus, gray marking. how about that? older americans are delaying retirement. companies face new challenges and find new opportunities. and i have a funny little joke

to telyou about that when we get back.

earnings are the big driver this week. up next, many of the banks front and center over the next few days. analyst meredith whitney on "squawk box" this morning gave her prognosis. >> unemployment continues to drive higher. and the banks are not prepared for double digit unemployment. so that's going to be a -- you know, an issue for them that

doesn't go away for the next, you know, year and a half. >> all right. so she thinks banks aren't prepared for that. she's talking about a 13% unemployment rate. what would that do to the overall economy and what indications should we be looking at? joining us now, director of large cap values at -- good to have you with us. >> good morning. >> a lot of people have focused in on the stress test only assumed 8.5% unemployment. >> right. >> but it appears that that 8.5% unemployment was not the number that drove the expected losses of the banks underneath the stress test. what i'm getting at is that unemployment number isn't the one to look at to see if the banks are ready. it might have been something else in the stress test. is it fair to say our banks are not ready for a sharper downturn? >> i think it's fair to say there's a lot of stress in the system and that banks have many cross currents working against them. i think the biggest factor right now is commercial real estate losses which we are just starting to -- starting to see

the tip of the iceberg there. that would be my biggest concern for the banks. >> and what about for the rest of the economy? i mean, 13% sounds high. but, again, we've been saying that the real unemployment in this country is really more like 16.5% already. because a lot of people are either underemployed or in part-time jobs when they want full-time jobs. >> yeah. i think if you ask yourself where will the economy be 12 to 18 months down the road, you can get a good idea of where you should be investing today. and i think, you know, if you look at unemployment claims, and you look at the second derivative, the rate of change in unemployment claims, you've got some very good news there. layoff announcements have started to decline. and the rate of change in unemployment claims is moving in your favor. that tends to be a pretty powerful signal for gdp. so i don't think now is the time to get overly pessimistic about the u.s. economy. >> this is where i jump in, m.j.

matt nesto here. how can you not be overly pessimistic about this economy when we haven't had a positive indicator really yet other than the change in the rate of change? >> i'm not sure i would agree with you there. look at the global pmi numbers. >> we're talking u.s. economy. i don't want to look at global pmi yet. >> i think you should. because the u.s. economy is so much driven by exports and sales overseas that that tends to lead to a false pessimism here. unless you're able to look at the global picture. vehicle production is up. vehicle sales are up. >> in china. >> china has shown some signs, you got very positive change in global short rates and in oil prices. companies have done a tremendously quick job of putting through those layoffs. that's why we see the

unemployment numbers. reducing inventories and cutting cap backs. >> i'm seeing below you we've nominated a new surgeon general. it seems like the president needs to nominate maybe a new economic general. there's even some talk about whether the stimulus was originally intended to be short term or long term and we shouldn't be waiting 18 months and two years for things to happen that were supposedly shovel-ready projects. >> right. the tremendous amount of fiscal spending that has been approved is a longer-term concern. it's certainly a concern for interest rates and inflation down the road. there's not a lot of evidence today that that spending has begun to impact gdp. but it's very, very soon to expect that type of thing to happen. shovel-ready just is -- is not a phrase that's, i think, useful in terms of applying to fiscal spending. >> lord knows there's plenty of

shovels down there going on. mary jane, thank you. appreciate it very much. earnings season. we've been talking about this consistently. here's the headline. companies in the s&p 500 that brought us the measure of the market expect a 17% drop in profits compared to one year ago. joe and carl manning earnings central. >> manning. >> you never know who's going to show up on this desk, right? >> why is it that when joe and becky were there they were sitting farther apart than carl and joe? >> why do you think, erin? what would you do if they said you were going to have to sit with kernen. >> he clearly wants to sit close to you. >> i like that you said manning. we're manning up here. we are. we're manning the earnings desk. we were working on an intro, it's raining men, music, maybe. if it looks good for stocks, what are we going to do? >> ready, two snaps. >> loved it. fabulous report. we are willing to do this, right? >> you want to talk some numbers? >> do we have to? >> we got a lot going on.

financials as erin said are probably going to steal the show, at least the earnings show. goldman is going to kick everything off before the open tomorrow. and i know you guys have been all over it, erin and matt. but meredith whitney, man, did she make some news this morning on "squawk." upgrading the stock from a neutral to a buy. >> it's actually a bearish call. but a bullish call on the stock. >> on the stock? >> because, you know, just as you were talking about the, the ias in california. most of the state under water. where you think goldman would be a an equity trade, it's a top underwriter of munis. playing heavily in the mortgage-backed market. in the first quarter they played heavily in the agency market. >> analyst consensus for goldman profit of more than $2 million. driven largely by the trading business. stai shares of the stock up more than

73% this year. she called it the mother of all mortgage quarters. as these loans are modified, lower loss provisions, higher earns over the near term below the line, she kept talking about. below the line. core might not be that great. even the business model of these companies in the next few years may not be that great. but this quarter should be good. she talked about a 15% bounce in a couple of the names. >> handily. used the word "handily." >> the futures literally turned around. if you read the wires if you try to figure what happened in the action in the market today they're all mentioning meredith whitney. >> she's talking about growth tangible book value for just about every company she covers other than citi. >> other financial names that did play into this include jp morgan, seen earning four cents a share. jp morgan paid back the t.a.r.p. there's expenses that go into paying back the t.a.r.p. so the operating earnings, even though we're looking for four cents, that's a 92% drop year over year there's items in

there. it's not directly comparable. underlying earnings might be stronger than what that four cents looks like. you don't want to look for earnings from citigroup. you look for results as we have quarter after quarter. the financial giant expected to post a loss of 31 cents a share. and then rounding out the big four, bank of america, the street expects bac to earn 25 cents a share. it's not just financials this week. >> beyond financials, other dow components on the docket, ibm, j & j tomorrow, friday general electric. if you wanted to hear from just one company this week, what would it be? who would it be? >> if i wanted to use one as a prophet? >> if you could just only have access to one set of numbers. >> i'd want it to be a financial. >> you would? >> yes. and i think it wouldn't be goldman. and i don't even think it would be jp morgan. i think it would be bank of america. >> bank of america? >> because they're everywhere and so consumer based.

and they've got merrill and countrywide. and it's the biggest bank in the country. >> did meredith make you feel better about this near term? >> what are you doing? >> haven't you seen that most places -- >> do you want to just -- >> no, i'm not going to do that. no. then i'd look like you were a ventriloquist. i already feel like a dummy. >> he's inching in. >> she doesn't need this. >> whatever that move is. >> if you look at networks -- >> oh, goodness. okay. thanks, guys. >> later it'll get busier this week and we'll be all business, i promise you. the formality will end, all business. up next, a group of lawmakers calling for a -- is the agency's oversight power going to get any bigger?

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dow back in positive territory. just barely. this is the fight that's going on. >> keep talking. >> you got the nasdaq and the s&p both solidly lower. crude is continuing its drop right within that range. it was sort of down about 30 cents, 40 cents. now we're down more than a dollar and holing there. we're at $58.60 down $1.30 for crude. a lot to watch in washington this week. certainly the surgeon general announcement now, the latest nominee. potential supreme court justice sotomayor in front of the senate judiciary committee. that's just the tip of the iceberg because i believe we even have hank paulson coming to washington later this week. so let's find out what we need to focus on. joining us to do that, "the wall

street journal" and john harwood of the "new york times" and cnbc. >> the return of hurricane hank, erin. >> here is my main question on that. when ben bernanke came in for his testimony about who knew what when and did what when on bank of america/merrill lynch, they really kept the testimony to that topic. if i had hank paulson in front of me this week, there's a whole lot more things i'd like to ask him about. are they going to stick just to bank of america, merrill lynch, john? >> you always get lawmakers straying from the subject. but i think there's a lot of fury up on the hill over that particular issue. we've really seen that resonate. there's also -- it's very unclear, even after two hearings, who said what when. so i think he's going to face a lot of grilling on that issue. >> john harwood, here's the problem. that is not the most important thing. don't people want to find out a lot of other things from hank paulson in terms of who designed

the t.a.r.p. and what it was intended to do and where these warrants are? there's so many other questions. >> sure, there are. if you're a democrat on capitol hill, you also realize that you've got a very full plate trying to fulfill the legislative agenda of your new president. so it's no accident that when you saw that letter come out last week of people wanting an investigation of the fed chairman and his actions on bank of america, it was mostly republicans on there. so i think democrats, certainly they want to talk to hank paulson, remember, they've got a treasury secretary now to work very closely with hank paulson on the design of the t.a.r.p. and resolution of the financial crisis as they played it out last fall. i'm not sure they're too interested in excavating for too very long on that subject. >> you know, but, john, you make an interesting point with this letter that was sent to the president last week. this b of a/merrill deal, even if it isn't the most important situation that the nation faces, has become a part of the

political football, part of the political game. right now that's being played over the fed. these lawmakers said the fed shouldn't get additional powers in the financial regulatory reform until everybody gets to the bottom of the b of a/merrill deal. it's very much a part of the mix. there are a lot of questions hanging over the fed right now. how its powers and responsibilities are going to be altered by the regulatory reform and other aspects of review of the financial crisis. >> hey, jon, it's matt nesto. we come in for a headline surprise with the plain vanilli headline cpi number wednesday because of the oil price down literally in half of where it was a year ago. the core number is going to be the battleground. what are you looking for in terms of core inflation? is inflation still a worry? >> the core number really is the important one. the headline number is going to be up a little bit because gasoline prices checked out. but the worry that i'm hearing when i talk to people, you know, at the fed and also in the

markets is that there's still a lot of slack in the economy. there's all these worries that the fed has pumped so much money into the system that it's going to create inflation. we know that argument. when you look at the job numbers, the really weak job numbers that are coming out, it tells you that there's a lot of drag on the economy. and it could pull inflation down. the surprise could be a really low core number which leads to bond prices rallying later in the week. >> all these john h.s. john harwood, all this talk about the pace of the stimulus spending, it's sort of like, well, we always said it was 18 months and two years. there are many out there that are saying, not really. we heard a lot of shovel-ready talk when we were being sold this $800 billion plan. >> shovel-ready has always been a concept. you're talking about projects more shove ready than other

ones. the administration has a problem, matt. unemployment continues to rise. they always knew it was going to keep rising even as the economy recovered. the problem is it's now gotten to such a high level already that it's creating political difficulty for the administration and you've got pressure on the left for additional stimulus and pressure from the right to say, wait a minute. we just spent $800 billion and what do we get for it? this is the most difficult time of this presidency so far for barack obama. i think his white house wants to defer talk of a second stimulus as long as possible. and hope we do get some positven signs of growth in the third quarter and in the fourth quarter to let people maybe tolerate that unemployment which is going to continue to rise over 10% a little bit longer. >> hey, jon, this just strikes me as such a political fumble on the obama administration's part. when they were selling the stimulus, they had to talk about its impact on jobs. but it seems like they just set themselves up for failure. as you said, they knew unemployment was going to rise. they didn't know it was going to rise as much as it did.

but it just kind of seemed obvious at times several months ago that they were setting themselves up to look bad six months down the road when the economy was still weak. >> well, you know, they had a selling problem. they were trying to sell the biggest stimulus in history. they had to make an argument it's going to have some success, which is why they talked about unemployment not going over 8% if -- and staying lower than that if they enacted the stimulus. the problem now with it 9.5%, people say, oh, you were wrong. they have an argument. which is that we hadn't seen what the fourth quarter was going to be like when we made those projections. that's true. but it doesn't alleviate the political difficulty. >> all right. jon and john, thanks to both as always. >> thank you. coming up, the mood of the markets as we check on the internal. dow is back up. i know it's -- you say why are you celebrating that? it's not our job to celebrate. nonetheless, there has been a battle going on between up and down. right now greens are winning. >> kind of a draw. >> yeah. we have the new challenges

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and let's just show you where the major market averages stand at this moment. the dow now up 24. high of the session was a gain of just about 40 points. nasdaq still is down just slightly about a quarter of one percent. and the s&p 500 is trading higher. show you the internals. give you a sense. this is a very interesting chart. it is a dead heat right now between advancers and decliners. we were saying that's how it felt looking at the market. often it can be incredibly skewed one way or the other when the overall market isn't moving very much. not so today. the same trendline on the nasdaq. as you can see there in that case, the nasdaq is down a little bit more. you are seeing decliners outpace advantagers by a ratio of about 1.6/1. energy is the big story, big pressure on the market. we're at $58.84. >> i'm joined on the floor by allen valdez, the vice president of hillyard lions.

just outline the markets here. it's a standstill, tug of war between financials and energy today. step back. >> it's energy running the day right now. that's putting the ka bosh on the market. can't have much of rally of s&ss without energy participating. >> we hang a lot on meredith whitney. 13%? >> stock traders, that's the number that really counts. we can talk about cpi, ppi, everything else. it's all about unemployment. that's the number we watch every day. we really key on that number every week to see where it's going. that's a terrible number. >> we're getting warnings from the obama administration.

no one's talking 12%, 13%. >> it's hard to even think that. we are concerned about the bull market going forward. and where are these jobs going to come from? that's our biggest concern. what kind of -- the worst is over, probably. still, the the jobless recovery could be a long time. >> companies that are slow to rehire, rather pay over time, check and see if the economy is clear. appears to be why skrat gists and economists are focusing on the rate of change of rate of change. >> tomorrow. a whole slew of earnings this week and all kinds of numbers. tomorrow we get retail sales. that's a big number which a lot of people haven't spoken about this week because of all the financials and everything. we'll look at that number. at the bottom of everything it's about job. if people aren't working retail sales aren't going up. that's going to effect earnings eventually.

it's all about jobs. >> you brought up retail. might as well talk about it. a sector struggling. discretionary spending. but a sector that's -- >> last time it was energy. the high price of gasoline brought retail sales up the last couple of months. as you can see, energy's coming down. we'll have to wait and see. that is definitely a factor we worry about. >> falling gas is like a tax cut. >> yeah, it is. >> that stimulates people? there's a lot of people that would argue that point. i would agree with it. >> at a pump it's great. if you look at the big picture it is worrisome. it really is. >> the only other picture is going to be the big earnings picture story. kicking off really big this week and then really going to jam next week. 35% is the handle that the s&p is supposed to be down. >> that's what they're saying. 32 companies reporting this week. big week. ge reports. google reports and all the financials. we're going to be watching this week. retail sales coming tomorrow. also jobs later in the week. >> clearly mary didn't get an

elevator. our loss. thank you, alan. we appreciate it very much. upstairs to ms. burnett. >> back up 40 points to the green. due to the economy more older americans are putting off retirement. for many companies that can be either a boom or a bust. insulating against a brain drain which we have heard so much about in certain industrial companies in particular. but in other industries, clogging the promotional pipeline for younger workers. green is reporter with the "wall street journal." she wrote a story on this very issue. good to have you with us, kelly. this is something we've all heard about at least anecdotely. older workers are going to wk longer and that could cause some issues. you actually took the t to go out and get the number what do they say? >> it's true given the backdrop you guys were just talki about, people are sticking to their jobs. they are not reting in the numbers that were expected. a recent survey found that or 40% of people who are in tir 50s or older are not planning to retire when they orinally planned.

ha of those expect to work at least three years longer than they originally thought they would. >> now, what's ironic in a sense about what you're saying is that a few years ago we would have celebrated this sort of a headline. because we have such a problem with medicare and social security and paying for retirement and we wanted people to work longer. so takinga step back from the economic isis, is th something thould be a positive? >> well, yea even without the backdrop of all of us paying for everne's retirement, an additional problem in some of the industries that have really long-te technogy, paicularly in utilities, water diricts, and the really unsexy big machines that are still around that werestalled 20, years ago. the one guy who was ther when it was installed ishe guy who might be walking out the door now. so, acally, one thing that happens is that companies have some addition time they almost got cut abreak, you know, to be able to do betr knowledge transfer. and to make a poin ofakg

sure that they capture that intellectual knowledge before those people maybe do walk out the door in three years. >> so when you -- you have obviously have noticed the trend. what will, do you think, it do to unemployment? particularly for younger workers? are we already seeing a direct impact on thatunployment rate >> well, it's interesting. when you look at the rate, this recession has hit ynger workers worse an it s hit older worker so far. but th theadditionroblem isitthealented younger workers, they're looking around and seeing their older counterparts still there. and are realizing tha perhaps the potential for a promotion, you kn, maybe even a raise, which you' certainly not going to get right nowithout a omion, right? bonuses are really in short supply. those people may be looking arou for e firstpportunity to jum at all possible. d so companies, y know, a this time when ty're also trying to figureut how toeal

with falling profits a trying to figureut how to keep those younger workers happy so that they still have them around when they need them. >> kelly greene, thank you very much. >> thanks. we've all talked about this, but she went out and got who's working and where and how much longer. >> the joke was about the retirement was, oh, i solved my retirement problem. i'm going to work a little longer, and i'm going to die a little sooner. >> oh. what a morbid. >> eureka. david faber with pick a pay loans. >> meredith whitney. you heard her this morning with her call on goldman and bank of america. is she right? what could it mea for the rest of the financ. our task for wh its take. the moe companies in t world

know that conntivity is about reachingurther, faster than anyone. together, we're helping to d nyse euronext. powerg the exchanging world.

welcome back to "squawk on the street." i'm david faber. never ending attempts to keep you on top of all of those mortgages that were made that are going bad. take a look at pick a pays or what we call option arms. i've reported on this at least a year, year and a half now. interesting. you have to look at your data sources to be sure. but nonetheless, the latest news out from another one of these firms attracts these things. saying option arms a much smaller asset size than was sub prime or i guess these fit under all things. option arms generating more delinquencies and foreclosures than sub prime. we talked many times about having improved the sub crime catastrophe already. that's all declining. defaults and everything else. typically you're talking about a 2 and 28 loan. we sets have already occurred.

take a look at delinquent option arms for april. 36.9% of people holding these mortgages are not paying them or at least missed a payment. option arms foreclosure, 19% compared to sub prime. unbelievable, isn't it? it is a more toxic, forgive me that word, used too often, perhaps, a more toxic product it would seem at this point than the overall sub prime loan. of course, i would consider it in many ways to be just that. originally a mortgage for people who had lumpy incomes. as we well know, broadened out significantly to include pretty much anybody who wanted to keep their payment low. and that then ultimately pay an interest rate that wasn't paying the actual rate on the mortgage, adding that to the principal balance. you get a recap. even lowered interest rates here have not been enough for people when they reset. home values going down.

mortgage payments that are going up. that is not a particularly good concoction for homeowners. we'll keep an eye on that. wells fargo already took a lot of big hits for the huge portfolio that wachovia had on this product. golden west. but you're also talking broadly jp morgan, bank of america. this product made its way around in many areas. we'll keep an eye. jp morgan, its ownership of washington mutual. then it could also mean more grievance, more problems for the fdic, which is going to be dealing with any number of banks that are dealing with these increased defaults on pay option arms. let me send it back to you, erin. >> thank you, david. we'll get a quick check on what's making news outside t busine world. nica novotnyjoins us. good morning. >> hi there, erin. all eyes on capitol hill today. the confirmation hearing now

under way on judge sonia sotomayor. going to call her justice. not yet. as the first hispanic justicen the supreme crt although she is expected toe confirm, republicans are promising t put up a ght. some democrats are calng for an investigation into a top secret cia program. a program congress knew nothing about for years. cia director leon panetta is telling members of congress that former vice president cheney ordered the agency to withhold that information. "the wall street journal" reports the program involved killing or capturing al qaeda operatives, but it never became fully operational. south korean media reporting north korean leader kim jong-il has a life threatening pancreatic cancer. a south korean tv station says the cancer was found when he had a stroke last august. however, there's been no confirmation of either illness. three men are being held in connection with the murders of a wealthy florida couple known for adopting children with developmental disabilities. the husband and wife were shot to death while eight oftheir 16 children slept. more arrests are expected.

erin, back to you. >> thank you very much, monica. pictures of kim jong-il always sort of grab the attention and the imagination. up next, meredith whitney with those couple of calls on financials on the squawk. our task force is actually going to analyze those calls, see what their view would be on the over/under trade. first it is my honor to say here's trish regan with what you can expect. >> your honor, huh? >> it is. on the call. happy monday, matt, erin. lots coming up for you only on the call at the top of the hour. first of all, most important earnings season, ok, that many of us can ever remember. we're going to talk about it. we're also going to talk about goldman sachs. we will have our earnings team for you. we'll talk about goldmans, just exactly what the numbers might look like, what it's going to mean for goldman, the financial sector and the markets as a whole. also coming up, connecticut ag richard blummen that will is going to be testifying on capitol hill about the viability of ongoing consumer protection

legislation. however, he's going to be on our show first to talk about why he is in favor of that. we have lots ahead, including the latest market news and reaction only on "the call" at the top of the hour.ka firsmatt and erin are back right after this break. it ma big splash with themoyees yeaaaahh! find out more at aflac!... ...forbusiness.com (laughte

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all right, folks, the "squawk on the street," talking about this rally, give or take, dow up 45 today. if you look at the s & p 500 and what's going on there, you can't not take notice of the financial strength somewhat being tempered by the energy index. it's pretty big, actually, folks, if you take a look at t let me look up something here, 2.8% for the financials versus a .7 decline for the s & p energy index. what is interesting is the financials are the only sector actually up or down now more than 1%. boy, are they up, almost 3%. if you take a look at this financial rally and look at the sector ratings and what is going on, mind you, financials are the third largest weighed is sector in the s & p 500, that gain

today accounts for about two-thirds of the s & p 500s move, clearly a financial index. you dive into the s & p more, you look at some of the industry groups within it, really insurers doing better on a percentage basis than some of the diversified banks and banks. and then lastly, i was just checking some of my chart magic here, if you look at the performance here today, 2..9% gain is the best single-day move since almost a 3.5% pop we saw for the financial index back on june 4th. so the best day for financial stocks in six weeks, folks, this has not been a good six weeks for the marketplace. if you look at the financial index, i show, what, 76 out of 80 are trading higher. here today, the big three percentage gainers, aig up, hig, hartford insurance and fifth third up 5% it is financials, they are a heavyweight, they arer getting it done today. >> next, we will have continued reaction on the financial trade, as you talk about those gainers,

especially the golden upgrade out of meredith whitne our gues are on tap, up 44. we will beight back with that.

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this morning on "squawk box." >> this is a very tactical quarter, upgrade goldman last night this morning. >> first buy rating you have had on whitney advisers on a bank. >> it is a bearish call but a bullish on the stocks. >> on the stocks. >> because just as you were talking about in california, you have got most of the states underfunded, tsunami of debt issuance. where you think goldman would be a pure play equity trade, it is actually the number one underwriter of build america bonds, a top underwriter of munis, playing heavily in the mortgage-backed market, first quarter, played heavily in the agency market. you know, you never feel like you know how goldman makes money because they change every quarter, next couple of years, it will be debt market focus. >> here with his reaction of the goldman upgrade, security analyst at information kelton and david faber with his take. >> recently seated. >> i'm moving around. >> let start with you, david.

an upgrade to a buy on goldman sachs, what a do you say? >> well with, you know, goldman has a lot of great qualities a great, strong franchise, lesser competition these days, good risk premium back in the trading market, so that is good. you know, second quarter is going to be very strong, obviously, first quarter was as well. i think you will see all these companies do really well in the first-half numbers but we are looking for a pretty listless second half, the number of the factors, results in the first half will not be sustained. >> and are the banks prepared and do they have -- i mean, i have actually heard recently that some people say, very legitimate people, our banks are overcapitalized, undercapitalized, shocking, given what you hear in the public sphere, but what do you say, david? >> we have commercial banks team and we would not agree on the commercial banks side. we think the capitalization is important and have a lot of

stress on the loan books. on the investment banks idea, investment banks overcapitalized, goldman, morgan stanley do not need this level of capital. the credit boom is over. i know trading is still strong but that is more -- a lot of agency only. it is different than, you know, making a lot of grid loans, funding mortgage securities warehouse. so the capital demands and the investment banks are actually declining if we end an equity-centered type of cycle, history would tell us we would, you know, down the road, then equity capital -- capital in general is relatively less relevant. >> david, as you mentioned, the second quarter, incredible for capital markets and to a larger extent, even the equity side, what are your expectations? you mentioned it a bit, you don't expect that to continue in terms of that torrent of issuance that we saw? >> yeah, i mean, first of all, equity origination had the big bank capital rates, that was great for morgan stanley,