>> i like rehabilitation. >> and stephanie. >> i like slumber je. sgr huntsman, hu.n. >> that does it for us. more "fast money" tonight. "power lunch" begins right now. thank you, michelle. we have three hours to go in the trading day. and it's going to be a tug of war to the finish. huge day for earpings. big banks, media, airlines reporting today. is it earnings or the economy driving the market, ty? >> mcdonald's continues a hit parade of earnings tomorrow. steady climb over the past year. where is their next opportunity? where is the challenge? we're going to get you ahead of the numbers. >> and another disappointing report on housing today. home sales dropping again. we'll take you to one market that is making a comeback. find out how they're doing it. with tyler mathisen, i'm sue herera. "power lunch" begins right now.

welcome to "power lunch." i'm kayla tausche at the realtime exchange. markets are bouncing back and forth. can't decide which way they want to go. at least for the moment they're in the red. the dow crossing above and below that 13,000 mark. right now we're at 12, 989. all three down by just about.3%. disappointing jobs claims number taking some wind out of those earnings sales. taking a pulse of the markets where we stand right now, the euro was trading higher despite a weak trading day in europe. you see it sitting right now at 1.31. nat gas hit another 10-year low today. now trading at an astonishing 1.91 down 2%. and the 10-year yield holding below 2% as well right now at 1.95. to our midday movers today we have e-bay leading the way after that strong earnings report. paypal is starting to pay off. e-bay up better than 13%.

bank of america also down today down to about 8.87. we'll take a deeper dive in our next half hour about bank of america. and that high flier qualcomm coming back to earth after a disappointing earnings report. qualcomm in the red by 5%. now let's get to the trading floors. bob pisani joins us from the nyse as always. bob, what are you watching? >> i'm not very happy with the home sales either. the trend is not the direction i want it to go in. however, there is one segment of the home market that i am very happy with and that's the d.i.y. the do it yourself market. we had u.s. gyp some come out. great numbers out of these guys. earnings and revenues well above expectations. wallboard volumes were strong up 17% from quarter over quarter. pricing up 16%. and the pricing is sticking. so they're getting volume and pricing. it doesn't get any better than that in the buildings industry. and by the way f you're wondering where this is coming,

it's the repair and remodeling. that's what's driving the sales. not the sales to the home builders. that's an important point. here's the building material companies. you can see not a lot of energy here. usg is basically flat to down all throughout the day. the other big names in that space also basically flat on the day. still not good numbers, but not enough really to get everybody excited. however, if you look at the d.i.y. space, look at the classic one in home depot, 22% up so far this year. this is the third best performer in the dow. e ch look the same for everybody else of course including lowe's. here's where we are on the major sectors here. just slightly to the downside on all of the big names. sue, back to you. >> thank you very much, bob. let's switch on the "power lunch" power surge drill down on the stories driving the day. and the economy is front and center for the markets. home sales dropping raising new fears about the health of the housing recovery. arizona.

home sales dropped a month-to-month. but the real report is the existing home inventories the supply of homes for sale usually historically rises in the spring because that's the busy season. not so much this time. inventories down 1.3% overall to a 6.3 month supply nationally and seasonally adjusted. i want you to look regionally at some nonadjusted internal tracking we got from the realtors. down to a three-month supply nationally. but out west where distressed homes make up the bulk supply, it's down to barely three months. compare that to over 11 months of supply in the northeast where there are fewer foreclosures. if one-third of the housing market is distressed sales and the supply is dropping, there's your culprit for the overall drop in home sales. we've been talking about this for a few months now predicting it. and it appears to be coming true. so the big question is then how will that affect home prices? now you have to of course look at home prices regionally and wonder where they're going to be going place-to-place depending on what the supply is.

also, remember, if the spring season was pulled forward into january, december, even february over year, we so, again, hard to tell with prices, but we really have to pay attention to these inventories going forward especially on the distressed properties. you can get plenty more of that on the blog, realtycheck.cnbc.com. if you wonder why we're december ert, it's because we fould a builder starting to build homes again. we're going to be talking to them in the next half hour of "power lunch." >> see you in a few minutes. thanks very much. to politics now. new nbc "the wall street journal" poll out a short while ago giving new insight on the race for the white house. our chief washington correspondent, john harwood, is at the white house. john. >> tyler, this is our first nbc "the wall street journal" poll since santorum stepped aside in the republican race making mitt

romney the certain republican. it gives us a baseline to start look at next seven months and see how this race is going to go. start with where the candidates stand personally. you see barack obama benefitting from his own likability from improvement in people's perception of the economy is 9 points in the black on his favorable rating. mitt romney having taken some bruises in the republican primary campaign is three points in the red on his personal favorability. now look where the parties stand. neither one is very healthy here. democratic party just plus one favorable. republicans minus 10. but important to note, tyler, that there is nothing in this survey that suggests that this is going to be anything but a very close general election. lots of time for mitt romney to consolidate his base and begin reaching out more aggressively which he hasn't been doing because of the primary to the independent voters who are going to decide the election. >> john, thank you very much. meantime, a monster day for earnings. a ton of companies from a number of sectors out with results.

the airlines among them. southwest shares flying higher after they beat their estimates. the stock is up 2.23%. the wings clipped a bit when you look into those numbers. phil lebeau's been listening in on southwest's conference call for us whach, what are they say? >> literally. being asked about what's seen in april relative to the first quarter it looks to be on target relative to what they're expecting. again, they're facing some comparison issues. here's the numbers for the first quarter. a loss of two cents better than the street was expecting. again, southwest had forecast it was going to have a loss for the first quarter mainly because of soaring jet fuel costs. in the first quarter southwest costs increased 45% when it comes to jet fuel. that more than took away the gain that they had in revenue, which was up 29%. take a look at shares of southwest. and we showed them to you right before the introduction. up a little bit there as people are saying, hey, this is pretty

much what we expected. the other airline earning of the day, alaska air. beat the street reporting a profit of 39 cents a share versus expectation of 35 cents. and what we're noticing with alaska this is an airline that is executing probably about as well as any airline out there by going into those smaller markets that are not targeted by some of the larger airlines. and the execution there especially when you look at the load factors, tyler and sue, i mean, 86%, 87% of their planes are full. that is huge. and when you get in the airline business, you get up above 85%, pretty much every seat is taken on every single flight. very hard to do but that's what they've shown in the last quarter. >> from planes now to automobiles. ford doubling down on china bet. what are the details? >> ford is making it clear that china is the lynch pin if they're going to reach their goal of selling 8 million vehicles a year by 2015. this morning the company announced it's going to be announcing a new plant in china. this means the production in

china by 2015 will go up by another 250,000 vehicles. and, again, it makes it much easier for ford if they can achieve these goals of getting to 8 million in annual sales by 2015. they will be building 1.2 million vehicles in china a year. tyler, don't forget, we're going to be live in china at the beijing auto show starting monday. we'll be there monday and tuesday talking with the newsmakers including executives from ford. this is a huge show. the most important auto show around the world every year it's in china. >> phil, thank you very much. >> you bet. >> travel safe. southwest is not the only stock flying high on earnings today. check out shares of the "new york times." at this point the stock is higher smartly so in terms of its move today. the newspaper topping estimates but there are some concerns about its advertising revenue. julia boorstin is reading into the latest results for us. hi, julia. >> well, sue, that surge in the stock this morning really did come down to the fact it won the expectations game.

earnings came in at eight cents per share, six cents more than expected. but the struggling "new york times" it's stock down more than 30% in the past year is not out of the woods. first, let's get to the good news. the payoff seems to be working. digital subscriptions to the "new york times" grew 16% from the fourth quarter to over 450,000 to the first quarter. so that was a growth of 16% from the fourth to the first quarter ending the first quarter with over 450,000. the company projects circulation revenue will increase by high single dimgts in the second quarter. total print revenue fell more than 7% from the prior year while digital ad revenue dropped 10% year over year. that came from weakness about about.com and fewer real estate classified ads. that's a problem not going away. the company says its news media ad trends will be similar in the current quarter. now, another challenge for the "new york times" company that

drew questions on the earnings call is that the publisher is still searching for a new ceo. janet robinson left in december. it needs a new leader to make better than expected results more than just a one-quarter blip. tyler, over to you. >> julia, thank you very much. nokia continuing to get nokiaed around. the struggling cell phone giant promising deeper cost cuts after posting a bigger than expected loss. jon fortt is in silicon valley with the details. jon. >> hey, tyler. yeah, zte really killing nokia at the low end. nokia ceo steven elop talked on the call about how low end android phones are beginning to encroach on the stronghold. in particular in china nokia's being hurt by some of the same market dynamics that are helping apple specifically the phone business in china is moving from a reseller driven model to a carrier driven model with subsidies. that means like in the u.s. customer ks get more expensive phones when they sign up for a data plan so they don't have to

settle for a cheap nokia. they can get android or some can get an iphone. a $1.2 billion lost warned last week. nokia's head of sales is out. the new phones are doing okay in the u.s., but this low end problem is in some ways worse than nokia's lack of a hit high end phone because it threatens to devastate nokia's core and business model. >> the struggles continue. meanwhile, apple, google, intel and four other big tech companies apparently facing an anti-trust lawsuit claiming they conspired not to poach each other's employees. what's happening here, jon? >> yeah. adobe, pixar, lucas film in there too. what they're accused of doing is collaborating together and agreeing not to poach each other's employees. this is an anti-trust issue federally. but particularly in california where this is even more of an issue. as part of this lawsuit, five engineers are bringing it. there's even a detail where steve jobs called eric and said

what is it with you guys trying to poach this particular apple engineer and eric said we'll look into it. apparently a recruiter might have gotten fired over that. the lawyer for the plaintiffs in this case told reuters that he expects that this might go to trial next summer, tyler. >> very interesting. let's switch gears a little bit here. another john, a guy named john stewart, apparently has been watching you and "power lunch." let's take a look. >> google, i am shocked. you stole people's personal information without their permission? that is facebook's job. the fcc investigated these shenanigans and that's when [ bleep ] got real. >> the s.e.c. wanted to know who are the employees involved in the engineering of this and what teams are they working on and what are their correspondents, google basically saying they don't want to tell you that. >> oh, well, if you don't want to tell anybody, you should put that information on google plus.

>> excellent job, jon. >> jon, you've made it. you have absolutely made it. >> apparently. we know john stewart likes to watch cnbc. but now we know he watches "power lunch," not just rick santelli and jim cramer. i figure i've been here almost two years, it's been great. now i feel like maybe i've arrived now that i've been on the daily show. when i'm out there with you guys next week, i can chat with jim cramer about more than just tech stocks and hair styles. >> this wouldn't happen if you were still at fortune magazine. next stop "saturday night live." >> perfect. >> i got it working here. >> coming up next on "power lunch," earnings coming in stronger than expected. we have to get back to business. but economic data coming in weaker than expected. so how do you position your portfolio? we have some smart strategies for you. plus, banking on the banks, b of a, morgan stanley both easily whipping estimates. is it time to get really bullish on the sector. b of a stock way up so far this year. or the past few months.

we'll give you the last word on the banks. [ male announcer ] while others are content to imitate, we'll continue to innovate. the lexus rx. why settle for a copy when you can own the original? see your lexus dealer. we have two car insurances that we're going to have you taste.? the first one we're going to call x. go ahead and take a sip, and then let me know what the baby thinks of it. four million drivers switched to this car insurance last year. oh, she likes it babies' palates are very sensitive so she's probably tasting the low rates. this is car insurance y, they've been losing customers pretty quickly. oh my gosh, that's horrible!, which would you choose? geico. over their competitor. do you want to finish it? no. does the baby want to finish it? no.

ncht all right. let's get a check on treasuries. we saw a move into treasuries on the back of some of that economic data. key auctions in spain. and next week we have the fed. holly liss is tracking the action at the cme. good to see you, holly. >> thank you. >> what's the most important factor to the market today? and how do you expect the trade to un -- i almost said unravel.

we don't want it to unravel. but you know what i mean. what's going to happen in the afternoon? >> i do. i think actually the key point today was that you saw sort of l weakness in the economic numbers. you had four key numbers today. you had jobless claims leading indicators, housing and philly fed. and three of those came out significantly weaker than had been expected. so i think as you go into next week's fomc, they're going to have to take note that you're probably starting to see some deterioration in here. the first quarter's numbers were very strong. and a lot of people were talking that maybe it borrowed from the rest of the year. and clearly the numbers that we're seeing more recently point to that picture. i think as we move into the fomc two-day meeting next week, they're going to take note of some of this more recent data. >> does it change the expectations for the fed meeting at all given the data that we've seen or not? >> i don't know that anybody expects that they're going to change the rate. they might give a nod to possibly a qe-3 which certainly from people that i'm talking to the odds are increasing that they're thinking that they're going to do a qe-3. so they might start leaning

towards mentioning that next week. or the other possibility is that they start mentioning an extension of operation twist where we saw they were going into the longer end of the curve and out of the shorter end of the curve to try to bring the long end rates down. although how much below 2%, that's a big question. >> all right. >> so they might tip their hat to either one of those next week. >> well, you read my mind because i was going to ask you what form qe-3 might take and you answered it for me. thanks, holly. >> thanks, sue. >> stocks right now shuffling along just a little bit there as earnings continue to come in slightly better than expected. not universally so. there are worries over europe and certain economic data as we've been talking earlier in this hour. points remain of concern. joining us now with their market forecasts and the best investment plays they see right now are stewart freeman, chief equity strategist with wells fargo, and peter bookvar with mill mill

miller ta back. peter, you say that you think the market is sort of tapped out right now. and stewart, you seem to think that we are at a pause point in the second leg of a major move up in a bull market. peter, why don't you react to that? >> well, i'm belief the first quarter rally in the market was due to central bank and very mild winter that pulled through growth. we see what's happening in spain and italy, we see almost every single u.s. data over the past couple weeks softer than expected as we give back some of that weather. and now we're somewhat in this lull between the end of that qe and what will potentially be another qe, but in between i think things are going to get worse before they get better, which brings the next qe. so in this environment of qe/not qe, it's tough to say that's a bull market environment. it's more of a trading market.

>> i like that qe/not qe. stewart, why don't you react to that. peter thinks we might be in for tougher times. you concede a lot of this second leg may have taken place already up 30% some since last october. but you see sort of a brighter future, i think. >> well, we had more than 100% upside in the first up leg in this market. we had little more than 18 months of sideways movement, a lot of volatility. that's normal in a cyclical bull market. the move we've had since last fall was really a giveback or takeback from a decline that was caused by investors being concerned about a second leg down in the economy, which we haven't seen. the economy's been a little stronger than expected. you know, we actually think that 2012 will be the building of the base for the second leg up. second leg tends to not be as strong as the first. >> how do you invest against

that? if it's not going to be as strong as the first and we have seen good stock performance in a number of sectors including technology, stuarrt, how would you play it? >> we have to keep in mind the market's about where it was in may last year. about where it was in 1998. but earnings are higher than both of those scenarios. we want to be -- we've been relatively balanced here. defenses are the cyclicals as we've gone through this mid-cycle period i think as we see and we think we will see a little better gdp all through the year. you know will be more interested in leaning more cyclicly as oppose today defensively. still staying with technology stocks on moves upward. i think it's going to be a volatile year. i think it's going to be more clear as we go through the year. the consumers are feeling better. >> peter, quickly, if i buy your thesis, what should i do? >> i think you have to be underweight here. how can you ignore what's going on in spain? how can you ignore the

moderation in asia? how can you ignore what's at best a mediocre u.s. recovery? but, again, we're going to get more qe. you have to play the reflags trade. >> peter, stuarrt, thank you very much. have you back again soon. >> coming up, as ty and i continue we're keeping a close eye on the biotech sector today. next on "power lunch," biotech is on fire with talk of deals, drug brek throughs and earnings. we'll show you which stocks are on the move. and later, phoenix rising. the housing market there is on the rebound. find out where the money's coming from and which markets may bounce back next. [ male announcer ] you are a business pro. monarch of marketing analysis. with the ability to improve roi through seo all by cob. and you...rent from national. because only national lets you choose any car in the aisle... and go. you can even take a full-size or above,

and still pay the mid-size price. i'm going b-i-g. [ male announcer ] good choice business pro. good choice. go national. go like a pro. [ male announcer ] aggressive styling. a more fuel-efficient turbocharged engine. and a completely redesigned interior. ♪ the 2012 c-class with over 2,000 refinements. it's amazing...inside and out. see your authorized mercedes-benz dealer for exceptional offers through mercedes-benz financial services.

through mercedes-benz you know, those farmers, those foragers, those fishermen.... for me, it's really about building this extraordinary community. american express is passionate about the same thing. they're one of those partners that i would really rely on whether it's finding new customers, or, a new location for my next restaurant.

when we all come together, my restaurants, my partners, and the community amazing things happen. to me, that's the membership effect. dow component merck in the news going to pay a nearly $322 million criminal fine relating to the marketing of the painkiller viox, which was withdrawn from the market back in 2004. the case involved the promotion of the drug to treat rheumatoid arthritis, a use not approved by the fda. this follows a civil settlement involving the drug marketing reached last november and already disclosed charge against earnings. let's head now to seema mody tracking the other big health care stocks. seema sdpl that's right. a lot of big moves in biotech and pharma. start with human gee gnome sciences. still up for sale and worth much more.

also in focus, the race to find an effective treatment for hepatitis c. gilead and bristol releasing upbeat data reporting a majority of patients remain clear of the virus four weeks after the treatment ended. that's big news. boston scientific and baxter international reporting this morning a surge in net profit for both companies on the boston scientific call the ceo declines in the heart rhythm market, which has hurt the company in the past, is starting to improve and will continue to going forward. back to you. >> seema, thank you. more clouds on the labor market horizon. jobless claims fell 2,000 last week. less than expected to about 286,000, a number that suggests some loss of momentum in employment growth. where do we go from here? insight now from editor and chief of "american banker." good to have you here, neil. >> my pleasure. >> little bit of softness in the labor market. but a lot of people would argue

we're still on the road to recovery. do you agree with that? >> yeah. it it's not like this is stalled. that's about half what it's been the last three months. some would argue because we had such warm spring weather for the last several weeks that some of this got pulled forward. i don't think this in and of itself is a great concern. there's also a leading economic index came out at the highest level since june of 2008 and that's before things started to get bad, sue. there's some signs for optimism in the housing market as well. what you're seeing there is that while the existing home sales haven't been great, also the inventories have been going down and the percentage that homes in delinquency or in foreclosures down about 5 percentage points. >> a little tightening there. the consumer seems a little healthier. they've been aggressively paying down debt. net-net that's a good thing. >> they are. it's not like people are partying like it's 1999 again. they're being careful. but they are spending some. things in credit card spending has been pretty good. particularly at the upper end of

incomes. it's been respectable. >> luxury still sells. you're going to stay with us and talk more about the banking industry in just a bit. neil, thank you very much. ty, back to you. >> sue, thanks. a big week for earnings comes to a close with a big bang tomorrow. mcdonald's will report up 26% over the past year, the stock is. does the stock still have room to run? first though gold trading higher today. the final floor trades happening right now. we're going to go live for a report from the nymex when we return. [ male announcer ] how do you trade? with scottrader streaming quotes, any way you want. fully customize it for your trading process -- from thought to trade, on every screen. and all in real time. which makes it just like having your own trading floor,

right at your fingertips. [ rodger ] at scottrade, seven dollar trades are just the start. try our easy-to-use scottrader streaming quotes. it's another reason more investors are saying... [ all ] i'm with scottrade. wanted to provide better employee benefits while balancing the company's bottom line, their very first word was... [ to the tune of "lullaby and good night" ] ♪ af-lac ♪ aflac [ male announcer ] find out more at... [ duck ] aflac! [ male announcer ] .... [ yawning sound ]

welcome back to "power lunch." let's reset the markets for you. we're off the lows of this session, but the dow, s&p and nasdaq all in negative territory. the nasdaq faring the best down just about one-third of a percent. gold and volatility up today. blackstone kicking off earnings for the private equity suite starting today. missing analyst estimates and reporting economic income or what they call profit is lower than what it was in 2011. the culprit here is lower performance fees for exiting investments. this morning president tony james telling reporters that the deal environment will remain challenged in 2012. and you can see what blackstone investors think of that. that stock down 3% today. and about 21% in the last year.

human genome sciences getting a bid after glax smith clien offered $13 a share to take over the company. it rejected the bid trading through the price up 97%. investors like the deal of a deal as well. up just a hair also. gold and metal prices getting ready to close right now. we have courtney reagan at the nymex. >> good afternoon, kayla. looks like another lackluster day here really into the close for both gold and silver as we look at it. gold traded as high add 1654 but ended up closing up just about $2 or so. factors weaker than expected jobless claims and strength in the dollar pairing those gains. silver a better day. and a note out of barclays capital noting exchange traded product holdings for most metals have rej strer stered outflows for the longer term suggesting declining interest there in the long run. tyler, back to you. >> thank you, courtney.

it was ground zero for the housing crisis. but it appears now that phoenix is rising from the ashes. builders are knocking up new homes again. diana olick looking at homes where demand is outstripping supply. diana. >> well, that's right, ty. we're just outside phoenix in whitman, arizona, where ripson homes is rising again. today's actually their tenth anniversary. but they haven't built a home in three years. two weeks ago they opened up the model home again and the customers began streaming in. it's all about supply and price point. supply of homes under $250,000 in phoenix is down 42% from a year ago to less than a 25-day -- that's day, supply. foreclosures down 52% annually. investors are eating up what's left of those leaving regular home buyers heading back to the builders. you haven't built a home in three years. what makes you say now is the time to start digging again? >> well, now's the time because we've been studying the

marketplace. we are familiar with the supply and demand dynamics. and we noticed beginning late last summer, early last fall that the prices -- homes priced less than $100,000 the market was becoming very tight. over the last several months those prices that price point increased such that today homes priced less than $300,000, there's less than a 30-day supply in the marketplace. it only takes a couple months to get building permits. and we can build a home in four to six months. >> so by the end of the summer you'll have a house here and you'll expect that house to be sold? >> i expect that house to be sold in the next few weeks. >> now, the price point on ripson homes is starting just under $200,000. but the key is financing. they are able to offer 0% down low interest rate financing thanks to the agricultural department's rural housing program. they're just far enough outside of phoenix. the usda has done 2,000 loans in arizona since the beginning of this year. one interesting point tells me a lot of the customers coming in

here they don't actually want to do 0% down. they want to put some skin in the game because they're afraid of the housing market again and afraid they might become under water and not able to sell. not everybody wants 0% even though you can actually get it. guys. >> diana, we're going to come back to that 0% question in just a minute. stay with us. joining us meanwhile to discuss how even or uneven the housing recovery is overall and whether we've finally hit bottom is executive vice president with carrington mortgage holdings. rick, welcome. i guess my take on what i'm seeing in housing is things have to stop getting worse before they get better. and it feels like we're at a point where things have kind of in many markets stopped getting worse. right or wrong? >> i think you're right. i think you can make a very compelling argument that things are getting less bad and the patient is finally showing signs of stabilization. so it is a necessary first step before the market comes back to full health. i think you can make that argument in a lot of parts of

the country right now. >> diana, you know, you've profiled phoenix. it is rising from the ashes. but can we say the same in other parts of the country? where are the other cities that are recovering in a meaningful way? >> well, as i've said all along, it's all local. and while the crash was national, the recovery is going to be local. we went to miami a couple weeks ago. we showed you how investors from south america were booing the miami market. other markets like atlanta and chicago not doing so well. parts of california are doing better. again, it's a question of where is the distress? where are the investors eating up that distress? and where are we able to put a bottom on home price? in the northeast we're seeing things better after the mortgage settlement and foreclosures going through the system again in new york and new jersey. d.c. still doing well. you have a good local economy, things will come back faster. >> so, rick, diana just mentioned that one of the reasons they're building in phoenix or that one builder is building in phoenix is there is

0% down low cost financing available that is supported by a government program. i feel like i've seen this movie before and it didn't end well. >> well, you saw a lot of excesses in that awful horror movie that we lived through back a few years ago. financing really is the achilles heel of the market right now. there are a lot of people interested in buying who under normal circumstances would qualify for a reasonably priced and reasonably managed loan who simply can't get that financing. so as that bottleneck opens up, i do think you're going to see some of that pent-up demand come to market. and you'll see a lot more of this inventory move. >> we've heard about that for a while -- go ahead, diana. >> i wanted to add one thing on the usda program. it's a small program and 30-year fixed rate loans only and very strict underwriting on that program. again, you're seeing more tightening in fact in the mortgage market especially because fha raised premiums. we saw a huge drop over 20% in

mortgage applications just this week for fha because they raised those premiums. so, again, a lot of the problem holding back the recovery is tight credit. >> right. i was going to say, when do you expect or do you have any inkling as to when credit conditions might improve? and how much of that is also a regional problem? >> i don't know that credit is so much a regional problem as is the value of the underlying collateral. and that's one of the considerations a lender has to make. i do think you're going to see the market move toward non-agency products that will be more accommodative to borrowers who don't meet the sort of restrictive needs some of those loans have right now. i wouldn't be surprised to see those products within the next nine to 12 months. >> rick, diana, thank you very much. and up next, financial earnings coming in much better than expected. b of a the latest to post strong results. >> so have the banks bottomed? we'll give you the latest word on that when ty and i come back. off vietnam in 1968.

over the south pacific in 1943. i got mine in iraq, 2003. usaa auto insurance is often handed down from generation to generation. because it offers a superior level of protection, and because usaa's commitment to serve the military, veterans and their families is without equal. begin your legacy, get an auto insurance quote. usaa. we know what it means to serve. departure. hertz gold plus rewards also offers ereturn-- our fastest way to return your car. just note your mileage and zap ! you're outta there ! we'll e-mail your receipt in a flash, too. it's just another way you'll be traveling at the speed of hertz.

not quite knowing what the next phase was going to be, you know, because you been, you know, this is what you had been doing. you know, working, working, working, working, working, working. and now you're talking about, well you know, i won't be, and i get the chance to spend more time with my wife and my kids. it's my world. that's my world. ♪

all right. well, we heard from priceline's ceo earlier. now we're going to hear from the street. a leading analyst on whether it's smooth sailing or bumpy ride to $1,000 a share. plus, all this kind of new again for the original low cost airline. we'll explain. and more bacon news. our new bacon news correspondent, darren rovell, who we're now calling d-sizzle. the story of a bacon burger with 1,000 pieces of bacon on it. that and earnings news. now back to sue and tyler on "power lunch." >> yikes. morgan stanley shares higher after reporting the company reporting better than expected quarterly earnings this morning. chairman and ceo james gorman spoke to david faber about those numbers a bit earlier today on

"squawk on the street." >> we've now had four quarters of earnings. this is not a profile of an institution that would typically be downgraded three notches. so there's more information now. the economy is recovering. the banks, us and the other banks are much stronger. so that's good input i think for moody's benefit. >> all right. well, with all the major bank earnings in, what are the takeaways? and is this the bottom for one particular stock, that is bank of america. let's bring back neil wineberg, editor and chief at "american banker." mary thompson and kate kelly with us as well. neil, what did you make of mr. gorman's comments and specifically as it relates to morgan stanley's bottom line results? >> obviously we know what's on his mind and that is potential credit downgrade from moody's which could cost morgan stanley a lot of business. what you've seen in general for the banks however is what they have been doing is improving their results by having lower --

excuse me by having lower charges for credit, then bad debt than what you're really going to be seeing here is this can't go on forever. >> mary, let me turn to you. do you agree? and what did you find the most compelling out of morgan stanley's report? >> most compelling out of morgan stanley's report is this is a company that saw revenue in fixed and equity training increase on a year over year basis in the first quarter. that is quite -- basically that's a standout from the other big investment banks. a number of them have tough comparisons year over year. so that was certainly a -- that was good news for morgan stanley. as far as the other banks, i would agree with neil. i think that is why expense management is going to remain very key for these companies in the months and the year ahead. >> yeah, kate, weigh-in on morgan stanley if you would. mr. gorman made his case quite nicely to david this morning. >> well, you know, i think there's an interesting parallel, sue, between what's going on with james gorman and brian

moynihan, the bank of america ceo i thought you were going to ask me about. >> well, we are. >> these guys took the helm in the last year or two and they've faced a lot of headwinds. a lot of leadership issues on the b of a side mortgage liability being top of mind. on the morgan stanley side for instance their sales in trading particularly on the fixed income side has been weak for many years. mary and i were chatting earlier, this is really a terrific quarter for them especially in that area. we may be in the midst of something of a comeback. and gorman's plan him being a very measured, very disciplined sort of former ma kenz guy may seem to be working out. >> neil, let's switch now to bank of america. kate started the conversation. weigh-in on, you know, bank of america. the stock's had a nice run, certainly. there are those out there that still see clouds on the horizon. >> certainly there's a lot of clouds on the horizon for bank of america. one of course is the countrywide financial legacy. it has a huge mortgage market. there was a $25 billion settlement with attorneys general around the country. and exactly what this is

ultimately going to cost bank of america is a big question. of course you have a lot of other issues here. you have dodd frank, the volcker rule going to limit merrill lynch's ability to do certain things. there's a lot of regulatory uncertainty as well as uncertainty about the legal and the regulatory liabilities are going to be related to its legacy mortgage business. >> you know, mary, you were talking about expense management. elaborate on that if you will as it pertains to perhaps bank of america. they did have the largest if not -- one of if not the largest cost cutting program in place, correct? >> yeah. i think actually kate should speak to that because she was listening in on the call. but one thing i want to note, again, this is a theme for all the banks. bank of america had one of the largest cost cutting programs in place. wells fargo is in the midst of one called project compass. morgan stanley on track to cut $1.4 billion in costs. again, with so many issues just as neil pointed out facing these banks, they have to keep expenses under control because for the traditional money center

banks, we are operating in a low rate environment and there isn't a lot of demand for lending, you have to keep the costs in line in order to help your bottom line. kate can talk about the b of a program. >> kate, do you think it's a bottom for the stock or not? >> i don't think right now's a bottom. i think the bottom was probably november or december of last year. you're not talking to a stock picker but my humble opinion is they were really bumping along the $5 range at that point last year. and they've had an amazing comeback since then including really excitement in the investor community this morning and pre-market trading. decent showing during the investor conference call. does seem like some confidence is coming for brian moynihan. on the expensive side i have to agree. the only bank we haven't heard a lot of expense cutting rhetoric is j.p. morgan. bank of america has reduced head count by 3% between recent quarters and also selling

assets. that was a huge theme for citi group as well, sue. i think this is a theme we'll continue to follow. i mean, obviously you want the revenue growth, but a lot of banks are focusing on the cost side which they probably feel they have more control over. >> thank you all. appreciate it very much. ty, back to you. >> sue, thank you very much. up next mcdonald's reports its profits tomorrow morning. the stock sitting near 52-week highs. is mcd's still worth 11? what analysts are saying next. [ male announcer ] if you want a luxury car with a standard power moon roof,

standard keyless access, and standard leather-trimmed seats, then your choice is obvious. the lexus es. it's complete luxury in a class full of compromises. see your lexus dealer.

time for three in 30. three stock stories in 30 seconds. news corp. stock down sharply as rupert and james murdoch will testify next week over a three-day period. news corp. shares down 2%. rimm up slightly on reports the company is hiring jpmorgan to advise strategic options. investors are not confident of a buyer. sprint nextel down sharply today. almost 5%. the state of new york is suing sprint for $300 million over tax fraud. that's three times what the state alleges sprint failed to charge customers in taxes. tyler. all right. kayla, thank you very much. mcdonald's will report earnings tomorrow before the opening bell. the stock taking a breather after hitting an all-time high

earlier in the year. year-to-date it is down about 4%. so, is it time to get bullish again on burgers? we're getting in focus with nicole miller reagan, managing director and senior analyst with piper jaffry. and our own phil lebeau. phil, this is a company that's going to have a new ceo very soon. >> right. >> it has been doing terrifically well. are people talking about that executive changeover? >> no. i don't think people are worried about it. in fact, i think in terms of executive changeovers at a dow component, this is going to turn out to be one of the smoothest transitions. in part because wall street is familiar with don thompson, the coo who's going to be taking over in a couple of months here. i think the real focus for investors is going to be on the performance in the first quarter and in particular what did we see out of europe. we all know about the economic problems that are going on in europe. and that is a huge market for mcdonald's. that's one of the areas people will be focusing on. >> nicole, let's turn to you and

ask what do you think the first quarter's going to show for them? i notice that you think that the same store sales are going to be a little higher than a lot of other people think. >> i think same store sales will be the topic that's most of focus. yes, we think u.s. numbers should get equal rating to the international markets. we believe they'll be better than the street's expecting. >> like 9% something like that? >> that's right. we have been at 7. the street's at 7. we did some work over the course of the quarter that leads us to believe that pricing is being absorbed by consumers. shift positive as they evolve food platforms and positive traffic turns. >> what about in europe? >> we're looking for mid-single digits. nothing different in terms of consensus than europe. i think we'll see certain markets that are larger for them

as standout markets. and then there's some underperforming markets. but net/net despite the economic backdrop in europe, they do have the benefit of mccafe rollouts of dual to-go drive-through. >> i want to ask a dumb questions, first with you, phil, because you handle my dumb questions so gracefully. is it all about the burger? how is it compared now? >> far less important. that doesn't mean it's unimportant. it just means where you look at where mcdonald's drives latest profit and profit growth what people are looking for, you're looking at breakfast, coffee drinks, look what we're seeing now with the smoothies and the fruit parfaits. those extensions, those are the ones that have really pushed mcdonald's over the last several years. it will always be to a certain extent about the burgers, but right now the focus is on the

growth and the growth is in the morning and with those extensions. >> love the coffees. nicole, thank you very much. we'll have you on for a longer time next time. phil, thank you. reminder, get the first read on mcdonald's latest earnings on "squawk box" tomorrow morning. all over the numbers with instant reaction and analysis as soon as they cross. you can stay up to the minute on earnings season in a special section up now on our website. you'll find a complete earnings calendar, company-by-company breakdowns as the numbers come in. and then a running score card of the season overall. very useful tool. >> terrific. coming up, just over two hours left in the trading day. charts of the day up next. omnipotent of opportunity. you know how to mix business... with business. and you...rent from national. because only national lets you choose any car in the aisle. and go. you can even take a full-size or above.

and still pay the mid-size price. i could get used to this. [ male announcer ] yes, you could business pro. yes, you could. go national. go like a

wow. this is new. yep, i'm sending the dancing chicken to every store in the franchise to get the word out. that could work. or you could use every door direct mail from the postal service. it'll help you and all your franchisees find the customers that matter most -- the ones in the neighborhood. you print it or we'll help you find a local partner. great. keep it moving, honey. honey? that's my wife. wow. there you go. there you go. [ male announcer ] go online to reach every home, every address, every time with every door direct mail.

nothing is sacred in the land of markets it seems. just days after the secret service hooker scandal from colombia, spirit airlines is using it for its advertisements. the new ad on the airline's home page shows a man in sunglasses -- you just saw that individual, a suit, ear piece surrounded by scantily clad women. the airline reads more bang for your buck.

flights for only $198 one way. another ad makes fun of the general services administration, the federal agency in trouble for another travel scam and lots of parties out in vegas. it says the gsa has great savings always. that's what gsa stands for. i guess what happened in vegas in that case didn't stay in vegas. and it didn't stay in cart either. >> no, it didn't. let's put the markets in perspective for you. the dow jones industrial average kind of being pushed and pulled. we were up about 19 points when we started "power lunch." we've dropped once again. there's that push and pull between the economy and earnings today. nasdaq is down 16 points on the trading session. and the s&p 500 is down about seven points. >> i thought since we were just talking about burgers we would contrast wendy's people say has a better tasting burger with mcdonald's stock price look at wendy's down 60% or thereabouts? >> 73%. >> 73% over the past five years and mcdonald's up