afternoon. where it was about 10:00 a.m. or so on nasdaq with a gain of about 3/4 of 1%. and the s&p 500 up about eight points. one issue to take note of once again, matt, is the price of oil. up again tont today, staying above that $72 a barrel level. >> who's leading who in the oil versus stocks trade. we've got you covered on all the markets, and we begin here on the floor with bob pisani. >> we are still moving to the up side. three days in a row we've had these modest moves late in the day and hasn't dropped off here. let's take a look at the markets in the last hour. but the bottom line is this, folks. we had that big drop on monday, we're right back where we started. stocks are flat for the week. all the major indices are now thanks to the last three up days. 2-1 advancing to declining stocks. three days in a row now. so let's not make it into a gigantic move up, but modest move up certainly gets us back to where you started on friday. what's interesting today? the financial outliers. your fannie maes, your freddie macs moved up noticeably. aig, folks, all day i've been talking about it. 134 million shares is all that's

out there after that 20 for 1 reversal stock split. it's traded 110 million shares today. this is a recipe for disaster if you are short the stock. that's the main thing that's moving it here. let's take a look at some of the retailers. you heard all day about sears, but take a look at some of the other ones. stage stores. dick's sporting goods also beat second quarter estimates, but their margins were lower and they had a decline in same-store sales. that was a bit of an issue. same-store sales were rose -- were upgraded a little bit for the full year here. and finally, gamestop having a really tough time of it overall. they missed their estimates and cut their full-year guidance. you can see that stock to the down side here. finally, i just want to mention what maria mentioned about the whole philly fed index. normally it doesn't move the markets, but now we've got the philly fed and the empire state on monday. both very positive. in fact, surprisingly strong here. the first positive reading on the philly fed since september 2008. and the important thing that got the traders' attention was the survey on inventories, noting a rise there. remember, we had very lean

inventories. that's a good sign for people finally starting to restock. tradertalk.cnbc.com. and scott, we are positive on the nasdaq as well. >> absolutely, bob. pretty good day for technology altogether here. the nasdaq is up a bit better than 3/4 of 1%. we've been focused on that google story throughout the day today because take a look at the stock. it's up better than 16 bucks. that's a gain of 3 3/4%. here's what the story is today. goldman sachs has added google to the conviction buy list. and here's what the note said. price target up to 560 up from 510. they expect revenue growth to reaccelerate over the next year. and they also see increased monetization of youtube. and that is critical. google leading the way for big cap tech today which is having as i said a pretty good day. apple's up 1%. research in motion up 2 1/2%. and look at cisco, up 3% as well. ebay getting a nice gain today of 1% here out at the wall. net app, though, a final tech i want to touch on, down 5 1/2%. they beat but they said they

couldn't give any forecast for the current quarter. they also changed the top job there. new ceo, c.o.o. tom georgens getting the promotion. people expected it to happen but in some of the analyst commentaries it did catch some people by surprise. perhaps that's one of the reasons why as i take you to the wall here you see the stock down 5 1/2%. and finally it's a story we've been focused on throughout the day today 1/4 that is the demise of shares on this day of sears holdings. down just about 12% today. they reported a loss. the problem was the street, it was being for a gain. revenues also a little bit below estimates there. brian schactman, down to you at the nymex. >> thanks, scott. with all the stories going on you'd think the story would be oil. but it's not. it's natural gas. it pushed $3 to the down side to seven-year lows. we got the inventory numbers today. there was a build. but it was on the low end of what expectations were. storage is tight. it's going to get more expensive to store. but you need to really go through some of the other reasons with this because it's a little strange that it was at

the low end but yet it still sold off so sharply, more than 5 persian. storm season's been muted, even with more storms, none of the facilities are threatened. after some of the hot weather in the northeast it's supposed to really cool down. so we have large stocks, we have low demand. traders say it's a foregone conclusion. i want to tack a quick look at crude. the last day to trade september as the front month contract, most of the volume in october. really not a big story today. we'll see if the consolidation of yesterday's huge gains releases another leg up to the up side. we'll see what happens tomorrow on that one. gold, silver, copper, a mixed picture. i want to point out two things. gold slightly just basically near the flat line to slightly down, but copper down for a fifth day in a row. rick, i take it to you in chicago. i think the gold trade needs you back because it's been a snoozer lately. >> it has. it has indeed. and also shows you how many people watch charts because in those kind of quasi-925 to 930 area in december futures it seems the contract found some support. well, volume didn't find a lot of support today.

a very quiet day in the treasury market. but some very interesting information. first let's start with the charts intraday five-year. the three-year, the five-year, they were holdouts. it's mostly been a day about firmness in treasuries. those maturities now are at yields that are unchanged. the longer maturities like the extreme 30-year bond it's been in positive territory, higher price, lower yield, pretty much 2/3 of the session, and underscores that even though equities are firm it doesn't mean the relationships of day traders in a quiet august of selling the dollar and selling treasuries works every time. now back to the story. it's all about supply next week. without t bills. and there's a boat load of those. we have 109 billion of twos, fives, and sevens. so supply will be back on the radar screen. but it doesn't seem as though the threat of it coming next week has done anything to get any treasury traders in a lather today. maria, back to you. >> rick, thanks very much. here's something you really don't want to see at a record level, and that is the number of u.s. homeowners either delinquent on their mortgage or

in some stage of foreclosure. actually hitling a record high in the second quarter. the new data, though, not being driven by people with subprime loans. is that something to be concerned about in diana olick in washington now with the story. hey, diana. >> hey, maria. and that's right, it's all about prime loans now. while total delinquencies and foreclosures rose to a new record of just over 13% of all loans in trouble, prime loans really led the way. the percentage of prime fixed rate lows in delinquency rose to 5.23% from just 4.68% in the first quarter and really spiking over the past six months as opposed to subprime. subprime fixed rate delinquencies showed the most dramatic spike during the crash, of course, but starting now to level off a bit in just the past two quarters. >> we had 43 states that actually had a drop in foreclosure starts for the subprime arm completely flip side. on the prime side we had 41 states with an increase in foreclosures on prime fixed loans. so it's clearly an issue that's

being driven much more by the economy rather than issues with the type of loan. >> overall, the foreclosure starts or new foreclosures, which are not included in delinquencies, were flat. but that is likely due to a big moratorium in illinois and the government loan modification program starting and slowing down the process. experts don't see it as a sign of real recovery. >> there's still a lot of mortgages that are first turning delinquent, and with a lag we'll entr the foreclosure process, and then after that we'll enter the market as a distressed home and will add to the oversupply of homes in the market for sale. so i think this is a concern. and in our view it's the reason why we don't think we've seen a bottom yet in home prices. we don't think we'll see a bottom in home prices until foreclosures peak, which are likely going to happen sometime in the second half of next year. >> now, important to note that we're still seeing the usual suspects, that is, california, florida, arizona, and nevada making up the bulk of foreclosures, 44% of all foreclosures in the u.s. however, the big jumps up that

we're seeing in delinquencies and foreclosures are not coming from those states so much as from some other not so usual suspects like new york, alaska, hawaii, idaho, and utah. and that of course again could be blamed on jobs. for more go to the blog, realtycheck.cnbc.com. maria? >> diana, thanks very much. now let's talk more about the market, how to invest in this environment. joining us right now to do just that is blaiz tankersley, strategist at baycrest partners. along with doug roberts, founder and chief investment strategist with channel capital research.com. gentlemen, good to have you on the program. >> good to be here. >> where do you think we are right here? looking at another rally. highs of the day. 69-point rally on the dow industrials approaching the september, october months, which are typically troubling. what would you be doing right now with your money? >> i think you really have to pay much more attention to the individual stocks that you're in and not focus so much on the stock market right now. traders have gotten a little bit short a few days ago. they were emboldened on monday

when the market started to come off heavily. and you noticed as soon as the big draw hit the tape in crude, crude started to spike up, took the market up with it. it shows you just how jittery the market is. if you spend too much time worrying about the market, you're going to miss what's going on in the individual stocks and probably going to cause yourself a lot of angst and worry. >> so what does that mean? >> i think what you have to do is pay attention to the fundamentals and the names that you're involved in. >> which names? >> we happen to like tech stocks very much. we've liked them all year. that's done very well for us. we continue to focus on those companies that have demonstrated growth and that have rock solid balance sheets. i think that's the only way to play it. if you worry about the market, you're going to drive yourself crazy. >> that's a crowded trade, though, wouldn't you say? so you like the government trade, which it seems the government's taken over everything, including your portfolio strategy right now. >> well, correct. right now if you look at it -- maria and i were talking about before, you still have foreclosure problems. the unemployment numbers aren't so good.

and the consumer's still locked up pretty tight. so really right now we're still on life support. the government is assisting with monetary stimulus-w lending programs. they're bailing people out. essentially it's really the government, the government programs. and this is not just limited to the united states. it's also across the world that's driving it. and what you've seen is really the reticence, the downturn in really japan, also in china, and even here. it comes when everybody talks about withdrawing that government stimulus. so you have to really look at -- and i agree with blaze. long-term technology. we also find health care that are going to benefit from the government trade-v substantial margins, good amounts of cash, so they can look through this and basically go for the benefit. >> are you buying autos? the autos are benefiting. >> right now it's a question of which autos. you could probably buy the autos. you could buy financials. i think really what you want to look at is something where the rules don't think as frequently. and right now technology that's not changing, and really if you look at pharmaceuticals you have a long-term demographic trend.

you see the pharmaceuticals sign on with the government, that they're going to benefit from that. so although you could probably play some other things, you want to limit yourself i think in a prudent way to those areas where the rules aren't going to change. at some point you have to figure out who's going to pay the cost for all this. >> hey, blaze, let me ask you, because i know you're watching oil closely. and i was saying to maria that the nymex a week or so ago, the guys there were looking at the stock market for direction and now the stock guys are looking over at the nymex for direction. what the heck's going on? who's leading who here? >> you know, to be honest with you, i'm not sure myself. it seems like we just kind of bat it back and forth, you know? and right now there's a lot of vested interest in the commodity trade moving higher. we do a lot of technical analysis at our shop. some of the technical things we look at suggest that if crude should start to move above the 73 1/2, $74 mark, there will be a deeper squeeze. i think that will probably translate as well. it's a tough call. >> so as a strategist what would

be your preferred portfolio allocation? what does it look like? >> right now we still have a nice weighting in high-grade corporate. we've got the technology stocks on. you know, we've been short some of the basic materials, some of the steel stocks, some of the chemical stocks. we're kind of set up that way. i'm not overcommitted right now. >> and what do you think, doug? i mean, one of the other things you pointed out is all the noise that's been in this marketplace, but also you like not only health care but also technology. and i said earlier that's sort of a crowded trade, kind of going full circle here. can you still find the value in what maybe makes the most sense given that i don't know anybody who doesn't like that right here? >> well, right now if you look at it, it may be a crowded trade, but they are generating cash. and if you look at the underlying demographic, the key thing with the market valuations we're talking about or even any valuations is can you generate cash in the future? technology may not be the best trade, but it's one of the least

risk trades, right now with the increasing cost of basically employing people the idea to try to get rid of them, you're still seeing unemployment pick up. technology makes sense. if you can do a technology-based solution that kind of replaced two or three people or decreases your cost substantially, that'll continue to make sense under any environment. >> so no issue with valuation? >> i'd say really specific things. you've got to look at the cash. but right now you're dealing with a momentum-driven market and long-term that's really where the benefits are. >> what's your take on commodities? we had the philly fed out. it was better than expected. do you believe that those sort of inflation trades i'm calling them, it's not really inflation, but it's looking at commodities like steel and iron ore and copper and gold, do you still want to be in those kinds of producers? >> the real thing is you have to look -- that's really being driven by china and a lot of the asian things -- >> and we had a rebound again. >> and we really don't know the full story. so although if you want to play the trade, it's a very, very risky trade because you don't

know really the basis of the data. you don't know how much of it is real, how much of it isn't real. and that can be a real danger over time. the other thing that always disturbs me a little bit about the commodity trade is you know, if you look at the cpi numbers to ppi you still have deflationary trends that are continuing to -- look at electricity in both china and the united states. still continuing to drop. how can demand for electricity be dropping? yet demand for oil -- sounds like it could be some form of manipulation. and that's a good trade to play as long as you know when to get off. >> in the notes you refer to it as a melt up. blaze, do you think maybe we're overthinking it and you've just got to let momentum be what it is? right now the momentum is green and higher. >> that's it. momentum's up. and like i said, you get a little bit squeezier action in crude i think that's -- >> do you think it would be 3,000 points on the economic data, i could give you three earning reports that were bad, there's going to be no clear-cut path.

>> absolutely. i think anybody who gets on a show and says hey, listen, i know exactly what's going to happen, probably not somebody you want to listen to. >> we'll leave it there because you guys are coming back and we'll check in with you in a little while before the bell. thanks so much, gentlemen. we'll see you in a little bit. >> so there we are. the dow's up 67. s&p still higher here today. nasdaq also higher by about 17 points right now. >> up next we'll look at five stocks that are producing strong cash flow. cash flow going forward, should you be following the money with your portfolio and focusing specifically on cash flow? >> and later we're going to discuss whether betting on high-yield bonds is a smart way to play uncertainty in this marketplace right now. >> and how about them financials? they certainly led the markets  on the way down. but will they be the leaders of a recovery or is there another sector that has been the leader since the lows in march? we will check on financials and how to allocate your assets coming up. >> but first let's check on the most active stocks on the big board today. some people buy a car based on the deal they get.

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53% jump in second quarter profits helped by strong sales and a lower tax rate. >> mary, thanks very much. i will take it. searching for companies that are raking in the big bucks? well, go no further. our next guest has made a list, checked it twice, and they've come up with five companies raising eyebrows when it comes to free cash flow. names they say investors should be watching. keeping on the radar, possibly investing in. lee munson is with us, chief investment officer at portfolio asset management along with cnbc contributor michael farr, president farr, miller & washington. gentlemen, great to have you on the program. >> thanks for having us. >> thanks, maria. >> michael, let me kick this off with you. good to see you again. why cash flow?

why is this the most important metric to look at in terms of investing? let's cover the bases here before we get into the individual names. >> right. cash flow's a great valuation metric to look at when you're looking at how solid a company may be. essentially you just go down to net earnings and then you add in all of the non-cash charges, again, like amortization and depreciation charges you have to take to get to that net. but it really doesn't take cash out of your wallet. you can still use that cash for spending. and all of that available cash makes a company stronger. allows them to go out and make acquisitions and allows them to grow. >> cash is king, particularly in an environment when credit is tight. >> you've got it exactly right. so those companies with stronger cash flow i think are really attractive, particularly through a difficult period. >> let's talk about the names that you like. first off, lee, what do you like? you've got -- you launched portfolio asset management in '08 after working at charles schwab for 12 years, investment

experience. can you give us a sense of what you're looking at in terms of cash-flow rich companies? >> you know, one thing i like in integrated oil is british petroleum. it's got roughly the same cash flow as exxon but it has half the market cap and twice the dividend. at&t has some secular growth that's coming from the smartphones, the iphones. and historically, telecom has been poor performers because they have a lot of capital expenditures. the cash flow's twice as important. plus you need that cash flow to pay that 5% dividend. and outside of that you want to look at things like caterpillar. that's a play on china, play on construction. if you compare it versus, say, a john deere, the cash flow is like night and day. and then i'll probably end with unilever. they've had a great increase in their growth of cash flow versus 2007 because of restructuring. food's going to remain important. and then time warner, to put on people's watch lists, it's a company that's cheap compared to its cash flow. but i'm really waiting to see if management is going to be able to break up that company a little bit and add some value. >> so you're not necessarily --

>> so there's my top five picks. >> you're not necessarily only looking at generating big amounts of cash. that doesn't make it an automatic buy for you? >> no, it doesn't. and when you're talking about larger, more mature companies, i want to see not only do they have the cash flow but i want to see if they're going to be able to pay it in a dividend. now, that's very different, from say, a small cap manager who they're only concerned about that cash flow so they can keep making acquisitions. a lot of things michael's talking about. from my perspective, when i look at big companies i want to see that cash flow so i know that, number one, they can pay that dividend, they're not going to have to rely on the kindness of strangers to keep their operations going. and cash flow's a very difficult thing to manipulate versus earnings per share. >> what do you think, michael? what are your picks in terms of cash flow winners? >> well, i've got five for you, maria. united technologies, daniher corporation, paychecks, microsoft, and waters. they're all in different industries.

strong cash flow is a great backdrop. it's a wonderful sort of safety net. we also require earnings growth. i don't want to -- this tells me that a company's got some real safety and wiggle room, as you said, behind it. but i also need to know that there's a driver, that there's a catalyst, and that they're growing share and increasing their bottom line numbers. each of these companies is doing that. we moved from the industrials. paychex is a financial, and i think it looks fairly cheap in here. it could be a little long in the recovery. microsoft of course has a ton of cash. great free cash flow. and waters corporation in the health care medical space, they make mass spectrometers. it's a medical equipment company. terrific company. but there's sort of a diversified portfolio with a lot of cash behind all of them. and it's left our clients in very good stead over the past 12, 18, 24 months. >> sometimes great companies don't necessarily make great stocks, right, michael? you take a company like microsoft, yeah, it's up over the last six months or so.

but the stock hasn't done a lot in about five years. what's the catalyst? and it's had cash for that time frame. so what's the catalyst that's actually going to get that stock moving? >> i think we've got to continue to see earnings growth. and microsoft is one of those sort of safer companies that starts to feel stodgy anymore. when you get to be as big as microsoft is, how do you really get dynamic growth? how do you get exciting growth? the answer probably is that you don't get exciting dynamic growth but you do get steady, reliable growth? and if you don't have to pay too much for it, it's a great place to have money over a long period. >> yeah, i guess the bigger you get the tougher it is to move the needle. great conversation, gentlemen. thanks very much for your ideas. we appreciate it. we'll see you soon. thank you, gentlemen. we've got a rally under way that is getting stronger. financials really one of the key reasons. and technology doing so well. 35 minutes before the close. and the dow is holding on to a gain of 73 points. >> so up next, what better to do in talk strategy. we're going to have a strategy session and tell you what sectors look good and where you should be pouring your money.

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welcome back. with the market accelerating the moves here as we approach the close, let's bring back blaze tankersley, he's strategist at baycrest partners. along with doug watkins, founder and chief investment strategist

with channel capital research.com. a lot of people think summer doldrums, volume on the light side. we were expecting volume on the light side, but do you read into this much? the 71-point move on the dow. >> no, i mean, right now you're dealing on low volume. what i was mentioning before is you do have an element, we were talking about before, of performance anxiety. right now the market is up, what about 8%, 9%, 10%. people are very nervous about it, as they should be. but at the same time you have a lot of money going into long-only funds. and people have to participate in it. they may be forced up into a situation as it continues that becomes self-fulfilling momentum. you know the old story, you can sit there and basically if you're down and everybody else is down you may not get a bonus but you won't get fired. if you're down or you're substantially -- your benchmark in a good market, that's a more serious problem. sow may have a market meltup if it continues. >> let me talk a little more about earnings. i had mentioned the retail

earnings situation and earnings season pretty much behind us right now. what are your thoughts as we go forward? the numbers for the third quarter and the fourth quarter are going to get increasingly easy, especially in the fourth quarter, which makes me think that that is a situation for disappointment. >> it's a good question. i think, you know, what we've seen is that the earnings have been becoming better. and the analysts' estimates have generally been too low for the last several quarters. i think that people are really going to start thinking about how back to school numbers look shortly and what the impact on back to school season was. we're going to start to think about how christmas is setting up. and i think, you know, discussed within another segment today, foreclosures are rocketing, we're still seeing a lot of stress on the consumer. you start to think about how christmas sets up. so you talk about how a retailer -- with the stocks up as much as they are, do you really want to bet, you know, christmas is going to be good? i'd rather not. i'd rather sell the stock, walk

away, let the earnings be what they are and take a look after they come out. >> what are the most important catalyst that's you're going to be looking for in the second half of the year? what's most important in terms of really -- we just had a segment on cash flow. where the richest companies are in terms of cash on the balance sheet and cash flow. what are the main catalysts that you look at? your screens in terms of investing right now. >> well, right now i guess probably what i'm looking at is we're seeing also the momentum, the so-called meltup trade. but the other thing i'm going to be really looking at is sustainability. this is going to become an increasing battle of earnings versus economic. so right now the key things underlying that is really employment, retail sales, the consumer, and also a little bit of the foreclosure issue. right now you have to realize our economy, i mean, everything is based 70% on the consumer. and if he continues to lock up and draw down, then you're going to have some problems, or at least a hiccup in the near term. and that's going to be something -- >> you're a bear looking to get

out of your bull suit, it sounds like. >> no, right now i'm short-term bullish because i recognize the momentum in the market. >> don't get in front of that trade. >> as john maynard keynes said, the market can remain irrational as long as you can remain solvent. you have to make that play. but at the same time if you look at it when you're out there, the big question in my mind is who's going to replace that 70%? down to 60%. who's going replace the 10%? increasingly it looks like it's going to be government. but is government going to get that right? we don't really know. blaze was talking about that earlier, are they going to be able to fill that void? nobody is sure yet. and if you look at certain indicators like manufacturing, we said that looks positive, but if you look at unemployment, retail spending, people seem to be just as locked up as they were before. >> all right. fantastic. thanks, guys, appreciate it very much for coming on two segments with us here today. blaze tankersley from baycrest partners and doug roberts from channel capital research. appreciate, it guys. >> thanks sop.

>> so what have we got, 27 minutes to go. 77, 78 points higher here today. the nasdaq is up 22 points right now, maria so, we're at our best levels of the session, up almost 3% in three days. >> coming up next, sears the latest retailer to actually report a disappointing number in terms of earnings. our next guest is shopping for some retail bargains right now. find out what they may be when we come back. (announcer) this is nine generations of the world's most revered luxury sedan. this is a history of over 50,000 crash-tested cars... this is the world record for longevity and endurance. and one of the most technologically advanced automobiles on the planet. this is the 9th generation e-class. this is mercedes-benz.

we've got 20 minutes before the closing bell sounds. a market up 75 points. there's a look at the widely held stocks and as you can see some of the most woodley held names out there include the financials and they're higher across the board. some of the other dow components, meanwhile, look like this. what's boosting the dow? include, as you can see, the financials. but also the oils. ge's higher. at&t and verizon. >> our "fast money" final final call. joining me now is patricia edwards, analyst at storehouse partners. patty, great to see you here today. what do you think of this marketplace? we were on the halftime report, were you one of the ones saying buy into the close or sell into the close? >> oh, no, i'm on the sidelines. >> sidelines. okay. i know there was a flurry of

people there today, and clearly it's been a buy into the close kind of session. do you take any confidence from that? >> you know, not so much on the buy into the close. i really think we've got low volume and this market's probably going to grind higher for the next couple of weeks. the technicals are telling me that. i think that we have a lack of news. we have a lack of participation. eventually i am still incredibly bearish. i think that the economy is not there. you know, you talk about housing and the credit crisis. still not being over in a lot of ways. but i think the next two weeks probably could stay at this level, maybe go a little bit higher. so i don't want to get in the way of that. >> we had two positive economic indicators today and arguably the most precise indicator of them all the leading economic indicators up for the fourth straight month. >> we did. another reason to be on the sidelines today. but let's not forget that we also have some information on housing that was not good. you know, the fact that we're seeing more prime delinquencies, bad thing. and not only that, but prime isn't even the big thng that's come. we've still got all day and the option arms are going to start

resetting here. those are absolutely toxic. so you start looking a month or two out once you start getting into the next earnings season, and i think things get really, really ugly. but until we get everybody in and actually looking at what's coming down the track at us, i don't think this thing goes down. >> so we have gap, aeropostale and foot locker reporting after the close today. there will be like a dozen retail names all told by the time the day is done here today. what do you think of retail? we've got sears on one side just imploding with high inventory levels and then you've got dick's sporting goods with a less worse than expected forecast although one that's still forecast sales falling. >> yeah, you know, retail is really hard right now, and i think part of it is because everybody, or almost everybody has been beating based on better cost containment. and that's nice and it's great. but i'm a revenue girl. i want to see the revenue backing up the earning growth. with sears, frankly they're not a good operator, and in this environment you've got to be a fabulous operator. dick's, good operator. they're doing what they need to. i want to see the revenue growth. but i'm willing to give them a

little bit of a benefit of the doubt. what i really like are the folks who are absolutely nailing the revenue growth even in this type of environment and that leads me to buckle. >> how did a nice revenue girl like you fall in love with junk bonds? >> well, they do pay out a lot of revenue. they do. i love the junk bonds because my clientele is really mostly individuals. they don't want to lose on the down side. so if you put a little junk bonds in with a corporate bond portfolio at this point, you're getting market participation. it's about a 60% correlation. you're getting a yield that's over 10, gives a little bit of spice to the pile there. and you know, frankly, i think that with the spreads that we've got to the treasury at this point we have got mostly the defaults are baked into the numbers. at this point i really think it's probably a fairly safe play. >> all right, patty, great. thank you very much. patricia edwards, storehouse partners analyst. thanks very much. and by the way, folks, coming up on a special sports edition of "fast money," a "first on cnbc" italian view with the ceo of aforementioned dick's sporting

goods. plus nfl legend john madden joins the "fast money" five to talk video games, michael vick, and of course football. melissa and the traders live at 5:00 as always. >> meanwhile, 20 minutes before the close right now. we've got the dow jones industrial average holding on to a move on the up side. up 77 points on the dow. financials and techs leading the way once again. >> never to be deniedish the volatility index, vix, the other vick, up 15% on monday to a one-month high although it's come down a little bit since then. what is the vix saying about where the options market is heading right now ahead of tomorrow's expiration? we'll have some answers on that in just a moment. >> and then after the bell we're discussing whether the new credit reform rules will help or hurt consumers, the impact it could have on the financial sector. we'll check into the credit card story at 4:00. tdd#: 1-800-345-2550

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welcome back. tomorrow marks the expiration of august options.

activity is picking up, and many are expecting higher volatility in the coming month. we look at where the action is taking place right now with john cusick, senior market adjust with options express, along with william lefkowitz. what can you tell us about the market right now? what are you expecting and what does the current activity tell you? >> right now the current activity has been, you know, pretty tame. you know, volumes have been light on the equity side. but actually, today right before i came on the show in the vix options we actually saw a pretty large print go up in the october 37 1/2 dollar calls. there was about 25,000 of these options that were coming out there. and we're seeing larger strategists coming in and start to put positions on september, october, and even further out, preparing for some potential volatility coming up. >> so william, what kind of volatility are you expecting? particularly if you look at the financial services sector, which

has performed so well. what are the options telling you there? >> we think there is an incredible market to be involved with the options because monday people into their offices and they saw the market drop like that, they got very nervous, scared again, and then all of a sudden here we go, three days right back up. we're in an upward trend for sure. and can you imagine if yesterday with aig trading around 26 and change, if you had bought the august 30s, they expire tomorrow, friday, at approximately 20 cents or less, today when the stock hit 35 you could have sold those stocks for 5 1/2 to 6 dollars. so even though the market might seem tame, there are some extraordinary opportunities out there. >> and do you think that the volatility increases in the coming months? >> it should increase. what happened was the earnings came out and basically the major companies like the dow stocks were all done reporting. so it might quiet down. but then you'll get next quarter, and i think you'll see a lot of volatility leading into that earnings release in the next quarter or so. >> what are the strategies then that you want to be looking at?

joe, let's talk about strategy, how to trade this volatility. >> well, i think some of the most basic strategies and trading strategies would be either a straddle or strangle, where you're buying either at the money, calls and puts at the same strike, or out of the money calls and puts. it takes a strategy of buying options. and it's saying, well, you know what, i don't know whether the market's going to go up or down but i'm anticipating a very large move. and even though as bill has noted there's some activity that's going on here, it's got to happen fast for these strategies to be profitable. >> do you expect much of the volatility tonight, or do you look at it at the close friday or at the open friday? where specifically do you want to be really making the play? ? i think tomorrow what you want to do is you want to watch where the key benchmarks, the s&p, dow jones, and the nasdaq settle because we have our european options settling tomorrow morning. also, i think you could see some volatility in there, some repositioning. and also, you want to watch during the day, see some

rebalancing. there are a lot of cover call writers, a lot of large cover call riders that are rolling their august short calls into september in anticipation that we could have these tight ranges or maybe even a slight pullback in these stocks that they own. take a look at that and watch that tomorrow. that could add a little more volume to the market. >> that's an important one. william, what about you? going into the friday expiration, what are the more interesting or important options strategies to know about? >> we try to isolate specific companies and with some kind of event surrounding that company to take advantage of the options. there's a lot of different strategies people use. buying the options, selling the options. but tonight there will be a few firms releasing earnings. salesforce.com is a billion-dollar company, trading at 46 and change today. they'll be releasing earnings right after the market closes tonight. stock's trading at 46 and change. you can buy or sell the 48s, which is two points away for about 75 to 80 cents. and again, as he was just

speaking about, the volatility, you can go two points lower at 44 and get those same options for about 75 cents. so if you expect a big move, you can buy them both. if you don't expect anything major out of this news release, you can go ahead and sell those options. so there are a lot of opportunities as the volatility's in this market. >> i guess we've seen a slight increase in volatility. are you surprised by the moves, or would you expect it, or what? how would you characterize the current volatility? >> okay. i think that the volatility makes a lot of sense. people are very nervous. and we keep on sath market looks good. but then you get the monday pullback and they're nervous. they're allowed now, and what people are considering doing is buying stocks, writing calls on top of it or they're buying a stock but marrying a put. they buy a put after they buy a stock, and the opportunity there is is if the stock drops dramatically they can make a lot of money on the puts, then hopefully the stock can bounce back up. there are great opportunities to take advantage of this volatility. and it should continue as you get great economic news and

lousy economic news and people aren't sure what's going to happen going forward. >> go ahead. you want to make a -- >> one more point. maria, you're seeing that some of the larger option strategy ifrts are starting to use leap options. they're rebalancing their portfolios with option that's might be out of the money or slightly at the money. further out, giving yourself some time, weathering out some of this volatility that could potentially come into the market in the next couple months but still participating in what could happen in the spring or even in the fourth quarter of this year being able to still continue to participate without having to put an enormous amount of capital into the stocks right now that could potentially become very volatile. >> all right. good scoop, gentlemen. thanks very much. we appreciate it. we'll see you soon. >> all right, maria, the clock on the wall says less than ten to go before we count it down. we're up about 73 points on the dow. 23 out of 30 are higher. cisco, boeing, amex all pushing higher, but merck, pfizer, and intel not taking part. >> google's up 4 1/4% as well. 4.61. five years after that $85 a

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okay, folks. welcome back to "the closing bell." let's take a look at some of those under the radar stocks. you hear the sonar. let's talk about dick's sporting goods. dks is the ticker. the second quarter profits slipped 2 1/2% to $39 million but it came in better nan expected and they also hiked their full year sales forecast. gamestop, tough day for them, reporting second quarter profit, down 32%. $39 million was the figure. they had fewer hit video games and a 14% drop in same-store sales. that's forcing the company to cut its full year outlook. wall street hates that as you can see by a 7% giveback there. and computer products distributor tech data, tecd, reporting a better than expected second quarter profit. the company also, though, lowering its third quarter sales. but they made it up in the fourth quarter, and that kept

things positive. they saw some positive signs of stabilization in tech in north america. >> and tech is doing well today once again, matt. you mentioned google up 4%. cisco you mentioned up 3%. that's certainly helping a number of these averages here. >> so up next we're coming back with the closing countdown. going to be exciting. >> and then after the bell google shares rallying after being added to goldman sachs's conviction buy list. five years after that $85 a share ipo. we will take a look at tech and what might be worth buying right here, next. hey mom i need some minutes.

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okay, folks, we are back here on the floor of the new york stock exchange. looks like we're going to close higher for the third consecutive day. it's a pretty good, pretty impressive three-day jump. it's about 2.8% for the s&p 500. which is not its best but certainly not its worst three-day run that we've had. >> what i think is important is we had an opportunity to really kill the market here on tuesday. on the second down day. but it didn't happen. every day they tried to drop it right at the open and every day sales. 2-1 advancing to declining stocks three days in a row now. and we've been moving up.

now it's almost 3-1 advancing. >> that big down day was 4%. the weekly stats tomorrow, it's going to be quite a derby. >> but remember, health care happened on monday because it lagged everything else and the hmo stocks were all up on monday. >> you look at financials today, one third of the market's gain today is financials, up, what, 2.4%? so you think the financials are leading this market. but they're not. health care right now is leading the market. >> and it did that because of what happened on monday. i want to show you what's going on on citi. we opened up citigroup because citigroup traded a billion shares today and of that 126 million traded at the new york stock exchange. that 126 million is 15% of the volume of the entire new york stock exchange. so there are small groups of stocks, citi, aig, bank of america, that are now volume monsters that trade -- there are five stocks essentially that trade 25% of the total volume of all stocks traded now, and they're all financial. >> and a round of applause for some fine reporting from bob

pisani. remember, gap, foot locker, and aeropostale out with earnings after the bell, all trading higher. and there it is. and it is 4:00 on wall street. do you know where your money is? hi, everybody. welcome back to "the closing bell." i'm maria bartiromo on the floor of the new york stock exchange. it's a busy close down here and the summer rally rolls on tonight on wall street. here's what we're looking for at the closing bell tonight. stocks extending their gains for a third day in a row after the philadelphia federal reserve index unexpectedly showed expansion in the mid-atlantic manufacturing activity and region. the s&p 500 creeping back toward its high of the year. set back on august 13th. the conference board's index of leading economic indicators also up, rising for a fourth month in a row, suggesting the recession has indeed bottomed out. google added to the goldman sachs conviction buy list,

sending the technology sector higher. google up big. coming up, we will discuss if the tech can gain momentum from here. should you be putting new capital to work in technology? here's a look at how we finished the day on wall street. the dow jones industrial average on the up side to the tune of 70 points. 3/4 of 1% higher at 9,349 on the dow. volume on the light side. no surprise. under a billion shares on this summer day. nasdaq composite about 20 points. better than 1%. at 1,989 on nasdaq. s&p 500 picks up ten points. energy once again a highlight on the up side with oil prices once again higher. 72.54 on oil. s&p tonight at 1,007. stocks advancing in the final hour of trading. we get all the action right now from bob pisani, our eye on the floor of the nyse. pretty good close here, bob. >> and look at this. three days in a row we tried to push them down right at the open three days in a row, and three days in a row it moves up. despite the big down day on monday. certainly very impressive, folks. we thought we'd have a chance four it down and it's not worth it. take a look athe