learn more at cisco.com/newways [ dog barks ]

a lot of e-mail to the show. "you cannot tax behavior, period. obesity is a problem in america and will continue to grow. not sure what the solution is, but a tax to the general

population will not solve anything but the pocket of the u.s. treasury who can't seem to ever close the checkbook." we got a lot from you. a lot of people talking about the sugar lobby, something we'll tackle on another show. in the meantime final hour of trade coming with "the closing bell." a successful 30-year auction briefly brings stocks to new highs. we faded a bit since then wp we're entering the final and most important hour of the trading day right now. welcome to "the closing bell," everybody. i'm bob pisani down on the floor of the new york stock exchange. hello, michelle. >> hi, bob, good to see you, i'm michelle caruso-cabrera in for maria bartiromo at cnbc global headquarters. right now the dow jones industrial average is lower by a 4r89 more than ten points. 9,351. the nasdaq pretty indecisive trade there as well, higher by nearly two points, sitting right now on the 2,000 mark. the s&p 500 pretty indecisive day but let's see as we go into last hour of trading higher by a little more than a point.

1,0067 is where the s&p stands right now. >> we've got some groups that are nicely moving ahead. financials, for example, materials stocks since the dollar has been a little weaker here. but the big talk is about the retailers, been walmart. we've got a lot of retailers coming. i want to show you nordstrom because that's going to be coming after the bell. everybody knows they had the big sale in july but look at this stock, one-month chart, up 30% in a month here. the speculation is the sale went very well. but don't be surprised to see some selling on the news here because the stock's done so well. that's a problem with a lot of retailers. look at the rlx. this is the retail index. the whole group is up 30% in a single month. think about this. if you were a retail ceo wouldn't you be a little cautious at this point? wouldn't it be better to be cautious rather than urge or saying your earnings are going to go up when you have a 30% run-up in sales? that's what we hear from a lot of retailers, cautiously optimistic but not overly optimistic here. finally i want to say something about walmart here, a lot of

comments about the fact they did well on the bottom line and the top line is still a bit of a light side. what people realize is walmart has dramatically underperformed the market since the march lows and the reason that it's happened, the reason it's a laggard is that professional traders do it as a place to put money. but once things start turning around they generally try to sell walmart and buy more aggressive stocks in the retail space. that's why walmart has underperformed for the last several months. finally, come back over here. let's take a look at this. this is king pharmaceuticals here. we're going to be waiting for them. the stock has been halted for news pending. we do not know what the news is. but there has been speculation on trading desks that it may relate to fda and possible fda statement regarding one of their pain drugs, embeta, which is supposed to be abuse resistant. they have a lot of hopes for it. we don't know that for sure. soon as we get the fact we'll let you know. let's go around the horn and talk with all my different friends on all the different trading desks. the nasdaq, how are things looking down there? >> don't blame technology for the lack of a big move in the market today. the nasdaq remains right now

still in positive territory. 2 2/3 points to the up side. that's .1%. but take a look at some of the big coop technology stocks today. apple's been positive throughout the day, up 1 1/2%. price target taken higher by barclays capital and really some positive commentary. product pipeline they like. also free cash flow. microsoft is in positive. google's positive. dell's 2 1/2% today to the up side as jpmorgan has raised the price target there. there's just been some weakness across the retail space today. weakness certainly across the solar complex today. take a look at chips as well. that's holding up quite nicely. the semiconductor index good for 1%. some stocks within that, intel half percent. qualcomm's positive as well. texas instruments got an upgrade today over at r.w. baird. so there's been for the most part throughout most of the day relative strength throughout the chip space as well. take a look at some other story stocks as well. even some stocks that started the day to the down side, reversed course late morning, and have stayed in positive territory throughout. palm is a perfect example of that. palm was downgraded at morgan

joseph. they put a sell rating on the stock. the stock's now up 5%. tellabs is up 9% as well. upgraded over at morgan keegan. urban outfitters up 2% today. their results beat expectations. in all this talk about retail sales and what the consumer is doing, well, at least they're going urban outfitters by the results there. and milk & crown a casino operator plan to raise $200 million. even in a broader market as investors come in and consider it a buying opportunity, certainly that holds up in technology. the nasdaq still holding positive albeit only 3 1/2 points, but on this kind of a day technology clearly continues to perform. let's go to brian schactman at the nymex. >> thanks, scott. just a few minutes ago i talked about how crude seemed to be correlated to the s&p 500 fade. i want to look at the relationship between crude and the dollar to further illustrate the point. the dollar's been relatively weak, consistently in a tight race throughout the whole day. but as you can see crude a little more volatile and shows you it's not acting as much on

dollar today as it has in the past. nat gas one of the biggest stories of the day. it had a little more of a pop on slightly bullish inventory numbers. back to the down side. out of the whole complex traders told me this may be the one that's actually trading on fundamentals. take a look at gold. a little more correlated with the dollar than other things i've talked about. lou grasso with millennium futures basically told me if it can get through 965 on the up side it could be a clear path to 982 and we might be talking about 1,000 by the fall once again. copper, silver, and platinum. copper the biggest gainer that n. that complex. and as i throw it to rick in chicago, in 30 years when those treasuries come to maturity i'll still be working but i doubt i'll be tossing reports to you. >> well, i tell you what. i hope that these 30-year bonds continue to perform, but i have to summarize. for the week the credit market update would be that we've had three auctions in a rather successful week at moving the 75

billion. now, what we are left with is as i look up at the board, is a flattening yield curve and over a dozen basis point drop in yields. why have the yields dropped? part of what i've just said. supply for this week is over and well placed. however, even though stocks may be at very lofty levels, and unchanged on the day, the anxiety about what the future will look like economically, especially after the weak retail sales, is another reason that there continues to be sponsorship even in the face of large supply and deficit of the treasuries. the dollar sponging today as you heard the schac talk k about, and ultimately maybe it's some of that better news on gdp that we heard in europe. but as far as supply, it's every other week pretty much. nothing on the coupons next week. and then the cycle begins with the twos, fives, and sevens on the short intermediate on the 25th, 26th, and 27th of august. michelle, back to you. >> twos, fives, and sevens week after next. take a look at today's

headlines. the commerce department reports retail sales unexpectedly fell .1% in july. that's the first decline in three months. economists had been looking for an increase of .7% because of the cash for clunkers program. if you exclude autos, sales fell .6%. that was also worse than expected. the labor department reports initial jobless claims unexpectedly rose by 4,000 the last week to a seasonally adjusted 558,000. and the number of americans continuing to collect unemployment benefits actually fell by 100,000 to 6.2 million. according to realtytrac, foreclosure filings jumped 7%. in some states the number of foreclosures is now at a record of 360,000, marking the third new high in the past five months. that breaks down to one in every 355 homes in america. bob? >> thanks very much, michelle. let's dig deeper into the market action today. you know rich peterson with standard & poor's. take a look over here. dan greenhaus, he's been here

before. miller tabak as well. dan, i'll start with you. there's a disconnect going on here with the retailers. retail sales were very disappointing. the retail index is up 30% in one month. is this a disconnect? >> i think there probably is a disconnect here because at the end of the day i took a look through the estimates. 2 out of 76 analysts thought retail sales would be down by any amount. 2 of the 76. and yet retail sales came down on the headline number. ex autos they were down and the so-called core group which excludes autos, gas, building materials. >> the obvious answer, though-s we're looking ahead to the second half of the year, don't bother us with july same-store sales, we're always looking ahead. how much further can you play this game with the retailers up 30% in a single month? don't they have to start showing something? >> that's the argument here. absolutely, the market is more or less a forward-looking indicator although certainly it gets it wrong plenty of times. at some point the optimism that you're seeing in the retail sector specifically has to

materialize itself in the form of higher data points coming out of the retailers. that's starting to happen. but again, if you don't see that as a general rule, then optimism is just piling on top of optimism. >> word is that nordstrom's july sale went fairly well. that will be a data pint right after the bell. let's talk about earnings. you watch the earnings situation. we know first quarter -- second quarter they're beating expectations. a little higher than normal. let's talk about the second half of the year. we're expecting a big turnaround in the third and fourth quarter. in the fourt quarter it's going to be led by financials. >> capital iq estimates probably based upon the fact that the fourth quarter was so horrendous comparisons are going to be positive. we're seeing incremental gains. second quarter of '09 is going to be the second positive surprise for corporate earnings. as dan mentioned the report about retail just going back to that, look at the performance since the march 9 lows. would have been the winners. department stores, macy's, nordstrom. the laggards have been walmart, dollar. beaten down so much at the march

9th low when the s&p was at 660. >> i want to keep you on the financials because a lot of the turnaround on the s&p earn sgz based on a big move up in financial earnings. we've seen the consumer remain very subdued. that's a big part of the bank earnings overall. is that going to be a big issue? >> we've also seen weakness in capital markets. the fact that we've had a little flurry, this is probably the worst year for ipos in many years. so far only $6 billion in announced deals. only about $30 billion this quarter. really a horrendous period for deal making. despite fact companies have a lot of cash on hand, a lot of valuations are still depressed. >> what are you talking to your clients about? i know you spend a lot of time evaluating the markets, telling people where to go. where do you think we should be? >> since the beginning of the year i've been favorable in the corporate bonds sector. though they've had a great year, investment grade and high yield, high yield especially which is up 37% this year, the concern is

about growth in the second half of the year and first half 2010 are going to continue, then you can make a case further spread narrowing to treasuries is going to go on. so there's room to -- >> and there's a very logical progression into treasuries and then later traders went into corporate bonds as well as some munis as well. let me ask you about the ipo market because we had three ipos this week, one ever them the biggest of the year. >> starwood capital. $800 million. >> any signs of a pickup dr it's been pretty pretty miserable, you have to admit. >> we've seen about a half dozen filings coming forward. the big concern is whether some of these private equity concerns like kkr and blackstone try to exit their portfolio companies. that would be a big telltale sign we are due for an improvement in the underlying economy. >> last question. we just have ten seconds. bears are anticipating a dip in september and october. do you think that will happen, and does it create a buying opportunity instead of a reason to sell? >> it's always difficult to say

because the stock market and the economy are two different things. i can make a pretty strong case that the economy is going to suffer a little bit of a relapse after a near term -- but what does that mean in terms of the stock market? ality always difficult to say. we find ourselves with data so important on a day-to-day and month-to-month basis, we have to wait and see. >> s&p 500 higher or lower than it is now on december 31 snt. >> if i had to guess i'd say not materially different. >> higher. >> rich peterson, thanks very much. and of course dan greenhaus as well. michelle, back to you. >> 48 minutes before the closing bell, bob. take a look. dow jones industrial average higher by four points. nasdaq has managed to get into positive territory as well as the s&p 500. >> our next guest oversees $2 belle billion in assets. he thinks there's still a lot of room for growth stocks to rise despite a big run-up this year. find out which names he likes for just a moment. >> walmart and mcdonald's have been two big winners during the recession as budget conscious

consumers shot for bargains. coming up we'll tell you which retailer could benefit the most from an economic recovery. after the bell sugar prices at a nearly 30-year high. copper at its highest level in ten months. can the run last or will the recent dollar strength pop the commodity bubble? some answers today at 4:00 p.m. eastern tame. but first the most active stocks on the new york stock exchange, led as it often is by citigroup, priced $4.06 a share. oof! i hope he has that insurance. aflac! you really need it these days. how come? well if you're hurt and can't work it pays you cash... yeah to help with everyday bills like gas, the mortgage... ...and groceries. it's like insurance for daily living. so...what's it called? uhhhhh aflaaac!!!! oh yeah! that's it! aflac. we've got you under our wing.

a-a-a-aflaaac!

. hi, folks, welcome back to "the closing bell." i'm matt nesto with the realtime flash. i want to show i a stock here. people say hey, how are you doing? i'm pretty good. ipg. ipg. the stock's up 6% thanks to an upgrade from buy to hold at deutschebank. they think the stock's headed to $7 a share. it's already had a heck of a run but they say we don't know when it's going to happen or how it's going to happen or to what degree but the economy is improving the outlook looks good, there's a little momentum there and when this thing turns around, this advertising company is definitely going to benefit. especially their margins. it's helping the entire group

here today. clearchannel, omnicom. lamar also higher. the ten-year chart tells you it was once a $50 stock. but who cares about ten years ago, right? it's up today. >> right. that was dow 10,000. thank you. since mid-january growth stocks have been on a tear trouncing so-called value stocks. take a look. the russell 2000 growth index advancing 20% this year. that's compared to only a 9% gain on the value index. we see a similar picture with the russell 1,000 growth and value index. russell 1,000 growth higher by nearly 20%. russell 1,000 value higher by nearly 7% in that time period. the trend is growth still the place to be? joining us is robert mcmillan, chairman and portfolio manager of jensen investment management. bob runs the jensen portfolio, a five-star morningstar fund. about to see you, bob. >> good to see you, michelle. >> the way you run your fund you can invest in either growth or value. so what do you think? are you scared by the run-up in growth stocks or do you still

think growth is the play to be right now? >> we're not afraid of the run-up in growth stocks, particularly when you look at quality in growth stocks, which is the segment of the market we deal in, those companies that have very existent growth, high-quality balance sheets and good prospects for growing, even in a slow growth economy. those stocks actually have not appreciated as much as the faster-growing stocks are and are now selling at only a slight premium to the s&p 500 p/e ratio. >> when you describe high quality, how are you getting there? and give us some examples of what those would be. >> one of the first screens we have is companies that have a very high and persistent return on equity and we require this for ten consecutive years. it's about 150 companies from which we then focus on and choose about 25. some of the companies you would certainly recognize, and one of them is colgate, for example. this is a company that is positioned very well in growing economies around the world with about 70% of their sales outside the united states.

number one toothpaste seller in america, latin america, and a very strong leader in china. >> now, when you talk about very consistent growth, i've got to think then that means that you're avoiding cyclicals. does that worry you as we talk about an economic recovery here? because cyclicals will generally benefit the most. >> they certainly do. in the early stages of an economic recovery. and we have some exposure to cyclicals in what we call quality global industrials, companies like emerson, for example, and united technology. these are more consistent cyclicals that we think will do well not only in the early stages but more importantly in the later stages of a recovery. and i think most people are projecting, and we would agree, that this recovery is going to be slow, long, and characterized by subpar gdp growth. consistent growing, quality growth companies will do well in that kind of an environment. >> that's your assessment of the economy. what about the overall rally that we have seen in the market? do you believe it? is it overpricing in a future

earnings stream that is not necessarily going to appear, especially if you think it's going to be a weak recovery? >> it's always a good question. although we're not forecasters of the market, i would guess that the market probably is a little bit ahead of itself right now, which often happens in the early stages of a recovery. so there's probably a little breathing room. a little bit more volatility in the market. but the general trend over the next several years in our opinion is up. >> what do you do, though, right now if you think there's a little bit of room for down side? do you have cash on the sidelines? how much cash do you have? >> we try to be fully invested because we only look at those stocks that we can buy at a significant discount to their long-term intrinsic value and in the quality growth space there's still a lot of stocks we can put money into today. >> what's the biggest threat to your outlook? government intervention? is it rising interest rates? because we're issuing so many treasuries because of the deficit? what is it? >> i would say the biggest threat would be a return to risk taking and excess leverage, which i don't think's going to happen -- >> i don't think so either. >> so that's not a particularly

valid threat. certainly more government intervention is always a threat to any person who's in business. higher taxes are in business to any person that's in business. and to the extent that we get significant portions of both of those i think it's a threat to equity performance. >> now, when you look for companies that have very consistent performance over time, normally health care stocks would be part of that, right? do you have any health care stocks or are you worried about health care reform? >> we do have health care stocks, and we're worried about health care reform. but we have the kind of health care stocks that are diversified, have strong competitive advantages, and have the ability to grow even under a health care reform environment. although not at the rates of growth that they've experienced in the past but at very solid growth going forward. and these stocks have not had the price appreciation that a number of the other growth stocks have. so they look pretty attractive today. >> you want to give us a specific name? >> in the health care field i would say a company like abbott looks good. they're very diversified, about

40% in pharmaceutical, the balance in nutritionals and diagnostic testing. another good company would be striker in the orthopedic device market. >> abbott labs and striker. thank you. good to see you, bob. >> thank you. >> bob. >> 38 minutes to go before the closing bell, michelle. dow jones industrial average only 20 points off the highs of the day. led by financials, bank of america, travelers. alcoa and dupont also leading as well. michelle? >> then bob, coming up next much more on which direction the markets are heading in and how you should be positioning your portfolio right now. 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. this is humiliating. stand still so we can get an accurate reading. okay...um...eighteen pounds and a smidge. a smidge? y'know, there's really no need to weigh packages under 70 pounds. with priority mail flat rate boxes from the postal service, if it fits, it ships anywhere in the country for a low flat rate. cool. you know this scale is off by a good 7, 8 pounds. maybe five. priority mail flat rate boxes only from the postal service.

a simpler way to ship.

buy at goldman sachs. increasing competition is threatening the company's smartphone market share. the analyst there also says nokia's problems are mostly self-inflicted, not cyclical. retailer j. crew upgraded to outperform from market perform by friedman billings ramsey because of strong customer traffic, fewer markdowns. also hike k its price target on j. crew to $36 from 25. stock higher by a little more than 1%. bob. let's bring back our guests. rich peterson from standard & poor's and of course dan greenhaus from miller tabak. let's talk about the bond auction because it did move stocks briefly here. we had a successful 30-year bond auction. i think it laid to rest the concern that the u.s. might not be able to sell any long-term

de debt. so that's very good news. what else do we need to see from the treasury market now? obviously, there's going to be more very quickly. >> yeah. there's going to be probably a trillion dollars worth of supply about the market. supply concerns, inflation concerns exist, but what you've seen over and over again is the treasury's able to more or less sell their debt, bring their debt to market with little concession on the part of the marketplace, and that is a net positive for stocks and for the economy. >> i would think so. one of the things that's amazing to me, rich, and you watch all these numbers like a hawk, we're what, 50% off the lows from march 9th? >> yeah. 50% up. >> at that level. in five months, though. and it has been remarkable. we've never seen that maybe since the depression going back five months. have we come too far too fast? 50% is an amazing move. >> some may think it's unprecedented. what would be unprecedent sd that droch, over 1,5000 in october '07 to below 670 in

march '09. >> what does it mean to you that we've come historically fast in the last five months? does it make you optimistic or cautious? >> we're watching the numbers. what the results are. will these valuations be verified by the numbers? we're going to see positive comparisons in the third quarter of '09 and hopefully in the fourth quarter of '09 also. the concern is that going forward will the consumer be able to generate power to buy and buy things? you know, cars. will they go to restaurants? will they go to stores? and will the margins improve in. >> and i would just add that in 1982 when you had a terrible bear market for over ten years, i think it was about 16 years the market traded effectively laterally, with the advent of a literal v-shaped recovery thereafter the market still took about eight months, 8 1/2 months to rally 50%. if we were to have that same type of recovery today, which a

lot of people don't think we have, then you could anal jooiz. otherwise -- >> more participants. obviously the broader exposure to equities than 25 years ago. >> i want to come back to retailers because we're going to get a flood in the next four or five days. jcpenney tomorrow, nordstrom tomorrow. abercrombie, lowe's, home depot, tjx next week as well. what are you expecting from them? are you expecting them to raise guidance? are you expecting them to be cautious? what do you think we're going to hear? >> what we're seeing from our capital iq estimates on the numbers three months ago, edge of november was higher. this week gains by macy's. today was walmart. expectations are cautious guidance. that's going to be really dependent upon looking forward. >> certainly the idea of presenting the market with cautious guidance allows the retailers themselves to be by

definition cautious. getting too far out of this which no one wants to do is -- >> that's been the consensus on the street all day. nordstrom -- they're going to be very cautious in the second half. and there will be some selling on the open -- yesterday because the stock's gone up 30%. that makes sense. why would you dramatically stick your neck out when the stock's had a big run-up? i'd be cautious too. >> you want to keep an eye on the margin compression because what we've seen obviously for months is in order to get people into the stores and you've seen this for cash for clunkers also, the consumers will buy things when you meet their price. so to what degree to these retailers have to reduce price oz to drive traffic and is the consumer -- >> finally, on the retail sales, we did see auto sales up but not as much as expected. about 2 1/2%. the feeling on the floor is the taking away from other discretionary income.

or is that a myth? >> i think the case could be made that it probably is. i want to make a quick point about the cash for clunkers program. it didn't show up to the degree that many economists and analysts had hoped in the support. but that said the sales are real and they will circle through to other data points and they will filter through to gdp. that said, they didn't show up today and what you saw anyway sort of validated that point-s that all the other components of retail sales declined. building materials declined. department stores declined. electronics declined. that in and of itself is a broad negative for the consumer that i don't think is getting enough play. >> dan greenhaus, rich peterson, always a pleasure. michelle, over to you. >> less than 30 minutes. s&p up by five. and the nasdaq higher by six. >> today it was walmart and kohl's. tomorrow it's going to be jsz pennee and abercrombie & fitch. these days, when you have to spend,

shopping online can help save. doing it with bank of america can help save a lot more.

up to 20% cash back from over 300 online retailers with our add it up program. just sign up and use your bank of america debit or credit card when you shop online. it's one of the many ways we make saving money in tough times a whole lot easier.

take a look at shares of las vegas sands. they're really spiking by 11%. a gain of more than one point. $13.67 a share. spiking on the amendment of their macau credit facility. obviously giving some relief to the equity holders there. maybe the debt picture is

improving. las vegas sands higher by 11%. intraday trade here on that amendment of their macau credit facility. macau of course being an island off the coast of hong kong, which is a huge, huge area for gambli gambling. competes with investigate ags monetarily in terms of size. we've got 30 minutes before the closing bell here's how the market are shaping up. the dow jones industrial average higher by nearly 22 points. 9,383 1/2 points. a gain of a quarter of a percent. the nasdaq is higher by 7 1/2 points. trading at 2,006. and the s&p 500 is also in positive territory right now. bob pisani. >> we just want to let you know, king pharmaceuticals, and i don't know if you can get a shot of this here but there's still a crowd in front of king pharmaceuticals. there you go. kg. they are halted for news pending. and we do not have any official statement about what the news is but there's been speculation on trading desks for a while that it may relate to fda approval or not of their pain drug embeta,

which is a very important drug for them. soonl as we get the facts we'll let you know. time for your "fast money" final call. wall street focusing on the retail sector today with walmart beating the street expectations for the quarter. abercrombie, jcpenney on deck for tomorrow. "fast money" contributor jon najarian, co-founder optionmonster.com. jon, good to see you. first just let me get your thoughts on walmart today. i know you're going to talk about it at 5:00. we did get a beat on the bottom line. sales still on the weak side, though. >> and i think people were more focused in on that they're still buying and the consumer is still spending. back to school is starting stronger than expected as well. and that's i think some of the optimism that people had for the report this morning. dana telsey i think nailed it when she said this looked positive virtually across the board from all the metrics, the earnings, revenue, and the guidance. so i like that. but this one moves about, what,

.2 beta? meaning it's only a quarter as active as the s&p to the up side? so it's like running in molasses in december. >> that's right. it's dramatically underperformed since the march low because they put money in higher beta stocks. let's talk about ab krom booe and jcpenney. do you anticipate in the change in the tone or the guidance? the general tone is retailers are going to be cautiously upbeat, not a lot of dramatic changes in their guidance. that may be the smart way to play it. what do you think? >> well, yeah, and abercrombie's been one of those trying to hold price too. a lot of the other tween retailers have been cutting pretty dramatically to hold on to market share as least. and abercrombie has just been defying gravity and continuing to go up, up, up. this morning, bob, we had sort of a negative outlook for it. but that swung 180 degrees. now we're seeing more positive.

it might be just like priceline was a few days ago. and that is somebody that on the charts you'd say boy, this could fall off a cliff because you know, it was up against some pretty significant resistance. priceline blew right through it, and now people are betting that at least the $2 or $3 popout of abercrombie tonight, or rather tomorrow when the earnings are announced. >> but how much more is there here? put the chart up for a month. jcpenney's up 25% in 20 trading sessions. abercrombie's up more. it's got to be up 35%. what else are you going to expect them to say that's going to drive the stock dramatically higher? even if they come in in line with expectations. can't believe that would move it forward. >> i think in both cases it's really going to be a story that they have not had to cut price to get the consumer back spending again. that's what of course they had to do in december to meet any kind of holiday estimates, even the lowest end estimates. now consumers are going back in without that big hook.

without those price cuts. which means margin improvement could be the main thing that they mention. >> and there's nordstrom, maybe a very good case. they're coming out after the bell. the word was july, they have an annual retail sale -- annual sale. everybody knows about it. it's planned. word was it did very well. so what do you do with a stock, another one up 30%? do you sell on the news when this comes out? >> yeah, because i don't need to have -- as i like to say, buy and hold is buried and dead. i don't have a need to hold on to these stocks. once they have performed quite frankly i would exit. if you're someone who wants to hold on into the earnings that's not really the smart money play but if you did i would exit tomorrow. because i don't know why anybody would hold on for more up side than they already got absent tomorrow's announcement i think the baby's born and you get out. >> coming up on "fast money" the pit bull makes his case for why this market may be too hot for its own good. plus "fast money" goes off the record with charlie gasparino to

debate whether john paulson could be the next eddie lampert. melissa and the traders live at 5:00. michelle michelle? >> we've got more than 20 minutes before the closing bell. >> consumers keep cutting back on their spending, michelle, that's helped some retailers become big winners during the recession. are there retail names you want to own ahead of an economic and consumer spending recovery? some answers in just a moment. and after the bell, colin frostbanker was the first financial to turn down tarp funds. we're going to ask the chairman and ceo if he thinks the government should step in to help small banks and if he thinks the use of mark-to-market accounting rules should be expanded. you could end up taking 4 times the number... of pills compared to aleve. choose aleve and you could start taking fewer pills. just 2 aleve have the strength...

walmart reporting better than expected second quarter earnings and much of the retail industry has been quick to follow walmart's price cutting path. what is the state of discount retail with signs of a recovery beginning to emerge? cnbc's jane wells in los angeles with some answers. what did you find out, jane?

>> well, bob, this is going to sound a little weird, maybe a little sexist but we got all kind of metrics, gdp same-store sales, i have one viewer who shops at walmart who says he's noticed the female shoppers here have gotten hotter lately so, maybe we need to fold in the hot female shopper index into retail. but regardless, discounters, especially walmart, are starting to see some new customers head into their stores people who maybe shopped at macy's or target before because it was hipper. >> i'm going in to buy a tv, so i hope i'm saving a lot. >> now, sarah lugo says she used to shop more often at the mall like at macy's or american eagle outfitters but discovered walmart recently and now she's hooked. >> i kind of shop when i go in there all the clothes are really cheap and cute and fashionable so i love when the season's over the clothes can go out and it was only a $10 shirt it wasn't so bad. all my kitchen stuff, all my bathroom stuff, everything here is so much more inexpensive. when i can buy a box of cereal for 2.50 instead of 5 ft. i'm like, yes. >> yes. if you look at the stocks, many

analysts had a positive outlook. managing invent sxri gross margins in this environment. they say they believe it will continue to make market share and this consumer migration to value may prove to be sticky, meaning they'll stick around for a while. walmart changed its logo. it's now got the asterisk at the end instead of the star in the middle. there's all this confusion now over how to spell it or what to call it, the company wants it one way, cnbc's doing it another. how to spell walmart, the debate over the hyphen in my blog, funnybusiness.cnbc.com. and you can vote for your preference there. >> get william safire involved. his weekly column on all that stuff. thank you, jane. so let's talk more about discounters. they were the big winners in the economic recovery -- i mean the economic downturn. who will be the big winners in an economic recovery? we're zeroing in on the american consumer all day today on cnbc. right now we do it with patrick mckee, senior equity analyst at

mkm partners. and eric beeder, senior vice president at breen murray caray. discounters did very well. a lot of trade-down going on. but many economists believe that the recession ended in the second quarter and we're going to see growth in the second half of the year. what does that mean for retail stocks in the second half of the year? >> i think that's a good thing. we're going to see the consumer -- we see the consumer come back, they're going to come back to a mall that has less product, less discounting, and really the potential here to generate significant up side to most wall street earnings estimates. no one really is assuming in their estimates that the consumer's coming back. so if they really come back you have some real up side prospects especially for q4. >> patrick, do you think they are going to go back to the mall or as jane reported has this migration to value because this economic downturn was so strong has that left the consumer permanently scarred and permanently going to the tradedown? >> maybe not permanently, but i

think the tradedown theme will continue to work its way through the retail space. >> even in an economic recovery? >> sure. i think you'll see consumers trade up a little bit but stay within the discount space. they'll start shopping more maybe at kohl's. if you look at the dollar store space, the deep discount store space, maybe they'll trade out of a family dollar and into a big lots or maybe even a walmart to some extent. i think to some extent consumers have been permanently changed. the behavior of consumers anyway. >> let's talk about the stocks themselves. bob pisani was pointing this out during the "fast money" segment. eric, when you look at some of these gains over the last several months, if there is an xik recovery, if people start going back to the malls like you say, eric, is that already priced in? >> part of it's priced in. you have to look in specific areas and certain specific companies but frankly i don't think we priced in the potential up side in earnings here. retailers have cut back a lot. we've also seen lower pricing

from asia for product. and i think if we see the consumer come back there's going to be a lot of leverage that most of these retailers never had that we'll see come through. >> patrick, we kind of saw this with cars, right? there was such an decrease in inventory when it comes to cars and now we're hearing from ford they can't keep certain things on the lot. do you think we'll see the same thing when it comes to retailers, clothing and all that? patrick? >> oh, sorry. maybe. if you take a company like kohl's, which is kind of a mid-tier department store, a few years ago they earned $3.50 a share, and they're well below those levels right now, below two bucks -- or below three bucks, in the high two area. i think foote consumer starts to come back you'll see earnings start to go back into that mid $3 area. the stock's trading 17, 18 times 2010 eps estimates right now. historically it's traded around 18 times. but if we start to see, get a better sense that that 3.50 area is realistic then the stock looks pretty attractive here even though it's worked. >> eric, patrick obviously likes kohl's.

what do you like in this environment right now? >> i think if you're going to try to play a turn arournd an interesting area to look at is some of the apparel manufacturers in that this area is still relatively cheap on a p/e basis and we've seen the department stores, which are their primary customers, cut back significantly on product. >> so we're talking about like warnico, g-3 apparel, maidensnorm. >> yeah, those guys are big suppliers to people like macy's. if the consumer comes back and they have to start ramping up, they're going to go to their main buyers and get their products here. and the manufacturers, relatively nicely placed, will come back in this universe. >> tjx and ross stores, we've been showing people your picks up on the screen. why do you like those? >> they're both momentum plays. they've had good sales now for the past -- they had a little bit of a pause back over the holidays last year, but they've come roaring back. they're generating 3%, 4% positive same-store sales growth. they're both going to report earnings next week. i'm looking for ross to deliver

50% plus growth in eps. t.j. 20% plus. so if you look at those companies' fundamentals right now, it doesn't look like we're in a recession at all. i mean, they're firing on all cylinders. the stocks are 14, 15 times, which is reasonable. >> all right, guys, good discussion. thanks. we'll have to watch those earnings reports as they come out over the next couple of days. coming up later, spending down, savings up. could the consumer be the tipping point to the entire economy? we're going to talk about the paradox of thrift ahead at 4:00 p.m. eastern time. bob? >> ten minutes to go before the closing bell. michelle, believe it or not, we're only 10, 15 points from the highs of the day. financials are leading the way with bank of america and of course some of the material stocks like alcoa and dupont. >> up next, matt nesto says talking about a bright future is helping some stocks get richly rewarded today. he's going to tell us which ones when we come back. ththththththth

let's take a look at some of today's under the radar stocks. communication equipment maker harris corporation one of the day's big winners. the company reporting a better than expected adjusted fourth quarter profit of $120 million.

harris also raising the low end of its earnings forecast for fiscal 2010. and shipping fuel supplier aegean marine reporting rising profits. and food service equipment maker middleby seeing its second quarter profit tumble 20% to $13.7 million because of much lower than expected sales although that stock has been moving up here as you can see late in the day. michelle? >> bob, it's arguely the most covered thing on wall street. not surprisingly it's also in short supply. we're talking about bullish guidance and cnbc's stocks editor matt nesto has a look at how much investors are willing to pay for it. matt? >> i know that you're pretty active out there socially. this is the ticket to the crystal ball. and if you get invited to the crystal ball, my friend, you have got the ticket to the big-time. you just saw bob mention harris. it is one of the stocks that is actually seeing things out

there. remember that crazy spooky movie that kid said "i see things." of course he saw dead people. these guys can see into the future. and they're confident enough even though a lot of ceos might have a hunch, these guys are talking it and the market is pushing the stocks up. 5%, 6%, 7% harris. and what's interesting too, harris of course is a technology company. they're in the telecom equipment, broadcast equipment. dr. pepper is a consumer staple, a beverage company, a soft drink maker, and watson wyatt technically is an industrial but it's a human resources firm and a financial consulting firm. three different companies and three different sectors all going on here. i call them guided missiles because truly if you give guidance and it's better than expected ba-boom. the things we're seeing where people are justifying their increased forecast, new orders and backlog building, also we're seeing sequential momentum. the year on year figures in most cases will show some sort of

improvement. but when you really see some sequential movement the market is lapping that up like a hungry dog as well. lastly we're talking a lot about cost cuts. but when you combine those with lower ingredient costs for a number of industries where you're seeing lower overhead that's going to help things more than expected as well. if you just take a look at one stock, for example, dr. pepper, you can see has had a great run. really since march. but pretty much all year long. even in the beginning of the year it was trading at 15. so you've added ten bucks. it's up about, what, 60%, 65% on a year to date basis. so if you dare to give the guidance you are duly rewarded. but of course if you don't hit your guidance and probably even exceed it a little, michelle, you will be duly penalized. >> punished. all right. thank you, matt. coming up next, we're going to come right back with the closing countdown. >> and after the bell we're going to get more info on the state of the consumer when nordstrom reports its latest earnings.

a lot of anticipation here. they had that big july sale. we'll get the instant numbers, 4:00 p.m. eastern time.