on the heels of that big sell-off on monday because of the asia worries seeing the bounceback and bounceback big. back above 9,500 on the blue chip average. nasdaq also strong, money moving into technology in a big way. this week of course the five-year anniversary of when google went public. the stock up sharply since that ipo. and the s&p 500 also on the up side today quite strongly with that broad-based move. let's get to bob pisani, our eye on the floor of the nyse, with all the happenings today. what does the day look like? how about the week? >> we did have a great week. before we get to that you were noting the dow jones reporting -- or "wall street journal" reporting the dow jones index might be for sale. they said they would neither confirm nor deny that story that the business was for sale. however, they did say that the possibility of a sale has been raised before, rufrmz hmors had floated in the past even prior to rupert murdoch's acquisition of dow jones.

two important points here. moved stocks up earlier in the day. mr. bernanke came out in a speech, saying the economy was on the verge of recovery. this all happened at about 10:00 eastern time. up for four straight months. that's the good news. the bad news is there's no real move up in the inventory no, real move down in the inventory, excuse me, unchanged for the month here. commodity stocks were strong as they were the last four days on the weakness in the dollar. and we did have some strength as the oil breakout helped energy stocks. there's your s&p 500 for the year. new high for the year, highest level since october. all the other major indices also at new highs for the year. oil services had one of the best weeks in a while. you know the strange bifurcation between natural gas, been a mess on weak demand, and oil which is hitting new highs for the year. oil won out, simply put. oil services were one of the biggest movers on the week. ann taylor and gap reported earnings a bit ahead of expectations. they're lean and mean, they've got low inventories. all the retailers are like that. the problem is no real sales

growth except aeropostale. there's your one exception, strong sales growth. take a look at the major indices for the week. dow jones industrial average up 1.9%. still settling out here. looks like s&p 500 a little below that, maybe 2.1%. and the nasdaq trailing 1.7. again, still settling out on the numbers there. maria, back to you. >> all right, bob. thank you very much. strong existing july home sales helping to spark today's move in the markets. we're going to talk more about that in just a moment when we get to diana olick. and we're going to welcome our guests in just a moment. now to diana ole nick washington with the details of what really sparked this move from the housing front. diana, what can you tell us? >> well, that's right, maria. sales are surging back thanks to the first-time home buyer tax credit and bargain basement home prices, but the bulk of the activity is on the low end of the market. sales of homes below $100,000 surged almost 39% in july.

bump up another $100,000, and we're still in the positive, up 9%. but when you cross the quarter million line, it all goes south. and the higher the price, the more sales drop off. over a million, and sales are down 23%. over 2 million, down 32%. >> sales are still very sluggish on the very high end. one interesting development is that despite the historically low mortgage rate we are seeing increasing number of buyers bypassing the mortgages altogether, going all cash. >> now, granted, a lot of those cash buy querz are investors, but there are still great opportunities while that tax credit is still available. but experts say go in with your eyes wide open. >> you need to think about this purchase as a lifestyle decision rather than a short-term investment, and that's because we're probably not at the bottom yet in terms of home values. >> realtors are also concerned about the expiration of the first-time home buyer tax credit at the end of november. they're hoping congress will

extend it. they're actually hoping congress will expand it but that remains to be seen. for more go to the blog, real realtycheck.cnbc.com. >> positive comments today from federal reserve chairman ben bernanke also one of the supports for this market, lifting equities. cnbc's mary thompson with the highlights from bernanke, who's in jackson hole, wyoming. over to you. >> thank you, maria. in a closed door speech to economists from around the world the ted chief suggests the global economy is emerging from a deep recession saying economic activity appears to be leveling out both in the united states and abroad. and the prospects for a return to growth in the near term appear good. bernanke spoke earlier today at the kansas city federal reserve's annual gathering in jackson hole, wyoming. while sounding an optimistic note, bernanke cautioned the recovery here in the u.s. will be slow at first, with unemployment falling gradually from its current high levels. the recovery's slow pace due to strains bernanke sees in the financial system, where he says financial institutions face significant additional losses and many businesses and

households continue to experience considerable difficulty gaining access to credit. most of bernanke's speech retraced key events of the last year's financial crisis along with the fed, the treasury and other efforts to contain them. efforts have included cutting interest rates and injecting capital into banks. the result, bernanke says-s fears of a financial collapse have receded substantially. in his speech bernanke urging regulatory reform as well. this to avoid repeating the past, saying we must urgently address structural weaknesses in the financial system-n particular in the regulatory framework to ensure that the enormous cost of the past two years will not be borne again. in particular, bernanke says regulatory reform needs to take into account how a single firm or market has the potential to undermine the whole financial system through their role in short-term funding and counterparty relationships. maria, back to you. >> all right, mary, thanks very much. we break down the market action right now with emmanuelle ferrera. portfolio manager at oppenheimer funds. along with barbara marsden,

portfolio manager at the ca bechlt lli blue chip value fund. great to have you both on the program. let's talk first about where the value is when & where you see this market after this huge run-up we saw. barbara, do you think there is still value in this market even though we're up 40% from the lows? >> the overall market is really pricing in the second leg of the recovery, which has been expansion into the real economy, and i don't think we're going to see that for at least another 12 months. >> isn't tirnting, emanuel, this rally we've seen even though the stock market has been doing well? a lot of people are saying what barbara's saying, and that is the fundamentals really haven't reversed so aggressively. >> and i think that's really the way that we look at it, is in many ways the market currently is more difficult than it was last year because there's a lot of hope on a recovery and there is some data showing an economic leveling out. however, it's being distorted by massive fiscal and monetary stimulus. and so markets end up

discounting earnings. and it's unclear at this point how much earnings we're going to get out of the real underlying economy when these distortions eventually run out because we continue continue to do fiscal and monetary stimulus at the pace we've been doing, which was necessary but unsustainable. >> which is why we really haven't seen revenue growth, right? you're not seeing end market demand. you're seeing earnings better than expected but because of cost cutting. >> exactly. and i think in the end in our minds that's what really makes this market environment particularly difficult, because to go and make an incremental investment today at over 1,000 on the s&p if you're looking at the trailing 12 months earnings, so current earnings, and current earnings after the third quarter, we're still only at about $30 on the s&p 500. now, we're going to anniversary that on the fourth quarter and get somewhere between 50 and 55, but that still implies a very high p/e, and almost 20 multiple on the market and therefore the

implication is you have to have massive earnings growth next year. and so while the cost cutting has been high, you have to see the revenue growth to get that. >> nevertheless, the path of least resistance is up. and i think it's very hard to time the market. long-term return on the market 9 1/2%, 10%, you get it in such uneven ways. i think an ving individual or investor should be looking at stocks you would be pleased to own over the next two o'three years no matter what the economy is delivering to you. >> so what are toes, barbara? >> wh what are you investing? >> companies with a strong balance sheet, hopefully pay a good dividend, global franchises. for example, companies that have a yaeld of 3 1/2 to 5% or 6%, bristol-myers, kraft foods, pepsico, johnson & johnson, at&t. all those are in that kag. get a good current return over the next year or two while we wait out these this period. >> those consistent growers regardless of what the economic backdrop is and also maybe along the way you can get the dividend. >> yes. >> emanuel, what do you think

about that strategy? and also i want to get your take on the international strategy. >> you can get that also, but those are very defensive stocks and i think the bid has really been with risk and the way we played that is really with names like research in motion, google, qualcomm. their end markets are still growing, and most of their customers generate a lot of free cash. so you can get some of that earnings growth. and when we invested in them, you still were investing in companies on a three-year-out basis that is still trading at a discount fort to the market. >> real quick to emerging markets, do you want to have exposure there? >> no. absolutely not. >> barbara? >> yes. you think it's -- >> yes. >> and you think why not? >> primarily because until we see a turnaround in the american consumer, most emerging markets are levered to the american consumer more than anything else. >> we will leave it there. emanuel, barbara, great to have you on the program. we appreciate your time. thanks very much. have a great weekend. you can see the sky falling apart behind us. it is getting dark. it looks like it's about to

storm on wall street. we have more breaking news on a story we broke earlier from dow jones that the company's index business is up for sale. julia boorstin on that angle. what do you know? >> newscorp bought dow jones for $5.7 billion in late 2007. that was really the very top of the market, and even then there was a question of how murdoch was going to grow the value of newspapers which even then were starting to see a slowdown in ad revenue as advertisers shifted their spending online. this year newscorp wrote down $2.8 billion on the value of dow jones, and with the newspaper business continuing to decline there's been a lot of speculation about what newscorp will do with these assets. the thing about the indexes business is that it's considered far more valuable and certainly very unique and much more valuable than many of the unit's newspaper assets. so it's really surprising and interesting that this is a part of the business that rupert murdoch is clearly looking to monetize something that has value. now, maria, this comes at a time when rupert murdoch and his

recently appointed digital officer john miller are talking about charging for all of the company's newspapers. earlier this week they shut down a small newspaper in london. they're clearly looking to cut their losses. that paper was losing about $20 million a year. now they're looking to charge for more newspapers, applying the model of the "wall street journal" to the other assets. this really is a period of a lot of change in the newspaper division, and news karp -- and it's interesting that they're taking this approach. >> thanks very much, julia boorstin, with the latest there. up yex the impact on big business. we're going to take a look. the incoming ceo of cardinal health will give us his take. also, later on on the program the long and short of investing the current market. one leading market watcher and investor will -- it may be worth adding to your portfolio.0- 50 tdd#: 1-800-345-2550 i want everything right where i can find it. tdd#: 1-800-345-2550 anything that makes trading easier. tdd#: 1-800-345-2550 i want to be right in the middle of the action--

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welcome back to "the closing bell." i'm phil lebeau live at a ford

dealership in countryside, illinois, where cash for clunkers is rolling into its final weekend with expectations that we'll see strong sales. in fact, today at this ford dealership look behind me. all of these empty spots, they were filled with cars this morning and there's been a steady flow of customers like this gentleman right here checking out vehicles, buying vehicles. and it's been that way at dealerships around the country. as we head into the final weekend of cash for clunkers some things to keep in mind. it will be ending monday night 8:00 eastern time. that's when the federal government says all paperwork from dealerships has to be submitted. they're stopping the program early to ensure adequate funding. 60% of the deals that have already been submitted to the federal government still awaiting review. so cash for clunkers so far has attributed basically 57,000 vehicles have been sold. that's what the government has counted so far. 1.9 billion of the 3 billion has already been set aside for government rebates, but only 145 million has actually been paid out to dealers. nonetheless, the automakers have benefited. they're boosting production to meet demand. analysts are worried that

clunkers, the program could pull forward sales. but we really won't know for three or four weeks the definitive impact of future sales. several firms, however, have already started lowering their 2010 sales estimates. cash for clunkers, again, ending monday night. one other big story in the auto industry today, several reports today that jim press, who is the deputy ceo of chrysler, will be stepping down from the company. press went to chrysler after a long and successful career at toyota. he went to chrysler a couple of years ago, was brought in to essentially help that company rebound under cerberus capital. never happened. in fact, his tenure might be best exemplified as somebody who was brought in with high expectations but due to a number of factors things never worked o out. again, jim press according to a couple of reports will be leaving chrysler by the end of the year. this was a rumored departure. so that if this is in fact the case in the months to come it will not be a huge surprise in the auto industry. that's the -- when people say,

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welcome back. we've moved the program inside the new york stock exchange as it is about to storm down on wall street. my next guest has 30-plus years

of experience managing a portfolio. there are three stocks on his radar right now that he thinks will be good bets for both short and the long term. he's william frye, managing director and co-portfolio manager at thornburgh investor management and he joins me now. sir, good to have you on the program. do you hear me? >> yes. >> okay. great. we are talking about investments for the short and the long term. what do you feel about this market currently, given this big rally that we've seen from the lows, sir? it looks like we are having an audio issue with our guest, and we do apologize for that. we're going to fix up the audio and get it back on track in just about a moment. the market of course was very strong today, and the market for the week is very strong. up about 2% for the week. and today the dow jones industrial average was up 156 points, as you can see there, back above 9,500 on the dow. the nasdaq is back above 2,000, which is interesting, a gain of

31 points, or 1 2/3%. and the s&p 500 also higher. and i'm looking at my screen right now, and i can tell you that there's a lot of green, largely really money moving into the market on a broad-based basis. you've got stocks like jpmorgan up 3%, ge up 3%, by the way, parent company of this network. goldman sachs was up about 1%, really lagged some of the other names. morgan stanley up better than 1%. bank of america as well as aig also higher. in the oil sector you've got exxonmobil up about 2% and boeing also higher as well by about 2 1/2%. let's check the ticker right here. the other stories we're following on the "closing bell" ticker tonight, and we can tell you that shares of j.m. smucker gained today after the company posted earnings of 83 cents a share. it was better than the estimate. the estimate calls for profits of 80 cents a share, and it comes because of sales that were up 58% due partly to the company's acquisition of folger's. it was up nearly 4%.

meanwhile, salesforce.com reporting its second quarter profit doubled on strong revenue growth. it also beat analysts' expectations. the company also raised its fiscal year and 2010 full-year expectations. and it got an upgrade to market perform from fbr markets. and the stock as a result had a big day, up 16%, as you see. caterpillar got a boost after announcing it is in talks with navistar. and the chinese automaker to set up a truck venture in china. the company helps the move will help break into chienas $22 billion heavy truck market. caterpillar moved today up 4% on the session. up and next here on "the closing bell" the i mpact of the president's health care plan on big business. these days, when you have to spend,

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welcome back. while the obama administration pushes for a major transition in health care, cardinal health is preparing for its own transition. in less than two weeks george barrett will take over as chairman and ceo amidst an uncertain time for the industry for sure. mr. barrett joins us right now in a "first on cnbc" interview as he gets ready to take the reins. mr. barrett, nice to meet you. good to have you on the program. >> glad to be here. >> so you are taking over in a quite tumultuous time in the industry overall. what's your first order of business? >> well, it's been an exciting time in many ways for us. obviously, we're dealing with some extraordinary events in washington. we're also preparing for the spinoff. and have been spending the last nine or ten months preparing to spin off our medical technologies business, which will launch as care fusion at the end of the month, and rebuilding and revitalizing our core business and our health services business, which is really a business built around cost effectiveness and health care. >> so much to talk about. the medical technology business is fascinating and has really

gotten so much attention over the years. what does the spinoff do for you in terms of financials and in terms of sort of overall growth for cardinal health? >> well, it really gives us a chance to focus on our core business of servicing the health care system across the continuum of care. so the med tech business is a very exciting business, and we're excited for them as they launch their new business. but for our core business it's a chance to revitalize our effort. our business is really about creating a cost-effective system, allowing the deliverers of care to focus their attention on delivering care. so pharmacists and physicians and nurses who devote their time to patient care as we work behind the scenes as the backbone of the sifrnlgs it's really an opportunity for to us do that financially. we have a large company in revenues, substantial cash generator. we're very excited about the opportunities we have. doing some really important work in terms of the customer experience. and looking forward to the spinoff. >> i want to ask you about broad business trends right now, and certainly what you're seeing. but let me ask you first about the president's health care

proposal. there's been a big debate obviously. you've got town halls all around the country. people are really getting vocal and opinionated about this subject. it's a very personal subject. what are your thoughts on what the president has put on the table, and how is it going to impact cardinal health? >> it is a very personal issue. it's amazing. we think of this as a very technical question. it's become enormously personal for many people and ideological. we tend to see this in several buckets. one is the question of access. the other is the question of affordability. and probably the third is quality and safety. sought part where we seem to see a building consensus is around the issue of access. the fact that we have 35 to 50 million americans who are uninsured or underinsured is an issue we need to address. we believe it will be addressed in some form. i think there's a general consensus that's going to happen. the idea that having portability of insurance and being able to cover pre-existing conditions we think is probably something where there's a consensus. the tricky part is really in the affordability and the cost part.

and that's been an enormously contentious issue. for us we believe that the access issue is going to be important. as the system includes more patients and as the demographics continue to grow, the demand for our products and services go on to increase. sought fact that we focused on efficiency and cost effectiveness i think is going to play to our core activities. but also the pressure on cost in a way also is really core to our business because again, our work is really about improving cost effectiveness. >> so as far as access is concerned, what would a public option do? if we were to see a public option, is that going to impact cardinal health? >> it's hard to know. it's hard to know because i don't know exactly what the public option means yet. we believe that under any circumstances there's likely to be an increase in demand. so whether that comes through a public mechanism, a private mechanism, that more people will be in the system and that, again, this demographic force is going to continue. so i think that will be a positive for us. the question of how we afford

all this is really going to be an interesting challenge and whether or not the public option is the only mechanism for creating the right competition is still one i think to be played out in washington. >> i mean, if the two goals are, number one, to make sure that everybody is covered. and i'm glad you said between 35 and 50 because there's a debate. everyone's saying 47 million americans run insured. but there's a big debate on actually that number because it's actually not necessarily accurate. but if that's one of the goals and if the goal is to get costs down, how in your view, having been in this industry as long as you are, having been a student of health care for so long, how do you think we get costs down? give me -- >> i think there will be a combination of things. there's going to be some pressure, i think, as it relates to the fees to providers i think are going to be under some scrutiny. we've seen a lot of that in various proposals. the question of whether or not we'll use taxes as it relates to taxes either on the most affluent americans or taxes on richer benefits is one i think still to be played out. our work is really more on the day to day. our work is really about helping

a hospital improve the efficiency of the way they do business. when we work with a hospital, we're constantly thinking about how we can reduce their pharmaceutical spend or their medical surgical supply spend, and so we've got tools that help them do that. we've got tools to help them manage their inventory so they can optimize those things. so when we work, again, across the spectrum, retail pharmacy, community hospital, major teaching institution, it's really about working on those back office activities that allow them to focus their time on their patients. >> so real quick, cardinal reported earnings on august 18th, revised its outlook upwards to reflect low single-digit growth. are you optimistic about where we are in the economy? what's your sense of the overall economic health? >> i think there are probably better experts to describe the economy. i do think that there are some signs, some economic signs that we're hitting the bottom and turning the right corner. i think from the standpoint of unemployment there's enormous pressure still and we're still seeing some signs from the american consumer that they don't yet feel that. but i do think there are good signs in front of us. we feel very optimistic about where we are. we think we play a role in the

system. we think that we are part of the solution to a very challenging problem across health care. we're very optimistic. >> mr. barrett, good to have you on the program. >> good to be here. >> we wish you well in your new role and we certainly hope you'll come back join us soon. george barrett, incoming ceo of cardinal health. federal reserve chairman ben bernanke saying today the worst of the financial crisis is behind. was today a victory lap or did it come too soon? hey, why don't we use our points from chase sapphire and take a break? we can't. sure, we can. the points don't expire... ♪ there is nothing for me... ♪ there's no travel restrictions... we could leave tomorrow. we can't use them for a vacation. you can use the points for just about anything. i know... ♪ the way you look tonight ♪ chase what matters. get your new chase sapphire card at chase.com/sapphire.

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at the federal reserve's annual meeting in jackson hole, chairman ben bernanke said that the u.s. economy is leveling out and that near-term growth prospects appear good. the speech is being called a victory lap by some fed watchers, but is it too early to celebrate? joining me now to talk about that is chris lowe, chief economist with ftn financial, and dan alpert, managing director at westwood capital. gentlemen, good to have you on the program. welcome. >> good to be here. >> dan, let me kick it off with you. what did you think of bernanke's comments today? >> it was a victory lap. the fact is the first half of the speech was really dedicated to telling everybody what the federal reserve had done, what regulators in general had done, not only in this country but the rest of the world. and the fact is that that's really important. he did all those things. but he's still in a race, and he could take his victory lap, but the next race meet is coming up

probably in about a week or two. >> chris, what do you think? how do you see it? >> that's right. look, we've probably got positive growth in the second half of the year, although i thought it was interesting he didn't mention fiscal policy, which has also played a role, and given the anarchy and gridlock that seems to be breaking out all over in washington, that might be a problem next year as well. if the fed starts to remove accommodation and we don't get further stimulus from washington we could see the economy stall. >> tell me about that. because some people are worried about a commercial real estate upset as a possibility and perhaps more upset from the banks. chris, what kind of upset might you be suggesting here? >> the most important thing is that 71% of the economy, the consumer sector, is not going anywhere. we have not seen any improvement in the growth trend in consumption. it's still downward. it's not down as fast as it was

in the second half last year. but until we get consumption back on a rising track, sustainability of the expansion is going to be difficult. >> dan, what do you think it's going to take to get the consumption back again? do you think we need another stimulus package or do you think it just takes time to see these things reverse? >> we've done a hell of a lot of pump priming when it really comes down to it. the stimulus is working. it's clearly doing something. the problem is that we're still faced with the same big systemic issues that we were even a year ago, maybe not on this grand a scale. and that is that there's still enormous volumes of loans on the books of lending institutions who would otherwise be providing capital to a growing economy. and those loans are starting to deteriorate at an even more accelerated pace. home loans are going into foreclosure at a more accelerated pace. the losses on those loans, once they default, are increasing. and the same thing is about to happen with commercial real estate and other loan categories. so the difficulty is it's not just a question of priming the

pump. you have to have the water start to flow afterwards, and unfortunately there's still a big dam in that stream in the form of bad loans. >> so how do you explain a 40% rally in the stock market? is that just divorced from anything else that's happening right now? i mean -- or is it expectation? >> there are two ways to explain it. the first one obviously is that there was panic selling in march. i mean, we went down to 6,500, or thereabouts. and perhaps the right range for this market to be trading in is 1,000 points behind us. but nevertheless, it's certainly not 6,500. the fact is that the financials have been leading a lot of this recent rally and the assumption has been with regard to the financials that for some reason they're fine. i would posit, and i think chris probably would agree, that they're not. >> chris, what do you think about that, the financials? >> i can't argue with a thing dan said. he's absolutely right. the banks are still carrying an awful lot of toxic stuff. i'd say part of the reason

investors are pleased with banks is that they did, or many of them did post positive numbers. in the last couple of quarters. and we're looking for gdp growth in the second half which should make things look even better. there are enormous problems on bank balance sheets which are getting worse. the delinquency rates are still rising on the biggest types of loans. that's residential and commercial mortgages and credit cards. and they're not just rising, they're accelerating. >> what about the international economy right here, chris? a lot of people look to places like china as the growth engine for the world. are you looking toward the bric countries as a potential positive here or no cigar there either? >> look, china will be a positive. i think the most important thing is that they've shifted their focus on growth internally rather than relying on exports. probably a wise move. france and germany have begun to grow. and i think that primarily even

though their banks are in rotten shape their consumers didn't go on the debt binge that ours did. so they're having a more normal recovery than we are. and then of course japan posted positive growth too, but that was all government. the thing is that that's not enough to carry the global economy, and it's certainly not enough to carry the u.s. economy. >> right. >> we need time. and given time, we can repair the problems that we face. but it's going to be touch and go, i think, for a year or so after the pump-priming second half growth this year. >> dan, we've seen extraordinary actions not only out of the federal reserve but also out of treasury and the government in general. what is your sense of the regulatory environment, how that may change, the regulatory reform plans on the table? >> well, to one extent the speech today was almost like a job audition. the administration has put forward a plan whereby the federal reserve is going to be the more equal among equal of regulators. and there's some resistance to that on capitol hill.

there's two camps for that. one is the sort of anti-government camp that says having too much regulation is bad anyway and then on the progressive side you have a bunch of folks saying wasn't it the fed that made the bad call to begin with? why do we want them in charge of this? the fact is i believe the federal reserve is really the only institution we have in washington unless we want to start creating a whole new one. >> that's independent. >> that has the independence, that has the econometric focus, that has the ability to sit there and look at a systemic situation as opposed to individual areas of regulation. so you know, he spoke to that issue today. the difficulty was that he really didn't say -- you know, he mentioned the issue of banks having short-term liabilities against long-term assets and all the other stuff, but the fact is that he didn't come out and simply say these lending institutions, the institutions under my care, under the care of the entire regulatory structure, went and bid up the price of financial assets by an enormous percentage.

>> well, that's certainly a lot of blame to go around. dan, good to have you on the program. chris, thank you so much. we appreciate it. we will see you both soon. gentlemen, thanks. have a great weekend. coming up next, the long and short of making money in a tough market. we're going to bring those stock picks to you. we're breaking down three short-term and long-term stock plays that could help you beef up your portfolio in an uncertain economy. stay with us. 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 es 350.

welcome back. as promised, my next guest has 30-plus years experience managing a portfolio. there are three stocks on his radar that he thinks will be good bets for both the short and the long term. we go back now to bill fries. he's managing director and co-portfolio manager at thornburgh investment management. mr. fries, good to have you on the program. we apologize if you had an audio issue earlier. we hope you can hear me now. >> i can hear you fine, maria, hi. >> give me your sense of the market here. does it feel choppy or overvalued to you given the 40% rally that we've seen? >> i don't think it's overvalued at all. i was listening to the commentary of your earlier economist, and i don't really see it the way they do, especially with regard to the banking system because i think the banking system has been reliquefied, and they point out it's going to take time.

the banks now have time. and about the time the stimulus runs out they're going to have the wherewithal to start lending more aggressively. >> so how do you see it, mr. fries? >> i think we're in good shape. pardon? >> i said how do you see it? tell me what looks good to you, then. >> well, i like fifth third, which is pretty much a long-term and short-term holding because this bank has come back from the dead. they've increased the scale of their balance sheet -- or their liquid reserves. and i think provisioning hasn't peaked for them. they're still going to have a number of more quarters of write-offs, but they'll be able to handle that. they'll have the liquidity to handle that. and i think the housing market, we're seeing evidence of that improving. and so the psychology is getting better. and the assets in their areas

were never overvalued like in florida and california to the same extent. although they do have business in florida that people have been concerned with. but i think all that's in the past. >> okay. so fifth third is one of your three picks for the short and the long term. let me get your take on where we're headed, though, broadly speaking. you said you don't think the market is choppy right here, even though we saw this 40% rally, and you don't necessarily worry about the banking sector. we're approaching the september, october time frame, when typically we have seen sell-offs instead of upset in the markets. are you expecting any disruption going into the fall? i don't want to make you a market timer of course. we really do want names for the short and the long term. but we are approaching, you know, when people come back from vacation in september and october have been iffy months at best for the markets. >> well, i think we're going to have much easier comparisons in terms of corporate earnings, cost cutting has been very effective, so i think corporate

profit reports as they come in will be somewhat better than people are expecting. and one of the stocks that i like in this environment especially, when people are getting very low returns on their money market and other short-term investments is an at&t. this company still has growing cell business, growing broadband business. people are spooked about, of course, the wire line business, but i think that's slowing down in terms of the deterioration. so, i think getting a 6.5% yield while you have a long-term call on a business that is still expanding, i think is very attractive at this time. >> okay. so, what about the other short- and long-term picks? you're looking at three names for the short as well as the long term. >> well, i think dell would be another stock that may take a little longer to work out. but i see very little downside

from here. and if you look at the way the stock has been acting recently, it's much improved. there will be an enterprise cycle at some point. and that may be several quarters or maybe towards the end of next year. but all of the -- the negative aspects of this company's situation with regard to their franchise, i think, is priced in. they've got plenty of cash, and the valuation, i think, is very compelling. and they're, you know, still profitable and will end up with much higher earnings. probably over $1.40 within the next 18 to 24 months. >> even though, mr. -- even though, mr. fries, you've got so much competition here. you know, dell has been up against tremendous competition, whether it's apple or hewlett. you think they are getting their business in order and will be able to -- to shine even in the

face of all of those competitors which are pretty aggressive with dell? >> well, there's no question that it's a competitive environment, and certainly the competition in the -- from the white-box manufacturers in asia has been a factor. i know acer has gained share. but i think dell recognizes that problem. and, remember, that they're primary focus is not retail, it's the enterprise. enterprises are not spending now. so, i think we're seeing an exaggerated impact on their market share. and when enterprises come back into a spending mode, i think their market share will increase again. >> all right. we will leave it there -- go ahead, mr. fries. sorry. >> well, i was saying, you know, overseas, there are companies that are similar, like a dell is depressed and s.a.p. is depressed. this company is certainly dependent on enterprises with their software. but, here again, i think that 18 months from now, this stock will

be much higher than it is today. >> all right. we will leave it there. and we so appreciate your picks. that's certainly what many of our viewers love. mr. fries, we appreciate you being on the show. thank you for joining us. let's get over to the nasdaq market site. melissa lee is there with more on what's coming up at the top of the hour with "fast money." >> hi, we'll talk about where the options traders see this rally ending. also, you heard about all the anger coming out of the health care town halls. we've got the trade for you. and it's not just the health insurers, by the way. and the cash for clunkers, our traders will give you the best way to play that stimulus plan. maria, a lot of show coming at you at 5:00 eastern time. >> thank you so much. "fast money" at the top of the hour. up next, more troubling developments in california to pass on to you. we'll have the controversial plan to save billions of dollars in the cash-strapped state.

and why it's turning into a hot-button issue for many of the people there.

welcome back. the crisis continues in california in terms of the budget. now, one plan to help plug the deficit is stirring a lot of outrage. cnbc's jane wells with the story in los angeles. >> reporter: hi, maria.

one of the more controversial plans to close california's budget gap is hitting a snag. the state senate approved a plan to reduce the prison population by 37,000 inmates over 2 years. that's a 22% reduction in an effort to save california more than a billion dollars. but the state assembly may not go along. this, after a federal court already ordered the state to reduce its prison population by 40,000 inmates over 2 years to ease overcrowding which is blamed in part for a recent riot. now, the senate plan includes releasing thousands of older or sick prisoners who have 12 months or less left to finish their terms at home. also reclassifying some felonies as misdemeanors to reduce the number of incoming prisoners or to shorten their sentences. >> the california state senate decided to up-end years of pro-citizen and anti-crime legislation and utilize a fiscal crisis in order to change that in favor of a dangerous, liberal

agenda. >> this provides a pathway and a hope to, in fact, be much more successful when it comes to helping those people who leave prison. >> meantime, california turned down an offer to house prisoners in michigan for less money, saying that the price is still too high. now, the state assembly could vote on this prison release program monday. and more bad news, financially california's unemployment rate hit a post-world war ii high of 11.9%. and on another front, calpers is threatening to sue the state over the mandatory three-day furloughs saying the forced time off jeopardizes the pension giant's ability to manage its assets. back to you. >> amazing, calpers, the story there has really accelerated recently. jane, thanks so much. we appreciate it. as we told you earlier, one of the big stories of the session, dow jones is exploring the sale of its index business, in fact, the dow jones

industrial average. we had the news straight from dow jones earlier today, and we continued to watch the story unfold as dow jones has been talking about potential buyers about the sale of its stock marketing indexing unit. the dow up 1.66%. we had a very broad-based rally today. 9505 on the dow jones industrial average, and you have stocks like jpmorgan up 3% and bank of america up 2%. general electric, parents of this network, up 3% as well. nasdaq did well also, up 1.5%. and google was up 1%. ebay up 2.5%. apple up 2%. s&p 500 up by 18 points and, of course, in addition to the above names already mentioned, the oils did well and that was part of the s&p's moves. for example, exxonmobil and chevron were higher on the session. oil prices for its part, up again. back above $74 a barrel at

$74.01 on crude oil. have a fantastic weekend, everybody, the market is up 2% this past week. and i'll see you next week on "closing bell." hope you join me on "the wall street journal report" on cnbc. back in a moment with "fast money." good night. are you back in? stocks rebounding this week to new 2009 highs. if you think you're too late, the traders have your plays from here. from the nasdaq market site, i'm melissa lee. these are the "fast money" traders. we've got the rally from all angles. and we've seen the town hall forays, but steve grasso has a fast way to trade it. do not miss it. but first, the word on the street right now. we're not as rambunctious as the crowds there, but it was an exciting day in terms of stocks. grasso, you were on the floor of

the market. >> you saw people scratching their head, now more so than ever. i've been saying this for the last couple of weeks. all the shorts are figuring this market has to come in. that bet has not worked and i have not seen any new shorts coming to the marketplace. >> at some point isn't that going to come home to roost? >> a baseball fan, no. but i've been more wrong than the mets' medical staff the last couple of weeks. so, mea culpa on my part. i get that funny feeling that we're setting ourselves up for a big fall, but today was a slap in the face for me, boy. >> if you learned anything this week, you learned about the tremendous amount of capital sitting on the sidelines and you learned how asset allocation how money managers are clearly right now underinvested in the market. we got down to 975 in the s&p futures. we turned around aggressively higher. got up to 1025 today. why is that, because everyone is underinvested right now. if you are playing the market right now, 975 is now your route and the minute the s&p gets