we have ten seconds. so thank you, sglon it's my pleasure. great to be with you, joe and michelle. >> watch you tonight. >> we're watching it. >> or at noon. >> love your brother. say hi to him. >> i will. >> join us on monday. "squawk on the street" is next. thanks, michelle. >> thank you. >> we'll see you next week. ♪ good friday morning. welcome to "squawk on the street." i'm carl quintanilla with. simon is at the nasdaq which is obviously front page news all around the country this morning. more from simon in a minute. futures look tape here. we have earnings from pandora and gap to do. of course, we start with the nasdaq. the exchange responding for the first time this morning on cnbc to yesterday's three-hour shutdown. ceo robert greifeld on "squawk"

this morning defended the way hisses change defended the outage. he added that he was, quote, proud of the fact that we had an orderly close. guys, here's how it's playing on the front page of paper it is people have not seen. nasdaq in fresh market failure is the way the "journal" puts it across the top of the fold. nasdaq paralyzed by technical breakdown is the ft. and then, jim, "usa today," wall street yawns as nasdaq goes dark. >> i thought that was the most cogent of all. no one really cared. bob said everything was good. they did a great job. it's fine. i want to let people know we speak with people around here. they all scoffed and laughed at that. bob said what he did. i felt what i felt which was that the lack of communication was terrible. i had the unfortunate moment where i had to be on air and had to try to speculate. the way you cut back on speculation is to come out and say, guys, here's what we think

is happening. we were all stuck trying to speculate because the communication was so bad. >> what do you make of his comments this morning, that those who needed to know knew what was going on. >> i don't know. i'd kind of struck by the fact that why do we need all of these exchanges if they don't really help to get the prices. i didn't understand how bertha coombs pointed out, how did the etfs continue to trade? i don't get the sense that the s.e.c. was willing to come out and say. the little guy just needs the b bid and ask. i don't think anyone is going to get hurt by this. no one is going to lose their job by it. >> not even bob greifeld. >> i think he will be fine. >> yeah. >> he said he was fine, therefore, he's fine. >> i'm sensing some passive aggression here. >> well, look, i, too, have been beaten by this. i want very much to say, look, i think this is outrageous. but you come when you listen,

everybody seems to be fine with it. a lot of interviews, people are fine with it. no one seems to think this is bad. bob said it was done right for retail and everyone is taking that at face value. i find it hard. i've been in the business much longer than bob. i'm a little jaded. >> a question about this because a lot of people are saying had they handled the restale and professional audience the same. it's not as if anyone on the retail side is trading directly with the nasdaq. if we're all trading through schwab and amr trade, aren't those the people who nasdaq is talking to ultimately? >> they're claiming only retail would get hurt by this. lots of exchanges, lots of price discov discove discovery. retail trades, it was the etfs who had to be the most corrupted by this because 20% of the etfs of these kinds of etfs had nasdaq prices. who had those prices? who had it. someone did or else it was just -- we were just trading back and forth. it didn't matter. everyone was equally wrong. >> guys, breaking news. on top of all of this i'm

getting word in my ear that steve bammer of microsoft is to retire. >> wow. >> really? >> this is all we have at this moment. obviously it's something that's been talked about, speculated about. >> holy cow. >> jim, i'm probably five or six years? >> yesterday they said the about vis was going to play a role. steve was a classmate of mine as i am. i'm not ready to retire. he's retiring young. i didn't expect this. i know there's a lot of pressure on ballmel to deliver. people believe he failed to deliver. i would like to think he left because he's done but this obviously is a shock. it's a shock. >> shares up 6% on the news. how do you feel of a ceo, 6% up on the news that you might retire. >> what some of the unlocked value. >> ballmer stood in the way. >> retire as ceo in the next 12 months upon the completion of a process to choose his successor. in the meantime, the release says he will continue as ceo, leave microsoft through the next steps of trans formation to a

devices and services company that empowers people to the activities they value most. upgrade at omera. >> interesting he said the activists are playing a role. the activists don't own that much. david faber has been tauing about that for some time. obviously i believe there was a huge amount of pressure coming from outside that we didn't know. >> him to leave? >> yes. yes. for him to leave. >> more than leveraging the offshore cash? >> yes. >> and buying back stock? >> yeah. i think that people are very disappointed with steve. the market is bigger than anybody, right? the market is saying, thank you. >> 8%. did you see that? up 8% premarket on microsoft shares on the news that he's going to retire. >> the market is speaking very loudly. >> a lo of people know steve but not quite like you do, something gone to school with him a very long time ago. >> he's a great guy. i saw him at my 35th reunion president a the beg. sometimes you had friends before

you were in the money beusiness. we used to call him shoe box steve when we played poker. he would bring a big box of coin, very clever. when i was editor of "the harvard crimson," he's a great guy but i know that doesn't matter. it's all about what have you done for me lately, like the nfl. >> new cfo. is his legacy going to be one that he -- an executive who led the company into a dead end, into a path that had no future? >> i think that if the next guy can't get it turned around, i think we'll see, you know what, windows business. had all that cash. i think about yesterday with meg whitman on our show. a lot of people were saying, meg, maybe the business is just terminal. now, she's saying, listen, generating a lot of cash flow. microsoft generated a lot of cash flow but the stock has done nothing. in the end, it's the arbiter.

these are about -- as belichick or parcells would say, these are a about ls and we need ws. >> internal or external, does it make a difference? >> it makes a huge difference. we need a shake-up. you need what we have seen over and over again. you get somebody in with a fresh pair of eyes. when you have that much cash you should be able to reinvent yourself. they've got the resources to bid. now, i did think there were a lot of things going on in the entertainment device business coming around. in the end they are a utility. they are a bust company. ever since ballmer took on the justice department, it's been downhill. >> the board appointed a special committee to direct the search. they've retained hydrocon struggles. bill gates is on that committee. he will work with the board to identify a great new ceo. john fortt who knows it is with

us. >> i'm just surprised that they just did this 12 months sounds about right. ballmer always resisted a lot of conversation about what he was going to do next and when. as you guys point out, it's time to start thinking about successors. i personally think that microsoft is going to look at somebody with more of a technical bent for the next phase. will have a lot of credibility in the engineering organization given the pace of change that they are looking at. i expect name is batted around quite a bit. he's heading up a lot of cloud effort. i'm not sure whether key lu's name will come up. he's into online efforts. meyerson who is doing a lot of hardware stuff. but that's there now.

>> jon -- >> jon, it's true, jon, right, they miss social, they miss mobile, late to the cloud. the wholly trinity, they were nowhere. >> i'm curious, jon, they just did a reorg in which candidates like don matrik who left. this timing is a little bit of unusual. >> you know, the thing about that reorg that struck me is it really invalidated the power in the ceo seat. to do a reorg it points everything up to krrksceo and c over the ceo is interesting. timingwise, we just -- even the name who would have been right at the very top of the names that we would be thinking about for the next ceo, you know, he used to run windows. he left. he's now gone over to horowitz

as a board adviser. it's a time when there's not one clear person, not the likes of a steve ballmer. the sort of suspicion that the board makes on who to put into that position is going to say a lot about microsoft what they can and cannot do in the years ahead. >> what did ballmer miss here? there's yahoo! google, facebook. who did ballmer team up with for phones? nokia. his cloud effort, that salesforce.com. where did they show leadership? i ask you, jon, where was microsoft on cutting edge post-windows? >> well, you know, actually done some of the right things for addressing the enterprise. i mean, look at what they've been able to do in server software. you look at their server and

tool biggs usiness consistently for years. but as we said, mobile, social, online. and these are not areas where microsoft couldn't see big truck headlights coming down the track. they saw them. they had some friends in many cases but microsoft's internal culture of competition where the knives are out in a lot of cases, where the company had a lot of trouble working together, really did it in turn after turn. the latest reorg was supposed to feel good for a lot of that to keep people protected. that's going major challenge of the next ceo. >> wow. 8% is a massive move. >> there's the plus side on steve ballmer. >> that is hard to do on a name like that. >> jon, thank you so much. jon fortt with quick analysis on

microsoft. we'll have more on steve ballmer now officially retiring from the company within the next 12 months. we'll talk about who might be in line to take that gig. and john williams will talk about rates and tapering. live from jackson hole. and also ahead, cfo of pandora and get his first reaction of that company's results last night. one more look at futures. what a week of news. for the time being, futures relatively tame. i turn ed 65 last week. i turn the math of retirement is different today. money has to last longer. i don't want to pour over pie charts all day. i want to travel, and i want the income to do it. ishares incomes etfs. low cost and diversified. find out why nine out of ten large professional investors choose ishares for their etfs. ishares by blackrock. call 1-800-ishares for a prospectus, which includes

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it's been talked about, speculated about for a very long time but it is now official. steve ballmer, head of microsoft will retire within the next 12 months upon a completion to process to choose his successor. the stock is up almost 9% on that news. and he's obviously a long way from actually leaving but there was some unlock value of the actuality of him being gone. >> the piece yesterday, catch a big move. i don't think that rick did that as -- obviously we don't know. rick -- i've known rick for almost as long as i've known ballmer. no inside information. i do want to point out that this stock is almost back to where it was before they reported the bad quarter that i think may have been a precipitating event.

that was a terrible quarter. you can see that stock just -- >> they had to do something because they just did the reorder. >> one microsoft. web that? >> wrus have been that bad q. >> i did point out a guy did have the nokia phone. >> they've got a little bit of traction but too little too late. >> the person that had the phone was ballmer at my reunion. i saw it as an oddity. it looked good. had a customer of one. the news flow on this friday morning in august does not stop because the federal reserve is holding a annual retreat in jackson hole, wyoming. they are discussing the future of monetary policy. steve liesman is there and joins us now with a special guest. steve? >> thanks very must have. i am here with san francisco fed president john williams. john, thanks for joining us this morning. we've had two other presidents on this morning. one was kind of on the dovish side. didn't think tapering was needed in september or he could wait

and the other one said maybe we ought to go ahead. do you want to break the tie? >> well, in my view, this has to depend on the data. from my perspective, i think chairman bernanke laid out a reasonable approach back in the press con innocence after the june fmoc meeting. my view has basically followed more or less my expectations of how the economy would evolve since then. so i'm going to stick with what chairman bernanke said. he said the decision when and if to taper later this year will depend on the data. specifically, are we still seeing signs of positive momentum in growth, in job creation? and we need to see inflation continue to edge back up towards our 2% longer run inflation goal. >> there's not a lot of data between now and september. you think it's okay to trip? >> i'm not going to say about what meeting or not. but i do think if the data continue to progress as we've seen, then i do agree that we

should edge down or taper or purchases later this year. >> there's been some talk about what kind of move to make. a taper light or a taper regular, a taper heavy, i don't know. like grades of gasoline or something. what is your sense of what increments would be the right ones to use? >> well, i think, given that we stale have a long ways to go in terms of achieving a longer run goals, employment is still well above full employment levels. inflation is still well below our 2% long run goal. i think, you know, i expect that we'll continue our purchases well into next year as the chairman said. probably continue them until the middle of next year. so any tapering i think we would do would be in gradual steps over time. so whether that's light or heavy, i would see it as a gradual series of steps of tapering, assuming our forecast comes true. >> san francisco fed research department recently put out a letter, really doubting the

effectiveness of quantitative easing. does that reflect your views? >> i think it's a great research product that my colleagues and the federal reserve has been working on for some time. where their results were maybe a little bit different than others was not so much on the question of does quantitative easing effect financial conditions. i think there's overwhelming evidence that our policies as we put them in place and markets have seen we may be ending them, we've seen sizable movements. i think they've been effective there. open question is how much does the change in financial conditions generated by quantitative easing actually effect the real economy. how many jobs does it create. it's true, estimates were on the lower side of other estimates that people have seen. one thing they point out in the pap paper that i think is important if you do find quaund tative easing at the same time, for a long time so kind of a forward guidance up you get sizable effects. >> let me ask you one more question and take a break. i'll bring it out later.

the markets have risen by 100 basis points. it's guided that there would be some reduction in quantitative easing. does the market have that wrong? does the market -- are interest rates too high relative to what the policy rate is going to be? >> it's always hard to understand, you you know, what factors are driving the term premium, risk premium in market, bond market or stock markets and like that. i do -- my own interpretation is that there may have been some players in the market or traders or however you want to think about it, who were thinking the fed was going to keep buying forever. we always indicated that's not what our plan was. i think some of the adjustment in the bond market probably was kind of bringing people back to reality that this because program that wasn't going to continue forever and i think that may be limiting some of the fear in the bond market. overall i'm not going to speak about whether the bond market is properly priced. >> john, if you might, stay right there. send it back to headquarters or the new york stock exchange and,

guys, we'll bring you more of this interview at 10:45 this morning your time. >> sounds good, steve. thanks so much. great couple of days of coverage out of jackson hole. when we come back, more on the situation at the nasdaq. what it means for today's open in nine minutes. plus, steve ballmer retiring from microsoft in the next 12 months. futures might get some action on the dow. we are seeing a few more green arrows here on a friday morning. more "squawk on the street" from the nyse is straight ahead. i've been doing a few things for a while that i really love-- tdd#: 1-800-345-2550

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just by talking to a helmet. it grabbed the patient's record before we even picked him up. it found out the doctor we needed was at st. anne's. wiggle your toes. [ driver ] and it got his okay on treatment from miles away. it even pulled strings with the stoplights. my ambulance talks with smoke alarms and pilots and stadiums. but, of course, it's a good listener too. [ female announcer ] today cisco is connecting the internet of everything. so everything works like never before. microsoft, the big story today. jackson hole is, too. nasdaq continues to dominate attention. simon hobbs is over there giving us a sense of what the mood is is like. >> good morning, carl.

robust performance from the ceo of nasdaq saying, a, he's very proud of what the team did yesterday despite the fact all the stocks were knocked out across the country for over three hours. the way in which they took their time to rebuild the market and open before the close means when we finally open again today, because we had 35 minutes of trade yesterday, there's no pent up kind of price discovery. more controversially he says he's disappointed about what happened yesterday and if anything, he seems to be trying to shift the blame down the road, i guess you could say, to the nyse. yes, there was problem with their central computer, server, which transmits best bids and offers and trades around the country but we had a connectivity problem for that caused by a connectivity problem and by inference we think that is the nyse where you guys are with their electronic system. he's talking about defensive driving moving forward and the idea that basically their systems have to be more robust from things that happen around the rest of the eco system.

really t not many apologies today from the nasdaq. guys, back to you. >> certainly, steve, the news from steve ballmer, simon, is getting a bit of relief to the headlines focusing on this but people are going to continue to wait for more of an explanation as to what happened yesterday, as simon up at the nasdaq watching for us right now. the opening bell is moments away. it's going to be another big day of trading. of course, we've got eyes on the opening bell here. over at the nasdaq and plenty more coming up with "squawk on the street."

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now you can get all the online trading tools you need without any surprise fees. ♪ it's not rocket science. it's just common sense. from td ameritrade. you're watching cnbc "squawk on the street" live from the financial capital of the world. the opening bell set to ring in two minutes. big news today. we're all watching to see how the nasdaq will trade as we get over yesterday's incredible three-hour technical glitch. steve ballmer is retiring as the ceo of microsoft in the next 12 months. we talked about the rise in premarket, jim, almost 9%. >> yes. >> that's $22 billion in market cap, premarket market cap. >> the people who buy it must think the sum of the parts are worth much more than the whole and the new guy can come in and

say -- as kelly mentioned. if somebody comes in from the outside. now, remember, if you buy the stock you're still going to have to deal with problematic quarter. buy the stock right here it's not like monday you're going to come in and name bill gates again. >> well, before -- >> monday, at least. >> depends on how much of that 8%, 9% jump here has to do with people pricing an not just a ballmer exit but to split up the company. >> right. >> after talking to meg on this show 24 hours ago, you could envision a situation, jim, in a few years where dell, hp, microsoft, look very different and may be elements of all three or some in some other form together. >> they look like univac and honeywell. those were the big players. they were revered. they were strong. they disappeared. >> of course, the other big story we'll watch ndaq. the prospect longer term, jim, of fines, of regulation of

lawsuits. it's a wall street story. it might no be a main street story. >> my problem with that is as we saw from the flash crash we keep losing people. we just keep losing people who want to be -- grasso was an old friend of mine. listen, we need those people. we need those people because that's what that was about. they leave the building and they go to cds because they traded all day yesterday. see how the glitch is going to impact cd sgs. >> there's the opening bell. s&p at the top of your screen. a little better than recent days. big board, office of emergency management honoring the nyse is the recipient of the private sector partner. sandy last fall. >> they do a lot of great stuff. there were a lot of commentary from people yesterday saying, listen, when they reopen the market the market is going to go down. the anger of the bond market. the market didn't go down.

>> 1% in the vix all day was down. >> how many people said, oh, when they open it, oh, boy, the sellers, the market on close, sellers. sometimes you have a decent take, so to speak. >> how lucky did they get. people making the point, what would happen if the ballmer news came out while it closed. would it have been to akin do to an after hours announcement or look at the etf space and try and fig out what's going on? >> investment management firm first trust doing the honors over there. all good questions. no contest about what the biggest gainer on the s&p is today, jim. >> no. >> no contest at all. it's microsoft. >> i guess -- i mean, look, it leaves you a little speechless. what it says is it really doesn't matter what you say. here's the way we feel. this is a company where it's been a very long time and people are fed up. i think it's people fed up and they say, anybody -- anybody would do better than ballmer situation is what that market -- is what that stock is saying to

you. >> we should keep in mind juan at hq saying the surge does not cover what microsoft lost after it posted the disappointed earnings on july. >> people thought they turned it around. a lot of people were snookered. let's give you irony. facebook over the level at nasdaq in 39. geez, they throw a lot at you on a morning when i thought i was going to have the day off. >> you got that right. we do have some retail that we can chew on here, jim. gap, 64 cents. that did match. raise the full-year outlook. it's almost binary with retail. you come in and miss and you're lower or come in and buy in and you raise. >> i've been speaking with people in the business. apparel is bad. gap did this. let's point out this. the two strongest players in apparel were gap -- were not gap but ross stores, which is up huge today. >> yep. >> and tjx. what did they do? they buy apparel from the guy who is selling apparel. >> who isn't who selling it.

inventory situation for them is incredible because all of these retailer what's are struggling are jumping into t.j. maxx and ross stores and loving it. >> this is nirvana for the closeout guys. that's why those are acting well. obviously other than sears, people are buying home goods, home depot, and lowe's. they keep saying, carl, no traffic, no traffic, no traffic. was this a tipping point quarter where we decided to all do it online and therefore we don't need to go to the mall and the mall is the traffic, the interstate highway is empty so you don't browse at abercrombie while you may have been wanting to go to macy's. >> abercrombie, their turn yesterday. today it was aeropostale. much wider than the loss expected. >> how many days we have come in and you said the most difficult area to gain is teenage apparel. now you can gain it. they don't want it. the dogs won't eat it. no matter what you advertise, the dogs won't eat it. >> to your point about traffic. where did he wee the upside of

traffic? appliances. >> sears. wow. >> they are losing share there apparently but it's the one thing that people won't necessarily buy online, right? it's a lot harder. >> a terrific article today in "the journal" about the edge with sears. and whirlpool, kenmore. sears is where you bought the appliances when you grew up. you went to sears p. they had that guarantee you could return it. obviously, they have seeded that to home depot and lowe's. >> pandora, a lot of home gamers want to watch this. it's off today. second quarter profit if four cents. double the estimate but the current outlook is weak. >> jordan has an excellent piece out saying the content costs are going up. one thing we like about netflix is they're blowing away the number of subscribers. that is not in pandora's case. >> you've got apple coming into this space. they're just going to have such an impact on it. >> those who are bullish pandora say the threat, the competitive threat is being overblown.

>> you talk about your other players that you think is very strong in this area. spotify. netflix is not competitive. netflix is -- >> hulu. >> generous. >> and we've. talking about the nasdaq all morning. we will continue to do so. you had simon on from -- irwin simon on. >> do we have a sound bite? >> we do. >> irwin reported -- mr. simon, for the ceo of hane, natural food company, reported best yesterday. froze the stock and i asked on "mad money" to irwin, what do you think about staying with the nasdaq given this? i think he had a pretty cogent response. >> take a listen. >> the time to be in your stock exchange company? >> hey, you know, listen, there's been a lot happening with nasdaq and pretty surprise that this happens. as a ceo i expect my stock to trade the whole day. >> sounds like you're going to

make some calls tomorrow. >> a day an earnings when you're t not trade for an hour and a half, you know, disappointing. >> enough said. >> disappointing. i know that irwin, he did not say, i'm moving over to the new york stock exchange today. i know the damage it has to do is going to have to reach out to the irwin simons and say you need to stay with us, it's okay. >> a lot of people who are sitting a 40ehome trying to fig out what is happening to them, for nasdaq itself, what does it mean reputationally and how does it affect the decisions made by a lot of ceo snz. >> it was not hurt by the facebook debacle. the company is a bit of a teflon company. we can say whatever we want unless the sec comes out and says this is outrageous, which they didn't. bob greifeld said it was the wrong thing to do to communicate with cnbc. >> done so while they were closed yesterday. >> come down and say me we figured out this, it's this

feed. please stay patient. i think that's what the nfl would do with the super bowl or greifeld felt it wasn't his job, is it just nobody's job or the s.e.c.'s to come out and say, listen, public, be careful. the etfs that you love to trade, a lot of them has nasdaq names. you're trading with nothing. maybe some had it and maybe some different. i think the etf rz the issue. and greifeld didn't address that. >> simon is at the nasdaq this morning. give us a sense as to how things are fairing on this friday morning. simon? >> we've opened successfully seven minutes ago. the likelihood was that it was going to be a smooth open. precisely of course because yesterday it took them 30 minutes to work out what had gone wrong and then spent another two hours, three hours working with the rest of the industry to bring, they would say, the market back online successfully. you have that 35 minutes to trade yesterday. stocks and the etfs and funds to get price discovery. successful open here at the nasdaq. what's interesting is the very

aggressive pushback you're getting from greifeld, the ceo of nasdaq saying he's actually very proud of the way in which his team bought the market back online yesterday. take a listen. >> we took the proper amount of time, right, to make sure that the testing was done, that the communication yesterday was so strong and we got that communication done, and we came back and came back successfully. so it's not our job, nor will it be, for us to go on the press, you know, to the press to public while we're focusing on the issue. >> what i think is a much more controversial position they're taking, now the investigation fully gets under way into exactly what went wrong. you have this server that basically disseminates best price bid and offer to everybody else around the country for the nasdaq stocks. that's what failed. because people didn't have price discovery asked everybody to stop trading. the question is why did that not function. and nasdaq is saying we had a connectivity problem. something external to nasdaq

actually messed us up and we think we're filling in the blanks now that it's the nyse electronic system four or five miles down the road where you guys are. that's the inference that those kind of jolt was and we did the best we could. what they're saying is we're very disappointed in what happened. i don't hear an apology from greifeld. what he's talking about cleverly is the need to have defensive driving policies moving forward. take a listen. >> i think where we have to get better is what i call defensive driving. so the systems are able to operate by themselves and this system has been in operation for 20 years. defensive driving means what do you do when another part of the eco system, another player has some bad event that triggers something in your system? you have to and it's our responsibility as systems operator to handle those kind of unforeseen situations. >> it's quite a clever pr message that they've constructed around what went on yesterday. the only point i would make, guys, is i think it's great

disingenuous to then say, we were really worried the ordinary guys at homes, the moms and pops and orphans and widows wouldn't get pricing and we needed to shut down. the reason that didn't happen is because the nasdaq failed. let's make not mistake. back to you guys. >> thanks for the recap. speaking of the new york stock exchange, josh lipton is on the floor. josh, what can you tell us? >> seems like we are operating normally here today. another frooif friday. summer session. talking to some of the traders down here like my friend ben willis of albert frooed, says you might feel hesitation before hitting that send button today but obviously the hope is we are back to normal. now, if you look at the s&p 500, your benchmark gauge, you are basically just positive on the week. you're trying to avoid your first three-week losing streak since may 2012. if you look at what's working this week, it's really this year's winners which had beening looing a little tired at the

beginning of august. that's transports, it's biotechs, it's banks. and it's hmos. also, i want to talk about some of the earnings from the retailers. i know you guys were talking about this aeropostale operating at a two-year low here. q3 gave guidance for the loss. the street was looking for a plus. ceo talking about a challenging teen retail environment. weak traffic trends. you also had foot locker reporting and, as well, and actually beat on the bottom. came up a little bit short on the top. the ceo talking about a highly challenging and competitive environment. i'm going to finish on ross stores. ross beat on the bottom and the top. that ceo talking about ongoing uncertainty in the macro environment. saying it was prudent to stay a little bit more cautious here near outlook. some basically caution here from the retailers. quickly, the levels traders are watching, scott weller of t3 live saying the bulls took back the 50 on the spx.

if you can hold that maybe you can continue that bounce to 1670, 1674. guys, back to you. >> thanks so much. see you in a few minutes. check on energy and commodities. courtney reagan at the nymex today. >> little economic news from around the world to really move the commodities complex today. we know that earlier in the week crude oil under a little bit of pressure ahead of those fed minutes now they with have those minutes, we vrt of steadied out a little bit. gotten a little bit of a bounce back yesterday but today crude oil futures little change traders saying. there's not a whole lot of incentive to move to the upside now that we think the tapering could be on the table in the relative future though. of course, we don't know the exact timing. also some supply coming back online from libya. so fundamentals certainly not pushing traders to want to be too long. it does feel like a summer friday. the volume is very, very right down here. and gold, gold a very quiet overnight session trading in about $9 range.

demand out of india and china, quiet. it will start to pick up in september and october when the wedding festival and weddings and other festivals start to kick in. traders have their eye on labor day and beyond getting ready for the weekend. >> court, thanks so much. meantime, jim, i guess orderly close and according to greifeld, orderly open. >> can i point out in terms of the organization that we are sitting at. duncan is a old friend but the new york stock exchange, they don't screw up like the nasdaq. >> do you think that's because of the presence of humans? >> i think that they have always competed well against nasdaq and one of the reasons may be because they are human beings involved and another is that duncan is a very strong ceo. i just feel like i ought to praise these guys. their model is better. they work better. >> whakt arca yesterday. >> they're the hostage to the nasdaq. everyone is hostage to bob greifeld. >> we'll be on the lookout for

transfers. i think that's fair to say. jim, no question. when we come back, steve ballmer announcing he is leaving microsoft. retiring in the next 12 months. rick would be rather be lucky than smart upgraded yesterday. will give us his reaction after the break. farmers presents: fifteen seconds of smart. so you want to drive more safely? stop eating. take deep breaths. avoid bad weather. [ whispers ] get eight hours. ♪ [ shouts over music ] turn it down! and, of course, talk to farmers.

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back to microsoft now and news that the company ceo steve ballmer is to retire within 12 months. the cnbc news line is rick shearling, head of u.s. technology research. he just got off the phone with microsoft. rick, was ballmer forced out? >> jim, it's not exactly clear. you know that value act was pressing and threatening to file a proxy battle. and on their agenda was management succession. so i guess what's unclear right now does this validate that value active getting a board seat and they're already having some effect for might suggest that value act had a harder time winning a board seat, that one of their key items to appeal to investors was was management succession is kind of off the table now.

the other items, i think on value act's agenda is the significant repurchase and significant increase in dividend. i think all of that becomes more likely if you have new management in place. but i think right now the key question would be does this probability of getting a board seat or wrath whether they have to go through the proxy concept and whether that's effective. one of their main octobbjective management succession. >> do you think that investors should chase the stock up here given the fact that what you just lined up is sounding like something not going to happen until next monday? >> i think that it validates that shareholder activism agenda is likely to be accomplished one way or the other. and so i think it suggests it's not so much about fundamentals right now. it's about corporate governance

and there are major changes. it's going to be good for the shareholders. >> outside person coming in? maybe bill gates coming in? someone who might want to break up the company coming in? gauge those and handicap me. >> so i think bill would like the successor to be someone that he knows and someone that he feels comfortable with. i don't think that person necessarily is an obvious person in the company. so the announcement that you're going to go to plan "b" which is struggle to start that search implies that, you know, they're going to look far and wide and maybe it's something that just has good general manager capabilities and not necessarily someone even from the tech industry and analog this might be lou who went to ibm, you you know, a decade or plus ago from nabisco who had no previous tech experience. >> it's definitely, rick, begun

a fun parlor game that we're going to play for months here. i've already heard people suggesting scott forestall. some people thinking about johnny ive if you want to make a dent in hardware. are you ready to play this game? >> no, i think that it would be very well we don't know of today just like lou being brought in. it's a good general manager. i think the list will be much broader than we might think or speculate about at the moment. >> well, rick, if this is the casend we don't know who is going to be in. again, i come back to the idea, what is value act, are they saying, listen, they have all of this cash. they can reinvent the company? we spoke to meg whitman yesterday. is this something where maybe if you acquisition a couple of spin-offs could fix? >> no, jim, i don't think that there is an easy fix or maybe

even a fix at all in tablets and smartphones. you can certainly continue to try. but i think this is t not about fixing the company in that regard. it's about the pretty steady cash flow to significantly enhance shareholder value. that's kind of step one. step two is, what exactly new management accomplish other than perhaps addressing some of the shareholder immediater shus that have shareholder value creates. the harder issues will be working through the details about what do you do about search, tablets, and that's not exactly clear. that's not easy to fix, obviously. >> rick, real quick. do you get the sense because it's going to be a 12-month move and instead of replacing him with a successor that there isn't a successor in waiting here? >> correct. i do not believe there is a successor in waiting. >> is that a management -- is

that a fault of management, rick? >> yeah, certainly is. you know, unfortunately at microsoft, there has been enormous turnover of senior people under ballmer. so we're left with, you know, not obvious choices there. >> okay. and rick sherlund again saying shares could move higher and today we're seeing just that and, importantly, the retirement of steve ballmer. more coverage on this news throughout the show. also still ahead, the cfo of pandora will join news a little bit with his first reaction to the company's second quarter. the shares are down. "squawk on the street" will be right back. if you're serious about taking your trading to a higher level, tdd#: 1-800-345-2550 then schwab is the place to trade. tdd#: 1-800-345-2550 call 1-888-284-9410 or visit schwab.com/trading to tdd#: 1-800-345-2550 learn how you can earn up to 300 commission-free online trades tdd#: 1-800-345-2550 for six months with qualifying net deposits. tdd#: 1-800-345-2550

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let's get six in 60 with jim. staples had a rough day. >> credit suisse, don't go there. i agree with credit suisse. >> bear? >> real estate investment a lot of people own. be careful if rates continue to go higher you're going to have to sell it again. >> solar. >> this is a company that has just been killed since they did the secondary. probably right no take a look at it. >> downgrade for guess. >> apparel, anything apparel is

a disaster in retail. >> jp has retail on facebook. >> they're saying that things are tracking better so they got 338. july/august looks good. new call. >> jeffries? >> i point this up because hewlett-packard is getting killed. these guys, you're doing the killing! >> very nice. relook forward to seeing you tonight on "mad." >> again, new york stock exchange kind of fairing better than nasdaq. >> absolutely. we do want to bring our viewers up to date. shout out to one of our youngest viewers probably in the woorld. everett campbell drake. everett's dad scott tweeted yesterday, he said, hey, carl quintanil quintanilla, your voice was the first tv voice this guy heard in his life. we watch you with jaim cramer. i wrote back, don't worry, it gets better. scott is a great guy. works in i.t.

loves the nfl and "breaking bad." your kind of guy. >> very nice. jim, have a great weekend. >> great show. when we come back, a lot more still to come. breaking news on the housing markets and new home sales data hout in a few moments. in a few . . . right now, 7 years of music is being streamed. a quarter million tweeters are tweeting. and 900 million dollars are changing hands online. that's why hp built a new kind of server. one that's 80% smaller. uses 89% less energy.

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welcome back to "squawk on the street." we are live here at post nine at the nyse. the big news of the morning, of course, microsoft ceo steve ballmer will be retiring in the next 12 months. all eyes are on the nasdaq as we get a good open this morning on friday. simon hobbs is live there. some breaking news on housing. jim with the cme. hey, jim. >> if you're looking for to the around the tape fer vus no taper debate we just got an interesting clue in the housing market. number came out 394 from an expected 487. it's an awful number. month over month is down 13.4, even the numbers from last time were revised from 497 down to 455. so this is an awful number. you know, the mortgage applications and existing home

sales have been diverging. mortgage applications doing poorly. everybody has been looking for something to see what is going to give in the market. this could be the clue. back to you, carl. >> wow. thank you for that. that is -- that's a big miss. that is a very big miss. >> horrible. think about the fact that, carl, just half a million a third of the pace we're building homes during the peak. half of the pace of what's normal. below 400,000 in july? we fell by 13%? i mean, that's extraordinary. >> it does feed the overall thesis that institution alibiing, they're not buying new homes. >> great point. >> and explains sort of what you see with existing we got a few days ago. >> and the rerating in the buildings down 20% since their may peaks. we've seen the -- here's what's interesting. you've got confidence -- homebuilder confidence continues to rise. eight-month high even after some of this adjustment and rates happened. toll coming out with commentary

saying the market is still strong. they still like it. it would appear what they're doing to shore up the business in the medium term at the same time means a hiccup or a pause in the rebound psyche that we've seen for new home sales in july. >> the biggest miss since may of 2010. >> wow. >> we were looking for minus 2%. we got minus 13% on new home sales. we will be talking about that for the rest of morning, i guarantee you. let's get to simon hobbs. catch up on what's happening at the nasdaq. >> good morning, carl. we've opened successfully here at the nasdaq. 32 minutes into trade. obviously the investigation continues into exactly what happened yesterday that all nasdaq stocks were knocked out for trading for 191 minutes. the interesting way is the way in which management here is pushing back very robustly, proud they say of how they handled the situation yesterday, bringing the market back slowly over a period of several hours so that you've got that final 35 minutes of trade. and therefore, price discovery

and the etfs could settle and basically we could shut down for the night albeit with some people the day traders or the high frequency traders had bigger problems during the coast of the day. interest that robert greifeld, the ceo, is not talking major investments here to sort out the problem. take a listen. >> we're deep my disappointed with what happened yesterday. we aspire for perfection. right? we want to get to the 100% uptime. and we spend a lot of time, effort, and money to try to get there. we didn't get there yesterday. obviously that's a problem. we need to continue on that quest. but it's important to recognize that we have to have the ability to handle the situation properly when a problem arises. >> there are obviously others deeply disappointed if not angry with what happened yesterday. really the story moves to the s e s.e.c. and the woman at the helm of that chair mary jo white and

she said she will call in an emergency meetings of all the exchanges and market participants. there were plan on the table that stalled for a bit on ensuring better stability of those systems and those now coming very much to the floor. what's interesting is that in andrew's interview that we had earlier today, at one point he said that he would consider an extra consolidator. in other words, doubling up on the job that the nasdaq does here with that server that failed which is giving the entire market the bids and the offers and the best price information. so there would be two brains potentially if you see what i mean rather than one which, is as you know, guys, always better. back to you. >> thank you. for more on the nasdaq fallout and the breaking news that microsoft ceo steve ballmer will retire at the end of the year, jim stewart joins us now, columnist with the "new york times." won a pulitzer prize in the 1987 stock crash. good morning. >> good morning. good to be with you. >> thank you for joining us.

look, i'm curious first of all, the context you would give here around the nasdaq and this trading glitch. the long-term impact. >> what a major story. i think somebody has to m-- may mary jo white to say this is not acceptable, this is t not tolerable. the idea of reredundancy. i don't want to be a scare monger, i'm not a fishing writer either but i could write a thriller of who exploits a major vulnerability in the entire trading system. there ought to be a backup system when something happens that kicks in. but you know, you're taking the average investors' liquidity away from them and one of the greatest advantages of stocks and etfs is the ability to buy and sell this when trading is going on. that was taken away yesterday. >> jim, for those who think this is a nasdaq versus new york stock exchange kind of issue,

just want to read a line saying the u.s. equity market which was one the best model for capital raising and capital allocation has become the laughing stock of the world. are they right? >> it's not just a nasdaq issue. i have to assume that any exchange in the u.s. or elsewhere could be vulnerable to something like this. i'm not a software engineer or expert on this. but something like this could shut down the whole thing. they don't seem to know why is scary. i assume that could happen anywhere. i don't think the u.s. is a laughing stock. it's a global problem. we can't just sit back and point fingers. this is a serious issue. the regulators are right to treat it as an emergency, to get in there and come up with some solutions fast. >> jim, why so many people saying, you know what, if you're a real investor this shouldn't matter. exchanges shut down periodically over the years for various reasons. i mean, we're in a technical optical age. this is going to happen. how can people just shake it off? >> i agree. i think this is really very serious. what if you're at a closing or you're about to -- you need this money at any particular moment. suddenly you can't get it? you couldn't trade yesterday?

not only that. so it was several hours. they shut it down and said, we don't know when it's going to reopen. good for them, they did reopen in a few hours. during that period of time you didn't know when. whether it was hours, days, or weeks. tremendous level of uncertainty. if we're vulnerable to this it's going to suppress prices. they traded a liquidity premium. if you start taking liquidity away it's going to show up and scare a lot of people out of the market. it's a terrible thing. it's got to be stopped. i have to assume given the technology cape it abilities of country, reredundancy has to be built. >> you can discuss big mac kro exchange related events and also stock-specific stories, what's your take on steve ballmer retiring? >> this is is fascinating. i have to hand it to him me did not have an amiable task stepping in after bill gates steering a behemoth like that during a period of incredible change. i think change is probably good

now. microsoft has really not vaulted past the pc era into this new age. they certainly have tried. they've done all kinds of things. but i really think the template here is going to be ibm which changed the business under lou from the hardware business, a legacy business, and decline and vaulted into a very successful transition into software. very bold. very difficult to pull off with a huge company like this. i think the challenges are going to be emmens but it's probably going to take someone with a very fresh and innovative ideas about where technology is going. >> does that it mean -- it's funny you say that. rick sherlund cited the gershwin model as well. >> well, it's definitely going to take somebody innovative which means maybe getting someone somewhat unconventional. someone who has not been steeped in the microsoft way. we've all worked at big companies at one time or another.

moving the aircraft carriers is incredibly difficult. and una at the top it really does take a change in agent with fresh ideas. i hope the board will think creatively and not worry about the safe choice. >> so i take it you dount want to see bill gates come back to the helm here? >> i don't think there's any -- i don't think bill gates would want to come back. he's got a great legacy there. why would he want to muddy with this now? he's on to bigger and maybe, you know, doing all that stuff. good for him. he's made his name there. i don't think he needs to go back. >> jim, it's great to have you. have a great weekend. thanks again. >> thanks. the nasdaq knowing it had some explaining to do, bob greifeld did that this morning on cnbc in the wake of that 3 1/2 trading halt. mary thompson joins us to look at whether the day after explanations are too little too late. hey, mary. >> carl, the nasdaq's five-year radio silence during and after that trading halt raising questions about its ability to manage a crisis.

ceo bob greifeld's response, the exchange was focused on fixing the problem, coordinating the reopen with other exchanges while keeping head traders an regulators informed. not the press. >> we took the proper amount of time, right, to make sure that the testing was done, that the communication yesterday was so strong and we got that communication done and we came back and came back successfully. so it's not our job, nor will it be, for us to go on the press, you know, to the press to public, while we're focused on the issue. >> still traders express frustration over a lack of detail about the problem source. former s.e.c. commissioner harvey pitt frustrated at management. >> this should not have happened. and the inability to tell people which securities would trade and which were opening ahead of others, that's pure chaos and it's wholly unacceptable. >> crisis management consultant

eric backs the nasdaq decision to fix the problem before speaking to the press however it says it needs to repair the brand. the incident tells us the nasdaq may not know what it's doing and it needs to show us how they're fixing the problem or else its competitors will. for greifeld, of course, tuesday's trouble his second high profile problem. bomping facebook's ipo last may resulting in a $10 million fine for the nasdaq. he did maintain the board's support after that debacle they assigned him to a new contract back in february of 2012 and gave him a raise. whether or not he maintains that support, we'll have to see. he says he will be speaking to directors and cnbc's e-mails and calls to various directors to ask about this incident were not returned. carl, back to you. >> all right. mary thompson joining us from times square on that nasdaq story. mary, thanks. when we come back, new home sales having their worst decline since may of 2010. big miss today. what does that mean for the

markets? since steve ballmer became ceo of microsoft in 2000, the stock is, what, up or down? >> how much are we up now? since he joined? >> since he joined. >> down 40%. what does ballmer's retirement mean for the company? in today's markets, a lot can happen in a second. with fidelity's guaranteed one-second trade execution, we route your order to up to 75 market centers to look for the best possible price -- maybe even better than you expected. it's all part of our goal to execute your trade in one second. i'm derrick chan of fidelity investments. our one-second trade execution is one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account.

getting back to the markets today which are trading slightly lower. premarket looked a little bit better than we're getting here. dow is awful 12. nasdaq up ten.

s&p flat at 1557. john manly is the strategist with wells fargo funds management, joins us on a friday here at post nine. john, it's great to have you. >> great to be here. >> what a collision of topics that investors now have to deal with, right? if it's not jackson hole you've got exchange mechanics to worry about. is this going to be something we live with for a while, this discussion, or not? >> i think -- mechanics i think go away. these things come and go. it's like my iphone going off, i get so mad only because it works most of time. we've got to get through the issues. at some point in time they're going to have to taper. i think we get through it again. >> really? >> yeah. >> the rest of the year you see us chugging along here or do you see a big directional move either way? >> i don't have a great feel. i think it's flat up. i don't see a lot of risk despite the fact that it's dell one the first half of the year. the fed is not going to tighten. does anyone really think ben bernanke will undo everything he broke every rule in the book to do? i think he's going to be

cautious. >> what about the home sales report this morning? >> people anticipate rates going up. so i think you might have front ended so stuff. we sold a house ourselves. people wanted to close very quickly. so, you know, these things are volatile numbers. they're subject to revisions. i still think housing market is getting a little bit better. i think you've got five years of pent-up demand. and basically fit doesn't do better, the fed is not going to leave. they're here to get results. they're not going to taper. >> well, but here's the interesting point. we're hearing the fed continue to outline some concerns about whether qe is helping more than it's hurting or just about the efficacy of the program, the way in which it can affect structural change on the economy. some of the market may be looking frothy. is that why people don't necessarily think a weak report like this is going to make them more think to themselves, better safe than sorry that, in fact, they might still want to press on with the taper? >> i don't think ben bernanke has ever had a unnuanced thought in his life.

if you want to put it all to the and when he starts to move he's going to move slowly. it's not only when but how. basically the way i look at it is the full faith and credit of the service behoond the economy and align with the market, does it go up for the next three months? i can't tell you that. does it go up in the next 15 months? i'm pretty confident it will. >> are you hearing from clintsz whether retail or institutional that they want in? there was that sense earlier in the t year when it was a straight shot, right, working our way up 10, 15%, i'm not hearing portfolio managers cry out the way they were in the first half. >> no, you know, i think, you know, it's not so much they want in is they don't want to be out anymore. part is just being on the outside looking in. i think the first six months of the year, first seven months, tremendous amount of money pushing in. i think there's still that money on the outside. that's why i don't know about the next three or four months. that much to empower us to the end of the year, maybe, maybe t not.

>> just curious. if regulators call you and say, john, is market structure today better or worse than a deck aid decade ago, what's your answer? >> let me talk to my lawyer and get back with you. i think things get better. >> you want markets to be faster? >> i want them to have the capability to be as smooth, liquid and clear as possible. i think that, you know, clarity is extremely important. knowing the trade is done is important. the more we do that ultimately we live within the states of complicated societies. >> john, it's good to have you. thanks for coming by. >> thank you. shares of pandora are losing more than 12% today following the company's quarterly results. and pandora's cfo will join us live after the break with his take on things. "squawk on the street" will be right back. i hav

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dow continues to mildly struggle here, down some 15 points. number of stories we're working on. obviously we wanted to see how the nasdaq would open. things appear to be orderly at the top of the session after a very difficult day for the engine change yesterday. steve ballmer leaving microsoft.

huge gains in market cap in the premarket. that's held on there. a gain of almost 9%. steve ballmer hits, kell, who owns 300 million shares, just enriched his pockets $840 million by announcing his own retirement. >> i was going to say who needs a golden parachute when all you need to do is retire. at any rate, then there's pandora, second quarter revenue jumping 60% thanks to mobile unit. the stock is down thanks to third quarter earnings. outlook below estimates. jul julia boorstin has the cfo of pandora. >> good morning, carl. good morning to mike herring, cfo of pandora. before we get into earnings. we've got to ask you about the big nasdaq flash freeze. i know that pandora is trading on the new york stock exchange. if you were the cfo of a company

about to go public, how ouwould that impact you? >> we're on the new york stock exchange so it didn't affect pandora. volatility and stability are important for a stock but i don't have a lot of comment directly on the nasdaq. >> and now do you have any sense of the need for more regulatory oversight or any changes? >> i'm sure that the nasdaq and the regulators will figure out a way to prevent this from happening again. >> moving forward, looking at your earnings, now, your stocks now at 12% today. why did you're out look fall so far short of estimates? >> pandora is a business that's firing on all cylinders. and we actually raised revenue guidance for the year and affi m affirmaffir affirmed profitability for the year. we're investing for our opportunity. we're third in mobile advertising revenue. we are the undisputed leader in internet radio and we think that that opportunity is just going to be bigger over time and who

the right thing to do strategically is for us to to invest in that opportunity. >> now, one big announcement we made yesterday is the fact that we're eliminate that 40-hour mobile listening limit. why are you doing this and how is that going to impact your results? >> we implemented the 40-hour listening limit six months ago in order to manage costs and control growth. in the last six months we've implemented other levers in order to control cost and improve listening experience. and the blank at 40-hour limit is no longer necessary. >> mr. herring, hi. this is simon hobbs at the nasdaq stock exchange. i know a lawyer who negotiates the rights within your industry and he tells me that one of the great unknown or underreported scandals is that artists are going to get very little revenue from your industry because the up fronts that the record companies are charging is so massive that they will never actually be made up and actually trickle back to the artist.

is that the case? >> pandora was founded by artists for artists. we're committed to provide strong revenue streams back to the artists. it's one of the reasons why we enjoy this statutory rates. it's guaranteed 45% of our ro l royalties that we pay will go directly to performing artists. that's one way we can guarantee that will happen. how the upfronts impact our competitors, payments, is subject to their own contracts. >> speaking of competitors, you have apple's big iradio launching in the fall. is this dropping of the 40-hour listening limit just a move to get ahead of that and what kind of threat does that pose? >> we are the undisputed leader in the internet radio. we've had competitors large and small over the nine years we've been establishing this category and we believe we will be able to maintain market leadership for some time. apple's entrance is the most

recent competitor out there. i think we are more likely to see their emphasis on advertising draw attention to the potential of connected radio advertising and grow the market generally. and we believe that we have a strong competitive position in that market going forward. >> but per simon's question, apple will have lower costs than pandora will. what about that? >> we are happy with the cost structure that we have under the statutory rates and preparing for the next rate of -- rates court proceedings that begin in 2014. the apple rates will be one piece of evidence as part of those proceedings. so we're confident that the right outcome will be achieved. >> quick final question about mobile. you are making more money from your mobile users but it lags desktop dramatically. how can you catch up? >> we've seen dramatic growth in our mobile advertising.

up 92% year over year to 116 million in the last quarter. in our monetization level is up significantly. it does lag our desktop monetization. that shows the potential of the mobile monetization. it's early days in the mobile advertising industry where the desktop advertising industry has now been around for over a decade. we think that mobile advertising industry will gain strength a lot faster than the desktop advertising industry did. and as that happens, pandora will be there to capitalize on those trends. >> that story is one to watch for pandora and your competitors. mike herring, cfo of pandora, thank you for joining us. >> we'll see if it can help shares find some bottom after being down double digits today. microsoft getting a pump on news that steve ballmer is retiring in the next 12 months. the question is what should you

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a downgrade coming for the big banks. yesterday moody's threatening to downgrade goldman, morgan stanley, jpmorgan believes the government is now more likely to let large banks fell during a crisis. l.a. times will not be owned by the koch brothers.

including the l.a. times and chicago tribune. interest in the papers have been heavily scrutinized by people concerned that koch owned papers would push conservative causes. a new "dark knight rises," warner bros. announcing ben affleck will play batman bringing batman and superman together on the silver screen. affleck will replace christian bail who has played batman since 2005. what a debate on the internet that is, kell. >> i am not supportive of this. speaking of bulls and bears, microsoft on the news the company ceo steve ballmer is to retire in 12 months. colin is director of research and senior technology analyst. colin, welcome. you've got a hold rating on microsoft. raise it to a buy here? >> no. in fact, if you're buying this, you have to be very concerned that you have a difficult 12 months in pront of you because if you think about any type of ceo transition, is this

happening because the business trends are likely getting better or likely getting worse? june was the fiscal year end for microsoft. it makes sense. hey, where are we? if you look at what's happening in the state of the pc market. two quarters of double digit delines. leno lenovo, sells more smartphones now than pcs. >> do you worry this is a distraction and one in which the company will double down on a strategy that isn't working? >> we'll have to find out who the new ceo is. steve ballmer is embarking on a major reorganization of this company. and that's going to be his final act. and then whoever is the new ceo coming in will inherit this along with any that comes from a reorg. if you are an investor in microsoft, you might be looking out. >> what ballmer will do in the next year, make the units fight for survival, right? something they naefr r never really did.

they fed all the kids no matter what they were doing. >> everyone wants to knock steve. he did take the company from 25 billion in revenues to north of 77 billion. he did a lot of good things. but unfortunately like we said, the bread and butter core of business is showing a lot of cracks, particularly if you go back and look at pc sales. they peaked at 96 million units in the september quarter of 2011. >> wow. >> this decline has been going on for quite some time. just really focused in on it because it's double digit. >> is it right for them to follow ballmer's idea, should the company be split up, need another strategy entirely? >> great question. the thing is whoever comes in next is going to have a very difficult time to split this company up post this transition. right now everyone who is part of, you know, windows raise your hand, right? everyone who is part of office, raise your hand. part of bing, raise your hand. afterwards, it's much harder. if you're expecting a break-up after this reorg it's going to

be much more difficult to accomplish. >> what about all of those wait for balance sheet whmaneuvers, dividen dividends, buybacks, are those now back burner issues? >> you know, they're among one of the better companies in the space of returning cash to shareholders. they have a decent dividend. they continue to increase it every year. they do excess cash to repurchase shares. you know, they faced a problem that most large tech companies do. they have a large offshore cash position so they don't have a ton of onshore cash. majority is offshore. issued debt at excellent interest rates. they've done a good job from the balance sheet perspective. >> some are saying keep it coming. >> sure. keep it coming. like any time you're dealing with dividends, you want to hike at a nice steady pace in-line. i think they've done a great job in that regard. >> the argument for the shares is not just the management reorg here potentially the company reorg but it is the financial engineering. do you not acknowledge that

there's upside here if they go forward with this plan? >> it depends, right, because, you know, the new ceo made decide, hey, i want to be more inquestions ti inquisiti inquisitive. there's 100 different -- >> instead of borrowing to do the buybacks. >> correct. there are multiple ways to take this company. stay the course, try to split it up, chase after acquisitions and push harder into devices and things along those lines. try to mimic the apple model. the problem with mimicking a business mod der that's been successful is you're typically too late to the party. >> i guess better late than never. >> well, we're going to find that out. >> yes, we will. all right, colin, sticking with the hold, colin gillis this morning. thank you. sense of normality is returning to the nasdaq here today, now clearly over an hour into trade. normal trade after yesterday the market was paralyzed, of course, for over three hours. not just here but all nasdaq trades across the country. this is how the ceo of nasdaq is

now explaining what happened. >> we have a data feed which consolidates trade for 13 exchanges. we do that for the industry. that had a problem. as soon as we saw that had a problem we had a fundamental concern. we knew professional traders had access to individual data feeds but the traditional long investor, retail investor now didn't have the same information. because of that we halted the market. >> joining us now is david sieberg, head of sales and training at cowan. what was your experience with yesterday? >> how are you, simon. thank you. my experience from yesterday is it was a relatively quiet day. we had lack of news flow, lack of volume. we were lucky about that. i'm going to tell you the biggest issue and when i listen to the commentary the ceo made this morning on your network, the biggest issue is communication. you know, he made a comment saying that essentially they're not responsible to communicate with the press, they're not responsible to make people aware

of that issue as it was incurring. i could not disagree more. i think it's absolutely irresponsible for them not to make the middle american investor aware of what was happening, the professionals were aware. they were getting feeds. we were getting news feeds coming in. they were making sure we were aware from the standpoint of how stocks may or may open. but if you're sitting in middle america, you had no idea. it angers me because there's a responsibility there to the people investing in these companies, listed on that exchange, and, you know, to make sure they're aware of exactly what was going on. and they were left out. >> i think in fairness to greifeld it would be a question of priorities in his view. probably you have a relatively small team, the job has got to be to ensure that financially nobody gets hurt rather than appearing on cable television i think is the point he's trying to make. >> no question. i absolutely agree with that. i'm not saying that. i'm saying if you're sitting in the middle of the country you have no idea what's locked up

and why. the press is the only conduit of information to you. i would say that we had an issue with facebook. we had an issue with the flash crash. we had an issue yesterday with what occurred on the nasdaq, technological issue. what i have an issue with is how it's communiqued to the public and how mom and pop in middle america are actually going to get informed on that and they should be informed because they're the ones investing their hard-earned money in the process. >> david, i want to ask you specifically and everybody now has an idea of what they say went wrong with the communication problem with the nyse and the main server here. what fascinating me is the statement they're making, pr statement and we just played a clip of it. professional traders had access to individual data feeds but the traditional long-term investor, retail investor, didn't have the same information. is that true? and if it is true, isn't it the nasdaq's fault in the first place?

>> you know, i can't answer to the fact whether or not it's true or not true. what i will tell you, what really adds to the confusion if you really want to put it in perspective and frame it out, there's 52 place where's stocks can trade. there's multiple regulators for each exchange. there's no real central decision maker. if you equate it back to when we had hurricane glory of 25 years ago. 25 years ago the new york stock exchange decided they were going to shut down and everything shut down. hurricane sandy comes through and there's multiple meetings, multiple -- condition fusion about what should or shouldn't happen. it takes the s.e.c. to step in and actually make a decision to shut down the universal market. i just think in general, there needs to be more central -- more centralized process about decision making to make sure everybody is kept in the loop at one time and it just doesn't occur. >> what about a more fundamental overhaul of the market structure. you hear that coming from senator schumer from new york. you hear harvey pitt talking about the need for zero

tolerance and very heavy fines. >> right. i mean, i think that needs to be looked at aggressively as well. but i think just the backup a little bit and realize we are going to have more technological issues. there's no doubt we're in a technological environment now and that's going to be the market. as nasdaq says, for the next 100 years, if it's going to be the nasdaq for the next o100 years, there needs to be a level of responsibility when it comes to communicating and a priority to make sure that people are aware of what's going on. and that, frankly, just did not occur. >> david, it's good to see you, sir. have a great weekend. thank you very much. guys, back to you at the nyse. >> simon, thanks. top minds in the economy ga gathering at jackson hole. we're going to take you there live to hear what they have to say in a moment. ] today, my ambe knew all about a bike accident, just by talking to a helmet. it grabbed the patient's record before we even picked him up. it found out the doctor we needed was at st. anne's. wiggle your toes. [ driver ] and it got his okay on treatment from miles away. it even pulled strings with the stoplights.

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our own steve liesman is out there and spoke to president in part one of two-part interview and promised, here's the second half of their discussion. >> john, let's talk about the guidance the fed has provided. the markets -- the fed had been trying to tell markets that reducing quantitative easing is separate from raising rates. >> right. >> the market doesn't seem to act that way. >> well, i'm not so sure about that. you know, we do try to read market expectations of future fed policy. and it's not obvious to me that market expectations today of future fed policy are that out of alignment from what i think is a reasonable view based on our own projections that come out in our fmoc projections. i'm not certain that today the markets are that confused about that but it is a very important point that to the extent that we adjust our purchases that in no way is handing a removal of monetary accommodation or a raising rates. i'm hoping our forward guidance

is helpful in that regard in separating these two. >> when would you estimate would be the first rise in interest rates? >> again, it would depend on the data. that's my mantra. looking at my forecast, i'm expecting i think employment to fall below 6 1/2% in first half of 2015. i would expect that we wouldn't start raising rates given the expectation of the inflation would still be below our goal until later in 2015. raising the fed funds rate. after the unemployment rates come down below 6 1/2%. >> and what about your growth forecast. you have to bring it down from where you were for the second half of this year? >> sure. it's obviously driven by the data. >> sure. >> and once the data come in your forecast has to be thrown out. you have to rethink that. clearly growth in, i would say, currently is running around 2%. real gdp growth. i still expect there to be a significant step up later in the year and in 2014, especially as

the fiscal restraint on growth steps back. >> how much of a concern is low inflation right now. >> i think it was a real concern earlier in the year. we saw readings on our preferred inflation measure get down to 1% which was quite low. at the same time, our analysis suggested there was temporary factors. what we've seen in the last few months supports that view. we're seeing inflation moving back up, not high but moving back towards our 2% goal. so i would say it's a concern but as long as inflation continues to progress as we see, i feel good about that. >> one thing that's not been discussed a lot is this notion of if the fed does not taper, it will especially in the mortgage-backed security market take a larger and larger chunk of the issuance. i've even heard estimates say you may be taking more than what's issued in the mortgage-backed trading market. how much does that play into the idea that the fed does need to step back. >> one of the factors in thinking about the right quantity of purchases has always

been thinking about both the effects of the macro economy, promoting growth and job creation and keeping inflation around 2% but also concerns about we don't want to be causing disruptions or dysfunction in markets. so as we -- if we got to too high a level of purchases relative to the market i think those concerns would be greater. right now i think our level of purchases that we're doing doesn't create the dysfunction or problems. >> in terms of the stem laws you provide. if you're taking more of the percentage of duration off the markets that's a reason to step down, isn't it? >> it's hard to judge exactly the effects there but i would think that the more -- the higher percentage of purchasing of the market is probably bigger effect we would have on that market. i would agree with your point. >> john, thanks for joining us. >> sure. >> we will see you at the conference. >> great, thanks. >> back to you guys. >> thank you, steve. and more from jackson throughout the day here on cnbc. meantime, here at the nasdaq, a very strong message from ceo bob greifeld speaking out this

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for more on the ripple effects that nasdaq has sent through the rest of the market system this morning, we're here with kenny, a trader at o'neil securities. you walked us through the thick of it yesterday having. having a day or night to sleep on it, do you feel any different? >> what i feel about is not so much that the economy is broken because nasdaq doesn't necessarily talk to the health of the companies that parade there, what it really talks about is the condition of market structure in this country which i think is clearly broken at the moment, as do a lot of people. there are way too many venues, way to many points of connectivity. there's no reason to have 90-plus venues to trade ge telephone, microsoft, apple. it just causes chaos. for some participants in the industry, chaos is great. for the long-term investors, chaos is not what you want at all. you want transparent, reliable, robust, and vibrant markets. >> isn't it the stock exchange's

own fault for going public? >> listen, and that's part of the conversation. i absolutely agree because then you become -- now you have a whole new set of masters to have to answer to when you go public, whether it's any of the exchanges that have gone public. >> what if in washington they said, you know what? we don't like this market structure, we're not convinced about. what we're going to do is make the nyse a public utility and all u.s. listed stocks will trade through here. >> essentially that's what it was. it was a public utility prior to the structure we have today. it was a human-based public utility so we know where that went. what we're talking about is the way the u.s. market is structured today. >> kenny -- >> so i agree. the other thing i think is that marketplaces should not be -- dark pools should not be owned by banks because there's an inherent conflict of interest. >> simon? >> kenny, you are head of floor trading on the nyse. of course, you're going to be

opposed to what is happening here in electronic trade in the nasdaq. electronic trade has given most people huge advantages they never had before. just ordinary people -- >> whoa! wait, wait, wait. >> let me speak. this is a free market solution that you see before you. the question is, is there the outrage across the country to generate change from the s.e.c., from the regulators, and to have more government intervention to put things a different way, and i don't see, i don't hear the outrage this morning. it looks to me like greifeld has again got away with a massive failure in terms of public perception. >> well, i think you're right, but i do think that there is movement now inside the industry that realizes that we've allowed technology to now take control of us versus us using the technology to control the situation, and that's where you've really gone off the rails, right? is when technology now is the one who is taking charge and leading. and that's the problem. the pendulum has swung way too

far to the left and a lot of people in washington and a lot of people in the industry now realize that's the case and it needs to come back some place in the middle. no one is saying go back to new york stock exchange, human brokers, pen and paper, buys and sells. get off that argument, i'm not there at all. i use technology all day long to do what i do. i connect to my customers, i access the marketplace. >> why do we need 90 venues to trade this stuff? >> i have a better idea, and it came from myron shoals, who is one of the fathers of options trading. apparently, i had not heard of him but he was in "the financial times" today. he made the point, and this is a free market solution, simply say you cannot cancel trades. goldmans or the nyse, if you make a mistake, you will have to pay the price for that. i think you'd probably find you suddenly had much more robust systems in there. >> in fact, that might be very true because i do agree at some point you've got -- if you never end up paying the price, then you never end up fixing the problem. so if you keep canceling those trades, it lets you off the hook. that might be one part of the

solution. although the other part of the solution i think is to go back and look at the current market structure we have today because i think, and a lot of people will agree, current market structure leaves a lot to be desired. >> you know, a lot of people said the biggest lesson of yesterday was that the small number of people who actually care, and what that says about capital markets in this country. >> that's a sad statement because capital markets in this country were really designed for listed companies to come, bring their stocks to go public, have the average person and people in this country be able to invest and generate and create wealth for a lifetime. when you have -- you know, the markets are very institutional. you have the retail guy who buys 50 shares of coke. it's not going to affect him. i get that. we're talking about institutions, major asset managers in this country and around the world that come to places like the new york stock exchange or nasdaq or the u.s. capital markets to invest their money and what they want a s a robust and vibrant marketplace. >> that's one of the better selling points we have. >> well, it absolutely is the

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welcome back to "squawk on the street." i'm jackie deangelis taking a look at shares of facebook here. they broke above $40. that is a new 52-week high for the company. the stock now up roughly a little bit more than 50% since reporting earnings on july 24th, and, you know, it's interesting to see this move because those earnings, carl and kelly, that we saw from facebook in the second quarter really a game-changer for this stock, but we are watching it. it's trading above its $38 ipo price. right now $40 even. back over to you. >> that's a big move. i mean, getting across $38 was an important psychological milestone, but getting to $40 and holding the gains is key for that company after that stellar quarter. in fact, since they reported, kelly, it's up 51%. >> wow. again, on a day when we've talked about nasdaq and the way it handled that initial ipo and

the fact it's crossed over $40, just an interesting one. >> poetic. with the dow up 26, if you're just joining us, here is what you missed earlier on. welcome to "squawk on the street." here is what's happened so far. >> i can never commit to anybody that there will never be a problem. we have to commit to we're going to work as hard as we can to get to 100% and to the extent we can't, we can't achieve perfection, that we have the proper procedures in place to respond to it. >> there's a lot of things that are really hard to get at to try to link the financial markets effects to the real economy effec effects, but absolutely classic monetary policy easing. >> you know, it's going to be business as usual. i don't think anyone is going to get hurt by this. it's just -- >> not even bob greifeld. >> i think he'll be fine. he said he was fine, so, therefore, he's fine.

>> i'm getting word in my ear that steve ballmer of microsoft is to retire. >> i know there's a lot of pressure on ball mmer to delive. i would like to think he left because he's done but this obviously is a shock. it's a shock. >> shares up 6% on the news. >> i'm going to stick with with wha chairm what chairman bernanke said, it will depend on the data. >> the number came out 394 from an expected 487. it's an awful number. >> well, i do agree it's not just a nasdaq issue. i have to assume that any exchange in the u.s. or elsewhere could be vulnerable to something like this. good friday morning live here at post 9 at the new york stock exchange. what a morning we have on tap. watching what's happening over at the nasdaq today. new home sales were a big miss. dow, the s&p, the nasdaq all

trying to get past all that though. we're looking at modest gains as we're coming off of a relatively losing streak over the past few days. microsoft one of the big stories of the morning. the stock rallying after steve ballmer says he will step down in 12 months. microsoft is forming a search committee, including founder bill gates. shares of expedia rallying as well. the online travel agency says it entered into a long-term agreement with travelocity. under the agreement expedia will run most of travelocity's u.s. and canada operations while travelocity will focus on attracting customers. an hour and a half since trading opened and things going as planned for the nasdaq so far. this coming just a day after trading was frozen for more than three hours. we'll tell what you you need to know the morning after. and major news, microsoft ceo steve ballmer announcing this morning he will step down in 12 months. we'll tell you everything you need to know about the future of this company and the move. and the annual jackson hole

symposium kicking off. we'll take you live to hear of the top minds at the federal reserve. plus the game ser back. game stop reporting a strong second quarter earnings. the latest editions of the xbox and playstation. we'll talk to paul raines a little later. first up, microsoft. our next guest predicted shares would jump if ballmer did announce his retirement, and, indeed, that is the case. it was up almost 9% this morning. settling back just a touch. dan niles is a cio at alpha partners. good to have you. good morning. >> thanks, carl. nice to be on. >> the big question is do you chase it here? you say it's a bit tricky, this call. >> i mean, i'm actually buying some shares, and this is the reason. what people forget about stock prices is there are two things that drive it. earnings and the multiple people will pay for those earnings. i think earnings are still too high. i think they still have to come down. but when you look at the stock right now, there are a couple of

events that i think are coming up that will probably make it go higher in the short term. august 30th obviously proxy contest. the deadline for that. the ceo is going to be gone. i think this was sort of a precursor to that and then september 19th you have the financial analysts day, and i think you will get a dividend increase and probably a big buyback increase. i think in the near term the stock probably heads higher, but let's not forget, this business has got a lot of issues, and, you know, there's a lot of precedent for replacing the ceo and still having the stock go a lot lower. >> dan, this is a short-term play for you then? >> it's definitely a short-term play. you can bring me back on after they report earnings, but i will bet you they're going to miss the earnings. i don't think they're going to be able to make it and i'll bet you that the estimates will have to go down after that. so the short term it's more about multiple expansion because people will look at this and say

this is great, ballmer is gone, bring in a new ceo, things will get fixed. look at what happened with jcpenney, look at what happened with hp. nothing has changed fundamentally. microsoft missed the transition to tablet, missed the transition to smartphones. those problems are all still there. so the new ceo better be amazingly good because he's going to have his work cut out for him. >> dan, a lot of the skeptics out there this morning are saying all of you who are trading the stock higher, remember the committee to search for the successor has bill gates on it, ballmer himself is on it. do you expect true out of the box thinking, dan? >> only way steve ballmer is gone is bill gates wants him gone, in my opinion. there's no other way this happens. and so i think that they have sort of struggled along this path for a long period of time. i hope they do some out of the box thinking and it gets

somebody from outside the company. they bring somebody from inside the company, i think that's going to be a very bad decision because, you know, the path that they've been currently on just hasn't worked. so the question you ask i think is the critical one and i think they really do need somebody from the outside to bring a fresh perspective. >> are you saying bill gates is still calling the shots for microsoft? >> let's face it, when you think microsoft, what do you think? it's bill gates. he's the largest shareholder at the company, and i think there's no way that steve ballmer could be gone if bill gates didn't want that to happen. that's my opinion, i don't know that for a fact, but, you know, he's the person that's the most important figure, in my opinion, at microsoft. >> and finally, dan, just to knock down some game theories out there, percentage lyle ikeid gates himself comes back to run it. >> i don't think that's going to happen. i think from my perspective he's doing what he wants to do.

he obviously is one of the greatest ceos we've ever seen in our lifetime, and, you know, but he's moved on to other things that i think are equally important in terms of doing things to change the world, and i think there are good ceos out there. i personally -- i would love if they brought a guy like michael capel la to run the company. he did one of the greatest turnarounds in history with mci. knows the computer business and the software business. >> there's a name we have not heard in a while. >> i know, but think about it. what company was more screwed up than worldcom, right? and he managed to clean it up. but i think they need to think about things like that. they need to look, you know, outside the box and think about things that, you know, you haven't thought about maybe that come top to mind. we'll have to see how this plays out, but don't get me wrong, for me this is very short term because, as i said, i think the

estimates are coming lower but i think in the near term the multiple is probably going higher. >> dan, thanks so much. dan niles joining us from alphaone. >> we want to bring in john frt with mo -- jon fortt with more details on the timing. it comes amid a key reorganization. >> yeah, kelly. i have been talking to some people today, and it's interesting. what i'm hear something that ballmer had been telling people internally that he planned to retire sometime around the time his youngest son was done with high school, which i understand is around the 2016 time frame. that might explain the line in the press release where he said originally he had seen himself being in place about halfway through this transition that they're going through right now. so a lot of questions around that, and, you know, i have talked to a couple of people internally who seemed flustered by the timing here, trying to get their heads wrapped around it. it seems like this wasn't that well telegraphed internally. part of the reason for that

reorg was because there are fiefdoms inside microsoft. ballmer laid that out. the idea is everybody put your knifes away, we're going to start working together and to kind of borrow from history, it reminds me of the sort of idea, okay, the king is on his deathbed, what happens in the royal family? all the knives come back out as people try to figure out who is going to jockey for position. that could potentially happen here given the fact that so many people even high up in the organization were surprised by this timing. it's not what ballmer himself had telegraphed up to this point, guys. >> that's really good color, john, and something we're going to use as we play this parlor game over the next few weeks and months. thanks so much, our jon fortt on microsoft today. things are back up and running at the nasdaq today just one day after it was frozen for three hours aft hours. after a major freeze, you can probably expect some new rules. some were pushing for new rules long before yesterday's debacle. scott cohn has more. >> this is what we're talking about, 377 pages of regulations

proposed by the s.e.c. in march to replace voluntary standards, some of which date back to the '87 stock market crash. together they're called regulation sci for systems compliance and integrity, and s.e.c. chairman mary jo white talked about it at a senate hearing just last month. >> regulation sci requires exchanges and clearing agencies to maintain policies and procedures reasonably designed to meet certain technology standards, and it would require appropriate corrective action if problems occur. >> but that very day, july 30th, the nasdaq and 16 other exchanges along with their self-regulator wrote the s.e.c. to complain that the rules are vague and overbroad, not to mention expensive. the cost burden analysis is significantly underestimated, they said. this morning nasdaq ceo bob greifeld seemed to back you a of that just a bit. >> when you look at the details of the rules, there's always ways to quibble, but the pure

spirit of the rules are there, and we think, in fact, we want to go further on this concept of defensive driving. >> in her statement last night, mary jo white said she would renew her push to get the regulations passed. the s.e.c. staff is reviewing hundreds of pages of comments. some saying the regulations overreach, others saying they don't go far enough. they are looking at potential new measures involving high frequency trading. so this is something they will be talking about for a while. carl, back to you. >> thank you so much for that. another day, another brutal day for teen retail. shares of abercrombie down another -- well, down 1%, as you know. a rough day yesterday, and, of course, aeropostale having a rough morning as well. we'll tell you if there's any safe place in retail to put your money when we come back. clients are always learning more to make their money do more. (ann) to help me plan my next move, i take scottrade's free, in-branch seminars... plus, their live webinars.

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aeropostale joins abercrombie in teen retailers reporting disappointing earnings. where are teens shopping. jamie, do you have a good answer to that question? >> well, our main concern is that teens are finding sort of other outlets to shop. with companies like h & m launching online capabilities, you know, there's the ability to find sort of fast fashion at low prices, and there could be sort

of a market share shift going on. >> interesting. richard, how long is it going to take to sort of clean out the inventory that's not moving and do you see any kind of acceleration in the period between back to school and holiday? >> not for the retailers you mentioned. i think abercrombie and aeropostale are uniquely positioned, poorly positioned to serve the teens. fashion has shifted. these two retailers have not kept pace with the changes. >> it's interesting, richard, because yesterday we had people arguing that if they get the fashion right, that he is nothing that fundamentally wrong here that the teen retailers have been closing stores, et cetera. do you share that view? >> yeah, it's all about product. >> okay. so if it's all about product, that would suggest that the industry itself isn't plagued by overcapacity, that the issue isn't that teens are under financial pressure or they're buying ipads instead? >> absolutely. there are no naked teenagers. >> okay. >> not sure where you're hanging out but you may be right.

jamie, what explains the success of an urban then. if you had to explain to your grandmother what they're doing that aeropostale, and a & f and american segaein eagle are not, the difference? >> they don't cater to the same consumer base. their consumer base is a little more high end with anthropologie and free people and the products span a range. the product that the teen retailers are offering are really quite commoditized. that allows teens to go wherever the best price is. >> i know this is the real trick here and there's not an obvious answer, jamie, but what is the fashion that you think teens want these days? >> you know, i think it changes very rapidly. and i think there are companies like h & m that are able to get things in the store in a much shorter time frame. whatever the current trend is,

you can't really batch order for the season. you have to fill as needed. as these companies tell us there's more left open to order, i don't think it's moving fast enough and it's kind of leaving them in the dust a little bit. >> richard, with all of the action that the stocks have made over the past couple weeks, are you comfortable with the contrarian short urban, go long a & f trade or does that still not make sense? >> it does not make sense to me. i think abercrombie has a fundamental challenge to reposition itself from the uniform that kids no longer want to the diverse, broad offerings that urban has and that teens have demonstrated they prefer. >> it's tough to keep up with those fickle tastes, i'll tell you that, especially when you have inventory and orders to do. thank you for your insight. talk to you soon. it's a big day for the nasdaq. things are back up and running after completely locking up yesterday afternoon. we'll go live to the exchange to tell you what happens next in just a few minutes. stay with us.

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welcome back. some might call yesterday's nasdaq fiasco a nightmare for nasdaq's executives. our next guest wrote nightmare on wall street, knight mare with a k about knight capital's glitch. edgar perez is the author and he joins us at post 9. >> thank you. >> how would you characterize yesterday's event versus what happened with knight? >> it's a big difference. in this case we're looking at a change in nasdaq that is supposed to provide a fair market for all participants. knight was one company. $461 million, they satisfied that price for the other investors. but in the case of nasdaq, it's surprising to me that this is a company that actually is supposed to provide a fair market to everybody and was not able to provide so, and the explanation doesn't really satisfy me. i listened to greifeld today in the morning and he said he had some information right, but he

got the information wrong for the consolidated to all market participants. it's surprising he has access to both sides, one is okay, one is not okay. >> his argument is liability is limited because everybody was at an equal disadvantage. do you think that's true? how much will they suffer because of this, whether it's class action lawsuits, penalties from the s.e.c., loss of market cap? a combination of all of those things 12 things? >> i think the market was closed for almost three hours is an indication also there's going to be sop liability there for nasdaq. remember, we have -- it was proposed, it wasn't really applied. had that been proposed it probably would be more expensive. they will fined still $10 million last year with the facebook ipo. >> you have been writing about some of the problems with high frequency trading for years now. is it your view that the existence and the rise and importance of these systems has

become enough of a problem that something more should be done about it here across the exchanges? >> more should be done, indeed. as you know, the proposal from the s.e.c. to regulate changes on market participants to provide technology that actually responds, right now it's more important than ever, and i think the s.e.c.'s leadership is lacking. it was lacking yesterday. we need to see them more active. >> some argue the s.e.c. trying to address this rule is part of the problem because for every new regulations introu deuced, it creates the inintended consequences. in this case perhaps of fragmenting markets together. what do they do to put the genie back in the bot. >> if you think about the automobiles that were introduced 100 years into the systems, people thought there would be accidents. we have to have regulation in place, insurance, we have to have people to control that. i think that probably helped some people make things more

expensive. in the end we're minimizing the damage. >> when in the '60s the big board was closed up to so the book keepers could catch up, that's not relevant anymore. it's not apples to apple approximates. >> this is not nyse versus nasdaq. this is the u.s. in the global markets. we're competing it shanghai and singapore. that's what we're losing. the u.s. has to do erg to maintain its prominence. >> what is the view outside our borders? >> the view is -- of course, there's admiration for the u.s., of course. when i travel around asia or europe, that's what i hear. nonetheless, we have to protect that. obviously nasdaq, facebook, you see nyse, now it's not helping. i think that's something the s.e.c. has to take matters more seriously. >> we start the show every morning saying from the financial capital of the world. >> we want that to remain the

case. >> author of "knight mare on wall street." >> the annual symposium in jackson hole kicking off. we consider a disappointing new home sales report we got. we'll go live to that meeting. plus, the bell is about to sound across europe. a couple minutes left to go in europe's trading day. we'll get you details on the close when we come back. 20 years with the company. thousands of presentations. and one hard earned partnership. it took a lot of work to get this far. so now i'm supposed to take a back seat when it comes to my investments? there's zero chance of that happening. avo: when you work with a schwab financial consultant, you'll get the guidance you need with the control you want. talk to us today. ♪ [ male announcer ] the parking lot helps

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we have some action on gold today. for a look at that, let's get

out to courtney reagan. hey, court. >> it was a quiet morning for gold until we got that report on new home sales and we saw gold prices spike higher. gold bugs remembering the feds mantra about weak economic data and what that could mean to the stimulus program. we're seeing buyers come into gold spiking up just under 2%. also, those interviews out of jackson hole making some gold traders believe that tapering is not on the table in september. also what's going on over there in the middle east giving support to prices as we aim towards $1,400. we're seeing gold sit at two-month highs. the most active mover in the commodity complex. if you look at crude oil, we saw a spike up when the dollar weakened, and we saw the yields on the treasury fall. that's where we're getting the support there. it's basically just movement following our other indices. that's what traders are saying right now. remember that the volume down here is very light on a summer friday. so these moves can kind of be exacerbated even on little

things like that. last but not least, take a look at what's going on in the rbob gasoline. we got a drawdown in the supply earlier this week. there are some refinery problems at a canadian refinery called st. john's. that'sing what goi what's going rbob market there. >> thanks very much for that. as we pivot back here and keep an eye on what's happening with the stock indexes, the dow is up five points, small gains for the nasdaq and s&p. we saw a leg down after the new homes report but the real action was in the ten-year. that moved all the way back down to 2.8% as people are debating what the fed is or isn't going to do. >> we used to think going from 2.92 to 2.9% in a day was impossible np n

impossible. not anymore. >> and the move has been one of the sharpest in history. the volatility has dramatically increased. >> we'll see how the afternoon session looks after europe closes. what a coincidence. >> let's look at the trading session in europe for you. shares are broadly higher. growth figures from the uk pushed the ftse up. now, consumer morale in the eurozone improved by more than expected. it hit its highest level in two years. as a result you can see the cac in france adding a third of a percent. a third of a percent for the dax as well. the pound a little weaker. it's had a big move and a lot of people who were surprised by the dollar's weakness reminded that it's more of an impact from the stronger euro -- stronger pound,

stronger yen to some extent. >> a lot to come next week. no doubt about that. let's get to josh lipton and see what else is moving down at the big board. >> carl, yeah, it is a friday summer session here, but there's been some interesting moves if you look at those major indexes. you pull up a dow intraday, you will see you're up for a second day, but you're down for a third straight week. it's really big oil, exxon, chevron, that's been weighing on the blue chips. you can see there was an intraday drop after the new homes data. the yield on the ten-year falling on that worse than expected new home sales data. economists will tell you that data point is volatile, it's subject to big revisions, but it certainly also doesn't square with that bump you saw in home builders sentiment. you look at the home builders and they're certainly reacting at that. you can see toll and dhi. also check out the itb, the home construction etf. you pull up a two-year chart,

you would see you bottomed in 2011, hit your peak in may but down about 19% since then. so just shy of a bear market. obviously those fears of rising rates and what it's going to mean for that industry. what's working today? you can look at those rates sensitive sectors. that's the rmz, the dju, the reits and utilities. i want to end on the retailers. i know you have been talking about this. certainly aro, q3 profit loss. the street was looking for a profit and that's dragging others down. aro at multiyear lows. >> an ugly morning for sure. let's get inside on the markets and the big news about microsoft with jordan posner. jordan, we understand you guys own about three-quarters of a million shares of microsoft, one of your top ten positions. what do you do with it here? >> we think the move in the

stock is appropriate. there's going to be more change at microsoft and we think that is a positive. the change in management, if a new ceo comes in and does the right thing by shareholders, has a lot of firepower to reward shoelders in an important way, that can drive the stock much higher. i don't know that we chase the stock right here today, but we think the stock could probably move up to the $40 range, perhaps into the low 40s, and that would be on the back of microsoft more effectively focusing on costs and more fek at this ll lly -- effectively utilizing its strong balance sheet. maybe something like what ibm has done over time. >> jordan, are you then advocating as some of the other shareholders might that microsoft use that cash pile, borrow against it, and pay it back in the form of dividends or buybacks? >> clearly, there's a lot of unused balance sheet strength that can be used more

effectively to reward shareholders. yes, we think they have the capability both to invest in their own business but also to reward shareholders along the way. you know, a cuompany even microsoft's size, doesn't need $60 billion to hoard on the balance sheet. >> do you think a change in management at the top gives them any more mojo in hardware? because it has been one long, painful process watching these guys try to make a dent in that area. >> it's been a problem area for a long time, and they've been trying to work against that. clearly xbox is a separate issue and over a long period of time that's worked out. a change in management can, especially if the new ceo is focused on hardware and has an understanding of how that business can work more effectively, can make that more meaningful. you know, some people suggest that perhaps you actually wind up breaking up the company or

dumping the hardware business, you know, into the can because it will be a long time until you get a return. i think either of those actions is probably too much. but they can be successful in hardware. it will just take some time. >> jordan, i'm not hearing from you -- i'm sorry. i was just going to say i'm not hearing from you that this company needs to make the kind of strategic changes that some of the other analysts have been pushing for saying microsoft has to be careful because they've already missed the boat on a lot of changes in technology. >> they have. i don't think they're out of the running forever. in hardware especially, it may take a long time, but they've got the resources essentially being generated from the software business to be able to apply against the hardware business and continue over time. some of that may come through acquisition. that is a difficult way, but it

can make a bigger splash. i think the company does need to rethink hard internally about how they can generate value for shareholders. one way to do that is better application of the cash and a way to do that is through dividend and share repurchase. >> all right. jordan posner joining us this morning with his thoughts on microsoft shares. again, one of his major holdings there. jordan, thanks. >> pleasure. are video games back? game stop reporting a strong second quarter and boosting its profit outlook ahead of new consols from sony and, yes, microsoft. we'll take a closer look at the next step for video games with the company's ceo paul raines. he will join us in just a couple minutes. don't go anywhere. the most free, customizable charts, powerful screening tools, and guaranteed 1-second trades. and at the center of it all is a surprisingly low price -- just $7.95. in fact, fidelity gives you lower trade commissions than schwab, td ameritrade, and etrade. i'm monica santiago of fidelity investments,

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welcome back. we want to get you straight out to the nasdaq. simon hobbs joins us with more on that you are troubleshooting. >> hi, kelly. we're beginning to get more information from people familiar with the matter about what exactly is going on behind the scenes here at nasdaq. clearly, there's a postmortem under way. we knew that was going to be the case today. not just here but across the data centers, across the country, and they're focusing on the s.i.p., the security information processor. remember, this they describe it as a utility that gives price information to all the other 13 exchanges. that's the focus and the focus is why did it go down yesterday when one market participant was connecting and reconnecting? in other words, sending waves of data intermittently into it and out of it and, therefore, that

caused it to fail. interestingly, these sources will not deny again that it was the new york stock exchange arca system. they're standing by the decision to halt the trade. they've spoken to the regulator twice yesterday and today, and the regulator they say, the s.e.c., is most interested in that decision to halt and why you had to have 191 minutes and they would explain it's about not just sorting out what had happened, but getting the system back online. interestingly, they say the halt was, and they're repeating this internally, they're repeating the idea that the halt was to unsure that ordinary traders, people at home, retail traders, long-term traders or investors, had as much information as would high-frequency traders or some of the big investors because they have their own proprietary feeds. they don't necessarily have to rely on the s.i.p. so they say it's about keeping an even playing field, and one more thing that the sources are telling us, and i think this is the most interesting.

they're going to ask the s.i.p. committee of all 13 exchanges that have to vote unanimously on changes how they want to move forward with investing in the s.i.p. to protect it next time or creating a mirror s.i.p. that can stand there as a backup. in other words, these sources are suggesting, again, hey, this is a s.i.p. problem that's run by a committee of exchanges. this isn't, guys, a nasdaq problem. back to you. >> yeah. well, the fact there was no redundancy in the first place has taken some by surprise. simon, great stuff. thank you very much. let's move to shares of game stop which have been on a tear. the company raising its 2013 earnings forecast yesterday counting on new consols from microsoft and soapy to boost holiday season spending on video games. here for a cnbc exclusive is the ceo of game stop, paul raines. he joins us from texas today. paul, it's great to have you. welcome back. >> great to be with you again, carl. >> catching you on an interesting day with ballmer announcing hit retirement. i know the xbox is in the boxes,

it's heading to shelves soon, but does that announcement raise any uncertainty in your business? >> i don't think so, carl. you know, we're the largest partner for microsoft xbox in the world. we do close to a billion dollars of revenue. we sell probably one of every two titles sold in the united states on an xbox. so we know microsoft well. that strategy is pretty well set. they've done a great job of planning out the launch and i think we're locked and loaded. it certainly is interesting to see what's going on but i think the xbox business will do very well this fall. >> really quickly one more on microsoft, what do you want to see in a successor as that search committee gets to work? >> well, i will tell you, the ceo job is a challenging assignment in any company, but i think the most important thing for any ceo in the technology space like we are is to drive a high rate of internal change, to make sure your company stays on the leading edge. at game stop, we have embraced digital and mobile businesses very aggressively and we will

have over $1 billion in those areas and those are businesses that didn't exist a few years ago. i think that's what microsoft is faced with, that kind of a challenge. >> yeah. what you have done with mobile is pretty amazing. that said, with the comps declining, i wonder, we all know that ahead of a new product introduction, a new consol, you would expect comps to come in. is this standard? anything surprising about what the comp zs in the quarter? >> you know, not really, carl. we, of course, are digging and have been digging very keep around new businesses to drive volume and cost controls, but when you look at a consol cycle, and we've been through five or six of them at game stop, this is the behavior at the tail end. fortunately our forecast for q3 is a double digit comps. we've done promotional things to let customers trade in old products to buy the new products. we'll continue to do so in the back half of the year. >> you know, paul, you were at home depot for eight years, at game stop for -- at least as ceo

for three. microsoft is looking for a ceo. would you be interested? >> i have my hands full at game stop. we are a unique digital and hybrid transformational story that's a heck of a lot of fun and i love it right here in grapevine, texas. >> how big of an impact have buybacks had on our company's share performance, on your earnings performance? last july you were under 20 bucks a share and now you're over 50 i think if i have gotten that right. so there, of course, has been some turnaround within the company, consumer habits are changing as well. you guys have been pretty aggressive on the buyback front. >> we have been, kelly. and capital discipline is very important to us. i think that obviously you have to focus on growth, on innovation, as we have with digital and mobile, but it's also important for shareholders to see that you're committed to returning free cash flow to them. you know, we've said that absent other large opportunities, we will return all of our free cash flow to shareholders. we bought back $1.2 billion of

our shares. eliminated all our long-term debt and initiated a dividend. we think that's important, and we will continue to do so. i think that many times buybacks are seen as a way to sort of manipulate the earnings or change the numbers. what they really are is a return of cash flow to shareholders, and it's a way to retire your equity from the market that you think is undervalued and, of course, our average price is around 21 bucks and we're trading today above $50. i think we made some good decisions. >> paul, everybody is anxious to see how battlefield 4 does, grand theft auto 5, these are big names, especially you could argue for a teen consumer. we've not heard good things about the teen consumer in the past few days, mostly on the apparel front. do you think that's something going on with that consumer space that we need to be worried about in the coming couple quarters? >> you know, it's hard to say, carl. certainly there might be a rotational piece going on as innovation returns to consol gaming. we certainly see great momentum around the new consols. you know, we mentioned on our

call yesterday, our reservations activity is very strong. our new title reservations are very strong. i'm headed to las vegas tomorrow to our annual manager and customer show, and i'm going to be with 5,000 raving game stop managers and probably over 3,000 customers, of our best customers. we'll be seeing all that innovation in action. i think you're seeing our space probably taking a significant share of wallet as the innovation returns, but hard to say what's going on in the apparel space. >> there will be some, paul, as well who look at this and say given the surprisingly strong performance of these new devices and the innovation you're talking about, they take a profit and they say there's no way game stop can keep growing and continue to match this performance and grow on it to the same degree next year. what would you say to them? >> well, i think if -- to those who have done the work, many of our investors are deep divers and they've been richly rewarded for understanding our story. game stop only 4 1/2 years ago

was a 100% physical console gaming retailer. today we are what i call a hybrid retailer of digital and physical merchandise operating in the gaming and mobile space in 15 countries around the world. so i think our growth prospects are not as tied to console gaming as you might think. having said that, we do see very strong growth in the console business for the next several years as this product comes in. so i think investors who take a deep dive and do the work will see that game stop's prospects are strong for a significant period of time going forward. >> it's going to be an interesting fall. thank you for coming back. we'll see you soon. >> thank you, carl. take care. >> paul raines with game stop. some of the top names in the economic world gathering in jackson hole, wyoming, this weekend, and we'll take you there live for an inside look at what might the future of the economy be. that's coming up next. in a world that's changing faster than ever, we believe outshining the competition tomorrow requires challenging your business inside and out today.

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we head now to jackson hole, wyoming, where central bankers have come together at the annual symposium to discuss the global economy. our own steve liesman, what a job he's done over the past few days, is there with a special guest. hey, steve. >> carl, thank you. i'm here with a guy i have been trying to get on camera for a number of years and, finally, in the last year of his term at the bank of england, he's going to be -- he's agreed to sit down with us. charlie, thanks for joining us. >> always nice to be here. >> people should know charlie is recognized as one of the monetary policy experts in the world. we have heard a couple papers on

quantitative easing, whether or not it works. what's your takeaway. >> i thought particularly the one we have just heard was very interesting because it's trying to dig down into the detail mechanics of how it works. when people like the fed and ourselves started doing quantitative easing we had a few that it would help signal that we're going to keep rates low, also that it would encourage people to rebalance their portfolios, and the paper this morning was digging deeper into the channels of how that portfolio rebalancing channel works when we buy government securities. how the people that sold them to us then respond. i thought it was very insightful. >> are you more resigned to the policy or less resigned? do you think that banks should be doing this more or doing it less given the research we've seen? >> i think one of the key things, we're learning more about how they work which means we can taylor them better when we need to use them in the future. as it happens, the bank of

england is not at the current juncture buying assets. it's been some time since we ceased the latest program of asset purchases. but we've said that we'd be willing to start repurchasing again if economic conditions dictated. so if we saw a big slowdown in the eurozone or something like that, we might feel that we'd need to restart purchases. but at the moment we're not. >> another critical tool that's been much discussed is this issue of forward guidance, and you guys -- well, the governor of the bank of england, mark carney, did it recently, and the market didn't seem to like it very much. what's the status of forward guidance in the uk right now? >> well, i think the first thing to say is that what we announced in august was an evolution of where we were in the past. all central banks always want the markets to understand how policy is being set and, if you like, in the jargon our reaction function. but in the past the bank of

england has tended to say it in words, if you like, and not be very concrete, very explicit about the nature of how policy will be set going forward. and one of the things that mark was particularly keen for to us do was to explore the idea that we might give more explicit guidance going forward. i think there's a strong argument saying its value might be greatest when you're heading to the exits. after the collapse of leman, everybody knew we were going to keep policy loose for a long time. they don't know how quickly we're going to withdraw the stimulus. so clear guide sense, we think, useful, as you might be moving towards exit. now, we think quite a long way from actually wanting to start timing policy. >> there's two views i have heard inside there. one is that limited effects of quantitative easing, but then

when fed chairman ben bernanke gets in front of the podium and he says we're going to be exiting, a massive effect from the potential of quauiwithdrawi. does that make you think there's more power to what the central bank has done than originally estimated? >> i think what we've seen in response to concerns about tapering here has actually i think made us realize how important clear communication is going to be going forward. there is a danger markets misunderstanding how policy might be set going forward. given economic news is always uncertain, we don't know how strong growth is going to be going forward and so forth, there's no way we can tie ourselves into a particular rate path, but at least saying what factors determine when you might be changing bank rate going forward might help. >> chairman, one thing i have noticed, there's been a bunch of research papers on the effect of u.s. qe on foreign rates.

>> yeah, yeah. >> does that befuddle you? is it a cause of concern that in a sense so much of your rates over there and your economic outcomes are tied to what's decided in washington? >> i think that's inevitable in globally integrated capital markets. you're going to get these spillovers between countries, and uk government bonds, they're reasonably close substitutes in portfolios for u.s. treasuries. it's not surprising to see a degree of synchronicity. we haven't been all that surprised at what's happened to the long end of our own yield curve as things have unfolded here, but what we have wanted to make clear is that the short end of the yield curve, which are -- >> is something you only control. >> we control. >> i'm running out of time. very quickly. a quick outlook for growth in the uk? will it be a better year and will next year be better sure? >> we're pretty certain this

year will be better than last year. we've seen growth pick up to not far short of its historical trend rate. we just had a revised release of the second quarter figures. 2.5% as you guys say it. that's about our historical average. the business surveys all suggest that's likely to continue in the second half of this year. so we're pretty confident that we're out of this long period of pretty flat output that we've seen for the last 2 1/2 years or so. >> charlie, thanks so much for joining us. >> you're welcome. >> and we'll see you hopefully again soon. is that back to carl in the studio? >> yes, sir. great work, steve. safe travels back home. we'll see you soon. our steve liesman in jackson hole. dow is up 11. housing bears roaring back today. we'll explain when we come back right back. you think about risk. i don't like the ups and downs of the market, back. it on my cash.

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the key debate for the next couple weeks is just going to be to what extend traffic continues to get hit and confidence continues to get hit or whether they take it in stride. >> in a week wells laid off all those workers because refi activity had slowed down. let's get to brian sullivan back at headquarters with "the halftime." thank you, carl and kelly. and welcome, everybody, to "the halftime report." i'm brian sullivan. scott is back next week, thank goodness. four hours to go until the close and here is where we stand. we have green on the screen but not by much. the dow up a meager six points. the s&p up by 0.1%. but we're still in the green. a lot of big stories and here is what we're following on "halftime." flash freeze. the second biggest stock market came to a halt yesterday after what's called a technical glitch. it shut down though the nasdaq for more than three hours. we're going to let you know the impact on investoron