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these names stuck out to us. rich peterson at standard & poor's sent these along. they're 11 stocks that are up 1,000 pes or mo 1,000% or more since march 9th. dollar thrifty and avis. dana on that list. you can see the rest of them here as we'll flash them by. arvin, pier one, beazer. 16 are auto-related. the car rental companies and a lot like these, tenneco and sonic automotive. boise is a paper and packaging company. valassis, a new one tuesday, a

media company. trw automotive. one more home builder in the form of beazer and of course pier one. doesn't are debt, can't kill it. thanks so much for watching. have a great weekend. and you have the final hour of trading and "the closing bell" starting now. stocks stumble into the weekend. the worst one-day drop we've seen in a month. in fact, the first weekly drop we've seen in a month here today as investors take summertime profits and cool things off on a hot august day. hi, folks. i'm matt nesto. welcome to "the closing bell." we're live here at the new york stock exchange. happy to have aw along as we count you down here for the final and most exciting and important hour of this business day. this trading day. >> it is exciting. i'm melissa francis in for maria bartiromo at cnbc global headquarters. in the markets right now, worries about the economy and consumer spending are weighing on wall street. stocks are down as we look to close out the week. take a look at the major indices here as we go with one hour of trading left. you can see the dow is down triple digits, 128 points, about

1 1/3%. the nasdaq right now trading to the down side as well. it's down better than 35 points. almost two percentage points. about 1 3/4 percentage points p and about 1.4% on the s&p sitting below 1,000. matt. >> thanks, melissa. appreciate it. lots of things going on eyre. let's get to the numbers. let's get to the action. we've got you covered on all fronts here today. we begin with our market reports right here on the new york stock exchange with mr. bob pisani. >> hello, matthew. and folks, we're down but we're off the lows here. let's stake a look at what's going on. i'll show you maybe hopes for a bit of a moveup in the last hour here. stocks are weak, but they're off their lows. that's the important thing. traders have really lightened up today after buying big into the summer cyclical rally and you know how those cyclicals have moved in the last month. but a lot of guys who've been lightening up hire say we think there's still a floor under the market, that is, they're not expecting the market to drop dramatically, they're thinking the market will drop a little bit and they'll be interested in buying stocks at lower prices. that's a bullish sentiment. it's still out there. this is your classical big

cyclical names here on what's been going on here. you can see masco, ryeland, alcoa, qatar pil, 3m, all to the down side. bring back the full screen. i want to see the summer rally and how these sectors have been moving so far in the month of july here. housing and banks and materials. real estate investment trusts all have been rallying rather dramatically. up 36, 32, 20% for the month. the laggards have been your consumer stocks, your drugs and your telecom and your consumer staple stocks. so that's really important here. finally, if you want to hold outs hopes of a little bit, put a bank of america intraday here because the financials are starting to move just in the last 15 or 20 minutes. you see that? the volume has picked up here too. a number of the other banks. i'm just putting up bank of america as an example. what's going on? well, there isn't any news out there. remember, though, we are going to get some delinquency data next week on credit card delinquencies. i've heard some hopes out there that maybe some of the trust data as it's called might show trends that are a little bit better than expected.

again, there might be hope for a last hour rally. tradertalk.cnbc.com. let's go to scott standing by at the nasdaq. >> bob, thanks. we're lower for the week. now we're lower for the month of august. today we're down by 1 3/4%. that translates to a loss of some 34 points. a broad-based sell-off throughout not only technology but elsewhere. i'll take you through that in just a second. chips, for example, they've been weak throughout the day. one of the weakest spots on the nasdaq today. philadelphia semiconductor index, the sox is down 3% today. intel down about 2%. take a look at the big cap names today. apple's been weak throughout the day, down 1 1/2%. cisco's been down 1 2/3%. yahoo's down just a fractional move for yahoo. we've certainly seen some weakness today from the internet space. and it's been that way and perhaps picked up just a bit on some of the names within that space after the consumer sentiment number was a disappointment. amazon down 1 1/2%. priceline down 1 1/2%. ebay's down 2 3/4%. if you're looking for any help

out of the biotech space, you're not going to find it today. amgen's been down throughout the day today after an fda panel voted against one of the company's key drugs. the stock was downgraded over at citi, and the stock has basically been under pressure from the get-go today. but celgene, biogen, and sepracor have also been weak today. and did you see those numbers from the npd group about video game sales last month? down 29% year over year in july. not really translating as you might think from some of these stocks. electronic arts, for example, is actually to the plus side by a half percent. certainly you're seeing a sell-off in take two interactive and then a thq. but internally the situation is still a 4-1 declining stock outpacing advancers as the nasdaq sits down by 1 3/4%. let's go to chicago and rick santelli. >> thanks very much, scott. indeed if we look at the credit chatter, not only capping off this week but looking ahead to next week, there's some interesting things to be aware of. the first is no coupon supply next week. i know i'm oversimplified, but for the most part it's every

other week. so we had it this week. nothing next week. and the week after will be the cycle where we go 3s, 5s, and 7s. but one thing we do have next week is a lot of data. you know, we're going to see the other inflation number. we're going to see housing starts, permits, philly fed, empire, all these will be key if for more important keys that the european numbers have turned a bit better. their gdp in all the papers today turned a bit better. that's going to put some onus of trying to perform on the dollar, especially if the u.s. data trends the way it has been. it has nts been spectacular, whether it's retail sales or as we saw even with good numbers industrial production, past utilization, it didn't make a big difference. one other point we want to allude to, and that is the yield curve and interest rates have had a lot of volatility on the week. ten-year note yields are down 30 basis points. last week they were up 40. melissa francis, back to you, and have a good weekend.

>> you too, rick santelli. taking a look at today's business headlines, the university of michigan consumer sentiment index unexpectedly fell to a reading of 63.2 this month. economists have been forecasting a small increase. consumers continue to worry about job losses and small wage increases, even as they expect the broader economy will improve. the labor department reports the consumer price index was unchanged last month because of a retreat in energy prices. the core cpi, which excludes food and enji prices, rose .1%. prices have now fallen 2.1% over the past year. that is the largest decline in 59 years. and the federal reserve reports industrial production rose by a better-than-expected .5% in july. that is the first increase in nine months because of rising demand for new cars as a result of the cash for clunkers program, that helped the capacity utilization rate rise slightly to 68.5%. matt? >> melissa, it's been interesting what investors have been grabbing a hold of, what's good, what's bad. it's been a mixed picture by any

estimates in terms of the economic data. earlier today on "squawk box" pimco's ceo mohammed al-arian said the economic reports don't support this 40% run-up we've seen since the march bottom. >> if you look at yesterday's employment number, if you look at yesterday's retail sales number, it suggests that that is still sluggish. so we have yet to see a durable and sustainable recovery. but the market has gotten ahead of the process by already pricing that in. >> so the market has gotten ahead of the process, mr. el-erian says. have they gone too far? we have a discussion. steve desanktus with bank of america security merrill lynch. and virginia dawson, she runs the industry leaders fund. it's a large cap blend fund. so virginia have we got anne head of ourselves? >> i don't think so. you look at the production numbers that came out today. the production numbers are on the upswing. i've been saying and we've been saying that we need two more quarters of making it on the bottom line and then we're going to make it on the top line.

>> i just said, like we pick and choose what's good. a week ago we might have flipped out and been up 200 points but today we just completely ignored what arguably was the best economic data when we got mired in i don't know what. >> our fund in particular we try to stay out of the sentiment and just look at the basics. if you look at companies with a strong balance sheet and companies that have great debt ratios, then they're going to do well regardless of what the market is. >> steve, the small caps, the russell 2000 down about 2.3% this week, about double what we've seen the drop in the dow and the s&p. something going on there? >> small caps are had a bigger run. they're up 50% off the market lows. the fundamentals are a little bit worse than what we're seeing in the large cap space. so i have to agree the fundamentals really aren't supporting the move by small cap stocks -- >> what do you make of this economic roulette, if you will-n terms of what's good, what's bad, what we're going to trade on during the day? >> i was very surprised yesterday with the economic news being where it was that the small cap market was actually up. i think you've got a lot more

momentum in the market. there's definitely been fund flows into the small cap space, and that's helped generate the performance. but sooner or later fundamentals are going to start to matter. >> virginia, i'm just flipping here. you say fundamentals can support the bearish or the bullish case, which leaves you kind of stuck in the middle. >> it does leave you stuck in the middle. like i said, you've got to take the sentiment out. and you're right, we can have one number and people can say the sky's falling and another number can come out and people can say that number's great. it's all about the stocks. strong stocks, strong balance sheets, doesn't matter really what the market is. >> we had one of our uber strategists and fund managers said no one he knows, michael steinberg, said no one he knows is long-term bullish. do you agree with him? >> i don't agree with that. what about all the forecasts that have come out for gdp? all the gdp forecasts are up. those people are bullish. i'm bullish. you know, what about you? >> i agree with that. because i think there are definitely some really good companies out there. and actually, in the rally in the small caps it's been lower mark cap, what we would consider

lower quality companies that have had very good performance and some of the companies that are actually debt-free or improving their business. there's plenty of them out there. and i think they've been missed. i think there are some real opportunities for stock -- >> let me ask you about small caps because i know that's where you fish. you're putting out some like -- it's like bizarro land right now. they're growing slower and they're less expensive and they're less volatile than large caps. what the heck is going on? >> well, i think last year, actually with the flip where the growth earnings was actually holding up better in small than in large, and they actually held up better in a down market, which is somewhat different and unique. and now we're kind of playing a little bit of catch-up here, especially on the fundamental side. but again, i think it comes down to the market narrowing and then there are just going to be good companies out there that people are going to be able to take advantage of and you'll have performance that way. >> there are some grumblings out there, we're seeing bank of america shares rally, maybe tlaz bit in financials here today.

we've got regions was just upgraded by -- do you like financials here? >> we're overweight financials. there's no place else for the market to go. you look at bank of america, morgan stanley, that's the retail sector. where else are people going to put their money? the sector's gotten smaller. so yeah, we love -- >> you look at a stock like the bb & t that's leading the regional banks higher here today. it's not because they're buying a bank that's insolvent. they're buying it from the fdic. but how can that be -- >> low capital base. i mean, anything can be seen as good news if you're talking about making the sector probably smaller, making it so that companies are going to clean up the bottom line and tighten everything up. that can be good news. it's all about how you look at it. >> we're in the final quarter here. a minute to go. steve, give me your closing thoughts on this marketlace. we've come a long way in a short time. no matter what you're looking at. >> a pause makes smens. we've written too far too fast. i'm waiting for the fundamentals to kind of kick in and support

the rally. evaluations aren't that attractive. the market's been very, very broad. i think it starts to narrow up. and just in terms of the banks and financials, it's more about individual names as opposed to the overall market moving higher. >> all right, guys. thank you very much. steve desanctis, virginia dawson, thank you both, appreciate it. we have 45 minutes to go until the market closes. the dow's down. we have some interpersonal betting going on that we might see some improvement especially if financials can get it going today. we'll continue to watch that as we get it down toward the closing bell. >> video game sales dropping sharply for the fifth straight month in july. but can today's release of the latest version of the popular madden nfl series give a boost to video games? >> you know, it's not just video games that are suffering from slow consumer spending. we're going to discuss when spending may actually pick up again and how that's going to impact a broader economic recovery. >> and then coming up after the bell is president obama losing control of the health care debate, and will that end up

resulting in watered-down  legislation? we've got some answers coming up at 4:00. >> and as is our custom, there they are, the most active stocks today. these days, wouldn't it be great

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taking a look at some of the day's research calls today, the latest upgrades and downgrades, clothing maker pvh, phillips vanheusen upgraded to overweight from neutral. they think there's going to be margin expansion and they also said global growth opportunities look good. the firm hikes the price target up ten bucks to $37 per share. jpmorgan also raised its opinion on avery dennison. they're now overweight from neutral on that one as well. they say the label and office supply maker is well positioned to benefit as demand rebounds from cyclically depressed levels. and lastly, regions financial, also a buy from neutral at bank of america merrill because the company may be close to raising enough capital to cover losses. always a good thing. >> all right, matt. the latest madden game touched down at midnight.

fans in new york city lined up outside gamestop in herald square for the release of "nfl madden 10." it is the first major release for the holiday season. the holiday season. are you kidding me? and one that electronic arts is counting on to revise slumping sales. so is it game on from here on out? joining me now is todd mitchell, senior research analyst with kaufman brothers, and rick menard, senior analyst media and technology with the motley fool. guys, thank you so much for joining me. todd, these numbers out of mpt were really depressing. hardware sales down 37%, software down 26%. total video game sales down 29% in july. tough time for madden to come out. >> you know, this is kicking off the holiday season for the video game publishers. it seems like the middle of summer for us. >> it does. >> but what i would caution you is that we're kind of at an inflection point this year. if you look backwards, we're coming off a bunch of tough comps last year with very little in the product line this year.

but going forward we're looking at stronger release slate against easier comps. so i do think we'll see positive trends in the video game industry going forward. i think we have to get past august. i think that will be a down month. but because of hardware sales. i think that july will be the last month that we'll see a negative comp on software. >> i guess. the comp argument is a little like, as people say, earnings are getting better but it's only because they're cutting costs. i mean, that's a very weak way for things to look better but i guess you'll take what you can get. rick, at madden 10, does it ever get old? >> electronic arts, they've been doing it for like two decades, pretty much. and i think, i mean, it's important not to get too excited about 2010 because you know, on an apples to apples basis this is a flat orchard. madden 2009, madden '09 came out last august. so what todd was saying, august doesn't look like it's going to be that good. >> yeah. one way, obviously, to improve business is to cut prices. what about cutting prices on

consoles? is that something we're going to see even more of ahead of the holiday season and what does that mean for the stock? >> i think nikint is a company that's pretty ripe. the wii came out two years ago at 250 and it hasn't cut its price and now it's starting to suffer sales. both sony psp and the nintendo wii are pretty soft right now. the xbox is holding up a little better but i think that's because of the xbox marketplace where a lot of people are spending the summer playing free versions of one versus 100. >> todd, you disagree with that obviously. >> i don't think it's necessarily just about the top line. i think that these companies are going into this year with a much rationalized product line. i think you see less high-risk i.p. than you did last year, a bunch of core staples like madden, like fifa, like call of duty. and i think these companies are focusing in on earning money this year and i think that's a good thing. >> so if you were going to try to invest in this sector, what would you do? or would you avoid it altogether? rick, what do you think? >> at this point i don't think

it's going to be the hot holiday season anyone expects. i think there's too many people playing mafia on facebook or -- >> how can it be a hot holiday season in the consumer is hiding in a bunker. >> i know of duty 2:spt modern warfare," there's a couple interesting games out there but i'm not seeing a lot of running to video games. people are still going to movie theaters. movie tickets are still up. people are electing not to buy as many video games and video game consoles as they used to and this may be a bigger trend than just the economy. >> so rick, your bottom line su wouldn't buy stocks in this sector right now? >> i didn't want to say that, but -- >> would you short them? >> well, you know, no. because i think a stock like an activision blizzard that's trading at an attractive multiple and a stock like take two interactive that's down to ten bucks after they told electronic rarts to take a hike at 26 last year, i think there's time for a little consolidation and that may help but if you're going to expect earnings and sales to help out i don't think you'll see it this year and maybe not next year. >> todd, what do you think? as an investor what would you do

in this sector? >> we are cautiously optimistic on the quarter going forward. we think that these companies are attractively priced historically. and we think that this cycle's going to be significantly along so they will get the operating leverage they need for an attractive earnings story going forward. so yeah, we do think it is a sector to buy. we also note it's not a sector that is really participated in this latest rally. >> guys, thanks so much for joining us today. we appreciate it. >> thank you. >> we've got less than 40 minutes to go here before the closing bell for the day and the week. the dow right now is down triple digits, about 127. the nasdaq down about 33. >> so much for that rally, right, melissa? up next we're going to have another tack on the sell-off today and for the week and how you should be investing right now.

all right, folks. welcome back to "the closing bell." live. on the new york stock exchange. 35 minutes to go. the looked-for, anticipated rally in the financials not materializing as of yet. we're still down about 125 points on the day and looking at our first losing week in a month. i'm joined on the floor by pete valdez -- excuse me, by alan valdes and pete costa -- >> we merged. >> -- here today. so we were just discussing before we got here, we're kind of like dead armadillos in the middle of the rad today. low volume. everything's basically selling off. nothing's working here today. how do you go forward and make money in a market like, this alan? >> you're right. it's broad-based today but there's no volume. the volume's very light. it was that michigan that sent us down in a tailspin basically.

i think it just -- you stay real nimble, real close to your trades, watch them every day because the market could go either way. but i think it's going to go sideways. so we'll get september and see the back to school sales come in. >> pete, what do you think? >> i've been hearing a lot about the back to school sales. and i'm going to dispel that one. and i tell you why. when it comes to people spending money on their kids, it doesn't matter if it's a recession or if we're in a boom economy. they're going to spend money on their kids. so i truly do not like looking at those as some kind of indicator of the future or how the economy's going. people are going to spend money. >> it depends where they spend it, though. >> it's true. you ratchet it down. how many people went to saks to get their school clothes? >> i know the costas are very, very fashionable and you dress them there. >> yes. >> you talk about this long trading range. can you do business in that kind of environment? >> absolutely. but a narrow trading range it's harder. what i'm looking at is maybe 40 to 50 points on the down side on the s&p, maybe 75 on the up

side. so it's not a lot of room. but people can trade -- i mean, like i've always said, you can trade anything. if there's someone willing to buy, there's someone willing to sell and you can trade it. >> i was looking at the weekly stats, first weekly loss and what held up, what really got slammed, is within the winners and those that fell the least was technology, only down .4%. technology held in there. very bullish. >> yeah. i still think it's going to hold up for the rest of the year, to be honest with you. i think if one group looks stronger it is technology. we're going to go sideways for a couple months here. >> so again, what do you do? you go to cash for sideways in you need up or down to really make money. >> i agree with pete. i think you're going to be in a trading range. in the dow you might be from 9,000 up to like 9,500. but you can make money, start trading. a lot of guys have made a lot of money trading in and out here. >> in this market, and i'm going to throw this out there for the first time, i think we're in a tweener market. >> tweener. >> a tweener. >> let me mark the day and time.

>> tweener market. in a tweener market a lot of what you see happen is there are a lot of acquisitions because there are firms that still have money, they're looking at companies that may be in there are group that they can probably get a little cheap because the market -- a lot of guys still have a very positive outlook looking three years out. looking three years out where do i want to be? i want to build up my business, and if i can do that by an acquisition. so i think you're going to start to see more -- >> got to be stock deals. is there enough cash out there? >> there's cash everywhere. >> i think that's another thing you're seeing. you're seeing these pullbacks. they're pretty shallow really. today's pretty deep, but basically people are getting in and trading the market. >> if we look at rotation, again, i'll go back to my weekly theme, the discretionaries, industrials, materials got hammered, they've had a big run up but they're also very cyclical. that's as unsettling as technology's strength would give you confidence. >> yeah. it does. i mean, this is just rotation. i'm seeing a lot of rotation out

of the sectors. like last week we saw the health care pretty strong. this week we're seeing technology strong again. you're seeing a lot of rotation also going on. which is a good sign. >> what do you think? >> i see for me technology for this country to move forward and to grow again, it's going to have to come from the technology sector. this is -- you always worry about that. you worry about innovation. you worry about where the country's going to end up in five years without technology and innovation we could be worse than we are now. so i'm going to be very bullish on the technology sector. short-term, long-term, midterm. >> final question, and real quick, how do we ignore the industrial production? how can you explain that away? >> you really can't. >> but we did. >> we did, but you really can't. at the end of the day really can't. >> so we got an iou on the marketplace. >> yeah. >> pete costa, thanks very much. have a great weekend. alan valdes, appreciate it. so back to you, melissa. >> all right. right now we've got about 30 minutes to go here before the close. the dow still trading down by

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the s&p also down about 1.4% right now with about a 14-point giveback. >> take a look at the s&p since the march lows. it's up about 40%. you'll see a similar pattern on almost any index. but have the markets come too far too fast? here to discuss that, tim seymour, "fast money" trader and partner with seygem. also scott nations, cio of nations shares. guys, thanks so much for joining us. tim-y are we selling off here? and are you going to selling on the close? >> we're selling off for a couple reasons. first of all, today's consumer confidence data, yeah, but i think the cap utilization data

showed you there really is not a lot of demand in this economy. i think most importantly, though, commodities have had a huge run. look at the move in copper off the lows. $1.30 a pound. close to 3 bucks a pound. this is a market that's tired. despite in upgrades in the metal prices i look at commodities as being a trade that is heavy despite being a lorm believer in the trade. and the dollar. the dixie is now through its 20-day moving average and the dxy is a great test for commodity prices to rally against. they have not been able to do that yet this year. >> scott, what do you think about today's trade, and what are you doing into the close? >> today it's a little bit -- i don't know if people are agnostic or apathetic or just have moved on -- >> exhausted. >> yeah. exactly. but the market has come a long way recently, and it came this far largely because of earnings. now, you can't miss on the top line and beat the bottom line forever. that doesn't work. going forward. so that's part of the problem, because people are starting to

think about that. but also what's going to be the catalyst to drive us higher right now? if the market were just pulling back organically-a that would be one thing. but now it's pulling back on bad news. for example, the news we had yesterday on retail sales was also bad news. and you know, the market just can't continue to go up on low volume forever. and people are starting to realize you know what, everything is not great out there. >> but tim, everybody's been saying things like what scott said all along. you know, it lacks fundamentals, we're not really trading higher on anything in particular, the market has continued to defy it. why would it move in the other direction now? >> i don't foelt totally buy the market doesn't have any fundamental strength to it. ibl industrial production was very good. global p michlt. the auto data, some think it's a mirage, it's only cluchker infused. i think auto production will be up 40% in the fourth quarter. there's real data to support at least a recovery. this market's not as we can as people think. i think half the people say this market's goelg going higher half

say it's going lower. technically people are very worried here and i'd be worried bay couple big plays. three names. pcu southern copper. that's the more expensive of the copper plays. southern copper. petrobras reports after the bell. also if you think oil's going down and emerging markets are heavy this is the heaviest play with a lot of political hair on it right now. >> so tim, that's pcu and pbr. are you shorting those or selling those? how are you trading it? >> i would not be afraid to be short pbr into these numbers. i think pcu, again, gives you a great hedge to the down side. it's 43 times earnings when its mean is 9 1/2 times. >> scott, tell me how you're trading this market. some of the second-tier financials look interesting right here. >> that's right. citigroup and bank of america have done really well and they continue to do well today. it's possible. i think the market has had its

recovery. up 40% from the low. so you have to look at companies that really, really got crushed, and the second-tier financials are those companies. you don't have to look at goldman sachs or jpmorgan. they've had their run. they're certainly best of breed. but look at some of the ones that really got crushed because they are holding up right now. they're showing strength. they're the ones that are showing fundamental strength, i think. >> would you buy jpm or goldman sachs on monday if there were some kind of dip? >> i would rather focus on the ones that have a longer way to come back, citigroup and bank of america being -- bank of america's done great today, over the last five days, and over the month. >> tim, you like alcoa? >> i like the story. i think aluminum prices will recover faster next year. again, i think it's a name that's been very heavy played in the last month, around 1,320 here. i would be buying it somewhere near the 15 moving day which is around 12.20. i think this is a story where you're seeing industrial demand. these guys have taken down production. the biggest issue with alcoa was their balance sheet, people priced that out of the crisis as

being a place they were going to be selling at a fire sale price either coming to market or selling assets. that's not going to happen. long-term the chart on alcoa looks great. it's a very good company. and i would not be afraid to own it here. >> and scott, oil looks pretty tired right here. you'd sell those stocks? you think we're at the top of that range? >> yeah, it seems oil's fully priced above $70. a bet on oil is really a bet on a weaker dollar. that may happen but it's not going to happen over the short term. we're going to have to see inflation before we see a weaker dollar. >> tim, you agree with that? >> well, not quite. i think scott's made some good points, but i think the dollar is going lower and i do think despite the fact that there's a lot of guys that were short the dollar and we've seen people run back in to cover that trade the dollar is going weaker over the long term. there's no way you can argue against the emerging market currencies. but a gradual transfer of wealth that will be happening over the next couple years. it does look like a trade that in the short run, as i mentioned, i think the dollar could trade slightly higher but not much higher and i wouldn't want be to be too cute on this. i would not want be short commodities that much longer. >> thanks both of you for

joining us. >> thank you. >> coming up at 5:00, the higher learning trade is red hot, but can it stay that way? the ceo of devry breaks it down, their earnings. and the "fast money" crew gives you the grade and the trade. and worlds collide. "options action" invades "fast money." you don't want nois this one. melissa and the traders are live at 5:00. be sure to catch scott, melissa, and the options crew tonight at their new time. "options action" is coming to you at 8:30. that's tonight right here on cnbc. matt? >> all right, melissa, thanks very much. 22 minutes to go before we close it down for a friday. we look at the dow, down 118 points. the nasdaq still down about 1 1/2% on the session and down for the week. >> another retailer giving a rosy profit outlook but is consumer spending really ready to turn around or will things remain sluggish for a while? answers in a moment. >> and after the bell the largest year on-year decline that we've seen in cpi since the 1950s. it's creating some pricing power problems for businesses. what that means for a potential economic recovery. that's ahead at 4:00 p.m.

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taking a look at some of the under the radar stocks with the sonar in the background. key bank has initiated select comfort with a buy rating and a price target of four bucks a share. they -- analysts there citing improving sales, cost cuts, and a possible sale of a controlling interest to sterling partners. great lakes dredge and dock, gldd, they're going to sell 12 1/2 million shares of their own stock at 5.75 per share. that's nearly a 7% premium to the closing price thursday. and railroad operator genesee in wyoming reporting a 1.2% drop in traffic volume last month. same railroad traffic, which excludes acquisitions, was down 14% because of lower metal, pulp, and paper shipments. >> jcpenney joining its competitors today in announcing a full-year guidance boost. and while retailers believe brighter days may be ahead, when will the consumer actually return to their spending ways?

in search of some answers we are joined by lakshman achuthan managing director at the cycle research institute and chris lowe, chief economist at ftm fnl. guys, thank you so much for joining us. chris, it's a little confusing because jcpenney and walmart out raising their guidance, people seem thrilled about that, on the other hand you look at all the consumer data and it makes it seem like the consumer is hiding in the closet, hoarding their pennies, terrified to go out and spend anything. how do you reconcile all of it? >> well, that's right. between this week's retail sales and then today's sentiment numbers where consumer sentiment down two months in a row it doesn't look too good. but i think the answer is in the conference calls when you listen -- what's happening at these big retailers is not that they're expecting a bounce in revenue but they've jut done a superb job in managing their costs, both keeping labor costs down and also keeping inventories under control. if you look at the inventory breakdown in the report today,

or rather yesterday, retail, the inventory to sales ratio is just about right. wholesale manufacturing not so much. so the retailers position themselves very well for a shallow recovery. >> lakshman, i mean, how much more can they possibly cut? the shelves have got to be bare at this point, there's one guy working each store. >> essentially, that whole process of cost-cutting so that you can become profitable in a smaller economy -- >> it's got to be over. >> well, yeah, that's part of what happens. that's part of what a recession is. that's part of the process of a business cycle dynamic in a recession. we've pretty much run that course. but what's critical is what the forward-looking indicators are saying. not what consumer spending or retail sales was but what the forward-looking indicators are saying. and if anything, they're suggesting that the guidance is a little anemic because if they're going to be profitable in a kind of low bounce or some sort of l-shaped recovery, then

they have to be a lot more profitable if it's something stronger than that. and the forward-looking indicators are literally the leading indicators. like the weekly index are literally on fire. so i'd say the risk is the surprise to the up side. >> like what? give us more specifics on that. >> well, these are leading indexes of the economy. there are a broad range of these things. but essentially you're looking at profitability, inventories, confidence numbers even with today's numbers, trends in the jobs market and the housing market with sensitive materials prices, with dpif types of risk metrics. all of these things together are very, very good at smelling the turning points in the business cycle. each of them on their own is quite fal ibl. but when taken together and when you look at different types of them, which we do, it's very unlikely that we're getting a false signal here. in fact, we're getting a

textbook signal of recovery. if you look at coincident indicators like sales or employment and you wait to see those recover before you recognize the recession has ended, you're going to be way behind the curve. >> chris, do you agree with that? >> absolutely. i would just offer one word of caution, and that is that we've just thrown hundreds of billions in deficit spending at the economy. we've been forecasting here that we would have a strong second half of '09 for some time. i'm very confident that that forecast is right. i'm also confident that we're going to see some weakness in 2010 behind it if congress can't keep that deficit spending going unless we can see a rebound in consumption. and that's where i am kind of worried because consumer debt levels are still very high. it takes no time to build a mountain of debt. it takes a long time to work it off. >> that's the hang-up. >> it is. and it's not -- you look at those debt levels, they have not come down. >> interesting thing. in these leading indexes the rise in the leading indexes and

literally the growth rates in the weekly leading indexes have gone to a 26-year high, you haven't seen that since the early '80s. so this recovery is going to be stronger than the last two recoveries. now, that's not based on the government writing checks. i know there's a lot of talk that it may be, but most of that government stimulus spending is actually in front of us. and if anything will reinforce i think this recovery for a few quarters ahead. >> lakshman, how do you address the last point, though, that chris made, which is one a lot of people make. >> the debt. >> yeah. that consumers have spent themselves into a deep hole, they can't get any credit, they have to save for a long time to make up for it. >> i'm not ignoring that at all. and if it weren't for that, i think you'd have a stronger recovery. that is taking the shine off this recovery. but it doesn't mean it's shinier than you think. and you know, it doesn't -- a recovery is not predicated on us solving all the problems that we have. if that were the case, we would

practically never have a recovery. so i mean, we're going to have a recovery. we're going to have to work off this debt over years. we're not going to get 7 million jobs back just because a recovery started. that's going to take years. so i know there are big things that still have to be resolved. but there's still going to be a recovery anyway. >> we've got to leave it there, guys. thanks so much for joining us. have a great weekend. >> thank you. >> we've got about 11 minutes to go here before the closing bell. the dow off the lows of the session but still down triple digits, down 111 at last check. >> and melissa, up next, we go to the cnbc investor network. we're going to take another look at this market, where it's headed with the pullback for the day and the week. is this a buying opportunity? are stocks attractive here?

you think we're going to start falling again beyond today and this week? >> well, that's absolutely true. i think it's predicated on the fact that i guess i'm not as sanguine as your last guests on the economy. you know, the consumer is just tapped out, and we can see that in the consumer confidence numbers. we see that in the credit markets. you know, retail sales are down. you know, the economy to me just doesn't look in good shape. and i realize we have to stop declining before we start growing. but frankly, i think we've had a bit of a recovery and now we're going to slip backwards. >> so when you say we've had a bit of a recovery, do you mean economic or do you mean equity markets? >> oh, both. i'm sorry. both. and that's a good point because the equity markets in my view have run far ahead, way ahead of the recovery in the stock market and even ahead of the prospects for recovery in the stock market. so unless the economy here in the u.s. recovers in a really strong way, which i don't see, you know, stocks are way ahead

of -- stocks are way ahead of the fundamentals, way ahead of the economy. so i think the stock market's going to fall back as well. particularly if the economy slips backward. you know, stocks -- >> i was going to say how far book do you think we will retreat? because really this rally that we've seen up from the trough is historically quite normal. >> oh, absolutely. well, it's almost a 50% rally, and that is the best rally we've had since, what 1937 or '38. i don't know how low it's going to go, and i try not to be in the business of forecasting because that's obviously fraught with disaster. i try to assess risk, and i try to assess potential. and to me there's just a lot of risk in the market right now. i don't know if it's -- >> let me ask you -- >> sorry? >> real quick. we've only got about 30 seconds. you're nervous about china you you like a silver stock and a gold play. tie it all together for me there. >> yeah. i think in the short term china is vulnerable, the chinese stock market is vulnerable, bad debts are up in china, that will hurt

a lot of things. but i think strategically i want to be invested in resources. so i'm looking for opportunities, and i see a couple of opportunities today. royal gold, for example, is very strong, i think, under $40. and the other one i'm buying right now is silver standard, a leading silver stock, which is also down because of an equity issue. so those two are good. but i'm looking for opportunities but selectively. >> all right. adrian day, thanks very much. appreciate it. folks, up next we're going to come right back with the closing countdown. we're only down 100 points here in the dow. >> i know. battling back a bit. then after the bell, it's been called the most valuable sports property in the world, but will the nfl's image get tarnished now that convicted felon michael vick is back playing the sport? he's got some answers coming up at 4:00 p.m. eastern.'s not looking for a bailout,for mm just a good paying job. that's why i like this clean energy idea. now that works for our whole family. for the kids, a better environment. for my wife,

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independence is the spirit that drives america's most successful investors. announcer: trade commission-free for 30 days plus get $100 cash when you open an account. all right, folks. welcome back to "the closing bell." we are down on the dow right now just 90 points. we recovered about 40 points today. but the big story is still intact which is we're down 3 of 5 days and we have snapped a four-week winning streak. which started really when second quarter earnings began in mid july, like july 13th.