august as part of the broader recapitalization plan. enough for the lenders to survive? and what roll, if any, the federal government plays. they found $4 billion in capital, but a cit source telling cnbc the company's ceo thinks that's more than what the company needs. still, cit hopes the government will look to sell the assets to utah-based bank. government officials over the weekend and this morning, noncommittal. they didn't rule out assistance. they said all along they wanted to help them get over the finish line but weren't going to carry it all or most of the way. they were working furiously to save the company over the weekend as they had previous or other big banks. as a regulator told "the journal" this weekend plan a was to ask for government assistance, plan b was to ask again. i suppose folks being told no again, mark, probably the company will go out to the private sector where it's found

at least some financial hope. >> like my kids, say no, ask fwan. >> or ask the mom. which, by the way, is what they ended up doing, going to all three government agencies that could provide financial help. we've got all reporters standing by. cool breeze here at the big board. >> futures up on a combination of several things. optimism over the cit deal and goldman sachs, folks, earnings in general overall have been a little bit better than expected but it's still early in the season. you want an example of this optimism, look at goldman sachs out with a bullish call saying it's going to be 13% higher on year end than right now. we're on the verge breaking out new highs for the year. 944 was the old high. in june, 940. we could do that here today here. keep an eye on that. number of comments from candidates. you heard about cit, 70% higher

this morning. we had gold service firms reporting. halliburton beat expectations on the top line. they did well. moving light on the bottom line. cautious on natural gas prices they don't think it's likely we will see a significant boost. manufactures are still having a tough time. good news, still beating on the bottom line. eaten was down from last year but better than expected over you'll. ruby tuesday, you know how tough it's been for the restaurants, stock up 10% but they're getting that deal done. tradertalk.cnbc.com. scott wa scott wapner, how is it over at the nasdaq? >> the nasdaq is pushed to theest level since last october. it looks like we're going get out of the gates to a plus side. cisco is upgraded today to out perform pr neutral. apple, yahoo! intel is higher this morning. big week for technology

earnings. we have apple, yahoo! and microsoft later in the week. also watching charles schwab shares this morning as cuomo pl plans to sue the company. human genome, their shares are surging. couple 100% to the upside. experimental drug for lupus, late-stage study. i'll show you off the open where exactly that stock is trading. let's head downtown now to brian shactman. >> thank you, scottie. we snapped a four-week losing streak and continued to the upside what had decoupled late last week back in en vogue. oil on the rise here. well above of $64, heading towards $64.50. starting to steal my thunder but halliburton came out with earnings. supply/demand basically says prices aren't recovering any time soon.

take a look at gold as well. back above $950. hovering around the five-year highs. dollar hedging, the trade that's involved there. the rest of the metals, very strong. silver, the out performer of that crew. special welcome back to mr. santelli. we missed you, buddy. >> thanks. i also miss the marketplace. indeed in my absence we saw that equities set the stage by improving that improvement. one of the factors in pushing interest rates up and the general good feeling of the better equity price, of course, wasn't necessarily a dollar friendly, but there are certain currencies like the yen where the dollar did improve and the yen/dollar is more of an anxiety trade. the dollar improves when there's less anxiety in that relationship. supply this week is short end. next week though you get coupon supply, 2s, 5s, 7s, i believe 20-year tips. mr. bernanke tomorrow will be

important. the government will able to grow in strategy when you're trading the markets. mark haines, back to you. >> thank you, rick santelli. let's check the overseas markets. gain across the board in asia. japanese market is closed for a holiday. hong kong, hang seng and south korea kospi is both at the highest level since september '08. shanghai composite adding 2.4%. india up 3%. guy johnson in london. what's going on? >> we're higher as well, mark. six days higher now for the european equity market and the chance just keeps going. move 142 on the euro/dollar is being watched. let me show you the last three months of the euro stoxx 600. the push higher that we've got in the last sweek or so. that's the last six days. that's taking us up to and above the highs we had in the beginning of june. up 1.4%. today you guys have been talking

about volkswagen, an interesting story. i have to say i believe believe it when i see it when this deal gets done. speegle and all the other magazines and newspapers have been running story after story on this one. we still don't have closure. even today, talking about a tax bill associate wed with vw taker of porsche. the board meeting is critical has been pushed back. there's so many stories. volkswagen being pushed lower. the other story i want to make you aware of gathering momentum in the uk and london, is swine flu. this story is beginning to make a lot of people nervous in lond london. london is the epi center in europe. it's got by far the largest number of cases at the moment. ba was effected by that. clearly being effected by the oil story. ba is saying it is going to refuse passengers that do show symptoms of swine flu.

atlantic saying the same thing. keep an eye on this one. it could have a lot of traction here in europe. rebecca jarvis, back to you. >> thank you so much, guy. time to get the word on this street. we're joined by art cashin, director of floor operations. great too see you, art. this gs call this morning, 13% upside year end in the s&p 500. are you board on that call? >> not quite yet. certainly they've got the shorts a little panicky here. if we can break out the new highs you might get a whole new leg up in this. i haven't seen the changes in the economy that i think would justify a 15% move up. >> in terms of those changes in the economy, a lot of the guidance we're looking for out of earning season is going to be interesting going forward. you've been talking the markets have been talking about the fact that a lot of what we've seen so far is cost cutting. it's bottom line growth. it's not top line yet. >> no, even if you could take your cost down to zero you've got to stop somewhere.

so it's the revenue line that traders and others will be looking at. how badly have revenues dropped. it gives you the signs, sales are stabizing if not growing. we want to see changes. we want to see improvement in house prices. all those things are needed. >> another thing we want to see very near term is the bernanke testimony. and not only what he says but he does with that. that could potentially mean whether he stays or goes. >> absolutely. he's going to need an academy award performance on this and he's going to need it two days in a row. for the markets, they clearly want to know, will he explain a good dool deal about the exit strategy. he needs credibility there. you have a little bit of a premium in some of these yields because people are afraid that they bungle the exit strategy and inflation could explode. he needs some explaining to do. >> in terms of bungling it, what's the time frame that the markets would like to hear about? >> well, i think it's less the time frame.

>> okay. >> they're checking the pulse and checking the temperature. so they're not exactly sure when he's going to exit, but what they want to know is, a, does he have the signals to look for. when that happens, what steps is he going to take. then you might see yields come down a little bit. >> mark, back up to you. >> thank you. up next, halliburton, hasbro, johnson controls and more, in focus over at the earnings central nerve center. then, are we looking at limited size of the market or building a foundation of a rally. and the chairman and ceo of johnson control will join us on cnbc with his read of automakers, the economy and a whole lot more. welcome to the now network. population 49 million.

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welcome back. earnings central in full swing. lion's share of the dow and s&p 500 reporting this week. becky quick manning the command center for us. jill, what's on your radar this morning? >> man/womaning it. >> thanks, rebecca. let's kick it off with hasbro. rose 4.8%. strong toy sales. it's not going to be strong. auto part sales or anything like that.

earnless per share beating estimates by three cents. revenue is just short of wall street expectation. driven by strong performances from what? transformers and g.i. joe. megan fox is everywhere now. big star from "transformers",right? >> huge. >> huge star, along with shia la blue. >> can you hear me? >> definitely. there's an echo. that's what the stock is looking like. 23, 29 tells you nothing. >> anyway, also, they are under pressure this morning. look at the bid right here. let me borrow your microphone. i was told i didn't have to put them on so stop complaining over there. i thought these were supposed to be moved on. this is going to be off by $1.50. close to $1.50 on the bid/ask.

revenue was not enough to offset a 44% revenue decline in north america. come on back to camera here. this is all right. this is what joe -- see, we help each other. we do help each other. weak demand in lower prices weighing on second quarter earnings in halliburton. if you check out that stock it's going to be trading higher today because the company in with earnings better than expectations. oil and gas company reporting aó actual drop went you stop looking at gain of 48% for the second quarter earning because of weak demands, lower pricing for the second quarter on oil that was out there. halliburton beating the analyst forecast. the company says that its results were negatively impacted by the steep continued downturn in north america drilling activity. now you stepped away again. >> i look tall and old, that's what i got out of that. johnson control posting a profitable quarter.

earnings per share coming in at 26 cents. analysts were looking for 18. the auto parts and heating system maker reported revenue. that stock was $8 in march and it is now $23. >> i think it bottomed out. trying to figger out what happened in the middle of march to make it bottom out. >> it was $44 a couple years ago. but $8. coming up, as you heard when they went to break, rebecca and mark, at 9:40 a first on cnbc interview with steven roell who is the ceo of johnson controls. that's right here on "squawk on the street." or we call it sots for short. >> that's right. coming up next, earnings, cit, more, the buzz beyond the big board as we countdown to the opening bell. later, why cutting back on executive pay incentives could devastate shareholder equity. this is "squawk on the street" or sots, first in business worldwide.

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welcome back, everybody. take a look at the futures. big earnings week. last week was a big earnings week. markets were up almost 10% last week. we are seeing that momentum continuing, not in as bullish of a force but still higher across the board. as far as the s&p 500, the dow, and the nasdaq go. quarterly survey of forecasters out today finds the recession's grip on the u.s. economy appears to be easing but not ended.

national association for business economic report suggests profitability remayine weak in the second quarter. they say however that the worst is over for the economy. while the other 55% argue that the low point has not yet hit. >> all right. our next guest says despite rumors of heavy short coverings, he thinks real buyers are what drove the market higher last week on better than expected earnings. we could see more of the same this week, he said. joining us from minneapolis, bill dowel with rbc wealth management. phil, good morning. >> good morning, mark. >> you are fairly optimistic here. the target for the s&p this year is 1080 which is about, what, 15% more than where we are right now? >> yeah, about 14%, 15 better. >> you expected that in six months? >> i get one chance a year to call the market and that was in december. that was my call then. so it hasn't changed.

my feeling is that expectations for earnings are pretty subdued. they could come in better than expected. you've got people basically underowning equities in individual accounts, pension funds and endowments. my guess is at some point people are going to recognize your ticket to wealth is to own something. you can't rent your way to success. i think there's going to be a gradual migration toward equities. the big opportunity is in quality companies, mark. >> you're not worried that we've turned off an entire generation of investors here? >> well, we may have, although my personal bias is that we went from being a nation of savers to a nation of performance chasers. hopefully we'll learn that in order to extract return you need to learn to tolerate risk. that's being patient owners. my ophope is they become manage of equity over time. >> folks will be paying attention to bernanke's performance over the next couple of days. how important is him securing

his position at the fed to your forecast? >> my forecast doesn't mean much in his world. he doesn't return my calls. >> a lot of traders are to loelg it because a lot of traders will argue they want to see him in office. >> absolutely. i couldn't agree more. i would agree with that sentiment. i think one sound bite from him that's positive could turn the market in addition to the leading economic indicators today. basically the consensus is for pretty subdued economic outlook, possibly turning in the third or fourth quarter with subdued earnings. any kind of reading better than that or thought better than that could drive this market significa significantly higher. we deal a restoration of confidence. we don't have that yet, rebecca. >> what do you think would bring about that confidence? i heard a lot of talk about the fact that we need to see top line growth. on the roevenue, and the sales line. >> well, i think the government can do some things to restore

confidence. so much uncertainty across the board and probably the fed chairman is the most likely person to do that in the near term. one thing you're seeing fleshed out possibly this quarter is a little bit more resilience to corporate guidance. you've seen a little bit more in the way of beat. i think companies have become willing to give you a little bit better guidance for the future. in the course of credit spread narrowing, you can see a big migration away from lower quality, corporate bonds into the stock market. i think the trend is there. it won't be straight up but i think the road to ownership is on the mend right now. >> and in stocks, you like blue chip stocks that are growing their dividends? are there any? >> right. yeah, there are several basically look at consumers stapl staples, look at energy stock, looks at basic industrial companies out there. there are a number of etfs that specialize in that. away from give depd growth, i think there are attractive

opportunities in health care, technology, and certain industrials. all traded lower multiples in the market business at this point in time. >> so you are optimistic about the economy? >> i'm optimistic about the economy and the future of stock ownership in the next few years, mark. >> does the economy turn before the end of this year? >> i'm not an economist. and my guess is that you will see marginal, possibly low double-digit growth by the fourth quarter. >> you don't have to be an economist, phil. in fact, probably an advantage. >> thank you. >> rbc wealth management. final countdown to the opening bell is coming up. at 155 miles per hour, andy roddick

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morning. also, oil is coming up. >> oh, yeah. >> a big gain on friday. today it's up again this morning. over a percent. and this is one of the things i know you talk about it a lot. you focus on it a lot. it's sort of -- it's got a mixed end indicated effect because obviously when it goes higher some people will say it's an indicator that, well, people are more optimistic about the economy. >> sure. >> it also has tim about of raising prices of annum ba numbr of companies like exxonmobil, making them go higher. >> on the consumer, though, you've got to fill your tank and cost you a little bit more. but i suppose on balance, it's -- >> there's a sweet spot somewhere in there. >> i don't know where it is. >> opec thinks it's around $65, $70 a barrel. >> i think it's about $20. i don't know. i know that at $20, gas is really cheap and that's what i want.

here at the big board, non-profit organization scholas, providing computer for low income celebrating their 15th anniversary. at the nasdaq, ebix. they're a supplier of software and e-commerce services to the insurance industry. >> and our market reporters, they are standing by as they always do. the nasdaq, the nyse and cme group. >> good morning. the idea here, folks, opened up 70 cents at $1.4. you know with the news here we've been reporting the board approved a finance package for the bondholders. what we are waiting for is a formal statement from the company. that's not what we have so far. we've got that moving stocks up. number two, we've got a little bit better earnings overall. generally earnings have been a little bit higher than

anticipated. more companies have been beating t. than not beating, that is traditional. finally, a bullish call from goldman sachs. you put it all together here, the s&p 500 right now oping at 944. that is the old closing high in june. if we just get above this level to 945, we will be at a new closing high for the year 2009. goldman sachs, they're saying the s&p 500 could be 13% higher than it is right now. that's, of course, 940 right now, 13%, you do the math on that. you're talking about about 1060 for their target price. also, we've got some better earnings overall here. we have halliburton come out beating the top line and did a little bit better on the bottom line as well. they did talk about fact that they think recovery and natural gas prices and likely for the rest of the year. this is the big oil service company out there. eaton is reporting earnings well belove expectations. compared to last year. top line, they did beat for this year and that's still the continuing trend here.

cost cutting helps beat on the top line. ruby tuesday, tough time the last six months. they're offering 10 million new shares here. that stock is trading down 7% or 8% on the open. tradertalk.cnbc.com. what about the nasdaq? >> up half a percent. eight day in a row the nasdaq is at the highest level since last october. that gives you an idea of the run we've had. it's out of the gates to the plus side today. led by cisco, the firm saying the company is seeing steady and modest improvement. can't say whether it's sustainable or not. they raised the price target up to 25. those shares are south of 21 right now. apple is higher, yahoo! is higher. both companies out with earnings this week. intel is higher. microsoft as well, which is going to report later today. charles schwab, andrew cuomo is ready to file suit against this company for civil fraud related to auction rate security.

here's the human genome, up 2% this morning. experimental drug for lup dous. isrg ahead of their earnings up 3 1/2%. let's head to brian shactman at the nymex. >> very interesting conversation with mark haines and rebecca jarvis about oil. it seems to be reactive to other factors today. weak dollar, strong equities. a lot of people think in the range where oil belongs we're not a high end. armstrong said overnight trading relatively light in terms of volume. we want to point outsources nigeria now put according to the local counter, down by a significant amount. almost more than half. keep in that noo mind. best to have the light sweet crude on the planet. brent, resistance there at

$66.60. nat gas, they don't see the price recovery any time soon. it has gone negative for the day. gold is in focus. we're back above 950. there's a lot of wondering whether we're going to make another push at 1,000. as i talked to rick in chicago, people say if we can get to 966 and hold it, we might take another shot at it. >> you know, here it's all about hysterectomy his, if you look at a couple month chart, you can see as we hover over $142.25 we're at the lowest level on the kurchs si since june. let's call it a month and a half. dollar index highly reflects that same dynamic. we're about the same time period a month and a half. interest rates, here we are with a ten-year note, approaching $3.70. the highest it's been in a month. so we need to continue to

monitor all these relationships. and, of course, as everybody watches oil, when i left i was off last week, we were flirting with the 50s dp n. now, in the mid 60s. many traders are looking at the global economy. i'm just looking at the weaker dollar. >> thank you very much, rick santelli. the major indices opening higher today with the dow turning positive for 2009. will this rally continue? is this a bull head fake or something? john merrill, founder, cio of tangle wood management. market strategist with ims capital management. usually we see him from seattle but he wandered east so we grabbed him. art, you have come from the farthest distance. give you the honor of starting. where are we headed here? >> consolidating the big gains from the march low. we are mired in a trading range. i would use this as an

opportunity to guy bood stocks on pullbacks and prune the portfolio of the underperformers and the weeks through the summer. >> what's a good stock? >> well, the stocks that we -- there are many good stocks out there. however, growth stocks are where the action is -- has been and is going to continue to be. so i buy etfs in the portfolio i manage. i've been focusing in on the small and mid-cap etfs. >> what's your take, jon? >> i think there's obviously a lot of cyclely bullish factors. the amazing ability for corporate america to have profits with falling revenue. >> they cut costs, basically. is there a point where they can't cut costs any farther? >> i think the secular portion remain predominantly negative. that puts an upside cap on this market. we couldn't reach 1,000 as goldman sachs, 1100 on the s&p in this bullish cycle. but when you have things like government expanding its taxes

and rising commodity and energy prices, and most importantly, this big overhang of debt that has to be worked off, these are secular forces that, if put pressure on consumer prices, jobs, wages, business investment, and will for some time to come. >> what do you do in light of that? >> you still can make money in a secular market but you have to identify what the underlying problem is. 66 to 82, it was inflation. and it was the inflation hedges that did so well back then, gold, energy stocks. this time it's deflation. and so this secular bear market is more like the '30s. and so you want high quality, much like art said, you want companies that will not only survive but could thrive and take market share away from their weaker over-leveraged competitors. i would stick with high quality industry leaders. you know, those who have bullet proof balance sheets are so

important. low leverage, those types of attributes. you would want differ dend growth and predictability of earnings. >> art, is your optimism or what optimism you have based on the fact you think the economy has bottomed? >> yes, that's part of it. and my optimism longer term, i disagree with john is i think the fost of globalization, that trend continues and it's accelerating. and i think if you think globalably, a slower recovery in the u.s. will be -- can accelerate a little bit by the more and more business that we do overseas. >> you're looking to do a little yard work here with high-yield bonds, sflit. >> yeah, when we had financial armageddon on the table here a few months ago the junk bod spread was 20%. bonds rallied profusely and still like 9%, 9 1/2%. his story 10% to 11% is where it's been.

i believe the market is still too pessimistic. there's no recovery priced into the market, especially in high-yield bonds. 10%, 13% yields. as that spread. >> narrator: narrows, get appreciation. >> cit, the fact they got lenders together, looks like they got their bailout, is that a win for government or is it too early to call eight win for government, cit, you have to go it alone. >> a part of these secular force that we have to overcome is our government support. we have to see private enterprise be able to work through all of the problems. when we get to that point we are through with the secular problem. >> good luck with that. >> john merrill, art, thank you for sharing your thought with us. still to come, while most of the country is stuck in the doldrums of a down drink,

entrepreneurs are creating their own positive occurrences. >> positive occurrences. but next, shares of johnson controls maker of car interiors and batteries. some positive occurrences there. take a look. more than doubling since the haines bottom. we will talk business where the chairman and ceo in another interview. you will see it here first on cnbc. you are watching "squawk on the street." we are first in business worldwide. d#: 1-800-345-2550 "i'm rethinking everything...

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johnson controls back in the black posting a profitable quarter. cost cuts and heating systems maker, but as the automaker faces an up hill battle in coming quarters, will johnson controls be able to keep the automotive unit chugging along? joining us now stephen roell,

johnson controls chairman and ceo. >> good morning, rebecca. >> you've got a quarter behind you that's looking good. what's you're out look for the future? are things getting better from here? >> i think we still have a difficult period. july through december quarter, we still expect the industry in north america to be down 45%. but despite that, i think we'll be able to turn profitable. we are seeing good quarter her quarter performance. >> how much of it is going to come from cost cutting, how much more cost cutting is left out there versus top line growth? >> well, fortunately i think we took our actions back in september of last year. it came back again early spring. i think we've done a lot of our cost cutting already. we closed of 26 plants. i think therefore most of us reductions are have taken place. >> so no more closures? >> we don't expect any more closures in the automotive sector. what we've done is we've been able to prove we can operate at

roughly 8.3 million units in north america and be profitable. to put that 8.3 in context, look at 1993 through 2007, the north american industry produced 15 million units per year. being able to generate a profit at a level half what it was, that's what we strived to do. >> sir, you are in automotive, power solutions, and what we would call building efficiency. can you give us roughly percentage of revenues that come from each? >> sure. well, the largest section of our revenues right now is building efficiency group, and followed by automotive and then power solutions, which is our battery business. >> i take it automotive used to be number one? >> yeah, if you go back in time, auto plo tive was our largest segment, as you would expect. the last couple of years it has shu shrunk. it is a big component of our

business. >> now, as i'm sure you're aware, last friday goldman sachs analyst urged people to sell your stock, with conviction, i might add. >> he did. and at the same time the other analyst who came out and raised their estimate. it was a good balance on friday. if you look at the results we published this morning you will find we beat the estimates put out by goldman sachs. i still feel con foye def confi. the fact that our building sufficiency group is build to conservation. i feel good about the prospects of our business over time here. >> stephen, in terms of what the government has done, clearly it has funneled billions of dollars into the auto industry. has it done enough, and do you think this is it? is this everything you're going to get from washington at this point? are you expecting more down the line? >> no, that's a good question.

i think what the government has really done is provided a soft landing for the supply base relative to chrysler and general motors. the cash for clunkers that they've talked about, i think that -- put in context, people will estimate that that is going to provide an incentive to sell maybe 250,000 vehicles. the industry is down $7 million from its basically historical norm. saying it differently, i think it's well intended but it's not going to have is a. significant impact on automotive demand. i'm not going to expect more from the government but i think the consumer will get back and have confidence in spending. >> when do you think that will happen? i think at this stage it's going to be a very slow process. i think we're counting on a very moderate recovery in 2010. and it's hard for us to really see that we're going to get back to the 15 million level until probably five years down the road. >> in automotive? >> in automotive. >> in automotive, do you supply everybody? >> we do supply everybody.

we are a global company in terms of the automotive business. we supply virtually all the automakers around the world. we've even got a very strong presence in china with 23 joint ventures there. strong basis throughout the globe. >> all right. thank you so much, stephen roell. coming up next, the latest buzz on k street, plus stock tons move, including eaton and jarred den. and later, new york may have fashion week, but miami has swimsuit fashion week. we'll take you there live to see if it's sink or swim for the $13 billion industry. introducing one a day women's 2o. the first complete women's multivitamin in a drink mix.

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welcome back to "squawk on the street." i'm mary thompson with your realtime flash, earnings forecast and obesity in in focus today. the maker of parts and airplanes and autos dut forecast because

of weak global economy. a weaker economy may be hurting most companies but not of jardon. it met or beat forecast for the second quarter as consumers trade down to cheaper goods. stock is trading up 1 1/3%. finally, orexigen is higher. you're going to be hearing more about this in the next hour as farm sougpharmaceuticals report anner an er interview with the ceo of the company. up this week, health care and the hurdles of facing in congress. plus, fed chairman bernanke semi annual testament, why that's an important test for him. joinings now, hilsenrath, jon, and the other john, cnbc chief washington correspondent john harwood. >> i wouldn't call him the other john. he's primo john.

>> all right. well, regardless, it's john, without an "h" and john with an "h." and what are you expecting this week? >> i'm watching very closely ben bernanke's testimony up on the hill. there are several reasons why this is important. one is that obama has to decide whether bernanke gets his job back. one of the things that's happened in the last couple of months is he's gotten a very rude greeting when he's gone up to the hill before. when he's had to testify about aig or bank of america, it's going to be important to watch how he's greeted. when i talk to traders, they're starting to try to position themselves on whether bernanke get the job or not or whether obama moves on to somebody else. we have a lot of questions about the economy we have to answer and also about regulatory reform. and the fed's own independence, bills floating around up on the hill that have fed officials kind of worried it could take away their independence. we have two days of bernanke and

there's going to be a lot coming out of that, i think. >> jon hilsenrath, i want to follow up on that question about bernanke and focus in also on geithner and this story that the t.a.r.p. funds aren't getting used properly, they're not doing what we were hoping they were doing. they're becoming or what government, rather, was hoping they were doing. they're becoming a means to bye new banks, to buy new securities and not necessarily to create more volume in the overall debt markets so that people can do things like finance their payrolls if is geithner potentially going to be in the hot seat going forward here? >> well, you know, i think as long as the markets stabilize and if the economy improves a little bit, the fortunes of both bernanke and geithner rise and fall really with the economy because they're two of the main architects of these rescues. as far as how the t.a.r.p. funds are being used, i'll tell you what they would say. what they would say is the t.a.r.p. funds help stabilize the financial system. we're near a melt down a few

months ago and not near a melt down right now. give them credit for that. of course, you know, we've been reporting stories for months about how -- about lawmakers lobbying to get their banks funding. whenever you get congress involved in this stuff, it's one of the reasons why the fed is so concerned about its independence. you start seeing funny business. >> john harwood, i'm sure you've seen headline in the "washington post" this morning, shows obama slipping on key issues. what do you make of it? >> i want to emphasize i'll play tom watson to hilsenrath sink any day of the week. look, i think barack obama is at a critical point in his presidency. he knows that the first year is when he has the greatest capacity to get things down and trying to do a lot of things at the same time. and he's trying to do c controversial things. his overall approval rating still at 59%, which is strong. but dipping below $60 is of concern for the president. he's done that in some other polls earlier. he's trying to push very hard.

it's a delicate balance between trying to push forward with democrats only who would produce a certain shape of a health care bill and going slower, trying to bring in republicans, maybe ramp up the cost controls in the bill, which is something that democrats don't do naturally but it's part of obama's strategy. and they're very, very tough choices to be made over the next two weeks. the house is likely to get a bill through. senate is less likely. and the shape of the ultimate package is very, very much up in the air. >> harwood, are they shifting to ago or slow approach? >> well -- >> do you think that's what's happening right now? >> well, not explicitly. and remember, it's not really their choice. they're exhorting congress to act. the house has the greatest capacity because the rules of the house, both leadership, basically do whatever they want and the democrats have a big majority in that chamber and they can lose a significant number of moderate democrats and

still pass something. the senate is a different animal. yes, the democrats have 60 votes, but come moan neean poec of a bill that could alienate that, the president can't dictate the speed of the goal in the senate. they can ask them to move quickly but there's no guarantee to do it. >> we've got to go. thank you, john and jon, we'll be right back. >> thanks, guys. businesses more efficiently, so we've brought in a team of experts to help.

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june leading indicators up .7. it's another up. i'm not sure it's four ups in a row. i haven't seen that in a while. last month was revised in a powerful way. originally released at up 1 fine .2. it was increased .1 of 1.3. still, this is good news. granted, prior credit crisis wasn't looked at one of the top tier type economic factors but it's still good news. the equity markets have reflected an uptick. as they uptick we see the interest rate complex remains stubborn. what seems to be good for equities seem to also be good for pushing rates higher under

pressure but off the worse levels of the day. quick check of the markets. data dow up 81. the s&p up 8 $1/3 and the nasdaq up 18 3/4. among the morning's market driver, cit getting a $3 billion lifeline, time to reorganize the old professor, steve has more. >> mark, we know what's the deal with cit. we just don't know where's the deal. they are waiting for an official release for lenders of that $3 billion financing package. cit's board approved the deal last night. the release was supposed to be out there morning. they say it's now in the hands of lawyers. the deal is still hoped to be announced today. they approved the financing package last night. it hopes the funds will stave off bankruptcy for a small business lender, at least in the short term. the loan coming from top ten

bondholders, carries a 2 1/2-year term, and some proceeds will be available almost immediately. cnbc also learned cit is planning a cash tender offer for outstanding senior notes in august as part of a broader recapitalization plan. unclear at the moment is whether it will be enough for it to survive and what role, if any, the government will play. stress test found a need for $4 billion in capital but a cit source says that the company's ceo thinks that's too much. more than what it needs. so the company hopes the government will look more favorably on the request to transfer some of the assets to utah-based bank. government officials over the weekend were noncommittal like they were last week after the talks fell apart for government aid. they said all along they could help the company get over the finish line. they complained bitterly they weren't going to carry it all of the way or most of the way over the finish line. the release could come at any minute but a deal like this isn't done until it's done.

it has to be that it wasn't made official before the market opened. mark? rebecca? >> thank you so much, steve liesman. and here to break down the market action, bob pisani with me here on the floor. s&p 500 new high for the year. >> you heard rick, it's been to the upside, third month in a row. the component and all that nonsense, but still that's nice. modest pop. here's the important thing, folks. put up that s&p 500 chart for me was that was the old closing high. we use closing highs here, folks. that's the important thing. look where we're at here, 947. if we close at this level, we have the highest level since going back to the fourth quarter of last year. what we're starting to see that's important, rebecca, the cyclical stocks starting to pop up. goldman sachs was out on a call here. we had pretty good earnings reports today from eaton and we have johnson controls, classic

cyclicals. they're topping out here. johnson controls hit a high for the year right now. caterpillar tomorrow morning, rebecca, before the open. that stock is not breaking out. it's just on the verge, all we need is a few percentage points more and all the cyclicals will break out. goldman said, higher for the s&p at the close in 2009. that will be about 10. $60 or so. that's a bull ush call. and the cyclicals are all moving up to the upside. they specifically mention the cyclicals which makes sense. it's an obvious call at this point if you want to make a call on the growth of the global economy. finally, you heard about steve. i think it's important to note that while we've been reporting there's some deal prks company itself has to come out with a deal. we are waiting for some kind of formal announcement here. i just want to note, rebecca, talk about polices. it was at a high of $1.44 earlier. off the highs. but on thursday, it was 31 cents. okay? at one point on thursday, it was 31 cents. >> huge move there. thanks so much.

now we head over to the nasdaq and scott wapner who is standing by with the tech on check. what is tech universe looking like today? >> pretty good. in fact, we're looking on our eighth straight up day here. shy of 1% up. give credit to cisco. up 3 1/2%. credit swiss say that the company is seeing steady improvement in the enterprise business. can't say whether it's sustainable or not but the mere fact there appears to be improvement on cisco's enterprise business, good for the over whaul tech landscape. you see the large cap technology stocks on the move to the upside ahead of earnings this week. i think tomorrow after the closing bell it's "yahoo! and apple, texas instruments has earnings after the bell today. it doesn't trade here at the nasdaq, of course, it's still a bellwether for the chip stocks. it's going to be closely watched. tech shares are up 1%. you're going to get a good indication on the consumer side of technology, on the likes of

apple. and the business side, yahoo! for example, texas instruments, cisco leading the charge today. >> thank you, scott. mark, back up to you. >> all right. oil, up 67. brian shactman at the nymex, what's going on? all of a sudden we popped back up above 65 bucks. >> you tee me up. at one months of oil, 73 and change on june 30th. we were at $58 and change a week ago. and look where we are now. the question is, everyone wants to talk about is where are we going? goldman sachs still saying 75 is a target for september. a lot of analysts and traders on the floor say they remain -- disappear. still above the dollar trade. i want to move on because halliburton came out with earnings and bearish things to say. they say we might be choppy in the near term but the trend seems more to the upside. we're not talking double digits to the upside but definitely a

little bit more bullishness from halliburton. gold, listen, the next target is 1,000. we're going to look at a stop at 966. the conversation is in place. we seem to fail when we get to this particular point. the dollar again will have a lot to do with that trade. i want to end with copper, nine-month high when it comes to copper. of all the metals when you talk about banking on the recovery, the system relates to china and they're buying copper. always in the conversation. so that's a feeling right now. it can change on a dime. but right now things are pretty bullish. back to you. >> thank you. bio pharma wins a double letter today, one company unveiling the first positive late stage test results for lupus in half a century. and a weight loss pill. pharma reporter mike huckman joins us now with a first of two cnbc exclusives this hour. >> not one but two. for months we've been reporting on the unprecedented confluence of three bio pharma companies

reaching the final stage of development for diet pills all at the same time. this morning one of them is out with a flurry of test results showing as many as 56% of pafshts on its drug called contrave lost at least 5% of their body weight. and those are key thresholds for fda approval. joining me live from new york city and another cnbc exclusive is orexigen therapeutic ceo. thank you for being here this morning. >> thank you. i'm excited to be here. it's a great day or orexigen. >> and for people who are fighting the bat with the bulge as well, of course. your pill for those who are not aware, combines the antidepressant with an antialcoholism drug. on is surface that seems like a strange combination. can you please explain what is it about this combo that seems to help people lose weight. >> the unique mechanism of action on contrave is award and behavior centers in the brain

that should help people with their food craving and controlling indices. across a very broad program we just completed, over 5,000 patients satisfied the major elements of the fda guidance. predominantly the guidance that the fda set for effect cassie, we exceeded the efficacy benchmarks the fda set across the board. we have great improvements in the risk fatters, improvement in gli seeycemic control. >> that means blood sugar levels for diabetics. >> that's correct. our safety and efficacy -- safety and tolerablety looks great. >> best case scenario, when can it be approved and on the market? >> i won't speculate on timing for the fda but we're looking at a couple of years from today as our rough target. >> couple of years. could these results though help you attract a big corporate

partner to help you sell contrave if or when it is approved by the fda or are the potential partners going to wait until they see big test results out of your competitors, if you will, before they decide which horse to bet on here? >> first, we're focused on a launch where there are a lot of physicians target where's a lot of obese patients get treated. the call to action is high. we can handle that launch op our own. for orexigen, there's nothing left to see. we've got all the data and they can carefully examine the opportunity that we have and i'm sure they will be pleased. >> we all know about the terrible trouble with the diet drug of phen-fen. the fda recently rejected essentially another type of diet drug because of psychiatric effects. does contrave appear to be safe or could it hit a snag with the

fda because the agency is so cautious with diet drug and super safety conscious about drug safety in general? >> those are good points. that's why i wanted to mention the safety and tolerable is great. that led to the design of a program to carefully look fwor that and we see absolutely no signal of that. >> you also have another diet drug in mid-stage development. some analysts think it might be better than contrave. what if that drug trumps contrave? what if you cannibalize one over the other or is there room in the market for both? >> there's room in the market for many. the obesity epidemic is unsustainable proportions. the market needs multiple tools for intervention. the patent results are due out later this year. we suspect two of those products together will help us create a franchise for us and partners. >> thanks again for joining news that exclusive interview this

morning. coming up in the second half of the hour, another cnbc exclusive with the ceo, this time of human genome sciences whose stock is soaring on the new lupus drug results. check me out and follow me on twitter at mhuckman. back to you. >> thank you, michael. up next, we head back to the earnings central, i nerve center for more on eaton and hasbro. >> then the ceo of tron anythinanythintronics and putting the first headset on the moon. and hotlanta, how keeping up with the employment in the local economy of atl. d#: 1-800-345-250 "i'm rethinking everything...

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♪ hotwire.com disco sound. i'm a little confused though. when joe is with david, it's the kahuna and the brain. but now he's with carl. >> the kahuna and the liver. >> i'm thinking it's maybe tex-mex. >> tex-mex. standing next to carl, i feel like chopped liver. i can tell you that, mark. it's obvious to anyone, youth,

height, looks, on and on. thanks, mark. let's kick it off with johnson controls. the auto parts and eating system maker, i say auto, mark, because he says i pronounce that auto like a guy. anyway, profitable quarter. you can see seven cents ahead of expect tags. the automotive unit saw sales decline. whenever there's declines in this market, it's how bad is the decline versus expectations. moments ago on the jci ceo had this to say about the outlook and the auto industry. >> at this stage it's going to be a very slow process. we're counting on a very moderate recovery in 2010. and it's hard for us to really see that we're going to get back to the 15 million unit level until five years down the road. >> good day today for johnson controls shares. $8 stock, carl, in march. now $23. >> incredible. interesting. also, weak demand, lower prices

weighed on second quarter earnings in halliburton. reporting a 48% decline in second quarter earnings. although they dead beat some analyst forecasts on earnings per share. the results were negatively impacted by the steep, continued downturn. their words. north america drilling activity, joe, and they say that because of the high levels of natural gas storage in this country, that drilling really isn't expected to make a significant rebound any time in 2009, maybe 2010. >> it's come back a little bit at three buck or whatever it was. why do you want to look for that stuff. it was 11, 12. eaton corp. is a case study and the notion that this is an art, not a science, it's up 8%, up nearly $4. my headline, eaton corp.'s second quarter profit plunged 91%. here's the deal. there's items in here. if you back out the items, the company actually beat

expectations by six cents. the electrical system maker, again, cut its full year earnings outlook. but the cut to $2 to $2.20 is still above well where the street is. it may have cut it again because times are tough for eaton. the street is down to $1.90. even though the company cuts down again, it's still above. also, there was one other -- what was the one other thing i saw on here, carl? it said something about they had seen some decline in one of its businesses, and the decline now was forecast to be much less than it was the last time they said it. >> i notice that page, though, talked about some of the cost cuts they've already made in addition to layoffs and pension cuts. you're looking for something else though. >> that's okay though. overall market will decline by 21 to 25%. before that it was 25% to 30%. you know, when the declines are

less than what the company previously said, still a decline but better than expected. that's what the stock will key off of. >> getting a little boost though. mnt shares, they saw the earnings plunge 75%, its deposits rose 12%. with that, the stock is up $1.27 at $55.71. and i think we got decent revenue line on hasbro. did we not? >> earnings per share beat by three cents revenue, just short of wall street expectations. the revenue growth was transformers and g.i. joe. and i don't know, last time i talked about it with becky, that's all know about transformers is megan fox and the guy who hurt his hand. >> what else was i thinking of? i think that was mostly it. and mnt, i didn't know it was in buffalo. that was good to know. that was good information. i need to know, mark, what does

mnt stand for? >> mnt is in buffalo? >> yeah. >> i didn't know that. >> i didn't, either. >> what does it stand nor? >> that's the other thing that inquiring mintds want to know. we'll find out. >> montagou. >> mark, good hair cut, dude. >> yeah. remember last week when i said i didn't have must have hair to get a bad hair cut? >> yeah. >> i was wrong. coming up, plantronics celebrating the "apollo 11" lunar landing and the next great leap for mankind. >> the first on the moon, now the ceo is first on cnbc. what a segue with our jim goldman.

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have the command module. if you had invested your portfolio could have been over the moon as well. since july 20th, 1969, ibm is up more than 60%. n northrup drum monday hmond is m 3,000% higher. upon setting foot on the moon, astronaut neil armstrong spoke that line, one small step for man, one giant leap for mankind. jim goldman joins us with pla plantronics ceo. over to you. >> ken is, in fact, the ceo of plantronics. thanks for being with us. we are talking about a fair amount of pride this morning certainly as we celebrate that 40th anniversary of the lunar landing. we're talking about a big piece of history on a very small piece

of technology. give us an idea of exactly what neil armstrong had those 40 years ago. >> sure. this is the actual headset that he was using inside the space helmet. this is connecting in. you know, the interesting thing is this all started when they said after the mercury landing, they had some problems, they need to have good communication. they had to have something that's going to work all of the way from the moon. it's going to fit inside a space helmet. >> this was state-of-the-art then. it looks rudimentary today it. >> does. 40 years of advancement. what gene krantz told me is that plantronics headset nerve failed. it may have been earlier technology but it's a technology that worked. >> back then, what was the biggest design challenge? obviously you're taking this technology into space. but what was the big problem that plantronics had to solve back then? >> tlhere were a lot of technicl problems. for one thing, you're using a

radio communications link that is a very, very, very long link. you've got all the issues inherent in that, as well as a lot of other issues in terms of just fitting it in in terms of the size of space. >> this is where we were 40 years ago. you guys are now a key player if not one of the most key players in blue tooth, wireless headsets. give me a sense of where we are today. >> sure. this is a more modern blue tooth headset. obviously it's a little bit smaller. you know, it comes with a charging case so you actually put in the. if you're on a plane or something like that, travel by spacecraft. it charges while you're there. it's very, very lightweight. it's very comfortable. you can talk for a long tronicsy accessory makers in the world. we focus on rim and palm and nokia and apple even. looking at your stock here, up from march lows around 7 bucks a

share, around 19 today. what is the big trend? is this sector's momentum going to continue? are you a better way to play this sector for the squeamish investor? >> the nice thing about plantronics, whatever you pick, whether it is apple or rim or nokia or motorola or whatever, we make a headset that works with that. we're playing across all of those. i would say with plan trob tron anythi plantronics, tremendous growth, we have a big play in the office. people use our headsets when they're just talking on the phone. and more and more of that communication is going to unified communications where they're using the pc for their voice. >> really quickly as we wrap this up going back to space. so much about technology innovation is connected to the space program. there's a big push now for increased spending in nasa and going back to the moon, going to mars, you're a technology industry ceo, do you think we need that kind of expense as far as driving technology

innovation? >> there's no question it drives tremendous innovation because, you know, when you're trying to solve some of those really advanced problems, you wind up looking at different materials, you wind up looking at different technologies. some of those breakthroughs absolutely help you with regular everyday products with people. >> ken is the ceo of plantronics, one small step for man and one giant leap for wireless communications. thanks very much for being with us. rebecca, back to you. >> thank you. coming up, top jobs in hotlanta. entrepreneurship where growing companies are hiring. we will talk to the president of the atlanta chapter of the entrepreneurs organization and the head of one of those companies that is adding to its rank. we're back. stay with us. 

let's look at the markets and the internals. dow up half of 1%, off the high. nas up 0.4%, 0.3%. big board, 3-1, winners over losers. nasdaq, not so good. almost 2-1. >> not so good, just not as good. all right. businesses across the u.s.

grieving a sigh of relief now that cit is avoiding bankruptcy for at least now. companies in atlanta seem to be more positive than most. new survey by the atlanta chapter of the entrepreneurs organization says 7 7 % of small businesses are looking to hire in the second half of the year. here to tell us why, dave mcmullen, president of the atlanta chapter of e.o. in atlanta and ceo of case mate, one of the companies looking to hire. sashi, let's bring things with you. you're one of the those companies looking to hire. why now? what's changed for you? >> we changed our strategy right when the economy, you know, said it was going down. we decided that we were going to become a global player. so even though we have a three-year-old company, we're in 76 countries. we decided to diversify product range more than anybody else in the market. we make cell phone accessories. everything that plantronics doesn't do, cases and chargers and so on and so forth. so we've taken an approach of

growing broad and growing the wider markets when everybody else shrunk. that attributed to our growth. >> what we heard have shashi is a lot of things contracted in the market and he saw his niche and going for it. is that why most of these businesses are hiring or is it different across the board? >> well, the attitude is the same. most entrepreneurs right from day one were fighting an up hill battle. a blip in the economy hasn't changed much for the entrepreneur. still a battle, have to do a lot of adjust ms. you see what guys like shashi have done, seen the economy as an opportunity. seen big players in a marketplace shrink and that opens up opportunities for them. plus, you can move quickly, he can adjust quickly, agile and can make decisions quickly and move on them. that's what entrepreneurs do and that's why i think you see a -- most entrepreneur rsz already

made their moves for '09 and planning on growing in the second half. >> that's true of most times of economic distress, isn't it? it's always -- they're always a lot of people around who find the opportunity. >> no question about it. i think that, you know, a lot of creative people and they want to grow when the others are shrinking. >> shashi, are you climbing out on a him here or is your order fl flow such that you need to hire people? >> i'll give you some numbers. we went from 32 employees at the end of december to 104 today. and we'll end this year with about 260 employees. so we are experiencing a phenomenal growth in this marketplace. >> right. i understand that. what i'm asking you is, are you counting on something to happen in the future or do you need these people now? >> i need these people now. >> oh, okay. >> so we are building the base but the business is already there. >> dave, in terms of the

stresses facing companies in the future, what are you hearing about the health care plan and proposals that are on the table and how much help do businesses that you're working with receive from the government versus paying? >> well, that's really the big question, isn't it, for the second of '09 i think the biggest problem is uncertainty. two of the big problems that entrepreneurs face are health care and funding. and so if there's a lot of uncertainty in that area, you have entrepreneurs struggling with making decisions and how they're going to handle it. guys like shashi might say to themselves, i can't hire quite as many people because i have no idea what it's going to cost me in the near future. so now, on the other hand, you know, they're gung-ho, they want to make it happen. it's a bit of place of uncertainty with them. that uncertainty is the biggest problem we face. we need clear direction. >> aside from finding people, what is the biggest problem you face? >> funding.

you know, today we compete with not entrepreneurs from california or from seattle but we compete with entrepreneurs from china, india, vietnam, where the garments are giving them -- governments are giving them interest-free loan '. they have benefits, huge incentive to set up shop. we don't have those here with us. so one of the biggest challenges we have is containing our cash flow and how to manage that on a daily basis. >> dave, was there anything in the survey that surprised you? >> yeah. actually, i was a little bit shocked that other entrepreneurs feel the same way i do. i got to admit i wasn't hearing that from other places, and when we went and asked them directly, you know, they said that, you know, they have an optimism about the future as well. i will say this, though, that the two things that over and over i get asked are the same things that every leader gets asked, you know, can we get resources provided and can we get obstacles removed. so that's what we really need from leadership, is resources

provided for entrepreneurs so they can fund themselves, so they can know how to grow their business. and the second thing is, remove obstacles, make it less difficult, less of a pain to get all the answers and all the growth that they need to get. >> it sounds to me like you don't think that's being done in washington right now. >> well, i don't want to say that i don't want because i'm not sure. i think the biggest problem right now is turn certainty, the -- there's no clarity coming out about the direction. when you ask me what i'm hearing, i'm hearing any number of things from any number of sources. >> what we are hearing, shashi, we are hearing from small businesses coming out and saying the administration's plan is putting the onus on the shoulders of businesses like, for example, yours to pony up the funding for the plan, it's going to hurt, depress hiring in the future. will that happen if the plan were to go through as it currently is, shashi, will that happen in your business? >> definitely impact us,

absolutely. you know, cash flow is king for a small business. that's why we depend on to grow our business. any time, any decision that impacts cash flow, we have to detract the number of people we hire or rethink our strategy in the marketplace. >> thanks so much. thanks for being with us, guys. >> thanks, guys. coming up, the man behind a new study, defines cutting incentives could cut the value of u.s. firms in half in just eight years. welcome to the now network. population 49 million.

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for a smarter way to trade online. trade like a pro. trade with fidelity. hi, may i help you? yeah, i'm looking for car insurance that isn't going to break the bank. you're in the right place. only progressive gives you the option to name your price. here. a price gun? mm-hmm. so, i tell you what i want to pay. and we build a policy to fit your budget. that's cool. uh... [ gun beeps ] [ laughs ] i feel so empowered. power to the people! ha ha! yeah! the option to name your price -- new and only from progressive. call or click today. welcome back to "squawk on the street." i'm mary thompson. it's not only earnings that are

moving stocks today. take a look at the software company red hat. moving higher 7% on the news it's replacing cit in the index. distributor of software once one of the hottest stocks in the tech bubble. tyson foods is lower. this after bmo put the rating on the stock to market perform to out perform. bmo says near term upside becomes limited for the poultry producer stock given recent gain on improved chicken margins and lower feed processes. bloomberg is reporting the company is going to file an ipo in hong kong next month. stock up over 13%. family worth raising quarterly dividend for the 42nd straight year. quarterly payoffs 3.1% to 33 cents a share. its stock over 2%. rebecca, back to you. >> thank you, mary. a new study from study finds that executive pay packages, it

could cut the value of u.s. firms in half in just eight years. we will take you to the study's author. but first, oh, trish? >> good morning, mark. good morning, rebecca. we're going to talk a lot about cit coming up at the top of the hour. this deal that to stave off bankruptcy, is this actually going to work or is this simply filling the gap, basically buying a little time until the uneftable. we're going to hash it out and give you the details. plus, in a cnbc exclusive we're going to talk to the chief medical officer, the company just out with a study that says that the majority of americans are not in favor of paying for universal health care. you have apple, yahoo! microsoft all ahead only on "the call" at the top of the hour. but first, "squawk on the street" is back after this break.

we're back. it seems that fat bonus checks on wall street are making a

comeback. goldman sachs is setting aside $6 1/2 billion. our next guest says this might not be such a bad thing. robert miller is professor at carneghy melon's temper school of business, warning that limb nating incentive base pay components could bring down the value of u.s. companies. professor, how would that happen? >> thanks very much for having me on the show. managers' incentives are aligned to shareholders interest because they're incentive base pay. if you took away those incentives then they wouldn't work quite the same way in serving their shareholders' objectives. we estimate that companies could lose 8% per year, and that compounds to about 50% over a, say, six- seven-year period.

>> excuse me, but in the run-up to disastrous economy we've had we were ladened win sentives to these people. so i don't understand your argument. >> yeah. if we're working at goldman we would be doing very well right now. but the very people who decided to work for goldman were similar to those that decided to work for lehman. some of them did very well. some of them are out on the street. that's partly what incentives are about. >> but incentives in this case, i think the point that mark was trying to make was that the int sent i incentives were not good for shareholders, they encouraged risk holding that blew up and not only encouraged those who had shares in companies but it also created issues for taxpayers that ended up ponying up billions of dollars to save the financial system from collapse. >> one of the key features of our study was to measure

compensation correctly. and the main way compensation varies is through executives holding shares in their own firms, stocks and options. when those stocks and options go up in value, the incentives make money, that makes money for the executiv executives. but when the stocks and options go down, the ones the executives are holding in their own firm, that reduces their wealth. that more than compensates, more than offsets both their wages and bonuses. sometimes they make negative amount in terms of their wealth. >> which actually happened to a lot of bankers who are now getting one-year later bo down necessaries in excess of 2007 levels. >> that is correct. although they're getting bonuses reported, it's also important to take into account the loss they make on the stock they own. those loss rest the main things that cause fluctuations in fluc

in executive compensation. >> professor, i get the feeling that i just dropped in from mars, okay? i don't mean to be disrespectful, but let me lay it out to you as plainly as i can. we had a heavilycented executive corps all through this decade and they led us off a cliff. i'm not sure how you were equating -- >> and it was in stocks. >> the incentives resulted in huge losses in vol u when they were there. so you know, to argue we don't use loss it is they weren't, it just doesn't make any sense. >> well, there is a presumption there maybe that perhaps it was the executives that led us off a cliff, as you say. but it is not clear that the only factor the way the u.s. economy works there were other factors as well. the issue is would things have been worse if executives had

been paid according to a flat wage? >> yeah. >> now, the issue, i think, is who is in the best position to be able to decide how executives should be paid? certainly not me. i would be arguing that the shareholders, the owners, the executive board probably, when it is their own money at stake, are probably in a better position than the rest of us, or at least me, to be able to work out how much they should be incentivized. >> all right. thank you, professor. professor robert miller, carnegie mellon. >> thanks a lot. shares of a small biopharma are soaring this morning, unveiling a test in results on a drug that could become the first new treatment for lupus in half a century. cnbc's pharma reporter mike huckman has another exclusive. hey, mike. >> good morning, rebecca. shares of human genome ticket, hgs are up to on heavy volume, 45 million shares traded in the first hour and a half.

the average daily volume is just 6 million, some short covering but a lot of it is a huge upside surprise for the lupus drug study that most on the street thought was going to fail. joining me live in another cnbc exclusive is hgsi's ceo tom watkins. mr. watkins, good morning, thanks for being here. >> good morning. >> how did you pull this rabbit out of the hat? as we mentioned, there hasn't been a new drug for lupus in 50 years or some the path is littered with failures. nearly everybody to on the street thought you were going to be the next casualty. how does this drug work? >> this is a drug target. this is a drug for a target that our company discovered in the late '90s. we first put the drug into human trials about 2001. in 2005, the results of a phase two trial informed us in a way that we have been able to design a very good phase three trial. and what we are seeing today is the first rules, the results of the first phase three trial, which were very encouraging. and the news here is really great for the 1.5 million lupus

sufferers in the u.s., roughly 5 million worldwide. but there is possibly a drug here within the next few years that can help these patients. there hasn't been a new drug approved for lupus in over 50 years. >> what does this mean for them specifically? many of them have to take painkillers and steroids? could they take your drug instead or would it have to be in addition to what they are already taking? >> the study we did, mike, was studying two different doses in combination with standard of care or medications that physicians commonly use versus standard of care alone. so the possibility or the promise is in addition to medications that physicians consider important today. and it is very, very interesting and very exciting news for those patients that we could have an option here and patients desperately need new options in this disease. happens been anything new in a long, long time. as you said, a lot of late-stage trials have failed meaning recent months. >> mr. watkins, you mentioned you have another phase three or late-stage study, i think due to

report results in a november timeframe. do you have to hit that one as well in order to win fda approval? would benlysta be doomed if you are not able to duplicate or beat the results we are seeing today? >> our agreement under the fda protocol assessment is that both trials reach the end point it is interesting that both of these trials are exactly the same study, they are designed the same way, just conducted in different parts of the world. so we are highly optimistic based on these results that bliss 76, which it is called, reports in november would also be positive and be even better news for all the patients suffering out there. >> i think your company has a big debt to pay. do you have the cash now to pay it down in and if you do will you still have the wherewithal to bring this drug to market? >> we report ted end of first quarter roughly $400 million of cash on our balance sheet. we have sufficient resources to move this and our other opportunities forward. that debt is due out in 2011 and '12 that you referred to and we are confident that we have multiple options for how to deal

with that. >> and finally, you have got an antidote for anthrax in development where. does that stand right now? how well is it working? are the potential customers governments and big corporations? >> we do have a product for anthrax, a therapeutic anthrax for anthrax, we deliver beard $160 million or 20,000 doses of that product earlier this year under a contract with the u.s. government. and we believe that product definitely has potential, hopefully not a product you or i will ever see used but we should all sleep a little better at night that the government does have stockpiles of such antidotes if necessary. >> certainly hope not. a drug in development for anthrax as an antidote and now this lupus drug as well. thanks again, tom watkins, ceo of human genome sciences for joining us this morning in another cnbc exclusive. mark, back to you. >> thank you, huck. up next, a final check on the markets. we lost a little ground but still positive. don't go away.

all right. welcome back, the s & p 500 marked earlier in the session, had been here today high levels, 942 right now. it was 946. markets pulled back a bit.

what is interesting to note since this earning season began be, the biggest gainers in the s & p were financial names. rich peterson at standa standard & poor's compiled a list but a number of those financial names are at the top of the list. the number one performer since earnings season began, huntington bank shares, according to rich peterson at standard & poor's. >> not a great sign, actually, because the stocks that led you down are almost never the ones that lead you back up. >> it is interesting. there is a lot of debate about that. >> yeah. >> we gotta go. we will see you tomorrow. >> take care. this is cnbc.com news now. >> the index of leading economic indicators rose .7 of a percent in june, more than economists forecast. td ameri trade will return $426 million to investors to set al case with new york state involving the sale of to auction securities. cnbc learned that u.s. marshals hired appraisers to assess the value of personal

belongings in the madoff personal apartment t will maximize the money available to victims. that is cnbc.com news now. i'm courtney reagan. good morning and welcome to the call, everyone. i'm trish regan. new york stock exchange, 90 minutes into trading, dow up 20 points. talk about this deal to prevent or stave off bankruptcy at cit. is this really gonna work or is it simply a temporary measure? we have all the details for you coming up. good morning, larry. >> thank you, trish. the third straight rise in the index of leading indicate wers may and april being revised up is a huge recovery signal that is getting us in some bullish territory. and fed chief ben bernanke on capitol hill tomorrow for his semiannual testimony on the state of monetary policy. in "the call" of the wild, we will discuss whether the fed should begin their exit strategy right now. i'm melissa francis, another cnbc exclusive, talk live with the am corporation's chief medical officer, they have a survey just released that says most u.s. employers are against

government-support health care. it this is "the call" on cnbc. okay. stocks losing steam after opening higher on optimism over a deal to keep cit out of bankruptcy. better-than-expected earnings, bullish call from goldman sachs, raising the year-end price target on the s & p to 1060, a 30% gape from now. dow trading higher by 23 points, positive on the day about .3 of a percent. s & p plus side as well, just barely, only 2 point there is, .2. the nasdaq trading higher by about .3. larry is trying to get here. trish, what is happening? >> i don't know if we are going to let him. may make him wait. >> i'm raising my hand. i just want to put in -- >> whatever you want to say. >> the index of leading indicators. >> yes. >> underrated bud very important, three straight months, the two prior months revised upwards it is a strong