somehow. >> persistence. >> persistence overalent wins. >> you'll set that up? >> we can try. >> thanks. >> really appreciate it. >> make sure you join us tomorrow. "squawk on the street" begins right now. good morning. welcome to "squawk on the street." i'm mel can a lee along with carl quintanilla, and cramer. we're bracing for what could be a massive selloff. s&p looking to lose 19 at the open and dow jones 200 and nasdaq about 42. the reason behind the selloff in the future, worries about spain's debt situation and greece continue to weigh on the futures, and, of course, get this straight because the selloff really began in china overnight. shanghai stocks closing at the lowest levels since march '09. it carried over here into europe with the dax now down by 3%. red arrows across the board.

>> amazingly it was a lot worse this morning. the road map begins in europe. the biggest intraday loss in the markets as reports suggest imf may refuse more bailout payments for greece. euro era highs as the country bans short-leg. >> mcdonald's misses for the first time in two years because of fx headwinds. shares are trading sharply lower with a disappointment soaking concerns of other blue chips. >> at least the chinese are going shopping. three deals where chinese companies are buying some kind of foreign sneak. canadian and oil gas company being bought for $15 million in cash. >> we start with futures here in the united states. down sharply this morning as worries about the european debt crisis worry. fears that spain will need a bailout. meantime, spain's market regular hater announcing a three-month ban on short-telling of all stocks. you also have concerns that

greece will not meet its bailout commitments. this as the troika hits the ground, greek prime minister saying greece is in a great depression, similar to the u.s. in the 1930s. flight to safety sending yields on the u.s. ten-year note to fresh record lows. wow. jim, we always thought we could come in on a monday and things could be reversed in europe, and here we are the opposite here. >> we had a couple of weeks where it looked like there was some sort of uniformity and then that merkel played the game again, the german chancellor. looked like there was going to be something that would be pro-growth. that gets taken away. greece back on the front burner. look it. there's nothing good whatsoever. i don't even want to try to come up with something good. it's just not in europe i can actually craft some positives about the united states, but to come up with anything positive about europe is just fantasy. >> but what you could do is coming up with new analogies to describe the situation that we've had to describe every day. >> yes. >> when we revisit this crisis

for the last two or three years. i forget sometimes how long it's been because that's where we are is give us a new one. >> i'm trying. i heard one today about -- something about spilling your dinner on the floor. i don't know. >> metaphor. >> we've run out. the fat guy who keeps having to just -- all right. so he buys bigger pants. >> there's no baseball team that's this bad. you can't say the mets slide, no, this is much more monumental. >> thanks for bringing that up. >> i've searching. >> throw the mets in to an analogy about spain. no natural buyers for the sovereign debt of spain. >> a short sale ban. that's been a great way to stop things, right? >> can you hear the collective groan when that headline crossed. >> real gdp and negative growth perhaps as much as 2%. unemployment rates, we know, extraordinarily high. this is a significant country. this is not greece which has 9 million people or something. this is a 50 million population

country with a real economy. we've been talking about it for months, if not years, at this point. but they can't keep borrowing at 7.5%. the short end is no better for them. >> right. >> where they have all been trying to get what money they can. >> it greece compresses the time frame that they have to act to about two months at 7.5%. this week is full of debt auctions by italy and germany. interesting to see what sorts of yields they will have to offer investors in order to buy those debt sales. >> meantime. more worries about various regions of the country. havevalencia and others asked t help. fears that it will be a full-on sovereign bailout. >> pick up the paper today. surns out sicily is the problem in italy, and we always remember, remember the spanish civil war. spain is not like -- it's more of a confederation of states, and it seems to be exploding. when bob reuben was treasury secretary and they were talking about creating the euro, his biggest worry had been that

there would be states in spain that would go into depression, and there would be no way to deal with them and here we are. it's actually happening. >> the question i have about the short selling ban. the last time we saw short-selling ban specifically on bank shares, this is on all stocks now, when we saw that we saw investors seek proxies for shorting european banks. have you to wonder whether investors with a short sale ban across all stocks will seek other proxies for shorting europe. maybe they reach out to the s&ps and here to the bank shares. the impact, you know, what we saw the last time was real pressure on the u.s. banks. >> right. and, look, one of the things that i want to point out, i -- i want to be unremittingly negative about europe, but we just came through a series of bank earnings, and if they are going to sell down wells fargo, 100% domestic. taking advantage of power boss problems in energy, 30% plus in the mortgage market, making more

money, they will send the stock down a couple of bucks and we'll sit here and puzzle over that and say that's ridiculous. no one wants to come in. next thing you know. three days from now, after a couple of auctions. wells bottoms at 31, 32. geez, we should have talked about wells in a positive way that monday and tuesday. it's kind of what happens. >> yeah. >> it's a big pain in the butt. no one wants to stand in the way of the future selling. absolutely there's proxy. very funny. i see citi down, right? >> right. >> citi has done so much to eliminate europe. vikram doesn't come in and say i want to be whack a mole. i want to be hit many times. he's pulled out of europe. let's knocks down citi. >> transports are down 8 of 11 sessions. a lot of theorists saying we've rejected 1375. never got to 13k. >> eaton, mcdonald's, growth slowing. this week is going to be caterpillar and apple. >> right.

some guide downs, cat. union pacific. i went over union pacific's quarters, because i'm pathetic and that's what i do on sunday. monster month. they called out timber at union pacific, timber because of a strong housing market this. will mean nothing today because it's $117. when i was at my hedge fund, there's 117 worth of points. can i blow that out. wow, i need capital. always people will need capital because people always positioned wrong and they go after the high-dollar stocks. it's a stupid game. ppg does incredibly good things last week. people take the stock up and what did ppg do, i forget? >> it's a glass half empty kind of market. you took a look at the u.n. and take a look at the buying of rail america and people are saying it's because they feel the pressure. rail carloadings of coke was lower and they have to diversify their portfolios and that's why they were pushed into the deal that. may be the fact of the matter.

today in a market environment like this, they will interpret it in a negative way. >> two short line companies getting together and it's very smart. >> i'm searching, david, for a really good negative reason. using the prism of desperation, sheer desperation to make any acquisition. desperados doing one thing because they are watching us and i can't take it anymore. cnbc says it's buy. i've got to go buy. is that the way it works. >> i think the chinese in particular are looking for resources anywhere they can possibly grab them. we know, that and so oil and gas do comprise a significant component of all of the deals that are done overseas by i? chinese energies. we go back to 2005, their failed attempt to acquire unocal. the hearings that followed in congress and cnooc pulling back from that deal. most of their assets were in

indonesia. >> they were. you're describing something prepostous. you're saying a company is being opportunistic, not desperate, a company is buying a property down a lot because natural gas is down. that's almost rational. you're injecting some rationality this morning. >> this is not a u.s. company in any way, shape or form. one is canadian and one is chine chinese. they do have a law that says you have to prove that a deal is a benefit to the overall country. >> exactly. >> and that could come into play here. there are gulf of mexico assets. u.s. assets here that could prompt potentially a review, national security. there is a potential that this deal will be stopped, we don't know, but if this is a country that stopped billion from buying potash, you might wonder if that's going to happen. the chinese go to great pains to describe all the benefits this will bring, including having

their north american headquarters in calgary and a lot of other things they plan on doing in terms of this acquisition. >> sidic securities buying agrico. >> chinese, china making moves here. talisman, tremendous north sea assets. csla, often uses their resourced on this show. the chinese, i guess they don't want to take the beating that every other country is being delivered. >> they want resourced to fuel their economic growth, each if that growth is not 8%, 7% which is a concern this morning. >> remember i told you 6, 6 is coming. >> they still need access to natural gas and coal and still need oil. still need all that stuff. >> the ncaa hitting penn state with a $60 million fine. >> wow. >> some earlier reports suggested it might be $30 million, vacating joe paterno's

wins from 1998 to 2011. >> wow. >> bobby bowden now the most successful -- >> any word on an inability to play football? i haven't seen any. >> that's the only headline out of a.p. right now. more information as the ncaa outlines their penalties to penn state later on this morning saying it will be nothing like anything that's ever been done in the history college football. >> wow. >> meantime -- >> that's an alumni situation. the alumni have to pony. i don't know how much the state, pennsylvania will pay, but, you know, that's got an endowment. there's alums that are serious. >> football's done a lot for that endowment, right? >> right. >> and just wait until the lawsuits start coming, and they are already in motion. meanwhile, take a look at mcdonald's today falling in the pre-market. the fast food giant reporting second-quarter earnings of $1.32. that misses by a nickel as a stronger dollar weakens margins and revenues coming in short of analyst forecasts.

ceo don thompson this reflects the slowing economy and global headwinds and we've been looking to see when the last real miss was for mcdonald's. not entirely clear, but the best year we have right now is '05 for a quarterly miss on mcd. >> let me play the other side, just a little devil's advocate. same-store sales up 4.4% for june. europe, plus 5 has%. obviously currency. we were able to see coca-cola trump currency. obviously mcdonald's not trumping currency, but i didn't expect to see dish didn't expect to see a 5% gain in europe. >> that's true. at the same time, when it comes to their guidance for july same-store sales, they are saying it will be positive but less in the second quarter which implies there's been a slowdown from june when we saw the very strong results to july, and that i think is more of the concern that not only is there fx headwinds which continue today because given the euro against the dollar is at a two-year low. these fx headwinds persist so now the question is do they have

sales momentum? and right now it doesn't appear, at least for the month of july, that they have any momentum. >> the stock goes down and market goes down. >> yeah. >> what about guidance that we've been getting as well on the second half. i mean, it hasn't been particularly good. i'm not talking about mcdonald's, by the way, talking generally speaking and we're well into earnings season this season. have stocks been accounting for that? should we be concerned? >> we just had a run in the s&p, and you've got to expect that we give back some of that. melissa mentions the transports as being a tell, despite the earnings. people are saying those earnings are in the past, in the rear view mirror. again, very easy to getting incredibly negative here. that has not paid off about domestic security and american companies. it's not paid off. >> we didn't talk about what happened to chipotle on friday. talking about another name in the fast casual space. there's a drought going on, jim. not seen the full impact of corn prices yet. >> and chipotle a 12% comp score goes to 8%.

a sudden sensitivity. interesting to note taco bell was up 15% during this period. you want to take a dollar store approach. >> trading down. >> this is maybe let's say nordstrom going down to 5 below. i'm working on chipotle. frantically working on chipotle like many people trying to figure out how to value chipotle now in a world where it turns out to be economically sensitive, and it's slowing. not easy. >> in terms of the mcdonald's turn this morning, the free market could. have much more to do with where the stock has been and what it's done since its record high in january. simply has not participated. had a stellar run to its record high in january, and after that it's -- i don't want to say it's dead money, but it hasn't gone anywhere, and there seems to have been a rotation within the fast food sector away from the mcdonald's which had been performing and delivering a dividend yield to the likes of a turnaround play like a burger king. >> do i think mcdonald's, again, get hit. went down to 85, 86 previously because of worries that this could happen. then ran up to 90, 92 as part of

an overall move in the s&p so maybe it revis its the 85, 86. >> not a great way to start if you're the new ceo, is it? >> tough. >> maybe it's the best way to start. >> well, i don't know. certainly you can say it's not my -- of course, he's been a part of senior management. it's not as though he's not been part of the management. >> management has been unbelievable. the strength is the best of any company in the world. let's not forget, any company that reported a good number last week is going to get hammered today. have you to look over these and decide, well, maybe google wasn't that good. is that the take, or do you say hey, listen, it's part of the overall market. it gets hit. maybe i'll get involved at a certain level. i know that when we come in tomorrow it's hard to imagine spain, germany is down a phenomenal amount. >> 3.5%. >> phenomenal amount, so it's easy to see we could have a couple of days of decline. i keep coming back to the idea that we are stronger than they are. >> they being europe, not germany per se, but europe. >> europe, right.

horrendous, horrendous. >> one more footnote on the penn state headline. a four-year bowl ban. >> yes. >> postseason ban, saw that. >> assuming they could get into a bowl. >> how do you recruit knowing that your whole time -- >> the money stops. >> and a reduction in scholarships as well. 10 initial and 20 total scholarships for a four-year program. >> lake a division three. a major program. >> simon is at the business travel convention in boston. we'll check in with him. a lot more on that front. we'll talk about bankruptcies and thomas horton of amr will join us as well. one more look at futures on what's looking like a very tough day. an implied opening of 200 points to the downside. a lot more "squawk on the street" is back in a moment. i look at her, and i just want to give her everything. yeah, you -- you know, everything can cost upwards of...[ whistles ] i did not want to think about that. relax, relax, relax. look at me, look at me.

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take a look at the chart of euro. 1.2085. a break below 1.2080 could target 1.1880 and that would be very close to the 2010 euro low. the euro setting fresh lows against the yen and the u.s. dollar. euro/yen hit an all-time low and euro/u.s. dollar hit a two-year low so that's one we're

watching. >> let's take a look at pete's coffee and tea. will be acquired by john a. been enckiser. it's a 27% or so premium. $74 a share, 73.50, excuse me in, cash. we have seen a number of deals of the smaller variety. this being one of them. digital probe is another one. digital probe and gon. did you like how i did that? >> yeah. >> gary owens with -- >> and now. >> look, look. i want to put these in context. obviously the market is going to be down horribly. we see the futures. at the same time there's companies that are saying peet's, which was very overvalued. i did a piece on "mad money" saying this is a very expensive

stock versus starbucks and still gets a bid. who wants to own rail america? a busted deal. goi had been a very disappointing situation. >> they lost their government contracts. >> right. >> there's been concern about that. made the bit for digital probe, goi and digital came back and said we're buying you. >> companies are taking advantage of these reduced prices. now, obviously you could say, jim, that's a needle in a haystack. how dare you say anything positive? what right do you have to say anything positive? did you get off on the right side of the bed? what are you thinking? just trying to put a little perspective. >> are you beginning to get the feeling that the things you're pointing out are outliers? >> big time, big time, but you get a couple of days and then you look back and then you say wade a s.e.c., that freeport, that held at 4%. maybe it wasn't so bad and new corp, got to 4.25 even though they are doing terribly. i'm pointing out you've got to understand the context of the 30-year treasury.

when you get that at 2.49, you get a lot of homeless bought, goldman upgraded to home buyers, home builders, kb home, used to have a big operation in france. when you see the home builders up there's a boom market in homes, and you want to slit only one wrists, not both. i think it's a one-wrist thing kind of thing. >> okay. it's a one-wrist kind of market so it's a slower bleed but then you die anyway. >> so optimistic. >> it's a cry for help. >> cry for help, got, it thanks. >> i struggle. >> you do. >> i'm here for you. >> you're here for me. i feel better already. >> we all are. coming up next, get ready for cramer's mad-ahead of the opening bell. one you don't want to miss and a look at futures a we head to the open. with germany down 3.5%, looking to lose 195 here on the dow. stay tuned. more eson the streets straight ahead. stocks for your portfolio? with the fidelity stock screener, you can try strategies from independent experts and see what criteria they use.

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okay. we are bracing for what will be a tough open at least, but before, that cramer's mad dash ahead of the open. people looking at a couple of earnings reports, eaton and halliburton's and the slowing growth is going to use them to their advantage. >> halliburton in a gutsy call, lee cooperman in the delivering alpha conference saying this is the bottom for halliburton. you may want to buy. it may be an interesting place. going through the release.

not nearly as bad. i would say it's getting better and there's been a margin squeeze. that thing is going away. >> i have the ceo of eaton on. why are they buying cooper? getting diversified? big electrical in america. no one will care. people will say eaton is bad. that's the judgment, it's bad, and what i urge people to recognize, 4% yield, making a merger, doing a lot of things right. they actually did the number. yes, they lowered -- truck is a problem. people who sell caterpillar on this, sell corruption again. carl, can you very easily develop an end of the world thesis and sell everything and then you'll look back and say why did i tell someone to sell eaton at 4.5% yield when they went into treasuries and made nothing? i just urge people to be careful in being too negative. it has not been a great play to be too negative since the 2008/2009 bottom. >> we'll talk about that and some. other big energy companies, at least. >> oh, yes. >> and industrial leaders this week when "squawk on the street"

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and the opening bell set to ring in what could be a very tough day here on wall street for the bulls. a sea of red here at the big board. celebrating the listing of its north american fund. optimer doing the opening there. italian regulators are banned for only a week, spanish for three months. >> these really are just terrible signs, terrible signs of a lack of real game plan, very short-sighted. very clear it's not up to spain anymore. got to be some sort of uniform deal. these people are flailing. they just don't have a clue, and they are the biggest problem in the world right now. >> look at that. just a -- maybe one handful of stocks in the green on the s&p 500. i want to set up the earnings

week, jim, because whether it's at&t, apple, facebook, boeing, cat, you name it, what are the true ten poles of the week? >> companies with big overseas business. obviously they will have to explain themselves. the question is have stocks come down so much that they have discounted it? i still found that they haven't. caterpillar, if you get a really bad number, you suddenly recognize, geez, earnings could fall off a cliff. take a look at cummings which has been the example. 120 went to 110. 110 went to 120 and reiterated. and then at 80 they want nothing to do with it because the quarter is not that good. at&t, as you get closer to a 5.5%, 6%, people say i need something. remember, there is this quality problem which is that i need to invest in something, and people often forget that it's a gigantic supermarket, and -- and there are still aisles that people have to go to because you can't just own nothing but bonds. so you end up with these

proxies, whether it be con-ed or at&t. >> that's why investors are paying a premium up to 20% for dividend-yielding stocks. we're also seeing the yield on the ten-year treasury today hit a fresh record low. 1.409% earlier in the session and 30-year hitting a fresh record low on yield. 2.940% is the new record there, so a -- a search for safety out there is on, and people are willing to pay up for it. >> real estate looks so good. house, your interesting buy with mortgage rates. >> you mentioned the goldman call earlier. they say, look, we know what the housing stocks have done so far this year. we're not blind, but in goldman's words it is the beginning of a longer-term positive trend in housing-related equities. they see a million starts next year. market is 800, 850. >> toll brothers had gone from 28 to 33 and then rallied to 30.

toll brothers traces back to 26, 27. again, i don't want to say anything should go up here. i do want to point out that there is a big schism between companies that are american and companies that do business overseas and with the exception of a couple of them like coca-cola, which is now coming in a little bit, ibm. >> right. >> people embraced a i want to stay american, and they are case by case with international. take a look at target, okay. target was up last week. geez, you know, target. and i think that stock could go down to 57 and 58 and people will come right back to it. >> david and bob will talk europe, but really quickly, "times" does a piece on mark lazare buying europe. $3 billion fund. calls it a big three to five-year bet and investing $75 million of his own money. >> three to five, one of the things i learned about the business, when you say three to five, that means, hey, listen, i can do whatever i want because there's a great lack of accountability when you say 3-5. you might say he's early today. doesn't matter.

3-5, so one of the things that is not -- that i think is far more pertinent is when jpmorgan came out at our conference and said they think the euro is going down and the best trade is shorting you'ro. that i didn't here 3-5. i heard now, and that's much more pertinent to people at home. >> we haven't touched on the jamie dimon stock purchase on friday as well. >> what do you think that have? may be taking 3-5. >> yeah. >> remember, it was a six-month swing rule. jamie dimon is showing some guts, basically saying he has to get the 4% yield. it's good. we can pronounce him long term. >> yeah. >> he's long term. >> let's get to david and bob who are on the floor. good morning, guys. >> good morning. >> you may have met -- i'm sure you can imagine what we'll start, of course. got to be spain and got to be back to the subject we've discussed so many times and the same loop in some ways. >> right, that's a good word. the doom loop is a phrase used a lot on the trading desk, and it's very simple if spain goes

out and seeks a full-fledged bailout which is what you guys have been talking about this morning, then italy is in play and the euro breakup has a certain inevitably so the whole gain and all the knows i see this morning is what can the eu do to prevent spain from seeking a full bailout? how can they give some kind of terms? what can the ecb do, and, of course, you know the story, germany pushes back, and the only real news is how much is germany going to move the line every single day? obviously the eu will have to step in with more generous packages somehow that isn't quite construed as a full-fledged bailout. >> italy gets wrapped into this. spanish ten-year above 7.5, at least briefly today. >> right. >> and italy has done a halfway decent job of reducing the deficit to a certain deficit. >> they tried very hard. all the italians i spoke with were in favor of mario monti and the taxes have gone up on everything and the economy is not improving. if you look at what's going on. 17 regional governments in spain. regional governments.

six may be asking for aid. two independent cities, but you can marge this going right down the line. there was an article in an italian paper over the weekend talking about italian cities may be asking for aid in the near future, not just sicily. i know you mentioned that, but italian cities. can you see this whole thing kind of snowball and at that point there's not enough of an aid package. the spanish government three weeks ago announced an $18 billion aid package. what happens over the weekend there,'s an article in the spanish newspaper, you'll need at least $28 billion in aid. >> each of these regions has also sold its own debt down the road. i do know u.s. investors who picked up these things at very large yields assuming they won't let em go belly up, but we'll see. >> and, of course, greece, just a lot of side stories going on today. greece, the takea will be meeting tomorrow with the greek leaders. always indications that they will give up. they won't meet the debt-to-gdp ratio any time in the future. may withdraw the aid.

the ecb has announced the banks -- >> how do we move past greece at this point? >> the greek banks will not be able to post greek -- >> collateral. >> greek debt as collateral. >> when is the ecb going to come in and buy sovereign debt again? >> that's what they have to do. >> no natural buyers for spanish connect. >> there aren't. >> that's cluesive. >> we're transferring all the money at this point, all the obligations over to government at this point. let's just move on and talk about earnings. i know you mentioned mcdonald's a lot. i watched eaton very carefully. i love eat-in because once again it's the company that does all the things behind the walls. a majoror player in electrical and power generation systems around the world. 60% of their earnings are outside the united states, so it's a great company to watch, and once again they beat on the -- on the bottom line, but the top line was light. this is the big story that is emerging for revenues, for earnings this quarter. revenues are just not growing much. we're seeing this as part of the overall pattern. of course, they talked about the global slowdown. i won't go into all of that.

the numbers so far. today is 1/4 of what the s&p is reporting today, 125 companies, and the pattern is very, very clear. 70% are beating earnings. only 41 boston are beating on revenue. >> right. >> and the average company so far of these 125, they are beating on earnings, the bottom line, by about 6%, but they are not beating atll revenues. in fact, the number is negative, so there's -- there's the problem, and i love looking at the revenue growth because you can't hide it between cost savings and share buybacks or things like that. by the way -- i know we've got to go -- for the third quarter earnings estimates are now basically flat to slightly negative over the third quarter last year. >> right. >> the fourth quarter, only about 12%. we started three weeks ago. 16%. remember, a lot of the expectations are -- >> second-quarter guidance definitely coming down. now over to mr. cramer. >> crude oil is being clubbed. let's go to sharon epperson at the nymex. >> reporter: widespread, global

equities and commodities as well. definitely oil prices. brent crude down as much as $4 earlier in the session and it is, of course, the concerns over greece. more importantly spain, as you mentioned, and concerns about default. that really has put pressure on the oil markets. it's interesting to note that this is occurring despite the fact that over the weekend we learned of a pipeline, one of two pipelines that take oil from northern iraq to turkey that had been bombed. now the oil flow has returned somewhat, but that was a big development, and we did see much higher prices earlier in the overnight session. the selloff intensifying as well as china. a lot of folks looking towards china and forecasts there for perhaps economic growth slowing again in the current quarter and that, of course, could have an impact on the global growth scenario in the commodities sector which is copper. copper is down sharply. in fact, it's posting its lowest level in three weeks time. you'll remember on thursday copper was at its highest level in two weeks time so we've seen

a significant drop in copper just over the last several sessions and trade remembers watching the copper market for any indication there about the global growth story. we're also looking at lower prices for the precious metals. the exchange-traded funds remain resilient, particularly the gold etfs, but the lower prices are across the board, david. back to you. >> thanks very much, sharon. well, we'll stay in energy to a certain extent. of course, come back to that very big deal that was announced this new york, snooc acquiring nexin through conventional and shale means play. $15 billion deal on the exity side and there a significant premium sending the shares up sharply. a $27.50 a share overall deal. why the spread? well, because concerns of regulatory, potential regulatory opposition to the deal. we'll see if it happens or not. of course, this would be, as you say, there have been a number of failed snooc acquisitions. most notable, the type attempt to buy unocal, the u.s.-based

corporation though its assets, most of them, not in the u.s. that was stopped or at least snooc stopped pursuing it once there were hearings held in the u.s. congress, but you can say there have been any number of other deals, much smaller in nature. this, by the way, would be the largest china outbound m & a deal across all sectors that we've seen. 20 billion overall when you add in debt at this company, but the question, again, of course, is whether or not canadian regulators will try in some way to argue that this will not be beneficial overall to the country. it's simply an open question. there are other things as well that conceivably could at least be -- present some difficulties to the completion of the deal itself. >> but, david, i'm sure people are saying didn't they think about this beforehand? it's a friendly deal. >> of course they did. >> so you have to believe that someone made some calls. >> so did bhp and they got quashed. >> not as friendly at bhp.

>> it wasn't. >> i look at this and say, geez, there's so many of these canadian -- >> and there have been other chinese acquisitions of canadian companies. >> right. >> this is not a first, so it's certainly a possibility that it will just sail through. >> and chesapeake has made some deals. >> yes. >> with the chinese, obviously not the whole company. i just want to point out that things aren't done in a vacuum. >> no, they aren't. >> someone must have felt that the canadian government is going to bless this deal or they wouldn't go forward. >> i don't know the answer to that. i don't know the answer to that. i will tell you, of course, u.s. -- u.s. oil and gas companies are making acquisitions of foreign companies all the time as well. as for chinese m & a, take a quick look to give you some sense in terms of oil and gas-targeted companies where we are in 2012. you can see, of course, there's been a ramp-up, if we have that chart for you over time, especially in the 2010-'11 period, and then overall chinese m & a, give you a sense there of what's going on because, again, the japanese and chinese have been very active. we say the japanese, too, by the

way, because their own economy is so poor. the chinese for different reasons, and finally oil and gas is a volume -- a percentage of the total volume of mergers and acquisitions activity from china. >> interesting day in the energy patch eds, not just this field, the nrg deal is based on natural gas because, of course, natural gas prices coming down, has brought the clearing price of electricity down from the independent power produces, and that's made them a lot less profitable. that why reliant and mirent which created this company that now nrg is acquiring, was so inexpensive, at least in the stock price because it's down to 55%. >> david crane, the guy who runs it, ceo of nrg, stock is up. a very positive stock when the acquirer stock is going higher. >> mcdonald's down 2.5%, now down 3.5%, 88.28. a lot of people talking about buying this name under 90, jim >> i think 85, 86 where goldman

downgraded. the level of my charitable trust. stock did run to 90, 93. i don't know what that was about, but i do think that this is a company that yield is something that has halted the decline before. given again i've really got to stay focused on the ten-year, really stay focused on the 30-year, because that is what your alternative is. i mean, people are sitting there saying i need some income, and they are going to companies that literally do give you that income and whether it be mass partnerships, companies that are in the supermarket. i mean, take a look at -- take a look at some of these companies like a heinz. i mean, why isn't heinz down guy giantically. another 4.7%, how can you not want to step up to the plate with the new ceo who said on his conference call he's going to be able to make it so that the company is lean, mean, our ceos

are the bright spot, our balance sheets are the bright spots. there's a lot of dark spots, but i do point out that in the dow you've got the pfizer mercks and j&js and these companies are good. >> not hitting the three to five years. >> i'm making a 20-year prediction. i own a tortoise, i do. his name is cactus. she's terrific. 9 years old. she's got another historically -- >> true. >> 91 years to go. >> i've seen that tortoise. >> yes. >> it's something. i am telling you 91 year perspective of cab puts, these stocks are devalued. >> there. >> how often do you make 20, 30-year predictions? every 20 to 30-year predictions? is that a rarity? >> when you talk about cactus, 20 to 30 years not a long period of time. this tortoise keeps growing and growing. >> i sense pet smart. >> pet smart's a winner.

totally domestic. look at that. time to step up. watermelon, lettuce, it doesn't matter. >> who knew. >> yeah. >> it's a shocker. >> coming up, we're going to stay on top of this morning's selloff. the highlights, tremendous weakness in materials, in energy as well as technology. here are the bright spots though of the morning. take a look. this is new york state. we built the first railway, the first trade route to the west, the greatest empires. then, some said, we lost our edge. well today, there's a new new york state. one that's working to attract businesses and create jobs. a place where innovation meets determination... and businesses lead the world.

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take a look at the dow heat map. all 30 components trading in the red. mcdonald's, of course, on disappointing earnings is lower. hewlett-packard hitting a fresh 52-week low in the session. 18 even was that level, but can you see across the board this is a broad-based selloff that we're watching here, jim. in terms of bright spots, we do have the home builders. goldman call, for instance, and it is, in fact, lifting mdc, that stock is up 1.7%. kd homes up. that stock is trading higher. >> also want to call out the

colgates of the world, down 4.6%. procter & gamble down 4.3%. look, people are very quickly saying, okay, this is a recession in europe, so what is a little recession resistant? do i think these stocks -- look, during the day we'll have another wave of selling, but, remember, when europe closes, tend to get a little lift and we get hit again because people feel europe is going to be bad, and then we start to focus on whether we can make a stand on the heinzes or whether nexen is more of a trend, and suddenly you have a better than down 2.5%. >> can't completely cut out the possibility that we have an out-of-control financial crisis because europe just spins out of control. >> europe -- >> we're still dealing with the same thing. at some point though, the dynamic changes. >> well -- >> and i don't know if it's spanish yields above 7.5% and we continue to come back to the same place and things continue to get worse, but that is a possibility. >> but i remember listening to tim geithner, treasury secretary

geithner. we're gloomier than we were. more of a slowdown. merkel seems to go along and then backs away and things get really ugly and suddenly merkel has a conference, austerity merkel, i call her, not angela, and then things die down again. >> obviously each time the spanish yield goes higher. >> they believe the 1% ten-year cole is the new oil at 200. apple at 1,000 type of gal. >> they are saying it's hype. >> just beyond the grass for the market, something that no hat happened. do you agree? >> i think we can get to 1% because germany keeps going on. it's a place to go. you have a stronger currency, so, remember, you've got to look at this as a european. you've got a great currency that's giving you a nice lift and you also have this piece of paper that gives you a nice yield. when you look at mcdonald's and see the currency, how much it hurt them, then you say okay, listen, i'm a frenchman, all

right? call me french for a moment. >> okay. >> i look at the ten-year -- and i look at the ten-year and i think, geez, hey, look at the currency. i could really do well. they even give me a little yield. i don't get a little yield in my country. >> you've got to like that. >> that's a good analysis. i shocked myself with that. >> one thing it scares people about is it saying something about deflation, and if so. >> right. >> is it speaking more loudly with each tick down. >> haven't even mentioned qe3. >> the worst drought in history. >> don't talk about the drought enough. >> unfortunate. >> dow's down 232. we should mention the vix as well trading back above 20 for the first time since late june. it is, i believe, the largest percentage jump since november. >> wow. >> of last year. >> a lot more "squawk on the street." back in a minute. coming up, jim cramer is revved up. jim cramer is ready.

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dow down 222. s&p down 23. we have not had, according to

the spoke, the s&p down by more than 1.5% since december. let me get to simon hobbes in boston at a major travel industry conference. >> yeah. >> with what he's got coming up on the 10:00. hey, simon. >> obviously a busy day for you guys. also busy down here. we'll take you inside one of the biggest business travel conferences in the world. the big news here. did american airlines ceo diss his potential merger partner? we'll talk to tim horton the ceo of amr. that and more on "squawk on the street." >> meanwhile, time for six in 60. >> delayed reaction. last week the little light. goldman springs into action. >> decker's downgraded. >> remember, this is just -- this is uggs and all i can say is ugh. >> upgrade for cablevision at b

of a. >> a nice counterplay. david likes to talk about these companies. cablevision, not the right time to pie it but he may disagree. >> ubs downgrades walgreens. >> walgreens had a gigantic move and now we're stuck with the fact with walgreens isn't doing well. >> look for an upside surprise at amazon. >> people at home, listen to me right now f.amazon does not go down and it starts reversing, you are going to see a better market than people think. this is the key to today's action. amazon. >> all right. finally, citi upgrades mozik. >> look, look, i think these fertilizer stocks are not done. i think the drought is not done, and i see mosaic having a big buy back. i like this call >> you say eaton's on mad tonight. >> look, these are companies that are not just taking the beating. eat-in is doing good things. sandy cutler is the ceo. i think he'll trace out exactly how well cooper is doing. >> see you tonight, jim. >> thank you. >> 6:00 and 11:00 eastern time. when we come back, mcdonald's

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. it is a sea of red out there on the street today. want to hit the road map for the next hour of "squawk on the street." some reports claiming the imf may refuse more bailout payments for greece, while spain moves to once again ban short-selling. so are euro fears back to the forefront for good? we'll talk all the latest headlines with barclays chief economist julian callo. >> and a rare miss for mcdonald's sending shares sliding this morning as the world's largest restaurant chain has fears over a slowing global economy. sorting through the numbers and looking at the road ahead. >> plus, american airlines ceo tom horton saying his bankrupt company has the tools to survive without a merger. is he sticking by his claim? we'll sit down with amr ceo tom horton in a few minutes. a market down over 200. dow down 219 as worries over spain and italy come back to the

forefront. our chief international correspondent michelle caruso-cabrera has the latest on spain and what's happened this week in greece. >> reporter: a lot of issues facing greece, italy and spain, the current troubled children of europe at moment. let's show you the carnage that we see in europe is pretty strong. i thought we would start with the stocks board. we'll start with this instead. i'm showing you three panels, the two-year, the five-year and ten-year for spain. let's zoom in on the two-year. wanted to see one week of all of them to see how sharply the yields have been rising. in other words, the bond market quickly abandoning spain when it comes to that, so if you look at you two-year, then look at five-year, rising above 2% and then the ten-year is a big issue because you've got to worry about whether or not this is a price, not a yield, unfortunately, unlike the other ones. the ten-year yield is above 7%. there's a lot of debate about how long they can hold on, carl. a lot of people think that spain could hold on at 8% for a lot

longer. let's slip to italy as well. we have cat lifts coming out of spain and greece, as you mention, but we are seeing the contagion spread to italy. once again, i'm showing you one-week yields, the sharp rises that are happening throughout the week here. the two-year spread, the five-year, do a quick pan so everybody can see closely what's going on here, and those are all prices at the top, not the actual yields. let's talk about some of the cat lifts. first, we're hearing that more and more regions are likely going to ask the federal government of spain to help bail them out. we have heard from the head of muncia. told the newspaper, are you going to ask for money? of course i am. absolutely. why wouldn't i. it's being reported that c catalugna is also going to ask for aid. the numbers don't really look that good, over 100%.

more and more realizations that bank debt holders will be at risk of restructurings. if you read the memorandum of understanding about the spanish bank bailout, they will punish people throughout the -- throughout the capital structure. there's questions about whether the senior debt holders will get hit but they put it straight in writing, hybrids, et cetera. a lot of people are looking at their investments in banks saying we've got a lot more particular and also greece. there are reports that the imf says there's not going to be any more money for greece. there are reports coming out of germany that angela merkel has said absolutely no more money for greece. they are really running out of cash. they got a big payment due in august. i would assume, carl, they will actually get some money in august for that big, i believe it's a 5 billion euro repayment because they owe that money to the ecb. if they were to use that to try to fund government spending, i don't think they would use that money. everybody else wants to get them paid back. things to watch for. will we hear about a summit usually three days of selling

and yet we'll get 291th or 22nd summit. the other thing to watch for is ecb going to step in? i hear roughly 8% could be the moment when you see a spanish ten-year yield or an italian ten-year crossing. 8%, that maybe the ecb steps. in the code phrase to be watching for is this one. the monetary policy transmission mechanism is or is not functioning. if whoever is making a speech or making comments in a report in an interview says the monetary policy transition mechanism, hold your nose as you say it, is functioning, don't expect any intervention. if it's not functioning, you can expect some intervention. carl, back to you. >> michelle, thanks so much. that's a lot to take stock of. >> it's tough. it's so tough. >> very difficult to read. >> interesting to look, of course, at spanish yields. just remember the short end of the curve is almost as high as the ten-year, so their ability to borrow on the shorter end is also really curtailed. there seem to be no natural buyers wer i years,

five years or ten years for spanish debt, raising this prospect of will the ecb come in? there will be some buying of some type, at least to try to bring that yield down as has been the case in the past? >> meanwhile the esm is still subject to approval by a german court in september. >> yeah. >> and no telling if or when that will go live, so to speak. >> there's not even a firm date set so we don't even know what we're waiting for, you know, if there's a time frame at this point. the impact of all of this. take a look at u.s. markets. we're in the midst of a very sharp selloff with the nasdaq feeling the brunt of the losses. down 2.28% at this point. microsoft down 1% and semiconductors being hit very, very hard. with the semiconductor index down by 2.6%. we are seeing weakness in materials and in energy as well as the financials. keep in mind, too, that europe, they installed a short selling ban in spain for one month and italy for one week so you've got to wonder about the impacts of finding a proxy for shorting european stocks here in the european markets and markets

outside of spain as well as italy. for more on this market selloff let's bring in dan greenhouse, cnbc contributor and a strategist at btib. dan, thanks for joining us. >> thank you. >> we have a mess at this point. is there any way for the u.s. markets in europe to see through this? >> well, sure. i mean, if earnings were coming in fantastic, then i think there would be an underpinning to -- to certainly equity valuations but not sentiment and what we've seen thus far in a weakened change in earnings epa estimates are coming roughly in line. sales estimates are not looking particularly good. for instance this, morning, there were four or five or six companies, or major companies that reported. most beat on eps, but virtually none beat on the sales side of things, including, of course, mcdonald's. >> right. and, of course, a huge heed wind for the revenue in line is that the fx translation has been very difficult. we're still seeing the euro versus the u.s. dollar hit fresh lows at this point. so, dan, is that going to be just a recurring problem when it

comes to earnings, or will companies and analysts better adjust for this? >> well, there's a couple of things to note. the first, of course, which is a headwind. we've been advocating like many people since the dawn of time. but it's important to remember that not all overseas sales are generated in overseas currencies, so the translation effect isn't really a one for one, so to speak, but from a company problem it's going to be a problem. mcdonald's noted it's a problem, and eaton noted it's a problem, and we expect that to continue more generally. >> i'm curious. we've been talking a lot about the call of the ten-year lead to go to 1%. cramer is mentioning it. capital markets and gary kaminsky mentioning it. fresh record low. 1.398. what are the corollary calls for people to believe that the rate is going to 1%?

>> david brought this up about deflation and disinflation and, of course, that's quite we will. lower interest rates are better for risk assets than are higher interest rates and all else equals and that's accurate. in a case where that's not true is why rates are falling in the uk, in germany and the united states, for instance, and that's because of concerns about growth and inflation. and as those turn down and continue to turn down, that is absolutely not a positive for risk assets, and least in the immediate. while lower interest rates are better than higher interest rates it's not conducive to sort of the type of environment that would drive risk assets meaningfully and sustainably higher. >> yeah. the idea of a 1%, simply said, dan, scary in a lot of ways, isn't it? oh, it's frightening. >> yeah. >> i think it's happening and whether or not we can blame to some degree or to oversimplify the decision of the policy-makers and what impact they have had in terms of

driving down the rates. >> if we are to believe, dan that there's going to be a continued flight to safety, whether or not the yield on the ten-year goes to 1%, can we still -- can we believe that investors are still going to be willing to pay a premium for the dividend-yielding stocks? at what point does that buy stock? >> well, my buddy john chang has a great story in the "wall street journal" today, something that i've been talking to clients about for some time now about valuations and more defensive-oriented sectors. you know, this has been something that investors have spoken about for some time. on the one hand when you go into a meeting with clients, they generally ask two questions. the first of which is why and while everyone is focusing on a bond bubble, is there a defensive bond bubble and our working assumes is there is not and valuations are getting up there. but if you look at companies like at&t or merck other

mcdonald's or some of high dividend-paying companies. they provide growth for investors. it's important to remember, of course, that that is not enough if things are worsening the today was a terrific day for m & a, but the market is still down considerably, and, of course, if macro fundamentals are worsening, these other sort of observations are supportive but not preventive. >> all right. dan, great to speak with you. thanks for your time. dan greenhouse of btig. >> from the markets to the travel beat. the local business and travel association hosting its annual convention today in boston with some of the biggest names in the game. our colleague simon hobbes is live on the floor there, and he has the latest. >> hi. good morning to you, david. let's be clear. you've got a market there of the new york stock exchange for stocks. this is a market as well here for global business travel.

and this market is growing. it will grow 8% next year. it's a $1 trillion market, and can you potentially make money from the growing market. the tragedy, of course, is that the growth sun even. china will exceed the united states as the biggest market for business travel in 2014 one year earlier than the organizers were expecting, and, of course, you still have a poor performance from western europe and the united states. this is how mike mccormick, the organizer of this conference, described the situation in north america. we're protecting about a 4.6% growth. continued to take that back. it's been a slower growth rate. looking at a couple percentage increase this year over last year. we're seeing continued but slower growth. a lot is driven by price increase. transactions are really flat to down in business travel in the u.s. this year, and, you

the outlook is still uncertain. >> so that's the view here on the united states, but, of course, then you have a number of companies that are trying to break new territory. virgin america is preparing for an ipo potential and american airlines amongst other guests on "squawk on the street," if we can fit them in amongst markets what. a day for the markets, guys. back to you. >> you're right about that. with the dow down 222, want to send it over to brian sullivan for a quick market florida. brian? >> involves a dow company here, carl, but i want to focus on the company involved with the dow company because we have a deal. i know there's been a number with snooc and others, but there's a smaller deal out today but a bigger deal for the company involved. gencorb is buying the rocketdyne unit from the pratt & white any division. this is a small transaction for utx but focusmore on gencorp, not often you see the acquirer's stock higher, up nearly 8%.

paying $550 for this rocketdyne division and this will basically, guys, double the size of gencorp. relatively small-cap san diego-based company or southern california-based company is now becoming more of a player in the defense business overnight. one deal, gy, gencorp, a name maybe to focus on going down the road. >> thanks for that. mcdonald's reporting a rare profit miss and the second quarter in a slowing global economy and the impact of a stronger u.s. dollar. so hats shine darkened for good from the golden arches? we're sorting through the numbers next. m in a timeout because apparently riding the dog like it's a small horse is frowned upon in this establishment! luckily though, ya know, i conceal this bad boy underneath my blanket just so i can get on e-trade. check my investment portfolio, research stocks... wait, why are you taking... oh, i see...solitary. just a man and his thoughts. and a smartphone... with an e-trade app. ♪ nobody knows...

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there's a chart to watch. the vix up over 23%. also another negative indicator. the dow transports sliding over 2%. the transports are down 8 of 11 sessions and 4 of 5 weeks, and there's one reason a lot of dow theorists are saying the trend is still to the downside when it comes to the industrials. meantime, back to the earnings onslautd. time to get reaction to the mcdonald's second-quarter numbers. joining us is matt defrisco, senior restaurant analyst and also joining us brian elliot, senior restaurant analyst with raymond james. guys, good morning to both of you. brian, hard to separate any kind of disappointment with the numbers with this tape at large on a regular day when the dow is not down 200. what kind of punishing would

they be taking? >> well, i think mcdonald's specifically kind of ran up here in the last, you know, week or two on hopes that u.s. business was getting stronger. it turned out a not to be the case so we're back where we were prior to that little bounce from the high 80s to the low 90s. you know, it's pretty clear that consumer spending is slowing globally. we're hearing that from all the restaurant companies that were reported so far, and -- and, you know, we've got food inflation risks rising with the drought in the midwest and the big jump in grain prices, and it's going to be a tough environment for restaurants for a while. >> matt, we had you on friday talking some chipotle. does this story -- is this going to start to sound familiar over and over again? >> well, i think bryan touched on the u.s., and the u.s. was sort of where we saw the biggest shortfall relative to our expects, both on the franchise

margins and in the company-operated stores, so this has been a stock that's been seen sort of as countercyclical and did very well during the downturn, and new we're starting to see the u.s. often a little bit and them not being able to manage margins as well as they have been in the past in a lower comp environment. so there are concerns, and i think the guidance right now for july is what's concerning most people where they see that to be slower than what q2 trends were so it does look like a deceleration globally. >> bryan, you mentioned a number of headwinds that face the sector as a whole. given all the data points we've, we've had a lot of stocks react to the negative negative points. on yum we saw stocks pull back and mcdonald's stocks pulled back and chipotle, same story here. in what point in your coverage universe are there buying opportunities given the declines we've seen already across the board? >> unfortunately, elliot spitzer's roles won't let me

foreshadow that and indicate any ratings changes, but let me say more generically, what we are in print saying that valuations are -- are, you know, are not stretched here for the most part, and -- and so, you know, we're not looking at we don't think significant downside risk in most of our universe. these are very good cash flow businesses with mcdonald's specifically, for example. we expect them to raise their dividend 10% in september, which is when they usually raise their annual dividend, and at that point the stock would have a little over a $3 dividend, and, you know, that should give the stock, you know, a pretty good yield support, you know, not far from, you know, current public valuations. >> i've never gotten el yet spitzer in an answer to one of my questions. i'm asking an an investor out there. you've seen the pullbacks in stocks. what's a buying opportunity

given the pullbacks? >> we like starbucks heading into this quarter. we think they have strong groth opportunities and they are managing their capital towards the consumer products group and also making a lot of headlines with their new product extensions, and that's what i think you want with a restaurant is when they have good long life to some of their new rollouts. certainly the refreshers are out there right now. evolution fresh was also a product that they bought in the rolling out fruit drinks, so you see a lot of growth opportunities for them in multi-channels. mcdonald's, we think it's a double-digit earnings growon. there are head winds in the second half of the year. the stock is adjusting to, that and like bryan said the stock had a big run-up into the quarter and into the tape because there were some channel checks out there that some people were claiming were high. they disappoint verse those numbers, so we were always somewhat cautious in the near term but definitely the outlook looks strong as a double-digit

earnings grower and once they trade off of those numbers the stock definitely has upside. >> bryan, a question on the second half of here. what's going to be the stronger dynamic working against them, currency headwinds or grain prices? >> well, i -- i -- i'm not a currency economist. difficult to forecast that. obviously we've seen significant weakness in the euro which is 38% of their profit. if the euro continues to fall meaningfully, that's a real -- you know, that's just math. the euro's sales and profits gets translated into fewer dollars that they report in. but, you know, grain prices and the risk of food inflation is now, you know, pretty much locked in. we're going to see, you know, mid to high single-digit overall food inflation until the 2013 crop takes shape which is, you know, another year or so from

now, at least, so that seems likely absent, you know, complete demise of the euro. seems likely to be the -- the larger of those two headwinds going forward. >> bryan, matt, thank you guys. we'll watch it closely with the dow down 216. >> sharp losses across the board over worries spain will need a full-scale bailout and fears that greece will leave the euro. a top european economist joins us with his take next. take it. we take it on ours. this summer put your family in an exceptionally engineered mercedes-benz now for an exceptional price during the summer event. but hurry, this offer ends july 31st.

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economists expecting u.s. gdp to take a hit in the second quarter. our senior economics reporter steve leesman taking a look at other gdp numbers coming out on friday. at least we can say our numbers won't be as bad as others out there. >> yeah. let's have a big party on that one, you and i, hats and everything. you know, the big economic news of the week is the second-quarter gdp report. it's expected to be week, but maybe what's less well appreciated by the market is economists are increasingly looking for the current quarter, the third quarter to be weak as

well. the european financial mess and the looming fiscal cliff. cnbc looked at the growth forecast of nine wall street firms and found it had dropped in the past several weeks for both quarters. down 0.2, the second quarter, the third quarter, down 0.2, and that's falling as well. it's written we've looked for g-2-ggdp to have risen by a mere 1.3% at an annualized rate. we expect continued below-trend growth for the remainder of the year. jpmorgan slashing second quarter goat from 1.4 to 1.7 over the weekend but took even more off the third quarter dropping it by more than half a point to just 1.5%. they said the real news is a convincing downshift in core retail sales through june coming at a time when sharply lower gasoline prices had been expected to boost spending. folks, can't do a lot without the consumer spending in this economy. there are a few optimists out

there. let's talk about them for a second. first-quarter growth suffered from an unpecksed 0.7% decline in defense spending. thinks there could be a rebound in that spending along with better housing numbers at 2%. hfe thinks the economy could pick up steam in the third quarter to 2.5%. some think the fid will act and others think bernanke is stalling for time. seems that a weak unemployment report will prompt the fed to act in september. >> is that your consensus? >> i'm getting that people think, you know, that they are expecting the weak jobs numbers, melissa, and that leads them to expect some action in september. it's all data-dependant. take your forecasts and say here's what i think is going to happen and then you sort of dial

in what you believe the fed will do after that. weak job numbers that will get the first week of august. should probably set up along with jackson hole speech by the fed chairman, should set up action in september i think is the consensus right now. >> steve leesman, thanks so much for that. >> continue to follow all of the developments out of aurora, colorado. the latest from there now. miguel? do we have miguel? all right. we'll get miguel on the other side of this break. meantime, we continue to monitor this broad-based selloff. a decline of 1.7% on the s&p 500. much more "squawk on the street" straight ahead. ♪

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. we are one hour into trading. the stories we're squawking about. 7:30 on the west coast. 10:30 here on the east coast. all 30 stocks in the red. hewlett-packard one of the biggest blue chip losers falling to new 52-week highs. 98% of the s&p 500 moving lower, nrg energy and eaton among the bright spots and peet's cove & tea source agreeing to go to beingsier in a private deal. >> dow is down 208 off the lows, but still a pretty miserable day shaping up. want to send it back to bob

pisani here on the floor with what he's watching. we've seen a lot of worst sense november metrics, bob, today. >> i know. 7-1, declining to advancing stocks, and believe it or not it was a lot worse at the open. we saw real forced selling at the open. a big volume spike. just take a look at where we are in europe because that's going to be the key to determine what we do today. obviously you see greece, italy and spain down and germany down. i just want to point out. you notice the big decline in russian stocks, moscow at the bottom, second day in a row. that's as global commodities sort of move to the downside and the russian market has been underperforming all the rest of the global markets ever since may. that's when the whole commodity started moving to the downside. that's another big story today. you want to take a look -- put up the german market. you noticed when we opened right at 9:30 eastern time, the german markets took a big leg down. a lot of people talked about that. forced selling going on. probably margin calls going on over in europe so the hope in

the u.s. market is once europe closed at 1130, since we seem to be seeing forced volume, much heavier than europe, perhaps what europe closes the pressure in the united states will ease a bit. dollar index at a new two higher eye. euro at a two-year low. obviously concerns about slower growth and deflation are there, and if you take a look at the materials stock, can you see the impact once again that have strong dollar, down mostly 2%, 3%, 4%. i think it's important to note here that right across the board, really doesn't matter what sector you're in, all the materials are down 2% to 4%. on industrials, again, the same situation. the global growth names are that in the industrials are to the downside here. eaton corporation just moved to the upside a little while ago. i think that's very interesting because obviously a little bit of a disappointment in terms of commentry, and the revenue growth was not really there. that's been, of course, the big story, carl. no real revenue growth. so far with one-quarter of the s&p reporting, companies that

have reported are reporting revenues below expectations. remember, earnings are beating, but on the average company that's reported, revenues are actually below estimates. back to you. >> all right. thanks very much, bob, bob picksy, and we're one hour into trading amid this broad-based selloff let's head over to chicago. todd colvin is at the cme group. todd, 30-year, hit 2 hadn't 47% in the yield. the ten-year dropped below 1.4. it was 1.398%, not to mention the five-year at half a percent. i mean, what are we to make of these yields? what do they mean, and what are your guys telling you? >> well, i think it's mostly coming out of europe. we continue to kind of get partial bits and pieces, and if you look at these yields, just a flight to quality demand here until we get some resolution. now europe has made positive steps over the past several weeks and then the focus came back here into the united states, and our economic problems and our election in the fall, but now it's going to back

to europe and we're seeing municipalities have to go back to the till again, specifically in spain and italy, and those are going to geth keep a lot of the money on the sidelines or perhaps go ahead and buy a two-year 25 basis points. where's your downside there, right? so i think we'll continue to see strength in bonds here until we get resolution. >> yeah, of course, the dollar looking pretty strong, isn't it, particularly versus the euro? >> go ahead, sorry. >> the dollar is strong. it's the best of the worst kind of a scenarios and i think that global central banks are going to continue to de-value their currencies in order to stimulate trade. right now the dollar is certainly i wouldn't call it strong, but it's the strongest out there right now, and that's really all that matters. >> and what is it overall? we've got amarket, s&p that's down significantly today. we're worried about europe again. >> right. >> the vix is shooting higher as we might expect on a day like today. give me your sense of what your thoughts are on the equity market >> i think the equity market has a bit of upside here, and as i

mentioned, look at the 25-basis point two-year yield, where else are you going to put your money, especially with europe putting its deposit rate to zero. talk of the fed doing similar actions. i think that equities, especially when you see dividend payers with low pe ratios, those will be very attractive and continue to be and equities have upsides here, albeit on lower volumes. >> we've heard that search for yield that. deposit over in some floating a plan they should have negative deposit rates in europe. >> yeah. >> try to get that money unlocked there instead of parking it at the ecb. todd, thanks for your time. >> thank you very much. >> got the shot back. let's go back to aurora, colorado, and get the very latest on the movie theater shootings and nbc's miguel almaguer has the latest from there. miguel? >> reporter: hey, good morning. 24-year-old suspect james holmes, a neuroscience graduate student, has been here at the prison -- of the jail facility which is just to the right of my shoulder since friday. he's been in solitary

confinement. in an hour he'll walk in an underground tunnel in a court facility directly behind me for his arraignment. it's possible that the suspect, james holmes, may not have to appear in court. may waive his right to appear in court, but certainly prosecutors are looking to file charges. we know they will file at least 12 murder charges, several other attempted murder charges in court today. it's unclear though if the suspect will actually come into court, although many folks are expected in there. he is, of course, responsible say according to police for allegedly opening fire on a crowd full of movie-goers who were jammed inside the batman movie premiere early friday morning around 12:30 a.m. police say they went to his home where he had wired his apartment with booby traps to try to possibly endanger the lives of investigators when they responded to his home. of course, he'll face several charges, among them the most serious the 12 murder charges, guys. >> miguel, thank you very much. miguel almaguer joining us from

aurora, colorado. of course, we'll continue to watch the markets which are finding somewhat of a bid. more on the broad-based selloff on "the street" after this. this is new york state. we built the first railway, the first trade route to the west, the greatest empires. then, some said, we lost our edge. well today, there's a new new york state.

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then you can customize the strategies and narrow down to exactly those stocks you want to follow. i'm mark allen of fidelity investments. the expert strategies feature is one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account. welcome back to "squawk on the street". i'm brian sullivan with a market flash. shares of ford and gm. a new low for gm post ipo. 19.14 a share, ouch. ford is basically spot on. its 52-week low. hit 9.05 back last october. a lot of concern about what is europe going to do, gm and ford, ford issued a profit warning about europe back on june 28th and apple, tuesday night is going to get all the attention,

guys. but ford's numbers come out wednesday morning, and it's going to be really interesting to see just how bad europe is, but those two auto stocks continue to sink. back to you. >> yes, thank you very much. brian, sticking with europe, off session lows in germany as well as france on skyrocketing spanish borrowing costs. let's bring in a barclays chief international economist. joins us live from london. great to have you with us. i want to focus in on spanish borrowing costs. at euro-era highs and some say this can persist for a couple of months before spain sun able to fund itself. is there a backstop that investors can take heart in? i mean, what sort of mechanisms can kick in in order to help spain? >> yeah. well, i think you're absolutely right. we do need to start thinking very carefully about what official measures there are to help spain given that euro is so high as they are right now. there are three kinds of measure. you can actually use the efsf

along with the esm which is likely to get approval from september could be used to go out and buy debt in the primary market, direct from spain. that would certainly be a big help. that could be agreed within weeks, really, and quite the near term. secondly, there is the european central bank. potentially it could go out as it has done in the past and indeed as the fed and bank of england have done and actually buy bonds outright. there the ecb has some reluctance to be doing that. it wants to put the pressure on spain to actually request if it needs it, if it judges that it needs it, the efsf to come in and by. and lastly, of course, there's what i call the sledgehammer option of spain actually getting involved in a fully fledged program but that would generate substantial contagion risks, so the most likely outcome, if

things continue to stay as they are, is that europe will figure out some way of getting the efsf to be buying spanish debts which could then be followed once the german constitutional court give its approval by the esm, also buying debt, but it remains to be seen, and the markets are nervous obviously. it's not quite clear what path will be taken here. >> sure. i'm wondering, julien, if you believe that will be enough if in fact reports are true that six regions in spain are asking the central government for money. will -- will a mechanism be enough to sort of stem the tide there? >> well, as for the spanish regions. the government is reckoning that they could be requiring the central government to be supporting them this year to the tune of around 24 billion euros. now, of that 6 billion euros has already been allocated, in fact,

from the spanish lottery. so that does lead a bit of a shortfall, and it's a bit unclear at this point quite how that work will be met. indeed, it must be said it's not absolutely clear if the full amount is going to be needed there, so it's definitely something that we need to be keeping eyes on. interest there will have to be some official involvement for

spain. it must be said that the central has a relatively positive situation in terms of its finances right now. it has a situation where the total for the rest of the year is relatively limited. >> so they don't need to come to the market that much because one can marge with no natural buyers for this debt, time does seem to be running out, julian. not much has happened. we've been talking about this at the end of the year. not much has happened. time keeps going by and we keep breaking records in terms of yield. >> well, there have been occasional rallies. you had a rally, of course, following the -- >> i know that. >> but i'm saying from a policy-maker standpoint, something has to happen where once and for all we're on a trajectory that we're leaving this crisis, an this route of f austerity, you're trying to reduce the deficits, the more that is feeding through into the real economy, the more that is then consuming financial markets, equity markets and that is transmitting back in and undermining sentiment there. how do you get out of this? well, you really need to be

thinking. either things get a lot better on the international horizon. admittedly that doesn't look very likely, does it, at the moment when you've got signs of heavy deceleration coming through in the u.s. and in asia right now, or europe has to start thinking about additional stimulus for sure. a weaker euro helps and ecb has been doing more, of course, in terms of cutting deposit rates being cut to zero here, but, still, europe may have to do significantly more in terms of stimulus. germany has the fiscal stimulus. that is clear here. would i expect some of that to happen next year. we think that the ecb is going to have to start look at suddenly buying debt again to help the situation. >> right. >> it's a question of, as you say, it's buying time, but also things aren't going to look a lot better for the financial markets until we start to see some improvement coming through in the business cycle here in europe, and i really i must say

struggle to see much evidence of that right now. >> all right. julien, thank you. julien callow of barclays. >> as we head to break, can you take a look at the s&p sector heat map. as you might expect, it is a sea of red across the board. we're going to dig deeper into the selloff when we come back. [ male announcer ] on august 10th... i'm running for office. does this mean we got to campaign? [ male announcer ] what does it take to win? a sassy salesman sold me sicilian sausages. more manly. i am so flustered. [ male announcer ] ferrell. galifianakis. are you taking money from tobacco companies? no. no.

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here's a bright spot in jpmorgan shares. up almost 1% at this hour. there is news, orvegs that jamie dimon, the ceo, bought $17.1 million worth of stock and shares for he, himself, his wife and an llc. we continue to monitor the market this is morning. let's bring in bob cinch at rbs. obviously the focus is on the euro. at least to the amateur eye, seemed like the euro was really able to hold that 1.20890 level, once we hit that we bounced higher. where are we in the range?

>> just above na level right now. but i think the real issue is it's hard to find buyers of the euro except on a minute-to-minute kind of trading basis. we have a big seller. that would be the swiss national bank. they've been buying a lot of euros to defend that 1.20 floor in the euro/swiss cross that they've been defending. then they turn around and diverse out of euros. for years, we had the period where a lot of asian central banks were buying dollars and turning around and diversifying part of those dollar holdings. now we have the opposite where the big intervention looks like it's taking place in the euro by the swiss national bank. >> what are they diversifying into, what are the other currencies out there? >> if you look at their basket of currencies at the end of the first quarter, they will release

the second-quarter update at the end of this month -- it was about 28% dollars and about 5% pounds and a little bit of yen. and then other currencies. and it's interesting. if you look over the last week, from the close on the 13th to today, five strongest currencies are actually the yen, the swedish corona, south korean yuan and the dollar. it looks like there is an influence on these markets. >> we had this news of a huge chinese deal, scenic to buy nexin for $15 billion in cash. do you expect that to have an impact on the canadian dollar? >> the canadian dollar, given

the selloff we've seen in risk appetite and risk currencies today, the canadian dollar is holding up relatively well, again, while $15 billion sounds like a lot for most of us, not all that big in the context of chinese reserves in what they might already be holding officially in the country. it's not clear how much of a net demand that is. but certainly the canadian dollar is holding up relatively well, given it's a day of negative risk app at a time. >> bob, we're going to leave it there. thank you for your time. a lot more "squawk on the street" coming back right after this. [ male announcer ] what if you had thermal night-vision goggles,

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well, that's what trade architect's heat maps do. they make you a trading assassin. trade architect. td ameritrade's empowering web-based trading platform. trade commission-free for 60 days, and we'll throw in up to $600 when you open an account. welcome back. taking stock of a day that is tough but has gotten marginally better. dow down. nasdaq off 2.4%. some repairing going on led by names on which you could argue some are taking a bit of a flier. jcpenney, cummins, even jpmorgan after jamie dimon said he bought a lot of stock on friday.

>> that's certainly a bright spot here. we have a lot of dow components, fresh multiyear lows like a hewlett-packard. technology is aen area that's taken a beating. tonight on "fast," we've got a strategist who says s&p 1,600 by year's end. on a day like today, sort of an interesting contrarian call to talk about. >> got to buckle up for that move. we have to get through so many earnings this week. and then gdp number on friday. and then we have to come in and get up early every morning to see where that spanish ten-year is. >> back in that dynamic again. not that we've strayed too far from it. it's always unclear each day when you're going to pay attention to europe very closely and when we seem to ignore it. but in the midst of earnings season, the bottom-line numbers have been good. but the topline number has missed expectations more often than not.

second-half guidance coming down. overlay that with the gdp numbers, and you get a tepid market, at least today. >> see you tonight at 5:00. meantime, good morning. welcome to the third hour of "squawk on the street." dow is down almost 240 earlier today. but right now, down 153. s&p's down a little less than 20. the nasdaq down 57 points. tech stocks, some of the biggest losers today fueled by the broader selloff, apple, microsoft, intel, hp and ibm all sharply lower this morning. housing stocks some of the few winners of it was upgraded. kb home, ryeland and mdc. let's get to the roadmap. playing the selloff. and then banks playing the market. is i.t. too treacherous a trade?

some renewed fears out of europe. especially spain and italy being blamed for today's big losses. how the overseas markets finish their trading day when europe closes. could mean upside action for the afternoon here. plus, apple's little change to the new iphone that could turn an industry on its head. we're going to tell you how it actually could affect you. all that and more is coming up in the next hour. we're going to get a start by getting a check on the markets. joining us, steven wood and from pittsburgh, mark lacheny. good to see both of you guys. steven, let's start off with europe. we knew we weren't out of the woods. but it felt like we looked out of the woods for a brief moment. is this worse -- are we closer to an end game, at least, when it comes to greece that, kind of thing today? >> i think the leverage that greece always had was that it could infect spain and italy. i think greece becomes something of a side issue.

i don't want to say a sideshow. but a side issue. that's going to be more political and historical. but if you look at what's happening in spain, on a negative day, i'll pull out a grain of positive news. spain, a couple of weeks ago when dealing with their banking crisis, they could have been put by the european union into that residual category, that slop bucket of bailout, which they didn't do. so at least there's a beginning to see the government's being forced by the markets to engage a more mature negotiations. so a banking union, banking resolution, european-wide, pan-european resolution. difficult problems. if that was the first step on this long road, it could have been a positive step. if it was a false start, we'll see more of this. >> mark, you say spain's gone from a banking crisis to a full-blown level of stress. is that what's driving today's action or does it have more to do with the likes of a mohm

mcdonald's saying growth is slowing around the world? >> obviously it's a replay of what we heard from other companies, slowing global growth, currency issues related to the strengthening dollar in the second quarter this year. i think it has much more to do with spain. it's basically a replay of what we've been seeing over and over again with regards to the markets and at the epicenter is europe. you have a market riot. you have a response by policymakers and then you get some temporary relief. what remains unambiguous at the moment is we don't have a concrete solution by european officials as to how they're going to solve for this. the concern is not just spanish banks but talks of the european issues related to policymakers not coming together to form a solution to solve for what's potentially a solvency issue for spain, which the efsf and/or the esm is not just refunded to respond to, let alone to triage

to italy. it becomes much more problematic for the markets. we're seeing a market riot. >> but you have not ruled out the notion of buying some europe, right? buying some german, swiss, uk companies, if in fact we saw a steep enough decline? >> absolutely. if you look at it purely on a valuation basis, if you will, almost absent the big macro risks at the moment, in the al aggrega aggregate, european equities are selling at a 40-year low relative to u.s. equities right now. while we're leaning toward u.s. equities because on balance, the u.s. market looks much more attractive, valuations are undemanding. but that said, you have to be drawn to the valuations in europe and probably the safer way to get access to european equities is through markets like germany, switzerland and on a tertiary basis, the uk, where their economies are doing reasonably better than europe in the aggregate. and you're still going to get

some lift should we see positive news become to emanate from the european community. >> we're already at your target for u.s. equities. does that mean we're going to float here? >> it's not a bad year. high single digits in a very bad year. if you look at the russell 300, even the russell 200 and the russell 1000, the u.s. has held up rather well compared to the rest of the world. but jumping off what mark said, this is going to need to be a globally diversified portfolio. we're at your u.s. market. you don't have a lot of options in government space. you need to look at corporate bonds globally, strategic bond funds. you need to look at equities. look at the u.s. as your base camp and build globally. where you see valuations get very attractive and where you have a good sense the fundamentals from a policy level aren't going to deteriorate a lot, you have some possibilities. >> the ten-year at 1.4 today. is there a level of worry that more than offset that is hunt

for yield, where you know you're not going to make anything in the bond market, you're going to buy at&t? >> yeah. everything costs. sleeping at night, the price of peace of mind has a big price tag associated with it. for long-term investors, overpaying for security at this point can be a pat of it. but it's not a big part of it. you need to beat inflation, look in equity space, global bond funds, you have to find a way to beat inflation. you have to be more disciplined and do a lot of research. this becomes a stock picker's game. but you were talking earlier about as revenues get impinged right now, not every balance sheet was created the same. not every company is going to do well in a challenging environment. extend all that time and do more research -- >> the final thing is you're given some lists of sectors of the economy that are doing well. autos, considered a relative bright spot. you wake up today, gm and ford awfully close to their 52-week

lows. >> you're right. there's a disconnect between the way mr. market is treating the share prices of those companies and the underlying improvement in the industry. just to the north of the 14 million units, encouragingly off a bottom of 9 million. it could make those stocks enticing. another area we like that's showing fundamental implement improvement is housing. and goldman sachs upgrading the industry, we've been bullish on it for some time, north of about six months at this jing chur and expect it to remain somewhat choppy. but it's a space that looks increasingly attractive. for the first time in six or seven years is going to be a positive contributor to gdp in our country, which is a positive surprise that's lost among all the pessimism at the moment. >> as we look at a one-year of the homebuilding sector. thanks for your time, guys.

we should point out as well, the dow earlier this morning was down as many as 239 points. obviously we've covered about 107 of those. we're not to the european close yet. we'll see if that process of repair continues throughout the session. want to get to our capital markets editor, gary kaminsky, looking at here, it says, a bear market thesithesis? >> a lot of these themes are themes you hear daily. i was doing my weekend reading. what caught my eye -- i want to get to it through this wellington letter. something that i've read my entire investment career. one of the reasons i like it is because the person who puts i together has had very timely market calls. item going to mention this weekend's letter despite the fact that he actually criticizes the business media here. he talks about back in 2007 when he came out with prelude to a meltdown, he sent copies of the books to all the major financial media. nobody wanted to cover it.

says basically all we do is have positive strategists. i beg to differ with that. but he is still short-term positive on the equity markets but brings up a number of things. the charts, some of the things that are of concern, obviously the libor scandal, what's happening in europe. as i've said, there's not going to be any euro bonds because there's not going to be buyers of the euro bonds. interest rates, we've been on this theme about the ten-year, it's going to 1%. what is the bond market telling you? and we talk about value traps. what i thought was really interesting, he referencies the delivering alpha conference last week. i was at that conference. talking about the presentation about value traps. i think it was a compelling thing here. this is what i want to read. the best stocks over the years, over my entire investment career, were those that were always that i thought were expensive and looked expensive. and they're expensive because they were delivering on what they had to do.

he talks about the hewlett-packard -- the fact it looks like a value trap. but here's something i wanted to read. jcpenney, he mentions jcpenney here and there was a lot of bullish calls last week out of jcpenney. again, it's nots just just a ond thing. i want to read about jcpenney. while on the subject of cheap stocks, jcpenney was considered cheap when the alleged marketing whiz from apple was hired as ceo. the stock now 55% cheaper. our view is that he is way over his head. he's used to a company whose products never go on sale. that's vastly different from a department store model which has thousands of skus. this is what was sort of a bold statement i wanted to share -- jcpenney will be in dire financial situation within two years and the ceo will have been fired.

the reason i want to bring this to you today is this is one opinion. but the idea that we are only giving bullish scenarios, strategy scenarios that are bullish, i differ with that. that's not the case. it won't be the case. i wanted to share this. value traps is what you have to be worried about here. in terms of value trap, later i'm going to talk about where something that a lot of strategists are telling people to put their money in which to me looks like the next value trap. >> i love the notion that the best buys he had looked expensive because the company was actually working. >> exactly. high multiple stocks are high multiple stocks for the most part for a reason. value, as jim chenos pointed out, typically is a trap. this is a pretty negative letter. but as i said, in the short term, the market indicators continue to be positive. >> talk to you in a few minutes. back to brian sullivan at h.q. with a market flash.

>> let's talk about homebuilders. goldman sachs out with decidedly different calls based on the names. mdc holdings, the name of the parent company, goldman sachs adding them to their conviction buy list. that stock is up more than 5%. also goldman sachs boosting kb home to a buy and ryland homes to a neutral. not a screaming endorsement for ryland. but they upgraded it and bumped down nvr to a sell. they had an abysmal report last week. that stock's down about 2%. mdc holdings added to their conviction buy list at goldman sachs. >> interesting call. worth a read for anybody who follows that sector. when we come back, banks taking a big hit in today's selloff. are these stocks too risky to own? dick bove join us after the break.

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banks taking part in the downward spiral on wall street today. are the big banks too risky to buy? dick bove is joining us today. good to see you today. >> thank you, carl. >> a few earnings under our belt. we'll see if there are any arrests in the libor scandal. but you've broken the sector up into four categories. i'm wondering if you can line them up best to worst.

>> well, the best has been the regional banks. no question about the fact that this quarter they showed better earnings than anyone thought they could produce. in fact, they were picture-perfect quotas. then there's the trust banks, which would be the bank of new york strait street type of company. they had reasonably good quarters. not great quarters and they basically showed forward momentum but not as much as you'd like to see. the third category would be the capital markets companies. and they were disasters. their trading operations were horrendous. their investment banking capabilities were not in play at all. and it looks like that that's going to be the same situation for them in the third quarter. and then the fourth category would be the universal banks, the jpmorgans, bank of americas, citigroups, they have all of the above. they are regional banks, trust banks and capital markets companies.

and they were kind of flattish in terms of what they were showing. the problem with bank stocks is not really anything to do with their earnings or the structure of their balance sheet. the problem with bank stocks is that people simply don't believe any of the numbers that they see associated with this group of companies. >> right. you're pointing to book value. at what point do we cross back to the other side of that rub rubicon? >> take a look at the amount of money citigroup made in 2011 -- and they'll make more this year than they did last year -- they made over $11 billion, net income. there's only 15 companies in the united states that make $11 billion in net income. here's a company which the market constantly denigrates and thinks is in trouble, which is making more money than virtually 99.9% of the companies in the united states.

jpmorgan just went through this horrendous period of den graduation. jpmorgan makes more money than any -- except for five companies in the united states. and even with all of the problems that they're facing this year, they'll be among the top ten money earners of companies in the united states. and they'll be either number two or number three in terms of bank earnings in the world. so if no one cares about how much money these companies make, no one cares about how fast their growth rates have been coming out of the recession, it's very difficult to understand what is going to get them to buy the stocks. >> yeah. indiscriminate selling. but fair to say you would be an active buyer of regionals but you would not touch some of the universals with a ten-foot pole? >> i think it's crazy not to own regional bank stocks right now because the quality of earnings is extraordinarily high. it's coming from more loans and

more deposits, and therefore buying u.s. bancorp, pnc, bb&t, fifth third, all these stocks are extraordinarily attractive and should be owned. i think in the case of the universal banks, you have to have a very strong stomach. i would, for my own account, if i were allowed to buy them, buy bank of america and jpmorgan. but it's hard to assume these stocks are going to go up as long as people refuse to look at the fundamentals. >> yeah. as he said, as bank of america once again has a six handle today. dick, what a year we've had on that name alone. thanks so much for your time. see you next time. >> thank you, carl. counting you down to the close in europe. we'll bring you the closing action live when it happens. a difficult day for some of these markets. in some dayses, the worst intraday of the year. back after a break. ♪ [ male announcer ] you've reached the age where you don't back down from a challenge.

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believe it or not, one stock that is higher today is research in motion. that's correct. you heard me. r.i.m. is actually higher today. why? because the ceo of fairfax financial holdings and a seat holder on research in motion's board just revealing that he has nearly doubled his stake in r.i.m. he owned about a 5.1% stake in the company. it's now at 9.9%. nearly doubling down on his investment in research in motion. this is probably one of the greatest bets of all time. it's heads or tails on this one. >> wattsa thinks he knows the answer. >> it tells you something about the tape today. >> it does. and i think for the year, walmart, what is it -- walmart, the only company in the dow that's faced bribery allegations is the best performer of the year. >> that's right. obviously focused on the

market selloff, want to go to the cme this morning. holly list and scott wren joining us. good morning, guys. good to talk to both of you. i'd love to get your take on the ten-year. the dow down 230 will get your attention, but so will 1.4. >> it's not just ten-years. everything except two-years all shifted lower. they've become themes dominant in our society. it used to be green shoots. now it's risk-on, risk-off. and the one more prevalent is not return on your money but run return of your money. los angeles we see that flight to safety, we'll continue to see these rates lower. you mentioned ten-year breaking 1.4. now it's like 1.4 is commonplace and we'll probably see 1.25 before too long. people want return on their money. >> you said technically headed to 1.36 and possible6.

is that in the near term? how long are we talking about? >> i would say probably nearer rather than further away. we were just above 1.50 just probably a week, maybe two ago. and we're already below 1.40. i think 1:36 could easily be within the next week or two. 1.26, possibly within a month. time frames are a little sketchier than outrit yield levels i would be looking at. you have treasury auction this is week. if those go well, given we're seeing new low yields and there is demand for treasuries, those new low yields could come sooner than later. 1.26 is probably going to be closer to 1.365 in futures. >> jaw-dropping yields there. opt one hand, you can imagine investors saying obviously that means people are afraid. on the other hand, some might argue an at&t dividend yield on -- looks pretty good in comparison. >> i think, carl, that really

when the market sells off like this, people are hiding in these defensive sectors. what we've bn telling our clients and we've been telling them all year long, any selloffs we want to use as opportunities. we're trading right now on a big, wide range. there's good support at 1,265, the 200-day moving average comes in in the 1,310 area right there. but toward the bottom end of this range, we want our clients in there buying the very sectors, industry groups and stocks getting hit the hardest in here. we like consumer discretionary, materials, technology. all those get hit hard on the selloffs and they've certainly gotten hit hard here today. >> but on that front, to the degree that you really go to the beaten-down sectors and names, you're saying not until 1,310? not until -- >> no, no. carl, right now, valuations versus most historical metrics, they're below average.

anybody that has more than a six-month, nine-month outlook, they should be accumulating stocks in here. don't wait for the bottom. most of our clients -- retail investors pay the bills here. they're not traders. we want them to invest looking out over the next 12 to 24 months. this is a good area to be accumulating stocks. we certainly want them doing that. >> thank you, guys. interesting day, certainly a lot to talk about. the closing bell set to sound in europe. well get that in a little less than three minutes. tdd# 1-800-345-2550 the 5-day moving average just crossed above the 20.

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welcome back to cnbc. this is michelle caruso-cabrera. we're showing you right now the carnage we have seen across europe. believe it or not, those numbers actually look better than what we saw earlier in the session, with the exception of greece, which is off by more than 7%. there are report that is they are being told by the troika who's supposed to be arriving later this week that, they can't get any more additional help. so far, no more clarity on that. but they were talking about asking for a bridge loan to help them get to their next bridge loan. i exaggerate only slightly. let's run through the yields for spain and italy. but hold on, we have breaking news.

let's get to carl quintanilla. >> thank you very much, michelle. we're going to take you to colorado. james holmes, the man accused of the mass shooting in aurora, colorado, making his first appearance in court. >> you have the right to be advised of the charges. there's a preliminary determination of probable cause to believe you've committed the offense of first-degree murder, a class i felony under colorado law. ordinarily individuals are entitled to bail, given the nature of the charges, you are currently being held on a no bond hold. you also have a right to have a jury trial and preliminary hearing to determine whether it is probable cause to believe that you're the person that committed the offense. mr. holmes, do you have any questions about that initial advisement? >> judge, we've advised mr. holmes thoroughly. >> thank you, mr. king.

>> we are entering a mandatory protection order. any violation of the protection order can institute a new criminal offense and/or contempt of court. it is the order of the court, you shall not harass, intimidate or tamper with any witness or victim of the acts you are charged with committing. shall vacate the home of the victim, stay away from the home of the victims and stay away from any location the victims are likely to be found. you shall refrain from contacting, directly or indirectly communicating with the victims, shall not possess or control firearm or other weapon. shall not possess or consume alcohol irk beverages or controlledsubstances. and you are not to commit any new offenses. ms. pierson, if you'd approach, please. i just signed a mandatory protection order. give a copy to mr. holmes and

acknowledge his receipt on the record. >> we are asking for an extended period of time, the 72 hours local rule, rule 5 only requires it without the necessary delay -- we would be requesting until next monday, july 30th. >> mr. king? >> we do not object to that. if i may approach, however, i do have an application that is completed and needs your signature. >> you may. >> your honor, at that time, we will also file an amendment to the protection order -- >> court has signed the application for a public defender. public defender is appointed.

given the nature of the charges and the likely voluminous pleadings, i'm entering an initial case management order. has counsel received a copy of that order yet? >> thank you. >> ms. pierson, did you receive a copy? >> we have, your honor. >> we'll make sure you get a copy. essentially what that's going to do, in order to track the pleadings, people's filings will be captioned with a sequential number thereafter. defense will be a "d" with sequential numbers thereafter. the initial case management order which i've captioned c-2,

does list the orders and motion to have been filed thus far. what i'd like to do is just recap that and make sure i'm not missing anything. so far, we have c-1, the emc order that i issued. we've got the p-1, the motion to seal the search warrant affidavit, orders and case file, filed by the people. i did grant that. we've got outstanding, d-1, which is a motion for access, to and preservation of the crime scene which relates to access by the defense and their experts to the movie theater. we'll address that in a moment. we've got d-2, a motion to limit pre-trial publicity. along with that motion, i did receive a proposed order. however, i'm inclined to go ahead and just track rule 3.6 and 3.8 of the rules of professional conduct. ms. pierson, the people --

>> we've lost the audio on that live shot. but that is our first look at james holmes the man accused of the mass shooting in aurora, colorado, on friday. showing off the shock of red hair that we have so far only been able to read about, showing very little emotion. and at times, looking almost sedated, closing his eyes. this is judge william sylvester advising holmes of his rights. >> this is what's called a first advisement in which the accused is advised of his rights. of course, he'll be in detention. he's in solitary in centennial, colorado, which is about 13 miles from the arapahoe county

courthouse. if we get any further details on the hearing, we'll bring them to you, of course, live. in the meantime -- we'll take you back to the courthouse. [ no audio ] >> any objection to that? >> that would be appreciated. >> thank you. do you have any objection to

that, ms. pierson? we do have the motion for access to the crimes. any objection on that? >> we are anticipating later this week at some point -- they are not finished yet with some of the things that have to be done. >> are you in a position to give them reasonable access with 24 hours' notice? >> yes. >> court will issue an order concerning that. anything further on that issue? >> one thing -- >> did i misread your motion? your motion only addressed the movie theater? >> i apologize for that. we file that had on the fly on

friday. we are asking and i will amend the pleadings -- >> your honor, i assume that they also want to be a part -- >> thank you. >> your honor, we file this had morning a motion [ inaudible ]. >> there was some discussion as to whether or not holmes would wave his appearance today. sometimes in these cases, a judge will accept a waiver, for instance, if the defendant is supposed to appear for something minor. obviously, this is not a minor case.

everyone expected holmes to be here today. the way this will work will play out over the next few weeks. this is what's called a first advisement. there is sometimes a second advisement. colorado law calls for a preliminary hearing. after that, the suspect has an arraignment and can file a plea. you can see the headlines at the bottom of your screen that the formal filing and charges against holmes will take place next monday. so the legal machinery that will fire up as a result of his arrest is really just getting started. let's see if we can hear a little bit more from the arapahoe county courthouse. >> with regard to pleading 5, we're just asserting all of mr. holmes' constitutional rights. with regard to -- i think that we're not really at that stage yet.

but we are filing this -- [ inaudible ]. >> may i approach? >> you may. >> all rise.

>> and that is the appearance of james holmes at the arapahoe county courthouse. a ten-minute hearing. not the last time we will see him as formal charges are filed on monday of next week. we've been keeping a close eye on the dow, down about 155. of course, it was down about 230 earlier in the session. bob pisani's here at post 9. whether we look at europe or the ten-year, earnings, potential for libor arrest, there's a lot going on. >> and there's a lot of side stories going on in europe, particularly in greece, spain and italy as well, that are sort of affecting the markets. the european markets have closed, closing off their lows. now the hope is -- take a look at the u.s. markets here. there is a lot of pressure here at the open. there was a lot of what some people think are forced selling at the u.s. open, saw it in europe as well. maybe some margin calls going on in europe where some european individuals or firms were forced to sell u.s. stocks.

the hope here is that that will abate somewhat. we hit the bottom. we were down 240 points in the dow about an hour ago. it lifted off that and moved sideways in the last 20 minutes. the dollar was quite strong earlier. it is now off of its highs. we'll keep an eye on that. take a look at the major sectors. on a day when the dollar is particularly strong, you expect a lot of pressure on commodities and big industrials. we are seeing that in the materials group. tech and energy, weak. look at the industrial, they're not down nearly as much here. only down 0.8%. a lot of that is due to eaton. they're in a deal with cooper that's going to close very soon. but the major industrials are on the upside right now, the majority of them are. that's helping here. i want to show you something about eaton and what's going on here. their numbers were not that great. their guidance was not that great. however, put that stock back here, i want to show you, the stock went from $50 to $37 this quarter.

there were extremely low expectations. the stock already came down. once the numbers came out, it wasn't quite as horrible as some people anticipated. that's why you're seeing that lift in the stock, even though the reports are nothing to write home about. take a look at the numberings, a little bit of a look down into eaton. their earnings reports today was very typical of what we're seeing of big companies today fchl you look at -- pull that back again here. if you look at what was going on -- pull it back from the prior screen -- their numbers in the united states were pretty good. electric americas, they were up. electrical r.o.w., they're done. their revenues as a result of this were flat. and foreign exchange negatively impacted them by 5%. the strong dollar hurt them. here's a very typical example. good in your opinions in the u.s., bad numbers outside of the u.s., revenues flat and foreign exchange generally a headwind for them.

let's put up that guidance number because we are seeing guidance for the third and fourth quarter, which is what we care about, continuing to come to the downside. so put up the third and fourth-quarter numbers here. right now, we're expecting guidance below, under 1%, negative 1% for the third quarter. and fourth quarter is where all the earnings are right now. we've started a few weeks ago. earnings for the fourth quarter, up 16% for the s&p 500. you see now it's down to 12%. that's the big numbers. we need financials, we need technology. 15%, 20% earnings increases, we're expecting in some companies. so far, it's not happening. that's a bit of a problem. >> we've known for a while that fourth-quarter expectations were lofty. thanks, bob. michelle caruso-cabrera got us started on the european close at 11:30 east coast and we'll pick up on where we left off. >> it was an ugly close, not as ugly as we'd seen earlier in the session. but you're going to see a lot of the european banks hit very hard as well. and the cause?

rising yields, particularly in spain and italy. sharply rising across their entire curve, whether it's the two, the five or the ten, you have to start asking yourself whether or not they're going to be shut out of the bond market. whether they're going to choose to shut themselves off. there's a debate how long spain and italy can go with a ten-year yield above 6% or 7%. some argue it could go to 8% and hold on for a while. we'll see whether or not we'll see european leaders call for a new summit to solve this problem in some way. finally, she winked, whether or not we're going to see the ecb come in and try to do something to help out with the borrowing costs of these companies. what's happened? we just saw the spanish bank bailout approved last week. this was going to separate the sovereign from the bank risk. they wanted to redirectly capitalize the banks, not impose the debt on the actual overall government. that would make spain look

worse. instead, give the money directly to the banks. that's supposedly what happened. but when you look at the fine print still in the end, if and when there are bank failures and money is lost in this process, the spanish government is absolutely going to be on the hook. i think the second key realization that is happening across europe, carl, is that when they start restructuring and resolving, that's going to be code word over in europe for shutting down banks, that there's going to be a lot of pain imposed on people who aren't, weren't expecting it. whether it's going to be the holders of junior debt, et cetera. a lot of times with the exception of ireland, a lot of those people have been spared any pain. the tonality has changed. looks like you're going to see a lot more pain throughout the capital structure than people anticipated. >> that will flow down to people who have small business, which will flow down to people who were hired by those businesses. >> and particularly in spain, he should highlight what they did in spain a lot is a lot of the mom-and-pop depositors were sold a lot of bank debt, told it was very, very safe. and guess what sf it's not. >> yeah, they definitely rallied

around the flag, so to speak. and it's going to cost some people some money. michelle, thanks a lot. dow off the lows but off what we had on intraday highs. back in just a moment. i don't y on gasoline. i don't have to use gas. i am probably going to the gas station about once a month. drive around town all the time doing errands and never ever have to fill up gas in the city. i very rarely put gas in my chevy volt. last time i was at a gas station was about...i would say... two months ago. the last time i went to the gas station must have been about three months ago. i go to the gas station such a small amount that i forget how to put gas in my car. ♪ you won't just find us online, you'll also find us in person, with dedicated support teams at over 500 branches nationwide. so when you call or visit, you can ask for a name you know. because personal service starts with a real person.

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markets lower across the board. dow down 142. it was down 230 earlier this morning. nasdaq has had a rough, rough day, down 2.4% close to the open. now down a little bit less than 2%.

want to bring in jim paulson with wells capital management and michael cloherty. jim, let's talk about the two camps here. one is that we are still in this range and that 1,265 would be more concerning than the level we're at. others say we're entering a new phase of stress, especially when it comes to europe. what do you think? >> a lot of it has there's been a lot made and a lot written and talked about of how we're replaying what we did a year ago. and the script is close. we had a spring slowdown last year. we did this year. we waffled during the early part of the summer and then right about this date on july 25th, i believe, a year ago, we collapsed. and went down, lost 20% from the highs as the slowdown turned into massive recession fears on the back of european sovereign debt fears. so i think we've sold this idea that we're going to replay this

script again. and i think that's part of what we're doing around the specific late july dates here. but i think we're very different. my guess is we could stay sloppy here for the summer yet for a while. but i still think that the u.s. is going to exit its soft patch and the market still has a good run to new highs yet before the year's out. >> does the ten-year tell you anything different? you're right about some of the news echoing prior springs and summers but we are in some uncharted territory on bonds. >> yeah, we are. but a year ago, too, we were. the bond yield at that point collapsed to its lowest levels ever seen. now it's a little lower than that. but the similarity is that went to a record low as well. >> michael, let me get your take on what the ten-year is telling us today. >> yeah, i do think we're significantly lower. so i think what the ten-year is telling you between this year and last is we do have some new hurdles, some headwinds coming our way, the whole fiscal cliff

issue, combining with european stress. also with europe, we have a little broader mix. last year, really focused mainly on a couple of countries in europe. now a wider mix of countries that we're worried in today's move out of spain, definite lly worrisome to move yields out there. hard to sustain those rates. >> we've been talking about what may happen to the ten-year yield in the short term. a lot of people talking about 1.25% being the next stop. does that make sense to you? >> we're a couple of bad headlines away from that. hard to persist at that level for very long, however. it's just so low, a lot of your natural buyers -- you just can't accept that kind of return right now. likely to steer them into other markets which may help equities as jim was saying. >> yeah. speaking of which, jim, housing,

some of the best names we've got going for us today, big call out of goldman upgrading the sector, despite the gains they've already had so far. as we've run into these continued challenges, does your shopping list get a little trimmed on the edge? do you go for sure bets and not things you were taking more of a chance on? >> i think i take advantage of the more cyclical areas and not run to steady eddies and dividend aristocrats. that's where people do run in these. but the european crisis now has been responsibility for many panic after many panic since january of 2010. every time you get into one of these, the right thing to do is not only buy the stock market but to go into the more cyclical areas that were getting beat up the hardest during that mini pan panic. it calms down because european officials do something again and we rally hard.

what leads out is the highly beta areas. we move toward the cyclical areas that some want to give away. >> jim, michael, thanks so much for your time. see you a little bit later. markets in the red, off their lows. we'll get the highlights as well after a break from the conference call over at mcdonald's after a break. ever i use the points we earn with our citi thankyou card for a relaxing vacation. ♪ sometimes, we go for a ride in the park. maybe do a little sightseeing. or, get some fresh air. but this summer, we used our thank youpoints to just hang out with a few friends in london. [ male announcer ] the citi thankyou visa card. redeem the points you've earned to travel with no restrictions. rewarding you, every step of the way.

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mcdonald's missing expectations this morning, thanks to slowing sales and a strong dollar. mary thompson joins us with highlights. >> mcdonald's predictably saying that weak global economy is hurting consumer confidence, which in turn is hurting its sales. the company's cfo saying on the call, the company will end 2012 at or slightly below the 6% target for constant currency profit growth that the company has laid out. of course, higher labor, as well as commodity costs, at play here. this is the first call for ceo don thompson. he was just named ceo last month, saying a change or put to the post last month saying a change in management doesn't mean a change in course for the restaurant operator. it's increasingly difficult given that macro environment,

which is one of the reasons the company's seen headwinds on both the top and bottom line. on some of the color first for the company saying that commodity costs actually will moderate in the second half of the year. the reason for this, the company said it secures grains and other commodities before prices rose in response to the drought. so that's the good news, although the areas expected to be in increase in those cost, about 2% here in the u.s. additionally in the u.s., the company is seeing increased competition and that during the second quarter, drink sales helped to drive sales in europe, france and germany, they say, are seeing pressure in the eurozone. the chinese consumer is being very cautious. and in japan, more consumers are actually eating at home now as that country continues to recover from the tsunami. so those are some highlights, again, from the mcdonald's conference call, going on now. carl, back to you. >> interesting to hear them talk about shoppers cutting back on discretionary items like snacks and dessert, which