european bank reports. hsbc and barclays had nice things to say as well. then we have a weak dollar. that's pushing up commodities and commodity stocks as well. finally, we've got autos and manufacturers stronger on the car sales reports. take a look here at the big financials. you'll see hsbc, barclays all doing well.. bank of america announcing a $33 million settlement with the s.e.c. over allegations about how they reported the bank of america merrill lynch bonuses deal. that stock is trading up. a brilliant series of commentaries in the middle of the day from bank of america on the cyclicals. the weak dollar you see here. breakout. these are essentially new highs going back to september or october for most of the major cyclical names here. on the autos, ford's at a new high, toyota motors also at the highest since september. and even the car dealers are doing better today. look at sonic automotive. all the car dealers are up. you know what's not doing well in the auto group? anything that's like those replacement parts like auto zone. they were doing better when the sales were terrible. now sales are doing a little bit better they're a little weaker

here today. take a look at the defensive names.s. the only groups holding back here is your classic pepsis and colgates, your heinzes as well. we had comments from clorox this morning that were a little disappointing. finally, here's the big story about being over 1,000 on the s&p. it's usually just a round number and an emotional number and doesn't mean much from a technical level. in this case it does. 666 was the march 9th bottom.. so 1,000 is exactly 50% over that number there. little bit of a technical importance here. tradertalk.cnbc.com. for more let's go around the horn and talk to my friends. let's go to the nasdaq first and talk to them, where we're over now that important 2,000 number. >> you know, bob, it could be psychological here, but we have not closed above 2,000 since october the 1st of last year. so keep that in mind. internals, 2-1 advances over declines. the story really that everyone's talking about is apple and google. eric schmidt oft board at apple now. the ceo of course of google. it seems there's excitement on both sides.

and it's the ground floor of competition. investors seem to be buoying on both sides of the fence. 2.2% for google, 1.6% for apple. also the semiconductor industry association says global chip sales up 17% in the second quarter over first quarter. still down 20% year over year. but the whole sector getting a bit of a bounce. except for intel, which ironically enough, july 14th they reported earnings. they said basically the same thing. and that was the hugest spark perhaps of this most recent rally. but they're underperforming for the day. ebay had a nice bounce from a cover story out of "barron's" that it says even at current levels they might have 30% to go. they're up 3 1/2%. they've been up all day. dell and cisco, some other big names that are moving today. cisco reports after the bell on wednesday. ubs says expect a good number. bob mentioned the financials. take a quick look at a couple here at the nasdaq. they're all to the up side with some strength. zions, h bank and of course fifth third. as oil starts shooting up,

alternative energy gets a little more in vogue. first solar strongly to the up side today.c i haven't gone into this in a few hours. i want to point out savient, it's one of those i never get right, it's down 18.7% because a drug for gout was bumped by the fda and that was a big surprise. and also i want to point out here on consulting, 68%, a mess of problems. they have to restate earnings going back three years. they lost their chairman and ceo. and they had no less than five downgrades today. they're down 68%. that's it from the nasdaq. let's go down to the hot oil trade and sharon epperson at the nymex. >> brian, commodities definitely the trade of the day. oil prices topped $72 a barrel today and closed the session at the highest level since october of last year. settling around 71.58 today. we are looking at dollar. it's a big reason we're seeing this run-up in oil prices and in commodities across the board. in fact, when you look at the dollar index, up about 1% on the

session, that accounts for a large part of the $2 move that we saw today in oil prices. oliver jacob at petromatrix makes the dollar-oil correlation this way. he says based on where the dollar index was just on friday oil prices should have been close to $89 a barrel, so expect a few more dollars up from there with today's decline in the dollar. the dollar trade affecting not only oil but commodities across the board.. we have copper at a 10-month high. those figures from china on manufacturing activity also helping copper as well as sugar now setting a new record today as well. and natural gas. natural gas truly on a tear up over 9%. we did get forecasts saying above-normal temperatures in the midwest over the next couple of weeks. but also, it's a very short market, and anytime you see oil rising, equities rising, and positive economic news you're going to see this happen perhaps in natural gas because of the short market. we're going to get colorado state university's hurricane forecast tomorrow. that'll be something to watch

for as well as later in the day that report from the american petroleum institute on inventories. rick santelli, to you in chicago. >> well, thank you, sharon. well, maybe the equities going up made some investors happy, but interest rates moving up and the dollar move down don't seem to be most of the -- the most optimistic of directions for either. but you can't stop markets in movement. look at an intraday chartar of 10-year note rates. you can see it was climbing most of the session. and this isn't a supply issue.. we get the announcement this wednesday for next week's auctions of 3s, 10s, and 30s. but nonetheless, a one-week chart reveals we're snugging up to the top part of a trading range, but this trading range is very significant and many traders remember that we touched 4% about six weeks ago briefly. but the market seems to constantly be inching towards higher rates. now, if you look at the stellar performer of the day in terms of movement, it was the dollar index. sharon's talking about it. commodity traders. and of course fixed income traders keeping an eye on the

dynamics of deficits and maybe with ecb and monetary policy numbers in the uk due thursday morning the dollar index at the lowest level since about the third week in september. melissa francis, back to you. >> all right. thanks, rick santelli. taking a look at today's business headlines, the institute for supply management's manufacturing index rising more than four points in june, drew better than expected reading of 48.9. while any reading below 50 indicates contraction in manufacturing, it does mark the slowest pace of decline since last august. meanwhile, the commerce department reports construction spending in june unexpectedly rose by .3% to $966 billion because of increase in residential building. analysts had been calling for a decline of .5%. and the government's cash for clunkers program helping to drive auto sales last month. general motors sales plummeting 19% year over year. but results w w up 12% comparedd to june. the fifth consecutive month over-month increase.

ford sales providing 2.3%. the automaker's first increase in nearly two years. and toyota's seeing a decline of 11% from a year ago, but sales jumping 28% from june. chrysler sales falling 9% compared to last year.r. sales, however, did soar 30% month over month. bob. >> and the story here is sequential improvement, folks. and that's what people are looking for. sequential improvement. we know year over year it's not going to be very good. let's talk markets and maybe a little autos. eric ross with cannacord adams and dean kernan, macro risk advisers. you know what the bears say we're overbought. but we've been overbought for a while. remember when the s&p went up 11% in the beginning of july and for four or five days in the middle of the day, boom, markets dropped. they tried actively shorting. and the markets didn't drop much. the market does not go down on overbought conditions. it's hardly even been going down on some bad news. and we have gotten bad news occasionally. so what's the story here?? the bears are getting -- the shorts are getting chased out of

the market, essentially. >> i'd say the majority of money managers actually we talk to are -- have been trying to short this market at one point or another, protect themselves, and it just hasn't worked.d. they've had to get back into the market. i think what you're seeing is earnings up side. 75% of the s&p actually had up side to their earnings.. yes, it was reduced earnings, but still up side of those earnings and that really drove the market and it then has been reinforced by good economic news, and that's what's been driving this market up. >> and yet there is a substantial bear position out there that is consistent, that's been around since may, that insists that once we realize there's no top line growth for the remainder of the year, that the debt levels are too high, the markets will drop in september and october. this is a tentative bear theory. are you with them? >> we put ourselves in that category over the longer time period. i think for now there's money flows into the market. you've got government-backed stocks globally. quantitative easing globally. so you've got this kind of rerisking profile, which you see in the dollar going down. you see in the prices of

commodities going up. volatility indices like the vix are going down. so this story, this kind of releveraging story i think has got a little bit more to play out. again, we're not long-term bullish on the state of the u.s. economy, but from a short-term tactical standpoint we've been playing upside call spreads in the s&p. >> so what are you buying for your clients now? what sectors are you buying? you're buying calls, did you say, in the s&p? ? that's right. >> that's a bullish position short term.. >> exactly. a few things. first thing, the vix is literally 50% of its level back in march. so you get much more exposure with a low vix than you get with a high vix. so you can buy a lot of options. we're still playing the s&p because we think the markets's still moving in a very correlated fashion. this is still a market where the macro considerations are still very important. >> you're getting a lot of bang for your buck because options are cheaper -- >> exactly. >> but what sectors are you buying? >> on the short side we still think the end demand from the consumer standpoint is not there. my colleague danny kirsch put out a piece this morning that

said 50% of the xrt, is due to report in the next couple weeks, we just don't think the consumer's got the dollars to spend. on the long side we think the china industrial commodities trade still sets up and we're long industrial commodities. >> so you're long commodities. i talked to you about this before. >> definitely, yes. >> we only have ten seconds. >> u.s. dollar continues to be weak. economy's getting better. you're seeing commodities continue to strengthen. >> thanks very much. always nice talking to you. eric, nice talking to you and dean, nice talking to you as well. there are 45 minutes to go before the closing bell. markets are essentially right near their highs, certainly haven't changed much in the last half hour. melissa? >> oil is back on a roll after some recent setbacks, but our next guest will tell us why oil prices could be heading to $100 a barrel by the end of the year. >> and later, high feed cost and weak demand has really taken a toll on the meat industry. coming up, the ceo of tyson foods tells us if he's seeing any signs of a turnaround. >> and coming up after the bell another black eye for bank of

america. a former s.e.c. enforcement official tells us what this means for the financial giant and ceo ken lewis.. that's coming up at 4:00 p.m. eastern. >> but first, take a look at the most active stocks at the new york stock exchange, led by citigroup and bank of america. d

check out gannett. if you haven't seen it, it was the darling of july. it's been the darling of this rally. it's the darling again today, up another 12.8%. look at that one-month percent gain. it's up over 138%. the stock is almost positive on a year-to-date basis. but if you rip it back to a year, you're still down 56%. it was about an $18 stock a year ago. it once was a $90 stock. what is up beyond the stock price?e? well, a lot of investors are going to say that short interest ratio at 23% has a lot of shorts running for cover and covering that position. "new york times" similar percentage gain. it's now in the s&p 500.

gannett, gci, the hot stays hot. back to you. >> all right, matt nesto, thanks so much. take a look at a year-to-date chart of oil crude up 60% so far in '09 after tacking on nearly 3% on the day. but if you stretch that chart out to 12 months, oil becomes a picture of volatility. it's ridiculous. so where does crude oil go from here? joining us now to discuss, our cnbc contributors ron insana, portfolio manager of thestreet.com's market movers.. and also john kilduff, senior r vice president and energy analyst at mf global. i'm going and both of you guys, what is going to stop oil from going right back to 150 the minute the economy recovers? aren't speculators -- and i don't say that in a negative way. but aren't people who bet on this market going to pile back in and bid it back up? john, what do you think? >> i think 147 remains a steep high water mark, melissa. but i think 100 is certainly in the cards for the very reason that's you're talking about. in particular, for me, though, i think the china situation is being vastly underestimated.

despite all the talk it even gets now, they're going to be sucking the resources out of the world. iron ore, crude oil, the whole lot of it, and they're coming on much stronger than people realize.e. >> don't they lie lie about their numbers, though, ron?n? >> the chinese? >> yeah. don't they overestimate what their gdp -- >> you realize the cnbc world is going to get nasty letters from beijing, now you said that publicly. all i know is the stimulus they've design sd working. i've referred to this in some of my newsletters is this is a rifle approach as opposed to our shotgun. they are pushing money into the economy, making loans, restocking commodities so they are as john said it's not just oil it's copper it's iron ore, it's a whole host of commodities that they are just pulling in and importing. and that's helping the rest of the global economy at the moment and pushing oil prices higher. >> john, i made that same arguments to a couple other people the other day and they said the speculators are already in the market if they could bid it up they would have done it

already. that's not true, right? >> i don't think so, melissa. and again, i really believe that there is a compelling fundamental story not just here and now but even last year. not to 147 quite as -- >> not even close. >> but look, we've gone through several of these tight energy pictures. right? in 2000 president clinton releasing strategic petroleum barrels and a couple of more shocks that we caught a break on because of the recession that ensued. and we're going to get tight again. that's my main point here. >> a lot of things, melissa, people don't remember about that super spike we had last year -- and guys like dan yergh and others were talking about the geopolitical risk premium that may have been as much as $60 a barrel because we had the iraqi war ongoing and iraqi oil production was down by 2/3. we had nigeria being blown up every other day. we had venezuela. we had the israel-palestinian situation heating up at the time. and we had iran. and now we've got iran again. and i wouldn't doubt it if we don't build a geopolitical risk premium into oil one more time.

china notwithstanding. >> ray -- i mean, john, i'm sure you agree with that. >> most definitely. and i would point out that last year at 147 was right after we had learned that israel had made that test run, if you will. out to greece and back. because it approximatemated the distance they would needing to into iran. and now we're seeing an op-ed in the "wall street journal" from john bolton yet again that this is on the table. if that perks out again, watch out. >> that's true. but at the same time, i mean, in the time i was covering oil about five years it went from $30, $25, all the way up to 150. demand did not increase fivefold. and i think that's what really frustrates people. >> look at china, though, melissa. they went from being a net exporter, pretty good sized one to being just behind us now in importing oil. and they're getting higher and higher every day.y. >> i think a lot changed, melissa. also at the time we were having a raging peak oil theory argument last year at 147 that the ross tenura field in saudi arabia was being depleted, that

mexican reserves were falling faster than anyone new. that conversation is again being had. but whether or not we're running out of oil or whether or not the supply-demand balance is tightening again, and last year was as tight as we've seen it in modern history, coupled with the geopolitical issues, coupled with china as an importer rather than an exporter, bras mazil, a these other aspects, whether it goes back to 100 i don't know. i find it too rich at 75. i find it too cheap at 55. i think it's somewhere in between there. but it can go to 80 quite easily. >> in the meantime no investment during this downturn. or very little. >> they've trimmed it. many companies have cut back massively in fact. >> all right, guys, thanks so much for joining us. we appreciate it. bob? >> and with just 40 minutes to go before the closing bell, melissa, we're not far from the highs. the dow is up about 140 here. only 20 points off. we've been led by strength in financial stocks as well as cyclicals and the weak dollar. nasdaq also over 2,000. melissa? >> another big market day. former citigroup cfo sallee krawcheck heading to bank of america. how does that impact b of a's

succession plan for ken lewis? charlie gasparino tells us what he's hearing when we come back.

welcome back. former citigroup cfo sallee krawcheck being named to run bank of america's global wealth and investment management operations. on-air editor charlie gasparino joins us now to explain how that could impact b of a's succession plan. before we get to that, charlie, you know what amazed me, $33 million to settle this whole claim. no admission of guilt on this

whole controversy over paying $3.6 billion in bonuses.s. i'd say that was a pretty good deal for bank of america to put this behind them. >> well, you do know the s.e.c. is a civil -- doesn't charge you criminally. as part of its standard settlement agreement you neither admit nor denying wrongdoing which is kind of one of the big problems a lost people point to with the s.e.c., basically saying here's some money and the s.e.c. goes away. it does give you some insight into the severity of the charges, though. listen, i have to see exactly what they disclosed. they're telling me that what they disclosed is very neblous, that it can be taken three different ways. and the s.e.c. took it in the harshest light. if that's the case, this is kind of a thing that i -- it's not that big a deal. but i have to like look at exactly what they disclosed -- >> my point is 33 million to set this will whole thing and -- >> but maybe that gives you an insight into the severity of what they did. maybe it wasn't that bad. i can tell you that a bigger discloseable event, bob, aside from the bonuses was the losses.

if they hid that football, that would have been a real problem. but let's get back to the sort of maybe bigger story here, which is the fact that b of a announced a major management change. it wasn't just sallee krawcheck. it was essentially five people who got either moved around -- and the upshot is the successors, the likely successors and ken lewis, have gone from two, brian moynihan and -- to five. moynihan now head of consumer banking. tom montag, remember former merrill lynch head of trading, brought in by john thain, thought to be a gunner when this deal went down with b of a and merrill lynch because of all those trading losses. he's now elevated. from what i understand he's part of the mix, too, to replace ken lewis. barbara desoer, someone i don't know much about, but she's apparently in this mix as well. so what senior people at b of a are telling me, bob, is those five people -- one of those five

people are likely if something major happens to succeed ken lewis. now, the question is when does that come? and i've been asking that question now for the last couple days. and what they say is this. listen, he wanted to leave on a good note. obviously, this s.e.c. settlement is not the best note to leave on. and that means return to sort of standard profitability for the firm. repay the tarp money, get out frunder the government's shadow and return -- b of a into more of a self-contained unit, not a government-run bank. when that happens, you know, people talking about a year. now, i will say this, bob, and here's the caveat here. when you see a story like this with this lack of disclosure, you know, sometimes the centrifugal forces which could move out the ceo faster. remember, they had board member changes recently. this is kind of a dicey situation. but i'm telling you that's -- clearly what they're telling me at b of a is one of those five are going to be the successor. that's what they're telling me.

it's going to happen not imminently. probably in about a year.. although i will tell you the fly in the ointment is this settlement and just how severe it is. and we'll have to see what happens. >> it's a necessary step in the whole succession plan. it's the first part of it. and -- >> well, they didn't say this in the release.e. but i'm telling you, they are -- my sources, they are telling me this is the succession plan, they've lined it up. and i will say one other thing before i wrap up here. the last time i saw a succession plan among five ceos was the merrill lynch succession plan back in 2001 -- 2000-2001, where david komansky named about five people, and i tell you, all hell broke loose. >> charlie, thanks very much. melissa, over to you. >> thanks, bob. tyson goods turned in a healthy third quarter profit net income at $134 million compared with $9 million a year earlier. and chicken was the tastiest item on the menu. that segment reporting its first profit in more than a year. its shares, however, are under pressure today after tyson warned the poultry business will

soften over the next three months. for more on tyson's earnings and the outlook i'm joined by leland tollett, interim president and ceo of tyson foods. thank you so much for joining us. chicken doing a lot better right now. what changed? >> the biggest thing that changed in our business is we got better control over what i call the controllables, the things that we should be able to manage. and we have very good control over those as we speak. the marketplace, we'll get what we can get out of the market, and the cost side, prime primarily grain and soybean meal. we had a period of time when we had fairly favorable prices, a run-up in june back off, and it's a little stronger this morning. so really it's operational as far as the biggest improvements we've had in our chicken business coupled with some help at the marketplace. >> so it sounds like you're not seeing stronger demand, actually. >> demand is not very strong right now in any of the proteins for that matter. beef, pork, turkey, and chicken.

of course, we just have the three. but we could stand an improvement in demand from this point forward, yes. >> how is the consumer behaving differently right now in this economy? >> seems to be a little more cautious. a little more cautious of price-value relationships. trading down to a certain extent. and some evidence they're e trading all the way down to the retail trade. >> so how long do you think that's going to continue, o'what are your plans for that time period? >> well, we think we have everything under pretty good control right now. it seems like things have tableized, not going down a whole lot -- or anymore. and our goal right now is to hold where we are, go to the customer with good products and see if we can hold where we are, and we're confident we can do that. >> you said, though, i think it was in your call, that you think the next three months are likely to be even more difficult than

in the past. you do think it's getting a little bit worse? >> well, i think it's close to the bottom. the third quarter was a pretty good quarter. especially the middle part of it. and it's tailed off a little since then. yes, there is some pressure on demand. the export demand is not quite as good as it was. but keep in mind there is not a surplus of supply pushing a rather sluggish demand. >> yeah. i know you operate in more than 80 countries around the world. how would you compare the market here in the u.s. to the rest of the world right now? are they getting better quicker than us? are they still continuing to fall? how is it different? >> most of the markets that we participate in are markets that we export products out of the united states into. china is a primary example. we produce products that go into there that are not common products that we move into the domestic market. we move a lot of product into

russia, into africa. that product is basically leg quarters. and that is a product that we've historically exported a lot of also. we don't participate in the european market at all. >> okay. leland, thank you so much for joining us today. we appreciate it. >> well, thank you very much. >> bob? >> 28 minutes to go before the closing bell, melissa. dow jones industrial average at the highest level since november, led by financials and commodity stocks. nasdaq also over 2,000. >> and coming up next, the "fast money" final call. the s&p 500 crossing over 1,000 today. find out which sectors could lead the market higher when we come back. this is "the closing bell." get. - others buy the car of their dreams. - ( beeps ) during the lexus golden opportunity sales event, you can do both. it's an opportunity today. it's a lexus forever. special lease offers now available on the 2009 es 350.

all right. we've got about 25 minutes to go here in the most important hour of the trading day. take a look at how these markets are trading today. the dow is on fire, up triple digits. 9,279. but the s&p is the exciting one. it's broken 1,000. you probably realize this is a 50% rally off the march lows.. the nasdaq right now is also on fire. it's above 2,000. last time it closed above 2,000

was october 1st, 2008. we want to keep an eye on that. there's the s&p. it's up about 1.4%. over 1,000 by one point right now. and the nasdaq, like we said, at 2,003. we'll see if we can hold that level at the close. >> the s&p 500 crossing that 1,000 mark. the irk issue is what kind of sectors had should you bet on right now? let's talk to steve grasso, a regular here, director of institutional services at stuart frankel and cnbc contributor.r. the great thing about it is we're over 1,000 but remember a week and a half ago they tried sell the markets off because it was overbought. bears kempt screaming at me overbought. they tried to drop it five or six days in a row and it didn't drop. market doesn't go down on bad news and wants to go up on any signs of good news. >> it's almost like i don't have to answer your question at this point. you're totally on. you're 100% on. the bears have tried to crack this market religiously for weeks now. and they can't do it. and they turn around, they have a surge buying in the later part of the day. so what -- >> you've seen it. what do you do at this point? do you continue to add to your

positions or do you lighten up? >> it depends. it goes back to your time horizon. right? so if you have that longer time horizon, i think you're going to be fine if you continue to add to your positions. the problem is this -- it's just like the tech story. everyone keeps telling you you can't buy tech because it's up too much based on valuations. isn't the market right now -- as you said, it's been overbought. and can you buy into apple -- at this point people keep laughing about it. how can you buy into apple? it never drops to a point where you can buy it. >> right. when we get to this level, 1,000 on the s&p, it's forced a lot of people's hands. predominantly the mutual funds. they have to be partaking in this rally. >> where do we go from here? remember the bear argument.. i keep pounding away at it because they keep pounding away on me at it. september, october, when everybody realized no top line growth, market drops back down, there's your chance to buy. >> problem is the market is the best leading indicator of them all. and it's told us that later part of this year and early part of 2010 we're going to be in a much better state than we are right now.

so take the lead from the market, get involved. you don't have to go all in but you have to be participating. >> so you see the economic numbers. i'm arguing your point here. but slowly improving. the ism, the chinese pmi, the auto sales numbers.. with our without the clunkers deals. the european bank commentary from hsbc today. all the bulls are arguing here are the numbers you that need to see gradual improvement. >> right. we're getting there. the problem is if you're looking for all of these things to be exactly in a row, we're going to get a couple bad data points but the market's not going to -- >> so the viewers took a whole bunch of money out of the stock market from october into march of this year and put it into bond funds. and now the argument is gee, we should have kept the money in there or should have moved money out of bond funds or moved them into stocks by april or may when it became obvious march was some kind of low. what do you do now if you're substantially in bond funds, substantially overweighted in bond funds and -- >> you've got to start easing

back into equities.. you don't have to throw it all in all at once, but you've got to start gaining some exposure to equities. and that's what plenty of people are doing. they're grossly underweight equities, and that's why we're going to see this market probably rally another 100 points. >> everybody's going long commodities. every single trader we've had on the last show it seems in the last two weeks wants to buy commodities or tech. what do you think? >> we're probably going to see that move higher. energy's going to move higher. we'll see hopefully the financials level off because they've had an incredible run. but let's remember, 2/3 of all of the stocks move with the overall market momentum.. that means a lot of stocks are moving up. >> and yet the defensive names, they're going to be -- >> those are the safe bets. >> only move when there are very uncertain market conditions. and they have been -- >> so if you look at walmart, which i own, the walmarts, the targets, the kohls. those stocks are seen as a safe haven in this marketplace. those are being thrown out. i think it's very apparent when you look at the tape. does this market have more room

to the up side? yes. does it have speed bum snpz yes. but -- >> here's what's going on here. this is important. "fast money" very interesting topic tonight. first on tap, ceo of molson coors on the company's strong second quarter results and its outlook for the industry. then is it time to bet on las vegas again? the ceo of mgm gifsz his take on the industry and the company's prospects for the second half of the year. that's guest host erin burnett and the traders live at 5:00, melissa.a. >> all right. we've got about 20 minutes to go before the closing bell. the nasdaq holding above 2,000. the s&p holding in above 1,000. the dow is up better than 100 points. bob. >> and despite all his campaign promises, melissa, president obama is going to have to raise taxes or may have to raise taxes on the middle class in order to pay for all the government spending. that's the big question. will that be a major roadblock to an economic recovery? some answers in a moment glp and coming up after the bell, fed chairman ben bernanke has had a major role in trying to turn around the economy of course. has he done a good job, and will he be reappointed when his

chairmanship expires in january? we're going to debate that coming up. (announcer) this is nine generations of the world's most revered luxury sedan. this is a history of over 50,000 crash-tested cars... this is the world record for longevity and endurance. and one of the most technologically advanced automobiles on the planet. this is the 9th generation e-class. this is mercedes-benz.

welcome back. good to see you. white house said this afternoon that the middle class will not -- but obama economic adviser larry summers didn't rule it out yesterday on cbs's "face the nation." let's talk with some key participants here. would a middle-class tax break make some kind of difference or would it hurt the economic -- >> the foundation of the -- >> so would a middle-class tax increase hurt the economic recovery? we break it down with steve east. he's the managing director at height analytics. curtis dubay is a senior tax policy expert at heritage. can you define for me because a lot of people are wondering this morning what exactly is the middle class?? how does the administration, how do economists define the middle class? gentlemen? >> i think the middle class is people who aren't poor and people who aren't rich. the middle class is a pretty broad swath. your average person plus some on

the bottom and some on the top. >> would you say -- >> but there's a price -- an income definition as well. >> in my own personal opinion the middle class probably starts at around 40,000, 45,000 in income per year up to about, you know, 200,000, 250,000. >> go ahead. >> a lot of times middle class is more of a class position, not really defined by income. most people think of themselves as middle class. they compare themselves to their neighbors. middle class in con may nnectic not be middle class in iowa. >>s if the president wants to stick to his promise not to raise taxes, what has to occur in the economy to keep the economy from stalling out? >> foote president actually goes back on his promise to raise taxes on the middle class, we're in a recession, probably coming out of the recession, but the

recovery's going to be gradual. and raising taxes is fiscal constraint. we probably still need more fiscal stimulus. disposable income growth in the first five months of this year was running at about a 10% annualized rate. but spending really wasn't going up that much. and the reason -- one of the big reasons disposable income went up as much as it did was because of tax cuts. so if we were to reverse course at this time and start raising taxes, there would be a big problem for consumption going forward, i think. we barely have consumption now. >> and curtis, of course, the expensive government programs as well. i know you believe we should be dumping cap and trade, that we should not be going ahead with the health care reform program.. what else should we be doing here to make sure that we do not raise taxes on the middle class? >> that's absolutely true. just think what kind of stimulus that would be for the markets today, if congress and president obama came out and said, you know, what we're going to put off cap and trade, we're going

to stop our efforts to nationalize the health care system, we're going to promise no tax hikes for anybody for the next five years. there's a lot of uncertainty going on right now in the markets because every couple days we hear of a new tax hike proposal coming out of washington, d.c. businesses aren't sure what their tax picture's going to look like one, two, even five years down the line. it would be a huge stimulus coming from washington, d.c., to say no tax hikes for anybody, anybody making over $250,000 a year or under $250,000 a year for the next five years. >> steve, we're in some kind of recovery. the debate is what shape it looks like, whether it's v-shaped or u-shaped or w-shaped. what shape are we looking like right now, and what effect would some kind of tax increase, let's say on the middle class, have on the shape of that recovery?y? >> right. i'm looking for what i call an aborted v-shaped recovery. i think that right now we're starting the part of the recovery that's going to look v-shaped. demand has come down a lot. production has come down even more than demand.

for a while, three, four, five months, now we can have production go up fairly rapidly to meet the new level of demand. that level of demand is now lower. and it's going to start out looking like a v-shaped recovery, but back to my point earlier about consumption, you have to -- after we catch up, have production catch up to the new level of demand, you're going to have to have demand go up rapidly to have production continue to go up rapidly.y. i don't think we're going to see a rapid pace of demand growth. we don't have private sector credit creation anymore. and that's different in this recovery from past recoveries. past recoveries was lower interest rates and get people to lever up more. household balance sheets to lever up more. now households are going to continue to save more, delever. and so i think what starts out to look v-shaped will end up looking like a broken v. >> curtis, we hear one day we might have tax increases on the middle class. the next day there is president.

let . how likely do you think we'll see tax increases? pick a number. over $75,000 a year or something like that? squarely close to the middle class. how likely is that in the next two years? >> i think we'll see tax increases on anybody making more than a dollar if congress and the president proceed on this spending path. right now budget deficits are unsustainable going forward. we've reached the fork it's road. the future is here today. we have to make a decision whether we're going to cut back drastically on spending or have massive tax hikes. i think right now the administration is laying the groundwork for massive tax hikes. they don't seem to be willing to cut back on spending at all. i think they're laying the groundwork for a value add tax. >> steve, you're in that camp too. do you think tax increases for the middle class are in fact inevitable? >> i think we're going to reach a point where the rest of the world is not going to want to continue to buy the massive amounts of treasuries that are going to be issued unless the rest of the world believes that we're going to get a handle on these deficits. at some point in the next year, i don't think the next couple

months, but some time over the next year i think there's going to have to be some sort of tax increases and i agree with curtis, a value added tax or national sales tax or something like that that's not an income tax but still raises revenues. it will still raise revenues on the middle class but it won't be an income tax hike on the middle class. >> they're boxed in on the income tax. half of taxpayers are non-taxpayers. they pay no federal income tax. and they promise not to raise taxes on anybody making under $250,000 pape national sales tax is a way they can get out of those problems. and i think they are laying the groundwork for it. and that massive tax hike on top of all the taxes we already pay would be highly damaging to the economy. >> i would agree that some kind of sales tax is definitely in the cards somewhere. steve east, curtis dubay, good to talk to you. melissa, we're just off our highs here. >> and we've got about nine minutes to go before the closing bell. the dow is up about -- well, 101,000. the s&p still holding on to 1,000.

the nasdaq holding on to 2,000. 2,005:00 actually. >> up next matt nesto explains why value stocks might outperform the rest of the market in the next 18 months. we're coming right back. these days, wouldn't it be great if saving money happened as automatically as everything else? at bank of america, it practically does. use the bankamericard power rewards visa credit card and earn rewards like cash back with every purchase. cash you can put into savings. or even use to help pay down your credit card balance. it's one of the many ways we make saving money in tough times a whole lot easier.

we only have six minutes. >> i'm going to say yes. and then we can correct me in the next hour. that sounded like the open to your old ventriloquist act, melissa, a funny thing happened. but truly, something is happening, and i want you to check it out. i want to show you the value index versus the growth index in just the past couple of weeks. this is a pretty wide out performance for two really big cap index that's compete side by side. all those value fund managers out there are probably going to be going whew, thank god, because the growth guys have been vague good run of it. but brian belski's note out this morning saying the transition is zech definitely under way in the value versus growth saga and he thinks the stock market is recognizing the beginnings of the slow economic improvement.

he's definitely bullish on the economy saying there could be some positive growth in terms of gdp by the end of the year. but he says earnings growth itself is actually becoming less scarce. when growth is scarce, people pay more for it, growth does better. when it's less scarce, value does better. and he also says that after bear market lows history would suggest that value outperforms and on an increasing basis, on a wider basis as time goes on by 18 months, the margin spreads to five percentage points. and this, again, a long-term historical average of 10%. 50% outperformance. and he also points out that the decline in volatility also bodes well for value. so if you take a look at my theme park via brian belski, these are all companies with positive cash flow with earnings growth that are all doing very, very well sticking to the formula. melissa? >> all right. matt nesto, thanks so much. up next we're coming back with

the closing countdown. >> after the bell maria bartiromo's exclusive interview with the president of the philippines. find out how that nation has been able to maintain steady growth throughout the global recession. that's ahead at 4:00 p.m. eastern. professional tennis. so i've come to this court to challenge his speed. ...on the internet. i'll be using the 3g at&t laptopconnect card. he won't so i can book travel plans faster, check my account balances faster. all on the go. i'm bill kurtis and i'm faster than andy roddick. (announcer) "switch to the nations fastest 3g network" "and get the at&t laptopconnect card for free".

ever want to look over the shoulder of a seasoned stock trader? well, here's your chance... i'm running strategy desk from td ameritrade to set up a trading strategy based on how i think the market's trending-- right now i'm looking at a 20-80 stochastic cross. now, i could be running multiple strategies... my own tweak or some combination-- but for now--this is good... this is strategy desk, advanced technology for traders

from td ameritrade. it's designed specifically for traders. with strategy desk i can compare the 20-80 with other strategies and back-test them all. multiple strategies. multiple stocks. over time. and i can look at that at the symbol level or have it charted out for me more visually. and i'm not trading on emotion... a buy here...a sell here... there you go. i just hit a buy point and strategy desk fired off a trade. once you trade with it... you won't want to trade without it. td ameritrade. independence is the spirit that drives america's most successful investors. announcer: trade commission free for 30 days plus get $100 cash when you open an account. bob pisani down on the floor

of the new york stock exchange. we're just off the highs for the day. dow is up about 125, 126. we're just off the highs there. more importantly, the s&p 500 looks like it's going to close over 1,000. we're at 1,001.98. that's important news here. yes, it's a round number, but more importantly here's a weird number. it's 50% above the march lows. 666 -- whoo -- was the march 9 low. and we're now 50% above that. economic news as well as company commentary better than expected. we saw economic news out of china as well as the united states a little better than expected. and some positive comments from some of the financial firms over in europe as well as some of the companies here, particularly the auto companies, all helping to move the markets forward here. we are overbought, but that hasn't stopped the market from moving forward for the last several weeks. tradertalk.cnbc.com for more. there's the closing bell. melissa francis is next.

it looks like we did it. it is 4:00 p.m. on wall street. do you know where your money is? welcome to "the closing bell." i'm melissa francis in today for maria bartiromo, and here is what we are following at the close. the summer rally extending into the month of august.t. stocks higher across the board after better than expected data on manufacturing and construction spending.. the s&p 500 breaking 1,000 for the first time this year. oil is heading even higher. crude up 3%, closes at 71.58.8. it is the first time oil has settled above $71 since late june. and bank of america paying a $33 million fine to the s.e.c. to settle charges it misled investors over bonuses paid to merrill lynch employees. take a look at the numbers as we finish the day on wall street. i'm so excited it happened on my watch. the nasdaq up above 2,000. 2,008. that's 1 1/2%. the s&p over 1,000.0.

also 1 1/2%. and i don't want to forget the dow. it's up 1.2%.. like bob said a 50% rally in the s&p since that march low. the nasdaq closing above 2,000 for the first time since october 2008. let's get more on today's action. bob pisani is our eye on the floor of the new york stock exchange. bob, it happened on our watch.. you're on watch every day, but you know, i'm not always here at 4:00. i love it. i can't take it. what can i say? >> yeah. and it is a little bit more important than just a round number, than just a psychological number. there are some technical factors. but more importantly, folks, this wasn't a fluff rally. there actually was some substance behind this and some reasons why we went up. let's take a look at the main reasons and they are economic as well as company commentary, sector commentary. number one here, and this is the important thing, europe and china all had a very nice breakout session earlier on with the china manufacturing pmi, and china is pushing the world around. so we had new highs over in shanghai, germany, france, hong kong, uk, australia, you name it. u.s. ism was stronger here. while it was