motion that starts taking risk, that's when you get the worst outcome. >> thank you for being here on what was a very important and newsy day. thank you for your comments. we appreciate it. i mean that. >> i am very excited. >> have a wonderful weekend. make sure you join us monday. "squawk on the street" begins now. >> good friday morning. welcome to "squawk on the street" on this friday the 13th of july. i am melissa lee with jim cramer and david faber live from the new york stock exchange. the dow and s&p trying to avoid a seven-day losing streak. the s&p is looking three at the open and the dow 24. as for europe the moody's down grade on italy by two notches is having somewhat of an impact on the italian market but green arrows for london, france, as well as germany.

we start the road map with j.p. morgan and restating their first quarter results in a number, 4.4 billion pretax for the trading loss and ceo jamie dimon put the whale issue behind the company. david has been on the call and has the latest. >> that continues by the way and the sixth straight day of losses as well talking about something continuing for the markets. may come to an end thanks in part to china gdp and keeps hopes of further stimulus alive and italy a two-notch down grade from moody's over night. >> and speculation about an amazon smartphone intense fiez. one analyst says don't bother given the costs and tough competition from apple. more on that in a bit. >> for the second quarter, of course, j.p. morgan chase earned $1.21 a share. a lot of items in there. it did compare to estimates far lower than that and pegging the london whale trading loss for the quarter, the second quarter at $4.4 billion at $1.6 billion

first quarter loss to that as well. jamie dimon says the worst case scenario fa here could see the number from trading and cio grow by another $1.7 billion. that's the worst, worst, worst case is what he just said. the company is reducing net income for the first quarter by the way after tax by $459 million amid questions about values that were assigned to certain marks in that portfolio. here is what dimon had to say on the conference call. >> the capital for known and unknown events and this we shot ourselves in the foot and that is one reason you have capital and we learned a lot and i can tell you this has shaken our company to the core. >> shaken the company to the core. a lot of other things to go through when it comes to j.p. morgan including the actual earnings themselves. we will get to all of that, i promise you, before the stock open this is morning. it does look to be up perhaps a bit but a lot of focus and

including a lot of the questions still are on the cio and what happened and what will happen from here. >> premarket is up 1.7% and so i think the question at this point from an investors standpoint in regard to all of this is have they acknowledged the problem enough? have they dealt with it, announced the clawbacks, we shot ourselves in the foot, and enough to say, know what, the issue is behind us as he said on the call. >> revenue growth is what i am looking for now, back to trying to analyze the situation and june was strong and i think the stock is up because there is actual discussion about earnings. i am sure the moment you deviate, like i am deviating now, i am not slaging at this moment, not attacking jamie dimon. people want me to do that. look, a tacked him and like make sure he never plays the game again or what? what i do like is june was strong. >> it was and they lent money.

they lent money. >> they did. >> to banks. >> they continue to. those would say you're not lending enough money, they would answer of course we are. we continue to tax and lend more and there was significant growth. there was mortgage lending growth. there was middle market lending growth. we can take a look at some of the numbers we have for you as well. probably not a bad time to actually focus on some of the fundamentals of j.p. morgan. >> he did not buy back stock. >> no. >> in fact, i haven't heard anything yet and i haven't gotten any answers from the e-mails i have been able to in terms of whether they're going to restart. >> early fourth quarter and they talked with the fed and i know 38, 39, 40, people thought he was interested in buying back stock and didn't buy back a share and i hate doing the he thing because it is mr. dimon and everyone calls him jamie and i am conscious about the personal stuff but in the end he bank made money and he is ready to buy book early fourth quarter. >> they have a $15 billion repurchase program out there. they only bought back $450

million worth of stock prior to the cio trading losses coming to the foreand spending it. they did buy back stock 44.75 is the average price they were paying when they bought that back. let's go back if we can for the investment bank, retail financial services, cars, commercial banking. they norm at this of the company, i was rereading the first quarter numbers and looking at the conference call from last quarter. we forget how enormous this is. look at the numbers. >> the great thieves in the conference call, it is enjoyable frankly. they just have so much money coming in every day. most people resident used to that situation. there is no company on earth that has that much money coming in every day, certainly no government on earl right now although a lot of governments would like that. >> and they have a lot of money going out. take a look at how much in small businesses and the cfo made a big point of this on the call, i believe, $10 billion in small

business loans and that's 35 more than a year ago. that's small business loans. they are doing the old-fashioned banking. jamie even said we by the way like making loans. >> i like that. that's a very wels fargoey style and i brought out the white out earlier. >> if they can find the loans to equal the liability, they would not have a cio to begin. >> i am trying to get to the root of was it hidden from jamie dimon or was it not? if it was hidden i feel better about dimon believe it or not because it is one thing to take a look at a run and say i don't think we're exposed and it is another thing to look at it and say it doesn't have integrity and then it doesn't matter who is looking for it, you can be fooled. >> they seem to have decided over the last few days is what mike cavanaugh said that they would take the restate the first quarter based on their at least assumption that while these marks on the cio portfolio were,

quote, within bid-ask spreads, they were not in good faith. they apparently listened to hundreds of hours of tapes and different languages. >> not in good faith is another way. >> i speak english. to me, bad thing, but jamie dimon did use the word accident. you get all of these things like accident and that's different from fraud which is different from bid marks not within. >> and the optics of the situation are quite good for jamie dimon and j.p. morgan. they restated the first quarter. they have thrown out the numbers for the clawbacks, so all of it is the next earnings conference call, are we going to be talking about this? >> i don't think so. >> we may be touching on it a bit, but we're not going to be focused on it. we won't literally have hundreds of pages of different presentations having to do with it as opposed to just focusing on the numbers them. when you look at the big picture in terms of banking and in terms of j pflt morgan, i know we have it if we can get to it. loan loss reserves continue to

come down. i like to look back at this. it does give you a sense where we were in the crisis and where we have been going. another $2 billion in release from loan loss reserves mostly in mortgages and credit cards but that's where the delinquencies have been and those delinquencies have been slowing significantly. look at that. that gives you some sense as to what we're talking about. >> what's the time frame on that? is that each quarter? >> yes. >> that takes you back. >> yeah. >> that does give you some sense. >> how about if we were talking about bbva? >> by the way, it wouldn't be nearly high enough on the left and therefore it would be probably should be a lot higher. the one that is haven't come yet may be far higher although that's the story for another day. on europe we did get -- we got more detail than we normally do on the european exposure. >> that was interesting. >> you see it in the slides i gave you. >> we give you the actual number. >> they did that in part because of the cio. >> six. >> about 6.3 billion total

exposure and because some of those trades were linked to europe, it would seem in some way as well. >> was there chatter on the call so far about libor, the libor situation. >> there was one question on libor, not long ago, and jamie dimon said, listen, it is way early. we will be totally open with the regulators, but we have no idea what to expect there. he did not give a lot of detail at all. >> do you think it will be tempest in the teapot. >> i bet he will not use those words again. >> ever again. >> reference to the last conference call in which he said the london whale is a tempest in the teapot. one reason why they went so far the other way -- >> you say that and i thought that was the most astute comment i heard all day is they had to make this into a much bigger thing in part because of how minimized it was by jamie dimon. >> no doubt about that. had it been different and perhaps a different bank, i mean, $6 billion loss is

enormous, but let's not forget that j.p. morgan in mortgaging since the crisis has probably lost $70 billion, in credit cards since the crisis probably lost $20 billion, just to put that in perspective, from the good old banking business. >> remember, it is not a loss when you're in the banking world. it is not a loss. it is a mistake or it is possible fraud but i just don't want to -- people say why should he claw back? they made a mistake. there are two kinds of mistakes. you can say direction bet and then hey you don't see the numbers and i know the numbers and the numbers going against me and i am not telling you and it is the latter i am worried about and they certainly better have better control but they said they're going to. >> they moved all of those assets or the synthetic credit portfolio has been moved out of the cio and about 320 billion in assets and one will imagine they will be managed conservatively from here. >> and imagine it is in the investment bank now.

seems so fitting. >> hiding in plain sight from now on. i think your point, melissa, the idea that maybe this is not going to be the focus going forward because of the way they dealt with it, i am coming around to that and i was very critical of these guys. >> that's a major turning point for you in terms of thinking of this company. >> on the libor question again because my notes are all over the place here, dimon did say something along the lines of remember all banks are not in the same position. >> true. >> he did push back on this idea perhaps there is some large liability there. we'll see what happens on libor. >> exactly. we should haadd that all banks e higher in the premarket. if you take a look that are reporting next week, morgan stanley, goldman sachs, citi, the wells number also that came in in line. >> a little high there. >> expenses were high. >> a little disappointing. i said that many times on the show. that's why the stock is not flying. >> this picture could help our markets in today's session.

the dow and s&p each with a six-session losing streak for the first time since may 18th and major averages on pace for the worst week since the week ending june 1th. on wall street's radar china gdp pulled off in the second quarter to 7.6%. that's the slowest growth in more than three years and in line with analyst expectations and they're cutting italy's debt rating by two notches above junk status and the yield on the italian tenure back above 6%. the reaction to the euro has been sort of flat which is a good sign for the markets. >> 121. i still don't see anything good about that in europe. i think the back drop of europe is still relentlessly negative. i think we could obviously just talk about it every single day as a price to earnings compressor. it is kind of where it is now. that plus the drought and the sky rocketing prices of crops and these are these themes that keep getting in the way of good banking at j pflt morgan, so you

have this yesterday satisfaction was a classic example. we got hammered in the morning. then we spent the rest of the day rallying back to the end and it is kind of like the good is digested later than the bad. >> yeah. >> and right in your face and the gooed is digested later. >> the best thing coming into today's session is the china gdp number. one analyst out there wrote it was basically exactly what you wanted, the best gdp number you could have for risk assets at this point because it is just weak enough so that the stimulus is still on the table and not too weak and it is sort of goldie locks. >> or exactly the number everybody wanted. >> one of the conspiracy guys. >> after spending five months on chinese corporate espionage, excuse me, why not. might be a little lawless over there, just a little lawlessness in china. >> anybody who remembers the greenspan era, you always wanted the numbers that were just bad enough that you might come in and cut monday morning and then

you had to cover your shorts. i think there is afraid to be short bid in this market at all times. i am afraid to be short. what happens if the chinese come out and do something? what happens if the communists do something captain list. >> it is possible. they have been acting like that. >> and the widow, wow, what a capitalist she was. >> she could party, too. >> all right. let's move on. amazon should stay out of the smartphone business. that's what at least baird is saying in the research note this morning. they say risks and costs outweigh the potential benefits especially with the apple iphone being dominant. they say it makes sense for amazon but a phone does not. >> yeah. >> i don't know. >> a tablet, it makes sense. you use a tablet to engage in commerce to buy content and further amazon's other money

making businesses and a phone, why bother with a phone? >> do you want to wake up in the morning and say, you know what, you want to go against apple? the fewer business lines you have against apple, the less business do you in italy and spain, they're like touch stones. don't go off against apple. give them that. also, apple has this curious relationship with the telco providers and they would rather nokia did better because they could make more money and that didn't work and this is a battle ground littered with players that were geniuses and you are going up against blackberry. remember when blackberry was good and motorola was good. >> remember the razor phone. >> i was very happy when i had my razor phone. i thought i was cool. >> you were still cool. >> the one thing to watch, forget amazon, the relationship between apple and the carriers and verizon and at&t. we talked a lot about the enormous subsidies and the level reaching above the amount they spent on capital expenditures, but plans are i think whiching. you can't get your phone every

13 months. i think it is 20 months and one does have to wonder if the subsidies will be less so because people resident renewing as much. >> and has anyone watched the stock of sprint lately? first of all the preferred went like this. there is something that is so incredibly powerful right now with sprint stock. it is like almost joining at&t and verizon and they have the iphone and they're willing to give it to everybody. any resistance verizon may be doing and at&t, dan hesse is picking it up. i think hesse is comeback player of the year. >> really? >> yes, comeback player of the year and it is only july. >> that's early, early, early to say that. >> comeback player of the year. >> you will crown him so you can remove him come december. >> come on, david. >> coming up, we'll be talking with b of a, merrill's head of u.s. equity and quantitative strategy and why she is lowering

her s&p 500 earnings forecast for this year and next and as we head to the last session of the week we're looking at an up session finally. people with a machine. what ? customers didn't like it. so why do banks do it ? hello ? hello ?! if your bank doesn't let you talk to a real person 24/7, you need an ally. hello ? ally bank. no nonsense. just people sense.

j.p. morgan chase posting a $4.4 billion pretax loss from the london whale trades and also saying some of the traders may have concealed bad credit bids in the quarter and we're squg you jail time aside what is the most finishing punishment for the traders? tweet us and we'll air your responses throughout the morning. i am sure there are a lot of people generally enraged at the way they behave, et cetera, but from the stock perspective, it does seem like this is an issue that may be in the past at this point. >> back talking about earnings per share. >> right, record earnings this year. >> jamie dimon saying consensus for the capital iq consensus was for $4.26 and last year it was $4.48. what he is basically saying is he is raising numbers on the call and i am not dismissing the fraud, possible fraud, whatever, but when we're starting to talk

about what began substantially above and when we're talking about scrubbed clean and the balance sheet and earnings per share, that's the jamie dimon that i want. >> he is back maybe. maybe he is back. >> i think that he by his own admission would say i will never be back, i will never be in the same pantheon that it was but i do want to put a multiple on things and he is helping us put a multiple on it and it seems not that expensive when you think about the quality of the bank. >> up next, using kramer as the good luck charm for profits getting ready for the mad dash and take one last look at we head to the last bell for friday, the dow looking at 23 points. much more straight ahead.

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six minutes before the opening bell time for kramer's mad dash. ahead of that market open. we're going a little off base here. >> the cell discovery, pretty well its own company, declining viewers against the olympics. i think it is interesting. olympics can't be time shifted. you can time shift a lot of discovery. this is important. incredible article about binge viewing and wall street journal. the creator of breaking bad saying maybe it is best to watch my programs on netflix or amazon because viking vibinge viewing . if it is not immediate, hey, i will watch it when i want to.

>> except for realtime of course which you have to watch, there is a real question in terms of what's going on. cable ratings across the board are coming down. discovery, incredibly strong portfolio of international properties and more so perhaps than any other network everything can cross borders. >> and that's why we're worried about it because of the international exposure. literally they're taking what we know is a positive and this is what's going on in corporate america. wait a second. we moved over to international and we were smart and now we're dumb? well, when you read the cell call, what you see is they're too exposed to the euro. >> of course the larger take away, you're correct, in terms of netflix and time shifting and viewing and as we see this move along as a trend that only grows when you get apple tv, you can access broadband in a full way. you have to wonder, i don't know, a & e is worth 20 billion and comcast just sold 60%. >> but content can still be king. i don't like netflix stock.

die believe you can't be shorted as much as you were at one time. i do like amazon. i think amazon is doing a lot of things. people want to get their stuff immediately they have to go to amazon and netflix and breaking bad starting sunday, you're just getting season 4 on sunday. >> we'll have a lot more "squawk on the street" and the opening bell is four minutes away. stay with us. mutual,

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have points in this country. i do think, yes, it is a tougher place to be sure than wrong. >> there you have it, the opening bell ringing on wall street as well as the s&p 500 realtime for the friday session officially under way. you have to wonder about the stocks that have been hit by the china slowdown and whether or not there still seems to be the back stop and possible further stimulus and if they will regain ground at this point. >> that's a tough call. a very typical situation, a firm cuts price target for caterpillar? why? the stock is down to 120. a lot of stocks it is difficult to figure out. say cummings, you bring it down to $9. i think they can do $9 this year. the stock is at 86. i don't know if it is cyclical. do i really want to buy this thing? do i want to buy it at seven times earnings? i think people are cherry. i don't think they want to pay up for these. i think their instincts are when

in doubt buy merck. >> right. >> big winners yesterday. >> yeah. winners, boy, let me give you a real one, the winners continue to win. look at proctor and gamble. bernstein comes up and says 90. >> really? >> proctor and gamble, $90. >> based on what? >> mcdonald out? >> if old mcdonald were to go to the farm that won't trade at 68. i think mcneerny is making noises he is not happy and that's scuttlebutt. i hate that stuff. no one knows what's going on in the boardroom. not even donald trump. >> that's impossible. >> he knows everything. >> back to the chinese? >> we'll talk a lot about it. we'll see. i would be curious so see whether some of these china related plays do have a rebound to melissa's earlier point of

any kind or whether, again, back to this point of do we believe the numbers? don't we? so many people look at electricity consumption and it seems to be down year-over-year. >> and you want to do a study of china and kleinfeld, must be up 28 hours a day. he has done a phenomenal amount of work on alcoa and alumina production in china. you may think the numbers are fabricated. i think he has them down to the 500,000 a ton and there is a lot of output. they do have to string wire from one place to another and they do have a great migration. true. >> yes, true. >> certainly not with lincoln. i have not seen a lot of lincoln like figures in china of late. >> i haven't seen a lot of lincoln like figures in the u.s. either. >> good point there. >> sobering. >> j.p. morgan shares are up 2.8%, very strong performance by

j.p. morgan along with the entire sector. are we back to what used to be the norm which was first out of the gate reports sets the tone and you fade the rest of the rally because the best came today? >> i tell you, the guys i expect to do the best in the business remain the u.s. bank corps. i think they'll have double-digit growth and i like bb & t and whether there is a first horizon and huntington bank and they're taking a lot of share from bank of america which a lot of people feel is losing share. >> and one of your faves, wells fargo, it is not. >> one of these banks is lower but wells i think, let's see what they say. one of these things we have been spinning all morning. we're spending every second listening to the j.p. morgan call. the j.p. morgan call i think it is binge viewing.

it is binge listening. i get this call on netflix after i am done with things. >> i think it is still going on. maybe it is finally ended. >> they're wearing us down. it is a chinese water torture situation. all right, all right, i will buy it, i will buy it. it goes on and on and on. >> is it different this time around that analysts are physically at j.p. morgan headquarters, david? >> i think it is. they never do that. of course they never have a two-hour analyst call either. maybe they wanted to keep them engaged by having them in the room. there will be a follow-up immediate call. we usually get that first. that will be a brief media call. >> and he goes to east hampton at 9:00 tomorrow to tell the story and at 11 water mill? what? he sat there until 12:30 and a cocktail party to talk about the numbers and nantucket on sunday and martha's vineyard and come back monday and spoken to everybody that matters. >> there you have it. >> that's the way it works. >> the traveling secretary.

>> important to be in touch with the people. >> green mountain coffee down by 5.6%. very volatile by stifle nicklaus is slashing the full year estimates sharply because they say according to scanner data there is a weaker pricing and promotional trends for green mountain coffee for the k cup, so that's bad news and we are seeing that move sharply lower at this hour. the coffee stock in general? no. your favorite dunkin' is running. >> and dunkin' remains to me that great american story where you can hide, drink, whatever you want, you will see me there tomorrow morning at 8:30 and i feel very strongly that it is going to go up. >> one name you like to focus on. >> not tractor supply. >> no, hewlett-packard. down 2%. that's an update in the technology. >> lex smart on the second quarter, they see weakness in

europe and fx head wind severely impacting. it is not just hewlett-packard. it is also shares of xerox. >> i am glad you mentioned that, lexmark itself down 6.5% and given the j.p. morgan, i totally missed it. >> how many people print things anymore? i mean, honestly. >> is that a serious question? are you kidding me? >> i am asking the wrong people. i am asking the wrong people. sorry. >> we don't want the razor and we don't want the blade. >> talking to bob here on the floor with what's moving. >> the important thing is here is 7.6 on china gdp, just good enough and i think the comments were right. it was just right for the markets. you see how commodities call moved up. did you see how copper moved up and oil moved up over night? overall, futures on most of the stock exchange has moved up. the betting is still china is heading for a soft landing and i agree with your points about how much you can put into the reliability of china statistics.

bottom line is you can watch electricity consumption. that seems to have been going down. the other major component is bank lending, and bank lending has definitely been going up and with a turn over of power coming next year, everybody i talk to thinks any sign of weakness in q3 is going to be met with further rate increases and more increases in spending and particularly back to the infrastructure spending they did in 2008 when how many millions of chinese lost their jobs due to the global slowdown. they went to a huge infrastructure project and it did create problems with inflation but it did help them get over the hump. they'll certainly go to that if things slow down. most people i talk to seem to feel they are engineering some kind of soft landing. by that i mean on either side of 8% and don't be surprised given what's at stake for the chinese leadership and the transfer of power that overall gdp for 2012 comes in around 8%. let's move on here. did you see what's happening in

europe? the bond yield seems to have stabilized since the eu summit. italy got the down grade and didn't matter. they floated three year notes and yields went down. things seem to be stabilizing a little bit and again i was just in italy. the big discussion i just got from a comment from somebody in italy is they're talking about getting back in the race and saying maybe italy can do without the euro. that's a bad sign. the support for monte that i saw in italy when i was there was very thin. they all support him, but they all say we're paying higher taxes and that's all we're seeing so far. every italian said higher taxes is all we're seeing under monte and still supporting him. careful here. burr l burr. i want to comment on wells fargo. i think you said a lot about j.p. morgan. wells fargo is the biggest mortgage supplier in the united states, and their comments on housing were very encouraging for the housing builders and the ceo came out and said we benefitted from signs of stabilization in the housing

market. i say big mortgage, one in three mortgages i believe are originated over at wells fargo. when they say things are getting better, i think it is a very good sign. mortgage revenues and i did a rough calculation, about 15% of the overall revenues for wells fargo. i don't want to do a deep dive into the earnings report. they were about in line with expectations. the comments on housing i thought were particularly encouraging. back to you. >> good point, bob. i have to tell you, good news for wells really at this point it is good for america and i like the action in wells and looking over any expense growth in that there is booming business in mortgages and that is our country. >> that's another interesting thing. the net interest margins seem to have improved a little bit because the way they're settling out some of these old mortgages, getting a little better, so when they bought mortgages from banks that they took over at 70 cents on the dollar, now able to resolve them at 72 cents or 73 cents, a little better than they expected, so the net interest income which is reflected in the

margins is getting better as well. that's another sign of stabilization in housing. >> didn't expect to see that. >> this stock moved up in the last five minutes. >> didn't expect that. >> it is $176 billion market cap, far and above the largest market cap bank in this country is wells fargo. >> more important than copper stock, fertilizer, come on, no. >> margin cap is only twice that of bank of america. >> the founding fathers will be rolling over in their graves. you are never supposed to have more than 10% for one bank and wells has done it. what's good for wells is good for the stock market. head to the bond pits. rick santelli. >> we know there is a lot of headlines that come out of places like europe that move markets. let's go to a second derivative. there is an east coast think tank who in my opinion their greatest skill is the timing of the topics they pick to write about. the topic today is the deposit rate and some of the issues regarding interest rates in general in the eurozone, and

many as you look at this euro dollar euro versus dollar chart believe that was one of the reasons we saw it jump up for what had been a fresh new interday low going back to the second week of june in 2010. it reads depending on your screen sometimes they're not exactly the same, right around 1.20, 1.65, that area and jumped up over 1.22. the beg your pardon now to many in front of a weekend may not shorts, all the new shorts that jumped in or the long liquidation. view it any way you want in the euro currency. it might be more supple to the upside. that's what traders think. look at the two-day chart or a 24-hour chart of ten-year rates, what jumps out is we're stabilizing for several interday sessions under 1.50. we settled under 1.50. last week we were at 1.55, so very significant which side.

we saw pti and indeed the headline including food and energy was higher than expected. here is one reason why. corn is trading just back under 750 and zooming up again and this is a real market with real fundamentals and no government i know can print corn. back to you, jim. >> great point, rick. surprised beer down today. that has gotten a lift and i think the fertilizer stocks could go higher. let's go to sharon at the nymex. sharon. >> definitely the one to look at of course and traders are all talking about china and the growth rate and the slowest growth we have seen in three years and the fact that while it was in line with expectations, we're likely going to have to see some type of growth oriented policies coming out of beijing and that is one of the big reasons why we're looking at copper up about 2%, gold actually catching up with the rest of the commodity sector and gaining ground and oil prices at their highest levels in a week's time. we also in the oil market have the news that came out yesterday afternoon that we reported about

the u.s. expanding its sanctions against iran and that really seemed to help to turn around the oil market late yesterday and we're continuing to see some gains in the oil complex today. as you look at the gdp data, also keep in mind there was other data that came out about power demand and about oil demand in china and that was not good at all. power demand basically flat in june and we're also looking at oil demand, crude runs in particular, that are at their lowest levels in june since october of last year. this under scores the fact there is still a great deal of concern about growth, particularly oil demand growth and that is something that could put a cap perhaps on the rally that is we're seeing here in the oil market, david. back to you. >> thanks very much, sharon. if you're just joining us we have been covering the j.p. morgan earnings this morning. i don't know if you have heard anything or seen anything about it, but i did want to come back to nuts and bolts of j.p. morgan and let's for a second at least put aside the $4.4 billion loss the company suffered as a result

of poor trading and poor risk controls and a lot of other poor things that took place. there is a look at the shares. they're up 4%. why? the quarter itself was better than many analysts who follow this company anticipated and $1.21 a share in earnings. there is a lot of noise to a certain extent and they had a dba adjustment and the price of the debt were they to buy it back fell and they have to report a gain and they also did have a $2 billion reserve release sometime back. jamie dimon says i don't consider that real earnings either when we release reserves, but all of it helps. the overall production earnings organic earnings growth if you will and/or at least growth of the loan portfolio is being seen as a positive, jim. take a look at the significant items that we are talking about to a certain extent. there is the cio trading losses,

the securities gains, and put it in the hopper and mix it up and as we look to the second half of the year, it doesn't look bad. >> look, at the beginning of the buyback, the start of the fourth quarter, you're talking about just a matter of months before they can come in with guns blazing if they feel like this is the right level. obviously they fought the federal reserve. we know that. there is a lot of communication there. that makes me want to go back and say how is loan growth? loan growth good. >> yeah. >> ruare you inclined to buy j. morgan? i know you are a big fan of wells fargo and usb but they have had huge runs and if you chart them against j.p. morgan, you will see the out performance. is now a time to think about taking profits and going to something with more upside? >> mike has a big position in j.p. morgan, one of the reasons why we took it a little more personally and don't want to

touch it. it is time to hold on j.p. morgan. it is time to hold. >> one final thing from j.p. morgan. we'll talk a lot more about it. we do look to it in part as a radio he flekz of the consumer certainly how large the credit card business is and how large the mortgage business is. take a look at sub-prime and it gives you a feeling for what's been going on in the u.s. consumer. we talk a lot about weakness in the u.s. economy but the big trends when you look back are still moving in the right direction. the worry is of course that things are starting to even out there. >> cash rich country. >> confidence poor. >> confidence poor, cash rich. >> stole that from the snap-on guy there. props to him. props to him. >> he made it his own. there is loan loss reserves again. >> a lot more the rest of the program. >> j.p. morgan chase says some of its traders may have concealed bad credit bids and so

what is the most fitting punishment for the traders? tweet us. we have your responses straight ahead. take a look at the early movers, lots of bright spots as the s&p is up by almost a full percent. stay tuned. between black and white answers... ...and 1,000 shades of grey duff & phelps finds the sweet spot that powers sound decisions. duff & phelps financial advisory and investment banking services.

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tag a look at the dow, only one loser in today's session, that would be hewlett-packard. it is down by 2.4% on this lexmark 2 q warning on european weakness in the business printer business, business commercial printer business is what i mean. we are seeing the knock-on effect of shares of hewlett-packard. here is an interesting 52-week high target. third day in a row of 52 week highs for this. >> good merchandising, very aggressive suddenly, the company in a lot of different ways and certainly domestic security names and this is also a big beneficiary of the implosion of j.c. penney. it is high with nordstrom. >> that sent the stock to the

races. >> great merchandise. >> target got it right. i remember the days when target, those were the dayshen walmart used to have a look and walmart is back in positive territory. greenberg has a negative piece about costco. >> even the general is up today. >> the general. >> that would be ge, my friend. vaguely remember that name? >> not dollar general. >> part owner of us. breaking news in consumer sentiment just moments away. >> beaches, picnics, pool parties. what's better than a summer weekend? how about six stocks in 60 seconds? before you call in today see what kramer has to say. "squawk on the street" will be right back.

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six stocks in 60 seconds. we start with caterpillar. >> people afraid to be short this one despite the price target lowering because of china. that goes up 3 points in china does something good. >> dean foods. downgraded. >> unbelievable reform of the

first quarter and of course now because of dairy costs, it is a play against grain. >> salesforce.com, think equity. >> people gravitating towards high growth for a couple of days. it is fine. >> vmware. >> a cloud play. the riskiest stock on earth and people are coming out of the fox holes. >> sachs downgraded. >> high end is bad and the stock hasn't gone down as much as the others. >> and your favorite, you look proctor and gamble. >> bernstein says it is worth more than this. >> mcdonald's steps down, i am using the price target of 70, up from where it was 1r5 minutes ago. that's what people are doing. >> we'll be right back. let's go to rick santel tell i. >> this is the july preliminary, very much lower than expected, 72.0 is the july preliminary,

university michigan sentiment index. looking for 73.4, i had estimates as high as 74. the last time we were had a final read this low, you would have to go back to december of last year. the lowest read currently this year on a final basis happens to have been our last look at 73.2. don't see the equity markets or the interest rate markets paying attention yet but it is a friday. sometimes they have a very strange glide path to the closing bell. back to you. >> no real reaction to that consumer sentiment number. >> no. we're a little better but we have been down for so long and seems up to me. there is only so low you can beat this market down. you have good loan growth at wells and good loan growth at j.p. morgan and people looking for macro numbers and there is the numbers. they're both positive. >> what we have tonight on "mad money.." >> this is the future of the defense budget, you listen to simpson-bowles and maybe this is

the solution is to have even more unmanned than we have. they're inexpensive and seem to do the job. >> all right. have a great weekend. >> as soon as i finish the wells fargo call my weekend can start. >> about midnight tonight. >> yeah. >> we'll have a lot more on j.p. morgan earnings and the cio, the media call has gone and we're back after this.

good morning. welcome to the second hour of "squawk on the street." get to the road map for this hour. j.p. morgan chase reducing net income for the first quarter by $459 million amid questions about values assigned to certain trades. also pegged the london whale trading loss at 4.4 billion pretax. >> and earnings season swings into full gear and savita subramanian is cut are her earnings forecast for this year and next and will explain the reasons why. >> google versus facebook. find out what eric matt told y

kayla tausche. we start with j.p. morgan, the big story of the day. the stock is up moving sharply higher. have you the latest. >> following it and the media call has begun and not sure if jamie dimon is on that call, but it follows what was a two-hour, you might imagine, very unusual analyst meeting for j.p. morgan. a lot devoted to losses at the chief investment office and those happening in the second quarter of 4.4 billion and $1.6 billion in the first quarter, so a $6 billion pretax loss given that trading strategy that went awry and now a number of significant questions about that overall because of a press release that came out this morning in which the company says it was no longer confident that the trader marks reflected, quote, good faith estimates of trader value at the end of last quarter.

that's raising questions whether this perhaps will become a criminal matter and very much unclear whether that is the case. a couple of questions asked on the press call at this point about where things really stand because mike cavanaugh who runs treasury services had said that the marks were within the bid ask spread but nonetheless they had been led to believe and after listening to hours of tape and the like from traders they still were not accurate. doug bronson, the cfo, says it left with trader intent and not sure if it was the belief in whether they really could exit the positions and the restatement only moved net income from the second quarter to the first quarter and no effect on the balance sheet or income. as for the overall quarter itself, though, and this is being reflected in the marketplace as well, a decent quarter to say the least, it would seem at least given where expectations had been, a lot of noise and dba adjustments and loan loss reserve and settlement on bear stearns and a lot of different things moving around. for the most part it exceeded

most analyst estimates of what j.p. morgan would earn and does seem reflective of a continuing repair if you will, delinquency still moving down, credit cards, still not much, mortgages and the like and loan originations. >> the highlight is $9 billion as a figure for the trading loss, that's off the table. the "new york times" reported that. you at the time said that was oon erroneous figure and it was out there and it was a concern and at this point we can take that off and it does look increasingly like next quarter we're going to be talking about this less and less and less from an investors standpoint. that's a good thing for a company that lost about $40 billion in market cap since the april disclosure of this trading loss. >> they moved the credit portfolio within cio has been moved to the investment bank. they significantly reduced the total synthetic credit risk in the cio and to your point jamie dimon said the worst case scenario and he does not expect it to be the case at all is another 1.6 to $1.7 billion of

losses. by the way, that's not nothing. we're talking 6 billion already. it may be there are no losses at all to come from here and so to your point perhaps investors can put this behind them and they will potentially restart the share buyback program in the fourth quarter of this year. they have only bought back a small amount of stock so far at much higher levels in the first quarter of this year. >> can i ask a stupid question. >> there is no stupid question. >> i think it probably is a stupid question. what they have come through and said is traders might have tried to conceal bad credit bets in the first quarter and if that's happened, fine, because to a certain extent it can't be jamie dimon problem if it is out right fraud in the company, if people are being dishonest, all he has done is trust them, so have they come through with any evidence they have an issue there? i have read what mike cavanaugh, former cfo, who is leading the investigation said on the conference call. they listened to tens of thousands of voice tapes, many in different languages as part of the review and partly kwl it is taking so long and it will

continue. in other words, forgive me if this is an assumption, they listen to tens of thousands of voice messages and mail in many languages and still haven't found in i wrongdoing. is that where we are? >> what they found is, and i think you're right to ask about real clarity into whether this falls into the fraud category or simply into what they said not acting in good faith and what that actually means. all i can tell you is the latest we have from the call on that very question i would ask i assume it was asked, i wanted to know an answer to this as well. we had questions said cavanaugh whether traders were putting marks on positions at where they really thought they could exit those positions. they were pricing more aggressively but generally within bid ask spread nonetheless it appears like they felt it should be restated. >> seems sort of cya. >> what does cya mean? >> cover your -- >> oh, i am sorry. >> extremely cautious, kitchen sink, throw everything out there possible that's bad and just get

it behind you. >> cavanaugh, correct me if i'm wrong, is a very strong ally of jamie dimon and he is out to protect his boss and prove something in the company that as yet they have not found. have they? i don't see it. >> you can go to the conclusion somehow that things were completely -- that it was in any way fraud, that fraud or to kramer's point that people were using white out to cover up things. we all know there was a lack of supervision. there was a lack of understanding and there was a lack of focus on the marks themselves and whether they were accurate. that much we know. >> if they come through and say this is a trading loss, it is actually not at all. the allies would say it is a trading loss, what a bank would do. that's not how they're treating it. they're reviewing tens of thousands of voice tapes and that continues in many languages. >> trying to figure out what went wrong. >> talk about the legal implications what's happening. joining us is a partner at

zumansky and associates. what's your opinion. >> i think this is a total mess. i believe it looks like there is fraud here with the traders concealing losses. there is out of control risk management. i think that this bank is too big to manage and if you look at what jamie dimon has been saying the last couple of months, it changes. first it is a tempest in a teapot, don't worry about it, a $2 billion -- >> jay, jay, jay, that's water under the bridge at this point. >> i don't think he knows what's going on. >> at this point the question we're dealing with this morning is what is the difference or is there a bright line distinction between fraud and not acting in good faith when it comes to these marks? that's the question that we're dealing with right now. >> i think if they intentionally change the marks to make the losses look lower, that's fraud. if the e-mails which are being reviewed and the phone calls show that there is an intent here, that could be criminal.

>> so that's where it comes down, jake. as your expertise as a lawyer, not as a banker, in terms of actually being able to prove fraud, that's where the line would be drawn? >> yeah. is there an intent and an intent nowadays when we have all of these e-mails and have seen it in all of these cases, if somebody is trying to hide something, change the numbers, cook the books, this is what comes out in e-mails and the phone calls and if it looks like it is intentional, let's hide this. let's make this look lower. that's a type of evidence that leads to fraud charges by the s.e.c. and the u.s. attorney. >> and to your point doug bron steen, the cf off the of the company on the said it is not our job to decide if it is fraud. there are regulators looking into all aspects of what happened. >> jake, from a shareholder perspective can there be lawsuits filed because of this if it is fraud? >> absolutely.

we have seen j.p. morgan lose $25 billion plus of its market cap since this whole london whale thing was announced so investors rely on the integrity of the information coming out of these companies. if it is erroneous, false, fraudulent, whatever you want to call it, those lawsuits have already been filed and they'll be moving their way through the courts. i happen to think this is a good one. >> why? >> why? because they make a representation that they have good internal controls. they report that these are the actual numbers that we have. people make investment decisions based on that. if that information is false in a material way, we have a problem. >> jake, i spoke to you on fast money shortly after this london whale loss was disclosed and you said that you were considering a lawsuit at that point. are you in the midst of one right now? are you representing shareholders and i would imagine that if it comes to the

conclusion of regulators, that there was fraud, but that would actually further your lawsuit, the original lawsuit, that there weren't proper internal controls. >> yeah. there have been class action lawsuits filed and i have been hearing from clients. i haven't actually filed one on behalf of j.p. morgan investors, but numerous people have contacted me. we have other cases against j.p. morgan, but there have been cases filed by large institutions that had had big holdings and big losses so those cases are moving forward. i am not on that particular case at this time. >> thank you very much for your time. >> j.p. morgan just off session highs in fact. right now up by almost 4% but it had been as high as 4.3% so nice gain here for j.p. morgan. >> perhaps the core of the business an upbeat kind of view. >> yeah. not bad. we all know capital markets has

been lackluster so the investment bank reflect that is to a certain extent and fixed income was not particularly strong. it is all relative to expectations but that being said, it was better and wells fargo didn't look too bad either. >> interesting that on the subject of the investment bank 35% drop in banking fees for the quarter although the wages were only down 12%. is that something they can pick up later? >> the investment bank? >> the wages are down 12%. >> the rev comp ratio is 33% which is a bit below last quarter which is 35%. usually it is somewhere between 35 and 37% and j.p. morgan did say they hope to keep expenses flat versus the first half of the year. expenses were higher than they anticipated during the first half. >> go to brian shactman at headquarters for a market flash. >> looking at petrobras up sharply this morning, raising

wholesale diesel 6%. looks like the government finally allowing them to pass along the price increases. goldman sachs came out with a note and they're positive on the move as are" investors. >> thank you very much. coming up savita subramanian will join us. she is importantly lowering her s&p 500 earnings forecast, not just for this year but for next. she will make her case next on the program. "squawk on the street" straight ahead and right now the dow is currently up 148 points. this man is about to be the millionth customer. would you mind if i go ahead of you? instead we had someone go ahead of him and win fifty thousand dollars. congratulations you are our one millionth customer. people don't like to miss out on money that should have been theirs. that's why at ally we have the raise your rate 2-year cd. you can get a one-time rate increase if our two-year rate goes up.

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take a look at the markets. we're snapping the six session losing streak for the s&p 500 and the dow with a rally. the nasdaq is up by more than 1%. the s&p higher by 1.2%. where we're seeing strength is the consumer staples sector. it is hitting a fresh record high and when you take a look at components and the runs they have had so far, maybe it is so surprise these stocks are doing so well. consolation brands up 40% this year, and whole foods up 36% for the year and dean foods seeing a setback because of higher grain

costs and the impact on dairy and its business and that is up 27% so far this year. a lot of winners in this sector. >> and with j.p. morgan reporting you kind of open the gateway to the bulk of the earnings season and savita subramanian joins us head of corporate strategy at bank of america merrill lynch. good morning to you. >> good morning. how are you. >> i am fine but you're more pessimistic because you're lowering your earnings estimates for the s&p for this year and next. what's the problem? >> yeah. the rationale behind it is really a couple of things, largely higher energy -- sorry, a drop in oil prices which caused us to take down our energy estimates. we also took down stocks that have more exposure to currency and with a stronger dollar and as well as stocks with a little bit more exposure to global growth. i think those are the areas where we are seeing more risk and i think so far what we have seen coming from company guidance suggests that stocks with more foreign exposure are actually starting to look a

little bit riskier and those are the stocks where we're seeing more negative preannouncements. i think those are the areas we have actually taken down estimates a bit. i would say, though, that this quarter's estimates actually we left unchanged and i think this quarter actually looks pretty reasonable in terms of -- >> i was going to ask you why you are keeping your year end target at 1450. >> a couple of reasons. i think from here to the end of the year we could see upside for equities. the reasons there are we still see positive growth in earnings for the full year. again, sentiment is off the charts negative. equity strategists are more bearish on equities than they have been in over 15 years now, so i think that sentiment has gotten to a point we actually see more upside than downside risk for equities. positioning is more conservative at this point in the year. i think that net-net if we avoid a recession in the u.s., i think that we could see positive returns for equities.

>> for equity investors there are a few sectors that have been the go-to sectors and that has been consumer staples which we mentioned and utilities sitting at a four-year high at this point. for investors piled into those stocks and seeing nice performances, do your earnings estimates bear out support for this move? >> i think we're overweight staples. i think it is a very good play in terms of today we saw an up market with staples leading. i think that's a good sign we could see going forward in the year. staples we like because again at the risk of a recession staples is the only sector that actually has grown earnings over the past few recessions and it has got a lot of cash and growing dividends and i think we see some strong cash return themes. one of the things i think is worrisome about the market today is there is a lot of data, so we're in a very data focused industry. there is ism dropping below 50,

the fed sounds dovish and china numbers look good and i think if you go back to common sense is and what's going to lead in equities, it is probably more about yield and cash return than anything else. we have got interest rates low, investors looking for yield. where are they going to go? they're going to go to income oriented equities, and i think staples fits that theme. >> so with so many people getting worried about the fiscal cliff at the end of the why ear and increasingly we're seeing ceos yesterday on the network saying they're very concerned and they will pull back and that's one reason why the ten-year is trading where it is at the moment. >> right. >> still calling the market up 7.5% by the end of the year on a kind of fair value this is where we should be. do you ignore those -- you mentioned other external factors. do you have to essentially ignore those and hope for the best and hope the market trades to where fair value exists? can you factor those things in. >> the fiscal cliff is a real concern. what we're looking for this

quarter is more of a sense that corporations are actually cutting plans, they're starting to change their behavior based on the upcoming fiscal cliff, but the one thing that i think could bolster the market going forward is corporations haven't been spending that much cash even over the last couple of years. they have been sitting on a lot of cash. even if they halt programs, it is not like the change is going to be that dramatic. it is not like they have been spending at this phrenetic pace and all of a sudden they will cut everything heading into the second half. the other area that i think that equities, the s&p 500 could do well is the u.s. is in kind of a better position than the rest of the world at this point. we have seen this in terms of more domestically exposed stocks out performing foreign exposed stocks even within the s&p 500 by a pretty wide margin. you have the consumer discretionary sector looking pretty decent heading into earnings season, a drop in oil prices could lift the consumer.

utilities like you said a sector that led the market, lots of yield, and tech we think could do well for dividend growth reasons. i think there are a lot of reasons within the s&p 500 that we could navigate this a little bit better than the rest of the world. >> okay. savita, thank you for your time. have a great weekend. >> thanks. >> savita subramanian joining us. >> the media and technology conference still going on but winding down in sun valley idaho and kayla tausche spoke with eric schmidt at the event and has the details. kayla? >> well, david, when i sat down with eric schmidt i asked him first what the most important thing facing google is right now, and he said making sure the market knows that larry paige which has been out due to a lost voice is doing okay while schmidt says he is not 100%, he is at least not expected to miss any further big meetings coming up in the future. >> i think he is still recovering. he is in the office.

he is working hard. he is running the company. his voice is definitely coming back. i think he will be just fine. >> the other big issue is facebook. facebook is friends with google, but they're also sort of fren emies and playing in each other's backyard and they say facebook's ipo, whether it is a success or failure is too soon to tell. he did wish google's instagram well saying because of their relationship they held early talks with the company before facebook decided to acquire them. when i asked how they viewed them as a competitor or a potential partner, this is what he said to me. >> we have had lots of conversations with facebook. they do search with bing and we have tried to get them to switch because we think it is a better search and we have not prevailed and there is always hope. we know them well. quite a few of the executives are good friends and people have worked at google and so forth. we have a good relationship with facebook. they're primarily competing in

the social space and i think that will probably continue. >> right now they're also competing over the attention of the hot startups here in sun valley. mark zuckerberg last night driving the ceo of drop box and the ceo of uber to dinner last night. it was a very funny scene and he was stuck in his car in front of a dry cleaning van and it was a nice moment of levity and all of those start ups will present tomorrow morning at 7:30 mountain time so people can feast on the new product which is are always the god golden valley and now the focus is italy and mario monte and people will pay attention to his comments. >> kayla tausche, thanks so much. i am glad to see the pm is out there in sun valley after moody's down grades two notches. >> it is a long time. what is that now, three or four

weeks. >> weeks now. >> with the best combined for a long time. >> i don't know what was wrong with that. >> it is an interesting pairing. >> that's a any net worth pairing. >> what do they talk about? >> coming up, a bull's-eye for target, the stock hitting two-week highs in today's session and what's working is the better bet at this point than rival walmart. be right back.

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the gdp report confirmed a slowing economy and the number 7.6% was in line with analyst expectations. what is fueling the slowdown? when will it in? we'll bring in tim seymour and good to see you. >> how are you? >> i am great. thank you. you actually think that the trough in terms of china growth will happen in the third quarter. is it time to get in ahead of that trough? >> i think that just to review the data, what this data showed is especially most concerned about the industrial production data which came in a little weaker than expected and in my view had been the china was going to be troughing in the second quarter and i think a couple of things have led to pushing that out to the third quarter. one of them is not least the scandal that's gone on in the people's congress party with

effectively the number three increa resignation and putting principal sis into china's policy. i think the numbers were a bit of a relief, the gdp at 7.6, while the weakest in three years, the cut last week of rates by the people's bank of china for many indicated things were much worse, and i think as we look into the third quarter, what this doesn't mean to me is that you're going to see an extraordinary policy response but that these guys will definitely continue to have their foot on the pedal, and i do think you will see some bottoming in the third quarter. i think what it means for mining companies is it is not necessarily the time to be buying all miners, but i think some of the integrated miners that have exposure beyond iron ore and coking or and they show in electricity production and useage are still down and they're not making as much steel and don't need as much coal and coking coal. >> you like hp.

>> i think it is certainly a place where you have a diversified miner who is i think trading at fantastic valuation even though i don't think that they're going to see the pickup into the fourth quarter. i think the other thing we'll explore on a special edition of trading the globe is the chinese growth crimped the earnings forecast for a lot of multinationals and we're hearing this now but there is certainly still a major opportunity for a lot of companies growing and we'll go into more detail on that. we already had the warnings and i think a lot of people priced a lot of bad news into many of the stocks. >> tim, thanks so much. of course we'll hear more from tim tonight on the new edition of traiding the globe as earnings season kicks into high gear and the master of doom and gloom on why he thinks the slowdown will only get worse. that's tonight at 7:30 eastern time. >> coming up on the program, a tale of two banks, both the earnings are out and which is a better bet, j.p. morgan or wells

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the dow is up 149 points, relatively broad base and had definitely led by the banks in the wake of j.p. morgan chase reporting a gain of 3.6%. as we're one hour into trading we do have a fairly significant rally at least after what has not been a great week. head to chicago and get more on the market's moves and for that we're joined by lincoln ellis, managing director of strategic financial group and joins us from the cme. what's your take here? j.p. morgan did seem to lend a positive tone one would expect and wells fargo, okay as well, i guess. >> i think if you continue to see some recovery and some resurgence in the financials, at least that stability at quarter over quarter making money ex any exo gl onneous factors it does put a floor you should under it and if we can continue to repair the balance sheet of the banks, it is positive for the broader

market as we go forward into the rest of 2012. >> what about china gdp? is that lending a positive tone here or there is continuing concerns. we heard an earlier guest talk about electricity consumption being flat to potentially down. how important is that in terms of what we're seeing today? >> i think melissa's conversation was instrucking about the forward expectations and the bottoming and whether or not it is the dessert on a prefix menu and in a transition year the mechanisms will be pulled to engineer a continued 7.5 or higher growth rate out of china's economy and that bodes well for places like the rim countries in asia and also as reflected in the australian dollar and the australian economy as well. >> lincoln, i get not wanting to be short this market. what accounts in your view for this rise going into the

weekend? is it short recovery? what's behind this? >> it is interesting. one of the things i have pointed out in my notes today the last time we saw the relationship between the ten-year and the equity prices at these levels we were trading 1260 on the s&p so obviously some short coming and low volume and low participation rates make for big moves like this. i do think that there is this fear of investors being caught flat footed as we move into the second half of the year and perhaps things as your bank of america earn approximate was saying a couple of segmentsing amaybe not being as bad as expectations may have been set. >> all right. thanks, lincoln. thanks for listening to so much of the show as well. appreciate it. >> my pleasure. >> lincoln ellis. >> more than what we listen to. let's get back to the j.p. morgan story and mary thompson's been keeping a watch out on the clawback part of the story, mary. >> hey, there. this is a closely watched

decision. j.p. morgan is the first bank to claw back pay from senior managers and to disclose it publicly. it is basically a groundbreaking decision closely watched by the street. the bank clawing back the maximum amount under its employment agreements which for those impacted involves about two years total compensation and the money being clawed back is coming from restricted stock as well as cancelled option grants. the three managers whose pay is being clawed back, achilles max, bruno iksill and javier martin artajo. ina drew retired once those were disclosed and gave up pay. she was one of the highest paid executives pulling down $15.1 million and here is what jamie dimon had to say about her. >> from my experience she acted with sbeg rid and i tried to do what was right for the company at all times even though she was

part of this mistake and i believe it is true here as well. in that spirit ina came forward and offered to give up a significant amount of past compensation which is give to the maximum claw back amount. >> as for dimon's compensation and others involved the bank says their 2012 pay and potential clawbacks will be considered during the ordinary course of business this year. the bank's move generating cautious praise from some in the governance community. owner bloxham writing to cnbc in an e-mail that clawbacks are substantial and added that the board should have been more out front on the clawback for jamie and the cfo and perhaps an internal audit would have done good as well. whether or not any of dimon's pay is clawed back is something we probably won't know until next year. simon, back to you. >> hang on a minute. they're obviously not going to claw it back are they if they come out with the figures and the news is as bad as it is going to get. >> the board said they will make that decision in due time.

>> the due course of business. we don't know. maybe they will claw back some pay. i guess they're going to figure it out at the end of the year when they see how the trade has been handled and how the rest of the business is impacted. >> sounds like kicking the can down the road. thank you very much. let's continue our j.p. morgan conversation. gerald cassidy joins us from rbc capital and he rates jpm as an out performer. is that new or have you had that since the fall off when the scandal first came out? >> no. we have had an out perform reading on the company for over a year now. >> what do you think of what you heard today? >> i think the company did a very thorough job of explaining to everybody what happened in the cio office. they also did a thorough job on reensuring everybody they have their arms around the problem and it is behind them. >> they cleared it? as far as you're concerned it is no longer an issue. >> i think they boxed it in effectively. they did point out they have not

closed out all the positions but by the remaining positions that need to be closed out, it will cost them anywhere in the worst case scenario 700 million to maybe a billion seven and they have $900 million of one-time gains slided for the third quarter. >> there is a lot of noise in the quarter. let's set aside i think it is strange to do the cio and the dva and the long loss reserve releases. what about the core business? what did you pick up this quarter? terms of what you're seeing there? >> that's really the heart of the question is that when you get to the core businesses, they actually did pretty well. when you exclude all the one-time items and if you say this trading loss was a one-time item as well as the higher securities gains, we come up with about $1.29 a quarter or run rate basis of almost $5.20 a share with a stock trading in the mid-30s. we think it is very attractively priced today where people can buy it. >> although again throwing a

multiple on 520 may be nice but people don't want to work much with multiples let alone one that managed to lose 6 billion in trading losses over the last two quarters. >> fair enough. i think you won't see premium multiples for this company any time soon. clearly the regional banks, they're the standard bearer of the highest valued at bank in the u.s. and certainly j.p. morgan is not going to get anywhere close to that any time soon. >> how responsive do you think the stock will be to the $15 billion buyback? of course they preannounced that and sparked a major rally on the market and now it is on hold because of events that we know about so well, the prospect that it might restart in the fourth quarter. will that move the stock substantially in your view? >> not substantially, but i think once they start engaging in the buyback, hopefully in the fourth quarter, that certainly will be supportive to the stock price, especially at these levels. >> you mentioned not necessarily being able to accord any of these bank stops of premiere multiple but at $50 what

multiple would that be? >> when we take a look at the price target of j.p. morgan and others the next 12 to 18 months, we're expecting that the banks will start to trade at anywhere from eight to ten times forward earning and probably premiums to book value which as you know has not happened any time in the recent past for most banks because of the problems they experienced. as we go to normalized earnings in 2013 and 2014 i think we could see better multiples for the banks. >> presumably you cover wells fargo. >> yes, we do cover wells fargo. >> so today you have a 17% rise in that second quarter profit. how does that compare as an investment with jpm? >> that's a good question. it is a different company as you know. wells is a very powerful nationwide bank that does a great job in the mortgage area. they're the dominant player there. they're almost a super, super regional if you will. they're not a global player like morgan or citi and a real play on the u.s. and if you believe that the housing recovery is in

place, wells fargo should do very well over the next two years benefitting from the housing recovery. >> all right, girard, we'll leave it there. thank you for joining us. appreciate it. >> you're welcome. >> shares at target hitting another 52 week high in today's session as the retail era unss noed it expects to open 125 new store this is year in canada. as target continues to out perform is tgt the best bet amongst the discount retailers? answering that question straight ahead. [ male announcer ] let's say you need to take care of legal matters. wouldn't it be nice if there was an easier, less-expensive option than using a traditional lawyer? well, legalzoom came up with a better way. we took the best of the old and combined it with modern technology. together you get quality services on your terms, with total customer support. legalzoom documents have been accepted in all 50 states, and they're backed by a 100% satisfaction guarantee. so go to legalzoom.com today and see for yourself. it's law that just makes sense.

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it is now up 4.5% give or take, 4.42% in the wake of those results earlier today. let's have a look at the consumer staples. it is broad based. i could look, for example, at materials up 1.3% or energy up 1.2 as the price of oil moves higher. >> this is notable even on a percentage basis. it is notable because it is a fresh record high, the s&p consumer staples, fresh record high. let's take a look at shares of target. they are also trading at a fresh 52-week high. the question is is it time to sell or is there more room for appreciation? patrick mcceaver is a senior analyst at mkm partners. it is interesting to watch this breakout in the stock, patrick, because it happened close to the same time walmart started to break out as well. what is behind target's break out here? >> i think one of the things

that is driving the stock right now is the company is really on its game from a merchandising standpoint. they had this initiative in the stores in may and june called the shops at target working with boutiquey merchants and i think it drove incremental traffic and they'll bring it back in the ball and they recently announced a partnership with niemann marcus to do about 50 exclusive products together in partnership and sell those both in target and in niemann marcus over the holidays, and that's looking pretty interesting as well. there are just a few examples of a number of things target is doing from a merchandising standpoint. the merchandise in my opinion looks better than it has looked in the entire time i have covered target which is more than ten years. >> wow. amongst investors seems to be a real appetite for the lower end sort of retailer in this sort of market, and as we have seen target stock break out, patrick, it is worth noting that it is trading at a cheaper multiple than walmart, than tjx and all

of these invest or favorites. at this point do you see a rotation happening within the sector? >> maybe a little bit, melissa. i think that target is around 12 times my 2013 estimate and some of those are trading in the high teens or close to 20 times in the case of the dollar stores, so i think the stock is under valued at. i have a $69 price target which is 14 times my 2013 eps estimate of close to $5, so, yeah, i think there is room to run here still for target and i think it is going to get more attention as we move forward into the back half of the year. >> hard not to note that j.c. penney is down again and what to extent are they a beneficiary? >> i think there is some benefit. there is not -- there is not a great deal of merchandise overlap in the apparel area. i think the bigger benefit to what's going on with penny he is

ais flowing to macy's and maybe to series and more to kohl's in the back half of the year. i was at company headquarters yesterday with executive management and i think they're going to start to see a bigger share gain from penny's. >> in terms of the target versus walmart, it doesn't necessarily have to be either/or. but when we see gains being made by target, should we think that walmart may be losing at the fringes? >> there, too, there's a different customer demographic between the two, probably more than most people think. i think they can both do well. and walmart's doing better than they had been doing. but target's doing a lot better. they comped over 5% in the first quarter, the best in six years. compares to walmart around 2% i'm not recommending walmart. i know the stock's done very well. my preference continues to be target. >> we have to wrap up. you just said something i was curious about.

why don't people appreciate the difference in customer base for walmart and target? >> well, target's a bit higher end, a bit higher income. the neiman marcus partnership i mentioned just a minute ago, i think, speaks to that. and walmart has more of a lower income customer base, more like the dollar stores, really. >> patrick, we're going to leave it there. thanks for your time. >> thank you. as we gear up for november's big election and the prospect of the fiscal cliff, we'll sit down with reince priebus, chairman of the republican national committee next. we'll get his thoughts on the economy. but first, rick santelli what's in the next hour of "squawk on the street." >> good morning, simon. today, we're going to ease back and talk about some topics that some would deem politically incorrect, things like soda, smokes, outsourcing and we're going to have some fun with it

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welcome back to "squawk on the street." i'm brian shactman, looking at shares of lexmark. they lowered their q2 guidance and the significance, other than the fact that they're way down, they cited weakness in europe. if you take a look at some tributary damage in sympathy, xia xerox also getting pulled down. david, back to you. >> indeed, we've dean that as you say there. hewlett-packard as well. tweet time. and today, all about jpmorgan. the bank posted a $4.4 billion second-quarter loss from its london whale trades but also saying some of its traders might have tried to at least conceal where their marks really were in the first quarter that led to them actually taking $459 million. so we are asking you, jail time aside, what's the most fitting punishment for these traders? tweet us your answers.

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let's get to it. time now for "squawk on the tweet." jpmorgan chase posted a $4.4 billion pre-tax loss from its london whale trades but said one of its traders might have tried to conceal trading benefits. so we asked you, what is the most fitting punishment for these traders? alex tweet, make them go work for r.i.m. >> oh, come on. >> in waterloo specifically. >> and mike tweets, they should be forced to fly coach and sit in the middle seat, forevermore. we wanted to put this whale in context. the world's biggest whales still swimming strong. take a look at the top five largest whales. the blue while, fin whale, bowhead, northern and southern right and the sperm whale. doesn't sperm whale oxoxymoron?

>> have you ever seen a whale snt flesh? >> never seen a whale. i have to check it out. have you? >> yes, i have, actually. here's one you might have missed. welcome to hour three of "squawk on the street." here's what's happening so far. >> i'm going to see if i have an indication. jpmorgan have decided they need to restate some of their first-quarter results. they're misrepresenting -- >> and there were specific

traders cooking the books, individuals cooking the books. that's what they're saying. the worst case future loss is estimated to be between $800 million and $1.6 billion. >> i'm trying to get to the root of, was it hidden from jamie dimon or was it not? if it was hidden, i feel better about that. it's one thing to take a look at a run and say, i don't think we're that exposed. it's another thing to look at the run and see that it doesn't have any integrity. >> $6 billion loss is enormous. but let's not forget that jpmorgan in mortgages since the crisis has probably lost, oh, $70 billion. in credit cards since the crisis, probably lost $20 billion. just to put that in some perspective, from the good old trading business. >> what we've seen coming from company guidance suggest that stocks are more foreign exposure

are starting to look a little bit riskier. those are the stocks where we're seeing more negative preannouncements. >> and good morning. welcome to the third hour of "squawk on the street." let's get a quick check on the markets. after so many down days, six days in negative territory, we've bounced back with some force today a broad-based raul, clearly led by the financials. 153 points on the dow. activist investor bill ackman and pershing square capital, taking a $2 billion stake in procter & gamble. ackman is expected to push for changes in the company's top management and deeper cuts in an effort to improve p&g's lagging profitability. back to the banks, wells fargo also reporting its second-quarter profit rose 17%. mortgage banking income climbed. revenue increased over 4% to

$22.29 billion. >> let's hit the roadmap for this next hour. jpmorgan posting a beat. will jamie dimon be able to put the london whale behind him? and what could jpm's results signal for the big banks set to report next week. amazon's reported smartphone could be dead on arrival. we'll talk to the man behind the call. that's getting all the chatter this morning in just a moment. plus, with november closing in on us, we'll here from rnc chairman reince priebus for his take on the state of the economy. we first have to check in with capital markets, gary kaminsky. what's on your mind today? >> the markets are acting well. a lot of people attribute it to jpmorgan. this time yesterday, we pointed out the technicals looked a lot like it did in april right after that disappointing fed meeting.

i don't think it's jpmorgan rally today. jpmorgan is helping but this was a technical move and i want to talk about jpmorgan because there's been so much out there, let's just sort of put and kind of crystallize what we know now. this is what we know de facto after everything that's happened. the jamie dimon reputation that was there really since 2008 is done. it's not coming back because in financial services, in the banking business, when you lose that reputation as being the greatest risk manager, once it's gone, it does not come back, number one. number two, since 2008, if you were a hedge fund manager, a mutual fund manager, a trader of stocks, you want to get long financial, what did you do? you bought jpmorgan. you put it in the portfolio. gone. that's not happening anymore. that's done. the third point which takes me back to 2008 as well -- actually to 2007, when you had david goldfarb at lehman saying that

investment banks should be trading at market multiples. we know how that movie ended. banks are going to trade at lower multiples. it's a result not of just what happened to jpmorgan but what's happened the last four years. lower multiples for investment banks in the publicly traded market, jpmorgan not the stock you buy when you want to get long financials anymore. and jamie dimon, apologies on a personal level, i think he is a very good guy, will not have the reputation he ever had again. leave it at that. >> hang on, gary. if -- >> hanging on, simon. >> if jamie dimon's reputation was so in question, would they not have announced today, along with the other figures and everything else, that he was having some sort of callback or that he had given up some salary? seems that they're braving that out. they don't believe potentially that jamie dimon's reputation is in question here? that's not the mood music surrounding the conference call today. >> there's two different reputations. there's the reputation in the public. his reputation in the public, saying that we are making

mistakes and we've made mistakes. that's doing the right thing. that's why i said apologies on a personal level because i think he's approached this crisis better than almost any other ceo. he's approached it in a human way. however, the idea, the reputation that i want to get long financials, i'm going to buy jpmorgan because i know jamie dimon has the best risk management out there, that reputation is gone and not coming back. >> never coming back. at the same time, we all know -- i'm just wondering if at some point it doesn't make a difference what happened because it is over in the fundamentals of the business -- and the fundamentals of the business are better? aren't we seeing that today? >> the fundamental story that came out today was better than it was -- let's go back six months ago. take the earnings projections and where people thought the bank's earnings power would have been. we're not there. the point is if this is a bank that can earn $4 a share, the

question, the third point i was trying to make is what's going to be the right multiple? it's not going to be a market multiple. is it ten times earnings. >> i get that. but i think that's a separate issue from discussing jamie dimon's reputation. as an investor, reputation doesn't make a difference to me. >> surely the state of -- >> reputation always makes a difference because what separates within a sector stocks that trade at higher level multiples trade there for a reason. it's either for management or because it has a greater long-track growth record. you take two companies that are in the same business, they generate the same type of revenues and they generate the same type of profits, it's the intangibles that create the relative multiple. the relative multiple at jpmorgan as a result of the last several months will not be above the rest of the peer group anymore. >> but the overriding concern, surely is where you are with the

u.s. economy, where you are with the mortgage market and the idea that we've stabilize there had and therefore you could get a -- >> i'm not disagreeing with that. not disagreeing with the fact that if the earnings power is not a dollar but it's $1.50 a quarter, if the earnings power of this bank is $6, and the multiple -- let's just throw out a number. the correct multiple for publicly traded banks normalizes out at eight times earnings. eight times six is going to be different than eight times four. you're talking about the core earnings power of the bank. i'm saying a relative multiple is done. >> we got it. gary, we'll come back to you. let's get more on the jpmorgan earnings. and bring in jason goldberg. we got into a heated argument with our capital markets editor about reputation and the impact on multiple. do you think that jpmorgan from here on out will suffer a multiple discount relative to its peers because of jamie dimon's lost reputation, even at

the margins? >> not particularly, no. first off s this a black eye for jpmorgan and jamie dime snn absolutely. but black eyes heal. if you look at the track record throughout the credit psych toll current day, yes, this is a mistake. but other banks have made a lot more mistakes. we still view them as one of the better risk managers in the space. and it's basically -- took this issue head-on and put it behind them. >> in terms of the fundamentals of the business, jason, as we look ahead to next week's very, very busy calendar, i'm sure you have a lot of conference cayou'n we glean from the results today? >> fortunately those calls won't be as long as jpmorgan's. but on the positive side, you saw very short banking results. continued commercial loan growth, which we expect as well.

we think margins will be under pressure next week. also you saw in capital markets revenues coming down from the first quarter, jp, in line with our expectations but still down without signs of improvement in the near term. >> so obviously last week's results notwithstanding, what is your strategy for playing this sector in what are you saying to clients? >> we think you have several high-quality institutions like a jpmorgan and wells fargo that are increasing earnings, trading below where they have historically. and maybe those multiples don't get back to where they were. >> how much upside, do you think? >> i heard the discussion on jpmorgan earlier. we see normalized earnings in the $5 to $6 area. you can put a 9, 10 multiple on that, versus a $35 stock today, that gives you a fair amount of upside. >> do you think, jason, that jamie dimon's pay will be clawed

back and do you think as an analyst you will now if it does get clawed back? >> our understanding is that's something the board of directors is looking at. they're waiting to complete their review. it's hard to comment without knowing all the facts. but it's certainly not something we'd rule out. >> changing the subject slightly, next week, hsbc will come through with their mea culpa. you have the libor scandal in europe and we've had comments from the treasury secretary overnight about his role in that indicating america was doing what it could in the face of a very difficult situation with the bang of england. morgan stanley put out estimates overnight as to the sort of figures we might be talking about, the regulators might charge off or that there could be cases along the line -- to what extent do you think the earnings are going to be impacted by that scandal and who would you point to in particular? >> among the u.s. banks which we focus on, obviously jpmorgan or

citigroup's q2's. it's something we're watching, look for more disclosure to come out over time. >> last quick question, jason, will we be hearing about reserves for libor litigation? >> no, it's not thog something we think we'll hear about during the earnings calls. >> the morgan stanley figure is $22 billion overall. is that about right for you? >> that number seems high to us. >> thank you, sir. >> jason, thank you. let's get to the cme group and check in with rick santelli and the santelli exchange. >> we're going to talk about soda, smokes and outsourcing. weird trio to combine together. but we're in chicago. so we're not dealing with the 16-ounce soda issue the way new york is. but it really begs the question, and you could really see it with

cigarettes. i used to smoke. and i don't hold it against people who do. i finally deemed that it was definitely unhealthy and i've quit for almost three years. however, let's think about this. there was a time about ten years ago where there were all these settlements with the cigarette companies. and this money was supposed to be used for educating people like me at the time who smoked, or you buy a lotto ticket and you think, this is going to go to education. but the money goes in a general fund, just like social security. they're not contributions, it's the tax, the payroll tax. but here's the thing, if smoking is bad for you, why don't they just make it illegal and be done with it? why don't they man up east of the potomac? i'll tell you why. because they're enamored with the money. it's like the ultimate form of hypocrisy. if it's bad for you, make it illegal. why don't they? it's even more ironic. now you have smoking, which is technically legal, but they

treat it as though it isn't and they take the money and don't educate people to thought. and then you have marijuana that's illegal and you go to a state like california and you could buy it probably easier than you could buy a sparkler in illinois. third category, this one really is something, no matter what you think about outsourcing, we're all allowed to have our opinion. but outsourcing isn't illegal. it's not illegal. but yet i look at what's going on politically and most of the issues that get most of the commercials about who we're going to elect to run a country that is erskine bowles own words has a cancer called debt. and what do we talk about? things that are legal that people do because the rule of law is the backbone of the country so if business is in a free society -- we're not building fences to keep people in like cuba, i doubt if cuba does much outsourcing, by the way. this becomes a central theme. if you want to make commercials about things like that, make a commercial, let's change the law and make it illegal and see how

ridiculous it sounds. maybe we should do if we had leaders that really used what's between their ears, we should make a landscape in this country, an environment where no rational business decision would want to go outside the country. but i guess that's just me. makes way too much sense. back to you. >> rick santelli, classic santelli, thank you so much. listen closely, amazon, you may be hearing a dial tone. amazon's potential smartphone may be dead on arrival. we're sitting down with the man behind the call next.

welcome back to "squawk on the street." i'm mary thompson with some breaking news. the new york federal reserve reltsing documents linked to a congressional request on information over libor, basically confirming earlier reports including one by cnbc that after the financial crisis, tim geithner, current treasury secretary raised concerns about the calculation of libor, concerns that were expressed to the head of the bank of england. basically also that mr. geithner pushed for some changes in how to set libor back in 2008. again, there are a number of documents on the new york fed's website that have just been posted, including a slide deck and e-mails about the concerns about libor, as well as e-mails between her vn king, the former head of the b.o.e. and mr. geithner.

we'll have the latest details for you. back to you. >> thank you, mary. a new research note out this morning calling on amazon to hang up on any and all plans to launch its reported smartphone. the person behind the call is colin sebastian at r.w. baird. thanks for being with us. >> great to be here, thank you. >> amazon, you say, may not have to make money on this. isn't it a loss leader in some respects, a smartphone candidate, engage consumers in a different way and make them more loyal and therefore there are other benefits to having a smartphone? >> certainly. there are justifiable reasons that amazon wants to be in the smartphone market. they certainly don't want to sit behind google and apple in terms of where their customers are. and there's also a foundation for amazon already from the e-readers and kindle fire that they can leverage in the phone market. but our concerns are largely based on several factor that is make it much more expensive. phones are more utility devices, requires carrier distribution,

requires developing apps like maps and search which are potentially large investments for amazon. >> so basically you're worried that amazon is going to spend too much money and not make enough money off these phones because they're essentially commodities in this world? >> i think what amazon wants to achieve in mobile commerce and content and in payments even, that can largely be achieved on phones through well-cu hwell-cu apps. makes sense for amazon to be in that market compared to the phone market. >> if amazon launches a smartphone market, would that be basis for you to downgrade the stock? >> it depends on what the phone looks like, what the value proposition is. jeff bezos has surprised a lot of people in the past in terms of technology and devices. we'll take a pass on that question and wait to see what amazon brings to the table. but certainly our bias would initially be negative. >> it does seem odd that a

company would want to set itself up to go head-to-head against apple in any respect, let alone the iphone which apple clearly has a lock on. >> yeah, i agree. i think the phone market is very different than the tablet market. apple and google are spending a tremendous amount of money to constantly innovate and bring continuous improvement to their phones and their mobile operating systems. amazon is an online retailer, a great technology and cloud company. we think they should focus on their strengths. >> have you gotten any indication from the company that a smartphone is actually coming and what the time frame might be? >> no. amazon itself is very much a closed black box, if you will. but our conversations with developers suggest that amazon continues to work on the mobile platform. they certainly have been considering a phone. we don't have any other specific details on launch timing, though. >> colin, we're going to leave it there. thanks for your time. >> thank you. >> colin sebastian, analyst at r.w. baird. we're counting you down to the close in europe. be right back after the fwraek. [ male announcer ] let's say you need to take care of legal matters.

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simon, looks like europe is going to close on a high note. >> we were higher before the united states opened up. but this rally we've had on wall street has carried us still. take a look at some of the major markets there. frankfort flying from where we were and moved spain over the course of the session as well. what's interesting you is europe can focus on the micro rather than the macro. but the degree to which the euro's fallen and bonds have been in trouble, you've seen the top 50 blue-chips stage quite a decent rally. the contrast is very marked.

whether they're able to sustain that going through next week in the earnings season is what a lot of people are focused on. may be optimism on china that we've been able to do so well today. more than likely, it's the short covering. you see that even on the euro, which has actually bounced from the two-year lows as people put profits on the short euro positions. rome was able to auction the paper that it had to today at a lower yield than last time around. deutsche bank suggesting the moody's downgrade -- you're still trading if you look at the five-year cds, maybe two or three notches below that on the assumptions that italy might default with a 35% probability. silverio berlusconi suggested he might return to italian politics for the general election next year. and remember that mario monti is not standing. it is conceivable that

berlusconi could win and he's spoken about the possibility of taking italy out of the eurozone. and bank of america/merrill lynch said of all the countries in the eurozone, it is -- they have the most advantage in doing so. the other thing we should mention is that berlusconi is still under trial for allegedly planning to have sex with a teenager. so he may not actually make it through that process. here's the close in europe. higher across the board. no particular sector has done well. some of those beaten down on china have also bounced back. but it's broad-based short covering. even the italian stocks that were down earlier have cut their losses. fiat is down 3%, as you can see. this was a huge week in europe for the fact that the european central bank said it would no longer pay banks any interest to have their money on deposit with them. sure enough, half a trillion

euro, give or take, flowed out of the deposit accounts and then kind of flowed straight back into the currency accounts the ebs h ecb has with it. the ecb may have to push money back into the economy. money has shifted clearly this week into the short end of the government bond market around europe. and you'll be aware that the two-year german yield, i mentioned it to you yesterday, is negative, record lows there. record lows in finland and the netherlands. the other thing i should mention is the interbank rates has plunged to a record low. that's actually good news. in essence, it should mean the banks are more easily lending to one another, though the figures may not perhaps tell the whole story. and don't forget, this, like libor, melissa, is under investigation. back to you. >> it is. simon, thanks for that. let's check in with bob pisani on this rally.

bob, i just saw jpmorgan go above a 5% gain. >> yeah. several things are really helping today. let's put up the vooen screen here. the three points traders are talking about. number one, the china gdp number, 7.6%, that's good enough, good enough for a soft landing in china, good enough for commodity growth. that's generally good enough. jpmorgan and wells fargo's earnings, let's call that good enough as well, particularly strong commentary on housing from wells fargo. that's helping some sectors of the stock market as well. and finally, when was the last time you saw a euro rally? we're getting that as well, that's helping on top of that. take a look at commodity stocks. you can see the reaction to the china gdp. we had commodities up overnight, as well as all the big commodity names. that's a major factor. banks moved up on jpmorgan and wells fargo. basically hitting the numbers here. and, remember, critical discussion on what's going on on the earnings situation in the second half of the year. put up the banks and you can see jpmorgan and wells fargo all moving to the upside, along with

citigroup and bank of america. i also want to note the effect on housing. the ceo of wells fargo making a point of saying, we are continuing to see an uplift -- modest uplift in housing and that is a big factor in their earnings report today. these housing stocks have been moving up recently. the housing etf, the exchange traded fund, is sitting at a multi-year high today. that's right, a multi-year high in the housing etf. that's a major factor moving the market forward. finally, i want to note what's going on in the second half of the year with the bank stocks. these companies have to go with some major improvement in their earnings. wells fargo hit the number, .82. some had .81 this morning. but look what they're expecting for the next two quarters. they're going to go up. they made 73 cents in the fourth quarter of last year. they're going to expect to make 88 cents in the fourth quarter of this year. that's a big, big increase. my point is there's a lot riding on these banks continuing to improve their profitability. guys, back to you. >> thank you so much, bob

pisani. the collapse of brokerage firm announced it has planning to file for bankruptcy. scott cohn is live in iowa city. he just got speaking with a former pfg best employee. >> reporter: we're out in front of the headquarters of pfg. the commodity futures trading commission has scheduled an emergency meeting of its technical advisory committee to try and deal with not only this situation but the wake of mf global and what one cftc commissioner calls the theft of customer fund and ways to stop it. that meeting to be held on july 26th. meanwhile, as far as the founder of pfg is concerned. he's been moved to a psychiatric unit after his suicide attempt earlier this week. and a portrait is emerging of a man who was in many ways a split

personality, a local philanthropist who was very well-liked for bringing the headquarters back to iowa from chicago, back to his home area. but someone who was given to outbursts, who had a split personality and that some employees actually feared. among them, jamie grenell. she was a computer programmer in the i.t. department. she says that as he was -- she was actually let go in april after she asked about her performance review. it was clear she said that there were money problems because people were getting increasingly nervous. >> there were a lot of people trying to take their money out because of what happened with them. then we had all these people trying to say, hey, it's no big deal. we're not mf global, that's not going to happen to us. >> reporter: in fact, grinnell says that employees were told to calm the customers when they called in, to say that there

wasn't a problem and that they actually were going to try and take over some of the mf global accounts as a lot of customers apparently were beginning to draw the parallels between pfg and the giant galapagos at mf global. she, again, as we said, was let go in april, still in touch with people who were here up until the bitter end this past week. and she expects that while they are still in shock, they will eventually realize what she came to realize. >> i guess it's kind of a shock at first to know that those things were happening. but then when i look back, i'm like, well, maybe that's where the money went. >> reporter: calls to pfg, its outside council and the wasendorf family have not been returned. we'll continue to follow this. but an issue that's not only shaken this part of iowa but also is shaking the entire futures industry and investors, as people want to know whether their funds are secure. guys?

>> scott cohn, thank you very much. let's go to capital markets editor gary kaminsky who has a take on pfg. gary? >> i'm listening to scotty's report, split personalities, immaculate offices, private planes, restaurants, people living above what they should, never sort of very stable performance. you read about stuff in "the journal" today about this. does this not sound like madoff? when this news broke the other day, we talked about the cftc. and simon made a point about the fact that perhaps if these regulatory bodies were funded better, they had more money to hire more people, to have better people working there, we wouldn't have these things continuing in this day and age. i've thought about that for the last couple of days. you could throw as much money as you want at these organizations. but as long as -- by the way, they're going to have an emergency meeting this weekend at the cftc, scotty said,

emergency meeting. i'm sure that at that emergency meeting, they should be thinking to themselves, is it about time that we brought in people to the cftc who actually worked in the business and know what's going on? i can guarantee you -- and you're going to challenge me on this, melissa -- i guarantee you if i go work for the cftc for six months and i go out to some of these routine regulatory examinations, i will know if i go somewhere, something doesn't smell right. why don't these people bring people in who have worked in the business, who have volunteered their time, simon, who have said, retired people who have traded in the businesses and said, we will go out there and help? you will see this again in six months. you will see this again in a year because these regulatory bodies don't know what they're doing. >> the budget, i don't have the figures in front of me, but from memory, the budget that was coming through from the white

house was something like $200 million. and it was slashed by the republicans to around $40 million. you have to fund the regulator properly. >> what's the point here? if they have more money, they can be more competitive -- >> they can hire more people and attract better people -- >> yes, that's the point. >> i thought about this. instead of hiring somebody from a law school that may be sort of a -- let's call it a midwest big ten law school, they're going to hire somebody from yale or harvard -- >> no, no, gary, the point is that in order to attract somebody who's been in the business and knows what they are doing, tough compete against a salary they would get by being in the business. >> wrong, wrong, wrong. >> why is that wrong? >> melissa, you and i both know people that have been retired from the business -- >> so your answer -- the point, gary, that you're saying is that you can attract retirees, so therefore, you're not competing on compensation, right?

you're getting around the problem. that's an aes entering sluice. >> maybe there's something wrong with me. but i think there's enough people out there that aren't only motivated by money. i have met people -- when we were in vegas recently at the salt conference, i spent some time with s.e.c. enforcement employees -- >> there aren't enough people. that's the -- >> america deserves a -- >> as long as regulatory bodies -- you read about this pfg, i guarantee you my 17-year-old son could have gone out there, looked at what was going on out there and said, something a not right. >> america deserves a first-class investment banking community, a first class wall street community a first class legal profession and a first class regulatory environment as well. whatever you determine that to be. no disrespect to seniors, but these properly funded and professionally organized -- >> let's get bart shelton on

this show on monday and let's ask him whether or not retired people from the industry have reached out to him and whether or not -- before we go, stop. is pisani still out there? >> no. >> can we pull the shoes in. pisani was just in italy. i have to say on a lighter note here, these are some beautiful shoes, combination of a wing-tip loafer with the sling on the bottom. >> whose desk is that that you've got your feet on? >> it's my desk. >> oh! >> it was a fun week. have a great weekend. >> thanks, gary. >> enjoy the clean-shaven look. >> over the weekend, he can re-grow his beard. we'll sit down with reince priebus, chairman of the republican national committee, for his thoughts on the economy next. you card for a relaxing vacation. ♪

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♪ ♪ ♪ [ male announcer ] what's the point of an epa estimated 42 miles per gallon if the miles aren't interesting? the lexus ct hybrid. this is the pursuit of perfection. ♪ coming up on today's "fast money halftime report," me! but aside from that, you should still watch. here's why. stocks on track to break their losing streak. we have the names you should be looking at. has china's growth hit bottom? steven roach thinks so. he'll make the china bull case.

and sprint shares jumping 32% over the last two months. but is it all short covering? it's the last of our special week-long series. that's coming up in about 15 minutes. back to you guys. >> looking forward to it. thank you very much, brian. let's goat to rick santelli in chicago who has a very special guest on cnbc. >> we do indeed, simon. we have reince priebus. and he is the rnc chairman, welcome, sir. hey, rick. >> i'll make this very easy. i'm a fiscal conservative. to me, when i think politics, i think about my kids. when i think about my kids, i think about taxes, how our tax dollars are used. as erskine bowles famously said on cnbc the other morning, debt is like a cancer. we could all argue how long it takes for the cancer to eat up the body. but there could be debate on that topic, but there's no debate as to final epilogue, should we not address it. but for the election coming up in your capacity, what do you want america to know? how are you going to enlighten

voters to make the right choice? >> well, the debt issue -- i agree with you, rick. i always say that we're in a battle for freedom in this country. and it's the same battle that founded this country, that james madison reaffirmed in the bill of rights. and here we are today and with regard to your debt issue and where we are in spending in this country, very shortly, it's going to cost about 42 cents on every dollar made in america just to run the federal government. now, that's a battle for freedom. and we're on a trajectory now, under this president, to have accumulated more debt under his leadership than every single president before him combined. and, you know, this is a serious issue. i would just say generally, a country has to surrender its sovereignty to its bondholders can't guarantee prosperity or freedom to its people. half of my family lives in

greece. and i will tell you that when a society becomes a taker society, they become dependent and they become irrational. and you can't guarantee prosperity or freedom to your people if you have to surrender part of your sovereignty to the eurozone. and that's what's happening in europe. and god blessed us with a vision of what could happen to the united states across the atlantic ocean f we don't change what we're doing. and mitt romney is the antidote to a president who's intent on importing europe in the united states. and so -- i know it was a mouthful, but you opened it up on the debt issue. and i think it's important. we don't talk about it enough. >> and let me stop you right there. you hit on the other topic that's near and dear to my heart. you agree that this top sick important. you're the rnc chairman. how do we deal with so much

information out there about the election, but it seems as though the topics we pick just aren't topics i pick. i know you wanted to talk about outsourcing today and i will let you do it. but is outsourcing illegal, mr. priebus? >> i'm not going to crow with you about -- >> no, no, no. and i don't want to. i have an issue that we see lots of debates about topics people have strong feelings about. then the debate should be, if i'm going to run, i'm going to change this legislation on what you can do with outsourcing jobs, something along those lines because that's a solution-based scenario. i'm all about solutions. but i know you feel strongly about outsourcing. so i want to hear what you have to say. >> listen, i feel strongly about lying and being a hypocrite. i get the global economy. i have a problem with a president who loves to throw stones but forgets about the log in his own eye. i don't understand where he comes from where you would decide that you want to lie

purposely and intentionally, intellectually rationalize it in your head, lie anyway, about mitt romney where he's got not a shred of evidence of truth. and then commit the ultimate sin, which is to take taxpayer money or worse yet back to our first topic, borrow money from china, then send it to china for jobs in china. now, i'm with you on the global economy. my whole point on outsourcing in this president is the fact that he's lied and now he's a hypocrite about it. i think the american people should know what they're dealing with with barack obama and the white house. he can't be trusted with the truth. that's the issue. it's not a global economy issue. it's an issue of lying and being dishonest. >> and i'll tell you what, much of what you say, i agree with. but when it comes to the lying part and i'm not going to take a stand one way or the other -- >> you don't have to agree with me on that. >> there's a lot of politicians

that i've observed in my 56 years on this planet, you know they're lying when they're just moving their lips. my one request would be, offer america some real solutions. >> and we do. >> to me, talking about things in a way where after the discussion's over, nobody's moved the football closer to the "america's the greatest" goal line. and the minnesota america is the greatest is because we strive to be better. really i think at the epicenter, mr. priebus, is striving to be better now is considered a bad thing. when i went to school, working hard, making a lot of money and buying stuff was okay. and i'll tell you what, i think there's a lot of americans that still believe that. >> rick, i don't disagree with you. and we will and we are talking about the debt. we are talking about the budget and the deficits and jobs and what this president promised and what he delivered. >> i know. and i think you need to be more like me. when they pick on your candidate for jet skis. >> we're going to do it. here's the deal, rick.

we're not going to let this president -- at some point, you can't let your opponent continue to lie and lie and lie without returning serve and saying, wait a second, pal, look in the mirror and look what you've done to the american economy, look what you've done with taxpayer money and sending it overseas. you have to punch back because if you just keep taking a lie without responding, you can have all of the good intentions that you have, which we want to talk about the economy and jobs and the debt and the trajectory and where america's going. but at some point, you have to block and punch back f. you don't do that, you're going to be on the canvas. that's what this is about. it's about the hypocrisy of the this president. he doesn't want to talk about his miserable jobs record. and i don't think too many people this weekend are going to sit around the dinner table hoping for another four years of barack obama misery. that's what we need to talk about. >> well, listen, i always wish

all my guests well. but who i really want to wish well are all the viewers out there who are scratching their heads these days wondering why if their kids' standard of living may be less than theirs, we need to find a solution, mr. priebus! thank you for being on this show. >> thank you, rick. >> thank you very much, rick santelli. let's take a check of the markets. close to session highs. europe closed out on a high note. and the baton is being tossed to the united states. financials really leading the sector -- the markets higher. >> jpmorgan up 5.5% now. >> 5.5% gain for shares of jpmorgan at this hour. consumer staples hitting a fresh record high in today's session. and utilities are sitting at a four-year high. so broad-based leadership here in the markets. much more "squawk on the street" straight ahead.

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markets seeing pretty big gains right now. joined by none other than ubs's head of floor trading, art cashin. what's powering us higher here. >> a couple of things. vastly oversold, down for six days, the market topped out on july 3rd with a full moon, coincidently and came back almost at 5%. this morning, things look a little bit better. spain looked it was going the way of greece, at least bought itself a little bit of time. the currency's changed. the dollar index is up a nickel,

now down 30 cents -- >> you predicted this? you predicted the rally today, right? >> yes. >> yesterday when you wrote about it. are there pateterns here that people should be learning? >> there are some patterns. you talk about a blind squirrel finding an acorn. i also suggest that had back on june 22nd that the market might top out on the 3rd, which it did. so i think if that pattern holds up -- and i don't recommend that anybody out there trade on the pattern -- this is a learning process, not a trading process. we'll see if this little bounce can take it into the beginning of next week. and then between now and labor day, things could get very interesting but also very volatile. >> very volatile considering that next week is a huge week for earnings. next week is full thanks a lot zbll and the secret is bernanke's testimony.

he might charlotte launching q.e. 3 next week. >> really? >> at least start talking it up. >> got to love those central bankers. >> in terms of the rally, though, today, looks pretty strong. we have broad-based gains strosz sectors and in terms of volume, it's decent so far? >> the volume's okay. it's in line with what we've seen. it's not as compelling. you always like to have it look like a cattle stampede in an old western. >> art, thanks again. that does it for us. "halftime report" up next.