this rare 101.7 carat flawless diamond fetched a record $27.7 million in geneva yesterday. the winning bidder was harry winston. christie's says the rock is so big, it took 21 months to polish. would be quite heavy around your neck, wouldn't it be? >> that's the gem version of "street signs". >> thanks for watching "street signs." >> that's also sarcastic. have a nice day, everybody. no music, but it doesn't even matter. welcome to the "closing bell." i'm scott wapner. >> and i'm kelly evans. maria bartiromo and bill griffeth, they're both on assignment. coming up on today's program, even when the market doesn't rally, it doesn't quite sell off either. bad news for walmart is hitting that stock, but overall the market not necessarily seeing the same kind of weakness. so what does that say if this rally does have legs or not? we'll get into that and a lot more. >> we're also waiting on earnings from jcpenney, the widely followed and controversial stock due out with numbers a little more than an

hour from now. we'll get that information here first with, of course, instant analysis and the reaction. >> and more developments on the irs scandal. the president today reiterating his outrage, but rejecting the idea of a special independent counsel to look into the matter. we'll have the latest details on that as well. >> let's check the markets. with one hour to go in this trading day, there's a look at the dow, in negative territory by about 14 points. the broader markets, the s&p 500 is negative as well by a touch. the nasdaq bucking that trend, is up slightly, by about five points. >> let's get straight to our "closing bell" exchange, michael g guyed here, and chris girsch. rick, i want to start with you, there's a lot of focus again on what the fed may or may not do from here. there's the good exit and the bad exit, but what do you mean by that? >> if the fed exits because the unemployment rate goes down and

the economy picks up, that's a good exit. they can exit, the stock market would hold in. if they exit because there's a fear of inflation or that the markets are getting overheated, that could be crippling for the stock market. and i fear that if there's talk about an exit early, like this summer, it's going to be the bad kind and it's going to be very bad for the markets, because we don't have an economy that's moving forward. we don't have unemployment going down, because jobs are being created. we have it going down because the participation rate is falling. why is the fed exiting, good or bad? >> chris, pick up on that a second. can you connect it to the kind of activity that we're seeing, say, in markets today? >> i think that the market is on steroids, moerre or less. we've injected it and it's starting to be that ogre in the room. rick announced this morning, we had a huge pullback on the s&p. the traders all of a sudden, they were afraid to hit that bid. no one wants to go short. we rallied right into the positive section. no one wants to be short this market. and until we have some sellers

come in, with some determining factor, everyone's looking to the long side. >> michael, i get the feeling from listening to people that people are trying to find an excuse to dump on this rally, rather than to accept it for what it is. yeah the fed's in the game, but the fundamentals of the economy are not all that bad. we've had a spring swoon, but otherwise, the data has somewhere backed up to where we are, hasn't it? >> i would argue, not quite. because what's gotten us to newdow highs have been very defensive, low-growth sectors, right? kind of adding to this on the about the tapering of qe, the fed probably has the to taper on the tapering discussion. because what's missing here is the issue of how do you cause a great rotation? you stop the bid in bonds. but if you cause that stopping of the bid in bonds, if that results in an accelerated interest rate increase, the market is not going to like that. so we have to be very wary of the speed of interest rate movements going forward, aside from just the level. >> there's a difference also

between pulling back on qe and raising interest rates. the fed could pull back on qe. that doesn't necessarily mean that rates all of a sudden are going to shoot up. it doesn't mean that they're going to raise rates by pulling back on qe. >> but if they do pull back on qe, the dollar probably rises. we saw that move the last eight days as this discussion on tapering has taken place. a rising dollar is deflationary. the fed doesn't want that. the fed wants inflation. every other emerging market is lowering rates, but we may pull back on qe. what's that going to do to our economy if the dollar surges. >> it's also interesting to see that dollar surge happening, yet stocks holding up reasonably well and participating. and i wonder, jim, to circle back to you on this point. some people have been talking about the fact that precious metals have lost their luster. gold, in particular, in terms of being a safe haven. is the dollar a new safe haven place? does that help explain some of the strange correlations, i guess you could say, that we've been saying? >> you could. but i think what gold and silver are suffering from, is that

they're part of the commodity universe. and commodities are going down and the most popular way people own commodities or at least institutions is through commodity funds. so once they've decided to sell commodities, they all get sold. that's why you see all of them going down. and by the way, why they're down, and this gets to scott's question earlier, they're down but the economy is not good. the earnings numbers are not that good. they're not recessionary, not that good. the economic numbers are not that good. and that's why you're seeing commodities down and everybody else suffering right now. >> look, i'll agree with you, lately the numbers certainly have not been great. it brings up the spring swoon, as i mentioned earlier, which we've gone through in the past. but there are pockets of good data out there. what, retail sales are better than expected. that's a positive data point. i'm sorry? >> nonseasonally adjusted retail sales was a disaster! >> rick, but nonseasonally adjusted, you would expect retail sales to soften from the holiday period, no? >> yeah, you know, here's the

problem. that trying to debate what's real and what isn't real with the economy is trying to debate climate change. you know, there's very little science, there's a lot of ideology. it's the same about the fed programs, the stock market, the economy, and what's worse, when we talk about the dollar as a safe haven, i can't totally buy that. strong dollar creates a vicious cycle. you have economies in europe that are weak, china's questionable, commodity's low demand, the dollar higher because of the weakness i just said in europe, and it creates the spiral. but is it really a good thing? and at 8:30 eastern today, the dax looks just like our market, which responded just like the fixed income. we're trading one set of dynamics, because it's impossible for the u.s. the to extricate itself from the global weakness, no matter how much pressure daisies we may have in our garden. >> rick, by the way, we've got some weakness in the high-yield space over the last couple of

trading sessions. we started to see, however, the ten-year to move back down. what do you think the message is from the bond market right now? >> i think when you're looking at etfs in particular, think leverage. so we get the nervous market that started a week ago on the hilsenrath rumor and they took a beating. i think you're still going to see a risk-on game, until the addiction is broken, so these drops are probably met with more buying at some point. >> maybe, though, rick, you have to believe, i guess what david tepper said the other day when he was on squawk b"squawk box." and that's don't worry about the taper so much. that if the fed does pull the punch bowl away or whatever, that it's going to be for a good reason, and the market could be able to stand on its own two feet. >> listen, he's a billionaire and my hats off to him. but he's a trader, okay? his true heart lies in cashing a check and i can respect that. if he tells me not to worry about their huge balance sheet, that goes in one ear and out the

other. >> chris, jump in here? >> tepper is not long. if the fed announces they're taking anything back, i guarantee he's covering all their long positions. everyone has to talk about the tepper rally. we have such a disconnect, 200 stocks in the s&p, in all-time highs, and we had a fall on the ten-year by seven basis points and the yield. it's such a disconnect. everything's on the fed, it's injected, it's a steroid rally, because of the fed. >> just like the fed was going to stoke inflation by doing what it did, that hasn't come to fruition, has it? >> there is no inflation. there is no inflation right now. >> for all the people who said -- for all the people who said there was going to be, it hasn't materialized, right? >> you know what, scott, scott, scott, it's not about -- nobody's been talking about inflation now. the worry about inflation is on the backside of this. >> rick, my whole point was that all the people who said that the fed were doing the wrong thing, that it was going to cause out-of-control inflation, they've been dead wrong. that's all they're saying. >> talk to me in about seven

years, scott. >> i'll come back and talk to you then. but the fact is, as we sit here today, they've been wrong. >> but they're causing inflation in the stock market. they're essentially benefiting those who have assets as opposed to those who have income. you have this real nasty wealth gap that's a direct result of the fed's quantitative easing. >> and yet the retail guy isn't participating. >> because the retail guy believes that this is rigged. that's just the reality. >> he's not wrong. >> no, so the question is, how do you break that. continuation of a bull market, and people pile in at the top, or maybe the bull market starts to sell-off and make people feel losses in their fixed income investments. you have to pull back on qe. >> scott, you've also got to keep in mind that while the inflationists have been wrong and you don't have inflation, the fed apologists have been wrong to, because this policy's qe3 year five is coming up and we're still at 1% growth. where's the growth? where's the jobs? trillions of dollars and we don't have a whole lot to show for it. so like steve liesman likes to say, both sides of this have been wrong.

those who said it would help the economy have been wrong, those who said it would create inflation have been wrong. what i've feared is what michael's been implying. all it's doing is distorting markets and when we stop doing it, we're going to find out how distorted the markets are. >> gentleman, we'll leave it there. thanks very much. we'll move on now and check in with our very own bob pisani. if walmart is the proxy for the economy, why is the market holding up so well today despite the weakness there. bob, can you do this for us? >> first of all, walmart's a proxy for the budget-conscious consumers, and i think while a lot of people traded down in the last recession, they haven't traded back up again, so walmart's doing well. look, walmart's had a great run for the last couple of years and let's give them some credit. they're very well managed, they have controlled costs incredibly well, better than anybody else in the country. look, they had a disappointing earnings report and they're only down 2% today. i think, number one, they've lowered the bar for the second quarter rather dramatically. and number two, this is a pretty heavily shorted name that's out

there. and i think people have been waiting for it to drop for a while. not necessarily seeing that happen. if you ask me what's representative of the economy, i would say costco. look, costco has been a swear competitor to them and i think they've been taking market share. i don't think people would argue that, from walmart, for a long time. you want to know what else i think? amazon. it's hard to describe the raging headwinds that online retailers represent out there to even a company like a walmart, a successful company like a walmart. did you see those come scan stories. 17% increase in ecommerce sales year over year for the month, for the month of april. they're growing exponentially. and even challenging walmart. let me move on to show you what the market's doing quickly. and the bottom line is, a little bit indeterminant today. tech energy materials moving to the upside, but barely, and defensive names still holding to the downside. the one thing i would point out, we've been seeing this bond rally for the last couple of days. i think it's noticeable. there's the agg. that's my favorite index for

bond etfs, the biggest one out there. two-day rally as the economic data has been crumby, calling into question whether or not we're going to have the fed actually reducing their bond purchases in september or october. guys, back to you. >> bob, thanks so much. 50 minutes to go before we ring the bell. take a look at the markets. we're still in negative story. dow is down by about 12 points. >> and coming up, jeff cox will lay out the case for why he says the stocks are cheap argument is getting harder and harder to make. well, rising multiples probably have something to do wit. >> also, the fed getting a lot of credit for fuelling the market's historic rally. but somebody here says the fed is doing a lot more harm than good to the market's long-term prospects. >> and gold is under pressure again today, but one top investors is taking a big stake in the precious medal. >> i love gold! >> okay, it's not goldmember, it's leon cooperman. should you follow his lead or

better off following that after george soros who just sold a big part of his stake. we'll explore that next on "closing bell." ♪ [ laughter ] ♪ [ female announcer ] each one of us is our own boss. ♪ and no matter where you are in life, ask your financial professional how lincoln financial can help you take charge of your future. ♪ do you want the long or the short answer? long i guess. chevy is having a great-deal- on-the-2013-silverado- but-you-better-hurry- because-we-don't-want-to-see- a-grown-man-cry-spectacular! what's the short answer? nice. [ male announcer ] the chevy memorial day sale. during the chevy memorial day sale, current chevy owners trade up

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[ roars ] ♪ [ roars ] ♪ [ roars ] ♪ [ male announcer ] universal studios summer of survival. ♪ breaking news on the irs.

eamon javers has the details. eamon? >> hi, kelly. well, cnbc has confirmed that president barack obama is going to name as the acting commissioner of the irs daniel wefrl, he's the comptroller of the office of management and budget. not a flashy or high-profile figure here inside washington, but he's been a long-time washington player, known as a green eye shades guy, who's been responsible in his current role in implementing the governmental sequester and dealing with all the bureaucratic blocking and tackling involved in that. according to sources, a white house official telling cnbc the president will nominate mr. werfel as the commissioner of the irs on an acting basis and we can expect that announcement anytime now, guys. >> all right, eamon, we'll look forward to that. meantime, gold is continuing to lose its shine today. bertha coombs is at the nymex with those details. >> interesting today, because we did have the dollar easing back and that did float some commodities, just into positive

territory, but not gold, down for the sixth straight day, and certainly fund selling continues to put pressure on sentiment when it comes to the pressure metal. we saw soros, northern trust and others get out of their positions, although paulson held on. we did see a couple of o funds, ubs and jpmorgan actually buying into the gld. and what's interesting, the world gold council also saying in the first quarter, we saw more interest in fiscal demand in china and in india, both of them up about 25% or so in the first quarter. and kelly, if they liked it above 1,400, they may be buying those ingots here at 1335. >> we saw that in hong kong and macau. the jewelry stores were absolutely packed. some of the most famous investors are split on whether gold is a good in-depth right now. josh lipton has the details on that one. >> heavyweight money managers in their 13-f filings telling us what they're buying and selling when it comes to the metals and

the miners. leon cooperman of omega advisers initiated a stake in the gdx, the gold miners, now at the lowest level since december of 2008, and he likes the gld, the etf that tracks bullion. cooperman also carved out a position in the slv, the etf that tracks silver, now at the lowest since october 2010. soros likes the gold miners, upped his stake in the gdx, but he did reduce his stake in the gld by 12% and we were watching john paulson. his position in the gld, unchanged, but he did eliminate his entire state in barrett, so all 915,000 shares. of course, if paulson is right, then michael novogratz is wrong. earlier this week on cnbc, he said gold is in a classic bubble and could trade back down to 500 per ounce. that's a price not seen in about seven years. scott, back to you. >> josh lipton, thanks so much. so with the smart money taking different stances in gold, how

should you invest in the money? >> george and the co-founder of graphite capital. hello to you both. >> hi, kelly, hi scott. >> the question is, given the backdrop here of some of the smart money, if you will, getting out of gold, maybe upping their position in the miners, is that a smart way to play at these levels? what would you recommend? >> i'll tell you, i've always been partial to the real gold. i've been partial to some etfs and there are a lot of etfs out there now. there are a couple of major ones. there are some that are mixed, that are part silver, part gold. but for the most part, i believe that the futures contracts and the etfs gives you the best exposure. and i'm in the steve liesman camp sometimes, but rick santelli, today, i think he hit it right on the head, because the dollar actually is very

strong for a number of other reasons. stock market up for the last five months. you have to pay for stocks with dollars, international investors buying stocks have to buy dollars. so the dollar is strong. fed leenlt said they have a plan, possibly not kblepted yet, to end qe and so, again, that meant interest rates ticked up, so the dollar got strong. so, yes, you've got a strong dollar going on and you've got a weak euro economic market, and all of that, plus the deficit, the trade deficit shrinking this past week we $200 million, all of that hurt gold. so that's a good sell-off for gold. but for the longer term, i think that will change. >> yeah, i've made a list here, and george mentions the dollar, one of the things on my list for all the negatives for gold. you've got momentum on the wrong side, right? four-week low.

technicals on the wrong side, below 1,400. the stock market rally, which is negative for gold. you have some big money getting out. and then you have, while physical demand is picking up all around the world, it's not enough to offset some of the investment dumping in etfs pensions, and other things that are going on. finally a positive. >> you hit the nail on the head. the trend right now is your friend. you have a stronger dollar, a stronger economy across the world. the trade on right now is buy the s&ps, buy the nikkei, buy the dax, buy everything, sell gold. that is the rotation that people are moving into, especially funds. and until that trade gets unwound, that's the trade on. i think if we see the s&ps fall 10% over the next month or so, you'll see that trade being unwound. but until then, this is the trade on, and you have to stick with it. >> i see other positives for gold. but for the moment, fear is

secondary. that's evident with what's happening in the equity markets and the corporate bond market. so gold, temporarily, is also very expensive. in india, we've had disappointment with the wedding season, the fall season, because of the weak rupie. japan, gold has become very expensive, because their stimulus made the yen much cheaper against the dollar. so you've got a strong dollar on three continents -- >> what is the catalyst to move this higher? there is no catalyst right now that can move this market higher. >> oh, i believe there will be, and i think that you may see a rally around the corner, i think, tomorrow you might see a little bit of short covering ahead of the weekend, because traders don't want to take a position with unknown headlines next week. but i believe that you're going to see a rally coming and usually these rallies are

unforeseen and they're caused by political and economic events. >> george sounding a little bit like some of the battered gold bulls we've been hearing from the last several months. still likes gold long-term. thank you both for your time today, gentleman. speaking of gold as we said, a weaker day for it, but with about 38 minutes to go before the bell, the dow is weaker, now, by about 40 points. we've got a weaker finish as well in the s&p and now the nasdaq, which is down by almost three. talk about sweet comebacks. after nearly collapsing, krispy kreme shares have more than doubled over the past year. and up next, find out if this is a stock that you can still sink your teeth into. >> speaking of tasty treats, get a load of this. taco bell testing out a breakfast waffle taco. when it could exclusively be heading toward a taco bell near you. that's coming up. it's as simple as this.

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welcome back. krispy kreme stock was all the rage more than a decade ago, but after some very tough times, the donut maker is experiencing an amazing turnaround. jane wells is following this sweet comeback. jane? >> forget the dot-com bubble, krispy kreme created its own donut bubble with that hot ipo more than a decade ago. and we were there even then, reporting on the hype and the concerns.

is the cream leaking out of the crispy? is there a hole in the donut story, or is there still plenty of dough to be made. krispy kreme is moving to the nyse in may. >> yes, that's how we did it back in the day, but investors glazed over as the company grew too fast. then came a management shake up. now the company has had 17 straight quarters of same-store sales increases, outperforms both dunkin and starbucks on the stock market, but there's still a hole in this donut story. coffee is only 5% of revenues here compared to 60% for dunkin. >> truth is, the business model that krispy kreme has is very different than dunkin' donuts or starbucks, and i've got great respect for both of their business models, but they are largely beverage companies and we are a doughnut company. >> you know, in the future, when dunkin' tends to penetrate further out west, will that hurt krispy kreme? i don't think so, because of

what krispy kreme is all about, it's all about the doughnut and dunkin' is all about the coffee. >> but coffee has much higher margins. and as they start to expand, coffee will play a role, and also, guys, analysts might also like to see maybe a lunch menu. i mean it's, you know, almost 12:30 here. this isn't really doughnut time. back to you. >> jane, i know for a fact that people can put a hamburger between two glazed doughnuts, so if you may want want to -- maybe you can suggest krispy kreme introduce that one. have you ever had one of those, jane? >> with bacon! >> yeah, with bacon, exactly! the food innovation never ends. and we'll pick up on that theme in just a little bit. thank you, jane. tough assignment, that one. >> reporter: you bet. >> so should you buy krispy kreme on its turnaround story or spare your portfolio the calories? let's start talking the numbers. enis taner, and for the fundamentals, joe greco with

meridian equity partners. enis, you look at the chart and what do you see? >> i'm a sucker for krispy kreme doughnuts, but i don't think there's much more dough to be made here. if you look at the one-year chart, it was a very strong uptrend to start the year, really after, at the end of 2012, into the start of 2013. that trend broke a couple months ago and, in fact, we broke below the important support level that acted at 1350. i expect that level to be resistance going forward. on the long-term chart of a five-year weekly, we can see that the best entry point for a longer term investment would be around the $10 level. that's where the stock broke out on a weekly basis last year. so i think, if it has a severe dropdown to ten bucks. >> and krispy headed for trouble in the near-term? >> i'll join the party that joins these crafty word plays, i say take the doughnut and run. don't have a position here, but if you do have a position, that's what you should be looking to do. i agree with enis on that one.

the price to book is weakening, the return on equity is weakening, and, you know, their expenses are going up. so that obviously means that their margins are going to be coming. you can't really innovate a doughnut. if you are a doughnut company, you've got guys like mike bloomberg that may be against you soon from a chloric and traditional value content. in all seriousness, you have both dunkin' donuts, which has a great market penetration, a great customer loyalty, and huge, you know, balance sheet to leverage, so they can expand into those areas like in the west, and of course, you do have at of the local gourmet shops cropping up. we've seen a ton of them in this area especially. and i'm sure that area is going to continue. krispy kreme really needs to figure out what they need to be. i don't think short-term you see any profits out of this name. they topped out after earnings. last quarter, i don't think in two weeks we'll see anything spectacular. >> i do think, though, it was a pretty incredible turnaround story. this stock was left for dead a few years ago. it's done a great job getting back to an earnings profile, it's appealing to investors. i don't think this is a good entry point.

>> well, good point. and a doughnut's round, so when you turn around, you're right back to where you started. that's where they're going to be. >> nice one there at the end, joe. joe, enis, thank you both very much for that. we'll see, scott, if it stumbles and people can then find a reason to fundamentally like the krispy kreme story long-term. but they've got to figure out what they want to be. >> well, we've got 30 minutes to go. they're still fighting it out. 30 minutes to go before the bell rings. dow is now a little more negative than it was, you know, 10, 15 minutes ago. we're down about 34 points with about a half hour to go in the trade. >> you have to wonder if those comments talking about the prospect of ending qe. and we'll hear from someone who says ben bernanke and the fed may be fueling the market, but their policies will actually hurt investors in the long run. >> plus, have you seen this new jcpenney commercial? >> -- brought back the things you liked about jcpenney, gave you new things to explore, and now we're happy to say you've come back to us.

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most agree the fed's easing money policy has been the big driver in this historic stock market rally. larry mcdonald saying that may be true, but the fed's action are doing more harm than good. >> larry is the author of "a colossal failure of common sense." also with us is our friend greg ip, u.s. economics editor if "the economist." he's an expert on the fed as well. larry, make your case. >> it's a deadly cocktail forming of unintended consequences that i think will force the fed out of the dual mandate. if you think about the dual mandate itself, what good is 6, 6.5% unemployment if the by-product of that outcome are socially destructive, really welcome side effe, side effects, and i think it has a lot to do with the high-yield marked. >> greg, first, i would like to hear from you on this. is it that bad?

>> you know, the unfortunate truth is that we can make a full t canni iaccounting of whether policy is good or bad until it's all over, so we need to wait a few years until they've exited from this policy. i have some sympathy for what larry is saying. if there is a lot of breakage on wall street as a result of risk being taken now, we'll have some regrets. but if the alternative was to not have this policy and to have unemployment at 7.5% instead of 6.5%, that's a cost as well. that is several million more people who wouldn't have jobs without income for several years. and i think when the fed thinks about this, they say, that is the worst of two evils. zl and larry, we only have to look across the atlantic for a sense of what that alternative scenario might have looked like. it's not as if there were any other good options here, were there? >> the most important thing, kelly, is conventional wisdom is so destructive. i was on the trading floor at lehman brothers in 2006. we were putting on giant short trades in the mortgage space. and we were lectured by senior officials, the new york fed told

us that in the history of the mortgage market, the entire history of the u.s. mortgage market, that if unemployment was below 5%, that you couldn't have an uptick in defaults. completely wrong. that's something that everybody on the street believed. it was completely false. the fed believed it. today you look at the holdings of individual investors that are in high-yield etfs, leverage loan etfs, they're up 70%, kelly and scott, since 2006. but wall street's balance sheet, because of dodd/frank, because of the volcker rule, because of basel is down 70%. so if people head to the commits, the bid is not there, the little guy is going to get hurt. >> speaking of heading for the exits -- i'm sorry, scott, go ahead. >> i was just going to say, look, if that's the debate we're having now, what time frame are we realistically talking about? >> i think larry's making a good point about the concerns that there's a lot of leverage being built up in the system, even if it's not directly on the books

at the brokered dealers. and the truth is that the fed knows this and they think about this and they worry about this. people like jeremy stein, a fed governor, has talked about this. janet yellin, who may be the next fed chairman, when she talks about reasons she would like to pull back on qe, the first thing she mentions is financial speculation. and so, as the fed starts to pull back, and i think that will start in the second half of the year, that will be a major reason why. but kelly, i want to underline something here. the fed has two exits, not one exit, ahead of it. the first exit is to stop the quantitative easing. the second is when the exit out of zero interest rates. the second exit is the much bigger deal for the markets. and i don't think that's going to happen for another two years. >> greg, you know, if you look at what david tepper said the other day, you know, in effect, he becomes the fed's best friend, right? you have a major market participant, a guy who runs a tremendously large hedge fund, telling the market, it's going to be okay. doing a job that perhaps the fed

can't do as effectively as a guy who's running that much money in the market. so can't the fed get out of this okay at the end of the day without causing some major unrest within the markets? >> i don't think anybody really knows. i think it's nice to have like a david tepper saying you're doing the right thing, but frankly, guys like tepper, guys like stan drukenmiller, they're traders first, so if they sense the bond market is going not opposite direction, they'll move as quickly as they can to get out in front of that. and that's the kind of move that keeps central bankers awake at night. this is a delicate process. there haven't had to do it before. and all along, they're going to be weighing the cost and the benefits. i think the one thing we can be sure of is that there will be plenty of advanced notice. that's why we should all be listening very carefully when bernanke testifies next wednesday for clues as to whether he is starting to key up and exit from quantitative easing. >> greg, i don't think we're

going to have any notice, because i think they're going to have to move because of these side effects in the marketplace. we were out last week at salt, sam zell talked about this. whenever the government in a big way screws around with the invisible hand of adam smith, there is always a slap in the face. and this is the biggest slap we've ever seen. this is going to make the 1994 preemptive move by the fed look like a kindergarten playground. >> the point is, though, the fed knows -- don't you believe that bernanke knows that he's going to have to wean people off of the stimulus? he's not going to rip the carpet out from under us, is he? >> that's exactly right. let's talk about 1994 for one moment. that is the big bond market sell-off. you know, it caused bankruptcy, it's what a lot of people think about as the worst possible income. but the big driver was because the fed was raising interest rates much faster than the market expected and faster than even the fed expected when it

started out on that process. if the fed can basically lay out a pathway in advance of how fast they expect to go and stick to that path, they should be able to avoid that 1994-type of event. however, there are other reasons that the bond market can tank. one of the factors that determines how low bond yields can go is how desperate people are for the liquidties of treasuries. if their risk appetite comes back, they could go running out of bonds and you could see the bond market tank in the context of no change whatsoever. >> and portugal's ten-year bond has gone from 21% to 5% in the last 52 weeks. the credit of portugal is in worse condition. this is bad side effects. it's going to come back to haunt us. i'm telling you right now. >> last word, greg ip, larry mcdonald, thanks very much. the dow is down about 50 points. about 0.3%. it's true for the nasdaq, which

is down about 0.2% as well. >> how about this stat, the dow is down 46 points and yet it's the worst day in two weeks for stocks. that shows you where we've been. >> that's right. >> so the markets have been surging to record highs. jeff cox, though, says, flat erpgs growth is starting to make stocks look less attractive. he lays out his case, coming up. and would you believe this? this lady taco, yes, ladies and gentlemen, we've gotta cos on set, has it helped to create 15,000 jobs? that's what taco bell's ceo, greg creed says. we know scott is dying for a bite. >> i was getting a little hungry. my stomach was growling with only 20 minutes to go. >> and in that case, he'll give us a sneak peek of the new waffle taco as well. here's a photo of that taco. the company is testing it. not available on is east coast just yet. p [ musick ] i knew there were a lot of tech jobs

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♪ ♪ the new blackberry z10. with time shift and blackberry balance. built to keep you moving. see it in action at blackberry.com/z10 . well, a handful of big-name stocks are making waves today. josh lipton rounds them all up. josh? >> headline stocks in today's action. first up, cisco rocketing higher today, beating estimates. ceo john chambers on cnbc this morning, sounding upbeat about the u.s. economy. on the other hand, walmart, not

so good. reporting profit that disappointed the street. u.s. same-store sales down 1.4%. and warren buffett's berkshire hathaway in the news. s&p cutting its credit rating one notch to aa. the rating agency talking about berkshire's dependence on insurance operations. after the bell, we're going to be waiting to hear from dell. remember, our own david faber broke the news that dell was moving up the timing of that earnings release. dell expected to report earnings of 20 cents, excluding some expenses, on revenue of about $14 billion. and jcpenney also expected to report. street is going to be looking for a loss of 89 cents on revenue of $2.7 billion, which would represent a year-over-year decline of 13%, first earnings report since mike ullman returned as ceo. kelly, back to you. >> josh, thank you for that. we want to turn to a crime and punishment story out of lower manhattan today. new york attorney general and the nypd announcing a takedown of an alleged massive cigarette trafficking enterprise. they say they're concerned it

could be linked to terrorist financing. cnbc's andrea day is live in new york with more. andrea? >> reporter: yeah, kelly. this is something that could have funneled millions of dollars into terrorism over the years. in fact, that's what investigators are checking into right now to confirm all those links. but they just said to us that this involves a group of palestinians, about 16 of them, who essentially would buy cigarettes that were much cheaper down south, massive amounts of these, cartons and cartons, send them by truckloads a couple of times a week up to new york city and sell them tax-free. here's what the attorney general had to say just a few minutes ago. >> we know that some members of this group have ties to some very dangerous people. we know that criminal rings like this have been used in the past to support terrorist groups and others, in other parts of the world. >> reporter: all right. investigators say this ring was led by two brothers. they were the ring leaders living in maryland. they would buy these cigarettes,

store them in a warehouse, and then their driver would pick up truckloads and cart them to new york a few times a week. investigators say this is, you know, we're talking about a hugely profitable business. that the ring made out with at least $10 million in profits. now, in new york city, taxes about $6 for each pack of cigarettes, so the ring alledgedly dodged some $80 million in taxes meant for new york. this, as you were saying earlier, was a major takedown for investigators. they are doing high-tech surveillance on these 16 palestinians for about a year, following from the air, following from the ground, until they actually made the arrest late yesterday. right now they have 15 in custody. one has gone off to jordan. they are trying to track him down over there as we speak. i'll send it right back to you guys in the studio. >> okay. andrea, reporting there live from manhattan. thanks for that. 12 minutes to go before we close it up. worst day in two weeks for the stock market. dow's down 50. >> which tells you a lot about

the last two weeks. coming up next, philadelphia trust michael crofton explains why he thinks investors should be keeping one eye on the exit door. >> and john harwood asking just how far up the food chain the irs scandal actually goes. >> do you personally have any reason to believe, or do you believe, that the white house was involved in this, caused it to happen, condoned it? >> this is called a tease, which means you're going to have to stick around to hear the answer. plus, the latest on what the president will and won't do about the irs scandal. that's all coming up later on the bell. [ male announcer ] with wells fargo advisors envision planning process, it's easy to follow the progress you're making toward all your financial goals. a quick glance, and you can see if you're on track. when the conversation turns to knowing where you stand, turn to us.

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all right. we're less than ten minutes away from the "closing bell." michael crofton of philadelphia trust company says to keep your eye on the exit if you're buying into today's market. >> and from an overall position to equities to a neutral one. they both join us here now. let's start you, with kevin. can you really be neutral? you're really saying that you think we've got weakness here? >> we reversed a trade we put on last fall, when we saw fundamentals falling and beginning to get better, and valuations were much better on equities. so as we've come into the last month, the data has flattened

out a bit. weak industrial data today, for example. so what we did, we recognized that and recognized that stocks are more pricey, less value going forward. we took that bullish trade off and went more to neutral position for the time being. >> does that mean more in cash for clients? >> we moved that money from the equity side of the equation to short-term, high-quality government bonds and other ne t investment-grade bonds. >> this is the best the bears can do? push it down 48? the worst in two weeks. >> this is just the beginning. as the market begins to roll over, they'll pick up momentum. if we get any volume into this market at all -- >> why hasn't there been volume? >> there hasn't been. you're going to exaggerate most of the up moves, which i think has happened. without volume on the downside, watch out on >> what are you talking about? >> i think you'll have at least a 10% pullback, if not more, it could take it down 15. >> why? what's the catalyst? >> i don't know what the

catalyst is. that's the great unknown. the market doesn't feel good to me. it's a financially engineered market. worldwide monetary authorities have flooded this world with liquidity. we've collected 2 trillion in money, which much of it has found its way into this market. i hear everybody say, there's nowhere else to go, which is the absolute worst reason you could make. other markets ended at '87, '99. >> and a lot of people making the analogy to the '90s. a lot of people saying there is somewhere else to go. >> i'm out of the bond market completely. >> what are you in, cash? >> we actually rotated two weeks ago from staples into tech, because tech was really cheap. >> so there is a play to go. >> poking holes in this. >> i'm sort of schizophrenic. and i have my eye on the exit. i've got a strategy in place, if we see this market starting to turn fast, we'll head for the exit and push a button and sell

a lot of stock. >> we're looking for anything with a great balance sheet, consistent profits, and you can find that in health care, you can find it in consumer side of things, you can find it in technology. >> some of the staples are getting kind of expensive, aren't they? >> i'm talking mostly the consumer discretionary side of things. we do see, there are companies out there that offer good value. look at walmart, i know that's not quite discretionary, but what you think about, is a consumer who's gone through a strong period of retrenchment, they're beginning to feel better about their finances and they're not going back into the cave. they're going to continue to spend. >> walmart's earnings report and their outlook was weak. the stock is getting killed today. are you a buyer then on the dip in walmart? >> we're bullish in walmart. we think walmart has a great balance sheet, all the things we love to own and a fantastic value. if you look out three, five years from now, i think you'll be very pleased owning a stock like walmart at these prices. by the way, stifel does make the market in walmart stock. >> we'll sell staples, sell

discretionaries. they're overvalued in terms of pe versus their growth rates. not a good place to be right now. >> we've got to run. we're back with the closing countdown right after this break. ♪ bonjour ♪ je t'adore ♪ c'est aujourd'hui ♪ ♪ et toujours ♪ me amour ♪ how about me? [ male announcer ] here's to a life less routine. ♪ and it's un, deux, trois, quatre ♪ ♪ give me some more of that [ male announcer ] the more connected, athletic, seductive lexus rx. ♪ je t'adore, je t'adore, je t'adore ♪ ♪ ♪ s'il vous plait [ male announcer ] this is the pursuit of perfection. otherworldly things. but there are some things i've never seen before. this ge jet engine can understand 5,000 data samples per second. which is good for business. because planes use less fuel, spend less time on the ground and more time in the air.

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weeks looks like for the stock market. the dow jones industrial is down about 45 points. the nasdaq and the s&p in negative territory as well. i want to talk about a couple of the big stock stories of the day. cisco certainly has to be one of them. take a look at that stock, up almost 13%. when was the last time you saw that? better than expected earnings, the outlook pretty good, some of the comments from the ceo, john chambers, positive as well. walmart going the other direction, down about 2% on disappoint earnings and somewhat cautious comments from its ceo. and we turn our attention to after the bell, a couple of pretty big earnings reports coming out. dell is going to be closely watched and you know we'll be talking about jcpenney, get the realtime analysis there. back with matt cheslock, what do you make of what we see here at the market? worst day of two weeks and we're only down 37. >> this isn't a dip worth buying. i would be more concerned about what wal-mart had to say as far as cisco, as far as the overall economy goes. if the consumer starts stepping back and taking pause here, maybe that's something that's

going to scare this market and have a move lower. >> really, what's the feel on the floor about where you think we head as we finish the week out? >> i tell you, the floor is really confused. no one really sure why we're going up, especially with what we have going on in washington right now. it's really confusing. but we're starting to see some signs that maybe the data is a little bit light. >> that's it. second hour begins right now. >> that historic rally taking a breather today. welcome to the "closing bell." i'm kelly evans, in for maria bartiromo, who's back tomorrow. scott wapner will join me in just a second. here's how we're finishing the day on wall street. the dow looks to shed about 50 points, putting in its worst performance in about two weeks. nasdaq and s&p also finishing lower. the dow heavily weighed by the performance of walmart and cisco, doing better, but not enough to turnaround a day where we're finishing in the red. the dow pulling back from yesterday's record and ending at session lows. >> bob pisani has been watching the action all day long.