others like sooef say they're doing it at the short end, doing it a certain amount. there's a lot of ways to interpret. >> draghi said the size ought to be adequate to meet objectives. they recognize you're not going to be able to fake. >> that should always be the case. size should be adequate to meet the objective. >> we'll be talking after labor day. join us tomorrow. "squawk on the street" begins right now. ♪ >> good morning. welcome to "squawk on the street." i'm melissa lee with jim kramer and brian sullivan live from the new york stock exchange. david faber is off today. disappointment is the name of the game this morning when it comes to the futures markets as well as what's going on in europe, of course the ecb meeting. we had a down nurn the u.s. futures, losing about 85 at the open, the s&p 500 looking to lose 11 1/2. dramatic swings in the european

markets this morning. the german diamondbacks doax do percentage points. we are half an hour into the press conference. mario draghi says the euro irreversible and that government should be ready to activate the esff. we'll have the latest. knight capital shares continue their free-fall this morning, the company saying the erroneous trade positions resulted in a loss and that its capital base has been severely impacted. retailers on the move this morning, costco beating estimates. steve liesman has the latest on the news conference. steve. >> melissa, thanks very much. there's some interesting contradiction in what i'm hearing draghi say. on the one hand he began strongly saying they'll do whatever it takes, the euro is irreversible, and then he starts to lay out a essentially a plan that says in the next few weeks we'll announce a plan effectively to buy bonds.

he later says it will be a plan to buy bonds on the shorter end, different from the sfp. a couple questions that are unclear to me right now. one, does a country first have to ask for assistance from the european rescue fund before the ecb will act? that's a little unclear. on the one hand it seemed like they had to, on the other handle they said no, the ecb can act anyway. the other thing that's curious is he said this is strong guidance and now we have to decide which nonstandard measures we'll take. a little unclear at this moment how far advanced the planning is. one hand he's talking about being very advanced. on the other hand he's saying this is strong guidance. that needs to be resolved, hopefully in the q&a that will be coming up here. interesting to look at what's happened to some of the european bonds. it looks like the yields fell substantially both in anticipation of this -- and

there's the italian ten-year. we don't have the intraday, but it did come down quite a bit if p i'm not mistaken from this morning. the bond market seems to be hearing that the ecb is coming to the rescue. the stock market is not hearing that and wanting a more firm commitment from the european central bank. one thing draghi did mention, he is ware of the opposition or the concerns from the president of the bundes bond. a little lack of clarity. actions coming from the ecb but lack of clarity on how far advanced those are, melissa. >> steve liesman, we'll check with you later on. we said going into this the ris ok the market, given the rally we'd seen going into this meeting, was to the down side. what would mario draghi do besides the verbal that he already pulled out at this point? >> once again really nothing

here. going back to buy at&t, buy verizon. it could be so specific and disappointed about it. pretty much the bears. you have to retreat to america again. there's nothing here. there's nothing -- >> you mentioned retreat to america, though. you think perhaps the old, you know, best house in a bad neighborhood analogy continues even more as capital flows to the united states? >> yeah, brick house. i thought retail was supposed to be really horrible when you get to that. retail is pretty good. we have a lot of things going in this country that tell me that we're muddling through. they're not muddling through. they're disappointing again. maybe we can try to translate something and make something out of it. i'm not going to go there. >> basically, draghi has to say he's going to buy the record. >> he's trying to buy and this is the date on which he's going to start buying. >> unless he says that, it doesn't look like we're going to get any sort of a draghi pop. >> yeah. >> did you hear rate cut?

did you hear, listen, we'll do something now? >> they considered a rate cut, which means nothing at this point if they're not going to do anything. >> considering buying a pony. >> really. >> so we've got the bernanke -- we need the jans call, where an obscure european financial -- >> that's great. >> for 200, alex. >> let me count on johnson & johnson and let's move on. nothing here. i'm going to tell you the truth, forget about it. >> the picture is getting worse in the u.s. in terms of futures and how we're setting up for the open. there are some really dramatic reversals this morning initially op the initial comments from mario draghi, and then the letdown that happened afterwards. for instance, the euro versus the u.s. dollar went as high as 1.24. broke that level. eased back down. now trading at 1.21.74. oil is down below 88 bucks a

barrel. so dramatic swings in today's markets so far. >> doing whatever they think without acting on every single word. people at home, don't pay attention to what these professionals are doing, because they're amateurs. louis bacon says it's too hard. >> right. >> what am i going to tell you it's too easy? anyone trading off this stuff, go do work on verizon. it was a really good quarter. >> bacon said something to the effect of it's amazing how one figure in europe can have such an impact on the macro environment. he was referring directly to angela merkel. >> that she's in charge. >> yeah. >> it may be you who is in charge. i asked leaseman, who is more powerful in the world, ben bernanke or mario draghi. he sort of suggested draghi. i would argue it would be a collection of people. the german high court. they make that september 12th ruling about the legality of any of these bailout, if p they say

this is illegal, it violates their constitution, it may be over. >> yeah. >> well, no. i got guys i think are very important. a guy named tim cook, responsible for -- >> right. september 12th is an important date. >> back to melissa's point about the one or two men or women who literally, when they change a word in a sentence, everybody goes crazy, futures go up or down 50 points. >> i'm trying to make this sensible to people other than hedge funds, and many are clueless. that is day we're trying to figure out whether pricing is right, whether it be the fxe, the opening of trading because of knight capital. i want to retreat and say, you know what, the only people i really trust are people who are running great american companies with good balance sheets. because this market is up almost 10% this year. >> it is. >> it's not because of draghi or because of trying to figure out the german court. that's what we try to pretend to do. i done like to pretend. i like facts. >> a market up about 10% made on the gains of walmart, of at&t, of pfizer, of merck, of all of

these large dividend-paying, defensive primarily u.s. revenue stocks. >> well-run companies with good bleelts are trumping poorly run companies with poor balance sheets. >> 12%. >> wait a second. >> bad news but -- >> merck was looking at abercrombie and fitch and saying that's something i want to get into. >> it defies serious logic. >> serious logic. i don't want to be so ethnocentric as to say forget about europe. i am saying that the empirical evidence is apple had forgotten about europe and i'm trying to make money for people, not trying to obfuscate. i am not going to pretend i understand what somebody's doing on vacation and what someone else is going to do. let's talk completely in house for a second. comcast. i went over that quarter last night. >> strong quarter. >> no one in that conference

call mentions luxembourg. it simply didn't come up. portugal did not come up. >> they did indirectly because they mentioned the olympics as break even instead of a $200 million loss. >> here's what i'm showing for american companies like great american tower that can move like at&t. duke. pimco, my friend, is beating amazon. i'm not saying it's game over. i'm saying it's game over for people trying to interpret what the germans will do. that's not my game, never has been, won't start now. >> we'll continue to monitor the headlines out of the ecb press conference, especially when the q&a starts. meanwhile, shares of knight capital group plummeting a second day. electronic glitches caused price swings in dozens of stocks are likely to cost the company $440 million in losses. it has traded out of its entire erroneous trade position adding clients were not hurt by those order. but it is pursuing strategic

moves to strengthen its capital base, which it also says is still within compliance at this point. this is a remarkable -- i've not seen a decline like this since probably the financial crisis in terms of the sheer percent loss in 24 hours. >> 24 hours. >> this hours. >> tommy joyce came on the show, talked about how bad facebook was. this is a very tough situation for knight capital. obviously we don't know their exact cash balance. we know they can be resourceful. one of the things tommy joyce has distinguished himself is he's always told the truth and always told it quickly. >> yes. >> telling this one quickly may have ramifications that he has to play with. honest man dealing with a capital situation. do i want to bank with them or -- i don't know. can't can not make a prediction how quickly credit lines can come. but this is a major confidence shaker. >> yes. >> and once again it calls into question the pricing factor of our stocks, which is not --

doesn't create a lot of confidence. >> yeah. >> from a knight specific issue, jim, can we address this. you and i talked about it a bit. obviously it's blow to confidence in the overall market. specifically with regards to knight, they're making comments about their capital base, which is spooking people. they're bringing it up, not us. >> exactly. >> what software was it? was it their own software? that's one thing. if it was a third-party software -- >> are they liable? >> -- that went bad, are they liable? do they have compensation from a third party and do they have insurance against something like this happening? >> i wonder if nasdaq didn't have the big policy for their -- >> yeah. >> this is a story worth watching where will it will ceo is beleaguered and embattled. he's always told the truth that wall street sometimes silence is speaking louder than truth. tommy joyce, i call him tommy, look, no friends here. just facts. this is a tough one for them.

>> yeah. they're pursuing strategic business moves or financing. strategic business moves. does that in your mind say we're up for sale? >> i think that they have to use, to use a term that draghi was trying to use but i think tommy joyce will use, any means necessary. >> to stay alive. >> because i think this is one of those situation where is we all kind of feel like, all right, let's trade with knight because their word is good. if their word is to be good, they need capital fusion. i don't think this is idle. i think this is a company that obviously the stock is telling me something. i'd rather read what the stock is saying than what the press release is saying. >> it's amazing to think about the number of glitches that investors have had to think about in the past few months. it started really with the bats ipo, trying to ipo on its own exchange. that got scrubbed because of a problem with its own system. then we had the facebook snafu. and now we have knight capital. >> again, i don't want to use

your fine show as a platform for the 2:00 show, but i will say in "street signs" we're going to do a whole segment today on do we need to add the man back a it little more from the machine, and i mean man as human being. >> maybe technology has overrun our ability to be able to -- >> right. in order to maybe reinrig vat investor confidence just a bit, and who knows if it will work, bring back a little more human interaction and control, because to your point, flash crash, battings ipo, this. and what you've got are people at home going the computers are in charge and the computers aren't working well, thus why should i have confidence in the market? >> hal. >> joshua. >> do you think it's a true -- i mean, fortunately, we are in a market that is actually higher for the year. maybe people aren't feeling so bad about this trading glitch. >> i think the companies -- again, i come back to the idea that there's faith in dividends because of what the federal

reserve's done, which is say, listen, rates are going to stay low, may 2014. there is no faith in the system that i can see from individuals. individuals act with their feet every day. i see the numbers. you see the numbers. people are leaving because they'd rather not trust their nest egg to this. it's a mistake because you can trust your nest egg to merck. but people don't look -- s&p traders, all those come on, from "the new york times," listen, you can't do it at home. c at home? apple. go look around. look at what your kids are using. apple. think about the balance sheet. done think about knight capital when you think about apple. think about a company that's well run with its destiny somewhat secured. >> the impacts of this glitch and whether or not retail investors will shy away from the markets, will we see this in the volumes reported by a td ameritrade or an e-trade in the

next quarter? will we see the result in the monthly trading volumes going down for this month? that will be the true tell in terms of is the retail investor really shying away because they don't have faith in the markets anymore? >> we had ameritrade on recently talking about how facebook pulled back volume and then came back, but now people options they're trading. >> yes. >> they're trading derivative securities you wouldn't expect the regular public -- i don't mean to unwash versus wash kind of thing here, but the regular guy is saying, you know, wall street glitch clobbers main street, am i going to disagree with this? i've never seen this kind of thing. where are the humans? we realize the sec sc put through some things about price wings, turns out they don't affect the openings. >> i wouldn't want to be the human in charge of that software glitch at knight capital. >> that guy will probably get a raise. does he get fired?

big raises here. there is a contempt for this surrounding area and within a five-block radius, tremendous contempt for what happens here, rich people who pay themselves a huge amount of money and give us this nonsense. and i'm with the people who have the contempt. i'm with them. i've been here 31 years. i've worked with all these places, goldman sachs -- this is ridiculous. >> we're going to go out underneath the buttonwood tree and hang out. >> we could use a tree house. >> let's talk retail stocks. they're on the rise this morning in reaction to july chain store sales reports. macy's, target, tjx all reporting better than expected sales figures. abercrombie lowering its outlook for the year and a&f has had a rough go of it of late. but better than expected for a lot of the retailers. costco, first beat since february. >> it was terrific.

don't forget, 20% europe. the comps down 20%. you don't come back from 20%, people. starbucks says last six to eight weeks horrible. we hear that. all business as usual. chipotle, having one tonight, last six to eight weeks bad. >> and macy's strong sales in the month of july when starbucks hit their slowdown, slow patch. is it a starbucks-specific story? green mountain on its conference call yesterday said there's not a change in consumer behavior that they saw. >> and if you look at scores, there has been a change in consumer behavior, to a positive. >> kim said last night the tone of the retail, the ability to be able to want to expand, the rays that are all going up for retailers who want to spend are dramatic, positive, sequential gains. i have never seen companies say it's the end of the world and

the other says it's a brave new world. >> abercrombie & fitch, getting specific, getting whacked today in the market. europe is killing them. comp store sales fell 10%. look at american eagle outfitters. they raised their guidance. that stock is gapping up about 6% this morning, right, aeo. there's the company specific because american eagle is less exposed to europe than abercrombie & fitch. it truly is the american gle. it goes back to -- i don't even know -- >> i'm completely with you. >> don't they sell the same kind of stuff? >> well, yeah, flip-flops in both places and they're pretty identical. >> aef and aeo in different directions. >> up next, more on the fallout from the knight capital glitch. what one well-known strategist has to say about it. what effect it could have on investor confidence in these markets. a look at the futures here, disappointment surrounding what mario draghi has and has not said at the ecb conference.

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superior service, best selection, lowest price, guaranteed! ♪ sleep train ♪ your ticket to a better night's sleep ♪ welcome back. i'm steve liesman monitoring mario draghi's press conference. we just got clarity on what it would take for the ecb to come in with high interest rates

relative to unknown bench marks. he seems to be clearing that a country must first ask for assistance from the european financial stability fund, and at that point the ecb could come in with a bond-buying program. so this is not a separate policy operation by the ecb. they seem to be tying it to the larger rescue fund operation, which is why they're going to have to design programs. so, guys, this is not something that may happen relatively quickly as in next week the ecb comes in. that's why he's saying it's substantially different from other bond purchases that they have done in the past. the new different program, i think maybe enhancing the fire wall but perhaps not as fast as the market may expect, guys. ? thank you so much, steve liesman. >> a lot to look at in terms of this market. not only do we have what's going on with the ecb and europe but a lot of individual stock stories. gm earnings, for instance, all these retail sales, 1navistar

getting investigated. >> shipping business to cummings. >> big shoutout to herb weesh. we didn't care about it. herb, why are you talking about navistar? once again proven to be right. herb, if you're out there, listen and call us. >> yelp was good, a social media company that was good. linkedin after the close. i don't see anything in europe. i make up stuff. there's nothing in europe. gold's down, there's no -- >> look, harley-davidson yesterday, your scene sales weak. today, abercrombie & fitch, weak. >> up next, the fast start you need from cramer. we'll give it to you in his mad dash for the opening bell. we'll look at how we're setting up. we are looking at a lower open. [ female announcer ] the next generation of investing technology is now within your grasp

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it is "the mad dash." minutes away from the closing bell -- closing bell. >> truncated session. >> let's talk about general motors. why are we focusing on gm? >> here's the issue. the united states actually is pretty good. but the callout is south america and europe, bad. plus currency made it so the revenues don't look good. they're booked the same. i get more calls on "mad money"

about is it time to buy gm and ford. you hear all this stuff about europe. that's general motors. you hear stuff about ford in europe. these matter more than the domestics. don't be confused about a $14.1 million bill. we're stronger than they are. it's not enough. >> all right, jim. got to go. got the opening bell. not the closing bell. i really advanced the day. get 3 years interest-free financing on brand name mattress sets. plus, get free delivery and sleep train's 100-day low price guarantee. sleep train's interest-free for 3 event ends sunday! ♪ your ticket to a better night's sleep ♪

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we'll even throw in up to $600 when you open a new account or roll over an old 401(k). so who's in control now, mayans? there you have it. the bell has rung at the big board. participants in the new york stock exchange, teachers workshop do the honors. and at the nasdaq, a celebration of an ipo today. take a look at the cnbc realtime exchange there, the s&p 500 sea of red at this point. as we continue to monitor what is coming out of europe. and we see the losses across the board many the european. >> this is what happens when you get nothing. the market goes down. for a week, we've lived on the idea that they'll give us

something. that was the hopium as i like to say from your "street signs" show, and now we're stuck with that and after a couple hours of trading we'll figure who is not hurt and keep selling the ones who are. >> melissa, you brought it up, when we thought they would give us something, futures spiked, then a 150-point turnaround on the dow. it shows you how on the edge we are about nuances and language, which is kind of sad. >> it is sad. >> that's our market today. facebook shares a new low in today's session, $20.76. and it is testing that low as we speak. so, the carnage continues. there's an article in "the wall street journal" about fidelity selling out of the shares it could sell out of, sizable positions there. we have continued pressure on this stock. >> again, when you read the fidelity, switching directions. fidelity does a huge amount of work. they like the story before they realized that mobile was becoming the way that people use facebook. there's not a lot of engagement

with mobile. you want to contrast facebook and i know it's a down day, but if you look at yelp, they literally are the mobile guy when you're trying to figure out where to go or what service to use. you do action. the advertisers and the consumers like it. the whole thing was the undercurrent was we're not facebook. we know what we're doing. >> we're boosting our guidance for the year. we are giving guidance. that's a huge difference right there. >> it was yelp, was that a different dorm at harvard? let's go do well? are there some gold medalists that at one point were roommates of people from yelp? i want to put money on them. yelp is mobile. facebook is desktop. until facebook comes up with making a lot of money on mobile, yelp. >> we should note that mario draghi has concluded the press

conference, so that is over at this point. we have what we have from mario draghi. >> that's it. >> we have what we have. >> to your point, more stock specific, just quickly, the gap. remember the gap? for yearses a disappointment. gap is up another 10% this morning, and i just checked. i had to, like, rub my eyes. it's up 75% year to date. what a turnaround story. >> management. this is, again, you can talk about european management sold to you. you can talk about that gap management that came in. and look at that chart. it's magnificent. there's other companies, you know, like cite the macro. weight watchers cited the macro. i've always fell you might still want to lose weight regardless of what draghi says, but perhaps i'm mistaken. >> just take a check on shares of knight quickly, because obviously this stock is one that is in the news here. this is 24 hours after that trading glitch happened and the stock is down 50%, 5-0 percent,

$3.53 right now. the low hit today's session $3.21. as the company says, its capital base has been severely impacted and that it is seeking alternatives for financing towards business. >> yesterday, the fragility of a company that was 24 hours ago considered one of the big trading companies. the fragility -- i didn't know that it could be sink or swim like this. >> it was one of the biggest, and i should probably say is one of the biggest market makers on wall street. in the month of june they did $20 billion worth of stock trades per day. this is how big the company is. >> massive in the etf space as well. >> all the small-dollar stocks. this is a vital backbone, me, tommy joyce, the ceo turned it into that, resurrected a company that had many s.e.c.

difficulties. the business model didn't include big software glitches that could take down 140 stocks. >> right. in terms of the european impact, the german dax down about 1.5%, red aerios across the board in europe, morgan stanley down 30%. that's the trade here. it is down. 3.5%. >> rightly or wrongly. isn't that amazing? here we have a great american firm considered to be too small, buffeted about by the winds of europe. >> a large writer of insurance on european debt. >> yeah. >> right? >> that's why people can't look beyond their day to day. it's a lilt business to begin with, these investment banks. their models challenged it. so diplomatic. so hard for me. >> i've got some friends that work on some of the desks that

do european focus stuff. what you hear from them is business is tough. it's down again. it was down last year. it's down again this year. right? it's slow. there needs to be a catalyst for something to happen so positions are changed and the investment banks see a new flood of business. but right now on european desks, things, from what i've heard, my contracts, friends, are sold. >> we all fought these were going to beat back the government. their own business didn't do good. and the hedge funds don't exist anymore. i come back and say give me a dividend, which these guys can not do, and let me go by a company that's got a good balance sheet and has some momentum. >> financials across the board, by way, not just morgan stanley, goldman sachs, citi, down by two-plus percent and we're seeing a strong pullback in

energy shares. let's check with bob pisani on what is moving. >> frankly, that's all anybody can say right now even though mr. drag hif is moving the markets. $440 million, the big number, nobody i talked to had a number that big. i saw people at $50 million, $100 million, some at $200 million. $440 million? how did that happen? once the nyse told them no more busted trades late last night, it was just a matter of adding up some numbers. at 10:00 eastern time we noted there was 300 million shares traded on the floor of the new york stock exchange. that is orders of magnitude more than normal. 300 million, good heavens. that's why people were freaking out. once the nyse came out late last night and said we're only investing trades in six stocks and in limited circumstances and the rest of them, they're all standing, it's just a matter of doing the math after that because what likely hammed was

there were tens of millions of duplicative buy and sell orders that kept going through. i was standing here about 9:30 when people were starting to mill around. by 9:32, people were screaming at each other say what is going on? the program just coming through, buy, buy, buy, or sell, semi, sell, hundred-share orders, over and over, tens of thousands of times. some of these stocks did 30 days of volume in literally the first 15 or 20 minutes. once the nyse made that final comment, it was pretty much a matter of adding up the math here. two questions that i don't have an answer to and i want an answer to. what exactly happened? i'm sorry the phrase technology issue does not quite tell us what went wrong. i asked several times about the new program the nyse had yesterday called the rlp, the retail liquidity program. this was sort of a dark pool on the floor of the nyse, a new program. there may, may have been problems with knight interacting with this program. nyse says the program worked fine. that doesn't mean knight may not have had problems interacting

with it. big weird problems occurring and a new program. you know, you want to ask questions about that. i still don't have an answer to that. the second thing i'd like to know is why did it take so long to shut this program off, this errant program? 9:31, people were talking to each other down here say kwhag's going on? 9:35, people were screaming at each other. the program kept running. 945, i'm saying, does anyone have the kill switch? i called nyse. they said, i didn't mean, we've notified knight. finally. why did it take knight so long to finally find the problem and hit the kill switch? unfortunately, this will give ammunition to those people who say, ha, you see these programs, they get out of control and people don't get in front of them fast enough. nyse, shining day yesterday, 9:31 all over it screaming and yelling but they weren't in charge of shutting off the program. you might wonder why didn't nyse kit hit the kill switch. there were legitimate buy and

sell orders coming in, huge numbers of them. if they said we're not doing it and it was a legitimate order, they could be liable. this was a question of why knight didn't act aggressively enough. that's what i want an answer to. >> i think that's a key question and part of the reason why. i would imagine today there are unanswered questions about what exactly happened. there's no ways of isolating what happened, what problem was. today the stock is in free-fall even more. $40 million lost that much in mark cap. more than. >> so true. >> bob raises it. it's not only just something went wrong. now we have to hear, we don't know what went wrong. talk about a lack of confidence, i mean, how can you possibly -- oh, let me get in the pool. we don't know what happened. >> that's it. it was apparently a bad installation of some new trading software or the software they installed was bad and fired off all these orders. to our previous point, if people didn't hear, you wonder whose

software that was. maybe there's an action against a third party. hopefully they'll tell us who the software creator was. at the same point, if you're an investor and you look at this, you go, a software installation? how is that possible? right. >> we all know sometimes websites crash, outlook doesn't fire up fast, but a software installation so awry as to fire off millions of orders? >> mickey mouse instead of making it more power pfl embarrassing. >> steam boat willy. >> the s.e.c. -- as soon as the s.e.c. hears technology, they say we endorse it, we like fast grading. got the whole orientation wrong. people leaving the building. nobody cares. rick santelli of chicago, you guys are not amateurs like we are. go ahead. >> i'll tell you what, jim, i have an easy litmus test for everything you're discussing. do you like to swim? >> i love to. are you kidding me? cleanest game in the world. >> you know what, i use the same

analogy for swimming as i think investors should do for investing. i wouldn't swim in a dark pool so, why would people want to trade in them? just having the word dark, it's like having an off balance sheet. i know everybody wants to throw blame around, but once again, why do we allow this? once again, entrepreneurs are like hungry dogs, and the regulators throw a bunch of raw meat on the floor. and everybody picks on them when they try to eat it. there should be transparency. there's frag mation. we know something about computer trading in chicago. we were there first. our hybrid systems were there first. these systems are expensive. anybody look at the stock price of the nyse lately? where's the money going to come from? speaking of money, let's talk about europe and mario draghi. where's the beef? i don't know. but the market seems to know. let's look at these turnaround

stories on the charts. look at the euro currency. straight up, straight down. let's look at our ten-year note rate. they're coming to settle right back around 1.5% after going up and down. the moral of that story is nothing's really changed. bigger promises, bigger plans. good job, andrew. i'm with you on that one. look at the bund yield. same story. here's where it got interesting. look at italy. now over 6% on their ten-year. spain is approaching 7%. not only right back to where we started, maybe the cat's out of the bag. how many times can you say boo and expect people to jump? the last one, this is one you really need to watch. this is a swiss two-year, a new fresh record. negative 45 basis points. everybody in the pool! back to you. >> outrage totally correct. incredible. the only pool -- thank heaven for the olympics. only place they got hope.

i watch them and i feel great. i do. let's check out the action in energy with sharon. >> the outrage is on many trading floors including here at the nymex, tradering showing this is why there's the importance of open outcry, why it matters to have an actual person doing these trades. but the fact remains volume for july was down 21%. looking at what has happened since draghi's comments. we have seen marks intensify in their sell-off, across the board lower, crude oil dropped below $87 a barrel, brent crude below $105 and we're continuing to watch the slide in gold and the other metals as well. again, capital's founder put it very well. he said with the bravado draghi had about preserving the euro coming so close to what his comments are after this great decision, that is something that really has disappointed the markets. it's not that some believe that the ecb won't do something

eventually, but they were expecting something today and got nothing. that is why we are seeing the disappointment in markets across the board. we're also watching what's happening with natural gas, because natural gas is going to have their report released at 10:30 a.m. eastern time. we'll bring it to you live. many traders are anticipating we'll see more of what we see all summer long. seeing that supply that we are seeing, the deficit come in a bit. back to you. >> all right. see you at 10:30 a.m. eastern time. coming up, capitalizing on the buy to rent market. we'll talk with the head of housing strategy at morgan strategy launching a new fund.

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helpinging to fuel the index at this time. a lot of interesting moves here. take a look at avis. talking about europe and what people are seeing or not seeing in europe. avis is talking about strength in european leisure travel in europe. that stock is higher by 11-plus percent. almost a 13% move on strength in europe. >> look at this priceline. people are looking case by case. how many stores does macy's have in europe? all american. a needle in the haystack. no. it's the same needles and the same haystack. american needles within a european haystack. if you let yourself be colored by a draghi, if you decide this is what you're going to trade instead of invest, you're going to lose money. >> right. >> could they be benefitting from the weaker euro in the sense more americans will get more value for their money as our economy e are covers more americans will travel to europe and rent from companies they know like snaifs.

>> i remember during the great age of investment banking when people told me they were going to take a shopping trip to paris over the weekend, of course that's become outrageous and horrible. >> maybe it was california, outside of palm springs. >> near versailles, kentucky. >> we should point out the move in the nasdaq. it's pared its loss tos from the lows of the session, now down 0.2%. cisco trying to move into the green. up right now by a penny or so. there is an effort amongst technology investors to get into this market. >> right. verizon 1.2%. that might be an opportunity. excuse me. for sale. i do think this notion of when europe closings, then brings new buyers in, it won't be a good day because now we're worried about unemployment. the endless focus on the hedge funds takes everything down. then we find the price line, look at the macy's, the gap

stores, how much business do they have over there and it works again. >> knight capital's electronic trading glitch that roiled trading for about 140 stocks is putting the firm's ceo tom joyce in a tough and rather awkward position. he was one of the biggest critics of nasdaq for its handling of facebook's botched ipo. that brings us to this morning's "squawk on the tweet." what would you say to knight's ceo at this point? tweet us. we should be clear, too, if tom joyce would like to come back on we would love his side of the story. >> invitation. say na, na, na, na, na. not hey, hey, good-bye. but na, na, na. >> i think mr. joyce might be a little busy right now. >> we're all busy. busy people. >> we'll take a break. i'

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something incredibly important just happened in europe. the head of the ecb laid out a battle plan to save the single currency. i'll explain. we'll talk about housing, how you can make money from a new fund being set up. goldmans will be here to talk about retail sales. and we'll have the ceo with a summer of sport, three strikes. >> time now for "six in 60." let us begin with owens corning. stock up despite what some say is a down beat call. >> they were wrong. talking about 2013 going to be good. this is the right reaction. housing still strong. >> it is. johnson & johnson. you talked about the-up. >> new ceo, i believe the stock is worth more. >> mgm resorts. >> oversaturation. way too many casinos and that's why they're not doing that well. >> down 3.5%. weight watchers, some new spokes people, not working. >> and they addressed the diet

pills from venus arena, they're saying don't worry about it. i'm worried about it. >> be careful. down almost 13%. now a couple names we know well. >> navistar is a loser. come into the winner. that's what he predicted. that's what's happening. >> one of the most hotly debated stocks out there, green mountain. you cut your guidance enough, they beat it, people like it. >> sorry, herb. this was potential bottom. >> really up 27%? >> herb tweeted me it wasn't good. it still wasn't good. sometimes it doesn't matter. >> "mad money" tonight, what's coming up? >> don wood. you love him. >> they own a shopping center near my house in new jersey. packed. can't find parking. >> stock down almost 100 points one day. we'll find out what happened. chipotle. >> and federal realty. maybe they get together. a short break. back with more market coverage, more knight capital. obviously that's a huge deback until the market today.

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june factory orders are down 0.5%. we were expecting up the same, so there's a bit of a surprise on this one and we continue to monitor anything, of course, that has to do with manufacturing, especially after yesterday's ism slipped under 50 for the second consecutive month. in terms of the marketplace, it's all about u-turns. u-turns, whether you look at euro versus the dollar and you look at interest rates, the ten-year still hovering a little under the 150st. we continue to digest yesterday's fed statement. mario draghi. all the promises that lie ahead of us regarding china's financial issues. melissa lee, back to you. >> rick santelli, thanks thanks to much. no action on tap, what's next here?

>> and it's knightmare on wall street. yesterday's knight capital trading glitch set to cost the firm a whopping $440 million. find out what a top strategist has to say about those problems and the effect they could have on investor confidence in the future. >> major retailers out with their numbers. adrian shapira. >> and the buy to represent market. morgan stanley's head of strategy launching his own new housing-related fund. we'll sit down with the man behind that and talk about what is going on with the market and how you can profit. >> first of all, let's just talk about what is going on with the european central bank. i appreciate that the markets are in negative territory. to me something very important has happened in europe over the last hour. with a very cool head, the head of the ecb has laid out a battle plan to stave eurozone.that is

not overstating what the man is saying. he's trying to keep everybody on board to go through this battle plan. the whole of the european council he saeays says the fear of a breakup are unacceptable and it is irreversible, the euro is irreversible. he is signalling to all the committees of the european central bank that they are now embarking on a decision to massively buy debt in the secondary marks. he says they have a mandate to do that. it is complete pli complicit with the independents they have. but one important thing has to happen first and that is that italy and spain have to go to the efsf and have to ask for a bailout or ask for assistance. with that assistance, there are strings attached. once they have done that, the safety net can buy their bonds as they issue them in the primary market and the ecb will come through in the secondary market. now, you don't have a promise for action now. when we headlined this, we knew

we wouldn't get action today. reuters was reporting it. guests on this program were saying it would take weeks to bring it together. what mario draghi is saying is that there will be explicit conditionality and total transparency. in other words, once they've gone through that political process, the ecb will effectively and dangerously draw a line in the sand with very deep pockets come through precisely at the end of the short end of the market where he feels it is important to drag down those costs. and if you look at yields today, they haven't actually backed up very much in spops to this disappointment that you see from the market. joining me now, jim paulson, chief investment strategist with wells capital management. i appreciate, jim, that isn't the price action that we have today, but would you concede there is a clear battle plan now on the table? >> i agree. i think this process you described just now started when draghi came on board. at that point last fall i would

argue that the focus on that crisis went from focusing on austerity and budget cutting to one of promotinging growth, stimulating and promoting future growth to get out of the problem. and i think that -- i'm very encouraged like you that that process is continuing where draghi now has dropped rates several times, where they're expanding the ecb balance sheet. they're doing the things to get out of this crisis the way the u.s. got out of '08, and that was promote and restart growth again and then worry about the budgetary issues as a secondary concern. i think that is the way out. austerity never was. it didn't work for the united states in 1929 when herbert hoover and it's not working in europe. i think the fact that they've changed and now are focusing more on that approach is beneficial. it's not going to solve it soon, but i think ultimately it is a way out. >> jim, given you awe gree with simon there was a battle plan drawn up today and outlined today this morning, why do you

think the markets are disappointed? i'm asking this because i want to understand what will trigger the markets to go higher when it comes to what the ecb will do. >> well, i don't know if they are that disappointed, melissa. we'll see. there was a big reversal. i think a lot of that has to do with traders, you know, up to the news. you buy the rumor and you're selling the news. i think there was not really much chance that we were going to get instant action this morning. and yet the market traded up in anticipation and then off after the report. i don't know if that's a disappointment. look around the u.s. marks recovering, marks are coming back. there's not been big moves in spanish or italy yields so, i don't think there's a huge negative reaction to this. >> you have to distinguish between traders who are sitting here now looking to buy and sell assets, many of them short term, and what is going on in europe. and the need to bring together. this is what they singularly have failed to do -- bring

together everybody including the germans and if not the germans at least do it by a process by which we overvote them and to draw all those institutions, all those governments together. that's what. and it's going to take time, but that is what draghi is laying out. it's a systemic, clear process. it will be transparent for everybody. and at the end, they will draw that line in the sand. that is effectively what he's saying. we will exhaust the process. we will bring everybody on board. and then we will fight and we will fight the short term of the italians and the spanish bull marks. and it is not, i don't think, by coincidence that as we sell graphed all week, as we knew would happen the italians and the spanish have gone into their own meeting now. as that ecb news conference concludes in madrid and we will wait and see whether they will indicate they are going to ask for assistance at the end of it. i think things are moving fast here. they're not fast enough for the traders. >> i agree, simon. i think one other big thing that's changed and made this where it's at today, it wasn't

there even last year yet. and that is that you finally drag germany into the recessionary potential. they're now looking at recession, not just somewhere else in the region or problematic for somebody else. they're looking at their own economy sinking. and i think that's bringing a change of attitude among germans in general and will allow the flexibility for merkel to accept broader stimulative measures throughout the region, not necessarily to save italy or spain but to save germany. that's a big difference from where we were a year ago. >> there are exceptions along the way. there will not be a banking license from the es mx because the legal opinion, says draghi, isn't there. they're taking stuff off the table to help the germans. what do i buy? how do i make money in this environment? where will the marks go? >> i think the united states -- i mentioned on the fed. i think it's really good that the fed stood down yesterday. i'd like to continue to see that. the best thing that could happen in the marks would be if the

united states exits its soft patch without fed assistance, without additional fed assistance. if that happens, it will be the first time that the marks and the economy withstood on their own without public assistance and confidence could build dramatically if that happens. i think we've got a shot at that if the fed stays down. we're seeing some evidence of a revitalization of u.s. economic growth a little bit. if that continues, i think the market's going to rally hard end of the year. to me i'd look at the areas that have been beat up a little bit here during this soft patch, so emerging markets i think are interesting. i like the industrial sector and industrial stocks here. i think the ism now below 50 pops back up again. lastly, i like the financials which sneakily have been the second best performing sector in the s&p 500 this year. they haven't done well in the last quarter but they're sneakily outperforming now since last fall. >> and can i jump in? jim, brian sullivan.

>> yeah, brian. >> a double-digit real return on the s&p 500 for the year, basically, dividend yield and -- >> do you remember another time where we had a 20% annualized return year to date and yet there was this much pessimism and this much fear and it has a feel of being one of the hardest investment years ever? i think it speaks volumes about where the mind set is. if we can go up to a 20% annualized return and we've got disappointment, i think it brings up -- really reinforces the old investment adage that markets climb a wall of worry. by the time you feel good and comfortable about things, this rally will probably be closer to the end. >> jim, good to see you again. thank you very much. jim paulsen there. >> thanks. let's head to the olympics where michelle cabrera joins us. >> the ceo joining us here. one of the things that's new

about the olympics this year is how aggressive the olympic committee is preventing ambush marketing, when sponsors who haven't paid the big bucks like you have try to associate themselves with the olympics and yet haven't put up the money. are you satisfied with these new rules? are they good for you do you think? have they backfired in some way? they're controversial. >> are you saying sponsors like us who haven't paid the -- >> no, you have. how much have you paid? >> in total we are spending around $100 million. i don't know exactly what we paid for the sponsorship. but in general it's absolutely correct because as a sponsor you put a lot of money into it, you spend it along with the ioc, the organizing committee, helping them to organize the olympic games and get some rights. the only thing you want is these rights are expected, not more, not less. >> the famous case, atlanta 1996. let's call it brand x, begins with an "n."

swamps atlanta with billboards, hand out flags, you interview people afterward, they survey people and they think brand x is the sponsor of the olympics, not reebok at the time. you're convinced that can't happen again? >> i don't think so. because the ioc has learned and also the national olympic committees and whoever the host city is, that if this happens then no sponsor will be willing to pay any money anymore. coca-cola is a big sponsor. why should they pain a big amount of money if somebody goes in and makes ambush marketing and doesn't pay a penny? >> there was some controversy earlier with one of the leaders of the olympics saying -- had suggested that maybe people wearing pepsi shirts or burger king shirts wouldn't be allowed in the stadium. that's going too far, isn't it? >> if a normal guy is wearing whatever shirt or pair of sneakers and he comes into the stadium, nobody will say anything. of course if it is organized and somebody for example buys 500

pepsi shirts and puts people in the stands and everybody sees it and it's organized, it's am bausch and this is forbidden. >> something called rule 40, which has gotten more strict this time around, which imposes on the athletes they cannot monetize their fame, can't be seen in advertisements with nonolympic sponsors. they've started twitter campaigns because they're angry about that. they say we hardly make any money during the year. this would be the one time we can. why not? how do you feel about that? >> i think that the individual federation of sporting goods industries, et cetera, they all have to speak with the ioc how this will continue in the future. because we also recognize that, because we have visuals of our athletes in all our stores around the world and we also have to [ inaudible ]. i think this is the case where everybody who is involved is concerned and i think we have to find a common solution for the future. >> how do you quantify whether

that $100 million you're spending is worth it? sales? brand loyalty? >> two interests in general. the commercial interests paid, so we want to regain as much as possible. you're selling merchandising that's branded or nonbranded products. the second one is exposure for your brand that the whole world sees. the athletes in your brand. from a commercial perspective, we're doing very well. we have achieved already our objective. and from the exposure, you know, for two weeks, as well, i think you see us everywhere. >> yes. >> this is great to see. >> just to say yesterday we interviewed a bunch of kids, and i said name some sponsors. and they said adidas. >> the mark research last week indicates we are the number one known and inspiring brand of all the sponsors who are here. >> congratulations.

thanks for join us on cnbc. >> thank you very much. >> ceo of adidas. back to you. >> thank you, michelle. we want to point out that the nasdaq has gone into the green sh positive territory if the nasdaq. we mentioned it was looking to turn around with apple paring its losses on the session. apple now higher along with cisco, microsoft, intel, and the chips have also turned around in the session. >> the wall of worry, jim paulsen just talked about. still to come, much more on the fallout from the knight trading glitch. ca art cashin's thoughts. anyone have occasional constipation, diarrhea, gas, bloating? yeah. one phillips' colon health probiotic cap each day helps defend against these digestive issues with three strains of good bacteria. approved! [ phillips' lady ] live the regular life. phillips'.

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welcome back to "squawk on the street." we're watching shares of aeropostale falling nearly 30% just at the top of the trading session today as the company is slashing its second quarter guidance, now saying it expects to break even. it was supposed to make three to five cents a profit a share. the company is saying its higher priced merchandise wasn't sell. melissa, back to you. >> thank you so much, kayla. very different stories being told from this sector. >> look at the stores, at least i do, and you say they sell similar stuff. >> because you're not a teenager. >> differentiate. >> that's exactly right. >> the ripped t-shirt from the ripped t-shirt.

>> call me maybe. gap up 76% year to date, what a turnaround that's been. kayla talked about a.r.o. i want to focus on another company under the radar, less than a billion in cap, about $900 million net assets, mbas. this stock, if this was "street signs" i might call it the the sunshine stock, up about 17%, raymond james upgrading to -- i love these looks. >> what? no, no. >> why can't you say that on this show to? you can say sunshine stock. >> we are on cnbc. we're still talking to the world here. >> smile and everything's fine. >> melissa will smile. >> i can smile. i choose not to right now. >> there's nothing to smile about apparently except for medassets if you're investing. not just a buy but a strong buy. >> gmcr another one we're watching, up 28%. obviously part of this gain is fueled by shor covering here. but the company did come out last night with earnings that

were better than expected. they also said they would review how they're analyzing the disconnect between what they're forecasting for demand and what they've seen. that apparently from the conference call. if you read the transcripts, it's fascinating in terms how management is sort of managing the perception of how they have failed to accurately forecast before. but that stock is worth watching here. we are up by 28.5%. >> it is brutal when these -- i saw chipotle. these growth stocks that people have bought in. the fallout will be brutal when they disappoint. >> miss by that much -- >> market cap like that. >> dropping 30%, 40% if you've got a p/e above 30 to. that's the trend we have seen. >> up next, we'll sit down with morgan stanley's former head of housing strategy, oliver chan, who has left the company in order to launch his own housing fund with strict focus on the rental market of single-family homes. interesting. stay with us. i look at her, and i just want to give her everything.

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vacancies fell to their lowest in the second quarter. rising rents, falling vacancies, growing demand for rental properties lending itself to a new investment opportunity for the former head of housing strategy at morgan stanley. oliver cheng joins usor a first on cnbc interview to announce the launch of silver road capital to acquire and ren single-family homes nationwide. we have our real estate correspondent, diana olic, for this interview as well. oliver, a billion dollars over the next however many years. where do you see the best tons at this point? >> thanks. well, we're very happy to announce formation of our new company. we see ourselves as the value

investors in the space, so we take a unique approach to this opportunity where we focus on the research, the strategy, and the technology aspects of it. just given my background as a housing strategist, we feel like we have a fundamental understanding of the housing market, so we can evaluate markets from the macro down to the micro level that helps us pick the best locations, the best neighborhoods and buy the right houses at the right prices. specifically what we're looking for are houses that are -- that we feel are undervalued and in need of repair. houses that we can renovate and bring back to a high level of quality and turn into productive assets. we can do that because my partners have almost 20 years of experience in the single family construction sector. >> are you taking advantage of low interest rates? are you acquiring these houses outright? >> so right now the market is eventually a cash market, but there is financing that's slowly coming to the market, mostly from bank-type lenders. but i think there were obviously a lot of lessons learned through the last bubble. and so in terms of leveragitis definitely conservative, you

know, to get started. >> how do you acquire scale? if you're buying a bunch of single-family home, and granted they could be in the same neighborhood or the same city even, but it's still difficult to actually go to each one and assess the needs of every individual home that you're buying and then refurbishing. >> absolutely. that's really a key component of this opportunity. so my partners have been in the -- focused on the institutional single family rental second forfor almost four years. what they've done is build a proprietary and scaleable technology platform that allows us to manage this process from end to end. we actually own -- capital actually owns our operating company. but we do the renovation, we do the leasing and the property management. it's this technology platform that allows us to scale. >> oliver, let's bring diane into this conversation here. >> oliver, we've been looking at some of the most disstressed markets and hearing from investors in there that there's no supply, we're already seeing prices go up, up 12% in phoenix because of lack of supply, and so much investor demand. do you feel like you might be a

little late to this party or that there will still be good returns for you in these marks? >> i think a lot of it depends on the type of product that you're buying, right, because there's two types of distressed properties. there is the financial dils dressed property as well as the physically distressed property. and so when you look at the marks that are heating up and what people are competing for, you know, they're buying houses that don't need a lot of work, right -- paint, carpet, and you rent it. when we look at this opportunity, we're trying to find where we can add value, right, because anybody who has the capital can buy a house and rent it out. so we feel like we can add value through the renovation and the repairs. when you look at it from that perspective there rant lot of people that can do that sort of work, so the competition within that sector is not as hot. just one last thing to mention is the size of this opportunity is huge. the single family rental mark is about $3 trillion. people always ask that question, what ining are we in, and i say

we're in batting practice. >> you can analyze a home and have an appraiser and inspector come in but you can never know exactly the homes may have that you'll need to spend more capitol on, nor can you tell what kind of renter you're going to get. you could get a perfectly lovely family or somebody that destroys your home. i mean, there's a lot of variables it seems on a per-home basis. >> absolutely. that's why the overwhelming component of this opportunity is critical. we see this opportunity as a business and overwhelming opportunity in addition to an investment opportunity. everything that you just mentioned in terms of, you know, finding the right residence and managing the properties and evaluating what types of houses you want to buy -- >> wh's going to do that for you? you're not going to do that. who does that? >> we do that in house. when we do our due diligence, buy houses, we send a team in, which is kind of different than how some other people handle it, where we have a construction person, a leasing person, and -- >> but doesn't that mean the return and the you can says of what you're embarking on is not really based on the dynamic of

house prices, it's about the quality of your personnel? and i don't know as an investor what the quality -- and you don't know further down the line what the quality of personnel is going to be because you don't know necessarily yet where you're going to buy the houses. it is more of a leap of faith than buying a bar of gold. >> so i would say that when it comes to house prices, we agree that this is not a play on home prices. we are not in this investment because we think home prices are going to come skyrocketing back in a v-shaped recovery. not at all. we think that the opportunity is if you look at the single family rental market, ill's an asset class that's been around for a long time, just mom and pop owned. this is antun to take part of that and institutionalize it. >> how do investors get out if they put $500 million with you or whatever the amount of money, what is their exit from your fund? >> sure so, the exit is very much tied to the entrants and what this opportunity is about. if you can buy properties at a significantly discounted price, then not only are you generating good rental returns, but you

have the potential for appreciation not from home price appreciation but simply from the convergence back to the replacement cost. >> let me pause you there. we have some breaking news. let's just check that if we may. sharon. >> we're looking right now at the natural gas number coming out here, up 28 billion cubic feet, which is greater than analyst expectations. it's a bigger than expected injection into the supply. we have been seeing smaller injections than historical averages, and that is the case this week as well. but it is bigger than what analysts have been-p anticipati. they were expecting an increase of 20 to 24 bcf and it was up 28 bcf. what does this mean for the market? we're seeing prices sell off. we're at the $3 mark for natural gas. on tuesday, it was trading at $3.21. what we have seen over the course of the summer are smaller

injections than the historical norm. that may change starting next week. that is what some analysts are anticipating. and that is something that is as has also been weighing on prices, in addition to the fact in the middle of august temperatures would start to get back to normal. yeah, we have some hot days in the next few days but it gets back to normal over much of the country. that has also been pressuring natural gas futures. again, we are looking at an injection in natural gas supply. >> thank vyou very much for tha, sharon. lease return to our confers with oliver chan, setting up a fund within hawkeyesing. diana olic, one final question there. our reality check specialist. >> that's right. we're talking about housing turn right now. all of the news you hear is people are more bullish on housing, that affordability has never been better, that home prices are stabilizing and mortgage rates are at record lows and this should be the time to buy and people are coming back to the housing market.

do you have any concern about your time horizon if attitudes start to shift back toward home ownership and away from rentals? >> one of the things that i talked a lot about on this program as well is that while we do agree that housing is bottoming, that doesn't mean that we're necessarily coming back strongly. one of the things that's holding back from the ownership part of the housing market is mortgage credit. it's still incredibly difficult to get mortgage credit. the environment for mortgage credit, whether it's government backed or private going forward is still very unclear. and all the while, even through the recession, we still had positive household information. so the total demand for shelter has grown. if you can't buy, even if it makes sense to buy, then the only other thing you can do is rent because you still have to live somewhere. we feel the demand for rentals is going to continue for some time. >> one last question. you pointed out each home you buy needs to be renovated. a lot hoff homes in foreclosure have been empty and vacant for quite some time. they have been on the market for a long time and they've

deteriorated greatly. on average, what do you anticipate puting into each home? just trying to understand the derivative tradeoff of this and that is the armstrongs of the world, et cetera. >> sure. our approach is like i said, different from a lot of the large vost out there where we do specifically look for homes where we put more renovation work in. so if you're buying a home where it's just pain and kaerp et you're probably talking about less than -- somewhere around 5% of the total cost will be renovation. for us, that cost could be -- that percent could be as high as 30% to 50% of the total cost of the house. >> which would be like, for instance -- >> if it's -- if you're buying a house for $60,000 then you could be putting $40,000 of renovation work into it. >> i hope you have good contractors. >> thank you so much for coming by. we appreciate it. ? thanks. >> oliver chang. raerl out with their july numbers. who are the biggest winners and losers? your retail trade with adrian

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july same store sales turning out to be more positive thap expected after reporting their first sales in three years in june. good morning, adrien. >> good morning. >> july is a strange month. i think we should preface the whole conversation by saying it's very much about clearance isn't it. >> you're right. july is more about clearance than blowup and the smallest month of the quarter. no one really roots for a big july. >> where would you lead us within what you've heard today? >> look, a better july is better, and i think that's encouraging than many.

actually, most retailers ended q-2 clean with inventories heading back into school. but the key we'll hear in the next few weeks is about early back-to-school trends and that's more important. what we learn -- >> i'm sorry. what is your expectation on that? >> well, i mean, i think what we learned today is frankly the retailers, the brands, those that have had momentum will likely continue to have momentum. the off-pricers, t.j., ross, spectacular continuation of high single-digit comps, they continue to raise guidance. nordstrom, another name that has done remarkably well, had a great month again. so i would expect those that have had momentum to likely continue in the back-to-school season. >> adrienne, it's brian sullivan. your call has been great, up about 21% year to date. >> thank you. >> but you had a sell on sears and that stock is up about 55%. are you going to throw in the towel on sears and expower line why they're up 55% year to date?

>> yeah, we're not going to throw in the towel on sears. we know how the movie ends on sears. i think they will continue to be a share donor. there clearly are some technicals driving sears but as we look at our wedge widening in terms of the winners and losers, i think sears, whether they're salvaged between online continuinging to gobble up share or the discounters or the soft line retailers, i think sears continues to be a -- >> but you're maintaining your sell on sears. >> we are. >> yeah. >> adrienne, july, as we mentioned, a small month, et cetera. august is much more in terms of back to school, going into september sales. but are there retailers out there that you would put an asterisk next to even though they've had a strong july? your concern going into the strong month of august because of the fiscal blip, of the elections, of what's going on in europe? >> i think for back to school, frankly, most to retailers that post monthly comps are domestic

based. i think what's going on in europe frankly hasn't had much to do with how the retailers that we hear from on a monthly basis report. so i don't think it's going to derail much in terms of back to school. clearly, the high-end retailers are going to be very focused in terms of what the fiscal cliff means, what that means in terms of taxes going forward. but i think for back to school, domestic retailers and the names that have done well like target, like nordstrom's should continue to do well in the back-to-school season. >> you've got six buys here in all. you've mentioned target. you've mentioned nordstrom. family dollar is the 0-1. pvh. ralph lauren and tiffany. >> right. >> of those four, which is the most compelling in your view? >> i think ralph lauren is a great franchise, a great brand. i think pvh, tiffany are, as well. clearly there's going to be some near-term volatility. but i think the market is i think much more concerned in terms of the near-term trends, in terms of europe.

but i think the opportunity to buy a great franchise like a ralph lauren, like a pvh, like a tiffany over the next 12 months, i think these are great buying opportunities. >> thank you for your analysis. nice of you to change us. >> thank you. >> let's get another market flash. here is kayla tausche. >> brian, taking a look at sony, the company reporting a record loss for its first quarter of the year, second quarter not much better, posted an operating profit but much worse than analysts had expected. they're also taking a lot of restructuring costs, unclear how much longer that restructuring under the new ceo will take. sony shares down nearly 9% today. melissa? >> thank you so much. the nightmare heard all around the street. a panel of top-ranked strategists joining us to help through yesterday's big trading glitch and what this could mean for investor confidence. this man is about to be the millionth customer. would you mind if i go ahead of you? instead we had someone go ahead of him

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well, the fallout from the so-called knightmare continues. bob pisani has the latest. bob. >> speaking on another news service, want to give you some of the headlines what's happening. mr. joyce was asked what exactly was the cause of the problem yesterday. mr. joyce said it was a software bug except it happened to be a very large software bug. he did confirm what we had been talking about and i had been talking about yesterday, the problem was interacting with the nyse's new retail liquidity program that started yesterday. the next thing. why did it take so long to fix the problem and shut the program down? mr. joyce said we don't think we acted in a slow face. with all respect to mr. joyce, i think there are a lot of people down here who would disagree. what about the effect on the market? he said we did not harm individual vovrs. we got them out of the way. he did acknowledge confidence took a hit in the market. what do we need to do at this point? we need to do a better job on our testing environment. i think the entire industry needs to do a better job.

how about the comment they are searching for more capital to keep operating. he didn't provide any specifics but did say they were open for business. certainly need a little more details on that. finally, about what knight capital does because some may not be aware, their key business is market making operation. they're one of the biggest whole sailers out there, putting buyers and sellers together, big order flow from retail guys like ameritrade and scott trade. they have an institutional sales and trading operation and electronics trading operation. they were founded in 1995. what's the ripple effect of this whole thing? another black mark on electronic trading. i'm sorry. 45 minutes to let an errant program run? there's going to be a lot of criticism of that. finally, we need to make sure these electronic trading isn't a kind of systemic risk. fortunately, they seem to have contained it yesterday. good news for the nyse, bad news for the overall industry. guys, back to you. >> bob, from the comments that you heard from tom joyce this morning about the software

interacting with the dark pool here at the new york stock exchange, does that imply there could be some liability for nyx? >> no. >> okay. >> i'll tell you why. mr. joyce went out of his way, to his credit, because that was on everybody's mind, to say this is not a problem with the new york stock exchange. i suspect because it was a new program there may have been a coding problem at knight's interacting with that program and that caused the problem. i think mr. knight made that immediately clear. >> bob pisani, thanks so much for that. let's get more on this fallout. let's bring in justin shack, managing director of rosenblatt securities, and of course the director of floor trading, the one and only art cashin. art, i'm going to toss it to you at this point. what do you think happens here? you've been around the floor for a long time. knight an important player in the market but today saying its capital base is severely impacted. >> you want to be careful of that. it's a very competitive business. what often happens is somebody gets to be front-page news, many of the competitors go out and

perhaps overstate what the travails are. i'd like to hold back on that. i know tom joyce for decades. he's a stand-up guy. and as he said, he's open for business and staying at it. so i'll leave it at that. >> obviously a lot of people out there saying this screams for more regulation. there needs to be somebody who's watching over the computerized trading, et cetera, et cetera. what's your point of view in terms of whether or not this would have been regulated out as a risk? >> i don't know if it could have been regulated out as a risk. there is a brand-new rule that the s.e.c. put in place relatively recently called the market access rule that's supposed to provide for more risk controls for these sorts of orders in the market. what's interesting is each of the episodes we talked about, three of the four we talked about excludeing the flash crash. you look at the bats ipo, facebook and knight yesterday, were related to new code being put into place, related to the rlp program here, facebook ipo, nasdaq rewrote its software for

the ipo cross and bats was attempted to become a listing market for the first time. in each case the code failed and it wasn't tested enough. i think it speaks to the need for better testing in advance of these things, slowing these things down. >> i'm not sure that -- the code didn't fail over here. >> okay. >> no. >> had nothing to do with nyse failing but knight's code that it wrote to comply with and participate in -- >> you know what strikes me is the reactive nature each time of what happens. everybody cries over the spilt milk, then we have another problem fur down the line. when push comes to shove, is this the achilles' heel in america in terms of the stability of what we do? this should be the most advanced, most stable trading environment anywhere in the world. >> well -- >> you know, this is just the normal common practice of doing what we do. not an attack as we've seen in other parts of the world. >> well, let's go back to be careful what you wish for. everybody was talking about

let's diversify the markets and the mark place. okay? when i was in this business and the nyse had 75% market share of its stocks, what happened with knight was noticed right at the opening yesterday. and if we were still 75%, we'd have been able to say, hold it, stop it right now. and so much of it would have stopped almost instantly. >> that's a very important point. because i know for a fact our ceo executive governor personal shut down three of the stocks that were shut down. you need in the system that we have, that's highly dependant on technology, a human backup, nyse has a human back-up, so in some ways it was good that it happened here it could have been worse if it happened somewhere else. >> where you're squeezing on the margin all the time they're not going to start putting more labor back into the systems, unless you have some overriding

governance from the government to dictate that. >> but simon, you get in the plane with an auto pilot. you wouldn't get in a plane with no pilot, okay? you need somebody to supervise these things. and having manpower down here, there's still about you, this is not run with nobody in involved. >> but knight has lost half a billion of market cap. >> i think that's a very important lesson. because if, i'm not saying that they just kind of set it and forget it. i think to the extent that that, that mindset becomes or maybe entrenched and it leads to stuff like this. people will think twice about having that sort of set it and forget it, and have a more human oversite. >> we talk about the flash crash, the bad ipo, make the case for why americans shouldn't throw in the towel in investing in stocks altogether? >> i think it's you can look at a crisis like this and make the

case of the glass is half full or the glass is half empty. in my mind, the glass is half full. even going back to the flash crash. here on the floor of the new york stock exchange, the classic new york stock exchange, if you would, nothing traded at a penny. okay? humans intervened and said, whoa. this is, this is vastly out of order. and it was stopped. we depart see those, none of the trades that occurred during the flash crash had to be canceled on 0 the new york, because none of those erroneous trades, they were elsewhere. it gets back to my point that if if we were still the vastly dominant trading force, they you would have been able to stop it completely and quickly to bob pasani's request. >> but what's to be said about investor confidence. none of these things help. investors see this and it doesn't help their confidence in the market. i think the real factor is we've been through years and years of boom/bust cycles where people have repeatedly lost tons of

money and they're just tired of it. >> if the market would be going up, they would be buying. >> it's a more succinct way of making my point. >> gentlemen, thanks for joining us. art and justin, we appreciate it. still to come, yelp beating the street's estimates last night. and raising full-year forecast. so can yelp's big beat turn the tide for the recent social media anger? but first, rick santelli working on the next hour of "squawk on the street" in chicago. good morning, rick. >> good morning, simon. we're going to be doing a post-mortem on the hearing we talked about mf yesterday in the senate committee. and going it talk a little bit about gm. you remember last week, mario draghi gave us this delicious hamburger, look how thick it is. but in the end -- i ask -- where's the beef? because the more i look at this, it's just really not meat at all. so we're going to talk about that, and the fact that i'm holding a bun, where's the beef. [ male announcer ] it's a golden opportunity...

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welcome back to "squawk on the street." i'm mary thompson with a market flash. bristol-myers squibb down 2%.

an executive being investigated for insider trading. bristol mires squib was considering buying some stocks. the company halting trials of a hepatitis c drug candidate over safety concerns. once again you can see 7%. stay tuned, we'll be back with more "squawk on the street" after this break. tdd# 1-800-345-2550 let's talk about fees. tdd# 1-800-345-2550 there are atm fees. tdd# 1-800-345-2550 account service fees. tdd# 1-800-345-2550 and the most dreaded fees of all, hidden fees. tdd# 1-800-345-2550 at charles schwab, you won't pay fees on top of fees. tdd# 1-800-345-2550 no monthly account service fees. tdd# 1-800-345-2550 no hidden fees. tdd# 1-800-345-2550 and we rebate every atm fee. tdd# 1-800-345-2550 so talk to chuck tdd# 1-800-345-2550 because when it comes to talking, there is no fee.

and thank you, brian sullivan for joining us this morning. for the two hours. >> it was lovely. educational and highly worthwhile. plus i was ordered to do it. >> what a fabulous combination. brian, thanks to you of course. carl is back tomorrow. meantime, in case you missed it, here's what you might have missed if you're just tuning in. >> welcome to hour three of "squawk on the street." here's what's happening so far. >> the president's proposal, if you look at it, what it does is it says that 50% of the people that the tax hike applies to, are folks that get at least 25% of their income from small businesses. which means you're taxing the very people that we want to go out and invest to create jobs. the company is now making comments that they see, realize pretax loss of about $440

million. they say that they have traded out of their entire erroneous trade position on this. and initial claims move from $357,000, up to 365,000. >> did you hear -- >> i didn't hear rate cut. did you hear listen, we're going to do something now. >> they said they considered a rate cut which means nothing at this point if they're not going to do anything. >> considering buying a pony. >> this is a major confidence-shaker and once again, it calls into question the pricing factor of our stocks. which is not, doesn't create a lot of confidence. there you have it. the bell has rung. they're doing the things to get out of this crisis the way the u.s. got out of '08. that was promote and restart growth again and then worry about the budgetary issues, as a secondary concern. i think that is the way out. if you can't buy, even if it makes sense to buy, then the only other thing you can do is

rent, because you still have to live somewhere. so we feel that the demand for rentals is going to continue for some time. and good morning, we're live at post 9 of the new york stock exchange, that, then, is a snapshot of the morning so far. it left us in negative territory, down 78 points on the dow. it is energy that's leading us lower, consumer discretionary actually the only in positive territory. abercrombie and fitch today, gap the biggest gainer on the s&p, abercrombie is the biggest loser. gap's same-store sales jumping 10%. while fitch sales fell short. knight capital taking another big hit after saying it suffered a $440 million loss because of the electronic glitches in the system that caused price swings in dozens of stocks just over 24 hours ago. so let's get to the road map for the next hour, yelp stock

getting positive reviews after second quarter results, will it help slow the social selloff on wall street? plus a new report that says the irs may not be able to stop the rampant identity theft in the u.s. and the price could add up to hundreds of millions of dollars. ecb president, mario draghi's comments on the eurozone pushing markets lower around the world. see what it means for your money when the european markets close in less than 30 minutes time. and could hotmail take down gmail, the big changes from microsoft that's making waves in the tech world. yelp posting a stronger-than-expected second quarter earning result. the stock substantially higher, a 22% bounce at the open. can yelp's earnings stem the general selloff you've seen in social storks acks and the anget surrounds them. jason epstein and michael packer joins us as senior analyst at webb bush securities. michael, that's a big jump on

yelp. would you still be a buyer? >> i don't cover yelp, so i prefer on not to comment on whether you should buy or sell it. >> let me pass the pass kw he to jason, then. >> we saw a very strong quarter out of yelp. they added 116% more businesses. we thought that was very strong. and they held monetization. i think yelp is a very unique situation. they're providing guidance, they're guiding to continued revenue growth and we raised our ebita forecast. so the revenue growth is not coming at the expense of profits. so we think what you're seeing with yelp does look sustainable. yes, it is an expensive stock. hence we have a perform rating on it. but we did, we were very happy with the result for the quarter. >> michael, you got to wonder whether investors are taking a look at the yelp story. taking a look at the fact that yelp is providing guidance, which it raised. and taking a look at facebook

with no guidance, disappointing quarter. saying there are other places in social media to invest that are better than facebook at this point. facebook shares hitting another new low, down by 3%. so, michael, does this make facebook look even worse in the eyes of the investor? >> i think that it's all about transparency and visibility. i think when facebook went out at $38, investors had an idea they were going to make $1 sometime. and when the company said we're going to spend more money than you thought in driving revenue, and we're not going to tell you how much we're going to earn in the future, people just adjusted their expectations downward. i think they're looking at now maybe that someday earnings power is more like 60 cents or 50 cents, that's why the stock has come down so hard. this is really about spending more than we expected and not giving visibility into what they're spending that money on and what it's going to get for investors in the long run. >> i guess the point that i was trying to get at here, and i pose it to you, jason at this point.

now we've gotten more data points from the social media companies, all of which were recent ipos, that there's a differentiation going on in the sector. they're not just all social media stocks. can you point to yelp and say this is a yelp story. this is a facebook story. and those two stories are different from linkedin, for instance. >> we can't comment on facebook. but what we're seeing with yelp is really that they know who these target customers are, these local businesses and they're taking the growth they're seeing in traffic and figuring out how to monetize that. and they're not seeing mobile usage statistics, it was up 7%, now 9% of users. they're at a point in their growth where woo what they're seeing is mobile is not coming out of the pocket of the desk top revenue. >> jason, i do know somebody who can talk about facebook -- michael, what's the view? >> i think facebook is doing everything right in terms of

driving users and revenue. they beat everybody's expectations on revenue. this it looks like they're laser-focused on driving revenue. the problem is we don't know how much it cost. they talk about revenue growth of about 30%. spending growth of about 60%. that's negative leverage. we don't know when that stops. what they said was it's going to happen for two quarters and no visibility beyond two quarters. so if they would come clean and say, look, we're just going to build up our infrastructure, then our expenses will grow in line with revenues and revenues are going to grow 30%, i think the stock would double. i think seriously, a double. so they've got to give us some kind of visibility on what they're spending plans are. what we're going to get for that. and we haven't gotten that yet. >> if you feel that the situation is as redeemable that the stock could double, michael, i guess you're not tapping into the general anger that some people feel about the whole social media space and whether it was overhyped before it came to market and whether actually a the although of people watching have been done a disservice when

it comes to this sector. >> all of us are responsible for the overhyping. you guys are, we are, of course. a lot of it was based -- >> well actually, hang on. i don't accept responsibility for this network in overhyping. we discussed many, many times facebook. but i remember my colleague here being exceedingly repetitious on the fact that facebook could not monetize mobile to the point where i almost keeled over with boredom. >> cnbc as an entity, not you personally. my point. >> i think that's called owning a story, mate. hype would be to give an artificial positive view of what was going on and i reasonly genuinely don't think that applies to me or my immediate colleagues, because i know how they behaved during it. >> i probably used the wrong term, so i sincerely apologize. my point is that facebook

clearly gave some type of revenue projections and earnings projections to the underwriters, we know that. and they haven't bothered to give that to investors. i think that's why investors are angry right now. that they'd like to be treated the same way that the underwriters who sold the stock to them were treated. i think that's fair. i mean i think we should at least get facebook's most recent updated projections for revenue for this year and next. >> thank you both, guys, thank you. i'm so glad you pushed back on that, sizen, because i can't tell you how many times we've gotten emails about the very subject, whether or not we played a role in hyping or overhyping the stock. you hit the nail on the head in terms of what "hype" means, it means excessively positive in some way talking about only the silver lining of things. i'm not saying that we -- >> we don't get it right all the time. but i think it comes from a point where people are genuinely angry.

they are angry, angry. that's the -- >> you see a stock testing $20, so after it went public, you know, double that. yeah, there's anger out there for sure. let's hit rick santelli with the santelli exchange. rick? >> all right. good morning. in "the wall street journal," interesting story, post mortem yesterday we talked about the hearing, split at mf global hearings, there's one area i want to show on screen. so please, maestro, put it up there. and this bothered me. this is the trustee, mr. giden saying this, about basically he's the man in charge of returning customer money. the preponderance of the evidence indicates that senior management at mf global was aware that customers' funds towards the end were being use utilized to cover other costs at the firm. >> what's the point of -- >> this doesn't look well, i think we need to pay close attention. the second point i want to talk about today is gm. now i, i know that autos are

having a tough time in europe. but one thing that i'm hearing in a lot of places and phil lebeau and i have discussed it. although he doesn't think it's a problem. look at a chart going back to '07 on subprime loans, the upper line is used cars, the lower line is new cars, you can see it's trending higher. and i know the defaults are very low. this is something to watch. as it climbs, it seems as though the fortunes of these car companies are slipping a bit. we need to pay attention to this. and with the common thread of gm and europe operations, i want to talk about where's the beef. we all know that mario draghi made a big promise last week and we're going to talk about it more throughout the show. i have another issue, i understand europe is important. but we also need to be very clear whether it's companies or politicians not to get too far ahead of blaming everything on europe. remember the movie "blame it on rio"? i'll pick one area, exports. if you look at the exports we had last friday in the gdp report, it was up 5.3%. what was the previous quarter?

up 4.4. what was the previous quarter? up 1.4 the trend in exports is moving higher. granted it's not over 6% where it was about six quarters ago. but it seems as though this is becoming a bit of a scapegoat. don't you remember the day when we used to lead europe out of these problems? now we're holding their hands, trying to come up with magic wands, back to you. >> thank you very much, rick santelli. a brand new report from the irs inspector general says identity theft is a bigger, more expensive problem than we ever thought. we have the details in a new report. >> this kind of tax fraud involves tax thieves getting your identity, filing bogus tax returns on your behalf and collecting inflated refunds and making off with the money. the irs inspector-general telling me yesterday that this is a crime that is growing exponentially. and he says that over the next five years, the irs could be in the position of paying out up to

$21 billion in bogus refunds to thieves across the country. now take a look at some of the specifics in this report. it's really fascinating. they found one particular residential address in lansing, michigan, that was the source of 2,137 tax returns potentially fraudulent. and received $3,316,000 in refunds. another address in chicago, 765 returns coming from just that one residential address. and again, in belle glade, florida. where is the crime most rampant. tampa, florida, 88,000 potentially fraudulent tax returns, refunds issued of over $468 million. again in miami, and atlanta, georgia, that's where this is all happening. now the treasury inspector-general called all of this disheartening. >> once the money is out the door, it's almost impossible to

get it back. the bad guys know that the irs is unable. given the limited number of staff it has to address every single allegation of tax fraud. >> now melissa, in its response to this report, the irs says that they have put changes in place since the tax year that they studied here. and they think that the allegation that up to $21 billion could be misspent is overestimated. simon, back to you. >> staggering numbers, good stuff there, aman jobbers, mary thompson with a market flash now. >> hi, we're taking a look at shares of apache right now. kth stock under pressure after the company's output for the quarter disappointed on investors as did the company's earnings of $2.07 a share. those results well below analysts estimates of $2.53 a share. you can see apache is down 4.5%. simon, back to you. >> i'll take for you, mary,

thanks. coming up, we head to olympic park in london for the latest on the medal count. plus we'll tell you how much it costs the athletes to win all of those medals. you can call them anytime you feel like saving money. it don't matter, day or night. use your computer, your smartphone, your tablet, whatever. the point is, you have options. oh, how convenient. hey. crab cakes, what are you looking at? geico. fifteen minutes could save you fifteen percent or more on car insurance. 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.

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day six of the olympic games in london. let's check in with michelle caruso cabrera who is on the ground in olympic park. >> let's get you up to date on the medal county. the u.s. and china are tied for

total medals, 30 each. when it comes to gold, china is still number one, they've got 17, the u.s.s that 13. let's move onto the big stories of the day. the rivalry between ryan lochte and michael phelps culminates tonight in the 200 meter individual medley. phelps could be the first male swimmer to win an individual event at three olympic games. the host country, team great britain finally winning a gold medal in fact two, or three, depending on how you count it, the first british gold was in rowing for the women's pairs event. that's where we're seeing two. and then bradley wiggins, winner of the tour de france, won the gold for the men's individual time trial in cycling. in our social media update for the day, wigans, let's go back to the wigans video here, tweeted out afterwards that he was quote wasted and blind drunk. and posted pictures of him celebrating with fans. he said now i know what it's like, how the beatles felt as well. while the sust post office

is struggling here in the uk the national postal service managed to have new stamps commemorating both gold medals within 12 hours. and they plan to do this every time team gb as they call it here, win a gold medal. there's controversy here in the uk because the uk winners don't get any money if they win a medal. the italian government, ironically enough is the biggest payer when it comes to gold medals. the italians who win get a payment of more than $182,000. second is russia, paying nearly $135,000. third is france, $65,200. how much do you win if you're a u.s. gold medal winner? $25,000. it's paid by the u.s. olympic committee. potential vice presidential candidate, marco rubio has sponsored a bill that medal-winning u.s. athletes should not have to pay taxes on that money. if athletes who win gold medals were taxed at the highest, are

taxed at the highest federal rate they could be paying nearly $9,000 for the prize money. the other side of the controversy related to the tape delay of some olympic events. in los angeles, a councilwoman wants to block the nbc live-streaming app from city workers. a technology officer who is begging workers to stop watching olympic games during work time because the streaming video was overwhelming the city's computer systems. a lot of people interested. >> so the st. louis is to ban nbc's live streaming, that's genius, michelle. all right. thanks so much. >> did you guys see this, this interview with edie stevens this morning, the 29-year-old who used to be an utility analyst. she useds to at lehman. a lot of people got, were squawking in the news room, because they said how did did feel. she made an interesting comment about age that's going to make us feel pretty old.

listen to this. >> i had this gut feeling that i had to go on an adventure in my life. you know. i was 27 at the time. and i was worried that i was just going to wake up, just doing the same thing day to day when i'm 39 and so i thought, hey, not now. >> to wake up at 39 and think you're just doing the same thing over and over again. >> she got on the cycle four years ago. she didn't know who to clip in the medals, just on sunday she came in only 27 seconds behind the gold medal winner. amazing. >> some people should take that lesson as well. we'll check in with you later on. coming up, how even the super-rich are not immune to the housing crisis. we are approaching the close in europe. [ male announcer ] it's a golden opportunity... to experience the lexus performance line... including the gs and is. [ engines revving ] because control is the ultimate expression of power.

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right at your fingertips. [ rodger ] at scottrade, seven dollar trades are just the start. try our easy-to-use scottrader streaming quotes. it's another reason more investors are saying... [ all ] i'm with scottrade. there's no question that the housing market is tough. not even the 1% is immune to falling home prices. that pressure is creating great deals. cnbc's robert frank is back with the details. >> yeah, deals in quotes, it is all relative. some of the best bargains right now in real estate may be in the mansion market. prices per million-plus homes have fallen 20% this year. in stark contrast to the broader market where you've seen stable or even rising prices, lower prices mean more deals in the sector. the number of transactions up 50% or more. these homes still aren't cheap. it's a very small slice of the

market. we did a little megahome mansion shopping, and found some surprising price cuts. we start in california. this home north of los angeles down 7.5 million, or 33%. moving a little closer to home, in bedford, new york, this home is down $3.5 million, this is an estate built for the harr i-man family in 1900. it's got 100 acres. down $3.5 million. florida has been a huge hot spot for real estate recently. donald trump talking yesterday about homes in miami are going. but prices are still falling at the high end. this home in delray beach down $4.5 million. or 19%. now going forward this year, a lot depends on the stock market. but realtors tell me that the high-end market should continue to strengthen as prices fall. melissa? >> all right. robert frank, fascinating stuff. makes me want to go -- >> buy a mansion, right? >> bells are about to ring across europe. we've got the close and the

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1:30 to the close in europe. let's send it to simon. >> everybody is discussing what mario monty said or didn't say today. i think it's positive but the market is deeply disturbed that they didn't get an indication about the ecb buying. in madrid we just had a news

conference with the spanish prime minister and the italian prime minister. they say it's important that the ecb said it's ready to intervene but they declined to say whether they would apply for support from the efsf. this is important because the led of the ecb has thrown the ball into the italians and the spanish court. what he effectively said is we will come through and buy your bonds in the secondary market. but you have to apply. formally apply for efsf support. what all of that means, that means conditions on how you organize your country, how you organize your budget, and then, the safety net will buy your bonds, directly from you. and we will come in potentially in a few weeks in the secondary market and force down those yields. specifically at the short end. so no movement from the italians and the spanish. it's a devastating close for many in the market that are trading today. because there was an expectation amongst some that they would get more from draghi. that there would be a bigger ba

zooka on offer. i thunk he's answered a master plan. but short term, people are disappointed. let's look at the close around europe. it's the banks that have been walloped. ostensiblies did a sea of red. you'll see those countries in particular that are most affected, spain and italy, down over 4% as a result of what is happening now. but it was quite clear as soon as we had the monti news conference begin, you can see the disappointment writ large on the larger markets, top three, london, paris and frankfurt. all of those markets went into negative territory on the immediate disappoint there wasn't more from mario draghi. and if you look at the spanish and italian markets, those stock markets it was even more pronounced. what i think is important to note here, and this is a one-month track, is the degree to which, well, what on earth is this on the one-month track, we

were bid up in anticipation of this and we've gone back into negative territory. i don't understand that chart. let me show you the big losses on the banks around europe today. i can tell you for sure that the italians have taken a wallop. particularly the smaller banks, those banks that are more marginal. that are holding in this case the italian debt and could do with somebody to prop it up to a better extent. those italian banks fall. it's the same in spain. let's go to spine and have a look there at other medium-sized banks. look at the way that they have fallen. in there, santander, the giant, down 7% and other banks affected like the french and indeed the belgian, the dutch belgian banks have fallen heavily. this is absolutely as a result of what draghi didn't say today. at the front end of the spanish bond market, this is interesting, this is where he said that they will concentrate their buying in a few weeks' time. there disappointment, but look at the one-month chart. and here the story on this one-month chart, is still, that,

is still that yields have come down. that is the bigger picture. draghi's promise to do what was necessary a week ago, has taken us from 7%, to 5%, a 2% move on the two-year yield within one week and one day. that is significant. and it is not unwound. think importantly, let's have a look down the curve. and you can see again, in advance of this, the yields were falling slightly. as people made way for what was about to happen. we're still i mean okay, we're moving arguably in the wrong direction here. but here the bonds have actually risen on the session overall, net-net and therefore the yields are slightly lower. there's one point i wanted to leave you with that mario monti gave at a conference yesterday. because i think it says a lot about we would talk all the time about the europeans kicking the can down the road. mario monti is effectively saying to the rest of europe -- you can only do this for so long. because the politics will crumble away from you.

if the bond yield ved in italy remains at these levels for some time, you're going to see a noneuro-oriented, nonfiscal discipline oriented government taking power in italy. in other words, the likes of silvio berlusconi, when they have the election next spring could well take over and he may steer italy out of the eurozone. and for many of the fathers of the european project that's a disaster and it ain't going to help the american stock market, either. back to you. reaction from rick santelli who is at the cme, rick? >> i really enjoy listening to some of the instruments that simon was talking about and he is hugely right on spreads like 2s to 10s in spain where we still see steepening and flat n flattening is where we see trigger of i'll do whatever it takes emanating from the likes of mario draghi. but as you look at the ten-year rates for spain, italy, you can see that you know back over 7,

around 7.25 now on spain. you can see italy getting closer to 6.5. there's a couple of things. first of of all, investors and hedge funds, they're not dumb, okay? they're not going to get trapped in the yield curve trade again. but they're proactively selling what they feel they can get away with selling at this point. due to the disappointment. there's very little beef. i bit into a balloon and i think investors feel the same way and the euro currency says a lot and when we get down to brass tacks and i would like to hear simon's opinion, it's stabilization versus solution. i get a little grief over it well in order to have a solution, you have to stabilize. here's the problem, whether in the u.s. or europe, we're years past when we knew some of these issues. if countries and bureaucrats would have tried to solve -- why funding is high anywhere spain and italy, they would have had a couple of years of progress. the problem is, it takes years to fix these things. and the market? i don't know if they're not giving them time for

stabilization or are they going to be patient for six, seven, eight ten quarters to monitor if solutions are working? we don't know what those solutions are, back to you. >> you know what i think marks this out as being different? there is only one, you know this, rick, there's only one operator that has the credibility in the markets, and that's the ecb. there's only one -- >> i disagree. i think it's that kind of thinking -- you got to stop. it isn't the ecb. it isn't the fed, it's people, citizens and an economy, okay? either the citizens are going to go along with something or they're not. and what's more, it isn't. central banks are going to take you so far into candyland if you don't have a solid economy, a good balance sheet and transparency, they're not going to fix it for you. >> but that's what, that's precisely what he's saying today. he is saying, i will come in as the backstop. i will draw the line in the sand with very deep pockets at the short end. i will do that. in a few weeks' time. please let me explain, please let me explain.

but what he's say something first, you guys have to apply to the rest of europe for a bailout. in other words you have to be disciplined on the fiscal side, bring your countries with you to the table. do everything which is what you're indicating, that you need to do to turn the budget deficit around. so we've got that in position for you and for the germans and then i will back-stop it. and i think that is the first time that you've seen a grand plan potentially that pulls in all the operators. >> i guess that's the difference between you and me. when you get a press release from the likes of mario draghi, believe it to be gospel. i believe it to be -- the same relationship arnold schwarzenegger had on that kindergarten movie. we have have countries that act like kindergartners, and teachers that think they're going to change their behavior. not going to happen. there's going to be a default because the likes of mario draghi have no credibility in their promises and they let countries like greece in by

doing swaps. and the freedom of information won't show us. >> you may be very correct in the final analysis. i think it's important to understand what's said today and potentially where that could take you. >> that's why i love you. back and forth, hopefully viewers will be a little more enlightened about which way they should priede with their money. >> thank you very much, rick, the view from chicago. let's bring in bob pasani, obviously the markets down triple digits and also knight is a huge focus, particularly on the floor. >> a very difficult day and a lot of discussions, tom and joyce, one of the most respected people on wall street. a simple questioning what's going do happen to this company, what's next for knight. there's two issues here, mr. joyce has acknowledged he's searching for capital, for a good reason. the most important thing they've got to do is secure financing and number two they've got to restore their reputation. it doesn't sound like much, it's equally important. $440 million loss, it has likely

wiped out whatever cash they have on their balance sheet. i've seen 200 million, i've seen 300 million, folks, whatever, they don't have any cash, they can't finance their operation, that's why they have to go out and secure financing. opinions are all over on the street about what's going to happen next. i'll give you one or two. from the more benign like this one, evercorp., this is a severe capital hit that will drastically reduce the amount of business the company is able to conduct moving forward there are more aggressive comments that are also out on the street. clsa, we believe knight capital is at risk of bankruptcy following the loss. we believe the company's best option at this point is a sale. so you can see a lot of comments that are out there on the street. i want to emphasize this reputational thing. why am i making such a big deal about it? it can go away. this one of the big market-making companies that are out there. they take a lot of business, they take business from the retail guys, the ameritrades and

your scott trades and they compete against citadel and ubs and other companies. it's simple, when you're a guy that's in the business of buying and selling stocks and you direct your business to some place and sometimes something goes wrong, you have questions about whether you can rely on them. if you're buying hotdogs from four sources and one source is a little iffy and your business is providing quality hotdogs, maybe you'll say i only want to go to three guys, not four guys. i know it sounds like a crude analogy, but that's what's going on here. it's tough to get reputation back if you don't believe it, look at the stock. imagine what has happened here. put the stock up. this was a $1 billion market cap company. three days ago. it now has a market capitalization of $340 million. what? $600 million on what, mr. joyce has acknowledged it was a coding error. that there was a software programmer that had a coding error and the company has had these problems on that, it's -- >> it's a staggering loss. but are we at the point now, bob

and we've seen this story sort of before where there's a question about a firm's liquidity, their cash on the balance sheet. people step away from them in terms of trade and they go into a spiral. and i don't want, i want to be very careful in saying that we're not saying this is happening right now. but what are you hearing on the street in terms of that? >> i'm only referencing as you can see, i put up a couple of opinions from some of the analysts. there are a number of different opinions from fairly benign, that they can keep operating, providing they get financing and secure their reputation. to other people who think, maybe better for them to be put up for sale at this point. so there's a diversity of opinions on the street. >> is there buzz as to who might buy them? >> there isn't right now, no. as soon as i can get some. i can -- you can throw out some obvious potential people out there. including their competitors as well. i think it's a little premature but they're certainly scrambling for financing. >> if you don't know what the litigation risks, are, if you have no objectivity to what's happening. >> their issue is scrambling for financing right now.

that's what they're trying to do. i can't imagine they have any cash left. >> bob, thank you for that. meantime, stocks are sliding on the lack of immediate action from ecb chief mario draghi. what's next for the eurozone? how will it impact the markets going forward? louise cooper is a market analyst and ann green house. dan, let's start off with you, is this a sell on the news, the 1.1% decline on the s&p 500? >> sure. but let's remember that we rallied 3.5% on thursday and friday of last week off of the idea that the ecb might do something. obviously now that the ecb has not done something at a minimum we should retrace some of those gains. >> louise, can you see disappointment here? is there something to be disappointmented about? or is it simply we got exactly what we thought we were going to get at this point? >> this is humely disappointing. if you look at the spanish equity market, from the

post/pre-draghi peak to the post-draghi trough, the spanish equity market actually fell over 7%. if you look at the spanish ten-year bond yields, back up over 7%. up about 50 basis points from the borrowing costs low today. so without a shadow of a doubt, markets are very disappointed by what draghi has done. and in fact, i suggest that markets could be even lower apart from the fact there were an awful lot of people coming into this market short because they thought draghi would disappointment and therefore, the markets are actually slightly higher than expected because of a little bit of short covering. >> can i point out all weekend long we had people balking back mario draghi's comments, so obviously if we judged this solely by the reaction of markets, there's no doubt that this is a surprise to people. but at least with respect to btig's clients, this is a conversation we were having all weekend, robin harding's article in the ft, explicitly laid out the case that the ecb would not

be launching additional bond purchases in the short-term. i don't know why anybody is surprised. >> louise? >> because, because a central banker has to reserve his or her, there's as many female central bankers out there, i'm very optimistic. they have to reserve their firepower. it's like the boy who criied wolf. by doing what mr. draghi has done today, nothing, he risks being ignored by the markets, that's incredibly dangerous. >> louise, do you not accept the premise that actually he's laid out a master plan as to how he will dry a line in the sand and he's laid out a plan in which he brings all participants through that process, namely spain and italy have to ask for help, the safety net will buy their bonds as they issue them directly. that to me, that is huge and when the central bank says, fears over the break-up of the single currency are unacceptable, the euro is irreversible and we are

unanimous in central bank to a man and woman on that. don't you feel that's a very powerful statement, if not to the markets, than the rest of the people that are within the single currency. >> it is, but the ecb is restrained by what it can do. it's not like the fed or the bank of england. its rules were written by the bundesbank who is furious at bond buying. the idea that it's going to be stairization-free bond buying will drive central bankers up the wall with furry. >> but louise, specifically, the statement they've come through is they believe that buying bonds massively is within their mandate and it's importantly within their mandate to be independent. they are very explicit that this is the course they're on regardless of the bundesbank. >> they have bought bonds in the past. we have had smp programs in the past. and where are we again? we're yet back at spanish

ten-year borrowing costs up over 7%. what you need is unlimited firepower. and the ecb has not dot that mandate. it's got a potential mandate together with the bail-out funds, but it does not have what is actually required. going back to what you say about it has laid out a plan, but that's the problem. why hasn't he laid out today that it's happening? that is the point. you know this has been going on for years. why is the ecb not saying this is the plan, this is going to happen? >> because the politicians have to ask for help first to keep the germans on board. >> i disagree with everything. >> we're getting shouted at repeatedly. it's always a great conversation. thank you, guys, thank you. >> up next on the program, can microsoft's new look take down the email giant that is gmail? our tech experts weigh in. after the break. ttd#: 1-800-345-2550

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coming up on a special halftime show, extended coverage of the two stories moving markets and your money today. selloff after the fed and the ecb deliver big talk, but no action. our traders have the stock that work without central bampg help. and the fallout over knight's trading glitch intensifies. how does it affect your portfolio and is the rise of the machines good or bad for investors? a special round table explores that. we'll see you in 12 minutes.

look forward to it. scott walker, thanks. microsoft defending its dwindling territory in the tech sector. will it be enough to fight scott stein is senior editor at cnet.com and dillon betweeny is executive et tore at adventure beat. dylan, what does it do for microsoft? >> i think it gives outlook a much cleaner, easier to use, more modern look. that's a big step forward it also importantly ties outlook into this kind of overall strategy that microsoft has. to kind of incorporate similar designs across all its products. the kind of metro design they have. it will fit better into the suite of office software they're building in the new version of window coming out later this year. it's part of kind of the overall kind of slow but grand strategy that microsoft has to kind of bring itself into the internet world and dominate you know, across software services, cloud stuff and hardware.

>> scott, that all sounds very attractive from a microsoft standpoint. but it seems like they're a bit behind the game at this point, they have 325 million monthly active users who now use hotmail, now outlook.com. as a tech giant they're very slow to make this transition, this have very lost anything at the margins by moving so slowly. we use gmail, we used to use outlook. i think a lot of people use google mail. i think people are slow to switch. people don't like picking a new email address. i think the advantage is that microsoft's new outlook.com has been very well reviewed and it's very clean-looking. it's a knee-jerk reaction to have good web services in 2012. i think it's more part of an advertising and branding reboot for microsoft to get awareness

for office 13, windows 8 and all of these products, a lot of people don't understand what office 13 is going to involve or there are these free apps available through microsoft, like word apps, et cetera, that you know, kind of compare to what you can get on gmail and google docks and google drive. i think a lot of this is about creating awareness of that and catching up. >> an awareness is fine and good. but dylan, i'm curious, does the microsoft product stack up to what google has to offer? when i use gmail, i use it because i have google docks, it's a whole integrated suite of offerings for free. >> microsoft has those, too. i think what scott was saying is right, is that not as many people know that microsoft has office live and can you do a lot of editing online and they are playing catchup in terms of the technologies if you're used to using gmail, it may be difficult to convince you to switch to outlook.com. it was only this summer that

gmail passed hotmail as the largest provider of email in the worre world. so there are hundreds of millions of hotmail users that might switch to outlook.com. and you know, microsoft has features in this like the integration with skype, so you can just skype somebody from within, within the email client. that might make it very attractive to certain people. so you know, it's too soon to say that microsoft is coming from way behind here. basically they've just fallen into second place and they're trying to get back into first. >> dylan, scott, we leave it there, thanks. up next, he is back, larry kudlow returns to post 9, he's got lots to say about the ecb, mitt romney and much more. we're back with the doyenne of business news, next. [ female announcer ] want to spend less and retire with more?

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the kudlow caucus is under way, larry joins us here on post 9. >> we've got to go fast. a word of warning, the ecb at some point is going to pour a lot of money, it's coming, we know it's coming. it will drop the euro. considerably. and that means the dollar is going up considerably. and that could be deflationary. and recessionary for the u.s. economy. that is one of my great concerns about all of this pump-priming which does not solve their fiscal problems at all. second point, speaking of fiscal problems, i draw everybody's attention to glen hubbard's article on mitt romney's economic plan. it has a lot of specifics in

there. you will see romney unveil this and speak about this from here to the republican convention. it's going to be a major argument. it's spending cuts, tax cuts, roll-back regulations, awfully good in my view it sounds like free market capitalization. >> i always feel we cheat you, we don't give you enough time. more "squawk on the street" after this. 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. [ rodger ] at scottrade, seven dollar trades are just the start. our support teams are nearby, ready to help. it's no wonder so many investors are saying... [ all ] i'm with scottrade. latex beds, and now beds infused with gel? but through all the fads, 6 million people have found

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