regard. >> we need you back as a guest host. your stuff. >> my stuff. >> yeah. >> it was great. >> it was great. thank you so much. >> so many viewers i think learned a lot. >> join us tomorrow. "squawk on the street" is next. good morning and welcome to "squawk on the street." live from the new york stock exchange. david is back at headquarters this morning. look at features. we could be looking at a triple-digit loss this morning. adding 200,000 jobs last month and taking the cues of europe. the ecbc standing pat. red arrows across the board there. >> the road map starts off with dow downgrades to put some pressure on stocks today.

general electric, it's a credit rating cut at moody's. big blue downgraded by bank of america a day after hitting a fresh record high. >> mcdonald's taking off the conviction buy list at goldman sachs. replaced by starbucks. they say it lacks near term catalyst. >> eddie lam pert, if you missed it this morning, shame on you. on "squawk" talking market risks and the turnarounds of jc penney's and sears. steve liesman has details. good morning. >> good morning, carl. treasury secretary geithner at a speech to the economic club of chicago making a very political speech this morning saying the government must be, quote, willing to do things not just cut things. again, just one of many digs at republicans. saying the -- he says geithner labels the gop economic plan a dark and pessimistic view of america and repealing dodd frank is a recipe to make us a

declining power and a less exceptional nation and using words used by the gop for the vision of america. government he says is a critical role in speeding the recovery. the u.s. cannot put fiscal challenges above all others and says there are substantial challenges. goes on to make some comment about the u.s. economy saying successfully navigated the most dangerous phase of the crisis and u.s. deleveraging better than the competitors and disputes a lot of criticism of the business climate putting out that profits are higher than before the crisis saying that business spending is up 33%. this is a political speech and maybe tells us about what role the obama administration envisions. geithner playing in this campaign. he's out there essentially making the case for the president but going beyond that and essentially criticizing the republicans. carl, melissa? >> all right. steve, going to be a long road

until november. thank you for that. now the blue chip calls out this morning. ibm at a neutral from buy citing limited upside. the interesting thing, too, is they say spending on i.t. is weak in western europe and u.s. public spending and what we heard from the cisco ceo yesterday saying it gets worse than it gets better. i.t. spending that is. >> i hear the opposite of accenture and sap. i heard red hat. people gravitating to cloud with middleware. i don't see this. i can't just say someone's mistaken. i.t. spending i see even in europe being very strong. >> even with the sandisk comments overnight? revenue coming down on the forecast for q1? >> i wonder if we don't have a glut in flash and amd.

micron -- you know what? there's a glut developing because that's the kiss of death. >> the problem is revenues were all right and sandisk's were weak and the average selling prices is a decline. a big one for micron and sort of the first inkling to have problems. the striking thing about sandisk is an apple supplier and apple gets a lot of -- sources across the board. sandisk is not the only supplier of flash. what does it tell you aft derivatives of apple trade? i would think that apple is the best apple play out there and it's not the derifty plays because they squeeze them. >> i think that's right. i talked about monsters. $1,000, target last night on "mad money" and i think what people have to recognize, apple not unlike the heyday of cisco, it's a charge. for all we know, apple called

this flash company and said here's the new pricing. >> yeah. >> i saw this happen with sirius logic. and it was making half "x" and a thing people at home must know, apple doesn't let you say their name. if you say that apple did this, apple will stop buying your stuff as soon as you say it. >> it's almost like walmart and its suppliers. >> yes. >> total control over pricing. the margins. as a result while the company that buys maybe and doing well it's the suppliers that suffer. >> right. great analogy. in the '80s -- gitano was public. a jeans company. >> i can see you in a pair of those, too. >> there you go. you never know. 50% -- got me there. i'm wearing jones jeans the other day and they -- walmart didn't want much of those. walmart stopped ordering and

gitano went bankrupt. this is a juggernaut, apple. you can't argue. you can't jawbone. >> just to circle back on the ibm call. part of it is they're saying, look, we love this company but -- >> thank you. >> but the valuation is reached what we thought it would hit and going to be tougher sledding ahead. i just wonder whether or not you think that's a corollary. the mcdonald's call is very similar in a lot of ways. >> i didn't like the call because they're using a web in 12 times earnings in the out years. i think one of the things that changed in 2012 people are looking at the out years and how they keep chipotle. thinking 2013, 2014. >> right. >> especially with interest rates low. dividend discount model to make sense and stick with these. why would goldman continue with chipotle because it's cheap. i don't like the downgrade. >> moody's downgrading ge by a

mach. that's the fourth highest investment grade rating. it's risking with ge capital. in a report, they say because of the large size and must rely on funding of financial markets, the agency argues the markets were not reliable in the recent credit crisis saying that the company's industrial businesses are strong. david, company puts out a statement last night saying capital's never been stronger. $80 billion in cash and due to a change in methodology over at moody's. >> you said it all there, carl. they had that statement and it's true. you know? where were the guys in the height of the financial crisis or beforehand to tell us perhaps that the balance sheet at ge capital might not what it appeared to be? they were nowhere to be found as we know and seems the rating agencies can't do us any favors? can't do us any favors moving in to a financial crisis rating everything incorrectly and not talking as much about ge and the

credit rating than so many of the securityized products and rated aaa and the like when they were junk, junk, junk. not looking back. changing the methodology. getting stricter. not sure it benefits the markets at this point either. >> what a bogus downgrade. maybe they change the methodology but looking at ge capital before mike neil came in and groomed it, it was a giant subprime lender in uk real estate and mexico. this is the best i have seen ge capital including the jack welch period. david, come on, man. this is the thing people at home are saying, wow, did ge get weak? they got strong. >> i think within the market there's really not much attention paid any longer to the credit rating agencies. that being said, they still can have an impact as you well know, jim, in terms of what institutions buy or not own.

and that's where you can see it. come on. are we paying attention to what they have to say? day-to-day. i can't imagine you are given how wrong they have been for so long. better to have them have a strict methodology than not as strict. >> it is fascinating the contrast. compare it to the story in "wall street journal" of fitch feeling like it was punished with a strict ruling or verdict on a secure tized product by credit suisse and not using our ruling. >> who pays attention? i have run some cash for the street. street which i founded. and when you get the downgrades the guy who is you're bond brokers, listen, kick out the ge, don't you? i say, no i'm going to put my brain on rather than in the closet and, no, not going to sell the ge paper but there are

guys that like to put the brains in closets. i don't know why. and they sell. >> interesting. big note out today. david, about next week and moody's and the specter of more downgrades for big banks. saying investors better get ready for the likes of a morgan stanley and goldman in some cases. >> listen. again. it could conceivably have an impact but let's keep in mind -- let's see what they have to say and how negative it is, really, it does feel as though so many of the banks moved through the crisis. so doubt you can't -- 2008. bank of america. verl sus 2012 bank of america. 2008 morgan stanley versus 2012. where were they then when perhaps we needed them to be stricter? there's so many people to fault, of course. easy to pick on the rating agencies. i don't mean to do that. i have had a hard time with them for a long time. >> tim geithner with liesman. our banks are so strong versus

others. you probably think i said ge is strong versus what moody's said. we come down. why is our market looking hideous? because of european banks and our banks are ready to clean up. i had u.s. bank corp. on last week and u.s. bancarp is taking the place of those that dropped out of u.s. business and seeing it going forward. you downgrade the american banks again, you can argue we'll be consistent even if we're stupid. we're consistently stupid. >> talk about the big call on mcdonald's. removing it from a conviction buy list. price target to 110. with the chain, goldman says it sees more attractive opportunities elsewhere and starbucks is a conviction buy. it also likes chipotle saying both will have 25% plus average growth. >> mcdonald's, they put together

an actual core way that you're going to make money with good same store sales. again, i come back. these are like -- these downgrades are so not sandisk. there's a real problem here. i read that downgrade and if you had slapped an upgrade on it, if you had said, listen, we are going hold the buy and here's the reason, i would have bought the darn stock. i'm not kidding. half hearted conviction down to buy and then said maybe they're thinking skinner, jim skinner. maybe he's retiring and we don't want to be there but that's certainly not in the note. >> i thought the flip side -- sorry. was more interesting. they didn't have starbucks on the conviction buy list for whatever percentage gain on the stock and now a valuation of 34 times current earnings compared to mcdonald's. >> i know. >> i thought that that was the more puzzling -- the upgrade of starbucks opposed to the downgrade of mcdonald's. >> you are right. what they hang their hat on is

single serve. we have had this debate. the green mountain coffee and we have what they say is coffee deflation. i hope so. i mean, i paid a little too much once again for the cappuccino with skim wet. will this go from $5.10 to $4.80? no. >> they're also looking at casual dining saying look at comps that are good. expectations that are low. food costs coming down. i wonder if it's a sign of an economy healing with more action at an olive garden opposed to an mcdonald's. >> if you go back to the darden call saying it's not call land lot. red lobster coming back. felt that the big meal for olive garden brought people in. the right promotion. here's an anomaly. they deliver the food to the casual dining. i'm telling you. like goldman. looking at the notes saying, dysfunctional.

dysfunctional. >> guys coming to fast food today, the more interesting news is burger king going public again in a sense. a number of weeks before it trades. my friend martin franklin that trades in london buying 29% from the owners. and that's how it's going to go public and then move over here to new york. don't forget about burger king either because they're talking about great growth there. not in the u.s. but outside of it. that's probably the more interesting story. can't play it right now. bill aikman will own it. >> they're in problems of the world having trouble. most heavily penetrated in europe and spent the least renovating the stores. >> many revamps announced this weekend. >> like mcdonald's. >> growth targets i have to say. >> wendy's is passed.

i think wendy's has really stepped in the fray. do i want to own it versus mcdonald's? the goldman note. the conviction buy down to buy which to me seemed like the sell to buy and there's no way you want to own any of these other than mcdonald's despite the fact they think mcdonald's is no longer the great growth story that it was. >> many morning, sears holdings chairman making a rare appearance spoke about how retailers like sears need to adapt to compete with their internet rivals. >> i think that a lot of businesses will have profitless prosperity and we've got adapt and i think that companies like amazon, ebay, they've made -- they've turned this in to a big opportunity and we've got to be able to compete with them. not just walmart, target, et cetera. >> david, we were all anticipating a great interview. we got one. reflections from you? >> interesting use of the word

opportunity. i remember from the walmart documentarie documentaries, when they make r call it a mistake, they call it an opportunity and seems as though he might have been doing the same thing there. >> well, look. i'm going to tell you. i have known eddie forever and i feel that eddie has shied away from tv. he turns out to be pretty darn good on tv and -- >> in that he keeps everything close to his chest? he doesn't really reveal too much? the fact he's saying they have to compete against amazon and ebay is that really a surprise? >> i guess i'm more speaking presentation, melissa. >> okay. >> the man behind the mirrors is coherent and got a view. does mention auto nation and big win and auto zone. >> yeah. >> i come back. look. i have begged eddie to come on tv for multiple years. that was a tremendous presentation that they did this morning and he has a great view of retail and people think he's

wildly over his head in retail. i don't like to shop at sears or k mart. that's a big issue and didn't like circuit city or radio shack. they have a problem of which he did allude to. >> investors coming in to the market. fed policy worked. being pushed further and further out. except for days like today. >> sounded like a democrat. he is a jet fan, too. always mystified me. >> hey, hey, hey. >> that's right. you like losing teams. i apologize. i do think that -- that's a joke. >> had not been a losing team for at least the last three years. 8-8 last year and giants are better. let's move on. >> i would have to take you to the woodshed in the break. >> i'll be back tomorrow. >> david, we've been talking about yahoo! lately and the company making official what the journal had already taking important steps in their words

to reshape the company. 2,000 job eliminations. "the journal" raises the possibility of more down the road. $375 million in analyzed savings. sees a smaller, nimbler, profitable company, david. >> the press release just out from yahoo! talking about bold new yahoo!. listen. when i look at the company right now, you knew this was going to happen. this is the new imprint of the ceo. they're facing dan lobe and a different proxy fight coming up. fighting with him will be hard and his slate trying to get on wouldn't allow lobe to be on the board. the deal didn't work out as it was constructed. no surprise there for some of us. so many challenges there for this company. we'll see, though. listen. he is taking the steps at least and trying to put his identity on it. >> no mobile. no social.

no cloud. 0 for 3. alluding to the mets there. >> now, that really hurts. okay? stop. just stop. >> like grass. >> different places. >> we haven't lost a game yet this year. >> real testament. >> lucas duda, baby. >> thank you. got a rotation. right on big shoulders. yahoo! i love the fact that every time -- you know what comes out today? you know what comes out today? the 3d version of "titanic." that's discussing with yahoo! to mention the "titanic" 3d version. >> not in a blockbuster record setting price offers kind of way. >> more of a multiple iceberg situation kind of like -- >> i've got children here! >> yes. someone downgraded discovery. frozen planet time for yahoo! >> live from the new york auto

show. nissan stock up 266% in 3 years. shares of annie's giving organic growth a whole new meaning. we'll talk with the ceo after he rings the opening bell and one more look at futures. a tough one. a lot of concerns overseas. weak spanish auction. worse day for the nikkei in five months.

welcome back to "squawk on the street." we all know yesterday there's a notion at least for the time being that there isn't going to be the fed training wheels in terms of some of these programs being extended. will the market or has the market stood more on its own two feet than many believe? that's what the market's been grappling with and took interest rates as hostage. moved higher yesterday. but instead of being in the two teens we are still close to two and a quarter and overseas everybody everybody's talking about spanish yields and rightly so and we have auctions in spain, their rates especially on the 10-year and the 3-year highest

since january but italy is much more concerning to many traders and if you look at their charts of their 3-year and 10-year as you are now, starting in mid-february, you could see their rates moved up, not to the highest of january but february. this is something truly to monitor in front of our nonmanufacturing ism at top of the ten. back to you. >> we'll see you in half an hour's time. thanks so much, rick. time for "the mad dash." we are days away from the start of earnings season and someone saying they'll miss. >> this rbc note. look, the ceo of alcoa built really fantastic new plants. russian expansion. really brought the cost down and doesn't matter because we are in a glut. and why are we in a glut? the chinese producing much more aluminum than we need in the world. they need to put people to work. so they have the dirtiest, most

polluting aluminum plants in the word and they don't care, they don't care. alcoa has a tough quarter and start of earnings season. starts the tone. could they revisit that level? if they don't blow away the nubmers, yes. >> monosanto. >> i like that monsanto. talking about okaxeccelerated f cash flow. important. soybean, it matters. this is the king of the ag group now. >> aig, bernstein. you don't see a lot of calls like this. upgrading from market perform to outperform. target to 45. >> i like this. the ceo is a legendary ceo of met lie. turned the company around. he'll buy back the stock.

this is the stock to very easily go to 40 and not expensive. l i like that call. >> do you expect that futures down triple digit? >> rick, talking about spain and italy again. i would urge that the adp number is probably most important thing today. unfortunately, the government chosen to release the key employment numbers. "squawk" will be on on good friday. why is this terrible? it's probably the most important thing. no one will be around. the government could do it thursday. they have the number. do it monday. tim geithner, listen up! you're partisan. i heard the partisan brief from liesman but great to pressure them not to do things on friday. people care about that holiday. >> more from jim after the break. over to you. >> hey, carl. a rare day with so many people wearing bunny ears. the ceo of annie's is set to ring the opening bell to celebrate the ipo. shares have doubled. speaking to the ceo straight

ahead.

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the markets. europe already is. germany down 2%. opening bell here stateside, some cheers for annie's after the ipo last week. of course, the organic food company. the ceo in a couple of minutes. at the nasdaq, the national autism association. by the way, if you see any bunny ears around here, not a playboy thing but all about annie's. bnny. >> yeah. saw the big bunny there ringing the bell. an amazing run for annie's. what's the comparables? whole foods. is it overvalued? >> you have to hope that the tax rate if you look at that and back it out, you will have numbers to justify hard valuation. i said last night, i liked it. just up 12% after i said i really liked it the day before and you are right about the comps. i do think by the way that the

projections are very understated. i did not like the fact that you have a tremendous amount of selling by insiders and when i was bullish on this company because i like the cohert very much, i wish that salara did not take the ownership down. i think the growth can be ax accelera accelerating. >> listing opened almost the same week that whole foods got hit with at least one big downgrade. talking about the strength in organic and the stock itself reached their target. was this the perfectly timed ipo? do you think they got the biggest bang for the buck that they could? >> i think that they're part of a wave of deals that are coming in advance to facebook. where you've put in for stock and you hold on to it and you go to the broker and said, i held on to the annie's and the exact target and the guide wire.

i want my facebook. that's how it's done. when i was hedge fund manager and a hot deal coming, i would say look at the margin run. i did not flip. give me a huge amount of facebook. >> right. >> so this is part of that wave. >> look at amazon, as well. there's questions about the margins this morning from morgan stanley. it was bank of america yesterday. >> just yesterday. >> drum beat of analysts saying maybe the pressure is on. >> i agree with this call. why? because when visa's reported the last quarter, he said ratchet spending up to win and the stock percolated up from 170 to 190 to 200. that seems to be a -- >> distribution centers, the robots. the spending goes on and on in this sort of environment so -- >> i think that they're caught up and netflix the other day with the downgrade. when everybody shoots at everybody, the margins go down. >> david, if you're there, a

look at the screen, mostly red. medium-term debt there at 5.7. the highest since january and beginning to hear people come out saying, look, the affects of the ltro are dwindling fast. >> carl, listen. this is the defining -- these are the defining things in the early going here today. we had a lot of individual stock stories at the top of the show and for the market overall, yes, we are talking about europe again and we are talking about the yields on a sovereign over there. 5.6% as you said. that bond auction did not go particularly well and the banks are taking the brunt of the move, as well. morgan stanley down over 3% in the early going. you know, the question is, is it going to be short term in nature, in other words, in terms of focus yet again potentially on europe and the impact or are we back? that's the fears out there and

talk about so often on the set in terms of ceo confidence and the like. replaying last year in their heads and if you look back 12 months, kind of right where where we were in terms of europe. >> we have growth, employment growth. i'm not saying this is 2011. i want to go against this trade. i just think if i wanted to buy -- morgan stanley, i'm a buyer. not a seller. >> same time, just for today's session with the direction of the day, piece together what david said about europe and spanish auction, not only high yields but the minimum amount they could auction went to auction. barclays down by more than 4%. gold down by $48 an ounce. gold is down. the dollar's stronger. flight to safety. the risk appetite in this market is not high. >> well, geez. we have had the best quarter since 1998. we had a good beginning in the

first day. i don't want to lose sight of the fact i think things are better, not worse and i think that this is as i said the other day on "mad money" we are driving the car. i'm more concerned about the fact again the employment data comes out when no one can take action. people trying to clean the book up. doesn't want to come in long. the three-day weekend. >> a detrimental effect for having the data released when the market is closed? >> copper is down. i don't mind that gold is down a little. i do like gold. i would rather take the cue from the first quarter than from the first ten minutes. >> all right. on that note, let's head over to bob pisani. >> i'm more positive, too, jim. two reasons. number one, adp and gold down. i think both positives. there's anxiety of friday, guys. nonfarm jobs report and the markets aren't open. trade the futures but that's not

good enough for a lot of people. good numbers coming in. revised prior two months on the upside, as well. i'm puzzled why bonds rallied on that. i called around. there's concern of spain out there but i think the adp numbers were good and good news for friday, at least in line with expectations. what about gold? why is gold down? more global uncertainty. shouldn't it be up? no. it moves on global uncertainty but the u.s. is stronger. the u.s. is moving away from the rest of the world. our markets are outperforming to the u.s. economy doing better and less qe3. that's negative for gold. better u.s. economy. u.s. outperforming is a negative for gold, two positive signs i see. yes, spanish funding costs are rising and certainly a great concern over there. this is the first time in a

while seeing spanish funding costs rise and a major issue and why we're weighing on europe. one thing that worried me today. not so much spain funding prices rising, i expected it. i did not expect spain. huh? remember, they're the big export exporters. soft export figures raising concerns of over in asia. remember, soft landing in china is a key to the global growth story and doesn't support that idea. the aussie dollar at a two-month low. yesterday, the royal bank of australia held rates steady and all sorts of hints they may, in fact, be cutting very, very at's something to keep an eye on. over to you. >> look, bob. the best call of anybody on europe. i'm glad to be on the right side of bob. he had a correct call. shift to rick santelli. rick? >> yesterday, jim, we were all paying very close attention to

the five-year. the ten-year's the quasi benchmark. most of the financing, a big audience with five-year yields. around 1% before the minutes. ended up settling yesterday at 111. currently splitting that difference at 105. if you look at a chart going back to the last time, i should say the first time we had a pretty robust selloff in treasuries, sparked by the fed moving on the 13th. looking at the dollar index and all things being equal, a rise in rates is friendly and has been on both occasions. 13th and yesterday. see we're a little bit below 80 in the dollar index. where at the close of last year? a bit above 80. this is bringing the dollar index towards unchanged. the real key is will the maturities trade above their high water mark over the last couple of weeks in that could be a dollar friendly. back to you. >> all right. thank you very much. let's get to david.

he'll bring us up to speed and more color on the burger king story today, david. >> interesting and complex story. special purpose acquisition corporations. this one listed in london. justice. started by martin franklin running car den and been in the area for many, many years. he did one with gle and took it public and then sold to man group. mcgruen and akman own it. they're buying 29% of burger king, taken private for $4 billion. that was 2010. and mr. ackman fought with mcdonald's. he is kind of always had an interest in fast food, mcdonald's or wendy's. there's kind of a little compilation of what's going on

here. 3gs, brazilians. they're associated with imbev and will own 71% of burger king but able to take it public through this mechanism. and they're getting $1.4 billion for it. what will end up happening is owning 10% of burger king. it will trade and then told to move from london to the new york stock exchange. that's the expectation at least and also hearing that ackman probably top up the position and these guys get a promote on when they buy the asset and the appreciation of the asset. from what i'm hearing, given up the appreciation promote for profits because they feel like they have a really god deal on their hands and an interesting deal of burger king to go public. they'll control it with 71% but you have bill ackman, martin franklin, they're in burger king and what you would expect, a lot

more upside despite what you, melissa, pointed out as challenges in especially europe. they claim it is growing faster and same store sales better than they had been, i believe. back to you guys. >> thank you very much, david. fresh from the opening bell, want to welcome the ceo of annie's, maker of or gainic foods. shares of bnny up about 100%. good morning to you. congratulations on the listing last week. >> thank you. great to be here. >> strikes me that it coincided almost with the pink slime controversy and does seem like we're at some interesting inflection point where the public's perception of organic foods and produced foods is changing quickly. would you agree? >> i would definitely agree and seeing bernie on the side of new york stock exchange would say that organic is mainstream. consumers are interested in healthier good options and

selling for many years to what we call gatekeeper moms and interesting in keeping artificial flavors, colors, preservatives out of the kids' foods and it is becoming a mainstream idea. i agree with you. >> i've been very bullish on the stock as you know and some people say too bullish. i got heat of people saying you're using too great a growth rate. you'll see that the growth rate they're using is slowing. you are saying things are slowing s. that in sync with what's happening at annie's? i don't see it slowing as much as you indicated. >> we're not quite ready to give guidance on the business. but our nine months leading up through 2031 are showing good growth and we think that the natural organics base is fantastic. right where consumers wanting to

be. annie's can deliver. >> one of the struggles i have had versus people saying, jim, you are washed up on this stock, i look at your losses, state and fed. to me i can back the losses out and provides for a nice spurt in earnings. are you able to use those net operating losses the not pay taxes for a couple of quarters? >> no. our nols are largely expired. it's all disclosed in the documents but i think the most important thing to focus on is that annie's is in a really good space and natural organic is a great place to be and fantastic companies in that space like whole foods and united foods and we feel blessed to be there. >> you mentioned the growth rate there. 11%. at the same time when you look at your best selling items, the mac n cheese and everybody knows, do you look at the opportunity in kraft? it's not just the growth in organic food but the overall

growth of a particular segment to convert people. can you quantify that opportunity? >> sure. so the way we look at the business, we are a cleaner, healthier alternative to the mainstream packaged foods that are in most people's homes and that kids and families love. and so we're the number one natural organic in fruit snacks, snack crackers, big categories highly relevant to families and we think we have good opportunity to grow as a real clean alternative. >> any way to assauge investors? >> i focus on running the company and staying true to the values of environmental responsibility and social responsibility. building the brands and relating with the consumers. that's what i focus on. i can't focus on the stock on a day-to-day basis. >> i know one of the things that's happened in this

particularly exciting period in ipos is a lot of lock-ups expired early. 90% to 63.3. will they come to you? will you let them sell stock within the next month or two? wave the lock-up. because the stock's up so much. >> i would say this. it's been a long-term committed investor in this business for many years and the reason that we took the company public is we thought we were very much near the beginning of what annie's could be and wanted to continue to participate in that growth. >> it's greet have you here. thank you for coming on. >> thank you. >> john, with annie's. want to head over to the new york auto show, as well. hey, phil. >> thank you very much, carl. i'm joined by the ceo of nissan

and renault. the taste of the new altima. tell me what you're expecting. >> you know, this is our best selling car in the united states. the second most sold cars in the u.s. it's doing great. and for us, it's a very important car. you get a much better car coming in our showrooms. lighter, more fuel efficient and with a lot of functionalities particularly in term of navigation system. >> and fuel efficiency is key here. >> that's the best in the segment in term of fuel efficiency. >> talking about fuel efficiency and what you have done here, so much attention on this vehicle. the electric leaf. >> yes. >> now the criticism is your sales have been slow this year. particularly last month. you had record sales for the company but the leaf under 1,000 were sold. still you're optimistic to hit

20,000 this year, right? >> yeah. we did not -- the sales were slow not because there's no demand but holding a little bit. as you know in august we are going to start producing the battery in the united states and start assembling the car in our plant in tennessee before the end of the year. >> that changes the pricing point. >> exactly. the cost basis will go down. shifting from a yen cost base today in japan to a u.s. cost base and change whole equation so you can expect to see the sales moving up dramatically starting september. >> what kind of change in cost base are we talking about when you have that? >> for us, it's a huge change. for us it is a huge change. for the consumer, it will not show too much because obviously it's in function of the price of gasoline. you know? because, you know, people -- some people buying the leaf because it's an environmentally friendly car. they want to save on gasoline. the cost of gasoline has people moving to the electric cars.

>> the other big news here in new york is this vehicle. >> yes. >> the tox xi of tomorrow. i think people say a taxi is a taxi. it is different. >> well, i don't think -- a taxi is a taxi. we spend a lot of time in the city of new york designing the car from inside out taking consideration what they want. 600,000 people every day use a taxi in new york. there are from new york, from outside new york, from outside the united states and i can tell you there are a lot of things and details that we change in order to fit with what they want. that's going to be a great taxi. >> a thing pointed out is barrier between the passenger and the driver. right now retro fitted in. the crash tests have been done in advance here. safety is one of the key components here. >> yes. this car has been crash tested with everything inside. and it has been through all the requirements of new york city

and there have been tough. the results is i think a great cab and by the way start in new york and maybe other cities in the world. >> real quick, industry sales this year, 14 to 14.5 million. >> yes. hopefully more near 14.5 million. >> carlos, joining us just a few hours before they unveil the altima and you got a sneak peek of. back to you. >> thank you very much. take a quick look at the dow this morning. down about 105. a bunch of concerns culminating in the early going. worries the fed will not inject liquidity. even a little bit of a sandisk warning perhaps. in the meantime, still a lot more "squawk on the street" still ahead. coming up, kracramer is on hunt. will he find them in time? find out after this break.

all right. a check of the markets here. we have a triple-digit loss. the nasdaq seeing the hardest hit. down 28 points or .9%.

we were saying it's not as bad as one would think. >> not a blood bath, for heaven's sake. not following pace with germany. turn it around. >> all right. let's hit 6 in 60 seconds. tiffany, raised. >> waiting for that. turned out to be a better quarter than people realized. >> international paper. >> charitable trust. i think it's headed to 40. acquisition. >> the firm raising the price target. >> where have they been? now they like it? come on. >> carnival, a short idea. >> totally disagree. i think that people go to be a wrong call. >> dick's sporting goods. >> i like this because at the same time, downgrades. under armour. i don't want to sell it. i want to buy it and buy the rest of the shoe wear companies

ahead of the olympics. >> brown forman. >> saw a bean downgraded the other day. i do think that jack is back. i want to own it. >> wow. what's troubling is the price of gold? >> gold is -- where is the chaos trade? not stepping up with the dollar trade. i feel that gold should be part of everybody's portfolio and might be good chance to buy, not sell. >> a nice pull back. >> not the minors. they have been horrendous. whether it's rand gold or whether it's gg which is definitely the best run gold company. >> just before we went to the markets you were saying where's apple? where's apple? it's 12% of the nasdaq or so. 19% of the nasdaq 100. not doing too badly like a microsoft that's pulling the average down.

>> this was up 10 yesterday. if we have -- if this is the real tsunami down, you wipe that -- those -- wipe it down another five minorities. apple's the key to this market. i'm wedded to the foegs if it doesn't go down a lot today we won't go down a lot today. >> a check on sandisk. the company warning last night. flash memory prices were a little bit low and micron is the next step to follow. >> i don't like micron. >> this is a big move. >> yeah. sandisk is erratic as we can see from the chart. take your cue from the company that doesn't ek cute it well. said it to the ceo and the team. this is just a wild trader and a hedge fund name. i don't want anything to do with it. >> research in motion. rim. a rough ride yesterday after on our show rim is going bankrupt and lit up the twitter sphere and saw them break 13 and bouncing 13. carl last night on "fast money"

so rumors of him being in the stock. he said he's not been in the stock and the name is linked to it. >> let me do a super telestrator on rim. >> did you get that? >> down here. i got the -- difficult to really come to a conclusion of where it stops. >> difficult to interpret you dropping to your knees. >> one-armed push-ups if it helps. it's nokia. >> all right. >> you know what? there's a great game. draw something. omg pop. i can draw this and i might -- kids complete it by saying that's rim. so omg pop tells the story here. >> what's on tonight? >> we are going to take a look at a couple of stocks that technically are really terrific that i have not looked at before and i think it's going to be -- i think some bargains. >> a mysterious tease there. >> yeah. i'm playing the tv game. i'm not talking about it. >> all right. 6:00 p.m., 11:00 p.m. catch jim. don't go anywhere. another big hour of "squawk on

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welcome back to "squawk on the street." we are seconds away from the march release of nonmanufacturing ism. of course, that's the service sector. the largest swath of the u.s. economy. and it is now out 56.0. we're expecting a number closer to 57. last look at 57.3. stands unchallenged. keep in mind, 56, downgrade a bit. we haven't been below 56, what, in a couple of months. we were 53 in december when this thing started to get legs. remember, that last look at 57.3 was a february read and it represented a one-year high and that one-year high would stand back to '05. should we get higher than 57.3. and this will be adding most likely to the softness in equities which has along with the ecb information and adp

taken the treasuries off their highest yields of the day and much higher than we were yesterday at this time. carl, back to you. >> thank you so much, rick. now the road map for the next hour. investors taking risk off the table. with the fed running the show, is more consolidation in store? we'll talk to pimco's bill gross. >> commodities crushed on the back of yesterday. what's the trade for metals? >> ibm in the masters controversy over female club admittance. live to the scene of that bat until a few moment. >> good morning. yahoo! laying off 2,000 employees today as the company tries to cut costs and change focus after many years of flat revenue growth. the layoffs would account for nearly 14% of the work december fore. many say that further cuts are likely. >> private sector payrolls

increased in march led by the service providing sector according to adp. the report released earlier today. the gain clocking in just above the median expectation of 200,000. >> and the ecb leaving the key lending rate unchanged for the fourth straight month. wait and see approach amid growing concerns of the euro zone in a mild recession. disappointing auction bond in spain and set the table for u.s. markets with a flight to safety. the dollar index is climbing. just under 80 right now and pushing commodities lower like gold most notably. >> interesting to see mario dragge doing a bernanke today. he went out there and he was a lone wolf. he said i think the president of the ecb with the last word on whether we're getting more concerned of inflation. whether there's a rush to the exits. he suggested he was not increasing the inflation whatever action might have come

from the statement. >> somebody on twilter called it quantitative teasing. not qe. this is going to be -- this would be at this close the worse day for the dow, the nasdaq and s&p since march 6th and had one triple-digit loss for the dow so far this year. that was on march 6th. seeing if it makes it the second one this year. >> first, john forte has the latest on yahoo!. john? we can't seem to hear him. >> all right. we are having audio issues with john. while we reconnect, we'll move on and hopefully bring john back. yahoo! confirming 2,000 layoffs. >> can i say on the fed i think it's a very -- it's a mistake to assume there's a line coming where the fed is likely to exit and signals it's coming and a linear process.

the fed is clearly zigzagging. the last statement is hawkish and then bernanke dovish on what he said on capitol hill. dovish on the abc interview and then go back again. we need to talk about the zigzagging of the fed and whether there's a fed put under the market and some that i have been speaking to argue that there is. do we have john back? john, are you will? can you hear us, john? let's talk about yahoo! >> reporter: yes. we can talk about yao hoo. the stock is not moving much. probably because investors have been waiting to hear about the asian asset spinoff. what i'm hearing from a source on that side from some of the asian assets is not expecting much action on that. but on the layoffs themselves, part of that's coming because the display business is stagn t stagnant. search revenue is down 41% last year and premium display with

advertising of folks is weak so 2,000 employees targeted in this cut. i'm hearing that they're targeted to preserve the core business and so many product groups cut. $375 million expected in analyzed savings and expected to take 125 to $145 million cash charge up front. that's not counting any facilities to close or anything like that. that's just the severance charges. employees are finding out this morning about these cuts. it's just 7:00 a.m. here and normally not showing up for a couple of hours anyway. sure to be a depressed mood here and earnings are due out on the 17th. so we'll hear more about that then but lots of moving pieces here at yahoo! especially dep z depressing news given that the rest of the valley is in a boom. back to you. >> 14% of the employee force is

fairly significant. a lot of pablom or hard to follow words in the press relowe's. i want to see if you make sense of it for me. they talk about focusing on the core businesses and the data of users and return on investment on advertisers. what are they talking about specifically if you know? >> reporter: what they're talking about there, you can kind of parse it from the previous calls and s.e.c. statements, what's not growing at yahoo! is display ad business in the americas, premium ad display in the americas. that's yahoo!'s bread and butter going forward. what's been growing is the long tail of display which is sort of the reminder inventory and business in asia and in order to bring growth to that premium category in the americas, they need to be able to make the case to advertisers they know who users are and allow them to

target the users they want. if that sounds familiar, that's what facebook has been staking its growth on and doing quite well. that's what they're identifying as the core, david. >> jon, thank you. that helps me a lot. i appreciate it. jon fortt. >> billionaire investor ed by lampert joined cnbc this morning. lampert sharing thoughts on markets and competitors. take a listen. >> i think that a lot of businesses will have profitless prosperity and we've got to adapt and i think that companies like amazon, ebay, they've made -- they've turned this in to a big opportunity and we've got to be able to compete with them, not just walmart, target, et cetera. >> i wonder if an element of that is surprising or surprising

to hear it from him. >> well, it was greet see the wizard emerge from behind this curtain. got the great voice. >> yes. >> you know? he speaks with authority. but at least from what the market is taking this morning, he really didn't have much to say about sears holdings. the company that he owns 60% of the. i think the stock is down near 5% this morning. >> maybe intentionally? yeah? >> i don't know about intentionally but, you know, he brings up ebay and amazon. you bet they're sears' lunch and target and in some ways walmart's lunch. look at the performance of sears holdings and kmart is a big part of that. the revenues are going down sequentially over the last four to five years. lampert has not demonstrated a clear turnaround plan. there was a plan a few weeks ago. not much there. >> what is your understanding as to how involved he is at the turnarounds.

>> some of my colleagues had a great story on the front page of "the wall street journal" and describing he's a micromanager of this company. brings managers to his place in connecticut and wanting to run this and that element and in fact it hasn't worked. we have seen a long exodus, execut after executive after executive leaving sears holding. he might be kind of arguing for his legacy attaching himself to richard rainwater. he doesn't have to answer to his shareholders that much. he can do what the likes. >> they asked him about today's investor and retail investors back in the market. here's what he had to say about that. >> companies, especially in retail, are finding themselves in the need of reinvention. jc penney, sears. seeing best buy recent commentary in the need of reinvention.

>> different bite than we were going to hear. david, thoughts on that? >> he is right. listen. jc penney is interesting with retail and the moves made there, of course, in terms of the new ceo having taken over. we'll see what they can do with the new management and that question still out there as to how involved he is on the day-to-day. but when it comes to return on investment, sort to speak, you have to go back to whether he's answering to his fund holders and had good returns with mr. lampert at the helm of the hedge fund but not very good results and bad ones with the decline in sears shares. auto zone, auto nation, pretty good investments. opposed to a private equity firm to for example buy control of a sears let's say and not a full control, in this case, he took his performance fee through the years of the stock going up and

yet as an investor, of course, given how much it's gone down, you're down but he's not giving back that money he made opposed to private equity with the performance fee on the exit of the investment. >> yeah. it's really good point. and it's in some ways i think the lampert aura has worn off of eddie. you know, watching -- i don't know if you talked about the burger king deal this morning. >> i have. >> bill ackman is the new eddie lampert. doing interesting, novel things to bring the private company in to the public markets and take 29% of it. that's creative deal making that i think lampert got his name for and what ackman is doing. for better or worse. maybe it will be down the line. would you axwree, david, or mott? >> yeah. bill's been with us for a long time. a lot of downs and ups there but i agree with you. interesting deal. we talked about the it, as well,

this morning, owning 10% of the overall and may buy additional 5% beyond that. would be interesting to see how burger king does. interesting deal from the 3g side on that, too. people have been waiting on lampert for a second act sort to speak or something we're not expecting with sears and hasn't come and doesn't seem to be any genie to out of the bottle here to make things just right suddenly. >> i tell you. maybe with that voice he should get a radio show, a sirius xm radio show. he has some presence on air. maybe there's a second career for him. >> we're always hiring. you know that. >> dennis knows that. thank you, guys. thanks. talk to you again. >> thank you. >> a big selloff across the board certainly on the metal space of the minutes of yesterday. we'll talk about the moves in commodities next on the program. foragers, those fishermen... e

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welcome back to "squawk on the street." breaking news on aig. sources tell me aig is moving toward an ipo of its aircraft and specialty finance unit that could come sooner rather than later. aig filed documents to take it public in september of last year and last month was freed to do the deal as kof nans of the u.s. treasury were lifted and mulling a second quarter ipo to value the unit at 6 billion to $8

billion. a partial float due to the unit for size and demand. many options remain on the table for aig and market conditions could hamper a deal. they declined to comment. the u.s. government owns 70% even after the montization last month. aig's position has, quote, stabilize. shares of aig reflected that. still above the ipo price and hearing a near term float because of that and the market trading it is the aim. simon? >> okay. david, did you want to comment on that? >> interesting. this is a valued investment. i remember during the death throws of the back in the crisis. there had been talk of trying to sell it. very difficult. this does appear -- do we have sense of the overall value is perceived to be for international lease finance? >> david, as you well know, filing for an ipo it is a dual track process, interest to buy

the entire thing or the units. my checks is there's not many interesting parties and that an ipo at least a partial ipo of that unit is more likely scenario that as we mentioned many options remain on the table. this is a pretty easy to value asset. i think people looking at it as straight book value and valuation with 7 to 10 billion earlier on. my sources tell me closer -- between 6 to 8 and 8 even for 8 billion would be a stretch. thinking about a 50% deal for that unit would be about a $3 billion ipo. still very large for aig to come in to the market. >> absolutely. very large. thanks for that. okay. we have got a lot of red clearly on trading streams today. delayed reaction perhaps from the fed. down today on the major indices. the dow is down 131. commodities have been hit quite badly. focus on that element of what's happening. lincoln ellis is managing

director at the lynn group and joins us live from chicago. do you look with dismay of what's happening today or a buying opportunity? >> it's an interesting question, simon. you know, commodities lead the risk appetite up and leading the risk appetite on the down here today. probably a bit of rebalancing in the light of the fed minutes echoed yesterday. investors taking money off the table across all asset classes and come mod imodities is no ex. >> it's trying to save something for the tax wall that we hit at the end of the year? >> it's absolutely the case. you know, just came from breakfast with treasury secretary and points out rightly that the combination of those tax expirations and a number of other items making a perfect storm that could produce as much as a 2% to 5% drag on gdp. yes, the fed definitely talking its book to give itself some

room for potential easing either just before or after the election. that's right. >> would you go as far as to say -- you said the fed is talking the book. would you suggest we're actually despite appearances now in an era where they micromanage? if the market does fall, you can bet your bottom dollar gnat doves will be out talking up the prospect of qe. this is surely, lincoln, a major, movable feast. >> bet your bottom dollar. no pun intended. the dollar finding a very big bid after yesterday's minutes coming out and the dollar related crosses in the commodity complex, canadian aussie hit today on the news and certainly the fed along with treasury very much interested in ensuring perhaps erring to the side of too much that the recovery is sustained through the balance of 2012. >> what's the advice? what do investors do now?

>> i think investor haves to look across the commodity complex. understand there's a $15 to $20 premium in the oil market. demand for food and that the gold trade is probably going to take a break for the next couple of weeks. >> so, if i paraphrase, buy food. sell gold. >> i wouldn't sell gold here but i wouldn't be a buyer. >> good to talk to you, lincoln ellis live from chicago. >> thank you. breaking newses of crude oil inventories s. it time to take the risk off the table? great shot.

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stream your favorite movies and full seasons of shows instantly on any screen. find out more online. ♪ checking the markets here. pretty broad based selloff. financials and technology really taking it hard here. take a look at the financials. seeing big percentage declines and coincides with session lows and cues of europe and european banks. barclays selling off hard in the european session. but here are the u.s. banks. taking another leg lower here. >> bank of america is still this year up 66%. so this is a broad based booking of profits.

if you look at what's lower today. it is not a panic move really coming out of spanish debt or anything. it is in the context of where we've been a perfectly logical consolidation. do you think? >> well, it's -- >> that people called for. >> ism miss. the fed nowhere near easing. you got the note saying that a lot of banks are probably downgraded by moody's next week. i think a lot of everything together. >> ibm, microsoft, ge. when you get those sorts of issues under scrutiny of the investors in ratings or -- >> in technology worth noting that apple is at session lows, as well. apple is down by 1.5%. microsoft, ibm, google, cisco, all of them are trading sharply lo >> multiple tornadoes hitting the dallas ft. worth area yesterday. national weather service in the area today surveying the damage. bertha coombs joins us from

lancaster, texas, a day after amazing video of highway rigs, bertha, tossed through the air. >> reporter: it is incredible, carl. april marks the beginning of tornado season and it's really gotten off to a ferocious start. texas, officials say it takes several days to sort it out. take a look at this house. this is a one-car garage house. the one car is in the back. these are two cars here on the front door. we don't know where those cars are from. so it takes several days to sort all of that out. if you take a look at the video of the rest of the neighborhood, you know, it's not just the tornadoes insurance officials say. you also had a lot of hailstorms so that's what's associated with the thunderstorms. it could be thousands of claims, likely hundreds -- maybe $100 million or so. the insurance institute talks about the business damage. doesn't look like a big $1 billion storm like last year in

joplin but a lot of businesses like that trucking company certainly are going to feel the disruption here. the airlines are feeling it this morning. coming back to me live here. the airports saying that at least a couple hundred flights were delayed so we'll continue to see that disruption impacting the airlines throughout the day. back to you guys. >> all right. thank you very much. let's switch gears now from tornadoes to currencies. the adp report showed the private sector added jobs at a slightly slower than expected pace. what could it mean for the u.s. dollar? let's go to the trade with andy bush and we should note that the stock market is closed and the currency markets open and a way to trade the jobs report. what are you expecting? >> we're always open in currency. new year's day only one holiday. the markets looking for something like 210 on the nonfarm payrolls and what i would like to do is look at a playbook to look at it if the

nonfarm payroll above 225, that's where i want to sell euros and buy u.s. dollars. below 225, i want to do the opposite. bayou ros and sell u.s. dollars. >> so your scenario is keyed in on the first one? >> that's right. >> yeah. >> more bang for the buck and the direction that the market feels right now. you have seen the euro sell off quite a bit. i want to take advantage. hopefully a little bit of a rally from this point. up to 132. a stop at 134.27. just above the recent highs and looking for a big move lower down to 125.50 especially if we take out the 130.30 level. so i'm looking for a substantial move, higher interest rates for the u.s. lower stock market. higher u.s. dollar. >> and in terms of other technical levels you are watching, you mentioned a couple, andy.

what sort of range to maintain? >> well, i'm not sure we're going to maintain a range. that's the point of what i'm trying to get at here. if we continue to break down especially through the 130.30, that's a big technical break on a head and shoulders. that channel came in at 1.3130. we did break that. maybe that's what your question was. >> at what point will it zigzag and talk about qe and turn it in other direction? the dollar is a major concern. >> right. well, simon, you hit a great point. apparently the transparency policy by the federal reserve is not a clarity policy. the statement by the fmoc says that the u.s. has growth. ben bernanke a week ago said maybe not so much on the unemployment side. that's confusing. bond market whipped. and now we see the equity growth is substantiating the minutes and what the fmoc statement was. with a strong nonfarm payroll on friday we'll move in that

direction again. higher interest rates, lower stocks. >> andy, good to see you. >> thank you. >> andy bush of bmo. currency trading on friday at 5:30 p.m. eastern time. yes, again, currency markets are open on friday. >> all right. some breaking news on oil inventories. brian shactman has it for us. good morning. >> good morning. a bigger build than expected. 9 million barrels in crude. the folks at tradition energy expected a 2.8 million barrel build but the petroleum institute hinted at maybe a stronger than expected build. so 9 versus 2.8. in terms of other things, gas a draw down that's less than expected and flat with disty lats and in terms of pricing, see a move to the downside. close to fresh lows. we were down about $1.20 when the numbers came out and down

$1.75. clearly when you put in motion with this, you know, the growth expectations with the u.s. and then with the qe3 expectations with bernanke, carl, getting a selloff across the board in just about everything and nat gas just went negative after being positive, as well. >> thank you for that. the market falling hard again today as the latest fed minutes called it in to question. will the consolidation continue? is the fed clearly running the show? we'll talk markets next with pim pimco's bill gross. carfirmation.

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about an hour here in trading. 10:34 here on wall street. starbucks one of the bright spots with all-time highs after goldman sachs added it to the conviction buy list. sandisk down 9%. citing weaker than expected demand and pricing. and signs of a growth slow down in the services sector, ism non-manufacturing index falling to 56 even in march down more than a point from 1-year highs sunset february. today is a day when the headlines speak for themselves. look at where we are on the commodities at the moment. if we have a look at the stock markets, i can tell you the breadth of the move is major. so far today, only two members of the dow in positive territory. the rest have fallen. 70% of the s&p 500 is in negative territory. if you look at the decline to advance ratio, it is about 7 to 1 down here. over at the nasdaq, see it's an even more extreme position and

clearly people book profits on tech which is one of the big movers. let's get over to the cme and check in with ira epstein. ira, does it feel like a major turning point for the markets? >> it feels like a big one and it feels like finally one that's come in from december. if you look at a chart, just been straight up and everybody thought they missed the boat so we are getting that first major break and often sharp. the reason is obviously the fed said nothing about stimulus, no operation twist and left traders saying, hey, here's a reason to book profits and away it goes. >> interesting the times, ira. we have the statement yesterday 2:00 in new york. yes, the markets down a bit by the close yesterday but nothing like this. why the delay? is it important? does it mean people are thinking more and not a just knee jerk? >> worse than that when the chairman spoke. the notes said what he did and reiterated what he did.

that is very delayed reaction. i don't think any one thing caused it. and that doorway is very small when everybody running for it. >> what is your advice to people, ira? >> my advice here is probably hold back a little bit and see how deep the break can go. >> good to see you, sir. thank you very much. >> thank you. the bond king is back. pimco's total return fund. the fund attracting 1.7 billion of investor deposits in q-1. bill gross with us for a first on cnbc interview. today marks the first day that pimco's trades under a new ticker symbol. bill, congratulations on the quarter. so congratulations. >> thank you, carl. like a golfer says, better to be above than below the grass and we're enjoying it. thank you.

>> let's talk about the minutes first. do you agree with the way they're being read, that somehow this makes -- any further injection of liquidity less likely? >> i don't. i think it's much ado or a little. i think we should think of the fed as a chess game with some of the pieces more important than others and bernanke, obviously, is the king. yellen is the queen and maybe bill dudley is the castle and the others are basically knights and i you have a story where the major pieces concedes and says, checkmate. but we haven't seen that. until that happens, i think, you know, this wordsmithing in terms of a couple or a few i think is relatively unimportant. >> tough to read. here's your tweet from this morning. central banks are where bad bonds go to die. without qe the financial markets and then the economy will falter. you want to expand on that? >> sure.

let me expand and say central banks are where bad bonds go to die and good stocks are born i suppose much like a star. bad bonds, what are those? i think in terms of the ecb, those would be peripheral bonds buying in the hundreds of billions and the united states, are they the treasuries? yes. the 10-years, 30-years. no one would buy at these types of levels and operating, yes, in a subsidized market where a 10-year yield at 10.25 and a 30-year yield is a subsidized level and who would buy them unless the fed does? not too many buyers i don't think. >> mr. gross, no longer presumably will the tombstone read r.i.p. he didn't own treasuries as you suggested it might. the reason you have had a good quarter is because you've bought in to these mortgages. and you now hold i believe about 38% and of course they have risen in anticipation of qe3

with the fed buying mortgage-backed securities. let's cut to the chase. do you continue to buy there? do you believe, therefore, that the threat of the fed buying exists and does it exist out past 2012 and in to 2013? >> simon, you know, i think that's sort of the cherry on top of the sundae. what an agency mortgage does for a buyer and yields 3% to 3.5%, not great but better than basically treasuries but does for a buyer is provides a higher yield because independent to some extent on interest rates not changing. if interest rates go down or up a lot, then the mortgage changes its character and average life so is it a bet on qe3? not necessarily. it's a bet on the fed staying where it is until 2014 and if it does then a buyer picks up 100 to 150 basis points in yield. >> but isn't the great reassurance if they're engaged in qe3 they'll awake and raise

general interest rates and cast iron? >> i think that's true. that cherry on top of the sundae to reaffirm they're not tightening. look to the point at the end of june and perhaps and i don't believe this is the case but perhaps the fed, you know, won't reinitiate a twist or a qe3. basically, when that's happened, simon, when qe1 ended and qe2 ended basically the stock market has gone down by 1,500 points over the next month or two and is the fed trapped in providing liquidity, cheap liquidity to pump up stock markets and risk markets? i think they are. i want to argue with rick santelli but it's a necessary policy of where they've led us. >> back to the etf. the last time i spoke to i believe was when it launched and i asked you if you're concerned of cannibal ballization.

what is your sense of what's happened so far, in terms of whether you're getting increment alibiers or you're getting buyers instead of buyers of the total return fund. >> we don't sense any cannibalization. we continue to have 50 to $100 million worth of inflows daily so we're, you know, bringing in money on both sides. the interesting thing is that in terms of the etf is it's done so well, you know, 2% better than an average indexed type of etf in the bond market and, you know, critics would argue that the fees in terms of 55 basis points are higher than the fees in terms of an depositioned etf but over the first five weeks we have more than earned five weeks

worth of fees based on the out performance. >> right. in fact, we are showing a full screen of the competitors and outperformed since the march 1st debut, bill. what do you perform for the outperform? more heavily exposed? what do you think put you over the top? >> it is that. it is mortgages. it is this well function of the flows. it is true that the total return fund hasn't gone up relative to the market but the extent that flows have been coming in to the etf and in terms of a more rapid rate than that made a difference. but both the total return and they're doing super in the first three to four months here. >> with stocks, very smart market observer wrote it's not about bears versus bulls but more fundamentalistas and liquidiliqui liquidistas. what side would you be on? >> if i got your question right, i think it is about liquidity.

you know, it's central banks poured in $2 trillion worth of money and written the checks and call them qes or ltros and check writing over 3 to 6 months and that's come with the affirmation and with the hope that equity markets and risk markets would rise and so i think it is dependent on qe continuation. on qe3 or whatever it's going to be called. twist or, you know, some derivation of twist. they have to keep going if they expect equity markets to lie at this level. >> would you put a number or a percentage around how much of the markets rise has pivoted around promises of liquidity versus promises of economic recovery? >> i think a good 10% to 15%. we can see that as qe1 and qe2 ended. 1,500 points down within a month

or two. those are only two data points but i think a good 5% to 10% of the market has come through check writhing from the fed and the rest of economic recovery and the rest through fed and other central banks check writing. >> bill, let me be quite clear and double back on what you said before. are you suggesting there's a fed put under the stock market? in other words, because the wealth effect is so important to america with the recovery that they will move towards qe3 if the market falls? can i buy the stock market? is it safe because of the fed? >> i think there is a fed put, simon. there's an ecb put and a question put to dragge about two weeks ago. what was the first thing he thought of in the morning? he said where the stock market was. that's a fundamental consideration for central bankers. the proper consideration?

probably not. at this point, you know, markets are dependent upon or economies are dependent upon markets and is there a put, a bernanke put? a dragge put? i think there definitely is. >> all right. bill, thanks so much for your time. good to talk to you, as always. >> you're welcome. thank you. >> like the greenspan era in many instances. >> they talked about the greenspan put. >> for years and years. >> back to headquarters with david with the latest on dynagy. >> yeah. independent power producer. with largely gas, natural gas fired power plants. something we have talked about on the show. went bankrupt. this morning, says it has an agreement in principal with creditors to emerge from bankruptcy and as soon as the third quarter of this year. why's it interesting in of course, helps us revisit a time of large shareholders and i believe carl icon stood in the

way of a deal and blackstone to buy this company for a lot more. it was about five bucks a share i think. they said paying too little. blackstone's happy it never did that deal. the company having filed. take a look at the stock price and the movement of natural gas, you get the answer as to what happened. they say this agreement in principal recognizes the continuing decline in natural gas prices and the impact on the business while also addressing all of the complex issues raised by the examiner's report of potential claims and the like. as for those claims, well, you you need to know existing ha ii shareholders get 1%. creditors get 99%. creditors over $2.5 billion of claims against dynegy. that's the reason here, the move down in natural gas. a loss of $200 million in cash to creditors along with this revised plan but wanted to come back on that. dynegy hoping to reemerge from

bankruptcy as soon as the third quarter. simon? >> thanks. let's have a look at where we are. dow down 155 points. we continue to edge lower on the market that's showing a lot of red across a lot of screens. only the u.s. dollar notably is higher. stay with us. careful, pringles are bursting with more flavor. [ crunches ] mmm. ♪ ♪

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[ all ]der strei'm with scottrade. well, if you really believe that qe-3 is less lickly, commodities will go down, the dollar will go up, and stocks will go down. that's exactly what's happening. the dow close to session lows down 167, at 13,030. s&p is once again for the first time in awhile back below 1400 at 1395. and the nasdaq at 3061.

take a look at the dollar as well. stronger dollar action across the board. one reason in part the commodities are a little bit lower. dollar index currently at 79.86. world's best golfers will be teeing off at augusta national, the golf club tomorrow in the midst of a lot of controversy with the club's tradition not to admit women. it's a big sponsor seeing how ibm, one of the biggest sponsors of the masters has a ceo who is a woman. jeremy raffle is live with more on that. >> good morning, carl. about eight minutes from now augusta national chairman billy payne will give his annual talk and the press is supposed to pepper or expected to pepper questions for billy, regarding the membership status of the ibm ceo. while some say this isn't going to be as much pressure as 2003, that resulted in augusta deciding to go sponsorless that year, there are others who say

this is even more uncomfortable since it comes from within. ceos of sponsors are traditionally invited to be members of augusta national as rometty's predecessors had been. but there's a lot that's unclear here. does rometty desire to be a member. ibm and roamtty have not even commented on it. we might even be a member and we don't know. the most pressure is on roamtty, does she have the obligation as a woman to be a trail blazer and if she tries to do that does the company valuable masters sponsorship go with it. for what it's worth, augusta national never comments on the status of members. they have to invite you. you can't ask. so it's going to be very interesting to see what type of information billy payne is going to give the press. but we are going to be monitoring it and we will come back to you if we hear anything new. knowing billy payne, i don't expect him to say that she is now a member of augusta national. back to you. >> and you tweeted earlier this

morning that perhaps no business in america works harder -- how did you put it exactly, darren? >> no business in america works harder to not make money than augusta national. you just look at the concession prices, and everything else around here. and that is one of the reasons why they can resist pressure like this, and choose to -- obviously they can legally do this. but because they only have three sponsors, and they can choose to go sponsorless, when you don't have the pressure that the money kind of imposes on you, you can do whatever you want. and that's -- so that's one of the reasons why they can kind of get away with this. but ibm is big. we'll have to see what happens. >> it's a lot of freedom they've got. thanks so much, darren. the dow now down over 170. 171. gold continuing to slide lower. we'll get all the moves covered on that and where the markets may go this afternoon. choose control. introducing gold choice. the freedom you can only get from hertz to keep the car you reserved or simply choose another.

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session lows here with the dow down by about 176 points right now. wanteded to revisit some of the dow components that got downgrades this morning. certainly those are putting pressure on the dow this morning. ibm getting a downgrade this morning, and specifically citing

potential weakness in spending. i.t. spending in western europe as well as u.s. public spending. that does gel with what cisco ceo said yesterday about u.s. public spending getting worse before it gets better. we see big blue down almost 4 bucks a share. mcdonald's getting cuts. and general electric getting its credit rating cut. >> what would be interesting regardless of the fed is if you could unravel the effect that the high frequency traders, if you've got three major stocks like that that are going to be down because of this news that's hitting them, the degree to which that would pull the entire market down because of those programs, and then you have the fed on top. >> it would be interesting. but at the same time on an upday you can make the same argument. >> they do. all folks tend to move together. that's what we learned from the flash crash. >> as bad as those are getting they're not as bad aas financial

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want to get to melissa. >> the outlook for commercial property and what happens when all the big box stores tighten up their foot prints. what are the impact on prices. >> not to mention the fight between the daily news and msg. going to be very interesting. >> absolutely. >> see you tonight at 5:00. simon's going to stick around. third hour of "squawk on the street." find out what you missed if you're just tuning in. >> welcome to hour three of "squawk on the street." here's what's happening so far. >> risk is coming back in to the markets. i think people are willing to put their money at risk. they want to return on their money rather than just worrying about a return of their money. >> u.s. economy is better than you think it is. there's mixed signals, but the economy is better than you think it is. people are starting to spend. numbers are actually not that bad. >> total private sector employment rising by 209,000

according to the private payroll company adp. >> here's an anomaly. goldman also says sell ciscos, they deliver the food to casual dining. i'm telling you i'm looking at your notes and saying dysfunctional. >> we've been talking a lot about yahoo! lately and the company is making it official what the "journal" had already, taking important steps in their words to reshape the company, 2000 job eliminations. >> opening bell stateside. some cheers. >> seeing a big picture of bernie our mascot on the new york stock exchange is definitely saying organic is now mainstream. >> let me do a super te teletraitor. so it's difficult to really come to a conclusion about where it stops. >> bernanke obviously is the king. and maybe bill dudley is the costle and the others are basically knights. so i think you have a story when some of these major pieces, when

one of the three basically concedes and says check mate. >> good wednesday morning. triple digit losses for the markets today. want to check in on some of the individual indices. the dow is barely off the session lows but still down 165. s&p as we said earlier, below 1400 at 1395. and the nasdaq at 3060. gold stocks taking a hit as gold slides almost 3%. harmony gold, kinross, barrick in the red. all these stocks are hitting new highs, starbucks, abbott, brown forman and southwest airlines the biggest gainer after an upgrade at barclays. gordon charloff is going to join us and help us make sense of the triple digit loss and show us how to play what appears to be come kind of pullback. plus eddie lamb pert telling "squawk box" that some retailers must adapt or die. we'll see what that means for retail stocks you may be invested in.

less than half an hour away from the european close. markets overseas down more than 1%. we'll help you play it all with the strategist who manages more than $50 billion. and romney making a clean sweep in tuesday's primary. the one and only larry kudlow, sir lawrence, makes his return to post nine to talk about what it means for the race for the white house. that's all coming up in the next hour. first breaking news. from steve liesman. >> thanks, carl. the new york fed out with its annual report about what happened inside what is now a $2.6 trillion portfolio all the trading, rejections about what's going to happen to it, and new york fed is projecting that net income will decline, this is the income that the fed takes in, remits almost all of it to the treasury, is going to decline this year from about $83 billion to around $80 billion. that income will bottom out in 2016 at $30 billion. that's less than was projected last year. there are certain assumptions in there. they use interestingly private sector assumptions, using what the fed has announced about its policy.

the rate hikes the blue chip forecast is pretty nice in 2013 and hit 4% in 2018. that's what the new york fed uses. the projections assume the balance sheet begins to shrink two quarters before the rate hikes begin. that's exactly what the fed has said would be the policy. hasn't given a time period bud said in general that's what we're going to do. mortgage back security sales begin two quarters after. the balance sheet will normalize by early 2017. it will fall to 25 billi under these assumptions from what is now a $1.5 trillion reserve balances. pron edge ekted to be all treasuries by mid 2019. now about 2011 the fed held 18% of its marketable treasury securities at the end of 2011 but when it came to longer-term holdings because of operation twist it was 25% to 35% of total outstanding. in total, the fed purchased $773 billion the treasury securities

in 2011. carl not a bad year's worth of work. >> yeah. >> how much you think about the actual operations that were done. >> thank you very much, steve. steve liesman. squawk on the beat this morning. yahoo! is cutting about 2,000 jobs today or tomorrow. and some say this is just the beginning for the troubled internet giant. our john ford is outside yahoo! headquarters where a lot of employees are going to be getting some bad news. >> they will, indeed, carl. and the bad news, as you said, is just the beginning. we know the size of the cuts now, but that doesn't answer the question of where the revenue growth is going to come from. that's what yahoo! is going to need to turn its attention to now. but on those cuts let's run down what we know. 2,000 employees, they've been targeted to preserve yahoo's core business that's going to be particularly in display and being able to target advertisers to those specific customers who they want to reach. yahoo saying they're going to reach 375 million annualized savings from this. but they're also going to take 125 million to $145 million cash

charge on the severance charges alone. that's not counting any facilities that might have to close. now, some of the challenges that yahoo faces ahead. one, the asian assets, that's where a lot of yahoo's value is tied up. what i'm hearing from their side of things, the asian assets that have been trying to spin off from yahoo has given yahoo's proxy battle, they don't expect a deal any time. meanwhile display ad revenue has been stagnant. the most important segment has been down in the americas and search revenue is just falling off the cliff, down 41% year over year. yahoo's with a major battle at facebook and try to right the ads. >> i doubt the layoffs are going to do much to make that proxy fight any less dramatic. john ford over at yahoo headquarters. gary kaminsky joins us once again on set. good to have you back. today you're looking at the performance of the market,

versus the performance of mutual funds. >> again, carl, we look at the relative performance of mutual funds and try to do it every month because it is such a great historical indicator of what are managers trying to do in the sense of putting money into the market or taking money out. we get the data as always from tom lee at jpmorgan. here's the main number. only 7% of active managers when you look at all mutual funds are missing the index by 500 basis points. take a look at the percentage that are essentially outperforming. at least beating the market. 24% of all funds will be in the market by at least 250 basis points. 12%, at least 500 basis points. as you remember, if you go back to last fall, when the numbers were so skewed the other way, in some cases you had 70% of active managers trailing the indexes, it was a great indicator of more money, closet indexes chasing

performance, once again, after the first quarter, active managing stock picking way ahead of the passive indexes, that is in negative sentiment in the sense of you're not going to see people just throwing money into the market with managed money because they are not trailing by huge amounts. >> so if last year's dynamic was chasing, is this year's dynamic locking in? >> it's a great way to look at it. again if you're one of those managers beating the index or you're benchmarking the s&p 500 by at least 500 basis points, you look at a day like today, of course you're taking money off the table. why would you not? take a look at this. because even with great active manager outperformance versus indexes, check these numbers out. mutual fund investors continue to load up on bonds. all equity mutual funds lost $5 billion in q-1 2012 with $10 billion out of u.s. equity funds, $5 billion into global -- out of global equity funds. bonds continued to get the money. i don't know what this says. but if you want to buy bonds,

don't buy bond funds. buy bonds if you can. you don't have to deal with the infinite duration issues. >> you wouldn't be surprised to see outflows continue the trend we've been witnessing, and that is leaving equities and going into fixed income? >> again it's not a performance driven dynamic. in my mind it's more of a demographic issue. and i would say, we all look at some indicators here. you know i respect technicals. it's great to be down on the new york stock exchange today. there are concerns when we talk to gordon in a few seconds. see whether or not he thinks -- >> all right, yeah, good day to talk about that kind of stuff. in the meantime rick santelli can give us the santelli exchange on this wednesday morning. good morning, again, rick. >> good morning, carl. santelli exchange has morphed. so we're going to go with it in a fluid process. we had the bond king on not too long ago, bill gross, and he did reference my name. the context was after qe-1, qe-2

died, we saw stocks lose 1500 points. the notion was he doesn't want to talk about whether the programs of our fed, world's fed, are good or bad. they're needed. that's great. and about the same time he said that he had a tweet that was out there, so many people follow mr. gross. here was the tweet about seine clock eastern. central banks are where bad bonds go to die. without qe the financial markets and then the economy would falter. i'm not picking on mr. gross. but here's the point. i've always said that the frog isn't really alive and what we are doing is throwing electricity in. when the lanes move we say it's economic horse power but we're being a bit disingenuous. another point, especially to that tweet. you know, if the toxic areas we are storing this paper are a way to nationalize some in the economy and banking industry and interest rates then the new normal that mr. gross and his firm put forth is a great

phrase, the new normal isn't really being allowed to grow. how long can we have the subsidy? how can we get rid of it? this is huge. how can you make money on it? just think, if we have a really bad or good jobs report on friday, it makes the outcome in the market ten times more volatile, because it's going to bring in the liquidity factor from the fed every time, especially if it's a weak number. back to you >> that's right. i love the dead frog analogy, rick. that's a good one. rick santelli, bringing gordon charloff, joins us. good to have you, gordon. pretty impactful fed minutes, wouldn't you say? >> i think people are focusing on them a little bit too much, though, carl, to be honest with you. i mean, char there's not going to be any qe-3 any time soon unless the situation changes dramatically. the fact of the matter is it really kind of makes sense. investors have to say, are we going to repeat 2011? or is 2012 going to be different? and there's a lot of reasons to think it will.

one of them expands out to the guys down here, credit markets. issuance of new bonds being greeted enthusiastically. that really is a positive overall. because they're going to be using some of that money to be age to support buybacks. some m&a activity. just things that are again green shoots to help the economy. now there are guys on the floor with this different opinions and i know that some guys are saying i want to be out next week on vacation. i don't want to miss the biggest move we've had in awhile and most of them think to the downside. the one thing we all agree about is get that vix going. >> i don't think that's going to be a problem. >> a couple things that i noticed this morning, up volume, down volume. could be one of the biggest dispersions almost ten to one today. is that something that you think is meaningful? obviously not a lot of volume but obviously a lot more down volume. >> sure. you know the thing about it, you can see right now, is they seem to put the brakes on somewhat. whatever is sort of selling was influenced by the futures being

where they were. we seem to have found a level at this point. but we've seen time and time again over the last few months, you know, rising tides lift all boats and the converse is true. when you see these kind of moves it's across all sectors, and this is the kind of action you get. >> why are we not seeing a better action out of the transports given the fact that everybody said we want to see some sort of relief in oil? we've gotten some relief. has not had a real impact on the transports. >> i think it might. what we're seeing here early in the first two hours of trading is a gut reaction to the qe-3, the minutes from the fed. so i think that these things will start to develop over time. >> so later in the day we continue this downward move in oil. you would think transports might be the place -- >> sure, of course. there's always that relationship. you've got to figure that might be a place because you might find some opportunities on a quick trade. >> if nonform is good, obviously we can't react till monday, but does it matter much if we're going in to an eerngs season where the analysts are saying

how moody's is likely to put downgrades on big banks. >> alcoa is going to miss. that's a company that seems to have sort of troubles in earnings season. the fact of the matter is this market has been earnings driven and by and large earnings haven't disappointed season to season. i'm not really seeing anything to suggest that we're going to see major earnings disappointments. so again, i don't see 2011 being what we're going to see in 2012. i think that we're going to start seeing guys that are going to be looking for performance, fund managers, are going to take the opportunities to get in here. when they see some attractive pricing, and support some of these stocks. >> even with some of the relative outperformers that gary was just talking about? >> sure. and the fact of the matter is, like, at this point it's hard to figure out what are the performers. that's really the caveat >> gordon is talking about the 7% that are still trailing. those guys are waiting for the dips.

l. when we come back, eddie lamb pert says retailers have to adapt or they won't make it. what does it mean for best buy, costco, home depot? we'll hear what he said after the break. every time a local business opens its doors or creates another laptop bag or hires another employee, it's not just good for business, it's good for the entire community. at bank of america, we know the impact that local businesses have on communities. that's why we extended $6.4 billion in new credit to small businesses across the country last year.

because the more we help them, the more we help make opportunity possible.

all right there's a look at the dow holding pretty steady here. down 161. although we'll see how things change. european close coming up in just about ten minutes' time. eddie lampert joined "squawk box" in a rare exclusive

interview to pay tribute to richard rainwater. talks about what he thinks the real challenge is facing the retail industry. >> companies, especially retail, are finding themselves in the need of reinvengs. jcpenney in the need of reinvention. sears in the need of reinvention. seeing best buy, recent commentary in the need of reinvention. and that means that you're going to have to try new things. and if you're unwilling to try new things and to fail and learn, you don't have a shot. >> brian neagle, senior equity research analyst with oppenheimer and company joins us here. always good to see you. >> thanks for having me. >> got to try new things. what do you think that means? >> well, i think it's very true for retailers. i look across my coverage universe and i don't cover sears, but i cover a number of other retailers. through the economic downturn, it was so powerful, these companies really rethought their business models. a lot of them slowed or stopped unit growth. traditional retailers are

looking towards internet as an additional sales driver. i think what mr. lampert says is absolutely correct. we're starting to see this divide between the haves and the have nots. and mr. lampert mentioned best buy. i do cover best buy. best buy seems to be a company that has struggled and is going to continue to struggle because it's seeing a lot of competition from the internet. >> what answers are there beyond driving more sales online, closing stores, maybe limiting the number of skus, i'm wondering, is there a there there to what he's saying? >> as far as other retailers go? >> yeah. >> i'll give a big, broad comment first. i think what's most interesting going back to the economic downturn, these companies stopped groiing. then they were able to devote all this intellectual capital, management time and attention and the actual capital doors really improving the internal operations of the business. home depot is a great example. one of my favorite names. home depot spent over the last three years built out a distribution infrastructure. so that's a signal of them

really improving their internal operations and taking the time and making the investments. dick's sporting goods. internet. they're really embracing the internet and melding with their traditional retail business. >> big upgrade of that name around the street. lampert did talk about the competition, as well. and here's what he lad to say about that. >> i think that a lot of businesses will have profitless prosperity, and we've got to adapt. i think the companies like amazon, ebay, they've made -- they turned this into a big opportunity, and we've got to be able to compete with them, not just walmart, target, et cetera. >> a profitless prosperity. of the names you cover and the kind of changes he's calling for, which companies are tops on that list? >> well, i think it's best buy. i think of a company right now that is in a very difficult spot that needs to change what they're doing. to their credit they are attempting to do it. but it's best buy because they're contending with amazon is really their primary

competitor. >> and may be no fiercer fight in retail right now. >> that's right. >> thanks very much. >> brian nagel from oppenheimer. when we come back, biggest losers and some key winners in this very down day in europe. [ donovan ] i hit a wall.

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tough day for markets around the gloib. nikkei had its worst day in about five months and europe is having some trouble getting out of the red as well. simon hobbs here to walk us through. >> it's a very powerful, very broad-based sell-off that you see in europe at the moment. but i'm not sure that it's anything to do with that european contagion. the eye of the storm, remains what's happening in spain, and today, you saw the spanish not able to perhaps auction as much of their government debt as they wanted. you see here on this weekly chart that the yields have risen in spain as a result. but don't get the wrong impression. let's have a look at where we've been over the last year. we're not up to the sort of levels that gave us a real concern at the end of the last quarter. let's have the yearly chart. look at the yearly chart. move on a bit, guys, and just see we're nowhere near the sort

of levels we had there. the yields we had a year ago. i don't think -- i mean spain is a concern. but this isn't what we're closing in on europe now. take a look at the close. >> the european markets are closing now. >> look at portugal down over 2%. a lot of them have fallen more heavily than you've witnessed in spain at the moment. but the point here really is the two-legged nature of what's happening. let's have a look at the session charts for the ftse, the dax and the cac. the two main indices. you'll see that you've got two legs to this. the first, which is catch-up on what happened yesterday with ben bernanke. and the second here, is the reaction to see wall street opening further into negative territory. the difference in europe is you had the rally but it's actually been not so good through march. take a look at the yearly charts of where we are in europe. so actually, the sell-off you see in europe is potentially of more devastating consequences because of the technical breakdown that you had during march, which you didn't witness necessarily here in the united

states. so you may see further falls from here. they are weaker markets in many senses. but it's not the banks that are falling today. it's across the board. all member of the cac quarante. all members of the dax 30. most of the members of the ibex are in negative territory. in that environment, of course today we had a european central bank news conference. mario draghi went out of his way to be as dovish as i possibly could. almost bernanke in style. there was a concern that maybe the germans were persuading the ecb as a whole to get more hawkish because of the money they pumped in. he was saying downside risk to the economy remains and he felt that on the question of whether they were getting more aggressive, he, as president of the ecb, is the one who had the last word on it. this is the man. >> i don't think i'm stepping up my rhetoric on inflation. i think the ecb's always said that -- that the increase increases the price of oil and other commodities to the extent

they are passed through, prices, wages, and margins ought to be contrasted. so it's not -- there's nothing new into this. >> and of course earlier on the program, carl, we heard bill gross suggest that not only is there potentially a bernanke put on the market but also an ecb put that neither of those central banks can allow the market to fall too far. they will inject more capital to keep it safe. >> at least he hopes, i think. thanks so much, simon. gary is here with a quick note on europe. >> i did want to point out what does a european close matter again? take a look at some of the big investment banks monday. after the european markets close. i think we have those charts monday 11:30. clearly there is a reconnection now between what's happening here, certainly financial services companies, but i love it when you do this live and we get some stuff and really good material. thank you dave sieberg over at cowan for pointing this out. apparently, john chambers at cisco made a comment at a wells fargo conference where he

basically said government spending continues to be very tough. obviously this has an impact and it's impacting those companies that do get a significant percentage of their revenues from various government spendings. those would include names like oracle, s.a. pjt and red hat. chambers. this is not new news, necessarily. he has said this before. but he was reiterating once again that the government spending environment yesterday, wells fargo conference late, continues to be very tough. >> he was early on that. at first his words were things like lunching was one of the terms they used last year before he said things are getting a lot more tough. >> dave sieberg pointing out this did not get a lot of traction overnight but is impacting some of the trading. dave told us some of those large cap tech names in january he continues to think that we're going to see significant profit taking at these levels. based on the flow he said. >> downgrade of ibm not helping either. >> exactly. all these factors having an

impact. but certainly you do not want to see a comment like that out of chambers because a lot of people think he's very straight forward and transparent. >> you are probably interested in what's happening in europe, too. >> for once i would say it's not just europe that's affecting us today. there's a little bit more going on. there's optimism about what's going on here and we are decoupling a little bit from europe. take a look at the s&p. right after 10:00 when the ism services number came out, we started drooping from there. and there's where it came out. and we just started heading a little bit lower after that. i think part of the problem is the ism number was okay but not great. one of the things people watch very carefully is new orders. new orders kind of dropped a little. a lot of people watched that new orders, particularly new orders to inventory ratio. that was down. you want new orders to be higher, inventories to be a little lower. that's a good indication. a little bit of disappointment on what's going on here. also we had oil come out in the middle of the day, put out oil. inventories are rising. wait, look what happened to oil. this is good news. we want oil down.

cheaper. it's a tax on the american public. i think the markets are a little more focused on the lower demand part of the story rather than the gasoline prices lower down the road story. so it's about growth in the united states. the extent this indicates lower demand, and slightly lower growth prospects that's why the market continued to weaken. here's what i think sopt mystic. why i'm still fairly optimistic. two or three things happened today. put up the screen here. i want to know the march adp was generally better than expect. this bodes well for friday with the nonfarm pay rolls report. after that i say the important thing is we're going to see housing numbers. get a tight shot of this. we've seen definitely better mortgage application numbers. up 7.2% this week. now mortgage apps have not been very good this year. that's been a real lagger. about time we started see being some activity here. and we're also seeing good spring traffic. gold's been lower. the question is, is gold lower -- is qe-3 a game changer

for gold. we obviously are seeing some pressure on the dollar as a result of what's been happening here. that's putting pressure on gold and all the other commodities and to the extent that qe-3 not happening is a game changer i think that's going to be the problem. >> late yesterday afternoon we were both here and the question was, okay, have we now factored in around the floor here that there will be no qe-3. >> yes. >> is it now factored in? >> well, i'm not sure it's totally factored in but i hope it goes away. i'd be happy to talk about the u.s. economy improving over prospects for a qe-3. i think that's certainly a good sign. here's the dollar in the last few days. that dollar going up, that's a real problem for gold overall. and all of the commodities. let me tell you what i'm a little more worried about. we're decoupled from the rest of the world. that's why our stock market is doing better than everybody else around the world. i'll tell you a couple things that have disturbed me in the last day or so. the australia exports being soft. this is the major engine that exports over to china. that was a startling figure.

secondly, india is slowing. sof the recent economic numbers in the last 24 hours, notable slowing in india. that's not a good sign. and the euro anxieties we know about. my point about all of this is i'm more optimistic about the united states. the stock market is reflecting that. i'm a little more worried about the global economy. although china still is in a soft landing. the rest of them i'm worried about. >> bob pisani. head over to rick santelli in chicago. i believe has a guest. >> absolutely. one of my favorite authors. harry welcome. i'd let listeners in on what you're thinking about the direction of equities. just look at the title of your book, "the great crash ahead." i think we know what you think. why don't you fill us in? you're looking pretty good in today in particular. >> we just told people to short stocks and the euro yesterday in our newsletter. we're seeing this more as an intermediate correction at this point. we did not expect the ecb to come up with $1.3 trillion in qe-2, in secretary. we did not expect bond yields to

keep going down when economies strengthen which our indicator said so. we think there's enough stimulus in the economy to put off a major crisis this year but yeah the stocks are way overdue for a correction. our question, are we going to be 5% to 8% here and go up months from now? or are we going to get something more like 15% to 20%? that depends on things like oil prices. we are cautious on the market now. we do think there's likely to be one more rally. because again this is an epic battle between governments saying you cannot let the economy slow down, cannot let the free markets deal with this debt problem, and they're ignoring the fact that iceland already dealt with their debt and now they've got the strongest growth and falling unemployment in europe. creating adding debt to debt is not the right policy and that's what we're doing. i don't like what's happening. but a market on crack as we call it only wants more crack. so the market's disappointed yesterday and today because they're not going to get qe-3 right around the corner. >> so you and i have a common denominator. and it is if there's a new normal we're supposed to have after the credit crisis, which

is going on four years now, we are prohibiting that new normal from taking hold so basically we're subsidizing the markets. and that pretty much sounds like your opinion. so i ask you, if the jobs number on friday is now as expected or a little weaker than exengted. i would fully think you're going to get a much larger equity sell-off. would you not agree? >> right now as expected, and still right now the market's got the logic. if the economy is pretty darn good, we don't get any more crack. we don't get qe-3. and the market would rather have qe-3 than a good economy. that shows how perverse it is. and why is it perverse? the government has pushed interest rates to darn near zero on anything and the markets act like there's no risk. the markets are not in a good position. but they actually want to see, i think, slightly weak -- they don't want to see extremely weak but they want to see some weakening so you still keep open that option for qe-3. i think you probably will get some weakening later this year, probably in the summer, and then i think you probably will get a

qe-3 because interest rates have been pushed so low by capital fleeing from europe. so, again, not what we would have expected. and it does say, if we do weaken, there's going to be a qe-3. so it's hard to see a big crisis this year. i think they put it off till next year, rick. unfortunately. >> thank you very much, harry. of course we're all going to watch the number because a weak number probably puts the hook in to get the whole qe argument all energized again. carl, back to you. >> good stuff, rick. thank you very much. sneaking of that, breaking news over at headquarters. steve liesman has the latest on some news out of morgan stanley. >> carl, speaking of the qe-3 argument, just being had right there, morgan stanley, which is one of the main houses on wall street that was calling for quantitative easing or additional qe from the fed now cutting its probability of qe from two-thirds to one-third as a result of the minutes of yesterday's meeting. vince reinhart the chief u.s. economy, former head of monetary affairs at the head going on with a video on morgan stanley's website citing the lack of a fed

discussion of qe in the minutes and a host of other factors basically saying now what they thought was a two-thirds chance is now just a one-third chance and really coming back to where the street was before that according to the cnbc fed survey that was only a 33% probability of additional quantitative easing. but also following others in sort of looking at the minutes yesterday, and saying you know what? where was the discussion about alternatives? where was the discussion about continuing operation twists and reducing the probability of additional help from the fed. >> vince reinhart was on this program yesterday. >> exactly. >> and we could tell how the dice was loaded. >> all i'm going to say is, you know, we got that bite from steve's interview with fisher monday morning because i told you 11:00 that was something i thought was pretty significant. steve, morgan stanley should have been listening to you two days ago if they thought this was going to be a surprise. >> yeah, i mean, vince is obviously one of the smarter guys out there when it comes to the fed. and i was a little surprised that there wasn't at least something of a discussion about what happens when operation

twist ends. that did not occur. and now, you know, morgan stanley backing off that really outside of the conventional wisdom. >> steve, before we let you go, we just had bill gross on in the last hour. he thinks people may be overreading the minutes to some degree. there's an element of truth to that? >> i think so to the extent that we are -- the minutes only repeated the disappointment that we got from the actual statement. remember the statement also made the markets think qe was less likely. and then that kind of drifted back to seeing more qe, especially from the bernanke comments on jobs. and now this redirects us to back where we were when the meeting happened in march. >> all right. hard to read the tea leaves. they're hard to read. >> that's why we get paid the big bucks. >> i read steve liesman and saw him money morning. i said steve you nailed it. >> thanks. >> kudos. >> thanks very much to you. with the markets up, obviously dow off the lows down 145. how should you be positioning yourself? want to bring in chief investment strategist at j.m.

montgomery. $54 million worth of investing to share with us. welcome >> thanks. >> we've only had one triple digit loss for the dow for the year. how important is this session? >> well, i think it's telling. because it comes on the back of some softening yesterday. you know we lost about 60-some points in the dow, and i think we saw little of the wind taken out of the sails of the market relative to expiration, or expectations or aspirations, that is, the potential for qe-3, which is what you were just talking about. but i think today's follow-through on that, and sort of a resurrection of the concerns about what's going on in europe, which has really been latent now for some months, suggests to us that all in, given the vulnerability, we thought the market had relative to terrific move in our first quarter of this year, we think that this is a natural, i think pull wac in which investors should consider this to be opportunistic. and load into things that perhaps they missed or were sidelined waiting for some type of corrective phase to be

undertaken. >> there had been some reflection on yesterday's session in which there was a bit of an afternoon rally. maybe saying that there was some underpinning to worries about less liquidity down the road. you think today, fair to say, is about broader concerns or at least a broader willingness to take some profits? >> i think so. i mean we you aobviously european markets closed and they were down two-plus percent. in some cases a little bit more predicated upon the country you're talking about. it certainly is a reminder that while what was done by the ecb through their ltro operation was mainly to defer problems in their eurozone area. it didn't necessarily cure it. and spain is a shining example of what was at risk here, which is to say a very large economic power relative to greece, certainly. that is facing some issues at the moment. and the very tough grip of austerity measures being undertaken by these countries don't necessarily put a salve on the whole issue of the lack of

growth and the still large fiscal imbalances in that country. i think it is what is contributing to the much broader sell-off and frankly i would welcome a pull back on the order of 3% to 8% or something of that nature which i think would be healthy. but doesn't necessarily slam shut the rally window that i think is still open. >> you say that window is narrowing. faster growth, in your words, may become necessary if multiples are going to continue to expand. and that's certainly what's behind some of the big calls today. the downgrades of ibm, the downgrades of mcdonald's. >> most definitely. yet at the same time when we still look at sectors like energy, for instance, and even in technology, health care to name another, there are still great quality names in those faces, trading at very, very reasonable valuations and as a bit of a safety net, we continue to think that theme of high dividend payers makes a lot of sense. we did advocate a rotation from utilities and telecoms since the beginning of the year into some of these areas, and i think that's been rewarding so far.

though we would continue to stay true to that theme. >> mark, appreciate your time today. thanks a lot. >> sure, paul. >> straight ahead the kudlow caucus is back in session.

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liberty mutual insurance. responsibility. what's your policy? all right. welcome back. coming up on the "halftime report," two big time investors.

tom barrack of colony capital, known as the world's greatest real estate investor will tell us how the fed is changing its strategy. and clarion capital's mark utay on where he's making money how. plus are cracks forming in the tech trade? we've got it covered at the top of the hour. now back to the stock exchange. >> all right, thank you very much scott. want to get back to darren raffle in augusta, georgia, with an update on the controversy over admittance at augusta. darren? >> yeah, of course, this was about ibm's ceo ginny rometty and whether she would be a member of augusta national because ibm is one of three sponsors. billy payne, the augusta national chairman just finished up with his press conference. he was asked about this. he said three things. one, that any talk of membership is subject to the private deliberation of members. he's not going to talk about it. he was then asked about her specifically. he said, because she's a

specific candidate, they wouldn't even talk about it. that even makes it kind of more private. and finally, he was asked about what he tells his granddaughters, to which he said, my conversations with my granddaughters are also private. so, as we expected, nothing done here. we did reach out to people representing ibm and there is still no comment from them as to her status. what that means to this sponsorship of the masters, or anything related to augusta national. guys back to you. >> darren, appreciate the update on that. going to be interesting to watch as the tournament takes place this weekend. meantime take a look at some live pictures of a water pipe that has burst at the white house. where the president will soon sign the stock act. interesting pictures out of there. meantime the treasury secretary tim geithner out this morning labeling the gop plan a dark and pessimistic vision of america. who better to talk to about that than our very good friend larry

kudlow. joins me and gary at post nine. >> thanks for having me. >> first let's cover where the market is today. you're encouraged by some of the action you're seeing. >> i really think, first of all, the fed's made the right move because the economy is stronger. we don't need any monetary priming so that boosts the dollar. that lowers the gold price. that lowers the oil price. that lowers the wholesale gasoline price. i think it's like a tax cut effect. and as the correction shakes out, my sense is this is very positi positive very positive. i like the numbers. this is still a high level. i thought the adp jobs report was good. the economy may not be spectacular. but it's pretty solid. and you're going to get lower inflation from this strong dollar, gold/oil move. look at gasoline prices come down, that's a tax cut. so yeah, just ride through this correction that's long overdue. >> which leads us to some of the political corners that are being taken about the budget.

what do you think about geithner's comments? what do you think about the president's comments yesterday about the ryan/romney budget? >> i'm not surprised. last year they ran ads that had romney pushing a granny over the cliff because of medicare. so this is just politics. i am surprised that the president has taken such a dark and negative standpoint. there's no hope in change here. and i'm surprised that there's no optimism either. and i think they're probably making a mistake and they got wrapped a little bit by mitt romney in his victory speech in wisconsin. so you know, i'm underwhermed by this obama -- we had paul ryan on the show last night and he rebutted all of these extreme chargers. ryan and the budget, let's face it, all they've done is slowed down the rate of increase for most of these programs. i'm not talking medicare which is bigger reform. that's all they've done. and these levels for education, research and development are so much higher than they were five years ago, and ten years ago, so this is just politics. and i don't believe it's going to help obama at all. >> talk about politics, this is

real fun for me because you and i never really get to chat about politics. you mention last night a foster has been a super pac fund-raiser for santorum. what's he going to do now? >> he's coming on the show tonight, so i'm going to ask him directly. look the indications were last night that santorum will continue. but i got to just say for my two cents, his risk in pennsylvania is that he loses to romney as the whole party coal uses around mitt. that would do a lot of damage to santorum's future career. i don't hear him dropping out. i think that's a big risk. we'll see what foster says. we have governor nikki haley coming on from south carolina. too much union spending on pensions and benefits. bankrupting a lot of government. she's had her own battles down there no south carolina. >> is your eye turning to deep stakes? >> the ryans, the mitch daniels,

the marco rubios, who helps the gop on the hispanic gap, who helps him on the female gender gap. who helps him as a president in waiting. governor mcdonald of virginia. oh, i love it the deep stakes. give us something to talk about until the next set of primaries which isn't for a couple of weeks. >> we've got to have something. >> as mccain did this morning. larry can't wait for tonight. >> thank you, appreciate it. >> of course you can catch the kudlow report 7:00 p.m. eastern time right here on cnbc. when we come back art cashin will join us, help make some sense of the poms back here with the dow down 148. i'm freaking out man. why? i thought jill was your soul mate. no, no it's her dad.

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