order now and get an extra three weeks of fantastic meals. that's right, 105 meals absolutely free. call or click now. guys, you can do this. just pick up the phone and call. you will lose weight. you may remember that brian was on bsh brian benstock was on from paragon honda and acura. he told me his dealership wasn't listed on the government site where they list every single dealership in the country that can participate. he said maybe it's because i'm a foreign dealer, he's been trying to get on and was unable to do so. well, we thought that was rather strange, especially given that

most of the clunkers coming in are american and it is very clear most of the new cars coming out are foreign brands, maybe made here but they are foreign brands, there is no question about that. so we found an example in the e state of missouri. we went to cars.gov ourselves just to check this out. adams auto corp. is listed but it did not tell you that adams auto corp. is really adams toyota, which is how they answer their phone at that dealership. elsewhere in missouri we found bening ford, and it is listed on cars.gov as bening ford. interesting they'll list bening ford but not adams toyota. they simply appear to not want to put foreign brands on the site. is it an oversight?t? if so hopefully they'll fix it. if not the backlash will come no matter what they do. hopefully they'll fix it. thanks so much for watching. time for "the closing bell." an appeals court wants a new insider trading sentence for ex-qwest ceo joe nacchio, saying six years is too long. a new diabetes drug from aft rah zeneca and bristol-myers squibb that's been approved by the fda. and wells fargo is being sued by the illinois attorney

general for allegedly discriminating against minority borrowers. that's cnbc.com dues now, first in business worldwide. i'm mary thompson. and there's a live picture of the floor of the new york stock exchange. we're entering the final stretch. and stocks looking to finish the day and the week higher on track for the dow for the best monthly gain in seven years. hi, everybody. welcome to "the closing bell."." i'm maria bartiromo along with matt nesto today. good to see you. >> you too. >> here we are coming to you u from federal hall. i love being from federal hall on our "summer on the street" special. it is such a proud place. the actual place where george washington, our country's first president, took the oath of office. >> tons of people hanging out. and the markets here, as maria said, not only positive for the day, the week, and the month. but if you take a look here today, kind of cresting. people really not pushing it into the weekend. the dow's up just about 20

points right now. you can see 18 points on the session. most of the work getting done for the week yesterday. and today was pretty much a glide through the pattern this morning. we got through that gdp data and we worked through. checking in on the nasdaq you're going to see also some gains on the session. not a big move. again, we're looking at the big picture here on the week. three weeks in a row positive. five months of gains for both the nasdaq and the s&p. and the dow up for the fourth time in five months.. so very, very positive. at least on the bigger picture. and at least today we can just take it as a green unless we give it away in the last hour. >> we'll see about that. but overall the momentum is on the side of the bulls. better than expected earnings and a ton of money on the sidelines looking for a place to hold and you don't want to get in front of this train.. >> no, you definitely don't. and it's interesting too the rotation we're seeing in stocks. let's get to our market reporters standing by in the usual locations starting off with bob pisani on the floor of the new york stock exchange. >> thank you, sir. what a nice month it has been here. let's just take a look at the winners and losers. the important thing is traders really believe this month that

the future was in global growth. and you can see that n. what they're buying, in the cyclical stocks, which completely outperform everything else. look at the big performers this month. commodities, tech.h. these are one-month numbers. consumer discretionary. those are retailers and home builders. and industrials. those are huge numbers for one month. how about the laggards? all the defensive names. your telecom and your utilities and your health care. hey, they did pretty well. this is not anything to sneeze at. but compared to the numbers that you saw for the more aggressive cyclical names they are e definitely laggards. as for the dow, well, you've heard it all week. but the bottom line is 8.8% gain here. that's the best since october 2002. the best one-month gains. there's a one-month chart for the dow. you can see that going up. and that's because the big industrial names, your caterpillar and other cyclical names all move to the up side. want a theme for the next month or so? try figuring out what's going on with the dollar because it keeps weakening here. the imf made some negative comments here recently about it. you saw as the dollar started

moving down about 11:00, a very familiar thing happened and that is commodities and commodity stocks start moving up. in fact, the overall market tends to strengthen regardless of whether you think about a strong dollar policy being the best thing. it's definitely helping certain stocks at certain times. it's pretty simple. you can look at any stock that's a big commodity not just a gold stock. freeport-mcmoran. these are intraday charts i'm showing you. all of a sudden you get the middle of the day about 11:00 boom, they start moving to the up side. you get this lift in all these major commodity stocks. there are the dollars. and the dollar strength or weakness will be a major theme here for the month.h. as for citigroup just want to note today that remember, there is a rebalancing going on. a short while ago citi completed a big exchange of its preferred stock for common stock. today the russell indexes are rebalancing to reflect the increased weighting of citi in the indexes. most importantly the russell 1000. so traders at the close have to buy citigroup because it's got a bigger weighting. and sell some of the other stocks short.. this is going to happen next wednesday as well with the s&p

500. bottom line you're going to get a lot of volume, not necessarily much in the way of price swings. tradertalk.cn tradertalk.cnbc.com for more. and mike, it's been a great month for the nasdaq as well. >> you set me up perfectly because we are about to close out the month. i wanted to highlight this very pretty one-month chart for july here at the nasdaq. barring some kind of unexpected huge sudden 11th hour sell-off, the nasdaq is on pace to have its best july in 12 years.s. but we're still not able, it doesn't look like, to crack above that 2,000 mark at the close today unless we have some pickup here late in the day. one of the reasons for that is that yahoo is down yet again. so microsoft ceo steve ballmer comes out, he says investors don't get it, the hookup with microsoft and yahoo is a win-win for both companies.s. what does yahoo do? it goes down another 1 1/2%. it's down about 17 1/2% this week alone. even microsoft is seeing some weakness here in the afternoon trading session, down 1% right

now. we've also got the nasdaq biotech index under pressure today. a big reason for that is this. look at the clip that genzyme shares fell off of down now about 8%. when the company revealed midday that the fda wants to come back for another look-see at a key drug manufacturing plant. analysts very bearish on that development. and finally, osi pharmaceutical shares down about 2 1/2% ahead of key data coming out this weekend at a scientific conference on its language cancer pill called tarceva. follow me on twitter at mhuckman. let's go to rebecca at the nymex. >> thank you, mike. it was an incredibly volatile day in the commodities complex. oil peak to trough more than i $4 swik in prices ending on a bullish note 69.45 the settle on the last day of july. and what a month prices have had, basically ending flat in spite of all the volatility we've seen in the last couple of days. today's story was really a

breakdown in the dollar. you saw as soon as the dollar began breaking down oil prices began surging. chris froeny of heritage energy says the up side close was bullish and a very bullish beginning to the month of august. also take a look at gold because those prices had a major swing on the day's session. $19 or so to the up side for the month. not ending flat like oil but ending higher by $26.66.. and i want to lastly call out steel prices because they have quietly emerged as a front-runner in the commodities complex in terms of gains for the overall month of july. up 13% on the month. the first gain of the year for a month. and that is something that many are looking to as a potential bullish signal as some restocking takes place. then again, when you look at where steel prices are right now, they're still many, many dollars away from their all-time high which was hit last year, july, above $1,000 this very  month. rick santelli, over to you in 

chicago. >> thanks, rebecca. sure, yields are down a bit. but the story isn't that yields are down, you know, in the neighborhood of a dozen basis  points for 10s. or the winner today being down  on the 30-year bond, which has  really been the most buoyant maturity in terms of higher price lower yield. remember, though, a week from thursday we will have a 30-year bond auction the august refunding. but if you look at a one-month chart of ten-years for the month of july, it's virtually unchanged. close to 3.53. now at 3.51 after the big rally. hey, let's look at another important chart, maybe the most important. the dollar index. not only as it moves down close to two cents on the month but it is hovering at the lowest levels in ten months and we are making obviously-f it's a ten-month low, new low close for the year on a friday the last day of the month as technicals significant for the dollar.. and let's look at the last chart. this is a combination of 2s and 10s. why do i bring it up? because at the end of june saw the yield curve 10s minus 2s

let's call it around 2.41, 2.42. here we are roughly 2.48, also virtually unchanged. maria, back to you. have a good weekend. >> rick, you have a great weekend. thanks so much. rick santelli in chicago. hot down here, hot inside with this rally continuing. joining us to talk more about the narkt, rich peterson director of markets, credit and risk k strategies at standard & poor's. and daniel greenhouse is a market analyst with miller tabak & company. what is driving this market? we know revenue growth is not there for the quarter. right? earnings because of cost cutting. >> earnings because of cost cutting. right now we've seen for the companies that have reported revenues are down anywhere from 14 or 15 to 17% or 18%, a fairly healthy margin. what's driving the rally now and this is not any new piece of information is the belief that the third and fourth quarters are going to be better and as a result of those cost reductions as the top line picks up you're going to see more explosive growth on the bottom line. >> i was impressed with that gdp number today. i've got to say i was not expecting such a drastic move

from this last one. what are your expectations and how do you feel about that gdp? does that signal anything for us in the second half of the year? >> expected was negative 1.5. we came in better than expected. but if you look through the numbers you'll see some worrisome signs here, residential investment down over 129%. increase in government spending. weakness still in the consumer. worrisome signs. commercial real estate worrisome. dan talked about the potential for the recovery in the second half of the year. but the concern is that could be muted, that profit growth will probably improve but we had this great gain, over 45% since the march 9 lows. there's reason for pause going forward.d. >> i would ask about real estate because we had mdc, one of the home builders, reporting earnings today. and for the first time in like four years they reported growth in orders.s. only about 2%, but hey, the first time. then we've had the housing gains

and it's positive. is this real or? just a question of numbers finally flipping? >> i think there's two things here. the first is that we are clearly seeing some signs of stabilization in the housing market. the first point is that in no way means we're going to have an upturn. and the second point i would make with respect to prices in the case shiller data a lot of people cited. it's not seasonally adjusted. if you seasonally adjust that data it shows continued price decline. >> here's something going on before we all get excited we have to remember we're all the way down here from all the way up here. we have a long way to go. >> what it is ain't exactly clear to finish the pun. >> we were chatting about restaurants earlier and there's a big tug of war with discretionries. if you lack at the big winners this month it's going to be the auto parts companies, the home builders. discretionary, again, this is the -- calaway golf. >> the end demand doesn't feel like it's there. >> if you see the past -- wage

increases over the past 12 months, very restrained. the potential of higher taxes going to put a cap on incomes going forward. 3/4 of the numbers we've seen, we see companies beating expectations. this month alone what's been the laggard? energy. consumer discretionary's done very well. >> the question is how do you invest in this environment? for example, dan, are you going to be committing new capital to these markets?? >> it's a twofold answer. the first is after a 45% rally how much further could we be driving equity prices in the face of the information we have? i'm a little unsure on that data. at the seam time you are seeing some stabilization here and if you start to get month-by-month data that corroborates the idea that there is even a most upswing, you can start to rotate into some names including -- the technology sector's done very well. good balance sheets. i happen to prefer staples, the safety play to complement it, the materials names in the emerging markets. there's definitelyplay places you can put money even after this rally. >> do you agree with that?

>> even though we hay rise from march lows, from the october '07 highs over 1500 we're still 50% below where we were. the fact is it's just to get where we were you have to write 50%. and that's just not happening -- >> is stock investing -- recessions die of old age. with four quarters negative. we haven't done that in the post-war period. so do -- >> there's been lots of correlation between gdp and equity markets. what's going to be the driver is corporate profits. s&p number's going to be about $55. next year it's a big question mark. does it go north of 65, $70 on the high end or just flattens out? if i can just remind everybody that gdp expanded throughout 2002 and the stock market did not have a very good year that year. if you were one of those investors who bought in anticipation -- if i told you the day the economy was going to turn around and you bolt bought

four to six months in advance you had a bad return. >> interesting. have a good weekend. stay cool, guys. >> 45 minutes to go until we close this bad boy up for a friday. the dow inching into the weekend with positive gains. same for the nasdaq and s&p. good for the week, for the month. five straight months for the s&p and the nasdaq. >> government spending, not consumer spending driving the any recently. we're going to take a look at that spending. up next we'll tell you what sectors are going to see the biggest gains because of that sending. >> and you know thank you love it you wait for it, it's the "fast money" final call. find out whether this tech rally can get another boost next week when we hear from cisco. >> and then matt, $33 billion. yes, that's the number banks have been handing out in bonuses last year even as they took taxpaytax p tax-p tax-p tax-payer dollars because of the compensation crisis. >> and as is our custom, a peak

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welcome back. the technology sector has been one of the brightest places for investors in the market certainly since the lows of march. it's not the only place investors can find some success and opportunity. we break down other sectors right now with thomas mcmanus, chief investment officer with wells fargo advisers and jason trenic, managing partner and chief investment strategist with strategyis research partners. let's talk about the market. the momentum on the side of the bulls. do you think this continues second half of the year, tom? >> i think it's a little ahead of itself. we were down 50 points and then rallied 60 points and now everyone's very excited again. clearly earnings were better than people were expecting, but revenues are down. the economy isn't going to be picking up as quickly as a lot of the bulls think. and we think the ultimate recovery for profits will be sometime in the latter 2010.

>> latter 2010. jason, do you agree with that? >> i'm somewhat more bullish tactically simply because i think you're going to have a lot of for lack of a better term faux growth. you'll have a lot of inventory rebuilding and fiscal stimulus which will probably make the economy look a lot stronger than people are expecting. and i know a lot of hedge fund clients that don't want to stand in front of that. so i can't say i'm fundamentally bullish but i also -- we've been telling our clients it's more dangerous to be short than long. >> how do you want to invest then? what do do i at this point after this big run-up? >> my own particular view is i think you want to invest in quality and i also think you want to invest in the late cyclical stocks, energy and basic materials. and that's mainly because the typical way you play the end of a recession is by buying early cyclica cyclicals, by buying retailers. i don't think that's going to work this time because you have to restructure the u.s. consumer. >> tom, what about you? what are the sectors to own right here in. >> i agree with jason. for the first time in a while i agree with jason. i think the commodity-sensitive

cyclical stocks are a good place to be.e. i'm still very nervous about consumer discretionary spending and i'm still concerned about the financial sector and -- but i do believe that some of the defensive sectors represent great value to anyone who has a three to five-year horizon.n. >> what about technology, though, in terms of the valuation? we've seen a lot of the money moving into tech. does that still have legs? do you still want to buy technology, put new money to work at these levels? ? i think you have to be a little cautious on technology. we were very bullish in technology coming out of the march lows -- >> i know that, yeah. >> -- because their march lows were nowhere close to their lows back in november. they were showing positive divergences at the time. they've been leading most of this rally, and you think some of them are looking pretty expensive. >> what are you hearing from hedge fund clients right here? i know there's a fear of being short when the momentum is so strong in the market.

but is there conviction as far as to what to avoid, what to be long on? >> to be honest with you i don't think there's a lot of conviction out there except that this is an important year from a relative performance standpoint. there's been a lot of hedge funds that didn't do particularly well last year, they're facing significant business risk this year and really can't afford to miss out on a rally. and that's part of the reason n why, again, it's more technical in nature than fundamental what's happening right now. >> i see. and what are the catalysts in your view that perhaps could turn this thing around? >> to go the other way? well, the two things i would watch are long-term interest rates, any sort of sense the fed may not continue to monetize the debt, or some sort of talk that you really are going to have to raise taxes to square the circle in terms of the deficit. those are the two things i think are most important, taxes and interest rates. >> that's the thing, i'm going to get your take on this because we know what's going to happen in 2010 if the president's policies do come to fruition. taxes are going to go higher. there is going to be bigger government. does that play into the

investing story at all? >> well, there's two sides to gdp. you spend more. right? that winds up being income, and it winds up generating growth. so yes, the deficit rises. but what we're seeing is really debt out of one set of pockets, the consumer, into another set of pockets, the government. so i don't think it's really going to interfere with the long-term trend growth that much other than the fact that consumer -- the savings rate had come down for 25 years. that was really stimulating growth. and i think what we're going to be seeing is a shift in the nature of growth that the economy is seeing. so i think we still have a long way to go for the economy to reconfigure itself to be less dependent on a spendthrift consumer. >> you're a long-term guy. i know that. but your whole buy and hold strategy here has been up for debate after a lost decade.. you still believe -- >> i think the average stock has obviously outperformed the s&p

500. you've had two big bubbles that were in the two largest sectors. first you had a bubble in technology ten years ago. then you had a bubble in financials a couple of years ago. but really i think if people focused on owning good businesses, you know, read buffett, understand what it means to own a good business, you've done significantly better than the averages over time, and i think you still can. i think there's still good bargains if you approach owning companies as underlying businesses with the appropriate horizon. >> i want to get your take really on an issue that i've been talking a lot about and something i feel like is timely. and i'm calling it the inflation trade, but it's not really about inflation. it's about increases in commodities and how to participate in that.t. it really is a china story, i think, jason. >> i think you're right. >> china -- and we had some people on the show this week who said china is just buzzing.g. when you're on the ground in china, they're back up to 9% growth. so do you want to own the copper, steel, iron ore, stuff like that, producers?

>> i think you do. china's walking a very fine edge he here between keeping growth fast enough to keep people employed but not fast enough that rice prices double like they did last year, which is dangerous socially for their economy. my own view is i think you're right. whether you want to own commodities has almost everything to do with whether china is stepping on the accelerator. and for now i think it's stepping on the accelerator. it would only be if you saw big food inflation i would think they'd go the other way. for now i'd be invested there. >> why is it the china stimulus package seems to be working better than the u.s. stimulus package? i mean, all of a sudden the stimulus package in china has really taken effect.. >> i think one of the problems is to what extent the states and municipalities are doing just the opposite of what the federal government's trying to do. the federal government is increasing spending, increasing debt, and the states and municipalities are doing just the opposite. they're laying people off. so that's a reverse stimulus incentive to dampen what's going on. >> and i think shovel ready,

let's face it, shovel ready in china means something very different than shovel ready in the united states. shovel ready in china means you pick up a shovel and you start digging. in the u.s. it can take a long time -- >> but they have a problem appearing too and there's a lot of see-through buildings. they're brand new buildings that haven't been occupied. >> yeah, that's really an important point. thank you very much. i know you guys are coming back later.r. so we'll continue this conversation. jason trenert. it is hot out here. you probably can tell, everybody. up next charlie gasparino will be along telling us what he thinks of the future of ubs's brokerage division. back in a moment p.

nice tie. >> thanks, bro. listen, they're going to find a guy to run it first and when they find a guy to run it they're going to sell it. ozzie grubel, the head of ubs's brokerage division wants to do.

find someone to run it. bob mccann's on the short list. ozzie grubel. another candidate on the short list. then they're going to sell it in three years. basically, he's been fielding calls from this set of people. i think the top one's amazing, kkr and bob mccann actually went to try to buy the whole thing. we reported sallee krawcheck went to buy it. and joe grano, the amazing joe grano went to buy it. grubel doesn't want to sell it now. he wants to sell it in three years. he needs someone to run it for three years. that's where they are right now. mccann is on the short list. lundman from wachovia is on the short list.. and we'll have to see where we are. >> how does it stack up in terms of size and clout and brokers, et cetera, to the now merged morgan stanley smith barney and such? >> nothing's bigger than morgan stanley smith barney, right? 20,000 brokers. a huge operation which morgan stanley i think over four years' time will be controlling. so they'll be controlling 20,000 brokers. after that you've got merrill lynch at something like 16,000 brokers. i believe wachovia, which is interesting, they're look at

this guy lundemann from wachovia. i believe they have 7,000, 8,000 brokers. i think it's the old prudential brokerage force at that wachovia right now. and then ubs. remember ubs used to be paynewebber and they have about 8,000 wroekers. they used to have an amazing brand name. they lost that in recent years. they haven't done well in recent years. grubel is new to ubs. i think this is an amazing story considering so many people want toed to buy this thing. sallee krawcheck as i reported, i think she had investors. she went to them. ozzie grubel said no way. former head of wealth management at citigroup.. bob mccann goes with kkr to ozzie grubel and says we'd like to buy it. he says no. and joe grano. joe grano used to run painewebber before it was bought by ubs. he basically asked grubel if he's interested. he said no to that. then what happened, it's fascinating, grubel turns around and calls up bob mccann and says listen, i don't want to sell it to you but i may want you to run

it. and they've had extensive negotiations and discussions. i also hear he's had discussions with other people. but from what i understand, on the short list is mccann and the guy from wachovia. that doesn't mean that mccann's going to sign the deal. i mean, listen, working for the swiss is not exactly a walk in the park here. i mean, talk to anybody that worked for -- - >> but the chocolates at christmas, charlie, offset all of that. >> what's that? >> the choblths you get at christmas -- >> oh, yeah. wonderful chocolates. >> it's worth it. >> but bob mccann -- >> charlie, very quickly, i just want to recircle back to this tax issue. what effect would that have on the selling price, the brokers that work for ubs as well as the clients that have accounts there? >> you know, i don't think anybody knows just yet. have you seen the details on the settlement? i don't know if it's been unsealed. >> that is the candor that we know and love mr. gasparino for. >> but i will tell you this. that if they can get that out of the way the next step is basically to get someone to run this. and you know, you probably can't get a better guy than mccann..

although signing him up is not going to be easy. >> no. charlie, thank you. appreciate it. have a good weekend.d. we'll catch you soon. charlie gasparino. so folks, the dow is up about 40 points right now. big week, big month, big year now. we're just about half an hour away before we close it up for the week. we'll be right back. announcer: welcome to the now network. currently, thousands of people are enjoying the new palm pre from sprint. its revolutionary web os allows multiple applications to run at the same time. - ( thunder and rain ) - millions are using the simply everything plan. - each is saving $1200 over an at&t iphone plan. - ( cash register dings ) together that's billions of dollars. enough to open a dunkin' donuts in space. from america's most dependable 3g network. bringing you the first and only wireless 4g network. get the palm pre. only from sprint. only on the now network. deaf, hard of hearing and people with speech disabilities access www.sprintrelay.com.

okay, folks. 30 minutes to go until we wrap it up for friday. it is the closing bell. i'm matt nesto. thanks for coming along for the ride. maria is going to be right back in a moment. take a peek at the dow right now up about 40 points, it's good for about half a percent. the nasdaq is lagging, still up, about a quarter of a percent on the day. but the weekly haul for the nasdaq and the monthly haul for the nasdaq's going to be a little bit more positive. up about 8.4% for the month of july. and the s&p 500 up about four points right now. again, about half a percent on the session. the big move, it was three days down, remember, and two days up. the big move and the one that

pushed us into the positive column for the week of course coming yesterday. well, technology and the canadian dollar, well, there's a topic for discussion. for anybody on a "fast money" final call friday. joining us now to connect those dots is jim iuorio, the director of tjm institutional services. jim, good to see you as always. so connect the dots, my friend. the canadian dollar. >> sure. today's a weird day. today we're seeing a ton of dollar pressure, and over the last five months the markets have loved that because the weak dollar equals that whole reflation trade that's been going done. well, today the dollar's really week, and the market's kind of -- i know it's a little positive now but all day long the market's been staring at the weak dollar wondering what to do and this tells me one of two things. one is this dollar's a little scarier than it was in the past, before it was the risk allocation trade and now it's just the dollar getting crushed against every other currency, so maybe that's not going to be the haven of value anymore that it was. or two, that we need a real live fundamental catalyst to take us

through the 1,000 level in the s&p, psychological level. the way to play it is this -- the canadian dollar's been the laggard of all the other currencies against the dollar today, and it's been the star over the last few months.. so i'm sure there's a good reason today for that, but overall it's probably a good place to be. so you buy the fxc. now, as far as the technology play goes, we have cisco earnings coming in on wednesday. we were just talking about a catalyst, what could break us through the psychological level. cisco certainly has the power to do that if it comes out with good earnings. the thing i worry about buying cisco is that it's been a little overbought as of late. i think if you bought the xlk, the technology etf, you could play that and still have a little more room on the up side too. plus the action on that is really cheap. you can get in on the call side simply. but today's a weird day for me, the fact the market hasn't rallied a ton off the weak dollar. >> and it's a weird day too on tech because tech isn't really leading it. it's material stocks and some of the miners. but if you step back a little bit, the gold and the steel stocks within materials haven't participated in that market-leading rally for the past month.. >> that's true.

and today the reason gold is moving i think is because it got a little panicky when the dollar really was on its lows. and i think and the pure panic play remember is just buy gold, forget about everything else. that's why oil didn't budge on that. gold and silver were the big gainers there. and to me that was a little worrisome because it meant there was people out there that should some panic. >> jimmy "many firms" iuorio, as we say. i can never keep track of all the firms. this one's for keeps. thanks a lot, body. coming up on "fast money" as the markets look to close the best july in over a decade, the traders are going to give you their best plays heading into august. plus, two "first on cnbc" interviews, with the ceos of health care heavyweight allergan and software giant mcafee. melissa lee and the traders live at 5:00 as always. so 20 minutes to go until we wrap it up here today. we are still at a positive level, about half a percent higher for the dow and the s&p. as i said, the nasdaq lagging on the day, up just about a quarter of a percent right now. we'll be right back.

welcome back. economic signals have proven more encouraging certainly recently, evidenced by today's second quarter final gdp reading. corporate earnings for the most part have proved positive. better than expected, even if it is a result of largely cost cutting. we take a look now, what it all means for the long term and how to invest in this environment. back with me right now here is thomas mcmanus, chief investment officer with wells fargos havers. jason trennert, managing partner and chief investment strategist with strategas research partners. good to see you back again. you just mentioned the federal reserve during the commercial break. what do we need to take away from some of these new comments about bernanke, the possibility of the undermining of the independence of the federal reserve? how do you see things playing out for the fed? >> the good news, the fed is triple the size of its balance sheet. >> and that is good news. >> that's good news because you're at least staving off

deflation. the bad news is that you eventually have to drain some of the liquidity. and that i think is what he's talking about. >> the old exit strategy. >> the olds exit strategy. the thing is that creates tension and it will likely create some tension between the administration and the fed, who no longer wants to monetize the debt. and that's happening at precisely the time that chairman bernanke's term is up in january. this is going to be a big parlor game.. if it goes the wrong way, maria, i think it could be very serious for investors. in my view if chairman bernanke isn't reappointed that could be a very serious negative event for the market this fall. >> do you agree with that, tom? is there a possibility bernanke's not reappointed? >> i think there always is something like that.t. and i don't think it would be a disaster. i do think he probably deserves to be reappointed. he's the right man for the job as far as i'm concerned. but no one person is -- we can't do without that one person. i think what jason said before about unwinding all of this huge increase in the fed's balance

sheet is important. keep in mind when the recovery occurs it's not going to be uniform across the country. so when he needs to raise interest rates the first time there are going to be certain areas where the unemployment rate is still very high and some congressman is going to say why are we raising interest rates? right? there's no one in my district who's getting a job. so that's going to be one of the problems. even so, it seems impossible for me to concede that he might actually tighten faster than the last tightening cycle. remember those 18 consecutive meetings of 25 basis points each. it turns out to have been too slow. >> yeah.. >> but while we were doing it we thought it was just the right thing, and we were nervous that we might interfere with the recovery. i think you might see the same thing happen. so i think you could see inflationary expectations build up again just like they did in the last cycle. >> what you said is actually something that i've been thinking about lately, and that is nothing is going to recover all at once. and that's interesting because if it's true, you know, you've got unemployment different in different parts of the country..

that's just like housing. >> michigan, for example. >> michigan 15%. the worst unemployment rate in the country. >> i think inflation is very much like that too. you mentioned that in the last segment before. look at last year. last year housing prices got crushed, labor got crushed. and yet it didn't prevent oil prices from going to 150 or rice prices from doubling and having commodity price inflation. that's why i think you have to be very cognizant over the next couple of years.. you can have inflation that's not homogeneous. you can have very heterogeneous forms of inflation where commodities are rising while housing and labor, for instance, are deflating.. >> the very important thing is as our populace, the demographics are changing, we're getting older, as the baby boomers are getting older it's the durable goods in the cpi that are keeping the cpi down. but it's the durable goods that older people really don't need. it's the services and the non-durable goods that they have. so older people actually have more inflation. their personal inflation rate is actually higher than the average. >> very good analogy in terms of

things changing at different times. what about the rest of the world? do i need to be having exposure to the rest of the world for an overall balanced portfolio? where? i mean, everybody's talking g about how europe is way behind the united states in terms of recovery and that things have really slowed down there. but do i need to be owning european companies? >> i think emerging markets make sense. i think china -- brazil, india. absolutely. and you can -- jason and i have talked about this for a couple of years. you can get exposure to those countries by investing in u.s. domestic isled companies that have very strong and growing operations in those countries. >> all of the emerging markets or with the exception of russia? that's been the theme recently. russia is stuck in the mud right now, you don't want to go near russia. i don't know. >> i think that longer term i think it probably has a long way to go to catch up to the rest of the developed economies around the world. and i think that ultimately it will be moving in that

direction. >> i think when you look at consumption as a percentage of gdp, in the u.s. right now consumer spending is 71% of our gdp. in china it's a third. so if you're looking at places where you actually have some pent-up demand to buy things, it's clearly the growth is going to be in the emerging markets. now, that's not going to be for the faint of heart. there's going to be all sorts of booms and busts that go with that. but for the first time in my career i'm kind of very interested in buying really the local companies. i agree with tom, a safer way to do it is basically buying multinational corporations in the united states that have plenty of exposure. but that's really where the growth is going to be. >> jason's talking about a very important thing. one of the reasons that we had the problem we did was that the savings rate was too high in china, it was too low here.. now you can see a convergence of savings rate, probably continuing an upward pressure on savings rate in the u.s. and we expect to see chinese demand start to increase for chinese manufacturers. chinese growth is going to be concentrated more in china.

and i think u.s. investors should be thinking about trying to put themselves -- or put their portfolios in front of that. >> well, the chinese customer is going to be at some point as important as the u.s. customer is to the rest of the world. that is a very important point, that the chinese economy is transitioning from an export-led economy to a consumer-led economy.y. so you're saying it's a third. so it's a third of gdp in china versus 3/4 of the gdp here in the united states. when will it be had? i'm just wondering how long this transition takes. >> i don't know how long it will take, but i know it's going to be a durable theme, and that's because mainly we've experienced all the growth that's come from leverage, that's come from the extension of credit. that hasn't really existed in the emerging world.d. and that's something you can look forward to i think for decad decades. and if you're talking about stocks for the long run-f you're thinking about long-term themes, that seems to be -- i don't want to say it's a gimme, but it seems like a pretty durable and well-positioned one.

>> aside from the obvious, the commodities producers of freeport-mcmoran, which is the largest copper producer, aside from where we know china has insatiable demand when it comes to some of those commodities, what are the other companies that are exposed to china in that way? >> well, some u.s. brands too. they like jack daniels, coca-cola, harley-davidson. a lot of the u.s. culture is popular around the world, and i think china will probably see that as well. but keep in mind as well that it seems to me that the chinese yuan is still undervalued at, say, 15 cents. as it goes up, first thing that happens is chinese production becomes more expensive to the rest of the world. second thing that happens is that the chinese people become wealthier in terms of what they can buy around the world with their stronger currency. so they start to become more of an economic factor around the world. >> and all of these issues, obviously, so important and evidenced how important they are

by this strategic economic dialogue going on this week. you know, u.s. and beijing officials. okay, final question here. do you believe the market is higher or lower than where it is right now by the end of the year? >> i think it's higher. >> higher. >> i think it could be a touch lower. but i think it's probably going to go down and then maybe come back up and finish the year around these levels. >> because you think that we're going to go down before we go up again. the move that we've seen. >> third quarter earnings season is usually a time where there's more downward guidance about the upcoming year than upward guidance. >> and jason, you think it's higher because of the money on the sidelines or what? >> yes. and i also think there's going to be a lot of talk about the obama economic miracle.e. like it or not, that's going to be a big part of the discussion over the next quarter or two, and i think there's not a lot of people that are going to want to stand in front of that. >> we'll leave it there. great conversation, gentlemen, as always. thanks for putting up with the heat. stay cool this weekend. jason tenert, tom mcmanus. coming up the cnbc network we'll fire it up. find out why our next guest says

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down for the day on the dow. it's hovering, folks. it's going to be close. and we'll count you right down. for another take on the markets, let's turn to our cnbc investor network. we've got a web cam connection to san diego, california. john glassmann, managing director of pacific american securities is our guest. john, what do you think about this market here? it seems like it's pure momentum and that if you've missed it we might even see a bandwagon rally making this irrational run-up more irrational. >> i couldn't agree more. that's the discipline that we're trading with on our desk, and that is the momentum discipline of buying high and selling higher. a lot of institutions are underinvested in this market, which is clearly the case by the underpinning that shows and the buying that comes with any pullback in the markets. couple that with the liquidity and the earning, very easy

earnings beats that have been happening. i do think that this market does have continued legs just based on that fact. >> if you take a look at the five-month moves really since this rally began, things like materials are up over 70%. financials have had a huge run-up. where are you buying high and looking to take it higher? >> in the momentum gains we have been in technology, intel beat mcafee, another winner of ours today. intuitive surgical, a medical company. cabela's, which does have some exposure to the recreational consumer spending. obviously, the auto companies been very good in terms of getting a benefit from an actual workable government stimulus. and we continue to be positive on the materials as we have been for some months. and the energy space, while it is pulling back, we do see longer-term opportunity, specifically in the natural gas space. >> i like that you call it an actual workable stimulus as opposed to the unworkable

predecessors that we've seen that are still waiting to take hold. what do you think about that, though? all kidding aside we have gdp figures out today that some are cheering and some are shaking their heads. it's four quarters negative in a row. >> right, four quarters negative but obviously the best quarter over quarter performance we've southeastern in some time. four negative quarters and what the market is pricing in now is a late season recovery, third quarter, fourth quarter recovery as stimulus takes hold as there is a crush of liquidity on the sidelines, as credit slowly begins to you that, as pent-up demand re-enters the economy and re-enters the market. you're going to have a return to the profit picture. couple that with an underinvested institutional population. and i do think this market continues to have legs. >> john glasmann, thank you very much. have a good weekend. he's from pacific american securities out in san diego. up next we're coming right back with the closing bell countdown. it's going to be a doozy here, folks. do we make it? do we break it? the dow now actually up 18 points. whipping around. and after the bell, is china's

red hot market about to come crashing down to earth, or are there still opportunities to be had there? some answers ahead at 4:00 p.m.

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