cuts, fine, it's a first half story, it will not work from here on out. and this is their most vocal argument. they get very angry about this. stop pushing out the recovery. they're arguing people are giving 2011 numbers, 2012 numbers, that's wrong, you've got to deal with what's going on next year and stay with it. the numbers aren't there then you've got to admit that and move on. look at brinker here today, we mentioned this all day. here's an argument for the bears. they lowered their earnings for fiscal 2010. wait a minute, that's right now. that's this quarter on into the first half of 2010 here. sales trends are not really improving for them. comps in the second half are supposed to be a lot easier because last year was a disaster, but it doesn't look like that's happening either. this is a problem for the restaurants here. the bears are arguing this is what we're going to hear more of from other industries like retailers as well in the next several months. how about the bottom line on retailers? we had july same-store sales. a little bit of good news. but it's still mostly about cost cutting. it's not revenue growth. sa same story as what's going on

with the restaurants. some companies raised their guidance, but overall demand is still poor, inventory numbers leaner, that's good, get any pop in sales you're going to need an inventory replenishment. these companies raised guidance. a whole bunch of them did. eight, nine, ten. most of them to the up side. aeropostale not right now. they had a little bit disappointing number on the july sales numbers. let's talk about some other groups here. how about aig? now, look, two days in a row titanic volume here. big volatility again, $29 to $21 trading range here. two theories. one is the earnings tomorrow the company will announce blowout quarter. or perhaps some kind of debt for equity swap that's going to help the company out. that's about tomorrow. the better theory is stock lending desks are now making it very difficult to borrow. the stock a lot of people were saying that the government banning naked short selling has made some of these lending desks a lot more conservative. you've got a short squeeze. you decide there. let's move on, talk about the rest of the financials here. big trading. sick trading at citigroup again. bank of america's been doing 350

to 500 million shares for four, five days in a row right now. citigroup will do over a billion. remember, they increased their weighting in the s&p 500. some are pointing out the big volume due to some better news from some of the mortgage insurers. radian had some positive comments yesterday. tradertalk.cnbc.com. let's go around the horn and talk to all my friends. first brian schactman over at the nasdaq. >> thank you, bob. we're hovering near the lows of the session. you're looking at the internals. better than two to one to the down side. we've underperformed the broader market for the last two days and it's continuing. i want to actually point out a few of the positive stories to start. because of some future margin pressures, even though they have good earnings, cisco was down early. maybe it was john chambers talking on "squawk on the street." yahoo up .5%. ebay up 2.7%. chips have been weak all day. intel is right in line with the market about .8% but marvell down 2.5%. the weakest of the big names today, research in motion which actually had some good gains

yesterday, giving it all back. 3% to the down side. dell down 3.3%. i did want to follow up on bob's theme about the restaurants because it is having a major impact here as well. and cheesecake factory down 5%. p.f. chang's down 3.8%. amazon.com is not much of a mover today. but i do want to bring to your attention that mcgraw hill expanding its offerings on the kindle, especially into education titles. this could be the wave of the future, and a lot of people are going to benefit. students are going to benefit because it will be cheaper, right? they don't have to pay for $75 textbooks. and of course mcgraw hill, their overhead is lower and amazon can maybe make a lot of money on this. ipos are a major story too today. we have two of them. the biggest of the year outside of mead johnson which was actually a spinoff of vago, hugely successful. priced at 15. now it's 16.65. based in singapore and california, sort of a semiconductor infrastructure company. but on the other side a hong kong-based software company, cdc software, down 17%. it priced in the mid range, and it's down under 10 bucks.

we'll get some comments from their ceo tomorrow, who's opening -- ringing the opening bell here at the nasdaq. finally i want to point out some earnings for after the bell. california pizza kitchen and leaf wireless. of course california pizza kitchen getting hit by the rest of the restaurant stocks. and also leap, pc -- excuse me, metro pcs had tough earnings and they're get dragged down by that as well right now. let's go to the great santelli in one of my favorite towns of chicago. >> well, thank you, brian. trying to get everything in order. you know, the treasury market certainly isn't robust today but it is hanging out in the upper yend of a 6 1/2-week high in terms of its yield roughly on a closing basis at 3.75. but today has been a wild, fun day. you know, it all started out early when trimtabs, the story written a few days ago, really got legs on the floor. charles bidderman is a good researcher, and people on the floor respect him, and he showed some good quantitative research about income and how it may affect jobs, but after contacting the bls there's going

to be no revisions for anything, even if it has an impact based on biderman's research from january through april jobs numbers. of course, may and june could be revised tomorrow. but any revisions through the first part of the year they're going to come out in february of 2010. mr. biderman is going to be on at 4:30 eastern, and i urge our viewers to watch because it's very enlightening and it has a real issue with spending down the road and incomes. recall that we had a very weak personal income number very recently. one final thought is that today the dollar really had a sustained rally, one of a few in the last couple of weeks. so it's going to be interesting on any type of wild employment report to see exactly how the dollar moves. is it going to move up on weak data? flight to safety or not? big issue. bob pisani, back to you. >> thank you, rick. and of course charles biderman, well known to all the viewers here at cnbc. let's talk to our guests here about where we're going here. bull, bear here. alec young, you know him, equity strategist at standard & poor's. and larry canter's the head of research over at barclays

capital. so where are we here? the bulls are saying get used to better gdp growth. about 2 1/2% for the second half of the year. some have 3%. the bears say you're kidding yourself, there's no sales growth here, you're not going to be able to argue cost cutting and margin improvement, it's not going to work in the second half. so what's going to happen here? >> well, bobby, i think over the short term sometimes the market needs to tack a breather. a lot of the bullish arguments you just articulated are what have driven a lot of this rally. but at this point that's in the market. i would agree with the bears that the bar for expectations is going a lot higher in the second half. but i think it's too soon to really panic on what's going to happen down the road. so you see the market just sort of hovering around. a lot of people have missed this move, and they come in at the first -- at the slightest sign of a dip. so we're really not getting a lot of traction one way or the other here. >> you've got to admit, larry, he's right. the bulls are arguing that a dip in the market is a reason to come in and buy prices lower

rather than just sell out. that's a completely different mentality than six months ago. >> and that's -- i'm on that side. i mean, i think, you're right, the bulls are saying 2.5% gdp. it's probably not strong enough. that would be the weakest recovery ever, given the fall that we've just had. and not only that, every single sign of a strong recovery is in place. you've got the mother of all inventory swings. that's going to start adding to growth. jobless claims have come down 100,000. you always see that when you're having a big recovery. massive fiscal and monetary stimulus. with rates at zero, and they're not going to change at any time soon, they have their best -- their pedal to the metal of fiscal policy. 787 billion. we think 10% of it's been spent. so the credit markets are rallying, stock markets are -- i would say you're going to see something over 2.5% in the second half. but you're right. you need that to keep this thing going.

i think you're going to get it. >> however how about the economic news tomorrow? payrolls, what are we looking at 3:0030 -- loss of 330,000? >> the street's at minus 330. the adp kind of set that up. the market's expecting at least an in-line number. if we were to come in materially short, say, 50,000 or more, and that has happened in the last couple of months, we could be vulnerable to a little bit of profit-taking. i think what's more interesting is the way the consensus expects negative job creation to flatten out very quickly. by october the street's looking for zero. and that ties into the bar being higher in the second half. >> and larry, if we don't get that, if we're still at 250,000 job losses for october, november 3rd -- >> the market's down from here to there. that's exactly right. but the economy has time. we're sitting here in august, we don't know it yet, and we should see -- in fact, we should see positive job growth before the end of the year. but you're right, you have to see that. >> larry kantor and of course alec young, my old friend. good to see you as always here. michelle, over to you.

>> all righty. thank you so much, bob. just about 49 minutes before the closing bell. dow jones industrial average and the nasdaq in negative territory. we're going to see if we can get into positive before the end of the day. bob? >> the s&p at 1,100. can we do it? that's what citi chief u.s. equity strategist tobias lefkowich thinks. find out what he thinks you should do to cash in on the potential rally p. >> plus, president obama promised the economic stimulus would turn around the economy. but unemployment at nearly 10%. is the stimulus working or not? coming up, council of economic advisers chairman cristina romer will tell whus we may start seeing real results. >> and after the bell your tax dollars may be going to pay wall street banks and lawyers nearly $1 billion in fees to help break up aig. should the government ask for a discount after giving billions to shore up the financials, or are taxpayers getting the biggest return for their money by paying the best on wall street to get the job done? that story today 4:00 p.m. eastern. >> and here's a look at the most active stocks on the new york stock exchange.

and we should also tell you that sonia sotomayor has gotten enough votes to be confirmed for the u.s. supreme court, the first hispanic to do so. that's a live picture as that vote is taking place right now. but once again, sonia sotomayor getting enough votes to receive confirmation to join the supreme court. eseseseseseseseseseseseses

hi, folks. i'm matt nesto with a "closing bell" realtime flash. did you ever hear of a company called ansys? anss is the ticker. they are a design simulation software maker and they're flying today. second best performer in the russell 1000 behind only cit. 15% gain is the best single-day move for this stock in a long, long time on big volume, on better-than-expected earnings, and a forecast that looks pretty strong on earnings per share basis on the full year. they did tighten the revenue figure, but the market is loving ansys right now. >> thank you, matt nesto.

let's show you a live picture. once again, the senate has confirmed sonia sotomayor as the first hispanic justice on the supreme court. vote was 68-31 for sotomayor. she was president barack obama's first high court nominee. she becomes the 111th justice, just the third woman to serve on the supreme court. there we go. once again, live picture from the senate. 68-31 in favor of sotomayor. all right. let's take a look at some of the day's research calls. here are the latest upgrades and downgrades. bank of america, merrill lynch upgrading miner freeport-mcmoran to buy from underperform with an $87 price target because they think the company should benefit from the higher copper prices we've seen lately and the company may reinstate its dividend next year. keith briette and woods downgrading to market perform from outperform. that's after the regional bank surpassed the firm's $21 price target. goldman sachs removing dr. pepper snapple groop from its conviction buy list, also another valuation call. shares of the beverage company are up more than 90% since early

march. they're saying don't get greedy. all right. my next guest thinks the better-than-expected second quarter earnings have given equities a boost. let's get over to bob pisani who's going to do that interview. bob. >> the s&p 500 hitting the 1,100 level is plausible. joining me now on the set, tobias lefkowich. you know him, he's been around forever, chief u.s. equity strategist at citigroup. i'm going to suppress my desire to talk about citigroup. but let's do bull-bear. i talked about it right at the top here. let me get your response about what the bulls are saying and the bears are saying. bulls are arguing second half growth gdp will be above 2 1/2%. yes for the second half? >> our economists think gdp is definitely going to be bouncing. i know they're looking at their numbers again so, i'm not going to commit to the 2 1/2 number. but i will say this, the production rates have to pick up and it's not because final 2ke78d is picking up it's because the inventory is so severe. this whole argument about all the earnings beat in the second quarter coming from cost cutting and not to top line, we're going to see the top line. earnings are a function of production, not a function of

some car dealer selling a car dealer to you and i. that's not reported in the s&p 500 as a sale. so we are going to see a real change as production goes up and earnings will swing. now, you know, people are upset about cost control but cost control gives you even more operating leverage to the up side. so i do think that's pretty exciting. the question is how good is this to carry into 2010 and beyond? and i think that's a legitimate concern. and let me just give you one thought on the consumer. there's all this fear. consumer spending 70% of u.s. gdp. they've lost money. do you realize in the last 30 years all the growth of consumer spending is a percent of gdp has come from health care expenditures, not you and i buying anything -- >> the ill collusion we're spending more. what about our credit card debts that go up year after year after year? >> we did that but so did our wealth go up. even if you want to sit there and say american consumers saw their debt go up by $6 trillion, their assets went up by 24 trillion and they're still up about 14 trillion. >> let me give you the bear argument. we are not going to see much sales growth in the second half

of the year. yes, no? >> no. they're wrong. if you look at what sales growth is, it's that auto producer selling a good. it is the company supplying, the steel company supplying them, the plastics company supplying them. housing starts rupp 31% year to date for single family. now, that means wood products are going to go up. you need more carpeting. you need more refrigerators and freezers. that stuff goes into vehicles. those are sales. now, again, the sale from that private home builder to you and i, that's not captured in the s&p 500. >> what about the retailers? we saw brinker with cautious comments. the restaurants, the retailer. are we going to see sales growth there at all? >> i think we're going to see it in certain areas. we've seen some of the retailers doing well. some of them not doing so well. there are shifts going on. people are making decisions, what they want to buy, what they don't want to buy. somebody wants to go out and buy a car under cash for clunkers, maybe he's not going to the restaurant tonight. >> lower prices. bulls are saying we may see a dip in september. you know the bears are arguing this is all a lot of nonsense,

when we realize it the market will dip in september and october. bulls say maybe, but that's a chance to buy at a lower price, not sell the market. this is a different mentality than six months ago. if get a dip in september, october, is that a buying opportunity for stocks? >> let me give you context. in june investors are getting a little too excited. we can see that on our sentiment work. in july our sentiment work went negative. they'd gotten too cautious. they worried about the head and shoulders formation in the market. and then we rallied in july. now i think we are going to keep rallying, but i do -- i have a little bit of sympathy, or empathy for the view that september, october we're going to run into a couple of issues. the big issue is earnings estimates, they're too high. and we've got some companies out there, one of the mortgage insurers that could be in some trouble as early as october, hitting the european banks. >> the important thing is we will -- why do the bulls keep pushing out the recovery? i've got companies talking about 2011 earnings, 2012 earnings.

caterpillar was doing 2012 earnings the other day. >> they were talking about when they would get to a peak. more importantly ceos, and i lls say this with a little trepidation, the ceos don't know what's going on in their business. if you look at the conference board survey of ceo confidence, what you're going to see is when they're very, very bearish buy markets and when they're very bullish you're not going to get the great performance the next 12 months. >> tobias levkovich, always a pleasure. citi's going to trade over a billion shares today. i know you can't know that. i do. >> 35 minutes before the closing bell. the dow jones industrial average roughly lower by 30 points. the nasdaq in negative territory as well. >> treasuries have had a big call this year. should you still be betting on bonds during the remainder of the year? these days, when you have to spend,

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time for the "fast money" final call. treasuries have had a great run this year, but should you continue to bet on them? with some answers joining us right now is greg tricoli, director of technical research at opalesque. good to see you. >> how are you, michelle? >> what's the good call on treasuries? we're talking about the ten-year specifically? >> talking about the ten-year. thank you for clarifying that. little bit of history here. from december to may the market consolidated between a 2% and 3% range. from may on we've been between 3% and 4%. came very close to 4%. we backed off to about 3.30.

>> we're showing that to our viewers right now. >> up around 3.25 right now. this is an area where i'll tell you going forward, 3% is the low. going forward, forget trying to violate 3% of the down side. we move higher from here. when we broach, you know, 4%, do we get above it? do we stay above it? a lot of that depends upon the near-term price action in the equity market. there's an inverse relationship going on. if stocks back off here, back and fill on the s&p to about 9.50, 9.45, not a big payne move to do that, i think you'll see treasuries at that point jump up on price. >> now, you brought up the equity markets. we're showing the s&p 500 here. below 1,000. what's your bet there? which of course plays into your ten-year -- >> well, the thing is, again-f we get some favorable numbers tomorrow and the market is still in very -- >> when it comes to the labor numbers. >> absolutely. >> then what you could see at

that point is the equity market jumps higher and you'll see price pressure on the treasuries. so higher yields at that point. >> but for those folks who have been arguing, boy, ten-year yields go back below 3%, you think they're crazy? >> absolutely. i disagree 100%. >> got it. greg, thanks so much. >> thank you, michelle. >> greg tro coli. coming up tonight on "fast money," the setup of tomorrow's all-important jobs report. how bad is it going to be? rick santelli will have the word from the pits. and two breakout stories. 99 cent stores on the 'verge of a 52-week high. imax, which has doubled in 2009, "fast" will talk to the ceos. plus charlie gasparino on if morgan stanley's john mack will get the knife. get it? mack the knife? it's coming up, live at 5:00 on "fast money." coming up here on "the closing bell" we're going to talk to the council of dmik advisers chairman christina romer. we are back in a moment.

i'm matt nesto with the "closing bell" realtime flash. well, this one could be a sell, sell, sell, if you will, in the words of -- the parlance of cramer. but i'm talking about prison cell. corrections corporation up 9% here today. one of the top ten gainers in the russell 1000. the stock's up 20% in a month.

it is earnings season. it is what they do. and they came out with better than expected results. demand is there. their man days are up. the money that they get for keeping people behind bars is on the rise. and they're holding strong at about 90% occupancy. corrections corp., cxw. back to you. >> got it. thank you, matt. we've got 30 minutes left until the closing bell. let's show you how the markets are shaping up so far today. right now the dow jones industrial average is lower by 22 points. 9,258, a decline of a quarter of a percent. there may be some nervousness ahead of this big jobs number tomorrow. what's it going to tell us about employment? the nasdaq is lower by 15 1/2 points. 1977. it was a great year. the s&p 500 lower by 4 3/4 points. that's a decline of half a percent. 998. below that 1,000 level. bob? >> see that little rally there in the last hour. that's financial stocks, your amexes, your bank of americas all moving up a little bit here. late in the day. commodity prices have had quite a run this year. crude oil up 61%. copper 95%.

have priced run too far ahead of the fundamentals? and is it a time for a reality check? joining me now to discuss that, john lakata, chief investment strategist at blue phoenix. rachel ziemba, the analyst over at rbg monitor. you think things have gotten a little bit ahead of fundamentals? >> i do think so. i think we're a little bit overheated right now. i think some of the corrections have made sense, we're no longer facing a near-depression, but i think the recovery might be more sluggish, the economic recovery, and same thing for commodity demand. >> john, i want you to comment. the cftc is holding hearings on whether or not speculators are manipulating the oil market. is there any evidence, since this is such a hot topic, is there any evidence that there are dark unseen forces that are somehow illegally or unethically manipulating the oil markets or any commodities markets? >> you know, bob, that's the million-dollar question. i think that's to be determined still. of course we saw the rally last year and the price of crude oil

touch $147 a barrel. and just when speculation started to hit the market for rampant we came right back down. so i think it would be a blind eye to the market to think that there wasn't more speculation. and obviously just today when the ftc came out with their ruling this afternoon actually around 10:00 this morning soon as it hit the wire the price of crude oil came off immediately. >> when y. did it come off, rachel? because speculators you are out there saying uh-oh, our activities are going to be krirkted therefore let's be involved less in the markets? >> i think there are a couple of things this morgan. some of it was in line with the moves in the equity markets. but i think the decisions right now are adding some uncertainty because it's not clear how all the decisions are going to be enforced, what position limits. the cftc might come out with. i think as the moment as the regulators try to grapple with how to define some of these forces in the financial markets there is more uncertainty and maybe in the short term maybe more people trying to take profits. >> with less speculators in the market, if there are, will there

be less liquidity? will prices be more volatile or also volatile? >> there's definitely a risk of reduced liquidity. i think it's not clear -- i think in the short term there might be more volatility. we're in the summer now. that tends to be a time of more -- of more volatility because of lower volume. but as john said, i think the jury is still out on how this will affect. but i think in the longer term it might mean less volatile swings. >> let's go back to fundamentals, john. you also think the fundamentals have gotten ahead of the prices here. why is that? what's bringing prices ahead of fundamentals? >> you look at copper, for instance. you just mentioned copper's up about 95% year to date. look at a company like freeport-mcmoran, their stock is up 165% year to date. i think there's expectations that certain commodities like cop r&r going to follow an economic recovery. there's been such a saving grace that china's going to be the magic wand for many of these

companies. and quite frankly, i don't think that's going to be the case. and just today if you look at the baltic dry index, which is a great barometer for the health of the commodities market, it dropped 5% today intraday on the fear that china actually might be cutting back importing coal. obviously, i don't think that's going to make copper so immune. >> if you are an investor, rachel, listening to this, is it better for you to own commodities or like commodity etfs or is it better to own the commodity stocks if you believe in the commodity story? >> well, i think in the commodities if you look at oil stocks, especially integrated oil and gas stocks right now, they're actually being hit by lower demand for gasoline and for product. so they're somewhat vulnerable even if oil prices continue to climb. some of the metal producers also face some challenges. political risks, security risks, uncertain regulatory

environments. so pure commodity plays perhaps better to go right to the commodities. >> john, last word. >> i agree with that. look at the mining sector right now. it's pretty evident if you saw comments last night from goldcorp that there's a deficiency with output. there hasn't been many mines, whether you're talking about copper, gold, silver, platinum, palladium, and so forth being found. so i think this is typically a season and many people are not talking about this, miners tend to strike over wages. i think before you know it when the fall comes that's going to be something they'll be talking about. >> john licata, rachel ziemba, always a pleasure. up next, charlie gasparino tells us what he's hearing about john mack's future over at morgan stanley, michelle. >> plus, council of economic advisers chairman christina romer will tell us when we may really start seeing signs that the economic stimulus plan is working. >> and then after the bell a restaurant's one of the most appetizing investments right now with a possible economic recovery on the horizon. undefeated professional boxer floyd "money" mayweather has the fastest hands boxing has ever seen.

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it is still a long way to christmas but cnbc's matt nesto

has an early present for you -- we've got to cut you off. let's go to president obama in the diplomatic reception room. he's going to comment on sonia sotomayor. >> deeply gratified that the senate has voted to confirm judge sonia sotomayor as our nation's 111th supreme court justice. i want to thank the senate judiciary committee, particularly its chairman, senator leahy, as well as its ranking member, senator sessions, for giving judge sotomayor a thorough and civil hearing, and i thank them for doing so in a timely manner so she can be fully prepared to take her seat when the court's work begins this september. the members of our supreme court are granted life tenure and are charged with the vital and difficult task of applying principles set forth at our founding to the questions and controversies of our time. over the past ten weeks members of the senate judiciary committee and the full senate have assessed judge sotomayor's

fitness for this work. they've scrutinized her record as a prosecutor, as a litigator, and as a judge. they've gauged her respect for the proper role of each branch of our government, her commitment to faithfully apply the law to the facts at hand, and her determination to protect our core constitutional rights and freedoms. and with this historic vote the senate has affirmed that judge sotomayor has the intellect, the temperament, the history, the integrity, and the independence of mind to ably serve on our nation's highest court. this is a role the senate has played for more than two centuries, helping to ensure that equal justice under the law is not merely a phrase inscribed above our courthouse door but a description of what happens every single day inside the courtroom. it's a promise that whether you're a mighty corporation or an ordinary american you will

receive a full and fair hearing and in the end the outcome of your case will be determined by nothing more or less than the strength of your argument and the dictates of the law. these core american ideals, justice, equality, and opportunity, are the very ideals that have made judge sotomayor's own uniquely american journey possible. they're ideals she's fought for throughout her career and the ideals the senate has upheld today in breaking yet another barrier and moving us yet another step closer to a more perfect union. like so many other aspects of this nation, i'm filled with pride in this achievement and great confidence that judge sotomayor will make an outstanding supreme court justice. this is a wonderful day for judge sotomayor and her family. but i also think it's a wonderful day for america. thank you very much, everybody. >> president barack obama in the diplomatic reception room

announcing the approval by the senate when it comes to judge sonia sotomayor. she will be sworn in on saturday to the supreme court, and for the first time in history there will be tv cameras there to document it. she's going to be the 111th justice of the supreme court. chief justice john roberts is going to administer two different oaths of office. she's going to repeat one oath that's prescribed by the constitution. that's going to be in a private ceremony with only her family. then they're going to open it up to reporters, and she does a second oath. and as i said, once again, for the first time in history tv cameras are going to be allowed to show that. 68-31 was the vote in the senate. what are we doing here? okay. christina romer is standing by as well. that's actually really convenient. let's bring her in. she's chief of the council of economic advisers. good to see you, dr. romer. >> great to be here. >> you must be excited about sonia sotomayor. >> i couldn't be happier. >> great. let's talk about the economy. we've had so many economists who've come on and said when you look at continuing claims, when you look at the housing data some say the recession ended in

the second quarter. do you agree, is the recession over? >> i think if you look at the gdp numbers what we know is gdp fell in the second quarter. in my mind that means we're still in a recession. obviously, we are looking forward to better news as we go through the end of the year. but actually, until we see a lot more evidence i'm not going to be calling anything. >> okay. got it. what about this employment number that we're going to see tomorrow? to me it looks like the market's trading a little bit nervously ahead of that. what's your outlook for unemployment in the united states? >> all right. so here i've got to be very careful to make sure i say i don't have the numbers yet. what i said in the speech this morning is unfortunately we do know sort of given what's happening in gdp that we have surely lost hundreds of thousands of jobs in the month of july. that's just the horrible truth of where we are. so we're going to be looking at these numbers as well. we're hoping to see a continuation of a trend toward

moderating job loss because that's got to happen before we can actually see job gains and that's of course what we're all waiting for. >> i'm glad you brought up the speech because the one you made this morning was titled "is the stimulus working?" you make the case yes. we can't let you do the whole speech because we don't have that much time. but a lot of people argue that it isn't working. why are they wrong? >> it was a chance for my whole staff to do a sort of clear-eyed assessment and what we did was look at things like if you made a sensible baseline forecast of where the economy was headed just based on past data you find we're doing a fair amount better than that. it's still lousy but it's a fair amount better than the past history would lead to you believe. we also did a certain amount of connecting the dots, looking at what changed between the first and second quarter of this year in terms of the gdp numbers and saying can we see the linkage? for example, we saw business fixed investment change from plummeting to a much smaller decline. well, does that go with the fact that we've had about $14 billion

of tax relief for firms and investment incentives? likewise, we looked at state and local government spending. that's been going down. we saw it turn around in the second quarter. and that, i think it's pretty clear, is due to the $33 billion of state fiscal relief that was there in the recovery act. >> we talk about the next big financial hurdle, and it's reforming health care. we look at all of these bills that are being put forth, and none of them seem to bend the cost curve. you as an economist, what advice have you given to the president, members of congress about what it's going to take to really, when they say bend the cost curve, start bringing the cost of health care down instead of that continuous upparred trajectory that we've seen? >> wrl, i'll certainly tell you one of the first things i say is how important it is to do that because you're absolutely right. for long-term living standards, for the budget deficit, slowing that growth rate of cost is absolutely important. there are lots of good ideas out there. many of them are in these bills. one the president has mentioned is the idea of an independent medicare advisory council.

we think that's a really important structural change that can put us on a trajectory to bending the curve. we're going to be continuing to work with congress because you're absolutely right, it's crucial that those curve benders, game changers, whatever you want to call them, the things that slow the growth rate of costs, have got to be in this bill. >> a lot of economists, and granted, they are conservative ones, argue that the only way you're ever going to really bend that cost curve is when you get the user of health care much closer to their health insurance company and/or their doctors. but right now the health insurance companies are incentivized not to please you, the individual who's got the policy, but the employer who actually wants to control costs or the government who wants to control costs and that we would be much better off you buy your car insurance, you buy your life insurance, why don't we all buy our own health insurance? any chance of that ever happening? and what do you think about individuals actually having more control? >> well, we certainly -- the idea of individual choice, the idea of informing consumers, providing them with information, we're wildly in favor of that.

and what the president has said consistently is kind of the american system is largely employer-based health insurance. and i think most people are pretty happy, pretty used to that system. so i think he's been hesitant to do anything that would disrupt what most people know and understand. and as he's always said, if you like what you have you can keep it. but that's certainly been motivating our strategy. but absolutely, we believe in empowering consumers. we believe in giving them information. and oftentimes just asking them what they want is important for guiding medical treatment. >> a surcharge, or surtax of 5.4% on the wealthiest americans, is that a smart thing to do when it comes to trying to pay for health care? >> what is going to be true and what is so important is that we do pay for it. so that is -- anything we do in terms of a health care investment, expanding coverage, the president has made very clear it has to be paid for in the budget window and it has to

have those game changers that you and i talked about. we've certainly emphasized medicare and other kinds of savings. right? we've put about $600 billion of hard, scorable savings on the table. some sort of a revenue increase may well be necessary. but there are lots of ideas there. >> revenue increase -- timothy geithner and larry summers both made a lot of news last weekend when they refused to rule out a middle-class tax hike. can you do that now? >> well, if you think about what we've been proposing, it was things like limiting itemized deductions on high-income workers. so that's certainly something we had in mind. listen, it's so important. nobody is talking about raising taxes on middle-class families. that is why the first thing we did in the recovery act is to cut taxes for 95% of the american people. we are in the middle of a terrible recession. it would just be silly, bad policy. where we are standing, and it comes right back to all that we've been talking about, is slowing the growth rate of costs in health care. that's so important. >> we agree. dr. romer, thank you so much.

we appreciate your time this afternoon. >> great to be with you. >> okay. there's a little more than 15 minutes before the closing bell. no, actually, there's 11 minutes till the closing bell. that backwards number, it takes me a while to get used to it, bob. dow and nasdaq in negative territory at this point. let's see what we can do into the close here. >> up next we're going to have charlie gasparino tell us what he's hearing about john mack's future at morgan stanley. a lot of speculation about this.

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welcome back. our on-air editor charlie gasparino has been looking into john mack's future at morgan stanley and what that means for their business strategy. and he joins me now with the details. charlie, there's some speculation here. and if there's any kind of a replacement -- >> i think it's more than speculation now, bob. i mean, it broke yesterday with doug kass, the -- what would you call doug kass? he's so many things. he shorts the market. he does investments. he -- >> doug is a well-known market commentator. >> he's a market commentator, writes a newsletter. but he came out yesterday and said essentially that john mack will be handing some of his responsibilities over to james gorman, who's the president and john mack's the ceo of morgan stanley.

james gorman the president of the firm. also, more importantly, i think than just the title president, he runs the sort of -- the brokerage arm, which now includes both the smith barney and the old dean witter brokers. it's something like 18,000 brokers, biggest brokerage department on the street. and he's going to hand some of that to -- mack's going to hand his ceo duties, some of the duties to gorman. gorng stanley came out and said there's nothing imminent, nothing's going on. i did some more checking and i'll tell you, what kass has essentially said from my sources, and these are sources close to mack, is that broadly he's accurate. kass is accurate. what's essentially going on right now is a transferral of power and the likelihood is that john mack before the end of the year is going to give up the ceo job, remain as chairman, and then the question becomes who will he give the ceo job up to in and the likelihood, and i keep saying likelihood because things could change, who knows what's going to happen in the next couple months? but you know, we're halfway through the year. the likelihood is that the ceo will be james gorman if

everything goes according to plan. he is running the most important part of the business. he's running the part of the business that morgan stanley is becoming. an advisory business. they've got anne way from the proprietary risk trading model, which blew up. the fact is john mack is turning 65 i believe in november. that's one aspect. another -- and i'll tell you, i really like john mack, respect him, one of the good guys of wall street. he hasn't had a good couple of years, and i think the board, from what i understand, board members are itching for a change somehow up top. and the likelihood, like i said, it's the likelihood, we don't know for sure. >> but charlie, it makes sense, right? jim gorman is the logical choice. he's the co-head of strategic planning. he's the co-president. he ran retail. if there's a logical choice, jim gorman would be the man, right? >> and a logical internal choice. i hedge this because you never know who's -- i mean, there's a lot of smart guys on the outside. i mean, larry fink almost took the job at one point. you know, when larry -- not that he almost took the job. the board, before they went and got mack back in 2005, when they

ousted phil purcell, the board actually interviewed larry fink and apparently he had some -- one of the reasons why he didn't get named to the job, the board said so what could we do to get you to take this? and he said if you allowed me to fire every one of you board members because he thought the board members were kind of effectless. but there are possible outside candidates. if we're talking about right now, from what i understand, the plan is to name gorman ceo before the end of the year, he'll take over in the new year, and then mack remains as chairman. but i'm getting that from senior people inside morgan stanley. >> morgan stanley down 1 1/2% right now. michelle, back to you. thanks, charlie. >> coming up next, we're going to come right back with the closing countdown. and then after the bell, cbs just minutes from reporting its second quarter results. that's ahead at 4:00 p.m. eastern time.

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some companies raised their earnings guidance. but still no top line growth. we're still not hearing much about that. same situation in the restaurant space as well. and yet the bulls still have the upper hand, insisting we will see gdp growth. most of them have it in 2 1/2% range. some are saying 3% for the second half of the year. the bears are insisting once you realize that the top line growth isn't going to be there the markets will drift downward into september and october. the bulls comment on that very simple. if the market drifts lower, folks, it's only going to be a point at which you can get in and buy stocks. there is a ceiling on the market. a floor, pardon me, on the market right now. the bulls believe even if it goes down you'll see it holding in there pretty well. that's pretty much the battle line right now. closing bell in five seconds on a day when the dow jones industrial average down 24 points. some of the big industrial names like caterpillar did have a pretty good name, pretty good day. bank of america also holding up fairly well. there's the closing bell. you know who's next. michelle caruso cabrera.

it is 4:00 p.m. on wall street. do you know where your money is? welcome to "the closing bell." i'm michelle caruso-cabrera in for maria bartiromo. and here's what we're following at the close. stocks slumping for a second straight day on wall street as weakness in technology and energy stocks offset a better-than-expected jobless claims report. july turning out to be another disappointing month for retail sales but some retailers are signaling that the pace of declines may be slowing. and cbs just moments away from reporting second quarter earnings. we're going to have instant analysis as the numbers hit the wires. here's a look at how we finished the day on wall street. the dow jones industrial average in negative territory by a quarter of a percent, down 25 points, well off the lows of the session, though. 9,255. nasdaq composite below 2,000. 1,973. a decline of 19, nearly 20 points, or 1%. the s&p below 1,000, down a little more than five points. a decline of half a percent. 997 is where it stands.

let's get more on today's action. roberto pisani on the floor of the new york stock exchange. bob? >> and a lot of the debates going on, remember, what's been happening here. earnings okay, top line isn't. let's do the bull-bear here and i'll show you the outline to the debate. we had an interesting discussion with tobias lefkovich about all this. the main argument of the bulls is get used to 2 1/2% and above. some have got 3% or more. lower prices on stocks, buy the dips, don't sell the market, it's a different attitude. and the bears are having a hard time countering that right now. bears main, argument is you're not going to get the sales growth in the second half, the margin improvements because of cost cuts, can't keep arguing that's only a first half story, it doesn't work in the second half, and stop pushing the recovery ought into 2011. bears get really angry when bulls start talking about 2011 here. take a look at brinker. this is the big thing the bears keep pointing out to me today. everybody's talking about the fact they lowered their fiscal year earnings. that starts now. second half of the year is their fiscal year.