the trading session. and yields are going down on the 10-year note. that will do it for us on "power lunch." ty, see you back at the ranch. >> all righty. "street signs" begins right now. don't miss the 2012 stock draft. >> you got it. >>. welcome to "street signs." i'm brian sullivan. the dow trying to make it three for three. stocks cheered by some better than expected housing news, a dividend raise by j&j and upgrade to walmart. can you trust this rally? we'll debate. jobless claims not a bright spot. what is the obama administration going to do to jump start the recovery? the president's chief economic advisor is here to tell you. and we are just 30 minutes away from the first annual cnbc stocks draft 2012. seven traders, 21 stocks. who's going to come out on top? this must-see event complete with sandwiches is 30 minutes away. >> love the sandwiches for us unfortunately. the dow and s&p are rallying

today trying to extend a streak of six straight april gains. the dow and s&p have not lost ground in april since 2005. in fact, they're both lower for april. but zeroing in on break even for the month. the dow is just about 14 points away. the nasdaq has not had a losing april since 2006. but even with today's gain it has lost about 1.7% for the month. let's get right to bob pisani at the nyse. you know, bob, considering before the opening it wasn't looking so crash hot there for the market. why are we up today? is it earnings? is it economic data? or should we be saying thank you ben? >> you should say thank you ben. i mean, look, the earnings -- this is the first day i have been rather shocked by the earnings numbers. we had some high profile disappointments. initial jobless claims disappointing, the euro weak going into the open. these are the residuals from mr. bernanke assuring the market if things go wrong, he'll be involved. the commodity earnings, the paper company, they came out and talked about lower global

prices, dow chemical said the same thing. potash, lowered demand for fertilizers. coal and iron ore producer, cliff natural lower demand as well in asia pacific, look at the nurmbers. rather surprising. mandy, a rise in brent crude today. that's not good for the economy. it's putting pressure on the transports. look at this it started going up for the first time in a wliel. did you notice transports? all down on u.p.s. and higher crude price. you very rarely get a divergence between transports and industrials like we're getting today. >> bob, thank you very much for that. in the meantime, outlook survey out today and we've got an exclusive first look at investor sentiment on where they plan to put their money over the next six months. berny is executive vice president and head of schwab advisor services. great to have you on the show. interesting findings here. you say at this stage advisors

are more bullish than high net worth investors. what are advisors feeling about the environment out there that perhaps high net worth investors are not? >> yeah. they're feeling very positive. and thanks for having me. they're excited about where we are now in the marketplace as they were at the beginning of january of 2011. and they're seeing that their clients are excited and confident in what they've been doing for them. so i think the real story here is about the success that the model has had and really the confidence that individual investors -- high net worth investors are having with advisors. >> back to the individual question, only 29% high net worth are feeling optimistic and bullish, 45% of advisors are, what's holding back optimism among investors themselves? >> look at the survey as well. what you'll see is that optimism in the advisor that the clients are saying i'm a little bit skiddish still, this has been a challenging time, but i know that my advisor's going to strike the right balance for me and navigate me through this.

so 68% of high net worth individuals feel that their advisors are going to accomplish what their goals are. >> berny, do you worry about etfs? we're seeing a huge money go into etfs. your advisors are telling them to go into. what's your real feel on etfs here? >> yeah. advisors are using etfs. it's become a bit of a passive environment given the past couple of years. etfs are obviously a low cost alternative. they can get you into many segments within the market. and they've been using them for their liquidity as much as that. so advisors are sort of navigating that market on behalf of their clients. i think they're here to stay and will likely see an increase in volume. >> all right. you know f you had to pick one area of the market that your advisors are telling people to stay away from, whatever you do, don't put your money there, where is there? >> you know, they are clearly looking towards the large caps, domestic, equities, small caps, those are the directions they

want to go in. where not to have your money now appears to be in the cash component. they're saying, hey, let's get this money out there and working. there's a price to be paid for not being in the marketplace at this time as well. >> according to advisors, what do they feel over the next six months? are you going to be the leading market sectors? >> in the next six months what they're going to see is looking for some of this political gridlock to end, they want to see more confidence in the economy coming back. we've seen a lot of good news so far. hopefully a continuation of that good news. but, remember, advisors are always thinking about the long-term for their clients. in fact, their clients tell us most aufb that they want something even more than just the performance component. they want the trust, knowledge and advice. >> always very important. thank you very much for joining us today with that survey. >> despite those couple big earnings misses today, companies have mostly been beating profit expectations this quarter. but what about the quality of the earnings? for help answering that question

we are joined by mary thompson who's been crunching the numbers. herb is big on this, mary. quality not quantity. >> exactly. we have a little bit of both this quarter. actually, brian, with just over half the s&p 500 reporting thompson reuters says actual earnings growth is running at 9.6%, revenue growth at 6.4%. s&p analyst howard silver blat maintaining last quarter's earning quality pointing to strong profit margins over 200%. even though he does expect that number's going to fall its lower margin industries like retailing start to report. so first quarter profits are on track to be the fourth highest on record. and notes that cash flows have been very strong. and within the s&p 500 where the margin's strongest he says tech. but john butters points out apple is an outside contributor to tech and the s&p 500's good results. exclude apple's blowout fiscal second quarter and blended earnings in sales which assumes remaining reports will be in line with estimates and those

numbers decline for both the s&p and the tech sector. actually, profits are contracting once you take out apple. as for the quality of earnings, butters points out that the first quarter's best performing sector has the poorest earnings quality. he's referring of course to financials where reported profits are up an eye popping 23% so far this quarter. but tepid revenue growth suggests earnings benefitted more from the 30% declining banks put for bad loans rather than underlying strength in the bank's operations. >> interesting point: i think it's fair to pick up on that point you were making on the whole we've seen most of the s&p 500 companies that have reported so far beating estimates. what does that say? do you think estimates are just way too low going into this season? perhaps companies were lowballing nort to bring out a beat? what's your feeling on that? >> i think it's pretty much typical. seems the last few quarters they

went about 70% beat. that's about the level right now. i don't think that's atypical for where analysts -- >> you know, whenever i look at this of course on the expectations and meeting or beating, it's what i care least about actually. it's really going to be the trend in this case when you see earnings growing better than say revenue growth, you know, how they get in that earnings growth and that's where earnings quality comes in. that's when you start getting suspect. >> you don't want to see tax beats, you don't want to see write downs or good will. >> i don't want to see buybacks. but i want to see genuine earnings from operations growing because of no funny money. >> right. driven by stronger sales, stronger revenue, et cetera. and, again, you know, for the most part within these sectors it's been strong. financials is one to look at because there were a number of charges that help them. of course the fact they're putting less money aside for loan loss provisions. one interesting thing to note is one of the reasons we have seen such strong profit growth is that companies have been cutting back significantly.

so what happens, you know, in the quarters going forward? do they have -- can they cut anymore -- >> we have seen this now for three or four quarters. you can only cut so much. >> yeah. they're hitting meat, not bone. >> thank you very much, mary thompson. in the meantime let's get to brian shactman with a market flash. >> on that same token if you get a dividend hike like you did before earnings, you might want to watch out. i'm looking at metlife. they were at negative territory about an hour or so ago. they got out of the forward mortgage business and now they are out of the reverse mortgage business. they're selling that unit. it's not a huge part of their business but they are now out of mortgages entirely. the stock near the highs of the day. brian, back to you. >> brian, thank you. more drama around chesapeake energy today. the s.e.c. reportly has opened informal investigation. while company policy permits mcclendon to invest in wells, it's increasingly unclear

exactly what it is he did. case and point, today the company issued a statement clarifying a statement it made earlier. the company wrote "the board of directors is fully aware of the existence of mr. mcclendon's actions was intended to con fay that the board of generally aware that he used interest acquired, et set rat." herb, my point we talked about it today. the language from the board was fully aware to generally aware is a clear sign to you, me, mandy, all of us, they are separating themselves from aubrey mcclendon. >> absolutely. this is a board with a lot to lose. you have all these guys and say where were they? when that first press release came out and i saw the words aware, that they were aware, i thought to myself what the heck

does aware mean. now i know. >> the law school in me says this the change from fully aware to generally aware, right, that's the subtle -- why would they make the change? here's what it looks like. it looks like there's some questions around -- and under this program, by the way, people, he was allowed to do it. but the language says you have to buy all or none of the wells and has to be that year. so it looks like some question about what exactly he was permitted to do by the company. >> the eyes of the s.e.c. reports are suggesting that at this stage the s.e.c. is opening an informal inquiry into it but we'll see where it goes. i think it's a double whammy for this company at this stage because they're also being hit by weak natural gas prices. the champion of u.s. natural gas prices and i think fitch today just revised outlook down. >> it's a stock lost 50% of value in eight months. >> when i was on in february with a herb alert, the complexity of the company was making my head explode.

this was a complex company that had lots of critics circling it as natural gas was flowing but still higher. >> the prices have been falling but very aggressive with spending plans for this year. >> herb, thanks very much. still to come, we are on the clock. we are just minutes away from the first annual -- and quite possibly first-ever cnbc stock draft 2012. and you are looking live at the room. who will be the number one pick? you're going to have to stick around to find out. >> next, the man with the president's economic plan is here to tell us how the administration is going to keep this economy growing and creating jobs. "street signs" will be right back after this break.

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it is time now for your retirement equation. survey of financial advisors shows that about a third of them uses single 60/40 strategy for traditional portfolios. 60 equities and 40 bonds. fell slightly last week but even with that decline it did still come in higher than expected. the labor department also says the closely watched four-week moving average rose to its highest level since january. and venture capital activity saw a big surge in the first three months of this year. the university of san francisco's vc index report rose to 3.79 breaking three straight quarters of declines. brian. >> mandy, thanks. one of the president's top economic advisors out with a plan to combat a so-called

middle class jobs deficit. what is it? how will it work? let's find out. go now to steve liesman who has a very special guest first on cnbc. steve. >> yes. thanks very much, brian. i'm here with alan krueger, who is the chairman of the president's economic council of advisors. before you got into government work a noted labor economist from princeton university among other things. let's answer brian's question because if you don't he gets angry. what is the middle class jobs deficit and how can you fix it? >> the middle class jobs deficit, steve, is a problem that's been brewing in the economy for quite some time. we've not been creating enough middle class jobs. the job market has become more polarized. more jobs at the top, more at the bottom. and the middle has been shrinking. and the deep economic crisis that started in 2008 has made that problem even worse. >> so when you say middle class, you say jobs at the median. we have this median income that people are supposed to be in but

there are fewer people earning it. >> there are fewer people in the middle. it's been harder to move up from the lower, middle or bottom into the middle. that problem has been going on for over a decade in the u.s. economy. the president's looking for ways to try to reduce -- >> why wouldn't you step back and say this is a product of what the market's doing. it's rewarding those with skills more heavily and it's really not paying as much to people without skills. if that's the natural agenda of the market, why fight it? >> part of the problem is we haven't done a good enough job to provide workers with skills, the skills employees need. we look at other countries, they've continued to raise their educational attainment while we stagnated. we went from having the best educated workers in the world to being in the middle of the pack of the industrialized world. and that simply won't do. so one component of the president's strategy to reduce the middle class jobs deficit and reverse it is to provide more access to community college education, higher education, to make it easier for people to get

student loans, to keep the loan rates low. so that's one reason why it should be addressed. >> and even though you're a princeton alum, you gave a speech on this topic. jobless claims third disappointing week in a row. as the labor economist, as the president's advisor, are you concerned that the labor market and broader economy could be weakening here? >> the past few months we have had a good quarter for the jobs numbers. unemployment insurance claims have increased a little bit over the past few weeks. it's difficult to read those numbers with seasonal adjustments. but i think fundamentally the problem that the economy is facing is that we need faster job growth. we need more hiring. layoffs have come down. and we're seeing a pick up in hiring. we'd like to do whatever we can to keep that continuing. >> okay. here's the quick question. i think i ask you this every time i interview you. when the political side of the

administration asks you what's the unemployment rate going to be on election day, what do you tell them? >> i think each time i tell you and the president's never asked me that, we make our forecast for the unemployment rate as part of the budget we forecast for the last quarter of the year and our forecast was 8.8% when we made it in november. the unemployment rate's come down much more quickly than we expected then. we're not going to revise our forecast again until this summer. so you'll have to have me back on then. >> you will be welcome, alan. thanks very much. alan krueger, the chairman of the president's economic

looking at charts, there were some nice offensive plays, i'm going with dell. it's trading in an ascending triangle over the next three to six months i expect the markets to correct down. dell might drop down to 14 -- >> spent a lot of time on hair. get the hat on. >> by super bowl next year i think dow will trade up 22 to 26 on pa pattern clearly reflects michael dell's focus on the small to mid-size enterprise getting away from the consumer, $8 in share -- i don't own it now. but i think it's a great play. >> all right. so bund team is on the clock. get ready.

i think it's a stunner. we're entering the third round and apple and facebook are still on the board. my head is exploding. >> with this pick abigail has just given us. dell is a veteran, up a reasonable amount, what do you recommend, jim? >> i think michael dell's going from commodity to proprietary. i think this is a fantastic call. this may be one of the better drafts we've seen. i'm putting it up with deshawn jackson. >> in my entire list it is the cheapest if you assume valuation matters. also is continuing to have a very strong balance sheet. >> buy back stock. not a big fan of buy back -- >> no. but i want to tell you, michael dell just has so much egoon the line on this one. it's either make or break. >> i like that. >> we'll hear from these two. back up to you, brian. >> let's talk to james, the boom team. i know a good friend of herb. and first off before you announce your pick, are you stunned by the other two pick sns. >> i'm stunned by what josh picked.

i thought he was going for an even more wrecked company that could bounce back. i don't think rimm has a chance at all. i think they're dead. >> it takes two to make a market. what's your third pick, james? >> i have to go with a company i think is going to be the first trillion dollar market company, apple. >> apple. >> we finally get the apple. you can barely see it. how are we going to get the hat on? >> tom brady. >> so ten times earnings, ten times forward earnings, the iphone 5 is going to be a huge hit right before christmas. and you got to look at asia. china sales in apple has grown 300%. and we've only touched the beginnings -- this is the 1984 commercial finally going to china. >> do you own the stock? >> i do own the stock. >> he's going with a team he already owns. >> putting my money where my mouth is. >> reggie's team on the board. >> we got to apple. someone had to pick it. superstar, what do you think about that, herb? >> i think nothing james ever says surprises me. i think he's a man of

conviction. and he's sticking with it. and he made some good points because there are still some events coming there. again, will google get there before apple is my issue. >> fantastic. we have reggie on the clock. back up to brian and find out what reggie's up to in terms of his team boom bust. >> we went from the boom team to team boom bust. and reggie middleton familiar to "street signs" viewers usually talking about companies he's afraid of, but there are no shorts in this draft, by the way. reggie, welcome. come closer. i'm the long arm of the media here. so with the fourth pick in the 2012 cnbc stock draft, who is team boom bust selecting? >> i'm going with strict pure fundamentals. i'm going with google. i was shocked it wasn't picked by the fourth pick. i'm going with google. >> and you're official cnbc "street signs" hat. all rights reserved. >> notice, ki have colors. you see, google is roughly about 50% of the value. should be hitting between 1,000 and 1200. >> got to get the hat on. it's part of the rules --

>> okay. >> there you go. >> once full valuation comes to play, google still considered an online ad agency, which it is and its cash cow is growing. growing at a decent pace. but they have several multi-billion businesses that are not factored into the valuation. android, which of course is getting critical mass to be monetized. they have the hardware company which they bought, motorola now directly off their website selling hardware. they announced google drive. >> okay. we have to leave it there, reggie. the 30 seconds to explain the pick time is up. >> yeah. >> guys, it's herb's favorite. and pete najarian is on the clock. >> great minds think alike. it's a stock down over 5% year-to-date. it was your pick as well. you approve? >> of course i approve. >> and you do approve, jim? >> i think google's fine. it's not a great stock. it's an inexpensive stock. but i've got to tell you, i do fear the proverbial overpay

acquisition that created behind the second class stock. >> i do like google drive. i hate the corporate governance but i like google drive. >> okay. a very quick break right now but we are going to come back. when we return, three more teams are still waiting to make their pick. we have pete najarian on the clock right now. don't go anywhere. this is our first annual cnbc stock draft 2012. and we're coming right back. who have used androgel 1%, there's big news. presenting androgel 1.62%. both are used to treat men with low testosterone. androgel 1.62% is from the makers of the number one prescribed testosterone replacement therapy. it raises your testosterone levels, and... is concentrated, so you could use less gel. and with androgel 1.62%, you can save on your monthly prescription. [ male announcer ] dosing and application sites between these products differ. women and children should avoid contact with application sites.

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and welcome back to the 2012 cnbc stock draft. let's recap the picks. josh brown after consulting with matt millon took research in motion number one. abigail doolittle with dell, james with apple and reggie middleton with google. and now up to brian with pete najarian with the fifth pick. >> that's right. three picks to go. certainly some shockers. pete najarian very well-known to cnbc viewers. your team name is pony express. >> yes, sir. >> what is your pick with the fifth pick? >> with the fifth pick in the draft i'm going to take starbucks. i can't believe it's still available. i view this as robert griffin

iii because when you look at it, number one pick for me was apple. after apple was starbucks. >> andrew luck was apple. >> this is rg 3. >> forgot. sorry about that. when you look at what starbucks has done already, it's a body of work very much like rg3. everything looks great, they're clicking near 52-week highs. they'll have earnings tonight. >> rg3 a little raw for the pros. >> so is starbucks, but they have all that potential because by 2015 they'll have 1500 stores in china. they also have energy drinks and juice and bringing in little alcohol for those who want the alcohol. >> pete najarian starbucks with a fifth pick. we have two more to go. >> go with the booze if you want extra revenue. what do you make of this mermaid lady? >> i like this very much. only thing that concerns me, the team name, pony express, remember southern miss? now, here's what i like about this. this is a gutsy move ahead of earnings today. i like a guy who sticks his neck

out. that's how you get reward in this game. >> it's already up by 30% this year. >> i don't care. i think he's got it right. there's like a billion cities in china with a billion people and they have one starbucks. >> the stock has done so tremendously, you have to wonder whether it can continue to perform like this over that span of time. >> right. >> you don't bet against howard schultz. he's play thd china card before. it didn't work the same way before. we'll see how it goes. >> 60% over the past -- paul is on the clock. what should he be picking next? >> i'll tell you out of crucial names. >> radio shack. >> no. no. no. >> i think he should do mastercard, microsoft or i would do johnson & johnson. >> let's find out what he's going to pick. brian, back to you. >> guys, thank you. enough speculation here. we have the sixth pick with a lot of quality companies on the board. paul, we want today go with a name notorious b.i.g. you went with big money.

>> team big money is ecstatic to say that we are picking jc penney -- >> oh! >> mo money, mo problems. >> have you been to herb? >> who put target on the map? who put apple on the map? ron johnson. the company skyrocketed in january when they announced their turn around plan. i disagree. >> herb and brian have another little bet going there like they did with rimm last year. a long shot. >> i'm sorry, jc penney. i got $33 khakis there. they're great. still a big merchandise problem. when you go to jc penney you're left with the holdover. i've always been a big ron johnson fan. the thing i want to emphasize is it's made a round trip, herb. there is some upside just to get back to where it was. >> actually, when i first brought up at the end of last

year my first pick this year my number one pick, i think you still have -- look my concern there by the way is between here and february. results are more like this. >> they have a long way to go.

>> down 35% year to 45% year-to >> that's right. >> go back to you for analysis. listen, they're going for return. they're picking some long shots. a little beaten to you and none the big cap dividends got picked. >> bottom of the barrel but down at the bottom of the barrels. we're going to go to a quick break and find out where are the surprises, where are the shocks? we're back right after this.

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welcome back to the 2012 cnbc stock draft. let's show you what's been picked. number one, r.i.m.m., research

in motion, dell, apple, james and google, reggi middleton and starbucks and then jcpenney, paul hick key and then radio shack, guy adami. >> here's a look at the seven traders. they are stuck with their stocks. now they've got to hold them through the super bowl, which is february 1st, seven teams, seven stocks. that sounds like chris berman. >> i want to go to you, guys, jim, herb, anything in terms of what they didn't pick? there were companies left behind. >> look, i say johnson and johnston is one that is so given up for dead. it's a good company, a good dividend, a good leader, which is very important. they've got good products. >> we are going to make picks, we were going to let mandy go first so you went ahead and jumped in line.

>> the elderly before women. age before beauty. >> this is true. >> he eats at 5:00, you eat at -- >> i wanted that for a moment. >> you guys fought. >> we were both really cross over that. >> i was going to say, i was surprised by the fact that very few of the big cap dividend payers, go long, go strong, who were you most surprised was not picked? >> i thought microsoft because you have windows 8 coming, you've got a great balance sheet. by this point skype will be monetized. i think people are going for wide receivers, for cornerbacks. i like to start with an o-line guy. >> i was still going for apple. >> right. >> it wasn't the most

undervalued. >> i would pick facebook. obviously it has an ipo in years. the closing price on the day. not the ipo price but whatever it ends at. i'm going to put my money behind facebook. >> would you buy facebook after the ipo price? >> it's going to be so stoked that, no, it's going to be no different than from buying groupon or yelp. >> and what about you, brian? >> well, i guess i'd pick a couple of those -- we're just doing this for fun. this is for real. they are going to win all kinds of stuff, like glory and recognition. >> and i'm going to take them to chick filet next week. the reason that i would select best buy -- listen, i'm not a stock analyst. you look at the balance sheet. they are in trouble but still have a lot of cash flow. i think it's the perfect lbo candidate. i would buy facebook purely on the speculation that this company could be bought.

>> is this a hokie -- you think this is a vick? >> michael, not marcus. >> you know, it's going to be what price would they buy it at if it was lbo. what price? >> every time we see a big box retailer, they say it's a real estate play. >> they have an offbalance sheet. >> can i ask you, jim, you're a clever guy. real quick, of that list is there one that you would not have touched with a pole? >> i actually think that radio shack -- this was the first of many losses in the quarters. this was the one that showed you its destiny. you can only lose for so long. it's got a rendezvous with destiny. >> 1400 mark for the s&p 500. h