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market at its high of the session after the fed left interest rates unchanged and updated on those key quantitative easing programs. okay. 52-week highs as we head off to the closing bell. starbucks. liz claiborne, an interesting one. and you also have cree and checkpoint software. how will it end? we'll find out on "the closing bell." >> announcer: this is cnbc.com "news now." stocks maintaining earlier gains as the fed leaves interest rates unchanged as expected and continues to say inflation should remain subdued for some time. the government reports a record budget deficit for july,

bringing the fiscal year to date deficit total to nearly $1.27 trillion. mieshlcrosoft and nokia strg an alliance to bring business software to smartphones including microsoft's popular office software suite. that's cnbc.com "news now." i'm mary thompson. stocks holding on to gains following the fed's latest statement and interest rate announcement. we are at the highs of the day as we enter the final and most important hour of the trading day. hello, everybody. welcome to "the closing bell." i'm scott wapner at the new york stock exchange. >> hey, scott, i'm rebecca jarvis in for maria bartiromo at cnbc global headquarters. and in the markets right now, as scott mentioned, stocks are still higher, holding on to those gains, on track for their first gain in three days. reaction to the federal reserve's latest policy statement has been pretty positive here in the final hour. just a few highlights, the fomc making no change on interest rates, noting it will remain in the zero to quarter basis point

target range for an extended period of time. the fed also expects economic activity to likely remain weak for a time though it expects inflation to remain subdued. as for the major indices take a look at them right now. actually near the highs of the session at this moment in time. the dow up 175 points. the nasdaq right now also hanging steady in green territory, up 45 points. the s&p 500, the overall markets also to the up side by 18 points. we have steve liesman here in studio with me to break down some of the headlines, steve, that not only on what we -- we do have some breaking news right now, steve. >> yes, we do. because the fed put out a policy statement saying they were going to slow treasuries, and within minutes of the statement the new york fed, just a few minutes ago, actually, put out its own statement which is the operational side. the new york fed executes that which the board tells it to do. so the new york fed saying we were gradually slow both the size and frequency of these treasury purchases in order to do what the fed, the fomc decide td wants to do today, which is to really lengthen it out to the

end of october. what they're going to do is announce this slowdown inside the two-week schedule that will come out beginning august 19th. so they're pretty much going to be on track until then, rebecca. so the big news that comes out of this is, a, we go from the economy contracting less slowly -- >> yes, leveling out. >> to now it's leveling out. and three, the idea of $300 billion in treasuries is going to run out not mid-september but mid october. >> thank you, steve liesman. and obviously, steve will stay with us throughout the hour. and next, to break things down and continue on this fed topic, scott, over to you. >> okay, rebecca. and what an interesting day in that the market picking up steam in the last 10, 15 minutes or so. right now the dow at the highs of the day, up 172 points. let's send it around the horn to get some more perspective on this market move. the nyse, the nasdaq, nymex, and the floor of the cme group in chicago. we start with bob pisani who's the eye on the floor of the nyse. >> basically, traders wanted the status quo, and by and large that's what they got. they got a little more positive comment on the economic

situation. so here's why we're moving here. number one, basically unchanged from the fed statement, but more importantly, economic activity leveling out. a little bit of an upgrade from the prior statement. more finality on quantitative easing. you heard from steve, full amount purchased bit end of october. pretty much status quo for everything else. inflation remains subdued for some time and interest rates low for an extended period. look what happened. watch what the professionals are doing. the xlf, the big etf for the financials here. they moved up on very heavy volume right after the fed meeting. a little bit on the down side. then moved up again here, indicating people were pretty happy with the statement overall. same with the tech situation. here was again your market leader. there were positive comments early in the day from astor as well as supplied material. this is your exchange traded fund for tech stocks. this is how professionals buy baskets of tech stocks very quickly here. commodity stocks, curious day, the dollar jumped on the fed announcement, then quickly moved down. we've had mostly to the up side on commodity stocks, although

not as much as the rest of the market. and curiously, the move in the dollar, the dollar weakness overall, has not been as much of a help to commodities and commodity stocks in recent days as it was in the prior months. tradertalk.cnbc.com. techs have been market leaders all throughout the day. >> it's just incredible. i was going to get my hair done, do my nails today. i thought it was going to be a snoozer. and it really has not been. after that early pop and we pulled back a tiny bit, but we're up 2.1%. i was talking about a battle for 2000. but that's out of the question at the moment. i do want to point out the nernlz. they haven't really changed. that means the buyers are just buying more of what they were already buying. an hour ago i talked about the storylines, will they hold up? applied materials, which reported after the bell yesterday, of course smaller loss than expected. the chip sector in general just jamming. that is definitely steady. microsoft, the deal with nokia and what it means for this global competition for technology and the smartphone

sector. obviously, the deal is bullish, up 3.1%. i also want to point out a couple of other names out there. dell is up 4%. apple, which obviously will be involved -- you heard what cramer said about possibly 5 million iphones being sold in china. up 2.2%. google up 1 1/2%. if you want some sort of test with the investor about the consumer, starbucks just shy off that 52-week high. it went over it, and now it's pulled back by three cents. lattes still cost four bucks, folks, but we're at fresh highs. bucyrus added to the conviction buy list at goldman sachs up 8.6%. i do want to point out quickly i'm not going to be debbie downer but there are a few negatives. amgen down .6% and palm. eph we haven't talked much about the pre lately. down 4.7% even though they say they'll be cash flow positive in the second half of 2010. let's go down to sharon epperson on the floor of the nymex. >> the dollar's not having as much effect as it has in the prior months on oil prices but the weakness there is still one factor that has helped propel

oil higher. but the real factor has been equities and the momentum that we're seeing in the stock market overall is really what has helped oil prices today. despite fact we got some bearish data from the energy department about inventories. keep in mind when you look at where those inventories are. you have to raise the question, really, who needs crude at least right now. we know the international energy agency says demand's going to come back in 2010. but for right now they said for this year it's going to be down. so refiners cutting their runs sharply and earlier than they do. usually this time of year we have more oil and distillate fuel supplies than were expected. that increased this week. and the decline we saw in gasoline supplies wasn't that great, and in fact, it was a lot less than what we saw a year ago. so what has happened to cause this rally in light of this bearish data? really, it is the s&p 500. take a look at that and the chart of oil for today and you can see how they've been trading in tandem. meanwhile, we're also continuing to watch as many traders here on the floor are this hurricane -- not a hurricane yet but the

national hurricane center is talking about tropical depression 2, which could become the first named storm of the season. they actually don't expect it necessarily to turn into a hurricane. they're also keeping their eye on a tropical wave off of the cape verdean coast off the coast of west africa. what has that done to natural gas in not a lot. we're expecting another pretty big increase for n. storage for this time of year tomorrow. rick santelli, to you in chicago. >> i'm jealous of your graphics. that was a neat graphic. listen, maybe some of the most important news had nothing to do with the statement after everybody got done, and we'll get to that briefly in a minute. we did see that the budget numbers for july were out. a record 180 and change, just under 181 billion. that's the new record for july. last july it was around 102 billion on the spending more than taking. the revenues dropped about 6%, 6 1/2%. and for the fiscal year we're just a nick under 1.3 trillion in terms of the deficit. all important. now let's get to the market. everything kind of did a u-turn.

that's because the fed really pumped it on everything that most traders were most interested in like quantitative easing. you see the dollar index? it almost stayed in positive territory for a few winks.n now it's back down. if you look at a chart of 30-year, the furthest out yet to be auctioned, you see its yield jumped and it came back down. but i have to tell you the curve did steepen. we're still higher in yield on 30s and sos. two-year yields are actually below where they were yesterday. which w. fits. keeping everything liquid as far as the eye can see. rebecca, back to you. good thank you, rick santelli. the fed as we said keeping interest rates steady but the central bank says economic activity is leveling out. cnbc senior economic reporter steve liesman joins us for his nuancement of the fed statement. and steve, it's not only that it's leveling out but it is still fragile. >> i think that's definitely true, rebecca. first of all, let's talk about what bernanke has said and how this is very much consistent with that. he has said he does not want to take away the punch bowl too

soon. he sees that, along with tim geithner, by the way, as a big problem that has happened both in the depression, where they took it away too quickly, and in other countries that have really gone to the floor and then all of a sudden see a little sign of recovery and come back. he is really using those heavy fed terms, extended -- and by the way, rebecca, i will pont out one thing the economists are abuzz about. the split infinitive inside the fed statement to gradually flow the treasury purchases. i did get one note from one -- a guy said -- >> they sort of hedged there. >> well, which is actually joking about the idea that the last time the fed actually split an unfinancetive in a statement. >> in terms of the economic outlook and you say not taking away the punch bowl too quickly, inflation is statement basically remains the same is what we've been hearing here. >> exactly. >> and that enables them at least on a theoretical base tois keep things steady as they stand right now. >> and you make a great point. that's the trade. either you believe in the fed's view of the world or you don't. the fed's view of the world is

as follows. high unemployment low capacity utilization, overall low aggregate demand means inflation is on hold for an extended period, that means foote fed is on hold and/or low for an extended period, if you think that's wrong, go ahead and trade against the fed. in other words, worry about inflation, trade on inflation, but really what they're saying is they believe inflation remains subdued for some time. i will say one thing. i think there's more talk going on behind the scenes that we'll get to about an exit strategy. i think they are talking about what i call preparing for the peace in a very, very serious way. so they are ready to move when things start to move that way but not anywhere close to actually implementing them. >> thanks so much, steve liesman. we won't keep you on hold here. scott, over to you. >> thanks so much. back on the floor of the new york stock exchange, where we can get more on today's market move and the fed statement and everything else going on today. jamie ajasper joining us, manager of the american israeli startup managers fund. and brian bielski is the chief investment strategist with oppenheimer. great to have you both on the

floor on such an interesting day. first let me ask you, brian, to you, to react to the fed statement today because the market clearly seems to be voting it it liked it. >> considering that the last three days prior to this were negative, it's not surprising the stocks snapped back because stocks in general on a short-term basis remain very reactionary. no real surprise to us that the fed did not change their language given the fact they're not going to be able to change what they think materially. so you start to see wage growth, which leads consumption. until we start to see those trends, the fed's going to have to become -- and remain, i'm sorry, more defensive. >> virtually an unchanged statement today. did you like what you heard? >> yeah, that's right. we're going to need to see more and better economic data in terms of better jobless numbers, better consumer confidence, housing stabilized, and we've just come off a 50% rally from the bottom. so where it goes from here i think is just stabilizing. >> just yesterday we stood in this very spot and marked the one-month anniversary of the start of the summer rally. we asked the question, is it the

start of the summer sell-off? here the market sits up at the highs of the day. what's interesting to me is that it appears everybody is saying the market should go down because it's overbought. whenever there's been a bit of a downturn. and take a look at financials today. for a great example of that, the market's going back up. people have bought that dip. >> exactly right. per my prior comments the markets seem to be very reactive. number two, we've written about this so-called correction coming that it seems like all our institutional clients are looking for and we said corrections are very ill louisive when people are looking for a correction. just like last fall when we were looking for a bottom one rarely occurs. this stealth rally could continue and that's why i think we have to in our fundamental work continue to be predominantly very positive going forward. >> jammia, where is this market going? >> the market's going to stabilize for a while out sxx we don't really know what's going to happen, but it's a good time for investors to invest in companies with solid fundamentals, with good management, cash on the balance sheet, and pick companies with a good dividend because we don't quite know where the market's going.

>> brian, jamia just laid out the perfect thing for tech, right? >> yes. >> strong balance sheet, a lot of cash. >> cash is still king. but in terms of operating performance, tech looks very good. tech we continue to believe will be leadership coming out of this. we were one of the first strategists to be -- we were very bullish on tech last year, we've carried it over into this year, and we feel very good about tech being the leader. >> guys-g to see you, thanks for being here. >> thank you, scott. there are about 45 minutes before the closing bell sounds. the dow near its session highs, about 170 points higher right now, scott. >> and up next the coat k tick by tick. find out what the recent sell-off in china is saying about where markets in the u.s. are heading. >> and investors, they've been pushing up yields on treasuries recently, but with signs of economic stabilization, should you be betting on a big increase in treasury prices right now? we'll have some answers coming up. and after the bell one major bank forced to take taxpayer money is getting back into an area of the mortgage market it exited during the housing meltdown. find out which bank it is and

whether the rewards could outweigh the risks this time around. that's today at 4:00 p.m. eastern. >> but first, take a look at the most active stocks on the new york stock exchange. big surprise, folks. it's the financials. they led us into the fed decision. they're leading us out of it most actively.

hi, folks. i'm matt nesto with the "closing bell" realtime flash. i want to draw your attention to the hottest stock in the mid-cap index here today. abc telecom. ticker adct. it's up almost 30%. its best day in at least a decade. the stock's up now, what, 60% on a year-to-date basis. three weeks ahead of their third quarter -- fiscal third quarter results. the company coming out and saying their earnings per share look to be stronger than they originally thought. higher than consensus. and they also are expanding a cost-cutting restructuring program to north america and latin america. there's the bad news. if you're a ten-year holder of the stock. it was once 300 and change. but truth be told, this thing is a momentum play off the bottom in the telecom equipment space. it competes with names like ciena and tellabs.

adc telecom about a $900 million market cap. rebecca? >> thank you, matt nesto. short-term vulnerabilities, long-term upside, that is what the charts are telling us about the direction of equities. jordan kotick, global head of technical strategy at barclays capital joins us now in our regular "tick by tick" segment. it's great to see you, jordan. and i'm curious to know what chart you're looking at to understand that right now we might see a little vulnerability but over the long run things are looking a lot better. >> a couple of things. in the month of august we were still quite bullish the equity market but heading into september we're starting to see some warning signs that are a little bit of a discouragement to us and wanted to point those out today. back in the fourth quarter when the world was falling apart there were a couple of things that looked good and that made us get quite bullish in the first quarter. now it's the opposite 37 the world seems to improve but some of the things are starting to fall to the down side. let's start with china. as we know china's falling overnight 37 first thing to notice is china bottomed pretty much in the fourth quarter of last year when the rest of the world was bottoming in the first quarter. it did lead the way. now we're starting to see

china's having trouble making -- >> everyone's asking if china's a bubble. the charts, are they telling you that? >> no, it's not a bubble. but what you've had is a very extended move to the top. if you believe the markets are mean reverting what you have here is the market is coming back to some kind of equilibrium. we actually think the shanghai composite has some down side here, and that's an early warning sign that september might have some headwinds to it. >> how about the baltic dry index? that obviously has something to do with this china story as well in terms of the commodities plays, the emerging markets. what's that telling you? >> certainly shipping of raw materials is a great deal. at the end of the day you had a decline on the baltic of 95% last year. it was pretty impressive. but yet again it bottomed in the fourth quarter, started to turn higher. that was one of the things that made us bullish. but now the problem is you have the baltic dry has fallen 38% to the down side. >> and you have the fed telling us that inflation isn't necessarily a concern, which if you're shipping dry goods, i.e. commodities, then essentially that could be down. >> well, it is. and we would argue that markets always lead the economy, it's not the economy that leads the markets. now, that's just our bias but --

>> six to nine months out. >> absolutely. >> how about the advancers versus decliners charts? what are they telling you? >> overall as i've argued for many times stock market cannot improve without breadth accompanying them. this is where there is some good news and why we are still bullish despite the risk of a correction. as you see we've had a massive base form on the advance-decline line. it's broken out to the top side. this is leading the way. as long as you have breadth going to the top side, which is exactly what you see here, then corrections are short-term corrections and a larger move higher. >> all right, jordan kotick. thanks so much. back over to you. >> 40 minutes to go before the closing bell. dow at the highs of the day, led bit financials today. check this out. citi up 7 1/2%. jpmorgan up 2 1/3%. bank of america is up as well. and technology's up to the races as well. nasdaq up by better than 2%, rebecca. >> good stuff, scott. famed investment strategist byron wee joining blackstone. find out where he thinks this market is heading, where the biggest opportunities can be found. and taking a look --

taking a look at some of the day's research calls, here are the latest upgrades and downgrades. insurance giant allstate upgraded to buy from neutral at bank of america merrill lynch on valuation, and because the frequency of claims remains at historically low levels. allstate shares have risen more than 20% in the last month, and they're up today 6.9%. liberty media raised to buy from underperform at b of a because of the media company's fast-growing and underappreciated online retail

business, qvc.com. and cnx gas comstock resources and new field exploration all downgraded to hold from buy at stifel nicolaus because of concerns natural gas prices could come under more pressure, scott. and whether it's his yearly predictions or his expertise on the markets, my next guest has remained one of the most recognizable names on wall street, and today he's taking on a new role. byron wien has joined blackstone as vice chairman of blackstone advisory services. he joins us now in a "first on cnbc" interview for an inside look at his new role. byron, i suppose, congratulations are in order first off for your new gig. what do you hope to accomplish? >> well, i hope to continue to do some of the things i've been doing over the past quarter century. i hope to continue to work on the ten surprises each year, to write my monthly essays, to appear on cnbc, to provide investment strategy advice internally at blackstone, and to

provide it for our clients and private equity, asset management and real estate. so i hope to continue to try to figure out how the markets work, where the opportunities are, and to share it with people inside and outside the firm. >> well, you're considered one of the most insightful minds on the street. i read a quote today from steve schwartzman, he of course the chairman and ceo of blackstone. he said "blackstone now stands ready to deploy the largest amount of investment capital in its history." where are you going to put that money to work, byron? >> well, you know, i haven't started the job yet. so you know, today's just the day of the announcement. i'm starting a month from now. and the opportunities may be -- that'll be the anniversary of the lehman bankruptcy. but i do think i've been positive this year, i do think the market will do better in the final months of the year. it's already doing well. it's had quite a move from march 9th. and i don't think it's over yet.

>> let's take a look at your predictions because that's certainly one of the things you're best known for. s&p 1,200 is what you said. right now the s&p 500 as you said is back over 1,000. do you stand to that prediction? and is that for the end of the year? >> that's an end of the year or sometime before the end of the year number. i'm not backing away from it. didn't look too good in march. it's looking better now. >> oil at 80 bucks, and we're certainly getting close. back over 70 today. >> right. it was 40 when i wrote that. it went down into the 30s. but the $80 forecast looks pretty good at this point. >> yeah. what about the stabilization in housing prices, byron? that was another one of your predictions. we got some really interesting data today on the existing home sales front and also housing prices. can you on our air today definitively say that the housing market has bottomed? >> no, i don't think i can definitively say it. that sounds pretty concrete to me. but i do think that housing is beginning to stabilize.

you know, it varies across the country. but you have housing affordability in the best shape it's been in in years, and you have prices having declined to a level where they are really attractive in some of the weaker parts of the country. so i think we're in a bottoming area. i don't know if we've reached absolute bottom. >> what sort of outlook do you have for the dollar? just yesterday i was asking some guests whether we've entered this new paradigm for the dollar where we see it strengthening not as a safety play but in fact on a recovery play. >> well, my view is the dollar is on a slow downward glide path. >> you still think that. >> yeah. >> but the amplitude or the slope of that glide path is really determined by what's going on in the yen and the euro. and they're in tough shape, too. but as long as we're borrowing as much as we are abroad i think there's going to be pressure on the dollar. we're running big trade and budget deficits, and that's not good for the dollar. >> you haven't determined where you're going to put some of blackstone's money to work yet,

but if you had to give investors advice today on where to put money to work, what sectors do you like best? >> well, i like energy because i think the price of oil's going up. i like oil service related to it. i like technology because i think the companies are in very good financial shape. and i do think they're going to show good earning trends. you know, i think that those are two good areas. there are stocks in the industrial area that i think will benefit from more infrastructure spending that will do well. and i also think some of the material stocks will do well because i do think commodity prices are going to be stronger. >> okay, byron. we'll leave it there. again, thanks so much for coming on "first on cnbc" today. congratulations with the new job. as we said, we'll look forward to seeing you again soon. >> thank you. >> rebecca? >> hey, scott. the dow right now is up 171 points. the nasdaq also higher by about 42 points. and there's a little more than 30 minutes to go before the closing bell sounds. >> and the yield on the benchmark ten-year yield treasury hit a two-month high this week, but can yields keep

rising if the economy is stabilizing or should you be betting on an increase in bond prices? some answers on that question coming up. but i did. you need to talk to your doctor about aspirin. you need to be your own advocate. be sure to talk to your doctor before you begin an aspirin regimen. you take care of your kids, now it's time to take care of yourself.

hi, folks, welcome back to

"the closing bell." matt nesto here with another realtime flash. i want to show you the hottest stock in the s&p as of just a few minutes ago. crm, the software company, the customer relations management company, the stock is up about 8% right now, trouncing all others. just got wynn resorts by a nose. but there you go, 48 bucks a share and rising. the stock is raised to equal weight from underweight at morgan stanley. they see some positive trends in terms of transaction growth and just in general. they like the stock. you can see it's moving to a multimonth high. it's up, well, almost a double since the low in march. they will report their second quarter earnings on august 20th. so crm salesforce.com. back to you. >> and with about 30 minutes left before the closing bell, here's how the markets are shaping up right now. you take a look at the dow jones industrial average, it's just off its highs for the day. it's really a financial and

technology-led rally today. home builders clearly strong too off that better-than-expected home sales and home prices data. nasdaq as i mentioned, that technology trade today is buzzing as the nasdaq's up, rebecca, by 2%. >> and as we told you earlier, it was another big day for treasury auctions. cnbc's rick santelli is at the cme group with more. hey, rick. >> reporter: hi, rebecca. indeed, it seems to have been lost -- the ten-year auction seems like it was yesterday with everything that's gone on since with the statement and the budget deficit numbers. but the auction went pretty well, especially considering the hurdle that traders had to overcome with a statement that could have been a game changer in a number of asset purchasing ways. but nonetheless, it went pretty well. we have 15 billion 30s tomorrow. what indeed happened after the auction and the statement? this sums it up from treasuries. intraday two-year note deals. yields are actually down a bit. because they're going to keep rates low for a very long time. but look at the longer end like the ten-year that was auctioned today, you can see its yield's up. up roughly half a dozen basis

points. and the 30s up close to ten basis points. some steepening which would make sense when you have a fed on hold and lots of supply and lots of deficit. the dollar was kind of the wild card today. the dollar really jumped briefly into positive territory right after the statement, only to give up ground every bit as quickly. back to you. >> all right. thanks, rick. and you're going to stick around with us. a new survey from reuters says the number of investors bullish on treasuries is at its lowest point since january. much of that is tied to the more positive economic data of late. but should that be enough to abandon treasuries? we get the take of ira jersey, head of u.s. interest rate strategies with rbc capital markets. and of course rick santelli joining us. and ira, i want to kick things off with you. rick has been talking about this. we have this flood of supply that continues to roll on. and on top of that the fed's commentary today says things are leveling out. so why would one want to put money in treasuries right now? >> well, really, the disinflationary environment continues quite strongly here. if you look at a lot of the

price data, you look at things like the labor cost data that came out earlier this week, all of these things are very disinflationary. so while we don't think we'll see the old lows in yields, we're not going to get close to 2% ten-year yields, for example, we do like treasuries in general, and we think -- we actually have a 3% target on the 10-year for year-end. we do think the curve will flatten a little bit. i agree with rick that near-term steepening makes a lot of sense going into tomorrow's long bond auction. why do you want to buy a 30-year bond at these levels? but really when you look at the belly of the curve, five-year, for example, are we really going to get significant inflation? market's not telling you that. tips break even. that's treasury inflation protected securities. break even inflation rates are still under 2% for the next decade. that's not just one, two, three years. we're talking about the next decade. >> when you look at the price of oil and you look at the price of commodities, some folks say these things are bound to

continue going higher as long as the chinese demand may be there and even more importantly as long as the dollar could continue to be broken. and with the policy that the fed has in place, which doesn't sound like they're raising interest rates anytime soon, is that not a possibility? >> well, sure. it's an absolutely possibility that headline inflation can go up. but as long as domestic demand in the united states remains he weak, and we have to remember things like oil and commodity price increases, just like the federal reserve noted in its statement today-r are really attacks on the consumer. and it really means that core domestic demand for non-energy and food-type goods winds up being re low, and ultimately that's not a very good sign for growth going forward. >> but in spite of that demand remaining low we've seen oil go up from 30 bucks a barrel at the beginning of the year to 70 bucks a barrel and no change in fundamental supply or demand. still weak on the fundamental side. >> one of the things i think is going on with oil at 30 bucks a barrel is really a lot of the panic trades have been unwound.

everything from stocks going from 700 to 1,000. the 10-year yields going from 2% to 3 1/2%. all of these things were basically panic trades just being undone. now we're kind of i think in a more fair value type model and fair value type markets where we're really going to be looking for what is the actual trend of growth going forward. no doubt in my mind the gdp growth is going to be positive in the third quarter. but that doesn't necessarily mean that we're going to get strong growth or inflation going forward. >> if you get decent gdp growth, and let's assume for argument's sake inflation is zero as far as the eye can see, we've been recipient of a boat load of purchases and treasuries, doesn't that concern you that that would reverse? >> i'm not sure that actually the federal reserve's treasury purchase program -- >> no, forget that. i'm talking about international investors that continue to stay hunkered down in the treasuries to feel safe. if you think gdp goes positive,

forgetting inflation-w all this issuance, you don't think rates can move up rather surprisingly quick? >> i think in that situation you have a -- you wind up maybe having a rotation out of treasuries at some level. but in that situation too you're talking about the dollar doing better, for example. so you are talking about inflation remaining low. >> you think we could go from 3 3/4 to 3%? >> sure. rick, remember, we were at 3.25 just not even a month ago. >> right. when green shoots didn't have as much meaning as they do with a 9,411 dow. >> well, i think, actually, if you dig into the data, one thing the treasury market's telling you is that there is -- the question is a topline growth story. and you've reported this for quite a long time. earnings have been going up, but that's because of cost cutting. that's because of laying off people -- >> so you're not really bullish the economy, then? >> correct. because unless you wind up getting top line growth you wind up with flat earnings, flat revenues, which ironically --

>> if you see flat earnings and growth, i see how you can be long treasuries. that is the big wild card. >> absolutely. and i don't deny that at all. >> and that's what we've heard continuously throughout this earnings season, a lot of companies cutting costs. but even if there's some kind of marginal increase like the fed talked about, that leveling off you don't see that, ira, translating into some kind of top line growth at all? >> well no, i'm not saying that it will be zero top line growth. but it's the pace of that growth. for example, if we wind up with top line growth growing at just a couple percent a year, if we wind up with gdp, for example, at 2% a year on a real basis and inflation at 1% for the next five, ten years, well, then that is an environment where you're not going to get significantly higher rates. you know, our forecast for the end of 2010 is basically for rates to be almost exactly where they are today. it's the path of that we're looking to trade as opposed to -- as opposed to whether or not we're going to get a significant trend in treasuries over the next 18 months. >> ira, it is something that

rick santelli hinted at as well, but china, do you see them at table and for how long in terms of being our consumer of our debt. >> i really think in the case of all foreign investors it's really a matter of flows in a lot of cases. so if you look at our current account deficit, it's significantly better. 25% to 30% better than it was just a year ago. what that means is foreigners have u.s. dollars to buy u.s. assets with. generally official flows tend to be in treasuries as opposed to other asset classes. as long as they continue to have -- we have big current account deficits, they'll continue to be a buyer somewhere. and quite honestly and there's a rotation out of treasuries where does it go? probably to corporate debt. and quite honestly -- >> we've already seen some of that. >> absolutely. we've seen quite a lot of it. but we've only restored, again, the panic levels that have been there from the post-lehman era to a more normal recession. still corporate spreads are

pricing in for a reasonably bad recession, just not a depression. >> all right. we have tom swannic. we had a little bit of trouble with his technology, and we want to bring him in for one last question. and tom, you're the bear in the mix. so tell us why you're bearish the treasuries. >> it's hard not to be bearish when you see the returns from the treasury market. at least the long end is minus 25%. the overall treasury market has a return of somewhere around zero for the year. and the federal reserve announced today they are not going to be buying treasury bonds after october. so we have a $1.2 trillion deficit. we've just been told that the $300 billion buy of treasuries has left the market, and i'm not sure where you're going to get support. in particular i know the previous guest was talking about foreign demand, but if the dollar's going to continue to head lower foreigners would be insane to fund our deficit at these low interest rates that are not just low on an absolute but a relative basis as well. >> tom, we're glad to hear you

with something we bantered about a few minutes ago but we are happy could you make it. ira, thanks so much. and rick santelli,al at always, thank you for being here. with 20 minutes to go the dow not the highs of the session but still about 156 points to the up side. >> and rebecca, our next guest is not sold on today's rally. find out where she's seeking safe havens in just a moment. >> then after the bell fdr once said the only thing we have to ear fear is fear itself. we'll discuss whether fear has become the biggest roadblock to president obama's health care reform plan. that's head at 4:00 p.m. eastern. with my new netbook from at&t. with its built-in 3g network, it's fast and small, so it goes places other laptops can't. i'm bill kurtis, and wherever i go, i've got plenty of room for the internet. and the nation's fastest 3g network. gun it, mick. (announcer) sign up today and get a netbook for $199.99 after mail-in rebate. with built-in access to the nation's fastest 3g network. only from at&t.

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welcome back. taking a look at some of today's under the radar stocks, medical device maker cryolife winning fda approval for a human heart patch which will be used during surgery commonly performed on children with congenital heart defects. the patch will start shipping late in the third quarter. irobot winning more than a $5 million contract with the u.s. army.

the robot maker will provide the army with 14 bomb disposal robots being used in iraq and afghanistan as well as spare parts used in maintenance. and casket maker hillenbrand reporting a 5% drop in third quarter profits to $25 million, matching wall street's estimates. but gross profit margins widened to nearly 42% because of lower fuel and raw material costs. breaking down the markets with today's "fast money" final call. specifically we're asking if the market has come too far too fast. joining me to discuss that is patty edwards, analyst with storehouse partners. hey, patty, good to see you. >> good to be here. >> do you think the market's gone too far too fast? >> i absolutely do. color me as the princess of darkness, but i really think there is not the revenue growth to support as far as we've gone. and when i start look out even into next year, i'm not seeing very many companies that are going to be putting up fabulous revenue growth. revenue growth is the basis for good-quality earnings for us, and given that i think you need to play it safe at this point. >> isn't sequential revenue growth improving?

if we looked at the last earnings series, sure, revenues were horrible, but sequentially they appear to be getting better. doesn't that carry over into 2010? >> it carries over a little bit but it's not enough. if you're looking at year-over-year numbers, which is what i'm really focusing on -- >> but of course year-over-year revenues stink. i mean, look at where we were. >> absolutely. but i'm just not believing this momentum. honestly, i've been a momentum girl before, and i'm not all stuck on val vaigs, but given what i'm seeing i don't think this market deserves to be trading at over a 16 multiple. >> where is it going, then? >> i think we've got to pull back at least a little bit, tack a breather. maybe get down to 8:00800, 8:00900. given the fact we've been trading on the consumer side of things in the high beta stocks thinking the consumer's coming back. consumer cannot come back. we've got a debt level that's amazing. if you take all the household debt and add it up, it is actually equal to gdp.

the only other time that's happened is in the '30s. i'm not saying depression. we are definitely in a recession. but given that, it's going to take a while to work it off. >> the bears keep saying the market's overbolt, the market has to go down, here it is, the market is up 138 points or so today. financials one of the big downswings yesterday. up today. so it appears that investors, at least the bulls, are taking any dip in the market as a buying opportunity. >> at this point i think they are. but i think over time they're going to be wrong. this economy right now is like a little kid who took a huge tumble and the fed put training wheels on. eventually they're going to have to ride that bike under their own power and the fed has already said they're taking the training wheels off. when that happens, which we know is going to be happening over the next quarter or so, we are going to be really seeing what we've got in terms of housing, in terms of debt, and in terms of buying power, and the consumer cannot come back to the level they were given that i think you need to be looking at a walmart philip morris international. >> i'm looking at your notes. you say this is not a recovery, it's still a recession.

and i have to say considering the voices we're starting to hear it appears that you're in a growing minority at this point. >> it's not a comfortable place to be, but it's where i find myself happiest at this point. >> you say you're watching home builders, and you're obviously watching retailers. it's a big week. i know you just spoke about walmart, which is out with its numbers tomorrow. what do you need to see? or what do you need, since you're so bearish, what do you want to see from consumers before you're ready to get on board here? >> the consumer has got to start to come back, and i don't think they're going to. i do a lot of store checks. i do a lot of store walks. given that, given the fact that sam's ceo has even come out and said they're still seeing a big pay -- check cycle, meaning that, you know, people in the fourth week of the month have no money to spend, we've got high unemployment, we've guite consumer that's 70% of this economy. so explain to me when the two biggest things they've got is their 401(k) and their home are way underwater, where are they going to get the money to spend? they don't have it anymore.

credit card limits are being cut. and i really think we're going to see a new vision as far as how the consumer's going to spend. we're overstored, and we need to see some of that pullback. >> explain to me how you're so negative on home builders after the news we got today on existing home sales better than expected. home prices higher, good outlook, toll brothers stock today is up 15%. kb homes up 3%. ryeland up 4%. beazer up almost 10%. >> 36% of the sales that came out were actually from foreclosures. there's a lot of banks where they have real estate owned on their balance sheets that they are not putting out into the market because they're bad. i'm not a believer. >> all right. patty, we'll leave it there. >> all right. >> coming up on "fast money," notable bear peter schiff breaks down the latest fed statement and makes his case for why we're heading to a depression. trading alongside the fed. melissa and the traders live at 5:00. >> we're holding off to things.

the nasdaq, techs leading the way up 1.8% right now. >> and as i was just mentioning home builders a major force in today's rally. mr. nesto ted us what's behind the move and whether it can last when we come back. these days every penny counts with everything you buy.

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call or click today.

another big day for home builders. we've been talking about it. after toll brothers came out with some surprisingly preliminary results cnbc's matt nesto looks at the stock and its effect on an already hot industry, matt. >> yeah, the home boys, as we like to call them, rebecca. they're flying here, toll brothers two weeks ahead of their official numbers coming out with some numbers that look very good and something we haven't seen really from them in a long time, which is growth in orders. so if you take a look at the aforementioned boys versus the s&p 500, this is not only a toll brothers story. you're looking at 5-1 outperformance since earnings season began in the middle of july forhis group. it's also interesting too because toll brothers is a mid-cap but it is spilling over into the five, soon to be four home builders in the s&p 500. i'm talking about d.r. horton,

pulte, kb, cent ex, which is see you later, bye, because it's being acquired by pulte, and lennar. so those five are all trading higher here as well. so what is going on in this nail-biter of a situation? the group is up 44 year to date, even though you can see it was up 60% in a month. rising orders. it doesn't get any more simple than that. that's a great indicator people are putting money down and you're seeing sequential improvement. yeah, i know it's off the bottom, but it's not going down. and the cancellation rate is going down. so people aren't backing out of contracts like they used to. and sharply lower. people are always going to cancel. there's always going to be some. but it's way down from 40% 50% in some cases. the backlogs, if you take a look at a company like pulte or d.r. horton, some of the big builders, even though their backlogs have shrunk 50% they still have a billion dollars worth of building in the books ready to go soon as they can start digging it. there are some of the builders moving today. note the bottom, e house china,

ej is the ticker, a billion 7 market cap for this company. it's a real estate agency based in china. they are out with much better than expected earnings here today. i kind of lumped them into my call. but ej is the ticker on e house china. back to you. >> fascinating, matt, you've got to keep an eye on china and their middle class there. >> oh, yes. >> coming up next, we are right back with the closing countdown. >> we're going to talk to the man whose company is behind today's home builder rally. toll brothers ceo bob toll gives us his outlook for the house market in an exclusive interview. that's just minutes away at 4:00 p.m. eastern. can't even tell me anything about this wine. ah, it tastes like sonoma valley... no, my friend, these grapes are very... sierra foothills... - foothills, ha. - idaho. with fields of the finest hops known to man. harvested at just the right moment, to produce the perfect balance of flavor... and refreshment. i'm sorry, you guys were saying... uh, budweisers all around.

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