the back half of 2010. the country's biggest home improvement retailer topped expectations, raised guidance on earnings, but sales fell 9%. the average ticket also declining and a couple hints of optimism for you. the number of customer transactions is improving at home depot. plus, hd is gaining share over the competitions. six of its thirteen departments captured a larger percentage of the pie. carpet, hardware, plumbing, lawn and garden and appliances were all strong. this counter target meantime delivering a quarter that beat on the bottom line earnings there, 13 cents ahead of estimates. but again, sales there were light, down 2.6%, and the story is that they're stronger than anticipated operating margins. on the credit card segment, that was in line with expectations, that's a positive. meanti meantime, health care, food and beauty were among the strongest categories. target on the conference call also noted more affluent consumers are turning to them, but discipline here is the key

word we are hearing in these reports, and trish, as i accepted it down to you, and bob pisani, that's really a key question here. can they continue to discipline into earnings beats if the sales aren't there, they continue to run on lean inventories, but that's going to be the key. if sales don't come back, then how are they going to really cut costs really into the far-out future in order to make the profit beats that we're looking at right now? >> rebecca jarvis, thank you so much for that report. we want to talk a little bit about this market here. we are seeing recovery from yesterday's losses up 48 points. and this is despite the unexpected news on housing starts falling by 1%. so a little bit of optimism here, and that's in part because of some of the retail news, as rebecca was just outlining for you. the problem still remains that we have not seen top line growth, and that is the issue that somehow has to be addressed in the coming months. next quarter, the fourth quarter, at some point, these companies have to start making some money on the top line. i want to bring in mr. pisani, who is following the financials

today which again are kind of leading things higher, and that's a good sign. >> it's interesting, it's not the retailers, even thee as you heard from rebecca, home depot did have better bottom line than expected, it's the financials. yesterday we had pretty good numbers on the credit card delinquency numbers in the month of july. >> yeah, very much a glass half full, though, because numbers were still, if you think about it, pretty weak. >> we're looking for improvement. 30-day numbers starting to improve, helping others that are more delinquent improve, as well. those were good, even though the market is weak, that's important. >> going in the right direction. >> that's one of the reasons their leadership stopped. citigroup, folks, is slowly moving up here. $4.35. that's the 200-day moving average. and yes, these stocks trade on technicals. 435, hasn't been there since october of last year, and has been barely above the 200-day moving average. it was 24 last time it was above its 200-day moving average. you can get up another quarter on citigroup, i think you're going to see even more greater

volume than we have seen recently. >> okay. you know, one of the concerns, of course, as i was just mentioning is that we haven't seen a lot of top-line growth. what are you hearing in terms of what the traders are saying about how the rest of this summer plays out? are we due for a correction? >> yes, there is definitely a change in sentiment. part of the problem is this whole earnings picture of lower top line growth here. so the s&p is only 3% off of its august 13th high. there is a lot of talk about a 10% correction that would bring it down to 910 or 900. of. >> and on average, if you look at the correction, you've seen after a recession, going back historically all the way to the 1930s, it's about 40%. so we're already ahead of the game in some respects. >> we are. of absolutely. >> okay. bob pisani, thank you so much. i want to head uptown now to mr. nesto standing by for us at the nasdaq. what can you tell us? >> yes, trish. time square today, and it's interesting if you look at the nasdaq, 6/10 of a percent higher, all of the heavy lifting done in the first few minutes and they have been trending

sideways. flextronics the best single performer. remember, no financials in the ndx, so h spin i show you because it's one of the strongest financials trading at the nasdaq today. the arp, call from rbc, that's ample, rim and palm, all higher. specifically in r.i.m., they think it's on its way to $150 per share. pack car fighting with joy global to top the industrial leadership here today and the markets in general. 3% higher. it is now neutral rated. luke warm. but it was sell rated at goldman sachs. look at huron. of this is a company worth only $300 million. today it was close to a billion. a couple of weeks ago, the company came out with better than expected earnings, but it's just been smashed. the management -- the whole management team quit a couple of weeks ago. but the amazing static is it's done as much volume today as intel. melissa, back to you. >> all right.

matt nesto, thanks seech. as reporting, housing starts fell unexpectedly in june by 1%, as did new building permits. single family home construction rose for the fifth straight month. producer prices also fell in july. so here to tell us what it all means for a recovering economy is diane swan, chief economist at messer owe financial, and real estate expert herly oel after son, and diana olick joins us, as well. diana, what do you make of today's news? >> i'm sorry. >> i'll take it for a second. first, we did see the unexpected drop in housing starts but that was driven by multifamily which was having all kinds of problems with credit, and unable to get loans for the large buildings. we did see a bump up of 1.7% in single family housing starts so that's an improvement, and we have seen a bump up in january of this year. good news on single family versus multi. diane? >> i agree 100%.

that's exactly what is happening. the condo market not getting any funding in the commercial real estate. we saw them being able to fund commercial mortgage-backed securities, extending the programs, talf programs, because commercial has not been funded in a long time and there is nothing in the pipeline. so that's going to remain weak. so starting to see something bumping along on the single family side. a lot of build to suit are starting to come back a little bit. individuals actually paying for it. i don't expect to see much speculative for some time. but the important thing is the shift in momentum. we're at the bottom, not a big bounce-up, still a lot of head equipped -- >> at least we're not going down further. >> you can only go to zero, can't go negative. >> exactly. what is the overall goal? like we said, there seems to be some kind of move in a positive direction. but the reality is, as diane just pointed out, speculators are -- it's probably a good thing overall, and no one really anticipates we're going back to the heady days of 2006, 2005,

when real estate kept appreciating. what would be the new normal? >> right, trish. well, you know, i think diana stated it well a few days ago when she said we want builders and the real estate market to recover in a more healthy way. and i think these new statistics certainly indicate the builders are hedging their bets by focusing on some of the better performing sectors like single family and avoiding the multifamily for many reasons, not the least of which is the lack of credit availability. but let's remember that behind the new housing starts are three factors. one is the availability of the vacant unit. the second is the demand by new households, and the third is the other financial conditions like unemployment and mortgage interest rates. now, in 2006, housing starts peaked at over a million and a half units, based on builders' perceptions of these things, which we see in 20/20 hindsight turned out to be wrong and fell by more than 50% after that. so the million-dollar question is now, what's the reality and

what's the perception. >> speaking of that, diana, didn't you look at a new study that said that 81% of people think their house isn't losing value or r any longer? >> that's the new zila survey out today, and it just shows how completely, i don't know, disoriented americans are in the current housing recovery. they think their -- 81% think that housing is not going to lose value. and they actually believe their home is going to appreciate over the next six months, whereas most analysts you talk to believe that home prices will fall another 10 to 15%. something else i wanted to get into, though, is the concern i have in today's numbers on the housing starts are they slightly artificial, because home builders are trying to get in those last few buyers to take advantage of the first time home buyer tax credit, which expires november 30th. and what will happen after that? and diane said she said there was lot a lot of spec homes in those numbers, but what i'm hearing from some folks is they are building a bunch of spec homes now to try and get these first time home buyer tax credit people in before the expiration.

>> diane, what about that? >> well, you know, i do think the spec home industry is small, but we are seeing speculators, the real competition is foreclosures, and forget has gotten to be so high, even in the most unaffordable markets in california, we're now hearing stories of bidding wars between first time buyers and speculators going after foreclosed homes that are now 50% off their peaks or even more. and so this is kind of interesting, it's really tough to justify buying a new home when it's cheaper to buy a home out of foreclosure and fix it up. and so i think this is another headwind that that industry is going to have to deal with. and we will see the secondary effects of that as a first time housing tax credit does wind off. we might even see some extension. i wouldn't be surprised. of because it's one of the only places we have seen during this first time buyer part of the market. >> all right, guys. of. >> and even with that segment, we're seeing a differentiation in markets. you know, california seems to be doing a little bit better. florida prices are still falling. >> right. and in florida, the key issue there is in insurance costs are

higher than real estate costs. i mean, really makes the equation both unploememployment affordability is different when you've got to pay for hurricane insurance or self insuring, and can't afford it. >> leave it there, guys. thanks so much for joining us. a quick programming note. pulte homes ceo sits down with maria bartiromo live on "the closing bell" at 4:00 p.m. eastern. >> it is certainly a big day, for tech. apple holding a key board meeting today. two tech analysts join us to talk making money right now. >> but first, jane wells is in iowa. jane? >> all right, melissa, i love the smell of biodiesel fermenting in the morning. up next, why diplomats from angola to zealand are here. we talk with senator chuck grassley after the break. people think that honda is

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i don't think vesting ends up -- a mij shift in how consumers address their cell phone. so it's true, the iphone is a success, but i think you'll see blowout numbers over the next six months. of. >> so would you buy the stock right here? >> absolutely. this is a major shift in terms of consumer buying trends, and i think that you're getting entire countries that are sold out, driving down l.a. on 405, you are seeing an entire side of a building with a billboard from sirius that is basically an ad for an iphone, and there is just something bigger going on here than just a simple mobile phone and that's reason enough to own the stock. >> i just don't -- i take your point, gene, but i don't think that's news to anybody right now. of. >> what about the tablet, gene?

are we waiting too long for that? >> no, two weeks ago, we got as close to confirmation we could get that it's coming. we think it will be in the beginning of 2010 and hard to figure out what the market is going to be for that. we're thinking 3 ii million units which is 3% to apple's numbers. so still small. hard to figure out what it's going to do until we see it. but another example of innovation from apple. >> gene, let me ask you about google, tomorrow is the five-year anniversary of the ipo, a bellwetherer for consumer spending. what do you think of that stock before we go? >> little bit of a headwind this quarter. still a great fran franchise but surfing through tough data. coming up next, the recent spike in volatility and what it means for a market and bull and a bear and whether it means correction. >> plus, the united bonus outrage earlier this year, and now aig gains approval to pay its new chief executive a multimillion dollar payday.

so do we really need a pay czar? that's ahead in today's "call of the wild." we'll be right back. based on the deal they get.pr others by the car of their dreams. during the lexus golden opportunity sales event, you can do both. special lease offers now available on the 2009 es 350. the first complete women's multivitamin in a drink mix. with more calcium and vitamin d... to support bone and breast health... while helping you hydrate.

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welcome back to "the call." rick santelli on the floor. of hey, another data point today that really spending triggers paid attention to, and that, of course, was housing, even though it was down a bit single family homes jumped to their best levels since october of last year. pay attention to those metrics for housing. let's look at the charts. the dollar index, as you can see

on the chart, it's stabilizing. it wasn't that long ago in august, we were trading 77.5. a big bottom. here we are now, starting with 79, but traders say 80 to 81 is truly the zone. is this going to continue or just responding to weak equities? for the ten-year, you can see rates down from the worst levels, but down to basically unchang unchanged. if you look at a one-month chart, it says it all. we have been holding this just below 3.5% level on every route of the stock market, or i should say correction of the stock market. when rates tend to come down. but august has a good find at the end of the month because of the august refunding and long data supply. but at the end of the day, greenspan said it best, the economy must have a couple good quarters in it, but it's the quarters beyond that that will be hard to handicap. trish, back to you. >> thank you, rick. for treasuries and stocks, are we headed for a correction, and

what is the reason -- what does volatility mean going forward? we ask our portfolio manager and advisor, and our bull, david peck, chief investment officer for matrix assets managers. okay. we're watching this vix index, and it's been spiking the last couple days here. what does this tell you about where you need to be right now? >> you need to be careful. first of all, we've had a 50% move off the march lows without much of a correction, at all. september is historically our weakest period time of the year. finally, recent economic data illustrated this economic recovery is a lot of hype. i mean, consumer spending is down. consumer incomes are down. consumer confidence is down. in the meantime, banks aren't lending. credit is down. and long demand is down, as well. so we have seen after a long period of economic slight improvement and evidence the economy might have been profiting, this last round of

economic data has shown that the economy really isn't accelerating at all, and is at best finding a bottom here. >> let me add to that the fact that while profits have been improving, we haven't seen a tremendous amount of top line growth. so david, where does that leave you? >> very important to put this in perspective. we are in a recession. recession seems to be coming to an end. we're looking for the economy to start recovering in november, december time frame. so we're not looking for good economic data now. the stock market typically recovers six to nine months in front of the economy. in fact, earnings were good in light of poor revenue, we think it's a very bullish time. and when revenues start to pick up in the december, january, february time frame, we think there will be more positive earnings. so we like the stock market now. we wouldn't be buying into days like yesterday of severe weakness. >> >> david, how do you deal with the fact that november and october are tough for the market, and the economic data has been uneven. i don't know that it necessarily shows that we're going down

further, that things are as pessimistic as jim says, but it's uneven and will be uneven for a while. how do you stay bullish? >> uneven is okay. we just went through the worst bull market of the last 50 years, the worst decade from 1929 to '39. stocks are poised to do better. valuation is pretty reasonable. in terms of the economy, the economy isn't supposed to go in straight lines. so we're uncomfortable with the your honor certainty. since we're not having a depression, we think stocks have a good deal of up side. >> valuations are not reasonable here, too expensive for you? >> not at all. first of all, look, we have to go through a tremendous amount of deleveraging in this economy. every economic recovery we've had in the last 50 years has been marked by an expansion in credit. so we have more and more credit introduced into the economy. now we have fewer numbers of banks, less leverage per bank, and we don't even have any loan demand right now. of we have consumers that are still way overextended. of in the meantime, their wealth is deteriorating rapidly.

we have seenel biggest falloff of consumer wealth since world war ii. so this is going to take years. this isn't going to be the quick recovery that were led by credit expansion we have had over the last 50 years. this is going to be a moreagent, and i'm trying to protect investors, because what they have seen over the last 30, 40 years is quick recovery, v-shaped. this is going to be a sluggish and slow recovery until the consumer delevers. >> so david, how are you trading and are you doing anything to protect yourself in had case you're wrong about being bullish. >> a longer-term perspective. you want to buy valuation. buying stocks down 11 times earnings, we're going to do very well over the next 12 to 18 months. we don't think you can time this market. stocks typically have their biggest jump and the last four or five months is a great example of that. the stock market up 50% off a bottom when it looked like the world was coming to an end. >> yeah. >> just sort of have to hold your nose, buy the market, in a

12-month time frame, we do well. >> one of the tough things, of course, is the fact that historically, if you look back at every recession going back to the '30s, the most you have seen is a 40% run-up, and questioning whether we have exceeded that. before you comment on that, i do want to ask you, have you been buying since march, did you capture any of this rally? >> yeah, we've been buying. we've been very bullish on the emerging markets. they have surpluses, not deficits. they have consumers that are spending. but even these markets, which have had a bigger move than our markets here, and not only that, the reinflation trade have had a bigger markets here, the gold and natural resources, the energy, but all of these moves are quite extended as well. so we're starting to cut back. we know we're entering a tough time frame of year. i think the stock market has one more leg up before we stall. so it's not unusual at all bar a bear market. because this is a very, very tricky market, and it's really based on a lot of hype and not a lot of reality.

>> so what's your best trade right now? >> right now, i think if you buy on corrections. because these things are due for a correction. i still like the emerging markets better. technology here in the united states is probably your best bet. not a lot of debt, good productivity play. but i would -- even on the technology, i would wait for a correction. remember, we're in a very treacherous time frame of year, and the markets come up 50% without a correction. >> thank you so much for joining us. we appreciate it. up next, a $7 million pay package for aig's new chief executive gains approval. quite a change from the $1 salary, but half what the industry normally gets. in today's "call of the wild," we'll ask if we need a pay czar. >> and the stocks trading on the rest of the day. he ran off with his secretary! she's 23 years old!

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whento compliment theirflac benefits package aflac! it made a big splash with the employees yeaaaahhhh! find out more at aflac!... ...forbusiness.com (laughter) upscale department stores, sax, posting a narrower than expected loss, as cost cutting efforts cost sales. ceo of sax will explain it all live in a first on cnbc interview on the "closing bell" today. >> aig's president and chief

executive robert benmosche will get $9 billion and incentives worth as much as $3.5 million a year. the package has received approval from pay czar allen fine feinberg. do we even need approval for that? we want to bring in keith boiken, editor of "the daily voice," and editor from "americans for prosperity." i would say, keith, given all of the animosity for seeing big pay packages, that the pay czar will come under a little fire for this one. >> well, you know, i think that's possible. looks at what senator chuck grassley said early this hour here on cnbc. he said he favored -- he is a republican senator and favors the idea of limiting executive compensation to $500,000 for companies that are receiving federal assistance. i think there is a lot of sense to that, not only to that

limitstation, because we're handing over hundreds of billions of dollars to these privately owned companies. yes, the government should have some say. aig received $180 billion in government loans. >> well, he has the say, right? >> why does the government have say -- >> are they have a say, and just handed out $7 million. >> here is the problem. the industry standard is about $14 million. if you look at what jay fischer at travelers is getting, $14 million. also, if you look at what benmosce was making at his lost job, this is a company in distress. you need a really good guy to come in and turn this company around. we going to come in and pay him way below industry standards and think you're going to get somebody qualified to do this, it's just not going to happen, whether it's fair or not. >> you're exactly right. that's the difficulty. we've got to focus on a situation where taxpayers have essentially taken over an insurance company in aig. and now you've got the policy goals, he wanted not to put a lot of taxpayer money in

someone's pocket, be frugal with taxpayer dollars, however, want to get top flight talent that can turn around and get some of that money returned to taxpayers in the long-term. the reality is, there are no good choices as long as the government is in the bailout. in the company. >> yeah. the key is getting the government out. >> are you telling me you can't find a qualified version for $7 million to republican run this company? that's half the industry standard as it is. you're saying basically you have to pay the full $14 million. >> i'm saying 7 is a deal to get this guy. that 7 is a very good price. that robert benmosche has an incredible record. you know, he's -- been in this business for a long time. he is the right guy to come in and turn around the company -- >> it's run like a government agency and put a bureaucrat in there, and whatever it is, and if you want to try to get something out of the investment -- what really scares me, though is the possibility

that this pay czar stuff could be the template for regulating all of private industry and not just bailout companies, something barney frank has said he supports. and i think we may be getting to -- if we go down that path, we're going to see a lot of top executives leave the country. >> keith, hang on. i want -- here is the reality here. what phil just said, do you think there is a chance that we could find the entire financial industry really governed by this pay czar, as opposed to by individual shareholders that own the companies thepss? >> first, individual shareholders have very little influence on what the ceo gets paid. i know that, i'm a shareholder myself. secondly, we're not talking about the whole financial industry, we're talking about a few companies that received hundreds of billions of dollars of taxpayer money. for god sake, if i give hundreds of millions to somebody, i ought to have a say where that money is going, and how much the ceo is getting paid. >> but don't you -- hang on, phil. let me follow up with keith. because if you get all that

money, poured into one of these companies, don't you as a taxpayer want to make sure that you get that money back? and isn't part of that hiring the most talented person you can to run the company? >> absolutely. but i don't buy into the hype for one minute, you can't buy qualified people to work for less than $14. plus, you can make this company prosperous -- bring prosperity back to the company again, and you can actually do something to get your name out there, help the reputation of the company, and yourself. this is a good incentive for individual ceos to take this and run with it. >> steve, he is getting half the industry standard. he is getting 7. you look at the comps, they're at like 14. so this is a deal. ben mmosche is doing this on the cheap. >> i understand. but i also understand that taxpayers have a right to make sure they get the best deal they can possibly get. maybe it doesn't have to be $14 million, doesn't have to be $500,000, but there is somewhere

in between that is fair to the taxpayers and fair to the company, and we can agree. but it doesn't have to be, and should not be the full compensation. make the money back. when you start making your company profitable, then you can get all the money you want. i don't care. but as long as you're taking money from the government, you should be held to government standards. that's a basic principle of giving money out. >> well, will you also agree that companies that haven't taken bailout money should be allowed to stay in the competition if they wish? >> sure. i don't have a problem with that. >> we'll end it on that note. thank you so much. keith and bill, always good to see you guys. >> "power lunch," and bill griffith standing by with a preview of what's in store. >> how time flies when you're making money, medical list. the fifth anniversary of the ipo of google, the stock up 34% in that time. we'll look ahead to the next five years of the company. these hackers that stole 1$1313 million i.d.s online, we're

wondering how safe is the u.s. financial system? to hackers? we'll look at that with a couple experts. and then we talk to the ceo of cke restaurant, they own hardee's. the role fast food is playing on the economy right now. top of the hour with "power lunch." >> thanks so much. a quick break, and then mary thompson with the stocks to watch today. >> coming back from the break, stocks almost doubling today. much i'm going to have that story, coming up after this break. and suvs in america. i don't know if you've heard, but this whole fuel-efficiency thing... kind of a big deal. anyway, ford and lincoln mercury have you covered. in fact, they're your cash for clunkers specialists. they'll recycle your ride and get you a rebate of up to $4,500. how's that for going green? why ford? why now? why not? visit your ford or lincoln mercury dealer. tell 'em mike sent you. if you think it would help.

time now for call to action, the stocks you need to watch. cnbc's mary thompson is here to look. >> we're keeping watch on american natural. its shares up just over 80% after it reached a funding agreement with general motors to cover costs linked to gm's bankruptcy. this includes a $100 million loan. the company is also expecting sales to double by 2013, and the stock is almost doubling up $2.54 at $5.18 a share. let's look at tj maxx, down $1.21, good news and bad news. second quarter earnings rose 31% thanks to strong sales and improving margins, but gave a forecast for the full year and the lower end came in well below wall street's limits. so that's keeping pressure on the stock. moving on to nova vac. stock is moving higher, up 43

cents, the company reporting positive preclinical results for its h1n1 or swine flu vaccine. keep in mind, not quite ready for humans, as the trial was performed on ferrets. according to the press release, they're the most appropriate model for evaluatingin influence ends adiseases, there is a wrinkle on your brain. the market selling $150 million in stock in what is called a mixed securities sales offering, from time to time the stock up 11.35. on the news, shareholders selling $66 million. the company plans to use the proceeds from its sale of stock to expand its operation. this is an resorts, among other things. media unpressure, down 51 percent after the visual media firm reported a second quarter loss. and then lastly look at j crew

up coming from dmo group which raised its rating on j crew, up $2.25 on the news. j crew's fall merchandise is trend-right, differentiated, but more importantly, the company is taking share from the battered department store sector. >> melissa? >> i was looking in the j crew chart. any idea what the big dip was for the trade? >> actually, i don't. i apologize. >> that's okay. thanks very much. trish. >> last call, regulating executive pay. you're watching cnbc. first in business worldwide. some people buy a car based on the deal they get. others by the car of their dreams. during the lexus golden opportunity sales event, you can do both. special lease offers now available on the 2009 is 250. but i've still got room for the internet. with my new netbook from at&t.

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okay. take a look at this, goldman sachs to buy, you see goldman trading up 2% or so. citing strains in the income and commodity segment, and stabilizing hedge fund business. and, again, shares of goldman up 3.21, latest trade. meantime, look at europe. we are seeing green right across the board. >> all right. trish. time for last call. the e-mails are flooding in on

the question about the pay czar and aig's pay package. the thing is that $7 million is an insane amount of money. of i would love to make 1/7 of that, no doubt. a lot of people mailing in saying i would do the job for a million dollars, trying to get the best possible guy so we all get our taxpayer money back, getting half what the industry standard is right now. i still don't know how you reconcile this thing and attract someone great if you're not going to pay what the going rate is. >> you're right. it's a going issue here. and the fact that a lot of these institutions, specifically aig have taken taxpayer money. so is this really bad catch- 22 position. you need to attract these people, but a huge political backlash against you. so it's a real mess. >> maybe the problem with government involvement. that is it for "the call." i'm melissa francis. >> this is cnbc.com news now. >> they're citing his cooperation as an informant

involving the tax evasion case against the bank. a warn has been issued to johnson & johnson drug development unit saying failure to properly oversee trials in experimental drugs. and the ins of the recovery has begun, but may be limited in the aftermath of the financial crisis. this is cnbc.com news now. i'm courtney reagan. holy cow, we have news breaking all over the place, which we'll get to in a moment here, but first we welcome you to "power lunch." i'm bill griffith. stocks with a modest raise. volatilities returning to the markets. will we see more ahead. one key indicator. >> same sue herrera, will the stock markets lift or are we heading into a bigger dip? we go hunting for opportunities in this market. >> and it is david against

goliath in the stocks business. we have a cnbc exclusive interview. find out why he is talking smack about mcdonald's. mu much. >> i'm rebecca jarvis. a lot of retailers -- we'll look at what worked for the likes of home depot and target and what it means for the american consumer and the stocks. >> i'm diana olick in washington. builders are starting more single family homes and planning more later. are they being realistic or like today's homeowner, totally misreading the market? two new reports coming up in an hour. >> and i'm jim goldman in the silicon valley bureau. hp is preparing to release what the street thinks will be good numbers later tonight. much google has been public only five years and is in over $140 billion. what is coming next for both? but first, let's get