hand to this rally we've seen today. materials, commodities, telecoms among the strongest performers. but look, the nasdaq's been up for 12 straight days, so you can't leave out technology either. and you know what, the bullish calls appear to be growing. legg mason's bill miller, conditions right, he said, for a new bull market. we heard similar commentary from some other market watchers as well. i mentioned the move in materials today. and take a look because they were one of if not the best performer of the day. names like alcoa, u.s. steel, and bhp bill-ton, which was up 3.25% today as oil moved higher closing above $67 a barrel. you also saw a move higher in commodities. massey on the coal side, for example, having a pretty strong day. schlumberger another one you want to take a look at. 4 1/2% from schlumberger. tesoro with a nice move of 6 2/3%. and telecoms. at&t was one of those components out before the bell today with a better-than-expected earnings report. i was particularly interested to see what they did on the wireless side after what we heard in the last couple of

weeks from nokia and sony ericsson. and at&t just knocked the cover off the ball on the wireless side. they had a record low churn. so the rate of cancellations was lower. and the strength went beyond the iphone. that's perhaps the most important thing. sure the iphone made a difference there, but it was at the low and mid-range also that add to the momentum in at&t. transports up nicely as well. the transports up by better than 100 points today. ups, unp, which is united pacific, and ryder either met or exceeded expectations. they gave some cautious comments. guidance was still pretty weak. yes, you want to see volumes higher from the truckers, the rails, et cetera. you want to see more rentals, for example, from ryder. 3m, take a look at this. 3m today, because it was a big mover to the up side. easily beat expectations. and as i mentioned, technology with the nasdaq up by 47 points today, that was a big move today. technology up for the 12th straight day, maria. >> broad-based rally. great day on wall street. >> people are really bullish

here. thanks so much, scott wapner. we are expecting those quarterly numbers to trickle out shortly, by the way, from microsoft, amazon.com, and american express. of course collectively they could set the tone for tomorrow's trading session. let's get a preview now with dan morgan, portfolio manager at nova securities. babb napoli, managing director at piper jaffray. let me kick it off with you, and ask you, dan, about some of these earnings coming out. amazon.com, microsoft, and american express. is there one company out of the list that you think is going to surprise more than the others, be sort of the name to watch once that -- once the numbers come out and you want to be looking at what that means for tomorrow's trading session and beyond? >> well, you know, maria, very optimistic that we're going to see a continuation in terms of the momentum that we saw in the last week or so. we know thain tell had great numbers. we talked about that last week. obviously, we're looking for those numbers to roll over into microsoft. they had higher chip volumes in terms of netbooks and servers.

and then if you look at amazon.com, also looking for them to show a good earnings report. the expectations are unbelievable on that stock. the stock's up 73% year to date. we know that ebay came in with numbers last night or the day before and they were very, very good. so we're starting to see people, it appears, returning back to the internet, doing their shopping. cost-conscious customers who are looking at amazon and so forth to do very well. and if you look at aggregate, maria, technology, about a third of the companies have reported only about an 8% drop on the quarter. much better than the other segments that are out there. technology as a whole obviously doing very, very well as you mentioned in the beginning of the hour. >> so that's what my next question really was. what does this really tell us. you think it tells us that people are beginning to not hoard their cash but spend the money. the numbers from amazon are out. 32 cents a share is what the company reported for the second quarter. and of course we mentioned that

the estimate was 31 cent a share. on the face of it it looks like better than expectations. you mentioned the stock had been really trading higher, 70-plus percent year to date. and the revenue is $4.65 billion, and the estimate is 4.69 billion. basically in line there. is that what you believe as well, bob-n ter, in terms of wh these numbers mean, whether it's intel, goldman or the retail sector, that people are returning slowly but surely and spending money again? >> well, i think spending has stabilized. i think you're going to see a little bit of an improvement quarter over quarter, a little less worse year over year at american express. i think you saw that at the big banks on the spending side. the comps get a lot easier later this year. sought revenue numbers are going to start look better in the fourth quarter, first quarter. >> so the stock closed of amazon.com at $93.87 a share, dan, and now it's actually trading lower. it's at $90.67 a share.

even though these numbers look better than expected and even though we know there's been a lot of momentum. do you think this is just a reaction to the fact the stock has been up so much and it was sort of sell on the news, buy on the expectation? what do you think's going on here? because amazon shares are trading down. >> exactly, maria. we've had such a big run-up in amazon.com. they did the zappos deal recently. they bought a shoe manufacturer. and they were what, a penny above expectations. the stock has just done so well and the expectations are so high when they come in and do a little bit better it doesn't surprise me that the stock is selling off in the news you that just mentioned. >> let me get to jim gold here. gentlemen, stand by. want to come back to you shortly. want to get to jim goldman now because he's got more detail on the amazon quarter. 32 cents a share on revenue of 4.65 billion. jim, what can you tell us? >> yeah, this is a nice beat for the company. but that top line is coming in a little lighter than anticipated and that's going to raise some

eyebrows. but let's go a little deeper in it report. operating income definitely came in lighter than anticipated. $159 million is going to be disappointing to some on wall street. you look at north american revenue up 13%. you know, the street was looking for something on the order of 17%, even 18%. international revenue growth 16%. the street again looking for something on the order of 21%. so even though we're looking at 32 cents as far as the company's gaap eps is concerned, that topline number is going to be a little bit of a concern only because that now calls into question amazon's decreasing margins and that, again, has always helped tell this story as a key metric. looking out to the third quarter, 4.75 to 5.25 billion dollars, that's good news. it ever so slightly raises the mid-point of the expectation, which on the street was at $4.896 billion. operating income 120 million to 210 million but that doesn't include $95 million in stock-based compensation.

that would take it to 215 to 315. the street was at $271 million. so maybe some disappointment on operating income as well. so this is going to come up on the conference call. you're wondering about amazon slowing down its business and whether these numbers today justify that 70-plus-odd percent jump we've seen in amazon shares since the beginning of the year. maria, back to you. >> jim, thanks very much. back to our guests. and i guess that is the question here. in terms of expectations are we getting ahead of ourselves? babb n bob napoli, let me ask you about american express and miernth do you want to be looking for similar trends from mieshlth and american express, that in fact we are seeing spending? what are the most important metrics i need to be looking at? >> you need to be looking at the level of spend for american express. i cover american express. we're looking for 150 billion. that should be down about 18%, 17% year over year. a little better than the last quarter. you want to look at their credit losses. we do think that american

express credit losses are near or at a peak. i think that would be big news if on the conference call you get the feel the credit losses could actually decline in the back half of the year. >> all right. you know what, gentlemen, sit tight. we're waiting on american express and microsoft. we'll take a short break. then we'll come back, likely have -- microsoft is just coming across right now. and the expectation on microsoft is 36 cents a share. on revenue of 14.37 billion. but the company is reporting an earnings of 34 cents a share on microsoft. the numbers are just coming across the wires now. again, 34 cents a share is what microsoft is reporting versus an estimate of 36 cents a share on revenue of $14.37 billion. we'll get you that revenue number shortly. dan morgan-f you', if you're lo just at the eps number for microsoft, 34 cents surprise you? dan morgan?

looks like dan morgan cannot hear me. hey, dan, are you with us? all right. well, we'll get back to dan morgan in a moment, obviously for some reason he's not hearing my question. 34 cents a share for the third quarter for microsoft. initially trades down. going to be looking specifically about what its guidance is for the rest year particularly as it relates to business managers because that is obviously going to tell us a lot in terms of businesses' bullishness and what they're expecting going forward if they are in fact putting more money to the i.t. budget. and microsoft's going to see that right off the bat. the revenue fought fourth quarter at microsoft is $13.1 billion. and again, that looks a little light here because the estimate calls for revenue of $13.37 billion. revenue coming in at 13.1 billion for the quarter and 34 cents a share for the quarter. this is the company's fourth quarter at microsoft. seasonally i do think that the fourth quarter is a little lighter, but i want to get dan's buy-in on that in a moment. i know that dan morgan owns

microsoft. so we'll check in on that in a moment. but the revenue a little lighter, 13.1 billion versus the estimate which calls for 14.37 billion. and 34 cents a share versus an estimate of 36 cents a share. we are looking at the stock trade down as you can see down about 2 3/4%. right out of the gate, once these numbers are all released. and the stock of course has been very strong today, and it's been strong leading up to these numbers. so i'm unclear whether this is actually a reaction to weak numbers and the expectation that perhaps things are not as robust as some of the market expectations have been suggesting or if this is actually just a referendum on the fact that the stock has traded up recently going into these numbers or a little of both. but microsoft certainly is a bellwether and it is going to set the tone tomorrow in terms of the dow jones industrial average perhaps and the nasdaq composite, which we know is up sharply just in the last two weeks or so. let me get bob napoli's views on

the broader market in terms of investing. in an environment where we don't necessarily know what's around the corner, bob, how would you invest in this environment? >> well, i mean, obviously the market has had a big move. i think we can see that confirmed in improvement by unemployment. the unemployment claims i think one of the most important numbers to keep watching. that has trended down from the high 600s to the mid 500s. we'd like to see that trend down further. i think that can confirm some economic strength in that environment. in financial services that with the moves you've had i think there is still selective opportunities. some of the bigger names are probably more long-term investments now that names like american express have just tripled off the bottom, if you will. >> all right. well, we'll see about that in terms of investing broadly. in this market. we have microsoft out and trading actively in the after hours. cnbc's jim goldman is looking behind these numbers, get to more headlines and in fact what

was the highlight for the quarter. jim, what can you tell us? >> korea. or mo yeah. or more like a lowlight. all you have to do is look at the microsoft chart where you see a 4% decline and for good reason. the 34 cents misses by two bennibe pennies as you were talking about. that top line, even though it defers $276 million in revenue connected to windows 7 and the upcoming release of that product, it is still way off the 14.38 billion that wall street was anticipating. so this is going to come as a shock to many. but as you look through the company's individual business units to help tell this story, client revenue $3.1 billion. that's $200 million lighter than the street was looking for. servers and tools 3:00.5 .5. online services a paltry number compared to the 725 million wall street was looking for. the business division, $4.5

billion. that's $400 million less than the 4.9, 4.95 billion that wall street was looking for. look at entertainment and devices. this is the home of xbox and so much software and a lot of momentum there. $1.189 billion. $1.52 billion is what wall street was looking for. so microsoft coming up light, way light in just about every one of its key business units. maria, back to you. >> all right, jim, thanks very much. jim goldman on microsoft. that indication in terms of the business unit at microsoft very, very critical in terms of what people look for for the broad economy on the business services side of the economy. take a short break. we are waiting on american express. we're going to have that for you when we come back, and we're going to fire up the audio for dan morgan. stay with us.

welcome back. we had a pretty good day in the markets today on wall street. american express just came out with its earnings, and we have also a group of earnings that are pretty important.

american express as well as amazon.com and microsoft. let me get back to our guests here. dan morgan is portfolio manager at synovus securities. now, dan, you own microsoft, correct? >> yes. we're holding microsoft. >> and what is your -- we've got american express coming in at 27 cents a share. that stock is also under some selling pressure here in the extended hours. amex 26 cents a share was the estimate, and the second quarter earnings are actually 27 cents a share. i want to get back to dan in a moment on microsoft. but bob napoli, you cover american express. right out of the gate what do these numbers tell you? >> well, what i need to know is if that 27 cents includes the one-time charges or not. you know, we were looking for 12 cents including the charges, 29 cents without the charges. there should be about 17 cents of charges. i'm not sure if that's 27 or 44 cents that they actually reported. >> i can tell you right now it's 27 cents excludes charges. >> okay.

consensus was 26. we were at 29. >> so this is lower than what you expected, then. >> a little below what i'm at and a penny above consensus. >> well, it is trading down, actually, in the extended market. but do you think this is a reaction to the quarter or a reaction to the fact that the stock was very strong heading into the numbers? >> well, the stock has been very, very strong going into the numbers. it depends what the revenue number is. we were looking for 6.1 billion of revenue net of interest expense. you know, they hit that revenue number, it's probably just a reaction to the run it's had into the quarter. >> yeah, the revenue was just about there. $6.09 billion for the revenue on american express for its second quarter. dan morgan, you heard the news on microsoft, and you mentioned earlier that the business component, the business side of the business is very important. it looks like there was some light numbers there on the business side. the stock is trading down. microsoft is in the extended hours. what's your take on the quarter? >> well, you're right, maria, that's a very important segment

because that's the selling of basically their office suite, which is very popular. you know, obviously not a good number, below expectations. a little bit disappointing and surprising after intel had such a good number in terms of last week. so i think overall what you may be seeing here, maria, is kind of the -- we're at the eve of the release of windows 7. we talked about that in october. i believe they might be under a little pressure right now in the operating system environment. we know that a lot of these new, you know, smartphones and netbooks and all these other things that come out don't require the massive operating system that vista and xp and windows 7 do. and you have to kind of see where is microsoft positioned in that space? i think when you go through this report you'd have to say that obviously it's disappointing and a little bit surprising based on what we've seen so far from apple, ibm, and intel. >> not to mention a huge run-up going into the numbers. talk about the nasdaq composite, up sharply year to date. 22% or so just in 2009. obviously, microsoft, google, amazon all part of that move.

>> yeah, definitely. as we said before, up 23% year to date. great move on microsoft. and i think that because technology as a whole has done so well, especially with these recent earnings reports, that microsoft would follow. and as i said, it just appears they're at the eve of this release. and they have a tough quarter here in terms of the comparison. but we'll look for october, when windows 7 comes out, and see if they're able to get some good momentum back in terms licensing revenue on the operating system. >> bob napoli, would you put new money to work in american express right here at these levels? >> yes, i would. i think the stock -- no warnings. 3 to 3.50. the stock is trading at nine times earnings power. i think we get the earnings power in 2011. i think the stock's worth between 10 and 15 times. historically it's been 18 times. so 36 to 45 over the next 12 to 18 months. >> all right. and dan, your thoughts on microsoft and amazon. would you put new money to work in amazon and microsoft at these

kind of prices? >> amazon, maria, we do not hold at this time. it's not on our buy list. can't comment on that. microsoft is a stock on our buy list. we do hold the stock. it trades right now about 14 times the $1.69 fiscal year estimate, which is at the low end of the range. whether a viewer should buy it is up to their own objectives or risk tolerance but we are currently involved in the stock and it is on our buy list. >> we will leave it there. great to have you on the program. thanks very much, gentlemen, we'll see you soon. following today's big move in the dow and the nasdaq and the big move in the last two months does the rally have legs from here? we'll check it out next.me . you're invited to the chevy open house. where getting a new vehicle is easy. because the price on the tag is the price you pay on remaining '08 and '09 models. you'll find low, straightforward pricing. it's simple. now get an '09 silverado xfe with an epa estimated 21 mpg

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i'm mary thompson at the breaking news desk. american express reporting continuing earnings of 27 cents a share. that was a penny ahead of expectation for the second quarter. the company's revenue, though, coming in a little light at $6.1 billion. analysts were looking for 6.3. provision for loan losses totaled 1.6 billion during the quarter, that's down from 1.8 billion in the prior quarter. in a comment the company says although it's still too early to point to any sure signs of an economic recovery the number of card members who are falling behind in their payments, the volume of bankruptcy filings, et cetera, is on the slightly better than expected. as such, if these trends

continue they say that we expect u.s. lending operates on a managed basis to be below 10% in the second half of the year and they say that is lower than an outlook they gave earlier. just to give you some idea of how the segments did, u.s. card services reported a loss of $200 million compared to a profit last year. international card service reported net income of 64 million. that's down from million last year. global commercial services, its net income down to 71 million in large part because of a decline in spending by corporate members. and then global network and merchant services down 21% on a net income basis to 236 million. again, american express beating on the bottom line at 27 cents a share by a penny but its revenue coming in light at 6.3 or 6.1, excuse me, billion dollars. maria, back to you. >> all right, mary, thanks very much. for more on today's big market move and the outlook for the economy i'm joined by tony fratto a cnbc contributor and former white house deputy press secretary under george w. bush as well as michael yoshikami,

president and chief investment strategist with yc investment adviser. gentlemen, good to have you on the program. tony, let me kick this off with you and ask you about what you feel the economy is telling us. we've got a stream of earnings out after the bell and of course there is some disappointment because we're not necessarily seeing those green shoots in all areas of the economy that a lot of people would like to see. what's your sense second half of the year? >> it's really been pretty much of a mixed picture for the earnings. strong companies are generally doing well, but my question is how high can a dead cat bounce? i think that's really what we're looking at. we stepped back from the abyss on the economy. i think there's a little bit of the euphoria for that. and some money that was on the sidelines is coming in. so there's money to make in the short term. there are lots of drags going forward. >> going into the second half of the year, we've got a number of proposals coming out of the obama administration. do you think that's going to have a big impact on economic growth? >> well, the question is what impact. is it going to have a slow impact or a rising impact? i think it's going to be a drag on growth on the policy side. when you see what's happening with health insurance, tax increases, it's very hard to see

where growth is going to come from, why businesses are going to make a decision to invest. we still have banks, that again, they have stepped back from the abyss but it's hard to see where they go with lending in the future and we know that they're not going to get back to the leveraged positions they had 18 months and three or four years ago. >> michael, what about that? how do you invest in such an environment where in fact people are questioning if the policies coming out of washington are actually going to hurt an economic recovery? >> well, first of all, i'm not quite as negative about the economy. i don't think it's necessarily a dead cat. i think it's certainly a crippled cat at this point. it's going to be a slow recovery. but i think you just need to be very selective. and i think what you're seeing right now in the earnings numbers that are coming out, if you notice they're missing on the revenue side. that really does suggest that in order for the equity markets to go higher you need to be looking at companies that will have tail winds when the economy starts to recover. caterpillar is a company that came out with revised guidance. and i think you're going to see cfos come out and start giving

better visibility, just like american express has come out and said gee, it's not going to be quite as bad as we thought, i think you need to look for companies that are giving those sort of clues. i think that's where you need to place your investment dollars. >> and are you expecting that we are in fact going to see a recovery take hold this year? >> i am of that belief, that we are going to have a very, very muted recovery take place this year, that the recession very well could be ending as we speak right now. i agree that the growth is just not going to be there, particularly if we have tremendous tax policies and socialized medicine. but i do think the momentum is going back the other direction. i do think our downturn is starting to ease at this point finally. >> michael, i guess i really want to know from you how do you invest, then, in that environment. do you want to be owning the cart pilars of the world like you just mentioned or are there other groups you that think can take advantage of a recover write and leadership groups you want to be in right here? >> i think you need to be in cyclicals. i think you need to be in technology, even though technology has had an incredible run certainly over the last 10 or 12 days. i still think it's going to lead the market out. i think microsoft is not necessarily an indication of

what's happening in technology. and i think you need to invest in companies that are going to benefit from, albeit a slow recovery, still a recovery later this year. those are the kind of names i think that are going to make sense. >> you know, a lot of people, tony, feel that if we are in this vulnerable situation that you really want to delay some of these tax increases on small business and on obviously the wealthiest people out there, or the highest earners. what kind of an impact are you expecting? >> well, look, if they're able to go forward with some kind of surtax, some kind of tax on businesses, it's definitely going to have a drag. >> you mean for health care policy or something else? >> well, we know it's coming for health care policy. we know we'll probably see it on individuals above certain income thresholds. we also know we're going to see a drag from cap and trade if they're able to put this in place. those stresses on business are going to be there and we're not finding any way to counterbalance that environment for them. >> what did you think about the

president's speech on health care last night? >> look, he was strong. i mean, he had -- did a decent job in making his case. the problem for going forward with the primetime news conference and you're asking networks to give up that time is you've got to come out and say something new and the president has not said anything new and so probably doesn't change the game and the political environment on capitol hill right now. >> it's interesting that this health care proposal, they want to get it done so quickly. what are your thoughts on making sure something's passed by august? >> yeah, that's the question. they're using apocalyptic language that we need to get it done by august 7th before congress goes out. we've got lots of time for this to do it right. and in fact, we're waiting for the white house to come out with their economic midterm projections. congress needs that information if they're going to make this decision. >> michael, do you see an investing play based on this health care proposal? >> yeah, i do. it depends on what the proposal looks like. but i think you are going to be having really a separation from companies that are going to be really focused on trying to deal

with price controls and companies that are going to be a beneficiary. i mean, i could potentially see hospitals benefit from this. even though their cutbacks are going to be in terms of the payments going to hospitals there may be more people going to hospitals. i could see pharmaceutical companies struggling with price controls. i think you have to look at the language. and i think it's absolutely correct there is just an incredible lack of details right now, so it's very, very difficult to make fundamental judgments. but i do think it's something investors need to watch for. >> we'll leave it there. tony fratto, great to have you on the program. michael ysshikami, we appreciate your time. up next an exclusive interview with the ceo of constellation brands. he'll explain why some big changes the company is going to be announcing are going to impact the efficiency and profitability of constellation brands. stay with us. >> announcer: here's a look at some of today's byrnes and losers.

welcome back. constellation brands is making a

big change to its distribution network. the liquor company is consolidating, moving from more than 15 distributors in the united states to just four. that will exclusively sell constellation brands products. for more on the announcement and the latest on the company i'm joined right now in a cnbc exclusive by the president and ceo rob sands. mr. sands, nice to have you on the program. >> it's a pleasure, as always, maria. >> tell me why you're making this change to the distribution network. >> yeah, what we've done, maria, is we're consolidating our distribution in 19 states around the united states, a little bit more than 50% of our market. and it's really to take advantage of the full power of the constellation portfolio today. if you look at how we previously distributed our brands in these markets, we were split amongst several distributors. we're one of the largest profit providers to the wholesale distribution network in the united states for wine and spirits. so we really weren't getting the

full benefit and the full power of our portfolio with these distributors. so by consolidating this allows us to garner a lot more support for our brands, and it's all about driving organic growth. >> well, it's certainly an opportune time to make changes in an environment where it seems like so many companies are struggling here. in your latest earnings report first quarter profits were down 85%. there was an analyst at deutsche bank, mark greenberg, who told clients he was concerned business appears to be worsening. what can you tell us about business, particularly for beer, which is one of the semths that that analyst brought up as far as deterioration? >> yeah, well, first of all, you're quoting our statutory earnings. our comparable earnings, which exclude one-time and non-cash charges, were actually up and not down. so in general, you know,pleased quarter performance, as was the market in general. our beer business is performing

not as well as we would like it to, but it's nevertheless performing well given the commission conditions that are out there. and our wine business, you know, continues to perform fairly well in this economy also. our oirng sales for the first quarter were up about 1%. so all in all, although that's slower growth than we would like to see, in this kind of economy i think that it represented a pretty good performance. >> when do you think things turn? >> i'd say that things look like they're in the process of turning right now. i think it's going to be a slow recovery, but i think that sometime during calendar year '10 we ought to see things get back into full swing. >> all right. we'll leave it there. mr. sands, always nice to have you on the program. we so appreciate your time tonight. >> thanks a lot, maria. >> thank you very much.

we'll see you soon. rob sands, president and ceo of constellation brands. up next on "the closing bell" we'll tell you why hershey shares got a sweet return on their investment today. up 7%. stay with us. has the fastest hands boxing has ever seen. so i've come to this ring to see who's faster... on the internet. i'll be using the 3g at&t laptopconnect card. he won't. so i can browse the web faster, email business plans faster. all on the go. i'm bill kurtis and i'm faster than floyd mayweather. (announcer) switch to the nation's fastest 3g network and get the at&t laptopconnect card for free.

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welcome back. now a look at some of the other stories we're following on the "closing bell" ticker tonight. candy maker hershey reporting its second quarter profits soared 72%. the company earned $71 million, easily beating wall street expectations because of higher sales prices. the company also raised its full-year profit and sales forecast because of easing commodities expenses. shares of hershey's tonight up 7%. safeway's second quarter profits slightly higher due to tax benefits. sales were down 6 1/2%. the company generated $9.5 billion in sales. that missed wall street estimates. the lower revenue forcing the grocery chain operator to cut its full-year earnings guidance. the stock today down 7%. and reynolds american, the nation's second largest tobacco company, reported a 4% increase in second quarter earnings to $377 million due to higher prices and strong sales of smokeless tobacco products. the company also raised its full-year earnings estimates above targets. the stock today up 2 1/2%, as you can see. our traditional media

outlets, are they still an attractive investment? right now despite concerns about revenue shifts, do company likes twitter and facebook? one of wall street's top media analysts will be with me, giving us her take on things. back in a moment.

advertisers today, and we're one of them, by the way, looking for really strong returns on investment. and we have to offer that when we sell time just as we have to offer that when we buy time. so i don't know that it's necessarily going to be a shift from one medium to the other. it's going to be a shift in the direction of where can provide the most value. >> shifting and finding the best value in advertising. disney's bob iger highlighted the hot-button issue at "fortune's" brainstorm conference in pasadena, california. over the next two weeks it will become clear if there is an advertising shift under way from traditional media to new media, with disney, comcast, cablevision, and discovery all set to report quarterly earnings. for insight on what to expect i'm joined right now by one of the most widely followed media analysts on wall street, jessica reef cohen. she's managing director at bank of america securities merrill

lynch. jessica, always great to see you. how have you been? >> great. thank you, maria, for having me on. >> let's talk about the quarter coming up. i guess the shift from old media to new media is one of the biggest issues here. what are you expecting in terms of the media companies' earnings? do you think we'll see a real reflection of that shift going on? >> this is going to be such a difficult quarter for traditional media. we're looking for solid double-digit declines in revenue and in cash flow. there will be very significant cost savings. but it's going to be a very tough quarter. for the cable kilometers we're expecting revenue and cash flow to be up modestly. low single digits. but this is -- you know, advertising, it's been a very bleak year. >> and advertising, really the traditional media companies because the advertisers aren't spending money and then they're looking for the best value. are we seeing the new media players get the slack or are they also down? is money moving to the internet

and to the digital moving to th praur properties or is it down across the board? >> it's been down across the board. this is a very hard economy to read. things clearly -- you look at the market today and you know that investors are expecting things to get better. so the next two weeks will be critical. last quarter, the stocks took off after companies said we're starting to see stabilization. that was the key word. we think that that will be the message this quarter as well. either stabilization or a bottoming of trends. what we expect is -- is maybe slight improvement in the local markets, but very slight. national still is incredibly difficult. we are in the process of the up-front advertising market. all of the networks, meaning broadcast and cable networks, will lock in lower rates for the next four quarters. so there's -- this market is moving very, very slowly. >> i guess four quarters, that means we're going to be seeing this basically in the numbers

for some time to come. certainly you're talking about four quarters. what about what bob just said coming into this segment? he's saying, look, we're seeing companies look for the most value so there are beneficiaries who can provide the most value. who do you think is best positioned there on that front? >> the issue with new media is there's only so much you can spend and get real efficiency. online, hulu, a lot of the models that are -- that are working are really subscription models like disney's model is -- either they have subscription businesses like club penguin. but for advertising, there's no real -- google is great for search, but there's no giant beneficiary at the moment online. and offline, it's a tough market. i mean, one of the biggest categories are the studios. and their spending is down 5%, 10% for the year ahead.

auto is starting to come back a bit, but their spending will also, i'm sure, will be down. >> they're not going to come back and say, oh, you know, we want to put lots of money into advertising. i get that. do you have a sense as far as when we might see a return or -- or recovery in this group? i'm looking at your ratings on the stocks. you know, you've got a couple of underperformers, a couple of holds. i want to get your take on investing. what is your sense in tum terms when business comes back? >> even though local seems to be picking up a tad, it's very, very slow and it's still down 20% or 25% from the previous year. so 2009 is -- it's -- there's not a chance that things will come back. 2010, our expectation is there will be a gradual recovery. certainly the comparisons get easier. >> sure. >> national, again, is -- that's a big part of most of these companies. revenue lines -- and the up-front market, clearly cpms will be flat if not down.

and so you have to work through the market. that's a function of the economy. our concerns is that unemployment continues to go up, wage growth is under pressure. you know, there just seems to be a lot of pressure. this is a push and pull between advertisers and the sellers of advertisements. >> we've looked at the stocks you've got. you've got a buy on dreamworks. you've got an underperform on disney. and you've got a hold on news corp. can you go through the names that you think you want to hold and some of the ones you want to be buying in this environment and why? >> oh, of course. discovery is one of our strongest buys. they've had phenomenal ratings. they have good growth. there's a huge amount of room for improvement and they're expanding it to nationally. and they're converting many of their channels. they're converting to the oprah winfrey network. so there's a lot of potential growth.

dreamworks animation is another company we're recommending. they have zero revenue from advertising. they have three movies coming out next year. they are diversifying their revenue streams into television and also on broadway shows. so we like that. and if you get really lucky at some point in the future, this is a company -- it's small enough where it could potentially be sold. disney is a fantastic company. probably the highest-quality name in the group. great brands. fantastic management. very good financial discipline. excellent -- you know, the way they look at the world, i think, is so admirable. our issue with disney really is that their businesses are lagging businesses, lagging to the economy. and so they -- they went down after the recession started. >> right. >> and their businesses typically come back later. news corp, they have great

management, great operations, but, you know, they have a lot of traditional media businesses. so we really don't expect a big pickup until they get through the next few quarters. >> all right. we will leave it there. jessica, great to have you on the program. thanks for spelling it all out for us. >> thank you. >> jessica cohen joining us, senior media analyst. we turn over to the nasdaq markets right now. melissa lee is standing by. >> hey there. we'll be all over the after-hours action. microsoft, amazon and american express. the continuation of a rally that we saw yesterday. we'll have updates throughout the hour straight from the conference call. also, a technical take on where the markets are headed next in two ceo interviews you'll only see on "fast money." maria? >> see you in about five minutes. up next, we'll tell you what could move the markets on friday.

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let's look at the news of the day.

we had a stream of earnings out after the close. it is moving stocks. microsoft is under selling pressure given the fact that the company did report earnings that were slightly less than analysts' expectations. issues on the business side of things, which is concerning because, of course, it tells you something about i.t. managers. amazon.com also weaker than expected. the stock closed at 98.76. amazon is up 70%-plus in 2009. ditto for american express. the company reported weaker than expected numbers and it's under selling pressure. i'll see you tomorrow on "closing bell." "fast money" is up next. join us tonight for our special programming on the markets tonight. as you just heard from maria, stock index futures taking a hit. shares of microsoft, amazon and american express all down in the after-market trade thanks to their disappointing earnings results. research in motion is still interested in nortel's wireless

assets. and president obama just wants congress to keep working on a health care plan. "fast money" with melissa lee starts right now. we've got an after-hours massacre on our hands. amazon and america express down big-time. i'm melissa lee. these are the "fast money" traders and this is "fast money." it is the s&p 500 closing at the highest level since november, but it's in for a big retreat tomorrow. how do you protect yourself and pr? let's get to the word on the street right now. we've got to talk about microsoft first. for that, let's go straight to jim goldman with the latest on the quarter. jim? >> yeah, you know, melissa it's 5:00 eastern. to borrow a cnbc phrase, do you know where your $1.25 billion is? this is such an ugly report from top to bottom. let's get to the details here. 34 cents, two cents light. that $13.1 billion in revenue.

as i said, 1.25 light, even though the company is deferring $276 million in windows 7 related revenue. each of the company's key business units from server and tools, the company's business division, entertainment and device s all of them two, three $400 million lighter. you can bet that analysts are going to be eager and anxious to find out why business was so soft. that's one point. the company's cfo is talking to the "wall street journal." he does say that tough economic times will last for the remainder of 2009. but there is some reason for optimism into 2010. one final thing i would add is that, you know, before we jump to conclusions here that microsoft's business is falling off a cliff, just keep in mind that windows 7 is on the way. so is a new office suite, new server software. there are major new products in the pipeline. it's likely that some of microsoft's customers are holding off purchases because