i'm optimistic but the jury's out. >> thank you. >> you've got him all week. >> street signs at 2:00 p.m. promo, join us tomorrow. >> that's where the magic happens. >> it's a great show if you back out the anchors. >> join us tomorrow. "squawk on the street" begins right now. ♪ good monday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer david faber. the new week kicking off like last week, dramatic downside action overnight in asia, shanghai composite posts its biggest one-day sell-off in nearly four years as worries about a credit crunch dominate the head lieds. u.s. futures dropping in response after the worst week for the s&p in april. q2 ends this week. a ton of data and fed speak.

ten year yield hit 2.67 up 100 basis points since may. european markets, losses there more than 1%. markets in the u.s. bracing for more losses after turning in their worst week in two months. shanghai venturing into bear territory on news the central bank refrained from injecting additional capital into the markets. u.s. treasury yield, new 22-month highs. s&p below its all-time intraday high on may 22nd high, that is the day the fed chairman testified on the hill and hinted the central bank might scale back the central bank's bond buying program. good chance majority of stocks are going to head lower? >> i go through the charts over the weekend, i'm not a chartist. we were joking how technical i've become. i see a lot of companies, their stock seem to be in the wrong place, want to go down, particularly the companies that are still bond market equivalents because when you look at utilities, look at some

the tellcos they don't yield if they should if the ten-year's going to three. i keep thinking about james carville's quote, he wants -- he was trying to figure out who's powerful in the world. i want to come back as the bond market you can intimidate everybody. i'm listening to how people still in charge of the market. at 2.67 have they lost control? i talk to people who are positive, believe this is, yes, a near-term dislocation. >> right. >> but not one that is going to be throughout the summer and have long-term implications. they worry more about china. >> and brazil. >> if you're saying they've lost control, perhaps it's a different story, that being the fed. >> i think you have to readjust. what would you do if they go to three? if the ten-year goes to three? a lot of stocks that you're in that yielded three. a 3% clorox is not as good as 3% ten year sitting at home trying

to prevent risk. that said when you talk about what david's saying we're not in where earning season is yet. alcoa the first. aluminum hits i don't know what kind of low. i felt like saying i'm done with aluminum here. the stuff is -- aluminum foil. >> you can use it again. >> alcoa can't wait. copper at its lowest since july of 2010. >> how about that? >> we have earnings this week, general mills, walgreens. >> someone downgrades walgreens. i like general mills. people keep chattering blackberry about make the number. friday, carl last week, e-kay, one of those weeks at the conclusion of my mad money on friday i sat there. i sat there. i leaned back. if you poured me a mai-tai i

would have had tonight the set. it's breath taking to watch tnx, tnx is in charge and that's the way to monitor it if you want to be at home and don't have a bond terminal. >> talking about a yield jump, according to dan greenhouse the largest since 1962. >> what does it tell you? >> in that time period. >> in early may we were 162. now we're 267. that is apretty violent -- we've talked about the damage done to the like of municipal bonds. >> yeah. >> high yield market. one wonders what will happen there, whether people move out or start to see opportunity when you take a lack at something like the mub, right. >> look. at a certain point we've got to settle down. joe was asking me if anything to pick among. a couple of stocks, i have some hi higher-yielding situations.

some mlps have gone to six, seven. someone says, you know, the filipino market is really the one to watch. i'm like, you're kidding me? i've got look at manila now? i'm watching brazil, the riots. i'm thinking, they able to dot olympics? check a london broker. you don't make that much money. if you bet against the olympics in brazil. >> right. where the focus in that part of the world, china. 5.3% decline in the shanghai composite though the lending rate did come down from extraordinary levels late last week. it's still very high. >> there's a bank where people are in fact saying they have lost control, right? >> well -- >> much more so than the fed here. >> what will happen if they decide to repatriate the couple trial in bonds they have a lot of the institutions are kind of what we would call nonbank bank naz are trouble.

>> they are going to do that now? i hope not. >> look where bernanke picks. there are hawks speaking this week for the fed. who is going to say the magic word? fed funds rate has to go higher. that's what we don't want to hear now. if you're a five-year cd .81, banks are coining money, but who cares? i mean, i've got turkish riots and brazil onriots and another guy says, you know what? that safe haven of indonesia is no longer safe. i didn't know it was a safe haven! the year of living dangerously, suddenly the asian bond market. linda hunt. >> yeah. in fact, good point, banks are reportedly presented a proposal to the fed how to pay for restructuring of the nation's largest financial institutions in the event of future crisis. according to the "wall street journal," the plan calls for big banks to hold a certain amount of debt and equity used to prop up any failed bank subsidiary that would be seized or is

seized by regulators. the journal says the plan was give tonight fed ma 22nd and is an effort to preempt what might be tougher regulations in terms of the treatment of failed institutions, capital, all of those things. on friday we saw the banks defy the rally. they were down. >> right. >> down sharply. all about wells fargo, interestingly. >> a regional bank, makes money on the cds. >> which would be hard pressed to meet the ratioed -- we don't know whether this will in any way be accepted as a plan. >> right. they're all down. >> they're all down. >> the bank of international settlements on saturday. they come out with something that says central banks have to stop the bubble creation. it's time for the politicians to take over. what, are they kid me? >> you think they're wrong? >> what politician is showing leadership now? i feel bernanke is boxed in a corner. rule number one, trader never

boxed in the corner. did he ever intend to be the world's largest bond trader? i don't think so. you teach at printton and start swinging bonds around. >> especially in the job longer than you wanted to be. >> when do you come out now? does he come back or just kind of fade into and be able to start teaching, what second semester. >> gives his waves good-bye. >> meanwhile, the president kicked him out. hey, enjoy yourself. spend more time with your family. >> pefeels like event filled la six months of his term, don't you think? >> it does. look we get earnings. who knows where we are. negativity. what scared me the most you have bullish guys. >> i do. >> i don't want to hear bullish guys. >> no? >> i want bearish guys. >> they've had good years. they don't feel it's going to turn over the basic construct of wanting to own stocked in this

period of time. >> u.s. stocks, dollar could guy up, copper under 3 squares me. chine nap does worry me. china has become where you get up in the middle of the morning, like i get up in the middle of the morning, and it's just -- it's like scream seven, i don't know. it's freddie. >> you can tell by font size on the websites all using 78 point. >> now it's chybor. >> i went to see a mere cat exhibit all huddled together. >> did you see a taper exhibit or no? >> no, just mere cats but they are worried about the bond market. they would not have been huddled this way. >> the weird thing we get sun t tory pricing overnight. wednesday hd supply prices here. >> so long. >> a couple last week as well. >> it is the inverse of all of the tone, right?

>> goldman starts the housing group and a couple that they don't, a lot they don't like. someone mentioned sherwin-williams and gown down grade on whirlpool. >> what government do they get? do they stop with olympics? come on, this one of those let them eat cake situations. building the olympics, world cup. in the meantime they forgot about the people. united the people, never be defected. remember? >> yes, i do. a rising middle class people have time now to think about things that could be better as opposed to worrying where their next meal's coming from. >> i don't know. >> somewhat a high-class problem. i don't want to be batista right now. >> that was a great piece. did you read that? >> no. >> used tonight in the "new york times." >> world's richest man. now trying to meet a margin call. >> he may be bankrupt. bankrupt for him would be a good lifestyle for most.

>> going from $34 billion to $4 billion, that's tough. >> that's a high-class problem. >> how of pain. it's in the mcmansion of pain. before it was a 40-room house of pain. it's shrinking. >> the house of pain where you take a segue from one room to the next. >> no offenseoffense, because m executive producer goes there, but this is in east hampton, hampton bay's move. my house is -- i have a house near asbury. he's going to rent my house. no, he's going to take my ocean grove place for month of july. he can afford it. >> at least you got somebody. that's good. >> i needed a renter. i need additional income. because brazilian market. >> get the security deposit. >> i want it in goal. oops, gold, holy cow, no! >> the guy likes to party.

>> m&a news. the ceo of tenet, trevor fetter. and late, dog lebda, take on rising rates. goldman initiates home builders as well. >> i want to buy high quality here. right into this. i'm willing to take the other side of the negativity right into this if it's the highest quality. we don't have earnings. i'm hoping. that's why you mentioned earnings this week. >> one more look at futures here. triple digit action. more "squawk on the street" in a moment. in today's markets, a lot can happen in a second. with fidelity's guaranteed one-second trade execution,

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♪ my baby don't mess around because she loves me so♪ some deals to tell you about this morning. britain's vodafone agreeing to acquire cable deutsche land for $10 billion. in the u.s., tenet health care agreed to acquire vanguard health systems. that deal $21 a share in cash. about $1.8 billion in equity value adding another $2.5

billion in debt. interview with trevor fetter later this morning. with that deal, we'll keep an eye on vanguard. big premium at 21. a significant winner. consolation in the hospital sector is afoot. hma out there with its board and management moved into a sale process. we'll see who else other than perhaps community health shows -- community shows up for hma. vanguard taken out by tenet. talking about what about eight times 2013 ebida. >> not bad. >> tenet spent a long time cleaning up its track record in terms of compliance. delevering its balance sheet. it is in a position to start to help consolidate. there you can see some of the key metrics on the deal itself. >> that's a good deal if -- for the affordable care act. >> yeah. >> united health, wellpoint,

stocks have held up so well. people are starting to really get ready for at fordable care act and profit from it. >> we'll see. tomorrow a big hearing on the hill in which they'll look at medicare and specifically also some of the provisions of obama care, as others call it. >> some guys who are -- hate it still? >> it's on the house side. >> oh the house side, yeah. >> fireworks there. >> wow. look at that move up on vanguard. >> that is sensational. >> yeah. is it a big move up. not high multiple. they have a big presence in michigan, particularly detroit. we'll talk to trevor fetter about that later. the bigger deal, cable deutsche land. doed vodafone has a lot -- kabul. >> what malone said, call the whole thing off. >> liberty global. vodafone trading at five times

ebida paying 13.8 times. that's a multiple disparity. >> wow. >> think about the wireless business in europe it's a commodity and becoming more so. mobile termination rates that continue to go down. >> right. >> you've got this need for convergence, many any where you need fixed line assets. >> you mean the triple play? >> yes, or quadruple play. >> dry play. >> right? the quad play. and here they do beat out liberty global. trades at only eight times. this helps overall multiples. i said this liberty global's exit will to be sell to vodafone. remember what happened when malone took at&t paper and sold tci. interesting battle between the two. always question on the liberty global side whether they can complete the deal, given concerns even though there was an overlap the german regulators would say no way.

>> how about telefonica, selling irish to hutchinson. the deals that are happening in europe in cable, some distressed, some opportunities. remind me of a consolidation in america years ago. it's happening so quickly. and people are talking about charter. is there anything -- any smoke, fire on global charter? >> i did my report last week friday. >> that is people -- >> i -- there's nothing new to add. i'm glad you asked. i'm not sure there's not that much new. chatter about cablevision. would they consider selling? i hear various things. the key thing you do need to keep in mind what we've reported. charter is focussed and its key shareholder 27% liberty media, again john malone. >> he's everywhere. >> focused on trying to bring another wave of console day, using charter perhaps is key with tom rutledge -- there's john -- well regarded as operator at charter. we'll see whether they succeed in that.

various impediments to any number of deals you might consider. >> verizon at a spike is coming back. >> what about at&t at 5.2 yield? >> not justify. i think it can go to 5.5, 5.6. >> sprint. >> that's done. that's done. >> now because american towers and the real estate trusts, american tour is the worst chart in the book but probably the company with the most money. >> and benefits from the sale. >> if the bond market were done, i would go reach for american tower. i want to see this tnx back off. tnx backs off, people come in, that's what everyone should be watch, that's the ten-year and you feel more comfortable. i need the velocity to stop. the velocity, 6:00 a.m. to 7:00 bond market rally, it's just -- from 6:00 a.m. to 7:00, trying to get dressed and the bond

market's saying, listen, don't take that shower. >> you remembered your pants, impressed. >> i ripped my pants on the way over. i tripped. you can't see. >> last week cramer told you to get used to a new market. today new ways to play. "mad dash" is next. futures. more to come with futures including important decisions from the supreme court in 40 minutes. [ male announcer ] my client gloria has a lot going on in her life. wife, mother, marathoner. but one day it's just gonna be james and her. so as their financial advisor, i'm helping them look at their complete financial picture -- even the money they've invested elsewhere -- to create a plan that can help weather all kinds of markets. because that's how they're getting ready, for all the things they want to do. [ female announcer ] when people talk, great things can happen.

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more than six minutes before the opening bell. time for cramer's "mad dash" ahead of the monday open. >> allergen. >> on friday the fda put out rules giving other generics a path to restas sis. a lot of guys downgrade. morgan stanley is worried about it. goldman on friday said, be careful allergen. but look at the decline. >> what is that a result of? >> well, they didn't have -- in the outyears they weren't able to develop a new drug tho compete. a company that had a big premium. that is disappearing overnight. it's a great company. it's important to point out, a great growth stock under tremendous pressure. >> something else under pressure, gold. >> goldman sachs has been the

total axon gold. since they downgraded told you to sell at 1500. no, they come back and say, this year goes to 1300. that would observe kay. next year, 1,050. 1,050. >> 1050. >> what is that saying? >> rates are going higher. a weird environment. why has gold in this environment given risk assets coming off? deflation worries, why is goal suffering? >> trades with bonds. right now inflection point is trading. cautious too much money to carry gold. the same with aluminum and copper. this is a dangerous trade for gold because it is out of the -- remember it's repealing the great bull market. >> it is. >> i think gold has a place in people's assets. i don't know how the -- herb greenberg has done fantastic

reporting about the problems in etfs. >> yes. >> be careful. if you like gold, think about gold coins. we don't talk about that typically. i think they hold their value. >> another challenger for the bulls. another challenge is what i meant to say. one of the worst market weeks of the year what we're following now. opening bell and market action straight ahead. [ male announcer ] i've seen incredible things.

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♪ all on thinkorswim. from td ameritrade. you're watching cnbc's "squawk on the street." opening bell in a minute. start the week with the dow off 743 points from the may high. not quite 5%. but we might get there in a hurry this morning. >> again, one of the things i tweeted, listen, everybody's negative. so sometimes it does surprise you. i just need to see what area surprises you, western digital, we didn't get to that. they did a deal. along with micron and amd. subcurrents of what's working and what's not. >> absolutely. worked our way through to china. the bond market today, copper and gold, talked about the deals with david. and we'll get the opening bell

here in 20 seconds. at nyse, it's rcs capital celebrating its recent ipo. at the nasdaq, junior achievement of new york. [ bell ringing ] >> have you noticed the city decline. >> >> yeah. >> this is like become -- michael's doing a fine job but -- >> now it's a nice short to get hedged, right? >> that's what people see it as, thank you for bringing it up. i think it's a short to get hedged. one of the things that's dangerous, they finished the sale of morgan stanley. people say, this is a pure play on what's not working. >> right. >> though the bank is so much better than it used to be. >> while we're on the banks, they are weak. they were weak friday despite a positive session in part because of concerns, broad concerns,

reports about minimum capital ratios, tier one, where we'll end up. today we have this story on the plan that would say you can combine -- they are putting forward a plan, combine debt and equity, make sure it's 14%, then you'll be in a position to help out. calling it a bail-in. long-term creditors are in there, unsecured, they're going to make sure banks don't do anything stupid. as you see, back to real-time exchange. we're negative across the board. banks off 2-plus percentage points as i'm looking at them now. >> the big losers, housing names. kb home. this call is interesting. they have a couple of buys, most neutral and interesting sells. >> when you look what they said, what popped at me is that they -- polty's a sell, it's good. only toll of the majors are buys and tolls the wealthy person's home. so that -- that rollout has not

helped and tolls -- clinging to a level that has held multiple times. >> we should mention pfizer. a spin-off from pfizer, an exchange offering. pfizer done own any more of the company. used to be part of their business. call it 400 million shares. had been exchanged did pfizer accepted shares of pfizer stock in exchange for 400 million of zoetis common stock. a lot of people planning the exchange offer in the risk arbitrage community and the likes. usually they go well. >> how were you profiting from that? >> plan, a lot of people long pfizer, frankly. >> right. i was going to say, pfizer alone is better so a fantastic animal

health company, i thought this was good financial engineering. you know how i hate up monday mornings? down monday is a license to pick away. i get more bullish. >> that's what you do. you mentioned apple in your note. jeff friday's cutting their target. getting close to the three handle. >> it was better when interest rates were lower because it was an interesting bond market. >> love to look at apple bonds. got to be down 12% on those, easy, right? got to be in the 80s. >> secret of this new apple is playing the bond market. that's -- it's a bond market apple. used to be putting out new devices, flipping around the bonds. >> they sole at a great time. shares of facebook down almost 4%. new plan in terms of offering news. >> my charitable trust owns it. that was one of the better performers last week. >> disturbing it reports about a

year-long leak of information about various users' accounts that has the stock down more than 3%. talk about a name that's not participated even when a market was on a roll. >> no, trading with the filipino 12-year, i don't know, whatever it is there. trading like an emerging market stock which is interesting. no yield support. obviously speculative play. whatever they seem to announce doesn't seem to work but it's -- people are talking about in in the out years as being cheap. i know it sounds strange. >> i downgrade on deere. >> cash receipts bad for the farmers in zeerer dedeere has b down. caterpillar at a level where it has held before. but that group is under severe pressure. farmers are under severe -- the cash receipts not that great. >> you didn't get a farm bill. >> you didn't get the usual

giveaway. monsanto down. reported a good quarter, doesn't seem to matter. a lost sectors so heavy you look and say let's give them room. when we get this vicious decline it's incumbent on people to take a look at something you like that yields more than you thought that might be insulg lated. say ten year goes to three. >> and? >> you can do some buying of a 6% yield. >> yeah? >> yeah. i think so. >> i'm looking for any green on my screen? i'm seeing sprint up. >> johnson & johnson. >> of course as carl pointed out the shareholder meeting will be the 25th. >> the late mark haines would say look at this, this is almost all down volume about look at higher quality stocks. take some pain. >> the couple of earnings we are going to get, blackberry will make numbers when they post

friday. >> i throughout it was surprising. a stock, by the way if you bought at 12 and sold at 15, printed money for a long time. that strategy's in force. >> walgreen, right? >> the day ahead of the quarter, wow, man, i always feel like that guy must have some insight. geez, walgreens a good company. maybe stock hasn't had a big move. >> all right. is josh with us today? is he filling in? let's get to josh lipton on the floor. >> carl, we are kick off this week here in the red. obviously you had concerns about the fed signaling it could taper. its bond buying program all eyes on china and the liquidity squeeze there. the worry is that that credit crunch could mean a further slowing of the economy. goldman sachs downgrade its gdp growth forecast for china. china stocks react. biggest drop in nearly four years. and the spill-off in other

markets. japan, obviously making news for all of the wrong reasons, it drops another 1.3%. major european benchmarks, well off intraday highs. cac 40, germany's dax down. keeping our eyes on the chinese names listed here in the u.s., a coal mining company, obviously, if we're talking china, talking about commodities. dollar strength greenback at a three-week high putting pressure on dollar denominated names. a three-week low. precious metal, gold, silver, covering their low nest 2 1/2 years. commodity stocks on our radar. look at rio tinto, billiton. turning to the u.s., light day in terms of earnings. you are getting a read on manufacturing in dallas.

that hits one hour. mr. faber, back to you. >> it wouldn't beday without mengtsing dell. another new special committee investor presentation. as everybody's lining up to meet with institutional shareholder services, i reported friday, michael dell did. we saw his presentation. today the special committee. it's much of the same except this time they've added pages 32 through 35 where they go after mr. icon again in his latest plan and say, this one also in our prn has a funding gap. essentially saying when you get $15.6 billion available to return $14 a share to 72% of shareholders or roughly 72% of all shares tender which is equal to around ten bucks a share, actually, near term debt maturities, adjust for minimum cash needs, adjust for cash available for the tender offer

and you get $12.7 billion which gets you to 8.15. under the icahn plan, 670 million shares outstanding after the tender. if they can do 3.3 billion in operating, you divide by 60 million a huge earnings per share number. throw a low multiple i think this has a great deal of value. >> agree. i'm coming around to your view. >> not my view. >> to that view. >> a great division between a sme special committee than done work saying this is a good deal for shareholders, the best we could do, and icahn who says why aren't you levering up shareholders? letting us take the risk. an interesting diversion of opinions.

iss will have an important role to play in this july 18th vote. they come coming back. they do it yet again with the latest plan. if it's 10 versus 8.15, it's a big difference. >> people feel they got too too cheap. western digital, people feel that too cheap. it's possible that it's worth a shot. >> we'll find out july 18th. going to be really interesting. we'll see a lot of back and forth. meeting with him today and icahn meets later today as well with iss. >> down 170 on the dow. i haven't found anything to tell the audience. you ought to be a buyer of. as it go lower, to 14,400 a level that has held. that's worth looking at. trying to figure out what to do. i find there's a lot of stocks,

not every stock -- some companies are doing quite well and maybe can make a difference. general mills ahead of the quarter maybe that works. treasury yields are -- remember, follow with the tnx. draeshry yields keep rising. they bounced a little. rick santelli. >> glad you mentioned etf. etfs didn't exist in the previous big bear markets. nothing wrong with etfs but i'm sure they're adding to volatility. two-day shachart of tens. look at low yield on friday and high range today. up 24, 24 basis points from that low yield on friday. and if you open the chart up, the comps going to stick around august, early august of 2011 because that comp goes up towards 2 and 3/4 as we hoover at 2.62.

boon participating not as much. up 24 basis points from the low yield. they're up 18 basis points from the low yield. open the chart up. comping back to march of 2012. look at the belly of the beast. china is reason one deleveraging right up there. but as a function thereof, shy bore, last week 11.75. it doesn't dismiss the notion that the chinese are doing this intentionally and have stomach for it. foreign exchange, the dollar/yen, the dollar versus the yen. there's a correction. look at europe reversus the dollar. more substantial than the dollar/yen to many. look at dollar index, you can

see on the year-to-day chart it's having a nice run. rates up. dollar up. gold under pressure, it makes sense to traders here as the market remains proactive. maybe a pain trade, liquidity mode. all of the above. back to you. >> rick santelli in chicago. kelly's here, sharing with us what she's watching. no dearth of topics. >> trying to figure out the conflew uence of market moves t kept people busy over the weekend. when they look at whether the sell-off is as obvious, whether this move higher in rates is as obvious and simple as it might seem. a couple of drg thiinteresting . last week, down transports, cyclical. next, taking a look at metals hardest hit. gold not the top of the chart. that would be silver and palladium. copper at a three-year low.

cyclicals, growth worries. the yield, look at difference between the ten-year and 30-year, i've been watching this all morning, it continues to flatten. we peaked eight difference between those two. that was a couple of months ago. now below one this morning. this idea of higher inflation, not happening. it's the ten-year making bulk of the moves and the 30-year coming. >> ten-year a bad piece of paperwork. >> exactly. >> why? >> it's a lot of people saying what we're seeing isn't inflationary spiral because inflation expectations are falling. the spiral in real rates the sell-off would make more sense if inflation were yielding bond. the problem, the perceived change and monetary policy. so it's going to depend on the

data. either we see inflation start to pick up, we get growth, or we don't. and the worry is as he says a real possibility is a deleveraging global economy shrinks faster as pockets of levelled recovery hole quick pily. >> don't leave us with that. thank you for doomsday. >> here's james making the point. look this is the fed trying to take a preemive approach taking down market laev raj. if they keep the s&p 500 in a 1550 to 1650 range as they reprice to 3% this will be a work of art. big if. >> i could go for a cezanne here. >> like jackson pollock. >> the ten-year as much as it's clearing out money in positions

from a fundamental point of view, does it look so bad when talking about no inflation, potential for reverberations on rates? risk-free 2.6%? >> it's just four sellers, i think. >> absolutely. >> yes, i agree. it does not seem that bad. i'm worried about a soup can market. andy warhol. >> very nice. >> impressive stuff. >> when we come back, tenet buying vanguard health systems at more than $4 billion. the president trevor fetter will join us later on. a major announcement later today that might include oracle. >> so good. >> a big day for microsoft. we'll handicap possible outcomes of both. take a look at the bright spots. there aren't too many. dow's off 158. the vix hit its high for the year. ♪

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kicking off last week of the month and quarter, two dow components holding on to green levels with the dow off 152. s&p on track to lose 2% plus in june. breaking a seven-month winning streak. let's get to jackie deangelis. >> good morning. crude futures turning a corner here in the last couple of minutes. west texas intermediate trading at 93.88, slightly above the flat line. we did see pressure on crude early on. brent dipping below 100 a barrel on the concern out of china. also stronger dollar and pressure that we've seen on u . equities. goldman sachs cutting its forecast on gold, looking at 1300 by the end of the year. 1050 by the end of next year. goldman doesn't expect jewelry demand will offset the pressure

we're seeing in gold. want to highlight copper, near a three-year low. pressure on the back of the client in china news as well. >> high wire dare devil nick wallenda completed his walk over the grand canyon. unbelievable to watch. took him 22:54 to walk 1400 feet along the two-inch cable suspended 150 feet above the little colorado river. there are no words. >> no. >> the squawk on the tweet question. the market is so scary right now, nick wallenda wouldn't even touch it. what name? we'll get you responses throughout the morning. as you can see, he landed safely, kissed the ground. now wants to walk between is the empire state and chrysler billing? nine blocks. >> a long distance. you. >> not got an provel for that.

>> let him do -- cristo did the gates thing. >> a coal stock. fears cool stocks. as mir cats. >> you mean coal? >> the issue with coal is the president's going to try to cut back from coal plants. the environmentalists trying to keep us from exporting coal. where does coal go? watch the rails. watch -- kelly mentioned transports, watch the rayls. coal-related. >> jim's 6 in 60 in a moment. [ kate ] many women may not be absorbing the calcium they take

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another rough day at beginning. down dow 188. 6 in 60, isis. >> diabetes good news over the weekend. and maybe they have something. anytime you have something big for diabetes, it's positive. >> fbr neutral on amd to buy. >> i've been trying to select a couple of the contrary plays. amd a couple of cycles with gaming, like this call. >> xilinx. >> the stock is very good. i like it. >> nike does report this week.

>> okay. nike not constructive. they have china, no one wants china. >> jpm on google. >> one that you may want nobody few think things are turning, fundamentals are great at dole. >> talking 1025 at google? whirlpool. >> whirlpool has been a great brazil yian play and suddenly everything brazil is toxic. >> the manufacturing renaissance, it's a positive show. i know it's not in keeping with the market but i like to go the other way. when everyone's too euphoric i like to temper. i'm not saying go into it. get started thinking if you don't own any stocks, people say they missed the move. you're getting a second chance. >> sounds good. >> great to have you back. so exciting. >> i missed a lot of good action last week. with the down 200.

>> take a look. >> level of confidence in bargains is soft. >> go to 1440, downside target where i start looking. >> on the dow? >> yes. that'ser are verizon i think will give you good yield, maybe att yields 5.7. i see downside but it's not unfathomable. >> see you tonight. 6:00 and 11:00 p.m. last week's markets felt worse than they actually were. we'll find out where they suggest you put your money. trevor fetter on his company's deal for vanguard. [ male announcer ] the mercedes-benz summer event is here. now get the unmistakable thrill and the incredible rush of the mercedes-benz you've always wanted. ♪ [ tires screech ] but you better get here fast. [ girl ] hey, daddy's here. here you go, honey. thank you.

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ah, we can talk about it later. we're putting the wonder back into air travel, one innovation at a time. the new american is arriving. welcome back to "squawk on the street." the dow is down 221 points, picking up where we left off last week with a wave of selling in global markets overnight while you were sleeping. let's bring in rich bernstein and paul schatz. good morning. >> good morning. >> rich, where are we in this narrative? and to what degree, in your opinion, is the fed -- the chairman of the fed to blame for this?

>> well, clearly the fed's to blame for it. i don't know if the chairman himself, personal blame. i think the fed, as usual, is kind of underestimating the impact of the markets and how markets respond. this is nothing new. the fed is notoriously bad at this all through time. what is important is to remember what we're going through right now is not unusual. this is a standard mid cycle period where there's always a tug-of-war between the fed changing policy and improvement in fundamentals. the question is, which one wins? and right now the markets are betting that the tightening of the fed -- what they're talking about, the tightening of the monetary policy is more powerful than improvement in fundamentals. this is a normal discussion. happens in every cycle. >> how do you think this ends? >> the problem is that earnings growth is not yet strong enough to offset the effects of rising

rates. that's in why you're seeing this correction under way. my guess is, especially with mortgage rates backing up and quickly as they have backed up here, the fed isn't going to do a thing. and because i think you know, mr. bernanke loved to look at wealth effect. we have the stock market going down, we have mortgage rates going up dramatically by our reckoning, the biggest in 15 years it has to have some affect on the economy which means they don't do anything. >> do they need to do something? will they feel they have to emerge and say something? it's worth pointing out that it is simply the words of ben bernanke that have tried trillions of dollar of wealth over the last month. looking at to-ing and fro-ing with fed watchers coming out, dovive interpretations and statements do they they behind the scenes are worried to the point they will emerge and say

something dovish to calm the markets, rich? >> inflation expectations are plummeting using the fed's own measure that they like to use. so we don't have to worry about inflation. you think they would. remember part of the problem is that the fed has this notion that clarity is good and opaqueness is bad. and so what's happened they lead people down a path where people think think have certainty and the path changes. and now they have to find a new certainty. and that's the downside to this open communication that the fed wants to pursue. and it actually adds to volatility. it kind of defeats the purpose if you ask me. >> what's going on here? look at ten-year, yes, jumped overnight but is since coming down. stocks off more than 200 point. there's a sense that in fact it's the spiraling increase in real rates. part of which is a result of inflation expectations falling

that has people spooked. how long can that last? first, simon mentioned that bernanke was destroying trillions in wealth. let's not forget what bernanke created on the way up. the fed's in a tough spot. i agree with rich, they wanted to have clarity, they wanted to be transparent and realizing that sometimes full transparency isn't what it's cracked up to be. regarding your question, the moves we're seeing now, everything is so compressed. what would have taken in the '90s weeks and months to transpire is transpiring in a period of days. regarding the ten-year, the ten-year's going in a linear fashion wherever it's going to and we're probably in the fourth quarter of the move. i think that you're probably close to the end of the rate rise in the short term. >> if you take it in total it's more than just a careful guiding how the world is changing. it's not the question of the

fact there's no longer free money forever. now you've got the people's bank of china engineering a cash crunch to warn its overextend banks. the risk of not just getting communication but making a fundamental policy mistake, maybe not here in the united states but elsewhere around the world is very real at this stage. >> you hit the nail on the head. i'm more concerned about china than the fed. i think bernanke has been dipping his toes in the water, floating the trial balloons. they're not working. i personally do not think the fed's going to tighten money any time soon. maybe a trickle. i do not think they're going to start and we'll taper to zero. in order to get there, you knee rosie economic numbers. i don't think they're going to happen. a much, much, much more concerned about china collapsing than the fed. what the bank of china did, to me, they're trying to avoid a repeat of what happened in 2008 because unintended consequences

they're causing over there that are going to reverberate around the world. >> a lot of -- go ahead. >> emerging markets overall one has to remember were the biggest beneficiaries of the global credit bubble, whether china, india, brazil, turkey, egypt. there were huge beneficiaries of the global credit bubble. we found it interesting, people will agree the global credit bubble is deflating but they want to invest in the places that were the big beneficiaries like emerging marketed it no accident emerging markets underperforming in the s&p for under five years. what you're seeing now is the realization that people are finally starting to realize that the emerging markets have very, very, very serious problems. >> yeah. we learned that lesson every ten years or so it seems. >> exactly. >> emerging market down 70%. people have such short memories when it comes to this stuff. emerging markets that rubber

band is stretched as wide as it ever gets stretched. it's going to snapback over the next couple of weeks or months. it's a better selling opportunity than a buying one. >> rich, back to the u.s. what level do you get interested in equities? and how severe is this pullback? >> one has to remember -- the question is bear market or correction? i think it's important to remember that bear markets occur generally when the fed wants them to occur. i'm not saying they want them to owe can but tightening monetary policy so aggressively we go into a full all out bear market and potentially recession. we agree that's not the fed's tint here. the fed messed up dramatically in the way they think the market would respond to what they were trying to say. but their intent is not to contrain money. their content is not to constrain credit which would push you into a bear market. that's the most important thing for you viewers, to say, what

causes a bear market? and it's the fed kind of wanting the economy to slow down dramatically. i don't think that's where we are today. >> let's hope not, at least given everything else we have to work with. thanks, guys. >> china, shanghai composite falling sharply overnight. let's bring in cnbc's eunice yune from beijing. great to have you on the line. if we think it look bad in the u.s. it was worse in china. >> chinese markets ended down over 5% and investor were jumping out of banking stocks because of what you were talking about, the concerns about the credit squeeze. now, the chinese central bank is -- appears to be imposing some discipline on the financial sector. it issued a statement saying liquidity is at renal levels and that major banks should play an active role in stableizing the market. the main takeaway is that

chinese authorities are getting serious about economic reforms and they are getting tough on the bank. so the question that people have here is now far are they willing to let things go, and can they do it with triggering some systemic risk? what we learned last week how fragile the entire system is. the government really didn't make drastic policy changes last week but what we saw was banks jumping up and down and basically not knowing how to handle the situation because they're so used to having the government come in and help out. so, a lot of people have been wondering if the authorities really do try to rein in excess, could there be a mis-callation, and how would the bank as just? >> sitting here, looking at china, it's hard to come to any other conclusion, the fed wanted this or tacitly happening.

is there anything wrong with that interpretation? >> one of the things that a lot of people have been asking is you know just how much control does the government really have over this situation? and you can argue because the chinese government is in control, that it should be in control. and the fact that it does in that it can push through direct lending and it can instruct big banks to lend to smaller banks which is what we're hearing they're telling some of the bigger banks. the fact is that there's so much informal lending here is evidence that the authorities aren't in total control and that's what's scaring people. we saw over the weekend that the state-run news agency shinua run an editorial on shadow banking. we know there's an evidenffort shadow banking. there's a lot of different ways that -- on the one hand we're

seeing now that there's this tightening going on to try to stop unofficial lending but at the same time, it's pushing others who can't find money through official channels really off the books. >> exactly. >> one guy said he was really concern bade lot of companies who couldn't get the money now through official channels going to the black market. what we're seeing is basically the market running ahead of the regulators. >> sure. also again, having consequences for trading around the world. seeing copper near three-year lows on the back of that. >> financials here are taking a beating with the broader markets. jump in the ten year starting to impact the banks. citi group down over 3%, bank of america, morgan stanley, jpmorgan down 3% apiece. jason goldburg is manager director and senior equity analyst. thank you for joining us. >> good morning. >> tell us what is happening to

the balance sheets of the banks as we see asset markets sell off? >> certainly. one of the bigger implications unrealized security gains which for the large banks in the u.s. $32 billion at start of may. fell to about $15 billion in mid-june as ten-year yields backed off and likely down further given where rates are currently. so that's the biggest near-term implications and that impacts tangible book and basil 3 ratios. >> how do you navigate this? >> the groups selling off, clearly, some implications of the backup on the ten-year, balance sheet, mortgage activity, there's some concerns in terms of global growth slow down. concerns on friday in terms of capital ratios and ultimately what does the fed end up focusing on and what level.

a lot of cross current events weighing on the group. the bank stocks outperformed every day last week. the broader market sell-off and the banks playing catch-off after holding relatively good last week in a challenging tape. >> big banks sold off friday, if i'm not mistaken. >> hit particularly hard as the uncertainty came to head friday and continued to be under pressure because of that. ultimately we think the big banks have a lot of capital. i think there's zil some of the rule rules the fed neats to ferret out. dividends and buyback plans go on without a hitch. >> where do you tell investors to go? net interest margin may benefit regionals, wells fargos of the world, refinancings are slowing down, big banks may suffer. so where do you point people? >> you know we remain constructive on the overall group. look at bigger banks, evaluations have come in.

if you think the u.s. economy continues to expand and you know the short end of the curve follows along, we think the banks will make more money next year than this year and that's a good thing. >> i don't know if you cover likes of i blackrock, what extent are managers taking a hit on the outflows from bond funds? >> clearly you've seen outflows of the fixed income side. equity funds are doing quite well until a week or two ago and that's a profitable segment of the business. asset managers most leveraged to what the overall markets are doing. that could weigh. >> jason, we thank you for spending time. i'll let you get back to work. jason goldberg. >> stocks in the midst of a sharp sell-off, 220 points off the dow. in fact, in terms of percentages it's worse for the s&p 500. more on the sharp sell-off when "squawk on the street" returns.

the yield own the ten-year hit a high of 2.667% today and its jump is the biggest since 1962. how do you play the rising market? rate strategist with morgan stanley, good morning. >> good morning. >> ira, help us take a broader view of what's happening right

now. why has this move been so sharp, and do you expect it to continue? >> two things happened, both fundamental and technical. fundamentally, the change in the federal reserve's stance, particularly with guidance of when they're going to go more to a hawkish buy, spooked the markets. and secondly, very technically, we've reached levels where there's a lot of hedging of mortgage portfolios that's needed -- meant that there's a lot of selling in rates markets. we think it can continue further. we amended our forecast for ten-year treasuries last week to 2. 75% target some time before year-end. we can trade around that and given that there's not a lot of buyers out there, buyers strike going on, volatility and rates markets are likely to remain elevated for quite some time. >> ira, why, for example, have munies been one of the hardest hit sectors here? >> i'm not a muni analyst.

i think in general spread product. talk about corporates or municipal bond they're all correlated and as interest rates sell off, people don't want to be in any interest rate sensitive instruments. so you look at outflows from mutual funds and outflows from bond funds have been the largest in recorded history in the last couple of weeks and real money outflows affect some markets that are less institutional than treasuries or investment grade corporate. >> lawrence, i was going to ask exact that. the role of etfs here. these products make this a different environment. what impact is that having? how much different is that making the landscape? >> well, i think you're right. and the rhine that it's different is the easing round from the fed has been different, right? part of the point in unconventional policy, part of the point in qe is to activate

something called portfolio balanced channel which effectively to get investors in safe assets in the corp assets of treasuries out along the duration curve, along the credit curve into spread product of asset classes to generate economic stimulus. i suppose what happens happened now we have begun to reach the end of the incremental easing of monetary policy, albeit in this unconventional way. wruf offgot to expect the unwind of easing which exclusively applies to rate mark market is going to be seen in this channel. yes, big falls in the allocation into the noncore assets from their highs but that was preceded by a big rise of holdings in those assets, precisely because that was of original fed policy. >> lawrence, a quick last word

there? ira, sorry. >> we have to be -- keep in mind we're going to see more unconventional policy on the other way, right we've had quantitative easing so we're going to see quantitative tightening. the problem is, is that the market's pricing for a policy mistake. you look at things like inflation expectations by the tips market and those have come down dramatically. seeing strange correlations going on, pointing to a fed error. >> fascinating argument. >> hang on. ira when you say the market is pricing for policy mistake, what do you mean? >> that the federal reserve is go heing to be hiking and/or reducing the amount of easing it's doing far too early for the economy to be on its own two feet. you can wind up seeing the economy start to slow. ultimately that's good for things like rates. but it winds up being bad for risky assets like investment grade -- >> ira and lawrence, thank you

both. >> tracking the sell-off. a lot more on the markets when we come back. later on, tenet health care buying vanguard health systems. the president and ceo of tenet will join us later on. ♪ [ engine revs ] ♪ [ male announcer ] just when you thought you had experienced performance, a new ride comes along and changes everything. ♪ the 2013 lexus gs,

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welcome back to "squawk on the street." down down 230 point allen valdez joining me. in term of percentages s&p 500 off worse, 1.7. where are the buyers? >> right. a lot of this i etf driven like you were mentioning in the your last spot. unfortunately etfs don't have any earnings to bounce off of usually think can bounce off of earnings. there's no news today, so they're bounding off the s&p index. >> what do you mean? etfs are a product based on underlying stocks. >> news comes out, earnings good, will help that same basket, take them all up in groups. right now no earnings coming out so they're look agent s&p. s&p hoping to hole at 1570, 1575 broke below that at the moment. there's nothing holding etfs up, so they're looking for a bottom.

>> did it start in asia in the european session or at home? >> we are globe. probably started oversatisfied in china, new york down and a lot of money coming in overoverseas. another thing, shorts, shorts covered two weeks ago when we had the first run. so now there's no shorts to buy the market back. right now there's no short covering going on either. >> people felt okay going into the weekend we had a couple of ugly days but the dow closed up 40 points friday. what changed? the. >> liquidity crisis in china drove this today. still rumors with bernanke tightening down the road. i think it was out of asia that really started it and that flowed into europe early this morning. >> it's not usually -- that should be on a flashing sign here, shun it? the continuten-year, definitely. the higher it gets the worst it gets. >> dow shedding almost 250 points.

>> thank you for that. news out of the tech workle. microsoft set to an make amou announcement having something to do with oracle. jon fortt live in san jose with details. >> reporter: good morning. two things here. oracle partnership and the rumored management shakeup. on the oracle announcement i expect this to be an upcoming version of oracle's core data product. oracle needs to show it can extend its database business in the cloud era. by linking up with oracle, microsoft is signaling azure will ab-i broad business platform not just a vehicle for microsoft's secret server. this just the first of several that should shed light on ballmer's strategy. he's trying to position azure as a business friendly riv toll

amazam rival to am ma zur. the natural successor to windows in the data center. there's the matter of a microsoft reorg which ballmer has been signaling inturn nerna. now that we're moving into the cloud era, the server and tools organize which owns azure has become more important. also as mobile becomes more important, it's conspicuous you have windows phone in the entertainment and windows in windows live division. something to imagine they might fix that here. >> jon, forgive my for asking, if the future of compute organize the future of tech is cloud computing, why too two great big tight ans like oracle and microsoft not attempting to conquer that on their own? why join together? isn't that a white flag and sign

of weakness? >> reporter: you've got these two companies that dominated their own segments of the previous era but still managed to work together quite a bit. most people run windows, most businesses run windows. also oracle database. if they want to gain ground in the cloud they have to show they can work together. if they don't one of the new upstart rivals, s.a.p., sales force trying to build its own platform, they have more of an advantage if these two big folks don't start working together. >> jon, thank you very much. jon fortt there. sell-off is big today. 218 down on the dow. interest rates higher. chairman and ceo of lending tree, talk about what that means more the housing mark which is one key pillar of the recovery of the economy. later in the program. the ceo of tenet health care,

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about one hour into a trading session with the dow down 220 points here, are the stories we're squawking. 7:32 on the west coast. 10:32 wall street. 98% of the s&p 500 in the red today with allergen among the

biggest loser. unconditional improvele fors $8.2 billion acquisition. neiman-marcus announcing it's file a registration statement for tipo. gogo down from its opening price. >> they got through it. they got out in time, didn't they? >> they did. the question is how much the door has closed for a lot of people who wanted offerings for high-yield debt. >> new issues pricing this week. tokyo overnight. interesting time to come to market. >> exactly. the role of etfs huge in creating demand for new issues over the last couple of years. as people pile oust them, discounts products are trading at now suggest it's a harder road. >> what are bankers saying behind closed doors? it's really rough out there or

go, go, go? what happens in the second half of the year. >> this is the thing, if you think it's going to get worse you do it now before the doors are slammed shut. if you want lower rates and they're going higher, i'm sure that's the pitch they're making now. >> this is a problem. even now the s&p 500 for the year is up almost 10% even with the losses today. if you've made 10 psh% 13% and sure what the second half will be it's obvious to book profits, isn't it? >> yes. >> would you not? >> i can't go there. i understand why you would say something like that. >> of all of the things to think of the bright spot moving forward, what would be the bright spot, growth? >> longer term, if you say the rest of the world's getting uglier et cetera specially emerging markets people will put capital back to here and rotation out of the asset

classes, spurred whether about by fundamentals or fear, even though going through a couple of choppy months, that's the danger. >> many in the market have got this wrong and therefore not in the control of the situation which they've created. >> they have this power, and we've seen this before, say 2011, say after things get bad enough, sentiment around. >> one of major reasons that ben bernanke put us in the position the housing market is showing strength, mortgage rates have been rising as a result of the prospects of the fed tapering, all tra low bow reporting encouraging those 0 refinance. so joining us is doug lebda, chairman,ceo and founder of lending tree, 30 million loan

requests and $214 billion in loan transactions that have closed to date. good morning. >> good morning been. >> what's happening in the mortgage market now? >> it's a very interesting and dynamic time in the mortgage market today. what you're seeing is less refinancing activity clearly as rates have gone up. but you're also seeing a lot of people getting off the fence in refi market but the purchase market is doing well. lenders are switching observe to originate more purchase mortgages. one of the great things for consumers and lenders, lender guidelines are loosening. put less money down to get a home and therefore more people who can refinance who couldn't just a few short months ago. >> yes. i appreciate, doug, that might have been very much the story until the last two or three weeks. i'm wondering what it's like inside the mortgage origination department of a bank at the moment, where they can see or the bosses can see by the day in rates rising substantially

whether or not they actually offer loans in practice to people that are banging at the door or not banging at door, as the case may be. what are you seeing? it's dangerous for a bank to make an offer now and perhaps by the time the mortgage's closed you can be in a whole different situation. >> well, the way banks work inside of mortgage origination departments, first off, they're very busy. they're trying to get a lot of things through the pipeline. the way they hedge the interest rate exposure, that's well managed. some lenders, you know, could -- who aren't as sophisticated may have a problem now. essentially lenders are trying to originate and what they're focused on is longer term strategy to start shifting over to the purchase market. retraining people to deal with purchase markets, opening relationships with realtors and really trying to transition their marketing strategy for the longer term and next year as housing market continues to strengthen as guidelines continue to open you're going to see a big shift in the interest.

>> doug, as someone who closed a refi, and i know it's never easy, this was a bear. i wonder if there's possibility that standards, which we have heard, have been loosen, if that reverses, if in fact we get into serious capital events, so to speak, on equities and other markets, too. >> absolute -- the reason you're refi's so hard to get through today because of the loan buyback risk lenders have had. every time a loan is sold if it defaults fannie mae and freddie mac look for any reason they can to push that back. so lenders have very, very strict standards of document agent where you see the widening is in credit scores and ltv and debt-to-income ratios, giving more available but what you hit on, too is key, the jumbo market's starting to come back for securations as wells alones people are holding on their books and the home equity

market. starting to see signs of life in home equity and asking lenders to open those filters on our system as well. >> doug, can i ask, i've heard the mortgage market described as investors being on strike now for weeks. i wonder if you can talk about whether we're seeing relief there, if that spread between mortgage rates and treasury rates is coming in in the last couple of days or if the opposite is happening. >> no, you're definitely seeing -- the spreads of mortgages over treasuries a few months ago were at record proportions. the reason is that's how lenders control their flow. every mortgage shop is capacity constrained. when they have too much volume flowing in the way to do that is raise prices. so you're starting to see the spread come in dramatically. it moving back towards more normalized levels as opposed to the record profits that lenders have seen over the last couple of years. >> let me ask you the question, how strong do you think the mortgage market will be in six

months? as strong -- or indeed the housing mark did as strong as it is now, stronger, or weaker? >> i think as strong as housing. refinance market will be smaller but the purchase market will absolutely be larger. net-net, less origination in the market. but lenders have been planning for that. the great news is really a capacity -- the capacity of the industry has been so dramatically reduced since 2008 it's going to be a fairly normal time. consumers will have good access. find for lenders that are strong, smaller lenders have a tough time and it's very good for us. as lenders ask us for more volume that improves our revenue. q1 up 17 where's at lending tree, the market was down 4%er. >> good to see you. thank you for spending time. doug lebda joining us on the housing. a merger in the health care space. tenet buying vanguard health

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we of course are coming off one of the worst week of the year, certainly worst since april for the s&p. down about 2% last week and adding to the pain today. the dow down 191. off of the lowed, as we like to say. >> practically rallying. up 30 points from the lows. >> s&p off 25. >> i'm being cheeky as well. we're seeing signs of pressure across the markets. whether you look at the vix up two points over 20, whether look at ten-year which is behaving like we saw last wednesday in the 350-point sell-off, in other words a bid come back into the market as people get jittery about equities. >> rick santelli with the santelli exchange. >> hi. i have too much energy to stand still. bear with me. there's a lot of discussions about what's go on in the fixed

income markets and what some of the markets in that sector are telling us. i'll give you an example. fed fund futures. many are looking at back months, way back months, 2014, 2015, drawing conclusions about what the fed may or may not do. i understand it. this isn't unique to the times we're in now. this goes back a long time but it's flawed. i'll tell you where the flaw is. the flaw is convergence versus correction. there's a certain arbitrage that goes on in all markets, okay? if you have a certain feeling about where ten-year's going, the guys trading 120 10s bens the 30s, the barbells, the 5s, the term guys in eurodollar futures, 90-day forward rate, yield curve guys swul interacting together puts a certain efficiency into the marketplace. if you believe the fed isn't going to tighten for a long time

rates, not talking about quantitative easing and another form of tightening or loosening, then you'd say, listen, i draw the line, i'm not going to sell eurodollars or fed fund futures. that's not the way it happens in real life. maybe textbooks. real life, everybody's looking at every possible market that reflects a rate and trying to make a move. as selling comes in, the swaps, scripts, everything changes. is it a reality? it's a reality today. but think about it, as those fed futures start to roll forward, whereas the eurodollar 90-day forward rate has to converge the libor or certain religion sets in a very much present value situation and that's the important part. marks either are going to be more correct in this correction turning into a reality or going to be wrong and it's convergence happens you're going to see big rallies. it doesn't dismiss the fact that

everything moves because of the efficient market. we talk about technical levels in zones, thresholds and the more volatility, the more momentum. you had over a week to make money. you saw intraday trade down at 211, 212, it worked. next key level 239, once you hit it lowest yield settle 241. we need to watch this carefully. if momentum continues, most believe that 290 is going to be your key level because from 290 to 239 was a huge sell inall and august. they traded thinly. >> monday morning on cnbc, obama care continued to drive consolidation in the health care sector. tenet buying vanguard for $21 a share.

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every sector in the s&p 500 is down but hmos out performing today. they are relaunching health care.gov, the portal for the health exchanges. a 24 hour call center starting now as well and starting the push towards getting people enrolled for the aca starting in october and today you have health care stock cigna at all-time high and wellpoint and humana with multi-year highs and the hmo out performing the overall market, carl. >> all right. thanks very much, berta. hospital stocks doing well and tenet health care agreed to acquire vanguard health systems worth $21 a share in cash and that includes blackstone over there. joining us in an exclusive energy is the ceo can of tenet. always nice to have you with us. >> nice to be on the prasm.

thanks for inviting me. >> why vanguard, particularly in the assumption there will be consolidation in the industry of which you're a part and a lot of people note hma may be for sale. why this deal and why now? >> great question. vanguard is a terrific company with a high quality collection of assets, very strong positions in the markets and they're very complimentary from a strategic and cultural point of view and the transaction gives us the opportunity to create enormous synergies. >> do any of those synergies or how many of those synergies have to do with not just back office but the affordable care act. i notice in the investor presentation you note the degree graphical benefit will bring substantial benefits as a result of the aca. why? >> first of all, the benefits from the affordable care act are really upside to the synergies that we outlined on our call this morning.

principle just for an example, the state of texas has roughly 30% of its residents not covered by insurance today. eventually we believe those residents will be covered by one form of insurance or another, and that will create substantial growth opportunities for hospital operators in texas and a very material part of vangu d vanguard's portfolio is located in the high growing markets of san antonio and south texas. it is very appealing to us. we have a strong presence in texas already, and together we will nearly double our revenues in the state. >> another key area for vanguard has been detroit where i believe as much as 30 or 30 to 40% of revenues are did erivederived. that does not scream growth to anyone. why is that an area you're happy to get bigger in. >> detroit is an interesting market obviously. it is a three-way tie for, number one, in market area and vanguard is very well positioned in detroit. they have high quality assets

with a great reputation. i think post the transaction revenues from detroit will only be about 11% of tenet's combined revenues, so we see big opportunities there. they have made very substantial investments that in the market that have yet to generate earnings, hospitals under construction and expansion there. we're looking forward to being in the state of michigan and operators in detroit. >> your stock is up which is always a good thing for an acquirer. despite this morning the cfo saying on the call i believe admissions for the second quarter are running down about 3.5% year-over-year. is that a surprise to you and what's going on with admissions? >> it is interesting. there have been a lot of speculation in our industry during the quarter about exactly what was happening in patient volumes. because of this announcement and the extensive conversations we're having with shareholders and analysts we wanted to be very transparent about the trends that we're seeing. what's interesting about it is

there is more volatility in admissions this year than any year i can remember in this business, and it is a combination of factors including people with higher deductibles and co-pays and people postponing treatments that they otherwise would get, and then a series of issues that are just sort of random. we have a portfolio of hospitals where we have very strong growth and it is not weakness across the board and there are just a few markets that are particularly soft for us in the quarter. i am not alarmed by it. we also reaffirm that we would be within the guidance range we established for the second quarter. >> just a quick question on the balance sheet. you will take on $2.5 billion worth of vanguard debt which if i am reading this right adds to the existing debt load of 5.5 billion so a significant load at a time when you are talking about some of these questions about hospital admittance rates and also people here wondering about rates going up. >> yes. well, that's the capital markets

have been very favorable for us. in fact, we have done i think $3 billion in financings in the last nine months at the lowest rates the company has ever paid in its 45-year history. so i actually look at this as a particularly good time to be borrowing money and the hospital industry is one that typically operates with a very high level of leverage relative to other industries because it is such a stable business. >> right. about 4.75 to 5 times by year end '14. is this the last big deal that tenet will do. >> i think this marks a turning point for the company in which we'll be more aggressive in acquisitions. we have been building our outpatient portfolio. we have doubled that through acquisitions in the last few years, and we have been building our services portfolio through acquisitions. this is the first big acquisition we have done in a very long time in acute care hospitals. it will not not last. one of the skills that vanguard brings to the table is that they're known as a very good acquirer and partner to

not-for-profit health systems and so i look forward to expanded acquisition pipeline in the acute care business. >> all right. we look forward to perhaps you joining us for future deals as well. thank you for that. >> thanks for having me. >> you're welcome. >> nice tone to hear on a day like today. dow is down 169. announcer ] my client gloria has a lot going on in her life. wife, mother, marathoner. but one day it's just gonna be james and her. so as their financial advisor, i'm helping them look at their complete financial picture -- even the money they've invested elsewhere -- to create a plan that can help weather all kinds of markets. because that's how they're getting ready, for all the things they want to do. [ female announcer ] when people talk, great things can happen. so start a conversation with an advisor who's fully invested in you. wells fargo advisors. together we'll go far. we know some people are never satisfied with a good idea. wells fargo advisors. and work day and night until they end up in a place that no one ever dreamed of. because they know that things can always be better.

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welcome to "squawk on the street." here is what's happening so far. >> we got over bought and complacent and we don't know what the fed means by what they say. china is a problem, and the u.s. economy is so-so. that's not a recipe for stocks going straight up. >> we're just not where earnings season is yet. we have to get to earnings season. unfortunately alcoa is first and i don't know what kind of low but felt like going through my drawers and saying i am done with aluminum here. aluminum foil i want to throw out. >> you don't want to hear that. >> i want bears. >> they've had good years so far and don't feel it will turn over the basic construct of wanting to own stocks in this period of time.

>> this is a standard mid-cycle period where there is always a tug of war between the fed changing policy and the improvement in fundamentals. the question is which one wins? >> i think it will be as strong as housing, so the refinance market will absolutely be smaller, but the purchase market will absolutely be larger. >> the two companies are very complimentary from a strategic and cultural point of view and the transaction gives us the opportunity to create enormous synergies that are very material in terms of creating value for tenet shareholders. >> good monday morning. live here new york stock exchange. s&p is down 23 and coming off the lows and interestingly at

the lows today s&p and dow negative for the quarter, not just for the month. they're back in the black but just barely at these levels here. apple is moving to the downside today. jeffries lowering the price target to 405 over concerns apple may slow iphone production and global equities research writing in a note the recent drop causing serious employee retention programs and morale is low at apple. also looking at peabody, stock down over 7% as analyst said they're cutting back on coal buying and not expected to return to the market until later this year. >> we're in global sell off mode. naft, with markets in china down over 5%, stops down 1.2 and ten-year treasury yields reached the highest levels in nearly two years. we'll tell you what you need to know to get through all of it. >> we'll start with the markets in china fears over the state of the economy there, what it means for the rest of us may not big reason for the plunge in u.s. markets today.

our chief international correspondent can explain just what happened in shanghai over night. >> if you're just waking up on the west coast, show what you happened in shanghai. the stock market got hammered, fell by more than 5% because of commentary in the papers over the weekend and most of the newspapers are backed by the government and voices of the government and basically made it clear the central bank of china intends to keep money tight. there is a new sheriff in town and you should get used to a new monetary policy. that being said, take a look at what happened to shibor, the shanghai interbank rate, the over night rate, basically what it costs one bank to borrow money from another bank. look to the right-hand side of the screen, late last week everybody was freaked out because this went to nose bleed levels. if we saw an interbank rate like that in the united states you would think we reached the apocalypse. it has since come back down from that. we don't know why. we do know somehow the chinese

central bank intervened in some way, they either called up a bank and said lend to this other guy, he is getting squeezed or injected some liquidity. probably won't know until a month from now. take a look at the one-week shibor. it has come down dramatically from last week but here is the most important thing. it still remains very elevated compared to what we would see for the previous six months, the previous year. this is the bottom line, the central bank of china is correspondeding to everybody on the ground is sending a message, tired of the lending as i call it. 21st century business herald, not backed by the government, a newspaper there quotes a trader and give an example of a trade that looks like it is going to get a lot less profitable which means a lot less money moving through the economy. can we show it to everybody? here is what it was. if you were running a small bank

and you borrowed on the interbank market 2 to 3%, you lent long into the shadow market, this is the unregulated part of the chinese financial system, either wealth management products or other things like that, what was your spread as the bank? you can make 1 to 1.5%, even more if you did some really risky lending into like pawn shops and things like that. now that it has gotten so much more expensive to borrow on the interbank market, look what's happened to your spread. it has dropped dramatically, 0.4% so killed a lot of the profitability of that stuff. what should we think? how should we feel? if you saw the interbank rates here in the united states you would think it is the apocalypse. we talk about this being a lehman moment maybe. here is what don sthaszheim says. this is not lehman september

2008. this is not a chinese market financial crisis. beijing can provide liquidity any time it chooses. this is the pboc, the central bank trying to reset expectations in china moody's put out a commentary as well. they said it is prudent for china to curb credit growth like it is intending to do. latest move is credit positive overall and could punish and hurt small and mid-sized banks and more importantly, the methodology, the central bank is using does entail risks. that's what i think everybody is worried about, guys. what are the unintended consequences here. do you see a smaller mid-sized bank fail? does it lead to runs? we don't know where this goes. bottom line right now they want to inflict pain but don't want to cause a crisis. back to you. >> carl, over the weekend we saw to some extent people starting to grapple with this.

it is just another at this point the main risk from this all really just seem to be that you don't have the really strong growing world second market. >> absolutely and the numbers going from 7.8 to 7.4 this year, that's a material cut for that huge economy. >> if you look at the quarter on quarter growth rates, already down in the sixes recently so implies a hiccup and whether that happens. >> u.s. markets continuing the slide this morning as you can see, dow down 187, probably 60 or so points off the worst of the session. thomas lee, a man with nice tactical calls so far this year, good to talk to you again. >> thanks for having me, carl. >> talk about the short-term. what happens now? >> we know investors are taking a step back because there is

uncertainty about emerging markets and the movement in rate and i think for investors today this may be one of the better entry points, one of the few times you're getting a market fairly indiscriminately and a chance to buy into a strengthening u.s. story. there is a lot of pent-up demand in the u.s., consumer net worth is back to '07 highs, and even though the bond market is derating stocks are still relatively cheap against investment grades high yield bonds. i think it is a good entry point. >> any part of that thesis, tom, require the fed to clarify what the market apparently in your view is over reacting to. >> well, yes and no. i think ultimately we are facing a regime shift. we're in a world where rates are

stabilizing and i think it really needs to change how people view the search for yield. i think in the future people have to search for return and real inflation adjusted returns come from equities >> tom, it sounded like what you were saying is we're seeing a shift away from the disinflationary world and the opposite seems to be the case. if you look at what's happened, real rates may have gone up and it is partly because they see no inflation on the horizon. >> that's right. i would say current cpi isn't telling us there is inflation but when we think why interest rates are going up and why the fed is considering tapering, it is because we should have stronger growth in coming quarters. there is capital stock which is -- tom, both you and the fed know very well if we're going to have the stronger growth it implies reflags in the economy so how come there is no talk

about the fact it is not falling into line with the narrative. >> i think in a way it is part of the transition that in some ways the market feels it is early and if it proves to be early to be talking about tapering, we also know the fed hasn't committed to that and can extend the window and continue asset purchases and i think the view on tapering is predicated on stronger growth in the second half. >> it is a big pred indication and frankly we have not only to see that growth and overly optimistic in the forecast repeatedly but the risk is deleveraging under mienlz the ability to get that what we were looking for because of what happened over the last four to six weeks. >> part of it does hinge on how housing holds up and we know it is a material contributor to activity and employment and we think there is enormous pent-up demand for housing. we have to remember even though

mortgage rates have risen steer still close to the 4% level which six years ago we thought was critical to help housing. >> if someone takes your advice and believes it is a better entry point, is it a general mills order or caterpillar order or somewhere in between. >> somewhere in between. we have done a lot of work on looking at regime shifts and what kind of stocks work best and when rates are rising, cyclical stocks are the best defense. they really out performedes in the 90s and extremely well in '93 and '94, the critical period when we had a big regime shift take place and i think the sector that may surprise everyone is technology. it is a group that has been dormant but great balance sheets and a lot of management inside ownership and i think a big beneficiary of this pent-up spending in the u.s., you have to remember corporates have been sitting on cash and waiting for

some sort of clarity and as we talk about rising rates i think it is potentially a catalyst for capital spending. >> that would be a bright spot for sure. we'll wait and see if it happens. thank you very much. at this hour stocks are down about 188 points, a little off the lows of the session and still broad based selling that we're seeing and we'll follow the biggest names you need to know including apple and microsoft and also we're following a ten-year rick santelli, i am sure you're keeping an eye on it. >> absolutely. after the break we'll talk to dan the man about a variety of issues not the least of which, the funding issues of china, the notion of easy money in the u.s. and europe and how the ra its will settle out and the recent stimulus out of japan and dan and i will look at this not through cheap sunglasses but real specks adds earnings season is around the corner and fundamentals will move to the forefront once again all after the break.

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dow down 200, the case for most of the morning. we knew we were in for a rough ride afternoon shanghai was down 5% plus over night. europe trade the down and futures weak in the early going. some buying midmorning, a pattern we sometimes see but for the time being see how the europe close affects things this afternoon. >> interesting to look at the sell off in copper. if you want to figure out what's driving this, a couple factors,

rates, the fed, china and goes back to the under performance we are seeing with three year lows. >> the ten year yield ticking up 2, 2.667 this morning. rick san tell will i is in chicago. >> hi, carl. imagine a big room, 12 x 15 with loaded mouse traps and on top of every trap a ping-pong ball. i think that's the way the market has been both equities and fixed income for months and months and months, afraid that one person unannounced would throw one lone ping-pong ball in the room. what happens when the ping-pong ball lands, dan? they all start snapping. we're in snap mode right now. there is debate between miss interpretation of the fed versus the market guy saying the only misinterpretation is i didn't get short bonds. >> it is the ping-pong ball deal.

i want to see fundamental reactions as to what may happen as a result of this. we won't know that for a while. i think the market has been too reactionary in rates and equities. let's see what's really there and not what we think may be there. if you look at what bernanke said, he said we may taper by the end of the year. he did indicate that it is a possibility. didn't say it is going to happen. if things change, will he change? will the fed change? they will change the strategy a little bit. >> would you think it is fair to say that we are not necessarily seeing the normal correction because of all the management in the markets by the fed. what we're seeing is a repricing and on the back side of this repricing, there is probably going to be a big rally and then i think the fed issues you bring up or steve liesman brings up will come back to the forefront once the emotion clears. >> right. that's the thing. you have to let the emotion clear. we have had three days of people being really spooked especially this morning after china kpast

exacerbating the whole thing. i think we'll start seeing that within the next couple days. >> many times i would ask you or people would ask me where would interest rates be if it wasn't for the fed? one of the answers was and i always thought it was a little light was maybe 100 basis points, from the 160s to the 260s, there it is. >> where would they be? they would certainly be higher and the market has a way of telling you where it should be. right now this is telling us at least today where they think it should be. probably a little high on the ten year. let's let the emotion back off a little bit and around the 2.5, 2.4 level, we'll see if it holds >> when you read various technical pieces they talk about things like relative strength, over bought, over sold, but as interesting as all of those are sometimes the wildest markets can have all of those issues to an extreme for a long time. >> they can and we'll see what happens. as a matter of fact, one of the extremes we have seen now is vikz at 21, close to a year

high. that tells me maybe we're reaching the end and i think within the next few days we'll see stabilization here. >> thanks, dan, for taking the time. "squawk on the street," back to you. >> we have news on apple. a stock we have been watching all morning long, it has fallen below $400 a share. berta coombs is back at headquarters with that. >> trading around 398 and change, hasn't been that low for two months and continues to fall. right now responsible for a little more than 10% of the decline in the nasdaq composite. apple just on a downward tear much late and can't seem to move to the upside. very, very different from what we saw back in 2012. >> yes, it is. karl, i can't help it, i look at apple below 400 and jpm's call raising google over 1,000 and something in me goes does it smell like a good pair trade? >> it is interesting. the three handle has proven to

be a decent floor as you can see from the charts over the past six months or so. we'll see if this is any different. >> the movie indicator. we had the internship out and getting an internship at google and remember when the social network came out, practically the peak of the facebook market as well. good thing i am not putting money to work. check out the vix. more on market when is we come back. it's monday, a brand new start. with centurylink visionary cloud infrastructure,

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chinese stock markets fell sharply over night with an impact. the shanghai composite index in bear market territory. let's bring in the ceo of essex manufacturing and the president of asset management. good morning, gentlemen. >> good morning.

thanks for having us. what was in this case, peter, look first to you with the firsthand experience in china, are things on the ground quite as grim as markets seem to be telling us? >> there is definitely concern. really started probably two years ago. we started to see vendors asking for cash deposits up front, cash payments before shipment, which was complete turn around from previously doing business on letter of credit basis. so i believe that they kind of had a feeling there were issues in the banking system and some currency liquidity issues. >> so essex manufacturing does what exactly and are you changing -- what decisions are you making now as you look at things getting worse there in china? >> the first thing is we do do sourcing outside of china and the philippines, vietnam, indonesia, portugal, and what we're doing mostly on the ground now is we're being very selective in who we do business with. they have to be financially

secure. they can't be leveraged. they have to be able to supply the productivity that we need. people don't realize there is a dramatic labor short ablg in the blue collar field inside china. >> a labor shortage because we're hearing a lot of reports about college graduates coming into the labor force and looking for work. >> when you say college graduates, they don't want to work in a factory whether it is assembling outdoor furniture as we do or whether it is sewing garments, whatever it is. they have been educated. they want the supposed middle market upstream jobs but they don't really exist. >> yeah. okay. now, jim, given that, is china here to look city investment thesis then, one that people should steer away from? >> no, i don't think so. we have been doing this for eight years. it is interesting to watch the sentiment. we started and it was horrible and then it was terrific and now it is back to horrible again.

the best times to have invested was in sentiment was horrible. i think right now you have to look a little deeper. it is not a factor of buying china but buying industries within china for example, areas like e-commerce are doing as well. growth rates are strong. i understand certainly within banking and export related industries there is going to be tightness and slower growth and more challenging. e-commerce, health care, environmental protection companies, those are probably very good places to invest and valuations have never been cheaper. >> i wonder every time we see the market run into trouble, the knee jerk is, well, that just means reforms are on the way and that will fix some of the ills. i wonder if you think there are any reform that is can help some of the structural problems that peter says they face. >> i certainly think there are some. reform thdrives where people li can alleviate labor shortages and skerns. others i think in terms of

controls on interest rates, all of those things i think can come together to provide a more efficient capital market that will help the economy. valuations are the real thesis. >> we'll leave it there. fascinating view on the ground. >> thank you. news out of italy this morning, the former prime minister has been sentenced to seven years in jail and banned from holding public office in the prostitution case that has held the country's attention for months now. here is the thing. the ruling not effective pending appeal, but if in fact that sentencing is closed, that would be a very big deal for the politics of that country. >> going back a couple of months to the elections, a lot of talk about his influence still and at a time when people are starting to requestion the fundamentals in italy. it is not as you say an obvious presence but as we know in the cases it will be drawn out on

appeal. >> keep that in mind. that's just crossing the wires. dow back to close to session lows. down 233 and bells about to sound and we'll get the close and the details on the impact on us this afternoon in two minutes. the mercedes-benz summer event is here. now get the mercedes-benz you've always dreamed of. but hurry, because a good thing like this won't last forever. [ tires screech ] here you go, honey. thank you. [ male announcer ] see your authorized dealer for an incredible offer on the exhilarating c250 sport sedan. ♪ incredible offer on the exhilarating c250 sport sedan. with centurylink visionary cloud a brinfrastructure, and custom communications solutions, your business is more reliable, secure, and agile. a talking car. but i'll tell you what impresses me. a talking train. this ge locomotive can tell you exactly where it is, what it's carrying, while using less fuel. delivering whatever the world needs, when it needs it. ♪

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lows in the u.s., bring in simon hobbs as we mark the close across the u.k. and europe. a lot of red.

>> start off by the breaking news here the prime minister of italy. effectively a night club dancer he made $9,000 to she said to help him start a business. the allegation is it was to have sex with her when she was under age. it is very important for two reasons. the first, the sentence is sen of years. as such it may not be commuted down to a level where he doesn't serve it. the second issue is he is barred from public office. the risk is that it tears his own party apart and therefore the support for the present italian coalition, he is no stranger and he said the prosecution is against him and arguably they are and arguably they are. who knows. it is important because it does risk potentially political stability. return to the markets. clearly down for a fifth straight day in europe and the losses are quite large in that

period of time. down over 6% and two main problems in addition to italy. you can see over the last month the greek stock market is down 19%. the other problem you have is after 19 hours of marathon talks over the weekend, the finance ministers of the eurozone have failed to do a deal as to who is going to pay what when a bank goes down. any idea that you would have some sort of banking union if you still believed in that is really pushed to the buffers. they'll try to talk about it again on wednesday in advance of the full summit thursday and friday and for professional investors both of those issues a. i want to show where you we are on yields as bond markets around the world sell off and moving

higher and disproportionately higher at the periphery of europe and the say the borrowing cost for spain and italy spiking and though let's move from that. there is a lot of chatter about the yield, the spreads between what the spanish are paying and what the germans are paying to borrow money and that extra risk. actually, if you look at where we are now and where we have traded over the last year, i think the important thing to realize is that the good that was done in europe from the huge amount of liquidity that came in from japan or at least during that period, which really forced down the rates, so, yes, you get rate rises and yes, it is uncomfortable but the base is lower in terms of fear as a result of that six weeks of massive injections of liquidity from the japanese but nonetheless, very difficult times and issues beginning to present themselves in europe that may become far bigger

moving forward. >> let's bring in josh with a look at what's moving at the big board. anything moving to the upside? >> you certainly are seeing a sharp sell off today. look at the dow, blue chip down about triple digits and really a one-two punch. you have the fed tapering and could curve the bond buying program and top of that you have chinese liquidity fears and the worries a credit crunch could slow down the economy more and you saw goldman sachs come out and lower the gdp growth forecast for the country. in terms of the spx you see a broad sell off today and the economically sensitive sectors, the cyclical sectors leading to the downside and materials and energy and financials and industrials, and also we're going to keep our eye on the china fund approximate sales, etfs, the sxi, lowest in a year-and-a-half and we'll talk china and commodities and commodity names and clf, hch,

scx, some of the names on the raid and dollar strength greenback at the highest level in three weeks. i want to end on the bond funds. some of those bond etfs, broad sell off and credit and the agg and the lq d. it has fallen for six straight sessions and down about 6% in the time frame. >> a lot of size among our viewer ship on that full screen. incredible. thanks a lot, josh lipton on the floor. a check on energies and commodities as well. >> hi again, carl. watching the energy pits, the prices here of course the pressure is continuing. i do want to mention that west texas intermediate below the flat line at 93.54 a barrel now. this is on concerns we're seeing out of china about an economic slowdown and liquidity crunch there. the chinese state news agency reporting commercial crude

inventories in china for may sit a six-month high and also reporting that refining activity dropped there, so of course that's adding to the pressure that we're seeing. i want to switch gears and talk about u.s. retail gas prices. lundberg reporting down 4 cents in the last week and will stay stable or go lower and despite the fact we're heading into the peak of the summer driving season and last but not least an uptick in the gas today. this after it took a hit on milder than expected weather forecasts so we're watching the prices very closely. carl, back over to you. >> jackie, i will pick it up. apple is trading below $400 for the first time since april. seema is at the nasdaq with more. >> kelly, just when the street thought apple may be in comeback mode, the shares of apple breaking $400 a share and a piece of level for the stock, global equities research says employees are viewing the drop

as an indication of a bleak future for apple in that recruiters are seeing more and more employees from apple applying for jobs at google, linkedes in, facebook, and even hewlett-packard. today very much a global story, chinese adr reacting to concerns over china's credit crunch problems and some of the hote r hotelerie hoteleriers, significantly under performing right now and you want to know the worst performing? grand gold resources in response to the fluctuations that we're seeing in gold prices and goldman sachs cutting its 2013 gold price forecast is shares now down 15% over the past five weeks. >> seema, thanks very much. dow is off 230 points here. s&p 500 is down 1.9%. art will put it in perspective for us when we come back. don't go anywhere.

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bosch, wade, lebron, chalmers, lighting up a stoegy, why not. >> i am surprised you can rattle off their names. >> what a series. if you love basketball, it was an amazing postseason. congratulations to the heat. they did work hard for it. >> wow. stocks selling off this morning as carl was saying and turning our attention back here, we're looking at 218 points off the dow, 1.8% on the s&p. bring in the director of floor operations at ubs. how worried are you? >> well, not terribly worried. i can see that the speaking of people who are happy, by the way, the sell in may and go away guys have got their pamphlets out again and things are working out for them at least monetarily. we have a little problem today because china and the rumor monkers told off the equivalent of 800 points on dow and there

is a fear in both banking areas that the central banks may have tried to make a move that they may have lost control of just as there was concern about bernanke here starting the tapering discussion and over there they wanted to tamp down on the shadow banking system and i think michelle had a piece earlier and the concern is do they have full control? the rumor amongers are all about today and stories unconfirmed they may have decided to tamp down on wire transfers and a few other things. >> ultimately is it a growth story for us here or other transmission mechanisms we need to be worried about? >> there are. all of the pain of 2008 and the post lehman world are still around 6789. when you spoke about the etf syndrome, some of the sponsors

have kind of pared back or limited cash redemptions. well, there may be good reason for that and it may be a lot of people lining up at the front door. given what's happened over the last five years, markets say wait a minute, that's unusual. i am a little worried about that. so all of these things contribute to the worries. the other thing to watch here that is very interesting is in this kind of rumor driven, anxious market, there would have been a flight to safety. they would have rushed into u.s. treasuries. well, they moved into the dollar but not into treasury, so they're hiding in cash. >> and they think it will happen but take us a little to catch up. is this a chance for retail investors to trump the institutional guys that have to sell these positions? >> i think they have a unique opportunity compared to the institutional guys and the irony here is people say, well, it is the end of the month and the end of the quarter and the end of

the half and while the unfortunate news from an old foegy like me doing this for 50 years, the week after the june expiration has a history of being down. in fact, it has been down for nearly 12 to 14 years in a row, so even with the end of everything, that so-called window dressing, sometimes turns out to be window breaking >> when you wake up in the morning and check and see what the ten year has done. >> after i check my pulse. >> after you make sure you're alive and still ticking, how surprised are you at 2.6? is this part of the normal pattern we start to brice in a new strategy, a new directions of rates in this country. >> i find the level surprising, the fact they broke above what looked like pretty strong resistance at 2 ht 4, 2.5, but yes, you're right, and one of the things the fed either decided not to play to or simply ignore is that when you change the direction of rates, or

easing things up, everybody rushes for the door. it is like a mad game of musical chairs. so you say, wait a minute, that yield is far too high and it is but it is on the way and i don't want to get trampled by the herd. people rush ahead and that's what we're seeing happen. >> do you think three is in the cards? >> i think unfortunately three is in the cards. we'll know a lot wednesday morning when we see the mortgage applications and particularly the purchase applications. people may still want to nail down refinancing. the purchases dry up and then the fed may have done more damage than it wanted. >> that's how usually not a market moving data center and you say now it is. >> you find data and safety wherever you can. >> well said. art, great to see you this morning we'll keep our eye on the markets. huge losses across the board and big sell off in bond funds and loom asales when we come back.

>> welcome back to the program. dow is down 222 points. nasdaq and s&p down as well and it is interesting we have come down to levels and drifted up earlier and we're just sitting here and haven't moved much from the levels in the last several minutes. >> the range after the initial sell off has been incredibly narrow. you're so right. in the meantime the ten year treasury yield jumped more than 60% since hitting the lowest level this year on may 1th. looking at 259. fg the lows about 1.6.

legendary bond investor and the portfolio marrying with looma sales is here this morning thank you. good morning to you. >> you make the point that these turns are always so difficult and take time to play out and hard to get information and you almost have to rely on your instinct in the early days. what is your instinct telling you now? >> well, my instinct is primarily a technical correction, but having said that, i mean, you have very measurable outflows from mutual funds and that's a little bit more anecdotal and very measurable outflows from the etf, and we get that each day. at that level have you outflows and seem to be picking up. i hear anecdotes and i have anybody that is leveraged in the market is still trying to cover.

on the other hand, one thing, a very good point made before the commercial, about the seasonal and the treasury market and always look out for early july, and that's become sort of part of one of the things you do. however, this year there is a little bit something different going on in that on the institutional side of the client base. the rebalancing has been going on earlier. it has been more steady. as opposed to crowding towards the end of june. and that, i don't know what's caused it. i really don't. it is just i guess -- >> you would argue is it a net positive, dan? does it make the quarter end just a little less dramatic? >> yes. it does.

what is making it more dramatic is the outflows. what's making it a little less dramatic, there may be a little bit of chicken and egg here, particularly the last couple days. some people who are rebalancing towards bonds advancing that. >> in just a word, dan, i wonder, do you think this has been a positioning, a clearing out of positions? do you think we have made the bulk of this move and that we may look book at the 2.6% level as a high point for the year? >> i think that the ten year treasury at 2.6 or 263 is probably a good 40 basis points or more over done. i would guess. all you can do is guess. even though i am in the camp that says rates are going higher, longer term, i think

this, the treasury market is very far ahead of itself, and somewhere right in here is a likely peak of rates, loan price, for the next six months or so. beyond that. i can't tell you. for the balance of the year i think, yeah, this is a technical sell off. it has some umph to it at the retail level, and a counter balance at the institutional level. >> interesting, dan. i wonder, how hard is it for you to find things to buy that you like? >> well, you know, the darnedest thing is, i am glad you said that. i am having a very frustrating day. we have money coming in, and there is stuff we would like to buy. at a price that seems to be the quoted price in the market. wonderful. go do it. so we get some. our traders work very, very hard

scouring the market. and what do you find? not as much as you would like. there are some lists in to be fair, offers wanted in comp, and the investment grade area. offers. offers wanted. not bonds for sale. they will buy. so the on the run market can get pretty frustrating if you are a buyer. >> dan, hard to listen to anybody else with more insight and certainly credibility than you. thanks for your time. dan fuss joining us. >> you're welcome. thank you. >> plenty of frustration on the street this morning. whether it is in the bond space or equities looking at the dow down more than 200 points after finishing friday in the green and perhaps just as scary, take a look at this. you may have seen it last night. nik wallenda completing his 1400 foot walk along a 2-inch steel

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squawk on the tweet for monday morning in case you closed your eyes and missed it last night, nik wallenda, incredible, completed his walk over the grand canyon, took him 22:54 to walk 1,4 hundred feet along a 2-inch cable suspended 1,500 feet over the colorado river. i don't know how he managed to look down and not get dizzy. we're asking what part of the market is so scary even nik wallenda wouldn't touch it? albert rights overweight and emerging markets tight roping the grand canyon and nick rights he wouldn't be brave enough to run with the bulls in brazil and sdwron wrooits metals are crumbling so badly even nik wallenda wouldn't walk a wire across an open mine pit. well done. plenty to choose from. in the meantime we watch what's

leading on the downside and fighting some of the upside. >> i think it is important to watch the composition of what's happening and not just the headlines. you may think the knee jerk reaction is rates are going higher and, no, if you look at what's happening, a lot of cyclical pressure and makes you wonder how much has to do with china and financials one of the under performer this is morning and take a look. seeing better than 3% sell offioffs. >> also some of those as tom lee put it earlier, some of the mature leaders like housing often today at least taking it on the chin and the fourth biggest loser on this goldman call where they stay vital and a couple of other. >> i haven't seen the note. i wouldn't be surprised if it has to do with the thesis on the consumer, buy the high end and worry about the low end and we're seeing that across a lot of areas and kb i think reports

this week and maybe lennar tomorrow and interesting to see what they have to say and going whack to the market signals, iron ore and lumber, some of the better performing commodities even at a time when copper is three year low and silver palladium selling off. >> and one of the one with the general media market coverage, apple losing the handle today going into three handle territory, the first time since the middle of april or so at 399.61 and the low back on the day in april was 392. in general it is not a story that portends growth. >> it is interesting. we're hearing tom lee was telling us he still likes technology here and it is a sector that people have strong opinions about one way or the other. if they look for ports in a storm, the vix up about 1.3. >> tom lee saying it was a good entry point and fuss saying over done technically on the short side. >> they are the same conclusion which is to say ultimately if

you think this bond move reverts as people go into the safety of treasuries, is there going to be support longer term here? >> probably will take a few days or weeks to play out. interesting day. let's get back to headquarters and the halftime. >> welcome to the halftime show, four hours to go until close. there is where we stand on the street on this day. is this monday down 200 on the dow and s&p and nasdaq negative as well. banking on the financials, why rising rates could be the best thing ever for the sector. which names to buy right now. cat or dog? can caterpillar shares rise with china getting ripped? one says yes and another no. a big debate straight ahead and the top story, rates and the rally and stocks sharply lower and as the yield on the ten year hits its highest l