at lowe's, but you and i would shop at home depot. >> it might shop at lowe's, too. i don't know. home improvement. you're a condo guy. >> you hire someone to do that. >> well, what are you doing this weekend? >> guys, the company is raising its to 09 earnings per share guidance, as well. they think fiscal sales will be down about 9% year-to-date. they're boosting their year to share guidance and expects earnings per share to be flat, up 7% from last year. they're now looking at earnings per share from continuing operations on an adjusted basis to drop by 15% to 20%. 144 is the number from the year off 178. so 20% of 178, 17 and 17. >> full year, okay. did we see a bid and an ask on this? did it go down yesterday?

>> everybody was down yesterday, yeah. let's get more reaction to this. bud lieu goch is on the phone. >> two days in a row. we don't do that a lot. >> bud told us yesterday that he had raised his nebs on home depot and bud, it hooks like you were right. what do you think of these numbers? >> well, if you look at thets them, they look pretty good, at least compared to what we were looking for and what the street was looking for. there is a bit of a regional impact here, as well. but we haven't seen depot outcomp lowe's since the late fourth quarter of '03.

>> and so at this point, you expect to see shares up on this. but if these shares trade higher on this news, you would still tell people to be buying into home depot over lowe's? >> yeah. we think -- well, we like both, as you know, but we think depot has a little bit more improvement ahead of it. quite frankly, what's going on in the stores, i think i said that to you yesterday, i really like this equity. >> and if there's one thing that you really are going to be counting on, though, does it have to have a turn in the housing market before you see some stellar gains from these numbers or -- it won't even take that. it will do it no matter what? >> no, of course, that would be very helpful to get stellar gains in the housing market, stabilization of housing values and continuing improving in the velocity. but the company has got itself database a lot of its destiny in

its own hands and it's doing a lot to improve its operation in its stores. so that's what we've seen in home depot. lowe's comes from a hire starting point so they don't have the relative gains ahead of it that depot does. >> but a lot of companies, we've seen them raise guidance to where analysts already were. this company says it now sees down 15 pirs to 20%, which doesn't sound that great, except they had been down 20% to 26%. did analysts believe the down 20% to 26% so that down 15 prers to 0% will have to cause you and others to come up to a higher full year number? >> not entirely, joe. we were seeing analysts moving ahead from company's guidance beginning in the first quarter of the year and during the second quarter. as i said to becky yesterday, we had moved our numbers up above it and we're still a bit above their guidance right now. >> i guess their new guidance is

1.44 to 1.53. 1474 is where the street is. where are you, budd? >> i'm at 1.53. i'm already at the top end of where that would be. so i'm already there. and this number was a street sense ahead of my number for the quarter at 67 cents. >> we had it at 64. not gap is 67. >> that's correct. and i was at 64. the number came in at 67. >> okay. so it is 67 even though it was boost bid a three cent tax benefits. the analysts didn't know about that? >> we didn't know about that. i'll have to check the adjustment. >> budd, thank you very much for joining us today and today. we appreciate your time. you made the right call on home depot, so thank you. >> thank you, becky. >> taking a look a at oil, relatively steady after

yesterday's big decline. joe, you probably missed it, from the mid 70s to below '68. sorrick yesterday talking about 40, where he thinks this market belongs. >> and we were ready for the dollar to continue to sell-off. all of a sudden yesterday the dollar was up because the risk trade was back. you can't count on anything lasting too long. more than 24 hours. ten-year note, treasuries are bouncing a bit after hitting those four-week lows. the yield creeping up to 3.502 at this hour. the dollar, a relative loser overall this morning. the yen, as well. the euro is getting steam from german consumer confidence which came in well above expectations earlier on this morning. with a relatively weaker dollar, we'll see what gold is down, up about four bucks to 940. we're going to get housing starts for today and the third

potential monthly increase, of course, ppi later on this morning, as well. and i did say pp. and then hewlett packard earnings tonight. >> we should just call it producer pricing. that would take care of it, wouldn't it? retailer and earnings come nating earnings stories this year. what do you see up there? you of all people know retailers, they're retailers. >> how exciting it is, earnings central. >> the christmas season thing returns in january so you need january as part of the fourth quarter, i think. but in addition to home depot, we are expecting results from target, saks and tjx. after the bell we're going to hear -- that is no slouch there,

hewlett packard coming after the bell. did you see that article yesterday about senator boxer in a little bit of a tiff because of who is going to possibly run against her? carly. who has some scratch of her own if she senated e ed needed to spend -- it could be the toughest fight that she's had to face. although most of the winds are at her back. >> so you could have the ex governor and -- >> sort of a nasdaq. i don't know if either one will really -- they're both republicans. we'll see what we're ready to do in to 10. she was a big mccain type. >> today, though, in the journal talking about the mid year -- yes, and riding the tea leaves.

>> it's much more difficult to see this time around. >> 52 guys in the house. >> and every president, except for 43. >> but you guys have 79 right now. >> i think republicans need -- 41. >> but once congress passes the public option and obama has a huge health care victory, then there will be no seats in the gop. i'm kidding! >> so what i like now is that the left will not let the public option go there. and the rate doesn't even want the co-op. >> joe, we had congressman weaner here yesterday who is completely opposed to the idea of settling. he said he and about 100 of his colleagues in the house would not go ahead and sign off on this if it didn't have that plan. then we had dick armey on saying forget it. >> co-op is neither -- it's both too hot and too cold.

>> i'll tell you what, i'm glad that this last election we were able to put aside some of our partisan differences. i'm glad we're getting along so well now. i'm glad that the guy at whole foods, the biggest backpacking granola eating left wing guy says, hey, maybe there's some other stuff we could do with health care reform. the daily post wants to string this guy up by his toes. >> you can't count on every capitalist having those good intentions. >> no. they hate him because they're calling him a right wing -- they're calling him a right wing zoellick because he didn't just sign off the on the health care plan. >> he wrote about how they their own plan. >> they've got other ways to try to hold down costs, but they're pillaring the guy who is one of them.

they'll eat their own in a millsy second. >> here is who bothered meed to. if i hear someone that says something bad about the plan, who do i report them to now? the fishy website, if you hear someone saying un-american, they close it down. >> they've stopped the e-mails from a third party, too. >> so the e-mail address flag@white house.gov -- >> is closed. >> is closed. >> so if you do hear an evil un-american republican plan like discussing things, i feel a little bit safer. i feel a little safer now that linda douglas isn't gol going to come after me with her checkmarks. >> things are getting heated and things are getting ugly. but what's pointed out today in the journal is what really matters is what happens with the

economy because that's where the american voters will vote. on the agenda, we have the july producer price index. housing starts and permits will be come out. the dow jones survey calls for total ppi to fall by 0.4% last month. the core component is expected to edge up by 0.1%. building permits are farexpecteo gain. >> be honest now, did you send anything in about me to that website? >> you don't have to tell him anything, carl. >> i don't have to say a word. i did my duty, let's put it that way. overseas this morning, christine tan is in singapore. let's go to london first where for the second day in a row we have ross westgate. we are not messing around. >> star power?

wow, blatant attempt at ratings. amazing. >> why are you here? we were wondering, ross. we've missed you. >> we have a dip in our female demos? >> well, you know win just thought i'd do the week for you guys and see how you're hanging out there, you know? >> it's ow treat. >> sort of check in. what's that? >> it's our treat, ross, our privilege to have you on during the show. >> that's very -- >> enough teasing back and forth. >> that's very sweet. i know that's not true, but that's very sweet. >> you have a cold, don't you? >> i do have a cold. i apologize for the slightly muffled tone of my voice. but we're not muscled on the stocks today, becky. european stock markets not far away from the session highs. mixed data here, 0.51% up on the session. cpi didn't drop as expected.

the about an of england thinks it's going to drop more than 1% potentially. didn't come down today. we had good investor confidence figures out of germany today, so that certainly boosted the german market, the dax, and that was helped by the fact that germans -- we got german growth last week in those numbers. it's no surprise to see that it's the miners again. resources, financial services and banks are bouncing back. some individual stories to take in note. first of all, you'll see rio tinto off the top approximated. it's around $2 billion to australia's amcore. hsbc, the fourth one down, they're up 2. 5/%, as well. that's because goldman sachs came out and said the u.s. lieutenant stop being a major drag earlier than expected. so things are looking better than they were at this time

yesterday. more of a mixed session in asia, but christine has the update from there. >> i do, indeed, perhaps it was a mixed session here in asia. most asian markets cue their cue from the shanghai composite yesterday yesterday. the index moved along the shanghai market. the shong high closed 1.4% higher pap new listing in china, china ever price securities made its debut today. hodge congress is tracking shares higher. the stocks fell today on the certainty that the chinese carrier nif paid too much. that's it from asia.

carl, back to you. >> christine, appreciate that. christine tan joining us from singapore this morning. the dow, the s&p wab the nasdaq all down more than 2% yesterday. futures were up this morning. jeff saut is chief investment strategist at raymond james. mike darda is joining us this morning. guys, good to see you both. jeff, i guess, you know, the words are everything from broad retreat to healthy pullback. you want to characterize what's been happening in the next couple of days? >> we've turned cautious for the fist time in quite a while. we've been using the ten-day moving average as a failed safe point to hedge some long positions and maybe rebalance, if you will, all three averages have brown broken below their ten-day moving average. so eve if they try to rally it here, i think it's a good time to be cautious.

>> was there something fundamental that changed your view or is it one of those things that you feel like you got enough back that it's okay to move back to the sidelines? >> well, i'm not really moving back to the sidelines. we're taking some of the gains off the table here. i think after some kind of pause and/or pullback that you are going to get an add-on rally and i think the markets will be higher at the end. >> does that mean you'll take part in that? we look to recommit opportunities as they prevent themselves. >> if you're directionally correct, i think it will be herer than it is now? >> no, not really. i mean, corrective action and pullbacks are certainly part of any market advance. i think there's some fear stemming from asia with this big pullback. you know, we're seeing in chinese equities.

but they also doubled in vary short period om of time. so i don't think that's outside the bounldz of what you typically see when asset markets surge like this. the important point, i think, is that we've had a huge improvement in the credit markets and that really hasn't been threatened yet. so as long as that's the case, i still remain upbeat. >> you were not shaken about any of the confidence numbers or retail sales numbers from last week? >> well, the retail sales data certainly was soft. the confidence data, again, is more of a subsequent dental indicator. improvements have come up from where we were months ago. and the depth of this recession, which is a fairly good indicator of what kind of recovery you're going to go suggests that we should be in for at least a period here. i don't mean a quarter, but more like four to six quarters of growth that surprises to the

upside. >> jeff, back to the market being ahead of itself, it's rare in history to see a time where you get so many people that we have here -- and this is how i noticed. i don't know anything about the markets except that they do the opposite of what everyone who comes on here says. and we are almost natural that the market is built on stilts, come too far. the underpinnings of the market do not validate these valuations that we have right now. that's about -- i'd say that's about 98% of the people that we have come on and say that. aren't you uncomfortable in that crowd? >> no. i just think you got a little stretched on the overpaut indicators that we use. i would point out that i think michael and his observation of what's happened in the spreads and the credit markets is spot on. and i would point out that this recession has been an anomaly and the productivity leaped during it and that implies that

companies cut costs front, back and middle and that any incrementalal demand going back to the first half of the year is going to come up against the bottom line. so i think the earnings will be the karat in front of the horse that takes the markets higher. >> i keep hearing that, too, michael, that gdp and stock performance don't necessarily go in tanld em when you've got so much cost cutting going on the corporate front. how do you synthesize the argument that it's difficult to have the consumer, 70% of the economy, help us get a recovery when disposable income looks so terrible? >> well, that will come later. you get a surge in sorpt profitability as jeff mentioned on the back of cost cutting. and then ultimately hours worked in hiring will start to recovery and incomes will start to recovery. this will happen further into the recovery process. we'll see, at least from the gdp

side, the impact of inventory building first. in fact, we can go back to the 1930s to see cycles that look like this. consumer spending was a share was worth 8 % in 1932. from 1934 to 1937 we had a recovery that averaged 9.5% per annum. so just simply because the consumer has a lot of debt or is a large set in gdp does not rule out the economy. >> and those will carry us for four to six quarters, in your view. >> i think so. >> we'll see what happens after that. gu guys, have a good day. hurricane bill is moving through the atlantic. we'll head to our friends at the weather channel for the latest on that. can i get in on that? are you a safe driver? yes. discount! do you own a home? yes. discount! are you going to buy online?

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there's a heat advisory in place for new york city today. plus, we've watching a few storms churning. scott williams of the weather channel is back with us with an update. morning, scott. >> morning, carl. we are keeping tab on the open waters of the atlantic basin here. we watched claudette make landfall earlier this week. scattered showers and thunderstorms around the ohio and tennessee river valleys. the remnant of ana here, as well.

really all eyes now will look towards hurricane bill. it is a category 2 storm but forecast to become a major category 3 hurricane by as early as this afternoon or evening here. maximum sustained winds at around 100 miles an hour here. deep convection around the center of circulation. making out an eye wall here, as well. we will continue to watch the projected path of this particular storm as we go in time here. and it looks like it will be impacting potentially bermuda here. but as far as the impacts around the eastern seaboard, we will see some indirect impacts towards the lat either part of the week. >> what kind of xwajts? big waves or things getting stirred up around the water? >> we are looking around the eastern seaboard toward the upcoming weekend.

should it should be mop toring the situation. but it looks like we will see a trough and a weakness in the ridge. so that will allow big to continue to move toward the west, that will steer bill farther towards the west here and eventually back out to sea here. so it looks like it will not be directly impacting the eastern seaboard. >> that is good news. scott, thank you very much. >> thank you. coming up, we have the futures pits. stay right here. tdd#: 1-800-345-2550

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♪ good morning. welcome back to "squawk box" here on cnbc. >> that's the kind of stuff you want to wake up to. >> yes, yeah. we do have some viewers that may not listen to that type of -- and you put down the animal orchestra pup prefer this? >> perry como at the top of the next hour? >> that would work for me. >> joe kernen along with carl q and becky quick. stocks are looking to bounce back after the s&p and dow both suffered their biggest one-day pullback since the beginning of

jump. the nasdaq had an even sharper drop. the risk aversion tradeback en vogue yesterday. the vix back up to 27, its biggest one-day jump. nice move on the hang seng and european xotit. >> yes. gapes are just around -- oh, between 0.35% and 1%. here we head to a live report to our colleagues in london and singapore in just a few moments, but still we have a dow component reporting today. >> the retail giant posting better than expected second quarter earnings. hd raised its full year guidance. although we heard from budd

bugatch earlier. >> do you have your wireless mike on? it's earnings central. go on over there, do some of your stuff on the wall. >> fine. i'm going fop. >> we are sending you over next time. standing by at the cme, kevin ferry, chief market strategist at cronus futures market. nice combo you've got going on there, k-fed. is there anything going on that has either eyebrow raised? >> yes. last week, the market was improvement of of holding in and by the time everyone woke up yesterday, the gain was on. after that, the market was stable. it just churned around down there. i think we're going to do a little work on the s&p between 9812 and 986. that's writ started this morning

after the earnings nuls started to pop it a little bit. i think that's key. the one thing that we were getting nervous about at the beginning of the month and it took two weeks before it started to manifest itself is there is far too much volatility in the currency markets to think there's going to be stability in the bond and equity markets. that's how you keep score. so until we see better stability out of currencies, that's why we thought the risk was rising in a harsh break in bonds or equities. >> wait. you mean the dollar going down? well, i think the volatility of it. the truth is that you saw it in the bound in particular. sfar too much volatility.

if think kaevent tell how they're going to coop story then the risk of harsh corrects were -- certainly when you're relying on china for both and credit, then yusht going to get a lot of strength. >> and bob, it leems oob though you may or may not get into -- we go down more than 50% from the best levels that we've seen historically. we get down to 6,000 from 14,000 basically and then we go back to under 9,000. and why can't things just go up regardless of what happens in the currency markets? >> well, you have to keep track of it in some type of form, joe. >> well, it's multiple -- >> plus, if rates are close to zero, virtually universal around all developed nations, then you should not have that much

differentiation in the fiat of those countries. >> right. but we're always talking about comparing stock price toes tangible things when it's the multiple that can fluctuate between 5 and 50. and you never know where the multiple is going to go, what kind of multiple you put on earnings for any given company. so you almost never know what's going to happen. it's almost always based on sentiment. that's why when i hear so many people saying the underpinnings are lmp there, they don't know. they didn't know about the underpinnings at 6,000. >> that's true. i can take the hit. i'll be the first to tell you that i don't understand it. but it becomes more difficult to manage. >> i don't how people are pulling away from the public option. >> i think overall, though, i think the real key that we took

away from yesterday's action is not much happened after the gap down. so i think the ability to bring stability to the market now is it's still quite high. and i think that that would be a good thing. that's the way i would term it. the process is back on. maybe the two-year note is a little too rich for another option last week. that process, although choppy, has been getting done. and i think that's clear, too. i would say choppy seas, but still on track. >> thanks, kevin. in corporate headlines this morning, apple's boss is knot expected to be here. smith 12e7d down the last month after cooling and another company started talking about

competing. another person that mraint in that argument is chief operating officer tim cook. >> bb&t corporation each secondary pricing is coming in at $26. the offerings size krezed to $33.45 million shares. the company's ceo is will be joining us live at 7:00 p.m. eastern time. bb & t failed to take over a bank last month. five facebook users filing a civil lawsuit against facebook in california. the lawsuit includes a request for a jury trial and demands damages and attorney's fees. the company says it mrns to fight those charges. >> am ex said the people in the

study failed to benefit from prior treatments. the company says when combined when standard chemo, the drug met another goal of significantly delaying a worsening of symptoms in one patient group. shares of amgen trading down a bit on after hours news. meanwhile, roche shows that the drug avastin increased live expectancy with women with breast cancer. avastin obviously is a genentech drug made by roche's reerchbtly acquired unit, genentech. >> let's talk about a story which has nothing to do with wall stwreet or with president obama's pay czar. washington national's signing steven stausberg to a more than

$15 billion. they signed it seconds before the deadline. former chinese president hin c dae-jung has died of heart failure. we'll take a look at the news making headlines outside of business on this friday. g#

monica novotny joins us with a roundup of the headlines. 28-year-old albert gonzalez along with two unnamed russian acome mribs polices hacked into the database ott several retailers to steal information from 130 million online customers. in a rare move, the supreme court held a rare summer hearing for information on troy anthony davis. and new research finds

traces of cocaine present on up to 90% of paper money in the united states. that is up 20% from a similar study done just two years ago. one possible reason, according to one of the researcher hes, an increase in drug deals during the recession. what city do you think had the cleanest bills? >> omaha. >> salt lake. >> i don't get the 90%, though. that is crazy. >> that is crazy. >> i think part of it is that they're saying the large scale contamination take place one the bills go into those cleaners. it's once they get in together, it gets pretty out a little bit 37 is that where it comes from? >> that's part of it. they say that's part of it, the actual use of the bills and it's

when drug dealers make transitions. >> what were you saying, though, when they go into the -- why is it -- >> into the currency counting machines. >> oh, and there's already some there. >> that there's cross contamination then. that makes sense. >> but 90%? still -- >> and it's up 20% from two years ago. >> and that seems like a -- we're in a recession and people are snorting more coke? >> that's what people are saying. but if we're in a global economic downturn -- >> hey, what's the highest? >> they didn't list the largest cities, but they said the drug was most common in baltimore, detroit. >> you're smart. >> i am making all of this up. >> monica, we appreciate that. >> we do that. all of our guests do. >> anyway, thank you, monica.

>> take care, guys. >> see you tomorrow. we're going to take a quick break right now, but first let's take a look in the squawk board room. our friend, byron wean is taking a seat this morning. we'll be talking markets, the fed, the economy and much more. stay right here. morning, byron. and later, it's a tale of david versus go lie eth. city mouse versus country mouse, big bank versus regional power player. how bb&t is snapping up customers and even failed rivals. ♪ well i was shopping for a new car, ♪

♪ which one's me - a cool convertible or an suv? ♪ ♪ too bad i didn't know my credit was whack ♪ ♪ 'cause now i'm driving off the lot in a used sub-compact. ♪ ♪ f-r-e-e, that spells free credit report dot com, baby. ♪ ♪ saw their ads on my tv ♪ thought about going but was too lazy ♪ ♪ now instead of looking fly and rollin' phat ♪ ♪ my legs are sticking to the vinyl ♪ ♪ and my posse's getting laughed at. ♪ ♪ f-r-e-e, that spells free- credit report dot com, baby. ♪

all right. if you're wondering how the markets reacted to the selloffs, futures are positive. decent action in asia. nikkei was up just a touch. some decent numbers out of  germany, consumer confidence indicator. we'll be looking at a stronger opening, some bounce off the dollar and gold and a bunch of other things. taking a look at the papers this morning, 55 million school children are going to be going back to school in the next few weeks. we're going to be talking about swine flu no matter how you slice it. the journal has a good piece, what is it, how dangerous is it, should you get the vaccine, which is not going to be widely

available in the u.s. people most at risk, pregnant women, infants, caregivers,  first responders. they're saying if your child gets sick -- first, it's hard to know if you have h1n1, and if your child gets sick, the cdc is advising schools not to close, isolate the student, but not to have the big school closings like we saw over the fall and spring. >> they don't think it's going to be as -- a stronger comeback as some suggested? >> it was about par with your average flu, or even less than some -- than your average flu, so it was -- i will say, at the airport yesterday, i saw a lady with a mask. >> really? >> yeah. i haven't seen one in a while. >> no, i haven't either. >> i was going to ask her -- >> is she sick -- >> yeah. do you have something or are you -- do you wear it all the time? i don't know. but it was -- her kids diplomat have it. she was just walking around with a mask on. >> they are advising, get your

kids to wash their hands. be cleaner than they normally are. good luck with that, right? >> good luck with that. we have spent an awful lot of time on this show talking about the health care crisis, and even arguing about whether there is a crisis, how you look at it. do you look at the number of uninsured, the costs we're spening on health care? one thing that could be a crisis, is doctor shortage. when it comes to primary care, your primary care physicians, these are the ones to prevent you from getting worse illsness illsnesses. the american academy of family physicians says that u.s. medical students that are going into primary carry has dropped 51.8% since 1997. if you ask doctors why they tell you, first of all, less prestige. one doctor says, all the sexy shows on tv are about surgeons, "grey's anatomy," "er, whatever it is. it's just not cool.

not to mention, lower pay, longer days, headaches -- >> insurance. >> driving away family doctors by the droves. what does it mean down the road? the expectation is that it takes -- because it takes 10 to 11 years to train a doctor, this drying up we're seeing in the pipeline is a very serious concern. the afp is predicting we'll see a shortage of 40,000 family physicians by the year 2020. the u.s. health care system has about 100,000 family physicians right now. it's going to need close to 140,000 over the next ten years. the current environment is attracting only half the number needed to meet that demand. that means you could have a much longer wait to see your doctor, will take you longer to find a doctor and many more people will be going to the emergency rooms to get basic issues treated instead of going to family practice doctors. >> what's your prediction? if your plan passes -- >> my plan? >> what will -- >> the white house's plan? >> if your plan passes, will that make it harder or easier to

final a personal primary care -- >> i think the biggest problem is lower pay the doctors face. if you get nickelled and dimed the whole way through -- >> when medicare-type reimbursements go down more, there's a lot of physicians that opt out of any medicare business at all. >> if the supply goes low enough, they'll have to pay, they'll have to pay doctors to come to your town. >> nine months from when you call his office, you'll probably pay enough, i guess, to -- who would be a primary care physician? i would hope that you weren't watching tv to decide whether that was your calling. >> no, that was -- that's what the guy's saying. there's less prestige. the longer dayings, the lower pay -- >> and it's going to get -- >> in a lot of ways i guess we don't celebrate it enough, too. it's probably -- it's probably a good wake-up call for all of us that we need to thank our family doctors. >> i love my family doctor. he's great. >> in other countries, former soviet union, coal miners made more money than -- every country

in the world doesn't have doctors -- >> not everybody goes into a profession for the cash. >> right. >> plenty people teach because they love teaching. >> you guys are journalists. we didn't go into this for money, did you? >> no. >> you want to turn the light on. turn the light on to issues. >> comfort the afflicted and afflict the comfortable? that's sort of what you do. >> anyway, just a reminder to all of us to thank your family physician if you like him or her. dr. coe, i really like you. >> i have an internist. >> really? coming up, blackrock money man bob doll, more than a trillion dollars on the line so where is he placing his bets before the bell rings? our guest host byron. i'm racing cross country in this small sidecar,

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stocks stumble more than 2%. the vix jumping 14% as a course of pros say the market is way ahead of itself. so is this a pullback or just a stall in the rally? survival of the fittest. regulators shutting down colonial bank and btb stepping in to buy the stock and meeting with investors to talk about the health. bank. first, executives talk to "squawk box." and ambassadors travel to america's heartland. senator grassley's push to improve iowa's business relationship with over 60 countries. a chance for diplomats to grow relationships and maybe even strike a deal as "squawk box" begins right now. ♪

good tuesday morning, welcome back to "squawk" here on cnbc. i'm carl quintanilla along with joe kernen and becky quick. in studio, byron, incoming chairman of black stone advisory services. a lot to talk with byron about. it's good have you back. >> good to be here. >> we'll get a check on the market. if you're waking up and wondering if yesterday is as bloody as yesterday was, not as bad. futures are up. asia had a reasonably good day overnight. german consumer confidence bouncing a little bit. so, the pain yesterday? >> going to be undone to a degree this morning. >> typical of the pullbacks we've seen recently. one day. remember, about two weeks ago we had one. we were like, you houh-ho and t went right back. one day it will be the beginning of a ten or 15 percenter.

you -- is that metal? >> yeah. >> sit down. go ahead. >> 15% down. what do you think, byron? >> 10% to 15%? maybe you're not in that camp. hopefully you're not. everybody is. you're not in that camp? >> byron, everybody's saying the same thing, fundamentals don't justify the current valuation. every person comes on and says that. it's just too pat, isn't it? >> why do you think fundamentals don't justify? >> i don't know. i don't know what the fundamentals are going to be nine months from now. everybody else seems to know, profits aren't going to be where it needs to be, the consumer won't be where it needs to be. they give me all these reasons for why the market is ahead of itself. bareni said if you look right now, you'll always be bearish. he thinks 1700 on the s&p two to three years out. what do you think? >> i started the year thinking 1200. i'm not backing away from 1200.

>> nice. >> i'm glad to see you today. >> why? >> you're never glad to see me. >> i am today. it's way too pat. we had el erian, all the fundamentals -- everybody has the same story but they're all looking at, as if they can could -- >> joe, what is the s&p 500 going to earn this year? >> you know, i just made the point that i don't care what it earns. when you put valuation of 5 to 50 times earning what difference does it make that it earns? what's the multiple going to be? what if it's 30? >> in 2007 the s&p 500 earned $88. >> right. >> okay. then it went -- this year at the beginning of the year i thought it would earn $60. the estimates went down to $40. >> right. >> people were putting a multiple of 20, depressed earnings higher, multiple -- >> on 40. >> on 40 getting 800. i got my 1200 by having a number at the beginning of the year of 60. $60. >> $60 a share?

>> right. the $60 turned into $40. now it's creeping back up to $60. look, i was on the program earlier this year when the market was down at 700. and, you know, i had this 1200 target. and i would walk down the street and see people like you i knew and they wouldn't make eye contact with me. you know -- >> i would -- >> that was a totally separate issue. >> i wasn't in new york. i' i'm never in there. >> so the point is, right now, a higher market does seem reasonable, unlikely as you say in the consensus, and that's probably why it's going. >> right. and why should the market give all these people that had been waiting for a pullback, why should it give them a chance? >> the market was put on earth by god to make fools of the greatest number. >> exactly. exactly. >> so that's what it will proceed to do between now and the end -- >> wow.t i'm really nervous because we are -- >> you do this just about once a

year. >> right. when planets come together -- >> i'm really disappointed. i was looking for a fight -- >> yeah. we'll talk about a public plan. >> i'm sure we'll find a few point of disagreements. >> you have so many private -- >> i'm unemployed. i just pay cash. >> you're not unemployed. you're still -- >> yeah, i still am. >> but your now job starts in september, right? >> september 14th. >> congratulations, by the way. >> thank you. >> let's bring in another voice, maybe somebody who will spar with byron on this point. joining us is bob doll, the vice chairman and global cio of equities at blackrock. good to see you. >> good morning. >> you heard this conversation we were just having, right? >> yes, i did. >> what do you think? are you on the side of the few optimists out there or are you with the crowd on this? >> markets never go in one direction without pauses in the other direction. i think the market will end the higher than where we are. our objective at the beginning of the year was 1,000 to 1050.

i won't go into the multiples and earnings to get there. of course, we've achieved that. and i think we're going higher, but there's going to be a pullback at some point, joe's 5 to 15, the number he threw out, i could see either end of that. i think right now the more important question is, which equities? you have to own stocks. the economy has bottomed, the recession is ending, stocks over time will wok their way higher. it's which one? i think the market was acting as if the only thing you wanted to own were the lower quality, deeper cyclical names. i think what yesterday was about, you need a little more balance. yes, don't give up the cyclicals and lower quality but you need stronger balance sheets. you need some higher predictability, more blue chips in the portfolio and that mix will do you well. >> like what? name some names. >> in the health care area, which had been neglected, i think that a wellpoint, amgen, these names, but don't give up

on the marathon, oil wells and energies as part of your portfolio. >> beyond health care and energy, i know you like technology, too. >> still like technology. ibm i think is a misunderstood company. it's changed from hardware company to a recurring revenue company and the multiple hasn't changed in quite some time. this revaluation makes sense. >> bob, you said at the beginning of the year you were looking at 1,000 to 1,050 for the s&p. you think it's higher. what are you expecting at year end? >> i would not be surprised to see us at the higher end of the range. when you got to 1,000 people said, are you going to up your target? i said, no, we have a range, to 1050, a percent left, and i'll be happy. if we end up at the higher end we'll have a very good year. next year we can look to higher numbers as the economy continues to recover. >> do you think it's impossible that the s&p could get to 1200

like byron is looking? >> 1250 is the target i would have for sort of the end of this bull market, this cyclical bull market. i think it's going to take some time to get there. we still have some headwind. how fast is the economy going to grow? how are bewe going to pay for all this debt? all the naysayers, i don't want to get in that camp, but there are issues we have. we won't have a normal 6% to 8% growth rate off the recession low we typically have. the market was beginning to signal that. i think we'll have a much lower recovery. byron, you are shakin head when you said the recession is over and you need to own stocks right now. >> i'm bullish in all the sectors, health care, energy, technology, those are three sectors i like as well. i like certainly material stocks and industrial stocks as well. >> which material and industrial -- >> well, i can't name them right now because, you know, i haven't cleared anything with the clients. we still have a compliance

department. but the -- i do think -- my big worry next year is what happens when the stimulus wears off? i talked about that on the program before. it continues to concern me. but i actually think -- >> what stimulus? >> $90 billion to the -- >> only 10% has been used. >> right, exactly. and so it will continue into next year, probably into the middle of next year. because they're going to try to accelerate it. but, you know, sometime in the second half of next year you may see a slowdown, at least that's the concern i have. the one thing, bob, are you still on? is he still on in. >> yes. >> bob, one question i have is this, i think over the next couple of quarters, with low inventories and easy comparisons, you could have a 4ñ or 5% real gdp quarter, which would really get people excited. do you think that's a possibility? >> absolutely. it could be the quarter we're

now in. if not, the next one. i agree with you. inventories, look at what's happening in the auto industry. the point i'm trying to make, the first 12 months after market -- a recession low, as you well know, typically has 6% to 7% real several quarters like that. we'll get a 4%, i agree, but i think the 12-month number is going to be a 3% at best. that's just kind of half of what we normally get. back to your point, how long does the stimulus last? maybe in the short run investors get bulled up if they see a 4% but behind that will come a 2% or 3%. >> i'm more concerned about the 2%, 3%. i think we could be saddled with a 3% growth rate or nothing better than that for several years. and that's going to be true in western europe as well. do you agree with that? >> absolutely agree. that's part of the challenge we have. when we think about things feeling better and congress saying, led by the president,

maybe it's time to raise some taxes, what's that going to do for incentives to save, incentives to work? i think that's going to work against us and keep that 2% to 3% number we're talking about. >> bob, we want to thank you for joining us today. good talking to you. byron will be with us for the rest of the program. stick around for that. earnings news this morning from the nation's leading home improvement retailer, home depot owned 64 cents a share, ex-items, ahead of analyst expectation of 59 cents revenue. basically in line. the company raised the fiscal 2009. look how the company fared against lowe's, reported a 1-cent drop in revenue. you could almost overlay one chart over the other. for the past year anyway, home depot shareholders have fared a little better. that stock is indicated nicely higher today, which is --

>> we didn't earlier because it wasn't very clear earlier. >> that's the one we need to -- that's a little piece of information that actually tells the story today, 26.53 to 27.07 versus a 26.11. so if you have a bid, 50 cents above the prior close, then you can tell that people are buying the stock today, based on that. >> of course, that's a dow component, helping the dow futures, which are up about 60 points above fair value. let's take a look at what we're expecting today on the agenda. the july producer price index, housing starts and permits, both coming out at 8:30 a.m. eastern time. we'll bring you those numbers as they hit. >> also known as -- >> the dow jones survey is calling for the ppi to have fallingen 0.4 of a percent last month. meantime, economists are looking for housing starts to have increased by 2.7% to an annual rate of 59,000. the permits are forecast to gain

a half percent to a pace of 573,000. got any comments or questions, we would love to hear from you. our e-mail address is squawk@cnbc.com. when we come back, regional financial powerhouse, bb&t continues to grow as others fold. this latest move, you probably read about, snapping up that failed bank. we'll talk to kelly ng, the ceo, after a short break. time now for today's aflac trivia question. what is the only national capital outside of the u.s. named after an american president? 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! reading about washington these days... i gotta ask, what's in it for me? i'm not looking for a bailout, 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, who commutes, no more gettin' jerked around on gas prices... and for me, well, it wouldn't be so bad if this breadwinner brought home a little more bread. repower america. i hope our senators are listening.

now the answer to today's aflac trivia question. what is the only national capital outside of the u.s. named after an american president? the answer, monroevia, liberia. an alleged hacker could spend up to 25 years in prison if accused of stealing more than 1 million credit and debt card numbers. they hacked into the databases of several retail networks to steal private customer information. the data was stolen over a two-year period in what's, called the largest case of cyber

crime ever prosecuted in u.s. history. guys, the picture is on the front page of "the journal," the lead story. who did you say he looked like? >> to me he looks like richard ramirez. i was out there when that happened. i'm not saying all hispanics -- i'm saying he resembles richard ramirez from the days -- i lived in the san gabriel valley when he was terrorizing los angeles. >> now he's terrorizing a bunch -- >> this guy had been a -- had been cooperating at one point with authorities, the secret service, before he turned aroun and went back and committed even larger crimes. but he's the guy who was behind, you know, the tj maxx retail store where everybody got their credit card stolen there -- >> which has been one of your pet issues. >> this drives me crazy. if you go to any of these stores, this is just more reason you should never, ever use your debt card when you go into these stores. use a credit card. stores try to push you to use the debit function because it

doesn't cost them any money. they have to pay the credit card servicers t servicers have time it goes through. don't put your p.i.n. number is, the more places you intert it, the more it's floating around. >> amex fired some guy who had stolen a bunch of information from -- it must have been probably hundreds and hundreds of accounts. i haven't seen anything weird happen yet, but -- >> the difference between a credit card and debit card, credit card, the credit card will cover losses for any fraudulent. debit cards will usually do that, too, but you can sit without your money for months at a time before they get that wrapped up because that money comes straight out of your bank account. use your credit card, not your debit card, when you go into any stores. >> something happened with that aflac thing. that wasn't too long. our viewers immediately, they watch a lot, so, i mean, obviously the liberia -- >> monrovia. >> we know the answer because we

just saw it. "jeopardy" never repeats, does it? >> that's right. >> you're doing sean connery. kelly king has been meeting with employees in florida and alabama on the deal. he joins us first on cnbc with more. it's great we have you first, kelly. and we appreciate you coming on here to talk about this. yesterday's weakness in your stock, it was a weak day for financials. you don't think it had anything to do with what happened over the weekend? >> no, i don't think so. you know, it was a downdraft in the entire market and downdraft for financials. so, you know, we got -- we got caught up in some of that. we were also in the market in terms of an equity offering, so that may have had a little bit to do with it. >> oh, that was as well? tell us, how is it going so far? you've met with a lot of employees. i'm sure you knew this bank and

had eyed it in the past, right? >> yes. we've been following colonial for a number of years. we started talking to them seriously back in december. about the possibility of a whole bank transaction, which we didn't really think would happen. but we wanted to position ourselves to be the leading candidate in the event this were to occur. so we've been talking to them off and on for the last several months. so last week when it finally became clear that the fdic and the alabama state banking commission was moving towards a resolution, we thought we had the leading position because of our knowledge we had developed. >> yeah. what does it do? it makes your footprint bigger, which, obviously, that's -- that always helps, right? is that why you're most interested in the transaction? >> yeah, strategically, you know, it's very, very important because it dramatically improves our position in florida. we were -- we've been on 16th in market share in florida, which

is not a good place to be, so this brings us up to number five. >> i think it was a good place to be recently. i think maybe 26 or 36 would have been a better place in florida, right? >> well, that's why we timed it just right. we stayed low until we got through most of the crisis and then we decided to take a larger position. but, no, actually, long term florida is a great place. people have to remember there are still 1 million people in florida and still warm in january, so notwithstanding the challenges they've had of late, it's a great market. we're excited about, there. it also gives us the number four position in alabama, which is a great market. they have great places like birmingham, montgomery, mobile. we do really well in those kinds of markets because we grew up in the carolinas. we're very excited about alabama and florida. >> are you sharing the risk with the fdic and the government here? >> yeah. this is a very complex but complete loss-sharing agreement. and it's really interesting the way it works. even though there was one

commentator that commented yesterday, something that was completely incorrect. the way it actually works is for the first $5 billion -- >> does he work here? >> for the first $5 billion of losses there will be no p&l impact to bb&t. from $5 billion to the full $14 billion of loans, we share 5%, which means the most we could lose, if the entire portfolio was charged off, which is, of course, extraordinarily unlikely, would be less than $500,000 over several years. it's essentially a risk-free, asset transaction for bb&t. >> as a taxpayer i think you're getting too good of a deal, kelly. >> i appreciate that. it's not too good a deal because the way we structured this, which is very favorable to the fdic. now, remember, joe, when we're talking about this, everybody keeps talking about the taxpayer -- >> right. you're right. it's member banks that are

paying into the fdic. so you're taking advantage of your peers, not the taxpayer. >> well, remember, i'm one of the peers, so -- >> that's right. >> you paid into it. >> yeah, right. but anyway, here's the way it works. so we have an arrangement with the fdic. we paid a $500 million deposit premium, which is a fair premium for the deposits themselves. then on the loan-sharing on the lonz, this is very creative we created an upside potential for the fdic. so if the credit mark on the loans is too conservative, for example f we don't loose as much as we thought we would lose, then the fdic actually shares in some of that upside. so, you know, what we have to do is we have to work really hard to service all of those loans, work with those clients, make sure that we, you know, keem all of those deposits, which, you know, have been somewhat this a precarious position because of the -- you know, the challenges that colonial has had.

so while it's a good deal for bb&t, it is not a great gift. people should not have that mistaken impression. it's a good transactions for fdic and bb&t. >> over the weekend kelly talked about the bb&t, worried they'll have to get short-term funding from treasury or raise assessments on banks. should we be worried about how much they have left in their powder keg to take care of more bank failures, which are undoubtedly coming down the line? >> i think we do need to be worried. i do not think $13 billion will be enough. now, some of the larger ones, they have already dealt with, have substantially depleted the fund. but many of the smaller ones that are yet to come won't have much of an impact. but i personally don't think they will have enough. there are at least three ways they can go about it. one is they can raise charges to the bank, which has been done

once. they can access funds from the congress, which they have available. the what i personally prefer is for the assets to accumulate in the fdic, to resurrect what's called the old rtc, resolution trust corporation, and finance it with fico bonds. this is what we did in the '80s when the s&l crisis occurred. the fdic had to accumulate billions of assets of bad loans. they simply held those in the resolution trust corporation and financed it with four-year fico bonds and the banks paid off those bonds. in fact, we're still paying off those bonds on a long-term amortization basis. so there are multiple ways chairman baer can approach this and none will affect the taxpayer. >> are you coming back? >> i'm talking to your producer. i miss seeing you guys. i hope to. >> i want you, too, because i want to talk about your chairman, objectivism, see these

articles? he's a told randian fanatic. you're not quite as far down that road as the founder, right? >> no, i'm not nearly as far down that road. >> but the bank has done well on some of those principles, right in. >> if i get a chance to come on set, this would be a terrific discussion. >> i want to have it, i want to have it for two hours. >> what my chairman and i agree on is capitalism, we're ultimate capitalists. you know, he deals strongly with the principles of capitalism, which we're totally in favor of. i think the focus should be on free enterprise and capitalism and not some of the esoteric objectives. >> will give us something to talk about when you get back up here. >> i look forward to it. >> thanks, kelly. we have a busy morning on the economic front. fresh inflation, housing data, more than an hour away. we'll have the numbers the markets are watching right after this. first, though, as we head to

break let's check t the price of gold. up slightly this morning after a pretty decent sized dip yesterday. up $1.90. "squawk box" will be right back. '

welcome back to "squawk box," everyone. let's take a look at some top stories today. home depot shares, the dow component is called higher this morning after the company came in with earnings that beat expectations. the company also raised its earnings estimate for the current quarter but some analysts were already there. home depot continues to make cautious comments about consumer spending. the bid's at 26.6 the ask is at 27.15 after closing at $26.11. that's been helping the dow computers this morning as well. gm sales of saab is getting near the finish line. the company signed a conditional deal to sell saab to luxury car dealer koenigsegg. they make sports cars that sell spor as much as $1 million. that's a stock purchase agreement. amgen says it's experiment with cancer drug has failed its primary goal of prolonging survival in a late-stage study

of patients with advanced colorectal cancer. how do you say it? >> i guess that's it. >> this is such a -- this is an eni gu inenigma wrapped in a study. in conjunction with chemo it did hit some end point. down $1.50. >> a bit confusing. then roche announcing a study about avastin increases life expectancy for women with breast cancer without getting worse, with common chemotherapy. made by gentech unit. >> when we come back, if you have any comment or questions, send us a note at squawk@cnbc.com. when we return, hello, iowa. ambassadors from countries arnd the world are on the way to

america's heartland today. on the agenda, trade and economy. this is something senator chuck grassley does as their host. this morning we'll go there with jane wells after a break. i'm racing cross country in this small sidecar, but i've still got room for the internet. 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.

u.s. equity future in rally mode this morning. stocks looking to bounce back after the s&p and the dow both suffer their biggest one-day pullback since july. nasdaq seeing the sharpest drop since june 22nd. the risk aversion trade back in vogue yesterday, widening credit spreads. we saw the vix spiking to 15%. asian markets overnight rebounding. european stocks also rebounding. you know, not off -- not that strong but a half a percent maybe to 0.75%. we will head across the pond for a live report from our colleagues in london and singapore in just a few minute. we are here right now with our mega market panel. brin bell ski, oppenheimer's chief investment strategist and former merrill lynch strategist, todd colvin is standing by at

the cme watching the futures and our guest host with us for the entire hour is byron wein. brian, you're new to the table. we're talking about what people have been looking for and you've been bullish for a while, too. you have a year-end target for the s&p of 1120? >> yes, we do. for the record we're somewhere sandwiched between byron and bob doll. we heard his comments earlier. we find it very interesting that many strategists, competitors have become very bullish. to joe's point, everyone is looking for what i like to call the elusive pullback. pullbacks rarely happen when everyone's looking for them. like last year in the third and fourth quarter everyone was saying, today's the bottom, no, today's the bottom. no, today's the bottom. bottoms rarely happen when we're looking for them. this is typical behavior as the market transi guesses from the end of the cycle to the beginning of the cycle. we think we're in the beginning of a new bull cycle. we favor equities over bonds and people are lacking perspective

to see that, you know what, good times are in front of us. the bad news is behind us and markets lead earnings which lead the economy. and it's quite a nice story. >> cyclical -- >> cycle as in -- >> cyclicalable or -- glo stock cycles have actually shortened. economic cycles have actually lengthened. i think we love to put this type of narrative with respect to whether we're in a secular or cyclical. i think we're in a cyclical recovery. from a secular difficult it's hard to make secular calls. economic calls can be made like with respect to china and international growth trade but in terms of stocks, cycles have shortened because there's so much performance pressure on managers to perform. >> will we see new highs? >> yes, event, eventually new highs. >> that's saying a lot right there. >> it's going to take time. per bob doll's comment, we think

the recovery in the economy is going to be much more slow and muted but that's good considering the consistency we need to see. >> and not inflationary maybe. >> not inflation. 80% of the costs associated to run nonfarm businesses in this country come from wages. we're not going to see inflation until we start to see substantive wage growth. that's several quarters away. >> that's one thing we haven't talked about this morning is the unemployment rate, which while there are some people saying, okay, maybe things are looking a little better after the last  couple of reports we've gotten, a lot of people still saying you can see this number climb above 10%. >> i think you can see it. the more important thing is, are you going to see it decline? i think we could be, you know, 8% to 10% for a prolonged period of time. i think the real question right now is, are we -- do you think that we're going to get back to 1550 on the s&p? >> eventually, byron. >> eventually, you know, i'm getting older now. am i going to see it in my

lifetime? >> yes, you will see it in your lifetime. you're healthy. look at you. >> no, i'm in good health. >> he's at 1700, byron. >> if you take a look at the three things fundamentally, two out of the three look good for corporate america, right? income statement's a little squishy because of where sales are and earnings are a little squishy. two out of three's not bad. market participant -- >> meat loaf. >> you like that? pop culture there. take a look at corporate america, byron, as you know the last ten years especially become increasingly conservative, how they manage their cash flow and balance sheet. that's why we think the recovery may be muted but it will be much more consistent than we've seen in several years. that will help us achieve new highs within your lifetime. >> hey -- go ahead, byron. >> my worry is the consumer was so overleveraged, we're in a period they're deleveraging. so much of what we're seeing is stimulated by the federal government, or will be when more

of stimulus comes through. so i think we're in a secular period of secular slowdown. and it isn't a normal cycle, by any means. >> right. >> over the next year it's going to look normal. so i think you could be fooled. i mean, you usually get the unemployment rate go up to as it did in '82, go up to 8% and then go down to 4%. i don't think you'll see it down to 4%. i think you have to assess the implications of that. >> eventual new highs might mean 10 or 15 years. i think you have another 10 or 15 years left. so i think it's a process. recovery's a process, not one-time events -- >> 10 to 15 years before we get new highs? >> why not? >> let's go to todd. >> todd, weigh in on the numbers that are expected today, the ppi and housing starts and just your sense of what the market feels like after the vix spiked by 15% yesterday. you saw a big selloff but this morning the futures looking a little higher. >> they are.

we went through a key level yesterday in the s&p at 985. once we got through that lem you could feel like the market was losing ground a little bit. now we're hovering there this morning. the morning's numbers, the housing starts will be focused. i think the ppi will get overlooked as inflation is off the radar for the fed. i think the biggest problem for the stock market here is that if you look at gdp, it's two-thirds consumer driven. consumers making less money, working less and they don't have the leverage they've had over the past 20 years. so i think any recovery is going to be much slower than anticipated due to the fact that you're going to have to reach into your pocket and pay cash and right now this seems to be a little stretch for most consumers. >> todd, yesterday the volume was very light, as you're talk about, many traders, away for vacations at this time of the year. how much did that play into what happened yesterday? >> well, i think that you're right. some of the desks are a little short-staffed. but i think in the big picture, with the movements we've seen in the stock market, you know, a pullback was necessary.

technical levels we're looking at are very tight. we have seen some movement above 1,000, now back at 985. not a huge range there. as we go forward here, september's typically a bearish month for the stock market. and i think when we get the desks fully staffed, i really don't see any change here. i do expect a pullback and i do expect stocks to underperform the bond market here over the next quarter or so. and i think we'll have to wait and see what the job growth, if it's there over the next, you know, two to three quarters. with with what we saw yesterday with the senior loan officer agreement thing we saw, they're still not lending, yet lending a little less than they were before. it's not as bad as it was before but still not good. that's what we need to see. we need to continue to see that fall. >> thank you for joining us. byron will be with us for the rest of the program. when we come back, stocks on the move, names you need to know before the opening bell and power world leaders are descending on the american heartland today. we'll go to the cornfields of

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live better. call or click today. hello, iowa. every other year senator chuck grassley inviteds each country with an embassy in washington to send their ambassador and their spouse to iowa. the participants travel through a portion of the state to learn more about iowa's businesses, agriculture, education and culture. cnbc's jane wells is in ralston, iowa, this morning with more on this story. jane, is it like fish out of water? >> reporter: a bit, a bit. but, you know, a lot of these people come from eg rare yan country so it's not that difficult. if your diplomat from croatia,

nepal and korea and you score a job in the u.s. and you think, i'll take a junket to hawaii but, no, by the plane load they come to iowa. >> welcome to iowa. >> thanks from engineer mane. >> thank you for coming. >> you've got a great country. >> reporter: hosting these bi-annual junkets to iowa, paid for by private sponsors. diplomats meet countries their countries might do business with and then local families host them in their homes for the week for some good old-fashioned midwestern hospitality. >> what i want to get out of it is jobs created in iowa from international trade because jobs, number one, it's a job. number two, export-related jobs are very much higher paying jobs. probably 15% above the national average. >> we've actually since been

able to draw some biolog with different countries, with their agricultural divisions to be able to expand our exports and expand our business sgroos one of the most important trips may have have been to monsanto where the company tried to reduce concerns, especially among the europeans, about genetically modified seeds. senator grassley even ate some to try to win over new converts. did he? how do governments feel about the genetically-modified seed? >> usually in european unions, it's -- we are -- it's -- >> reporter: you're trying to be diplomatic, it sound. >> yeah. well, we both know. >> reporter: you can't win them all. senator grassley says they do actually sign contracts out of these trips. he says back in the '80s he had

to call and beg and ambassadors to come to iowa. guys, he doesn't have to do that anymore. they'll finish the week at the iowa state fair where they have finally combined my two favorite foods, chocolate-covered bacon. >> oh, my. that does paint an image. >> it does. >> kind of like chocolate-covered pretzels, a little salted, a little chocolate. >> i bet it's good. how could it not be? >> it's a gorgeous sunrise behind you. has the weather been cooperating or is it one of those muggy, oppressively hot iowa summers? >> reporter: no, they left that in washington. actually, yesterday it was high cloud but, you know, coming from california, to me it was humid, to them it wasn't. mid-70s, a little chilly but the weather's been cooperative. we have john deere. so, you know, spray a little fertilizer later. i've got to get to work. there's some soybeans over here. >> get in the combine and go, jane. we'll talk to you later.

we should mention senator grassly will be on the call, i think, later on this morning. >> 11:10. >> to talk about what jane was discussing. interesting story. it's good to have countries come together, joe, and what better way to introduce america -- or to talk about america, right, than to go to the heartland? >> yep, yep. that's a warm spot for state with three vowels and one consequence nent. >> ohio. >> iowa. very unique. >> anybody else? >> i think that's it. hawaii has a lot of vowels. >> high on the end and round on both ends? >> oh-high -- ohio. yeah. a lot of meddling. >> yep. let's get a check on the markets. futures are rebounding from yesterday's selloff. let's go to london and check in with martin baccardax. what's going on in europe? >> hey, good morning, carl. it's interesting in that i think it puts yesterday's selloff into perspective what we're seeing today. maybe that was because yesterday was just so thin on the ground in terms of volume.

there was a cascading effect with respect to the pessimism. we're sort of rebounding today but, again, the volumes aren't anything terribly significant. and i think that probably explains why we're getting the mooufsz we are. 0.8% on the ftse 100. more active stock is itv, a private broadcaster, rumored to be returning to the ftse 100. take a look from a sector point of view. some of the basic resources leading the way is copper prices make a rebound. on the downside we're not seeing anything particularly moving in terms of negative. health care, one of the defenses, up about 1. -- 0.18%. a couple macro pieces of news, firstly here in the united kingdom, executing a huge amount of quantitative easing, inflation stuck at 1.8% at the core level. that's interest because that will remain volatile.

secondly, inrester confidence out of germany, the biggest economy in europe, that reached a 3 1/2 year high. last week the economy exited recession. back to you. >> martin, thank you very much. still ahead, we'll be ringing up the retailers. we've heard from home dough poe. now we're waiting from quarterly results from target. dana will be hitting the bull's-eye. my mother made the best toffee in the world. it's delicious.

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take a look at some stocks to watch this morning. you have to put home depot at the top of the list. it was up almost -- wow, now the up 4%. it was up about 3.5% earlier, now almost up $1 now if you split the bid/ask. lowe's was a nickel ahead of expectations and then the guidance, even though it's down from last year for the year, down 15% to 20%, better than the prior guidance, which was down 20% to 26%. cardinal health is reporting 86 cents a share. that was right in line with expectations. revenue, 25.2 billion, above expectations of 24.4. first quarter net guided to $1.90 to $2. that is above the previous guidance. that stock is going to trade higher. goldman sachs up upgraded from buy to neutral at pali research.

american express upgraded to outperform from market performance. >> do the -- does home depot numbers make you miss earning central? >> yes. >> do you know what's going on in earnings central right now? it's not, used. >> is it just dark over there? oh, my god. that's why i didn't -- look, see, there's a tumble weed. is that someone sleeping? >> that's one of our tech ops. >> a tumble weed going by. >> oh, yeah, those are the days. >> guess what, saks is coming out -- >> and tj. >> we'll get top stories in a moment, including target due to report in just the next half hour. we'll get the numbers and some analysis. speaking of retailers, we've got some new data about how shoppers feel about everything from cars to computers.

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the heat gets to the bulls. >> taxi! good morning. i'm dead. >> the blue chips get crunched.

optimism over an economic recovery melts away. the search is on for new opportunities. breaking news on the way. inflation and housing will be front and center at 8:30 a.m. eastern time. how satisfied is the american consumer? from autos to computers, which mega brands keep shoppers coming back for more. ♪ >> "squawk box" begins right now. ♪ i think i love you so what am i so afraid of ♪ ♪ i'm afraid that i'm not sure of the love there is no cure for ♪ >> now, they can play. >> you just had that crush on david cassidy. >> i did like david cassidy. >> or shirley jones. >> his little brother i liked

even more. >> susan dey? >> no. welcome back to "squawk box" on cnbc, first in business worldwide. david just did pretty good at a golf tournament. >> bonaduce -- >> yeah, target, saks. >> saks out with a loss of 23 cent. the street was looking for a loss of 52 cents. a loss but smaller than expected. this is a company, this is the fifth quarter in a row they've posted a loss. street not looking for them to earn a profit in the next two quarters. >> how would you like to be saks in this environment? $770 million market cap. it's tough. >> it's tough to be a high-end retailer. the ceo and chairman of the company says even though the economic environment remains difficult they're extremely pleased with their expense management and gross margin exceeded expect takings. saks, comp store sales, down 15.5% for the second quarter, in line with expectations. this is a very difficult time to

be a high-end retailer. >> they see comp store sales, decline for the second half of the firscal year to the mid to high single range. >> did you see the low on that? 1.50, $1.50 on -- >> yeah. >> our guest host this morning -- >> is byron. byron -- lord byron. have you ever been called that? >> i have not. >> lord byron. what else? >> you don't want to know what else. >> any predictions come true yet? your weirdest ones come true yet, any of them? >> some have come true. >> the ones, the most recent one? >> yeah, the 2009 surprises, this is a very good year. >> which ones, in a nutshell. real quick? >> ten-year treasury, 4%. that's come true. >> that wasn't one of your crazier ones. i like your -- >> like obama win income a

landslide, how about that one? >> that was 200 8. >> obama winning in a landslide and the democrats getting 60 seat joou had to see what happened to al franken and and you assumed spector switched. had you it all. >> and landslide is a bit of a -- >> landslide was the word used. no, no, no -- >> 53-46, that's a landslide. >> what was reagan's? >> i don't know. that was big. oil at $80, that's pretty good. >> that's right. that is good. i didn't think -- >> you said christmas will be good. >> are you worried about that one? >> yeah. i'll tell you that obama changes his position on iraq and afghanistan. >> and does what? >> slows troop withdrawals from iraq and increases them in afghanistan. >> the withdrawals or -- >> no, increases troops. >> they want me to go and keep talking about other stuff, like

futures, rebounding after yesterday's selloff, now indicated with home depot, strength coming from that dow component. looking at 62 points of upward momentum at the start here. >> earnings news this morning from the nation's leading home improvement retailer, dow component home depot, 64 cents a chair, ex-items, ahead of analyst expectation. they did raise their guidance for fiscal 2009 as well. the ceo says housing and jobs continue to be a concern for the sector. we're waiting on results from target. they're expected sometime in the next 25 minutes or on. we'll get reaction to those when they come out. there's a look at the bid/ask. becky just brought you up to speed on sks and their guidance on mr. begins for the second half of the fiscal year. bb&t corporation secondary offering price of 26 bucks, offering size increased to 33.45 million shares. company ceo kelly king talked to us earlier about the firm's takeover of that failed colonial bank group.

>> for the first 5 billion of losses there will be no impact to bb&t. and then from $5 billion to the full $14 billion of loans, we share 5%, which means the most we could lose, if the entire portfolio was charged off, which, of course, is extraordinarily unlikely, would be less than $500 million over several years. >> here's a look at the bid/ask on bb&t. we talked about a bunch of other things, objectivism. we'll talk about that. and whether or not the fdic has enough money in its coffers to handle any further failings. he said he doesn't think they do but there are ways to bolster that war chest. we've been watching the futures this morning and they have been rebounding after yesterday's more than 2% tumble for the dow, down 2.4% for the s&p 500. matt of the south futures group at the cme group in chicago this morning. matt, not only did we see some big drops yesterday for the equities market but the vix

jumping by 15%. what was the feeling there as you saw things going through the day? >> we saw a lot of big bets, placed on the vix for a big pop in vool tillty. it's been a one-sided market over the last several weeks. you were talking early about the all-elusive pullback. i think people were looking at yesterday, is this the beginning of the big correction we'll see? obviously, today, we're seeing that's not the case. you know, so i do think we will see a pop in the volatility. it might be september, historically a very lousy month. i think there's some continuing headwind. we have most of the shorts have already been squeezed out of the market so that will be gasoline off the fire and insiders selling at high levels now. i think now or in the coming weeks in september we'll see a decent size pullback and i expect to see the market going higher after that. >> are you talking about 5%, 10%, 15%? >> i think 5% to 10% is probably in order. you know, but, again your guest

host pointed out earlier, when everybody's looking for a pullback, usually you won't get one. we'll probably get the pullback once we get everybody in the market long. we have seen seen a lot of money coming off the sidelines in the last few weeks. i think we'll see a pullback, albeit temporarily. >> thanks. let's get more market insight. from new york, barry knapp, barclay's market strategist and byron continues with us. barry, don't know if you had a chance to watch most of the show this morning but we're definitely having one of these debates, looking at everything that's half full or half empty. what does the market look like to you right now? >> in the -- i would say in the short run i would definitely be in the half empty category. i agree with some of the points that lord byron was making a little earlier about deleveraging and pressure on the consumer sector. even yesterday we got a couple of pieces of information with respect to deleveraging.

one was on the face -- or surface it looked quite positive, which was better than expected master trust and credit card delinquency data. when you consider we haven't had a positive core retail sales number since february, in essence what the consumer's done is taken the fiscal stimulus and paid off credit cards. so that deleveraging pressure will continue through probably 2010. >> the point i was making earlier was that we can talk about all these factors that go into the "e" of a price but it depend on the multiple which can fluctuate by a multiple of three. you can -- stocks are trade at eight times earnings or trade at 30 times earnings. always talking about the current fundamentals or even trying to forecast future fundamentals seems like it may have very little to do with what happens to the stock market. >> i wouldn't dispute that point at all. in fact, that's a good part of the reason why we've been so

focused on correlations across asset classes and weights been going on with the other markets. you've seen, even in the last week or so, cmbx, a cmbs derivative, aaa part is down nine point. the next capital structure is down as much as 15 points. >> we don't need that. the baltic -- i guess there's a lot of worrisome signs on the horizon, too? >> absolutely. it really began with chinese equities reacting badly to the first signs of tightening in china. as we started to look at the prospect of call it the beginning of the end of kwan tattive easing here, you know, credit wideened, cmbx sold off, nonagency mortgage market came under pressure. so, it's going to be ebbs and flows to be sure and the data won't be even its improvement. it looks like it's time for a spread-widening event which the equity market had a delayed reaction to and yesterday was the catch-up to that. >> can you tell me why interest

rates, the ten-year treasury yield, is 3.5%? with all the borrowing we're doing, why aren't interest rates on government bonds higher? >> well, i think part from our perspective is bank cash levels are so high. if you think back about what happened in the early '90s, bank cash levels got to similar levels in terms of the percent of assets. their holdings of securities were down to, say, 10%, 11%, that's treasuries and agency nbs. over the next few years as loan demand was tepid they kept adding treasuries to their balance sheets. and i think that's part of what's driving it right now. banks may continue to hoard cash as they get worried about the end of the fdic bank guarantee progr program. so those technicals may not change through the balance of the year until loan demand picks up >> barry, are you willing to go out on a limb and say that 8500 is probably going to be hit

before 10,000 on the dow? >> i do think that -- i was thinking about it probably more in terms of the s&p. and i was i thinking 900 would be a reasonable target before we get to 1050. >> before we get to 1050. so we go -- what is that? how much of a break would that be from -- >> well, 10%. >> so 10%. >> off the top. as to the much earlier question about hitting 1560, i don't see that for years, until earnings get back to that peak. you know, again, given how much of those earnings were driven by the financial sector, that seems to be multiple years out. >> boy, we got china, so many things happening and all of these lean and mean corporations now. things come back quicker than people think, don't they, barry? so you think it will be years? >> well, for the -- you know, for the market as a whole. again, there's particular sectors, industrials, that have been, you know, cutting workers and increasing productivity for years.

the energy sector -- >> that means thelue chips won't go up. that will be a 0-year bear market for the nifty fifty then. >> i haven't thought about it in that way but it could very well be. >> okay, barry. thank you. >> thanks a lot. >> appreciate it. >> all right. >> he's been charging a lot of money over at barclays. huge. >> ambitious organization. >> yes. coming up weshg have breaking news for the markets to digest. we're talking about the ppi and housing starts, both numbers at :30 a.m. eastern time, just about 15, 16, 17 minutes away. we are also waiting on quarterly results from target. we could get them within the next ten minutes. we're watching for that. up next, though, customer satisfaction. is the american consumer happy with mega brand from computers to cars? we've got the results in a new stu study.

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apple's board is expected to meet today. the directors will reportedly talk about who should fill the vacancy left by eric schmidt. schmidt stepped down last month amid questions of conflicts of interest. "the wall street journal" has reported one person who might be added to apple's board in the

near future is the chief operating officer tim cook who stepped in and did such a fine job when jobs was away. apple is one of those companies known for, consumer-friendly. the university of michigan has released it's american customer satisfaction index today. overall customers in this country are pretty satisfied with the stuff we buy. let's get some details from our next guest, claus from the michigan university, he yoinz us this morning. it's good to see you. we were just talking about apple computer. i guess let's start with computer in general. apple is awfully close to the top in terms of satisfaction, is that right? >> apple has been at the top for a long time. it used to be dell. apple now has the lead. that seems very, very difficult to -- for any of the other players. >> in computers, is the satisfaction trend generally up or down? >> well, it hasn't moved much but it was up a little after two

years of after a very slight  decline. >> how about portals and search engines? we talk about google and now we talk about bing. what's the story there? >> who knows whether they can do it or not. it's the same. i just talked about apple and google in terms of customer satisfaction, they are so much above the rest. this is true for google as well. i think it's 10 percentage points or so above anybody else. it will take a long time, i think, before anybody can catch them. >> google has led among search engines for seven of the last eight years. they've got a lead that's going to be hard to topple. how about autos? everybody wants to know whether or not ford, the quality of the cars coming off the line will meet with some buying demand, as so much government money has flowed into the big automakers, are people generally -- well, let me ask it this way. are people less satisfied as a lot of the big companies have had to file for chapter 11? >> no, they're not.

this time it's all about detroit. even we were surprised. at seeing these results. all the detroit companies are up. now, this is a big difference from what we've seen in the past. leading the way is ford, but general motors is not far away. chrysler has a big improvement, but they have a longer way to go. >> is it the same? is the case the same for european cars, asian cars, luxury brands? >> asian cars are stalling. both the japanese and korean, they're at the high level but  they're stalling, not improving so the gap is closing to our domestic industry. european, particularly vw and mercedes are doing well. >> major appliances to the degree they're selling in the housing environment like this one, ge makes a few appliances, whirlpool as well. how's the race shaping up on

that front? >> whirlpool wins. ge has declined. among the lowest we've seen for quite a while in this industry. whirlpool has really increased by some 4%, which is really high when we talk about an industry unstable like this. >> a year ago, looking at general satisfaction was loef. if it's creeping up right now, what does that mean for the broo economy in stocks? is there a relationship between this index and how stocks or economies tend to perform? >> yes, there is. there's a relationship between customer satisfaction and consumer spending. as customer satisfaction goes up, the demand curve shift  upward. so consumers will be more poised to spend. so we got the foundation about  right, i think, for increased spending. the question, of course, will be are the means to spend really there? and means would be cash and/or credit. and there we still have

certainly some difficulty in this economy. >> yeah. there's a big gap between, willing and, able to take out the wallet. good stuff. thanks for your time. >> thank you. coming up, facing the heat. texas congressman michael burgess, about to hold his own town hall meeting. does he expect a hostile crowd? find out in the next half hour. as we head to break, check out the price of crude.

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let's take a look at the futures this morning. they rl showing a substantial rebound, up by about 65 points above fair value after a major selloff yesterday. you were talking about the dow down 2%. and the s&p 500 down by 2.4%. part of what we've been watching today, retailers dominating earnings central this morning. on the "squawk" newsline with reaction is retail analyst dana telsey. we've heard from home depot, saks out with a smaler than expected loss, talking about how they expect those gross margins to improve in the second half. waiting on target. overall, this has been a pretty positive morning. is had this what you were expecting? >> a little more than positive

than expected. especially with saks. better than expected gross margins, solid expense control led to the improvement there. when you take a look at home depot, home depot's numbers, they raised the earning guidance going forward, so that was a little bit more encouraging than expected. but the beat was driven by the expense line. >> for target, we are looking for earnings of 66 cent a share, but what are you hoping to hear just in terms of the consumer? is it too soon for people to get excited about the consumer coming back and shopping? is this more a story of gross margin improvement? >> this quarter is gross margin improvement, we're not seeing any real improvement in the consumer wanting to spend more. we're in the middle of our back to school shopping tours around the country, day seven of 11 days. we'll finish it in another week or so after earn beings but we're not seeing a pick up in consumer spending. we think it will be -- continue to be a sluggish back to school spending season.

>> which is what a lot of retailers say they are slashing their inventories and not planning to stock up before we get to christmas holidays as well. does that mean don't look for any real return in retail, at least in the sales end of things before next year? >> exactly. we're going on see sales continue to be sluggish given the fact that inventory levels will keep, lean. if we begin to see any improvement in same store sales, even getting to flat same store sales, that will be considered a victory as we move throughout the year. >> dana, we're getting the headline numbers on target, looks like 79 cents. i want to make sure there are not one-time items in there because if that is the case that would be a major beat -- >> they beat in the first quarter also because they came in in the first quarter well above that consensus number that originally was around 52 cents coming in as 69 cents. so here we're at 68 cents for q2, coming in at 79 cents. that would be another beat if it excludes the kroerd. >> second quarter earnings were

stronger than expected due to strong operating margins in the retail segment and the credit card segment that was in line for expectations. they say for the second half of the year they're focused on initiatives to try to drive incremental traffic in our stores while maintaining disciplined execution in our business. that's an impressive number. >> that's definitely an impressive number. wouldn't surprise me if it's a gross margin beat, because we knew same store sales, same store sales for the quarter came in down 6.2%. >> so would you tell people on to buy into target at this point based on everything we've seen? >> we like the target story. we think there's upside to target. we think the improvement in same store sales and stability in the credit business are two of the keys. >> well, now we're talking about a significant pop in the bid and the ask for target. you're talking about 43.12 after that stock closed yesterday back at around $41. so, again, you were talking, yeah, $41.21 was the close. the bid is 43.20.

>> it looks like the gross margin did come around 42% 3% so that is coming in better than expected compared to the 33.4% last year. and when you look at even on the expense line item, they're coming in at around 20.8% and that is a little better than expected also. so it is a margin story. >> dana, thank you very much. it's great talking to you. >> thank you. when we come back, a round of breaking economic news. 31 are streaming a sales conference from the road. eight are wearing bathrobes. two... less. - 154 people are tracking shipments on a train. - ( train whistles ) 33 are im'ing on a ferry. and 1300 are secretly checking email... - on a vacation. - hmm? ( groans ) that's happening now. america's most dependable 3g network. bringing you the first and only wireless 4g network. sprint. the now network. deaf, hard of hearing and people with speech disabilities access www.sprintrelay.com.

welcome back to "squawk." a lot of data, now at 0.9 lower, that's minus 0.9 on headline ppi. that is three times what they were looking for. you strip out food and energy, down 0.1. year over year metric, down 6.8. that's a bigger negative than expected. if you strip out food and energy, up 2.6. that's somewhat in line with expectations. but still down a solid half a percent versus last look. housing starts for july, 581,000 on an annualized basis. that's darn close to expectations and a bit of a drift down from a revised 587,000 in june.

if you look at permits, 567 560,000 annualized, down a bit from 570,000 on the last look. and also, you can say both of those are down from expectations but in the right neighborhood. and we always know that starts and permits are a mixed bag. considering the inventory, the foreclosures and all the recent data, do we really want to be building and adding into that inventory? we'll have to let the market decide. aftermath, higher equities. equities -- excuse me, i'm sorry. higher treasury prices pushing yields down. the equities taking it a bit on the chin. even with the downdraft we're still up 37 in the pre-dow futures. you know, these inflation numbers might be the last of the red or negative numbers. we'll have to wait and see. we all know what june and july meant for commodity prices. maybe it will be a different story next month. at the end of the day, it seems the zoo institute on the german

consumer confidence was the biggest for investor confidence. >> stay right there. scott nations and our guest host, byron wein. byron, you asked a question a little bit ago is why in the world would you see the ten-year trading at 3.5% when you look at all the government spending? maybe the ppi numbers are showing a little deflation. kind of explain the reason for why. >> yeah, but i don't think the bond market is really looking at inflation or deflation. i mean, you know, it's supply and demand. right now people are looking for protection and buying treasuries. that's drawing yields down. >> what do you think about these ppi numbers for july, though? do you think this is the last month we'll see those numbers below expectations and -- >> yeah, i really think we're running at a normalized rate so i don't think we're in a deflationary area. >> this morning we are talking about strength in the futures. what's happening? >> i think we like the fact we

had good news from some retailers. farce the bottom line is concerned. that's tempered by the fact that it's another story of miss on the top line, beat on the bottom line. we know that can't continue forever. the home depot earnings number was pretty good. you know, the comp store sales was disappointing. it was even more disappointing than had been expected. and i think this is kind of retail sales from last week redocks. i think we'll have to start focusing on companies that beat on the top line. it seems like everybody has costs under control, so i think the market would like to see, you know, a little more growth, a little healthier revenues. and i think that that might be the way we get things turned around. you know, kind of a tepid reaction given how good some of these retailer numbers were today. >> byron, you mentioned something similar on the break afterwards, talking about how you can't continue to cut costs and think that going to be the road tole is vags. >> right. i mean, i think what we need to see is some revenue increases across the board.

not oonly in the retail sector but industrial sector. we need capital to pick up. only 10% of the stimulus has come in. as more stimulus flows through the economy i would expect to see some revenue growth. if we're disappointed there, i think we're in for trouble. this is my worry for 2010. it's not a worry near-term. >> rick, you think about long-term worries pretty frequently down there. has anything swayed you, any numbers we've seen recently changed your opinion? >> well, you know, traders trade on the short term but we all like to definitely think about long term. and i think the one issue long term is, is that when things actually stabilize, whether it's at a high growth rate or a mediocre growth rate, the notion that interest rates and reversal of flight to safety and co-numb drum for years is going to make the interest rate side a real hornet's nest for any improvement over a two or thr

three-year projection forward is the biggest issue to contend with. >> scott, what other things are you watching this week? we know volume has been low. we know that the retailers have been coming in with better than expected numbers, although as you point out, it's not from beats on the top line. so what else are you watching? >> well have to watch volatility. we have paid attention to the vix and the fact it couldn't get back below 23 earlier this month, which had been the low for the summer. and it's-t spiked pretty substantially yesterday. we're going to pay attention to some of the protective money in the option markets. over the past month we haven't seen a lot of put buying, which would have protected some of these gains. what we've seen is people reaching a little bit to buy calls because they wanted to participate as a proxy and not risk a whole lot of money if this is the turn around we had. we'll pay attention to the flows in the option market. if we see put buying that's a good thing. it shows people are, a little hesitant and we milt have -- we

might have -- our expectations might be a little more appropriate. >> gentlemen, thank you very much. by the way, you can catch scott on "options action" every friday night now at its new time, which is 8:30 p.m. eastern time. when we come back, facing the heat, lawmakers around the country getting an earful from angry citizens who are up in arm over this proposal health care reform. congressman michael burgess, a medical doctor, chairman of the health care caucus, holding a town hall today but first talking to us about how to cure america's health care crisis. as we go to break, take a look at futures, off of their session highs after getting that producer pricer number, which was cooler than expected and housing starts as well. some people buy a car based on the deal they get.

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we have that economic data out just a few minutes ago. the housing starts and building permits both dropping unexpectedly last month. we saw the headline ppi, fell larger than expected, 0.9 of 1%. the core component was in line with consensus. we've been watching the futures. right now, the dow futures up by just over 40 points above fair value. the s&p futures up by close to four points above fair value. we've been watching shares of target. they got a bit of a boost in the premarket. in fact, a big boost if you're taking a look at this. 43.39 about is where we're looking for an open after a close of 41.21. target came in with earnings better than expected for the quarter.

in fact, earning 79 cents a share, which was 13 cents better than the street had expected. one of a handful of doctors in congress making a house call in his district today to talk about health care reform, congressman michael burgess is set to sit down with north texans on the topic. joining us with a preview, is the congressman, member of the energy and commerce committee and chairman of the health care committee. >> good morning. >> even after all the town halls, you're still willing to do this. how much work can be done -- or have these things just become circuses? >> oh, no, this is valuable time the country is spending. i will credit the democrats with slowing down the democrats' plan. obviously the republicans don't have the numbers or the organization to effectively stop anything the speaker of the house wants to push through. this was revealed to us on about july 15th. we were supposed to deal with it

over the next two weeks and then vote on it before going home for the august recess. as you know, that didn't happen. it gave americans a chance to look at this bill, they did, and now they're reporting back to us with their grade sheets. to tell you the truth, most on -- almost all on both sides of the political spectrum are turning in an unsatisfied report on this bill. >> do you think americans know exactly what they're grading or -- i mean, when you have something going on in senate finance, your bill, you have no idea -- the president has not made clear what he insists on getting to his desk. how are americans supposed to know what to argue for or against? >> first, a brief correction. it's not my bill but the district -- >> i'm sorry, the house bill, yes. >> correct. you make a valid point. the president is the one who has the political capital to spend. certainly members of the house and members of the senate have approval ratings in the single digit. the president still enjoys

widespread popularity across the country. he's the one who should be speaking on this. this past week he has been. and i don't know that he's been entirely effective. here's the deal. people are so concerned that the government has taken over such a large section of the manufacturing in this country, the financial sector, and now it's going to take over their doctor's office and people are understandably concerned and some feel betrayed by their government. >> big government is one fear. another fear is having 14,000 people lose their insurance a day, right? or, denied because preexisting conditions. isn't there an argument that with every day, more people are, added to the rolls without insurance, that eventually those are numbers that are by nature, you would think, going to side with some option, whether it's a co-op, whether it's a public plan, something that does not involve the hardened for-profit model we have in this country. >> let's be honest. a public plan is not a free plan. it's going to cost something and

it's going to cost something in terms of dollars and cents and going to cost something in terms of freedom. on the issue of the job losses, we would do far better for the american people if we would concentrate on that. remember, bill clinton, when he said he was going to focus like a laser beam on the economy? don't you think the american people would wish we would do that right now instead of push our efforts off into a thousand different ways? we could do so much if we were focused on job creation in this country. instead, we're not doing that. we're ignoring the crisis in commercial real estate. it's not even on the radar screen. that's going to create additional job loss, leads to employer-sponsored insurance loss. we could deal with the problems people are having facing job losses and employer-sponsored insurance. we could address the cobra problem, and make that more streamlined, deal with preexisting conditions but we just won't. we won't because we want to push this big program through. right now, that's, done at the

peril of the american people. >> i agree with you that the number one priority should be creating jobs. but just focusing on the health care program, it seems that 70% to 80% of the american people are satisfied with the program they have. so why not allow the existing corporate programs that are in place to remain and just focus on the uninsured or the people losing their insurance? >> that's exactly the argument that i have been making. if we focused on the 8 million to 10 million people with a tough medical degrees, preexisting condition or their insurance company has dropped them after the fact, we could go a long way of solving the crisis for the people, hurt the most. and, you know, the president says if you like what you have, you can keep, it except that's not really true in this bill we had in the house. you pointed out that most americans are, in fact, happy with the insurance that they have. and then the other thing the president says is the only thing that's not acceptable is the status quo. wait a minute.

you have 60%, 70% of the people happy with the status quo. how can that no longer be acceptable? >> is it overstating it to say that democrats that are entrenched won't accept anything but a public lan and republicans that are entrenched wouldn't even accept a co-op? >> that's so difficult to project right now because no one even knows what a co-op -- how that's defined. a purchasing co-op? sure, i'd be happy to look at that. there's a lot of things to recommend that. if you -- especially if you can purchase across state lines, i think there are places around the country where that model could work and work very effectively. it was encouraging to me to hear senator conrad say on sunday that they don't have the votes for a public plan in the senate and stop chasing that rabbit because it's not going to work. >> but they're back chasing it again today. >> well, sometimes that's what we do. >> do you believe the white house has truly backed off of the public plan? they're protesting quite a bit about us making too much of what

secretary sebelius said over the week snend. >> i'm a relative neophyte in washington, i've only been there a few years. one thing i have learned is nothing happens in washington by accident. so when you have tim geithner, lawrence summers talk about a tax increase, and then they try to walk back from it the next day, get ready, because they're thinking about a tax increase. when you hear secretary sebelius say maybe the public option is something that doesn't have to be in there, these are concepts they're putting out there for a reason and gauging response to it. so the town hall then plays into that. the one i'm having tonight, let me hear from the people who think the public option is the best way to go. but i also need to hear from people who agree with sect sebelius that perhaps the public option should be taken off the table. >> as a neophyte -- >> remember this public option is not free insurance. there will be a cost associated with it. a cost to the deficit and a cost to the individual as well. >> cbo has projected that for sure. as a neophyte to d.c., does, there make you want to stay or

get out as quickly as you can? >> a valid question to ask. and i'll tell you right now i feel like i'm exactly where i need to be. i didn't give up a 25-year medical career to come up and sit on the sidelines. i want to be part of this debate. i welcome it. that's why i scheduled an additional town hall tonight. we had 2,000 people show up in denton, texas, a little over a week ago for a saturday morning town hall. my denton town hall normally brings out 40, 50 folks. 20,000 people. hi to go to the parking lot to hold the town hall because there were too many folks that wanted to make eye contact with their member of congress and let them know how they felt with it, whether agreed with me or disagreed with me. later we ent up to gainesville texas we had over 500 people show up the community college for an additional town hall. people are feeling enormously betrayed by their government and they want to let someone know how they feel. so this is an important part of the process. >> but, congressman, as a

doctor, do you think there is definitely something that needs to be done and with-k we reach a middle ground? we had congressman weiner on yesterday who said he and 100 of his colleagues in the house will not vote for something that doesn't have a public plan. we heard from dick armey who said, we don't even like the idea of co-ops. is there a middle ground? >> there is. i eluded to it before. we could have fixed the problem with preexisting conditions through insurance regulation before we came home for the august recess. that's the kind of activity the american people want to see us do. now, remember, the health care bill is written on the house side with a closed process. i went to my chairman in january and said, i want to be part of the solution. he said, thanks for showing up, closed the door and i never heard from him again. at the same time there are many many of us who are anxious to work on this, work in a bipartisan fashion. i mentioned a blue dogs a couple weeks ago, this is going to take the rank and file members of congress working around their leadership to get done. i don't know how the trajectory

is you do that but i don't think the leadership on the democratic side and quite frankly my own leadership is not as engaged as they should be. >> do you think one of the reasons they won't maybe do -- take small steps and do things that are needed is in the back of their mind single payor is what a lot of people -- they don't say it anymore. barney frank said it in 2003. are they disassembling? are they not really saying what they're headed for, doctor? >> if you're looking for a way to insure political power for years to come you'll take over the american health care system. it's one of the last bastians of freedom in this country and on continuous assault from all sides. i'm a doctor. i don't want to give any more control over to the private insurance companies and i sure don't want to give any more to the government. it's the worst of both we have now. you have the government setting prices through medicare, private insurance follows right along and pays 110% of the medicare

allowable fee schedule so you have the government setting prices, private insurance, a willing accomplice in that and the person who suffers is the poor patient who now can't find a doctor to take care of them.t >> the model is in trouble, no doubt about that. other western countries still have their way and we're trying to find ours after all this time. >> they have their way, it's not necessarily better. >> they would argue -- >> no, i lot of them wouldn't. >> that's the point. >> incoming president of the canadian medical association is worried their system is imploding as well. >> it's an intractable problem. >> it has to do with demographics. you're talking about the globe, for the first time in years we're going to have more older people than younger people. >> we managed to keep everybody alive. >> but don't forget, most of the breakthroughs are coming from this country. we don't want to stop that as well. >> it's the delivery that's better in our parts of the

world. >> that's a blanket statement that's not true either. >> congressman michael burgess. >> you get delivered in nine months into a filthy hospital. >> the quality of the hospital you're used to is just not the standard around the world. we got to go, we'll be back after a short break. don't go away.

all right. time for the traderses edge, joining suss art cashin director of operations at ubs financial services. art, for those who think we need a pause that refreshes, yesterday looked like the beginning of something again. >> well, it may well be. it was a 90% down day, meaning 90% of the stocks were down, advanced declines were negative. vix exploded to the up side. you might be entitled to a bounce today. i said last week, i thought the market was ahead of reality and that i would worry about things, particularly going into ramadan on the 22nd. i still have my warning signals up. i think there are things gathering around here that are kind of esoteric. >> clouds? >> yeah, we could see --

>> storm clouds. >> perhaps historic trading over the next eight weeks or so. >> september and october are coming, too. >> that fits in also, the calendar doesn't hurt. >> you just wonder almost seems too pat. but things can happen like that, right? >> absolutely. things keep repeating and repeating. now sometimes it's coincidence rather than causation, so you have to be to be a little bit careful of that. human nature is to seize on the first pattern you see, we're hard wired to do that so you have to look for a little causality. but i'm going to keep my eye on things like the baltic dry index. a lot of situation about the credit numbers coming out. >> we heard that earlier, art. yeah. so it's going to be potentially a very exciting period. >> really? okay. doesn't matter that enthusiasm was too great and we had to have

another dose of pessimism. >> quickly, art. >> that's right. you can't live by inhaling alone. you have to exhale once in a while. >> tell that to bill clinton. >> some of us never exhailed. let alone inhaled. >> all right. a final round with our guest host right after this. "squawk box" will be right back. but don't panic, it could be a good thing. your ford and lincoln mercury dealers are cash for clunkers specialists. they'll recycle your ride, and get you a big fat juicy rebate from uncle sam. you can get all the details, charts, graphs, etc, at ford.com. why ford, why now? why not? visit your ford or lincoln mercury dealer. i'm thinking now would be a great time. tdd#: 1-800-345-2550 if i'm breathing, i'm thinking about trading. tdd#: 1-800-345-2550 i always have my eye out for a stock on the move. tdd#: 1-800-345-2550 doesn't matter if a company sells computer chips tdd#: 1-800-345-2550 or, i don't know, fish and chips. tdd#: 1-800-345-2550 i'll look at all kinds of stocks before i settle on one.

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our guest host, byron wien, any cogent, pithy final thoughts we can take with us? >> i don't think we should be frightened by the pullback. it was the time, late summer, peopler away. people are too optimistic, we've got to convert some of that to pessimism, we're in the process of doing that but it doesn't discourage me that the market could do better between now and year end? >> 5 or 10%, you figure? >> could be. >> that's not guaranteed. might go up today. >> well, yeah, you're not going to go straight down. >> but you're pretty sure we're in a consolidation right to you? >> yeah, i'm pretty sure. but i'm also not losing my nerve. >> you'll come back after you start at blackstone? >> you're quite, i'm starting the 14th. >> so is len know, starting on

the 14th. >> that's right. >> gig. >> make sure you join us tomorrow. "squawk on the street" is coming up next. the government reports a 0.9% drop in the producer price index with a the core rate dropping 0.1%. housing starts fell in july but revised to show a gain. target shared called higher after better than expected results in the quarter. that's cnbc business news for now. first in business worldwide. i'm courtney reagan. live from the financial capital of the globe, this is the one and only "squawk on the street." good morning, everybody. i'm mark haines. welcome to volatility tuesday.

futures off session highs but still on the plus side after monday's big slide. housing starts and producer prices tempering earlier enthusiasm. >> that's right. i'm erin burnett, and the original enthusiasm was generated by a few big company, target, saks and home depot all beat estimates and either stuck with or boosted their forecast. target interesting, profits were down more but way more than anybody was looking for. >> and home depot was a surprise after what lowe's had said the day before. in fact, home depot went down big time in sympathy with lowe's. >> that's right. >> and now they're going to bump it back up. futures not as enthusiastic as earlier. up a half. call it 25, 30 points on the dow at the oenchts let's get towel at names you need to watch today. rick santelli for the ppi and housing start