strong and robust houses, while the whites have a more cunning and mysterious houses. >> called drogo rose. does the work, though. >> he ended up very badly. maybe not. maybe not. wonder what would happen if you -- oh, we've got to go. thanks for watching. good afternoon. welcome to this special edition of "closing bell." i'm kelly evans down here at the new york stock exchange. >> and i'm bill griffeth. it's about the stock market sell-off. the nasdaq posting the worst decline of the day again. seema mody, what's going on there? >> bill, high-flying growth sectors that have led the nasdaq up and down this year once again showing signs of weakness. it's been a tough day for biotech, social media and internet stocks also getting hit on the chin, names like trip advisor and baidu showing signs of weakness. now, social media also moving to the downside after staging a

major comeback over the last four weeks. but here's the thing, guys, it's not just those momentum stocks. large-cap tech stocks also moving to the down side. steve malone vich at ubs has a buy rating on apple, but he did put out a cautious note today, saying apple could face pricing pressures in china. on that note, intel and ibm will be in focus, kicking off tech earnings next week. that's when investors will get an initial preview of what to expect in the second quarter. bill and kelly? >> seema, thank you very much. let's talk about what's going on today and what it means. joining our "closing bell" exchange, winnie sun from sun group wealth partners, rob morgan, mark matsen from matsen money. anthony chen, maybe one of the most bullish economists on wall street. he's with chase. and our own rick santelli. anthony, i'm going to start with you. the tone of the market lately, we've seen very defensive issues moving higher. utilities are actually up today, while the secondaries, the small

cap stocks are getting clobbered here, which would suggest that this market's anticipating some economic weakness. what do you think's going on? >> well, i think that if you look at the bond market and you see bond yields coming down to 256, that is a little bit of nervousness. we know that earnings season is coming upon us, you know alcoa's going to report. you'll see a major financial institution reporting on friday. so, i think this market, they really need to see real evidence that the economy is getting better. i think the employment report provided a nearby preview to an improvement in the economy. now they need to see if there's proof that this improvement in labor market condition's going to translate into better economic activity in the second half of the year. >> all right. i'd like to know, winnie, rob, mark, to all of you here, are you -- do you have the shopping list out? do you look at a name like twitter up 7% and see an opportunity to get in here or cross some of these other sectors? winnie, first to you. do you recommend right now that people look at these names, or

do you have a sense that there are deeper sell-offs coming? >> well, we're here on the west coast, so tech is something that we're very comfortable. and yes, absolutely. we've had a lot of cash on the sidelines. and so, that's something that we've been looking forward to. we knew that some pullbacks were necessary for this moderate economic growth economy. >> are you waiting for more or is this the time to start to shop? >> well, you know, we're going to start to add now. we do have -- we've had a lot of cash waiting and we have cash coming in. there's been a lot of changes. and so, for us, this is a good opportunity to start adding. >> what about you, rob? >> yeah, bill, i like tech, too, just like winnie. i don't think i'd necessarily go so much for the momentum names, though. i'd go for some of the bigger cap names, maybe microsoft or an apple, something like that. i think that the high fliers, we're going to continue as the year goes on to see risk on, risk off. today was a risk off type day. and of course, some of the

twitters of the world got hammered. >> what do you think has flipped the switch, mark? why are we now in a risk-off period, and are you seeing value now as a result of the sell-off? >> yeah, one of the toughest things for investors to do is to smash the illusion that they can predict the next 20%. nobody can. so, investors need to focus on the next 200%. if there is a sell-off, then what investors have to realize is the people that panic transfer their wealth to the people that are smart enough to buy on the dip and then rebalance their portfolio. so, own equities long term. don't try to time it. own it and then buy on dips. >> rick santelli, welcome back. what's the market telling you? what do you think's going on here? >> i think the market is telling me that the economy is improving, and some of the parts are improving rather well, but the total economy isn't the sum of the parts. it's less. whether it's productivity, which by the way is well below its ten-year average. it's currently, if i start pegging it from the fourth quarter of '08 to current, it's

1.4%. definitely on the light side. it should be basically double that. so, i think to summarize, as we improve and we look at stocks that, you know, pretty much are built for perfection, we're going to see probably periods of low volatility, lots of interest in the puts side or the vix on the options side. on the interest rates, here we sit at 2.56%. this is exactly where we were on february 3rd, six weeks into 2014 when interest rates did their plunge from over 3%, and i continue to say -- [ everyone talking at once ] pardon? >> rick, it's as if the june jobs report never happened. >> well, the reason we say jobs, jobs, jobs is it's the lowest common denominator to put the money into consumers' pockets, but what do we see? we see that consumer credit, which just hit the wires, came in a whisker under $20 billion. it was supposed to be closer to $24 billion. last look was $26 billion. you could look at it two ways -- consumer credit goes up, we continue to have the synonymous interpretation of taking on more

debt as the same as income, but this way it's better, but it's not part of the fed's plan and i think that's key. >> anthony, what i can't figure out, maybe you can shed light on this, are we witnessing a speed-up or a slowdown scare in the economy here? why are markets selling off? is it because some of the jobs market data has been better and the fed response may be quicker, or is it because there's some sense of additional weakness out ahead of us in the economy? anthony? >> kelly, when you have an equity market that goes up over 6% on a year-to-date basis and our expectation is that the s&p will go up 8% to 10%, you are going to see corrections along the way. if you look at since 1945, we've had over 20 corrections, and the average correction is about 13.8%. corrections are the part of the process. rick, by the way, is correct on the productivity. if you look at the hours worked in the second quarter, they were up almost twice as fast as in the first quarter, a little over 3%, almost 4%, hours worked

compared to 1.5%. if you get growth in the second quarter in the neighborhood of 3% and you have hours growing faster than that, you're not going to have productivity accelerating. that's the story for the second quarter. the hope and expectation is that as the year progresses, that dynamic changes, but it is not going to be a big one for the second quarter. >> so, winnie, you say you're looking at technology. that's where you want to put some of that cash to work. what in technology? where's the growth opportunity for you right now? >> well, if you think about it, i mean, one-third of the global population is on the internet. so, we view that there is so much activity in terms of smart homes, smart wireless, and there's so much innovation all around us here in the state of california, so we see this. but there's a lot of risks, a lot of things that we need to take care of. for example, a lot of these tech companies need to be able to hire more talent, and we need to get through a lot of the regulatory and tax issues, too, for more of the tech companies to evolve over time. >> you know, winnie, we had

three profit warnings that perhaps point to what's happening in the market today. samsung, philips, walmart. in other words, the nexus of the consumer and their mobile device to some extent. so, the argument that you're making doesn't seem to stand up to the developments in the market today. >> at least not right now, right. >> right. but i think over time, i think that's the consensus. we do feel that these levels that we can add, and we think that, the story hasn't unfolded yet. there's a lot of legs to this tech rally. >> rob morgan, do you hedge to some degree? i pointed out utilities are doing well, actually, today, relatively speaking. they're actually positive here. do you put some money to work there just as kind of a hedge against a correction in this market? >> well, you know, as anthony said, we're going to eventually have some kind of pullback here. but i think that at this point in time, you've got to stick with the cyclical sector. i think the danger here is being out on days like today where you

could be buying on the dips. and so, not only do i like technology, which i mentioned before, but i like industrials and financials as well. >> and rob, why is that? for viewers out there who are watching, who are saying, oh, forget it, the economy's terrible, it's not as good as you think, make the case for investing in cyclicals here. >> you know, from the standpoint of a lot of today's action i think was brought about by "the new york times" article by neil irwin about bubbles, bubbles everywhere. i'd make the case that if there is a bubble, it's probably in the bond market, and that money's going to continue to flow into the stock market through time. the retail investor really hasn't gotten back into the stock market in a big way, started to get back in. but we've got a reasonably priced stock market with a healing economy, as anthony pointed out, retail investors that will ultimately be getting back in at some point in time. and i just think that those cross currents just say good things for stocks. >> yep. you want to mention or shall i? neil irwin's going to be with us next hour here on the program. >> i was just going to ask rick

santelli -- >> too bad i can't ask him a question. >> more people talking about how it is going to be the bond bubble here -- >> it was a great article! it was a great article, but i think he needs to go to the next level, and the next level is the real bubble is in unaintended consequences of bad policy and monetary policy. >> you have a new question for neil irwin now. >> thank you, guys. >> that's coming up next hour. thank you, folks. >> we will be speaking to neil about that piece next hour, as it continues to make the rounds here on wall street, and so, too, does the head scratching as we look at these markets selling off again here under pressure. we've got about 50 minutes into the close. the dow's off 114. it is off its session lows. while the s&p's giving up 14 this hour. alcoa's earnings, they will hit after the bell today, and it could set the tone for the trading session tomorrow. we'll tell you what to expect. plus, we have ceo klaus kleinfeld here exclusively, even before he talks to analysts to break down those numbers and

walk us through what alcoa's seeing across the economy. did you know shares of alcoa, by the way, are up 78% since being kicked out of the dow 30? we'll get his reaction to all that. >> that's not the only company that's left the dow and then taken off after that. isn't that interesting? by the way, middle -- pause. >> hopefully, after six years, we're starting to gain a little traction in the u.s. and that traction's coming at the top end. i think the middle and down is still pretty challenging. >> that's what we were just talking about, middle and down still pretty challenged. do the concerns of walmart's ceo, bill simon, raise a red flag about the entire economy? a couple of top consumer watchers will be weighing in when we come back here on "closing bell." stay tuned. ♪ [ girl ] my mom, she makes underwater fans that are powered by the moon. ♪ she can print amazing things, right from her computer.

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welcome back. the dow back below 17,000, we're down 115 points. we were down 149, coming off the lows. nasdaq is hit hardest today, so is the russell 2000, almost down 1.2%. i pointed out earlier today that it was on this day in 1932 that the dow hit its 20th-century low

of 41.22. >> 41.22. >> 41.22, exactly. and i tweeted out with a little joke that at the same time, the vix hit 17,000. and somebody wrote back and said, come on, guys, the vix wasn't invented until 1986. it was a joke. >> yes. >> sarcasm. >> he knows. >> anyway. meantime, walmart's ceo is worried about the financial health of walmart shoppers and sat down earlier with courtney reagan. courtney joins us now. courtney, as we try to appraise exactly what's going on with the u.s. economy and these markets here. >> that's right, kelly. here today at walmart's headquarters, more than 900 meetings are going on between small businesses and walmart executives, as walmart looks for new vendors to add to the roster of companies that produce products made in the usa. now, while getting a distribution deal is a very big opportunity for any business, walmart continues to struggle to gain those positive same-store

sales and positive traffic as competition continues to increase across retail. now, walmart's u.s. ceo says while unemployment may be at the lowest level in six years, the reta retailers for consumer may not be a part of that job growth. >> the unemployment numbers particularly have been difficult to read with the number of people dropping out of the work force. and i think it's going to take a while, six months or a year for those numbers to balance out. you'll see a drop in the rate, and then as more people come back into the work force, that might change again. hopefully, after six years, we'll see that. that traction's coming at the top end. i think middle and down is still pretty challenged. >> simon says that walmart is working to better serve customers for built-in trips, to better compete with dollar stores and drugstores. in fact, the company adding more of the small format stores this year for the first time than those big-box locations. kelly and bill, back to you.

>> courtney, thank you. such an interesting perspective on the consumer. as goes walmart, so goes the economy. that is the question. >> yeah, so let's talk about the state of the american consumer right now, bring in seven capital managing principal monica meyda and jonathan murray, managing director at ubs. monica, you agree with bill simon, it depends which consumer you're talking about, the upper 10%. you feel they're doing fine, right? >> exactly. we've mostly seen an asset recovery because of fed policy. the top 10% of americans who own real estate, stocks, they're doing fine, they're feeling fine. but if you look at everybody else, the middle class in particular are suffering. i think i saw a statistic, 59% of americans feel that the american dream is impossible to achieve? 52% can't afford the house that they live in. one out of six prime-age working men is not working. labor force participation is down by 8 million, and 4 million of that's not coming back. it's 2 million that are living on disability and another 2 million who are idle and of

prime working age. >> jonathan, she have you convinced or do you think the outlook out there is actually pretty good? >> you know, i just think it's better than what a lot of folks think. and what i do is i look at the nfib numbers, national federation of independent businesses, and if one does that -- in fact, some data just came out today -- you'll see that these optimistic levels are at levels that they haven't been in for seven years. small business owners for the first time in seven years are finally feeling good about things. they're hiring. they're the ones that said today that they see an increase in wages. they were also the ones, the nfib, that said that they're having a difficult time filling their job openings. and to me, that gives me reasons for optimism. >> how do you reconcile that, though, with what bill simon, the top retailer in the whole country, what he's saying about their business? it's just stalled out. it's growing, but it's just stalled out compared to what it's done in the past. >> well, bill, maybe that's a company-specific anecdote.

i mean, i wonder if the ceo of amazon or google or twitter would say the same thing. >> great point. monica, what do you say to that, and to walmart, who says they were seeing more of the impact of the snap benefits going away in the fall than they expected? shouldn't they have realized that and positioned more aggressively for the loss of benefits to their bottom line? >> one point, we're at a 30-year low in terms of start-up activity, and while small businesses actually do generate most of the jobs, we don't have enough on them and we're relying more and more on large corporations that are really focusing on efficiency measures and are more likely to utilize technology and outsource jobs. i think that's a big part of the problem, too, and it's not talked about. walmart has their work cut out for them. you know, again, the consumer that they deal with, that everyday low shopper is the one that's getting hit the hardest. and inflation actually hits that consumer the hardest, too. they're spending more and more on the very basics, like college tuition, housing, electricity. so, you know, walmart's best positioned than even the dollar

stores. like, in the dollar store space, you're actually seeing mergers and acquisitions, companies trying to combine to lower their cost bases. it's tricky for everyone. >> jonathan, you could also argue to some extent that the companies like amazon, which are growing share so rapidly, are actually not as sensitive to the general health of the consumer because they're building business and stealing shares from their rivals. >> yeah. look, kelly, i give walmart credit. our analyst just had a meeting with the new ceo and she said that she applauds his strategic vision. they want to get much more into e-commerce, they want to improve their same-store sales, so she thinks they are on the right mission, but right now, we have a market perform rating on the stock. >> jonathan, this is the way it's supposed to be, i guess, given fed policy at the moment, but when they start to nudge interest rates higher, isn't it that small businessperson that starts to feel the hurt before the large corporations do? >> i think less than interest rates, bill, it's a question of regulation. all of my clients, who are small

business owners, tell me they want clarity. they want less regulation, but they want clarity. what's their tax picture going to be? are they going to be penalized for health care? they're ready to hire. they're seeing interest out there are to people that want to work for them. >> we can't guarantee the clarity, but we can guarantee that rates are going to go up at some point, and that's going to smart, won't it? >> for some companies, perhaps, but i think it will be a good thing for consumers. look, we're talking today about consumers and the health of the consumer and the wage disparity. a lot of baby boomers right now are desperate for interest rates to go up because that's what they're living on. i mean, they were used to getting cds at 6% and 7% -- >> retirees also. >> retirees, yeah. so, i think a rise in raises could actually be a good thing for the economy and for the consumer. >> they're almost one and the same these days. >> are they? the baby boomers. oh, boy. the stories we could tell behind the scenes. thank you both for joining us today. appreciate it very much.

>> thank you. down 110 points as we head towards the close. about 40 minutes left in this trading session today. >> much more ahead on today's sell-off. alcoa's ceo will give us his exclusive take on the company's earnings, due out just after the close today. plus, honeywell's ceo makes the case for preserving the export-import bank. it's a government agency that backstops losses if foreign importers don't pay their bills -- exporters, we should say. and wait until you hear what both of them think about the state of the economy right now. >> that's a very big issue in washington right now. meanti meantime, the u.s. attorney for the southern district of new york is no longer undefeated. a little while ago, preet bharara lost a jury verdict on the insider trading case. we have the news and the aftermath coming up after this. [ female announcer ] there's a gap out there.

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welcome back. heading towards the close, and here's a look at markets which are under pressure across the board. actually, the dow and s&p are holding up better as the nasdaq sells off to the tune of 1.4%. the russell about the same. and in fact, these two-day losses, which we started the week off, pretty much give back some of the gains for these indexes that we had in all of last week. and bill, as we mentioned, the retreat in the ten-year interest rate as well almost seems to have ignored the fact that we got that stronger-than-expected june jobs report on thursday. >> exactly. we've got the dow utilities we can show as well. that's been a positive today, interestingly. so, as we mentioned earlier, the secondaries, the defensive

stocks are doing well. so, there it is, up a fraction in today's trade. don chu, who's moving this market? >> bill, kelly, let's drill down more with big momentum names. they're taking it on the chin. we're talking about priceline, amazon, netflix, tesla. they're all losing ground in the trade today. off 2%, 3%, 4% in today's trade. social media stocks also taking a hit. twitter, facebook, yelp, zynga, you name it, all moving lower on the board today. also, shire after increasing its offer for the british drugmaker off 4%. they told shareholders to sit tight while it reviewed a sweetened bid. one company in the green is engine maker cummins. it increased the quarterly dividend by 25% to 78 cents a share and added $1 billion to its stock buyback program. and we'll finish off with the airlines, all falling except for united continental, although off their lows. air france kln issued a profit warning for the year.

this followed lufthansa's profit warning last month, and airlines have been one of the high flyers, one of the best performing industry groups in the s&p so far, now losing steam in today's trade. back to you. >> they certainly have. and the implications for the broader market make it something to watch. meanwhile, the federal government's top again against wall street insider trader preet bharara defeated today. >> but scott cohn, tell us about it. >> every streak has to come to an end, bill. in this case, it would have been kind of an afterthought, if not for the fact that it is the first defeat in u.s. attorney preet bharara's five-year crackdown on insider trading. it's led to, as you heard, 85 convictions or guilty pleas, not a single acquittal until now. this is the younger brother of raj raj rod nam, currently serving an 11-year president term. rangam was initially charged

with his brother, but by the time the jury got the case this morning, all of the underlying insider trading charges had been dropped or dismissed, and only the conspiracy charge remained, the verdict not guilty. in a statement, the u.s. attorney says he is disappointed but "we will continue to seek justice in the investigation and prosecution of those who violate u.s. security laws." so, preet bharara is now 85-1. perhaps more important, though, this investigation has changed the flow of information on wall street, but rengan rajaratnam, unlike his older brother, is now a free man. guys? >> thanks, scott. stay with us there. what is the significance of this loss? what does it mean for preet bharara and for future prosecution? >> joining us is mitch evepner, former u.s. prosecutor. what'd you think of this defeat? >> i think it was a reach too far for preet bharara and the u.s. attorney's office. they went forward with a case where, frankly, the proof was not as strong as it's been perhaps in some of the

prosecution against the older brother. >> maybe you could have seen this coming, because some of the charges had been dropped, a couple of fraud charges. the judge dropped those a few months ago, right? >> yeah. everything that sort of underlaid the case, the substantive charges were thrown out. so, all that was left was conspiracy. we did hear rengan on tape at his brother's trial. so, the case was that he was involved in the conspiracy, even if he didn't do insider trading himself. but as you heard, maybe it was a bridge too far for the u.s. attorney. >> i do wonder what this means for additional prosecutions now, mitch? >> well, the big question that's out there is whether in order to be found guilty of insider trading, you need to not only know that somebody's giving inside information, but if you're not the person getting it directly, you need to know that the tipper is actually receiving something of that value. and that's an open question right now. judge buckwalt, who presided

over this case, held the government to that higher standard. that's why she dismissed the substantive charges. and if that is the rule going forward, it will be harder to bring insider trading cases against people down the daisy chain. >> does this also tip the hand to future defense attorneys? they can see maybe a little ray of light in arguments that they can make based on either this case or some of the other cases that may be pending right now? >> absolutely. it's both a question of what you can argue to a jury. it's also a question of what sort of leverage do you have in negotiations. obviously, when you're negotiating against somebody who has all the poker chips in front of him and has never lost a hand, it's hard to get them to back off of their big demands. >> scott, how many more are in the pipeline? >> well, i mean, this is an ongoing investigation, but as you've heard, i mean, a lot has played out here with 85 convictions and some pretty high-profile ones at that.

so, the question is, how much further are they going to go? and this whole question of the standard of insider trading, pending before the 2nd circuit court of appeals is also likely to be an issue. the other thing that's kind of interesting is what this says, if anything, about the anger that the public has towards wall street. it was for the longest time difficult for any hedge fund figure to get necessarily what they might have thought was a fair shake against the jury in manhattan. this is an acquittal, and maybe it signals that the tide is turning just a little bit. >> mitch, you agree? >> i absolutely agree, but it takes away some of the fear that you can't get a fair trial. i'm not certain whether it shows that the tide has turned, but i think it will give some more courage to people who would be otherwise afraid that they couldn't get a fair shake. >> oh, okay. thanks, guys. mitch, thank you for perspective there. >> thanks for having me on. >> see you later, scott. heading towards the close, back to the markets now, 30 minutes left. the dow kind of plateauing here.

we're down 111 points. we were down 149 at the low in the morning session, but we've since come back at this time. >> and as we asked why maybe this market is worried about earnings season, which is getting under way here on wall street. we'll be hearing from alcoa's ceo, klaus kleinfeld after the bell. before that, we'll speak to some pros about what to expect and if samsung and philips' earnings are a harbinger of more to come. i make a lot of purchases for my business. and i get a lot in return with ink plus from chase. like 50,000 bonus points when i spent $5,000 in the first 3 months after i opened my account.

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welcome back. selling on wall street today. the heaviest selling has been among the small cap stocks. look at the bottom of the screen. the russell 2000 down 1.25%. look at the nasdaq, down 1.33%. they've been the highest. fliers recently are the biggest decliners today. the dow's down 117, was down 150, and the s&p down about 14 points right now. >> all this as alcoa's getting ready to post quarterly results after the closing bell today. morgan brennan joins us now with a preview. morgan? >> thank, kelly. consensus estimates for the aluminum giant, 12 cents per share on $5.66 billion in

revenue, that would represent a 3% decline in sales, but a 78% increase in profits. the ongoing story for alcoa, its transformation into a products manufacturer. so, investors keeping an eye on revenue in the flat rolled and engineered products divisions. also looking at how primary metals, basically the mining and smelting operations are doing as aluminum prices seem to be stabilizing. watch for alcoa's aerospace industry outlook, considered a big growth area for the company, especially now that it's acquiring firth rickson for about $2.8 billion. kelly, back to you. >> a big deal for them, and ceo klaus kleinfeld will speak to me exclusively after the earnings come out after the show. morgan, thank you. we'll see you with more numbers in about a half hour. first, earnings warnings from samsung and philips, issued for this current quarter. samsung citing weak smartphone demand for q-2, philips saying its health care unit will miss forecast earnings.

>> is this all a sign earnings season could be weaker this time around and is the stock market forecasting that, too? joining us is nick raich from earnings scout and max wolfe from citizen vc. good to see you both. max, let's start with samsung. what do you make of this profit warning, and do you think it's responsible, by the way, for the broader pressure the group seems to be under today? >> thanks for having me. it's always a pleasure to be joining you. we think samsung's a little bit of a bellwether, talking about the all-important smartphone space, and we still expect 1.2 to 1.3 billion smartphone units around the world, also the tablet space. i think what we are seeing is that these markets are maturing, so growth is slowing in tablets and smartphones. and in china, lenovo, shalamy and callway are taking away part of the market, so samsung has a chance of being hit from above probably by the new iphone, hit

by below by the chinese competitors putting smartphones in people's pockets for the first time below 200 bucks. so, we think it shows a maturation in shift in the mobile market and it's something the market should be paying attention to. >> nick, the question we should ask is will there be others warning in that area? you say maybe not. one company does not a trend make, obviously. >> that's exactly right. no, it is a global bellwether and the largest component in the emerging market index, so it does raise some eyebrows, but it also is a graeme of expectations. and two years ago, apple had very high expectations, too, with regards to its smartphones and tablets as well. for samsung, those expectations have steadily crept up, and sometimes it's just a game of that. also two years ago, apple's loss was samsung's game, and that might be reversing out, because apple has gotten steadily better. the overall technology sector earnings are actually acceler e accelerating, particularly in the semiconductor and semiconductor equipment industries that does not give us a cause for concern just because two of these companies have come

out and warned. >> by the way, i'll point out, blackberry's been up 50% in the last month here. >> not too shabby, right? >> okay. just pointing in out. >> it is a specific story in some cases, nick. i'm looking at the estimates from capital iq. they're looking at increases of 8.5%, roughly? does 8.5%, in light of what we've just heard from samsung and philips sound still achievable to you? >> absolutely. that definitely could happen. and in certain areas of the semiconductor industry within the technology sector, expect to see 30% earnings growth. but what we're looking at, kelly, is this. a year ago at this time, the technology earnings estimates in aggregate were going down by about 7%. now they're actually being maintained or actually raised. so, there has been a steady improvement in the underlying earnings trend, the rate of change of the earnings expectations, and that's what's moving the market and that's why technology stocks are out-performing in 2014. >> max, nick describes it almost as a zero sum game between apple

and samsung. are we seeing the tide go back to apple at this point? >> i think a little bit on the high end. but samsung is the biggest producer of feature phones and the smartphones, and they're giving us a little bit of a check of temperature on some of the things that are very important. we have a slow economy in europe that looks like it might be slowing. we have some deceleration in china. and we have ferocious hardware battling on the low end for tablets and smartphones. part of what i think nick is referencing we acknowledge, too, but we don't see it as a repeatable offense or a repeaceable situation, and that is, there is a replacement cycle having a little to do with microsoft phasing out the xp, and we think that the notebook/desktop world will be strong and the semiconductors, but we don't expect that to last more than probably two to three quarters. >> got to go, max, but then what do you think could be the real surprise from this earnings season, then? >> well, i think we're going to see a bunch of big names come in weaker than expected because the bottom line is the macro global economy isn't good enough to produce double-digit growth in

all but the guys who are taking someone else's market share. we expect that, it's a stock picker's market, there will be strong names out there, but rising tides won't lift all boats in this quarter. >> good to see you both. >> yes, thank you. >> thank you for your thoughts today as we get ready for more earnings coming out in a critical area. heading toward the close with 20 minutes left. the dow still down 111. somebody hit that machine and see if it's still working. the s&p down 13 or thereabouts and the nasdaq and russell off sharply. >> we'll have more on the sell-off coming up. plus, "welcome to the everything boom or maybe the everything bubble," it's "the new york times" article generating buzz on the internet and on the floor today. >> very much so. >> some say this is playing lower in the market. the author of the article will join us live in just a bit. (vo) watching. waiting.

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at the big board, seema mody at the nasdaq. bob, you wonder if they're anticipating a lousy earnings season or we're just kind of taking a rest after a pretty good rally last week. >> we saw in march and april all of the momentum names weaken, and for good reason. people started questioning valuations in biotech and some of the other names and some of the pharma names and some of the internet names. and look at the valuations of some of these names. i just did a "trader talk" on this. 150 times forward earnings for a company like pandora? really? think about it. that's a lot. those are huge numbers. 70 times for yelp. groupon is 66 times. it's right for people to say, fellas, are we doing the right thing by paying this much money for these stocks? and i think it's a healthy thing for the market. the overall market is not doing that much. it's fine right now. >> seema, what about you? i mean, it's really, you know, eyebrow raising to look at some of the social media names in particular hit hard today. >> yeah, we've seen a lot of volatility in the so-called

momentum stocks, social media, internet and cloud computing names have staged a major comeback over the last one month. that's one of the reasons the nasdaq was a big winner in the month of june. now you're starting to see some of these stocks move lower, sign of weakness, if you will, ahead of the earnings season. so, definitely a concern. of course, growth prospects and valuation will be two things investors will be talking about when it comes to these momentum stocks. >> by the way, everybody keeps screaming at me whenever i bring up this -- guys, is it worth it paying how much, facebook, 43 times earnings? they say, we're not buying on forward earnings for 2014, we're buying on 2017. i say, you know what the earnings are going to be in 2017 for facebook? oh, yes, we have excel spreadsheets that explain this. i'm sorry. >> bob, quickly, kelly and i have heard the talk about the neil irwin article in the "times" today. how much buzz have you heard about the bubble article? it was the lead article on the front page of the "the new york times" today? >> look, everybody mentioned it. i thought it was a good article, a timely article. i don't think it revealed anything much more than anybody was saying.

was it responsible for some of the sort of risk-off that we've seen today? it may have been, but notice it was in the big momentum names where the stocks would have been hit. that happened yesterday as well. >> good point. thanks, guys. >> just a reminder once again, neil will be with kelly next hour. "closing bell." looking forward to that very much. heading toward the close, 13 minutes left in the trading session with the dow still down 111 points. >> we'll have more on these markets next. and from the "you cannot make this stuff up" department, if the economy is so bad, how did somebody raise more than $40,000 on kickstarter to make potato salad? >> to make potato salad. >> this is for real. there is a look at it. he will also be joining us in the next hour. >> that had better be really good potato salad. >> get your recipe cards ready.

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welcome back. about ten minutes left in the trading session. it's been a sell-off day. the dow was off 150 points in the sell-off in the morning, has since come back. what's not come back is the small cap stocks, the nasdaq, down 1.4% and the russell down 1.3%. joining me to talk it through,

jeff kleintop and tony benjamin from benjamin and jerrell. what do you make of, the market's been cranky since the jobs report last thursday. >> because the eyes are on yellen and what they are perception of expectations are going forward. but let's not forget the backdrop. we clearly had a nice run-up, the dow 17,000 and came up above that. typically when we hit those milestones, you do see a lot of volatility, see the market come back and correct. it would be healthy in my view to see the market in down to 16,750 before it came back up. i think there's more to the down side, but -- >> you think it's constructive, though? >> i think it's constructive. all eyes are on yellen. she's got a credibility issue with the inflationary issues, and i think that i would like to see her turn around and do something with the rates right now, kind of a token rate -- >> sooner rather than later. >> yes. >> that would get the market's attention, wouldn't it, jeff? >> it certainly would jerk them back awake after the sleepy summer we've been in. but i chock this up to early

earnings season every jitters. there's nothing going on this earnings season, no crazy weather, no crazy moves in the dollar. companies have to deliver. >> and with the dow above 17,000, that raises expectations that much higher, doesn't it? >> it raises the bar, but i think it will deliver this quarter. we just had the 25th anniversary of "seinfeld." this will be a show about nothing this earnings season, no real surprises. after a few earnings reports, no surprises, stocks will rally back. >> what about the idea, you would like the fed to raise rates now. you're not alone in that, but the fact that we have had better jobs reports, you know, there have been calls on wall street that maybe the fed will raise rates sooner rather than later here. >> i was thinking more like a token gesture. let the markets know that we're watching closely. and remember, bill from my vantage point, it's not the inflation numbers that count, it's inflationary expectations that begin to mount that will begin to bring pressure and you see it in the tenure. >> which the fed agrees with you on, by the way. >> i would think they do. >> yeah. inflation, is that a worry for you? >> not yet.

remember, that becomes a problem when the yield curve inverts. talking about the midyear outlook, numbewe're a long way that. think about how much inflation it takes and how much the fed would have to inflate rates. the yield curve has predicted the session with no false positives. it's a great indicator. need to keep an eye on it. it. >> how much would you like to see us move down before you start to buy again? >> again, about another 150, 16,750 on the dow, you know -- >> 1,963 on the s&p right now. >> yeah, i would say we're going down around 1,950, somewhere around there on the s&p. not so much on the s&p. a little further on the dow and not as much on the nasdaq as well. >> okay. stay there. we'll come back and get to the closing countdown, look ahead to that earnings report after the bell. we'll bring you the alcoa numbers that are due right after the close. and per tradition, alcoa's ceo, klaus kleinfeld, will break them down exclusively even before he

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[b♪ll rings] time and sales data. split-second stats. ♪ its so close to the options floor, you'll bust your brain-box. all on thinkorswim, from td ameritrade. welcome back. about three minutes left in the trading session here. selling by degrees. what do i mean by that? sell-off certainly for the blue chips. the dow on the open this morning

at the low, down about 149, 150 points. sideways since that time. we're down 114 here on the close. what got hit today were the small cap stocks. nasdaq down even more, down 1.3% here, a 60-point decline, slow roll south to 4,391 and the russell 2000, which had been the high flyer this year, setting all kinds of all-time highs, even before the dow earlier this year, down and off its low, a little better than the nasdaq has. what has been positive today? the utilities. this is interesting. the defensive stocks for the most part have done pretty well, even health care has done relatively well, but this has been the standout today, as people go to those areas where they feel a little more secure, if we are going to get a correction of some kind today. now we wait for the earnings to begin. alcoa kicks it off. it's not in the dow anymore, not considered a bellwether, but it is still the number one, and it

has turned positive here, as you can see, as we get ready to report those earnings. the expectation is for a profit of 12 cents. whispernumber.com says that they're expecting 13 cents, and the revenue expectation is $5.66 billion. alc alcoa, does it matter? >> doesn't really matter. it's not much of a bellwether for anything. later this week we'll get wells fargo, next week we'll get general electric, far more bellwethers for what's going on in the u.s. economy. >> but what do you think they'll tell us? >> what i want to hear interestingly is what's going on in europe. we've seen europe bring down interest rates here in the u.s., we've seen europe weigh somewhat on the stock market here of late. i want to hear better results. nike had better things to say about europe, carnival cruise lines as well. i want to hear that from a broader selection of companies. >> i know two days does not a trend make, but we have seen the blue chips go down, but small caps have gone down more than that at this point. does that say anything to you? >> i think for a while, the small caps have been overbought. we tried to -- or the market

tried to correct them a while ago to some extent or another, but the nasdaq kept coming back and kept getting stronger and stronger. so, after the correction we saw recently in the nasdaq, i think we're going to wind up finding ourselves a little less down side now there as the markets start to catch up to that move down. >> what about my point about the utilities? they're positive today -- >> i think that's another indicative example of what i was talking about with inflationary expectations. people who move to flight to safety, as you mentioned, looking to say how do i hedge myself for the future going forward with rates going higher, possibly. >> would you hedge in utilities right now? >> i would not hedge in utilities right now. >> why not? i mean, come back here. >> they've come back here. they had a wonderful first half of the year, tremendous utili utilization of utility output, it was a cold winter and rates came down. i wouldn't count on that for the second half, but industrials could be the leader in the second half. >> that's the difference between a trader and a fundamental strategist. you see it right there. thanks for joining us today. so, we're going out off the lows of the session but still pretty

meaningful sell-off today as we get ready for those earnings. alcoa kicks it off. we've got klaus kleinfeld, the ceo, here in the second hour of the "closing bell" with kelly evans and company. i'll see you tomorrow. >> thank you, bill. welcome to the "closing bell," everybody. i'm kelly evans, and here's how we're finishing. a pretty dismal session across wall street. indexes under pressure. the dow jones industrial average off about 113 points at the close here. it was off as much as about 150 points earlier in the session. the s&p also giving up about 0.66%, 13 points from its high last week. and the russell 2000 and the nasdaq, we should say, both the underperformers. certainly both down more than 1% today and we'll talk about what's weighing on these markets in particular now with our panel.

joining me today, mike santoli from yahoo! finance, cnbc's eamon javers and jason from strategic partners and more with the markets, "fast money" trade yr trader. mike san toloie, is this the start of the sell-off everybody's been waiting for? >> this may not be the one. i can't pin this much on anything except we're up 7% almost in a straight line without a rest in three months. and the market seems to have gotten to a point where as it has in this rally in general, the froth, they don't just let the froth evaporate, they wipe it away in a couple of swipes. and i think that's what we're seeing right now, the markets fed on good news and bad news to go higher, and i just think it's kind of tired. what i'd be watching for is whether the anxiety really wells up, just as we've seen in the past, 2% or 3% down. all of a sudden, we get a little panic, so that's what i'm watching for. >> jason, what are you watching for signs of how much further this could go? >> listen, obviously, we're

right on the verge of earnings season. and i think one of the things we've noticed is that there's been four negative preannouncements to every one positive preannouncement. that tends to make me believe that a lot of bad news is already priced in. so, frankly, i would be nervous being short going into earnings season, just given the likely bounce we'll see in gdp in the second quarter. >> and recent history, by the way. a couple sectors exhibiting stress today, obviously, we discussed some of the social media momentum names under pressure. the airlines have performed really poorly recently, kate. and also today, the financials and goldman as we head into hearing from some of the major banks getting a downgrade today. >> i think mike he did a good point about the market being a little too bullion or overbought. i've talked a lot on this show about how the hedge fund managers i've talked to are sort of buying stocks but holding their noses at the same time and waiting for the bottom to fall out. we had stock-specific news today as well, well, general and specific. one is i would point to the cost-cutting theme, the fact that the efforts the banks are

engaging in aren't enough to make up for pay expenses that continue to be high as well as new regulatory expenses and there's no sign of the regulatory expense set slowing down. i mean, if you think about even today hearing about higher frequency trading and perhaps new changes to the structure on wall street. and goldman, interestingly, we have that story about lloyd blankfein thinking about succession, introducing some of the new generation of leadership to the board and also in very casual and in the course of business, but a story like that doesn't end up in the newspaper lightly. that tells you blankfein, who whatever his flaws, has carried the company through a difficult period and into a new era. >> i want to talk about those numbers in just a second, but it does look as though we're getting results now from alcoa. let's go to morgan brennan right now with the numbers. morgan? >> thanks, kelly. well, we've got strong numbers for alcoa today. 18 cents ex-items. that's earnings per share. significant bottom line beat versus the 12 cents expected by the street. that's on revenues of $5.84

billion. again, a beat versus the $5.66 billion that the street was looking for. a few items of note. all of alcoa's business segments were profitable during the quarter. and the one that we really want to highlight here, and this goes back to the fact that alcoa's been shifting away from being just a pure aluminum producer to more of a products manufacturer is its downstream business, engineered products and solutions. that delivered the highest after-tax operating income in the history of the company, $204 million. we will keep going through this report and bring you more as we get it. >> morgan, thank you so much for that. looking at alcoa's shares, which do appear to be moving higher after hours. with us now to break down the quarter in an exclusive interview is alcoa chairman and ceo klaus kleinfeld. klaus, welcome to the program. you guys have managed to deliver results pretty handily, beating what the consensus was on wall street. what particular component of the business in the quarter do you think led to this

out-performance? >> well, look, it's a strong quarter. transformation is in high gear. you see our value add business makes up 59% of the revenues but almost 70% of the profits. and our downstream business, the highest quarter ever in the history, our midstream business up 34% in profits, and you also see that on the commodities side, we continue to improve our cost position and also to perform better. so, that's fantastic. >> we can see that necessary as well as the price of aluminum remains under pressure. but as you say, this is a company that's focused on putting the bulk of its performance into the downstream value-added kind of segments where you're making important components for everything from aircraft to ford f-150s to bud light bottles. so, if we could just go through some of those business segments with you and talk about the outlook, let's start with aerospace, where you've just made a major acquisition. is the outlook for aerospace in light of this sector being under

some pressure lately, still as rosy as you saw it last quarter? >> actually, we continue to be very, very positive about it. i mean, we raised in the last quarter our projection for growth for this year to 8% to 9%. over the longer term, we see a 7% growth rate here. that's a nine-year order backlog in the large commercial aircraft. this is a great business, and that's why we have invested in it organically. we have invested here with two expansions, one in virginia and one in la porte, indiana, growing our business organically, and as you just mentioned, we have announced that we are in the process of acquiring forth rixon, so this is a good growth business, but this is not the only one. the next great one also in this quarter is automotive, and in particular in north america. it's growing in general. it's growing even more because of those likely for us. so, you see the announcement

earlier this year of ford going for the f-150 as an all-aluminum intense vehicle. this is fantastic. this is giving us additional tailwind. and you can go further. i mean, a great story also this quarter continues at a good indicator for where the u.s. economy stands is commercial transportation. commercial transportation up, orders up 20%. the backlog is also growing. this is a great business. we just launched a new wheel that is the lightest wheel on this planet, basically going into this segment. you can go to building and construction, where we also are very strong and building components and curtain walls and that business also showing signs of recovery here in the u.s. all of the early indicators show this business is coming back. >> you know, klaus, and yet there's this juxtaposition with what you're seeing across your business and what markets seem to be nervous about here lately, where the ten-year interest rate is moving lower, people are out there talking about whether the quality of jobs in this economy and growth in this economy is really that strong. you sound confident in spite of all of this.

what gives you that confidence? >> well, first of all, i think when we are looking at jobs, this is always a latent indicator. so, nithis is not the best way take a look at the economy. and obviously, there are technological changes also on the job site. so, in regards to the economy in general, i would say there is a lot of innovation going on. if you go to aerospace, what is driving the aerospace demand? there are really two factors that are driving aerospace demand. one is the growth of the middle class in all of asia and the emerging countries. and the second is the efficiency of the new types of engines and the new types of planes, and that's exactly where we are investing. >> right. >> i mean, we are marrying firth rixon and us, two of the largest innovators of engine makers together, they are at the sweet spot and we are delivering in that. same holds true on the automatic front. they directly give money into the pockets of each consumer because it goes for higher fuel efficiency, right? this has now become one of the largest decision criteria for

consumers in the u.s. when this go into the dealerships and look for a new car. >> right. yeah, it's not just cup holders anymore. there are a couple of big-picture issues out there as well i just want to ask you about, and one of them is capex. so, how much are you guys investing this year to continue the production of some of these components that you've discussed? and to what extent is any proceeds you have from being in the credit markets or your cash flow generally going to what some would more derisively call financial engineering? >> well, look, i mean, i didn't talk about our proactivity. proactivity is strong and it comes from all across the company, and it has been like this basically since the crisis. this needs to -- again, we show that the balance sheet is stronger. we are generating nice, free cash flow. our net debt has come down. so, this is a very positive thing. this allows us to invest. and as i said, i mean, if you look at the investments just here in the u.s., indiana, $100 million, virginia $25 million,

the firth rixon acquisition $2.85 billion. then you look at automotive. automotive is two big expansions here. one is in tennessee that's just deramping, coming online. and that's $300 million. this is going into the ground as we speak. aluminum lithium, the new material that we invented, very strong in aerospace but also in other applications that we see, another $100 million we're investing there. so, we are well positioned to capture the growth of the investments that we've made. >> okay, final related question then. are you looking for more deals, especially in a sector like aerospace, oil and gas, for example, on the heels of this firth rickson deal, and are you under any pressure to lower your effective tax rate, which i think at last check is in the range of the mid-20%? >> well, we are very committed to generally to value for our customers as well as for our shareholders, you know?

and we look at every opportunity that we can find there. so, as you saw, i mean, we do a lot through organic growth, through innovation, and we also look at inorganic ones, and we have a lot of markets, not just the aerospace market that are attractive. i mentioned automotive, commercial transportation. so, the good thing is, we are building a lightweight, multimaterials, innovation energy that's firing very, very heavily, and at the same time, we're building a competitive commodities business and these two things are a very, very nice fit. >> how long before you're back in the dow? or do you want to go back in the dow, given the performance since you've left? >> look, kelly, i mean, the moment we were booted from the dow, we said this is not going to influence our strategy. and everybody seeing it is not going to influence our strategy. we are continuing on that path. we're building a lightweight, mult materials innovation powerhouse at the same time we are increasing the

competitiveness of our commodities business. this is what counts, and the strategy works. you see that we are creating value all fronts. >> klaus, thank you for being here this afternoon. >> thank you. >> good to see you. klaus kleinfeld, ceo of alcoa, whose shares are moving higher after market on the back of their earnings beat. before we go, want to get quick thoughts from the panel. brian kelly, our trader with us for this segment, what do you think about the numbers and the activity tomorrow on the back of this? >> so, great numbers, obviously. the real question you have to ask yourself is how much of this is priced in? the stocks have doubled since last october. we've known about ford pickup trucks going all aluminum. mr. kleinfeld's very excited about the aerospace industry. i'm actually short boeing. i would be a little afraid that he's late on this. you're starting to see a lot of overcapacity in that. so, if i had a double on my hands, i'm not in alcoa, but if i had a double on my hands, i would absolutely be taking profits. >> just zooming out to the macro picture, i was fascinated by what he had to say about the economy generally. he kind of said jobs shouldn't be taken overly seriously.

i think he called them a latent indicator. maybe he meant lagging, said there was a lot of innovation going on. it sounds like his tone, mentioning automotive, aerospace, commercial transportation, what you call financial engineering he calls pro activity and says they're in position to take advantage of it. regardless, it sounds like his tone bespeaks the confidence other companies are airing right now, so perhaps the economic picture is better than the data indicates, even with relatively low unemployment. >> we'll talk to someone else who was booted out of the dow coming up and ask them about the relevance there. alcoa rallied significantly since that happened. thank you for coming up. brian kelly will be up on "fast money" later today. three internet stocks you should buy on today's "momentum meltdown." get out the shopping list. that's all coming up. meantime, we'll send it over to dominic chu for a "earnings alert." >> container store cts shares, down about 11% in the after

hours, the stock is moving lower after the company reported a loss in the first quarter of 7 cents a share. that's a penny worse than estimates on wall street. revenue also coming in light at $173 million. the company also giving 2014 guidance, full-year guidance that's below wall street expectations. i want to note something that the company said in its release. the chairman and ceo said that they think that while consumers are buying homes and automobiles and even high-ticket furniture, most segments of retail are, like us, seeing more challenging sales than we had hoped in early 2014, but we are very much looking forward to the fourth quarter. they see slight improvements in the second and third quarters. so, that might be one reason why you're seeing the stock react the way it is, down 14% now in the after-hours trade, kelly. back over to you guys. >> and remember, they went public just a short time ago, dom. fascinating that in some ways it seems easier for companies if they need financing to sell big-ticket items to the consumer today than kind of just the day

in, day out purchases. >> maybe they've been saving for a while. again, this may speak to a broader theme developing among the consumers out there. >> thank you, dom, for that in addition as well. stocks have been under pressure generally today. my next guest isn't too surprised, though. he says stocks, bonds, emerging market, farmland, pretty much every investment in between is expensive. and now, are we in the everything bubble? this was the front page of the "the new york times" today. the article's author, neil irwin, is here next. then, we'll take the pulse of markets and the economy when i speak with honeywell ceo david cote. you're watching cnbc, first in business worldwide. ♪ during the cadillac summer's best event, lease this all new 2014 cts for around $459 a month or purchase with 0% apr and

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welcome back. here's a look at the session today. stocks under pressure with the nasdaq in particular taking it heavy. seema mody, what was driving indexes lower today? >> a broad-based sell-off here at the nasdaq, kelly. 90% of the stocks on the nasdaq 100 trading lower. the biggest laggards were a mix of internet, biotech and social media, but it wasn't just the momentum stocks that weighed on the nasdaq today. large-cap tech playing a role, also consumer-related stocks, best buy, chi popotle and other. there is a reason that the consumer discretionary sector is

the worst performing sector so far this year. but let's also put the nasdaq's move into perspective. yes, a big two-day drop for the nasdaq, but this has been the key outperformer over the past two months. in fact, investors did not sell in may and go away. the nasdaq up about 8.5%, out-performing the s&p 500. of course, now attention turns to earnings. tech earnings begin next week. inte intel, ibm and ebay in focus. >> thank you, seema, for now. so, red arrows across the board on the street today. we wondered if "the new york times" article "welcome to the everything boom or maybe the everything bubble" is something behind it. that's certainly some of the speculation down here today. joining me to discuss is author neil irwin. neil, great to have you here. what's interesting about the point you're making is that it's not necessarily that it's one particular part of the economy where valuations are sky high so much as it's so many different types of asset classes are at just higher-than-average levels right now. >> yeah, this is the dotcom boom

in 2000, stocks are much more reasonably valued than they were then. this isn't housing in 2006, different measures of real estate are more reasonably valued than they were then. what's different this time is that everything across the board around the world, virtually every financial asset class seems at the high end, at least, of historical valuations. there aren't the bargains out there, emerging market debt, bonds, stocks, hard to find a deal. >> across the board, around the world. >> neil, it's eamon javers here in new york. i wonder, if everything's so expensive right now, what's this going to mean for wages, and in particular, i put on my washington hat and what's it going to mean for jobs and politicians, ultimately? that's what everyone's focused on is when are people going to start to see an increase in their pay once they've seen all of the other assets skyrocket? >> yeah, in many ways, what global asset prices are telling us that the central bankers around the world have succeeded in one aspect of their job, which is trying to reflate the financial system and get prices back on track. the question is, when or does

that translate into wage gains, into employment gains, not just in the u.s. but around the world? and the evidence is spotty, you know. we had a good jobs report on friday and we've had a few of them over the last few months, but there's a big difference between a few good months and a kind of systemic, broad-based recovery and i think the jury's still out on whether the financial system, the financial markets have become disconnected from the world economy. >> neil, this seems to tailor nicely with the sort of issue that we've been grappling with really for years, but certainly in recent months with the thomas pickety book about the wealth class divisions we're seeing and the economic underpinning of it. i think certainly for the middle or working class, it's hard to save and gain any yield, and it's certainly probably unaffordable for many people to buy a home or other assets, whereas they're being bit up dramatically by the wealthier classes. was that sort of a current you saw in doing this reporting? >> yeah, it's a risk. the question is, if you're ben bernanke or now janet yellen, you know, is this a case where you've succeeded on one dimension of your job and

succeeded in trying to reflate a financial system that was already, you know, was in deep disrepair five years ago? maybe that's succeeded, but that's not having the translation into middle class gains that one might want to see. and the question is now what do you do? well, fiscal policy is really on the bench, not doing much of anything. the fed is looking to taper and get out of extraordinary accommodation. and now we might be stuck. and it's great to have a large stock portfolio, not great if you're trying to get a job and trying to get a raise. >> i tend to agree with mr. irwin quite a bit. i mean, i don't think -- >> would you use the bubble word? >> i wouldn't, because i think you almost come to an existential question, which is what is the net present value, then you're discounting by a negative real interest rate. when interest rates are this low, it's difficult to come up with a right valuation -- >> but this is exactly what happened during the last expansion, where the fed said you know what, we can never really know, so we'd rather try to clean up afterwards than try to predict it beforehand and clean up the economy. >> i think mr. irwin is pointing

out one of the myths of monetary policy. the fed is quintuple the size of its balance sheet. it was $800 billion, now it's $4 trillion. so, you're essentially trying to hammer and nail with a snow shovel. you're using the wrong tools. you should be using fiscal policy, i would argue, or easing up on regulatory policy, but there is very few -- there are very few alternatives in a low interest rate world. >> wearing your investor hat, what do you see when you see an article like this? how do you react? what opportunity does this create? >> kelly, personally, i think people are still calling this a rally. this is a bull market. it's been going on for five years. so, i view this as a piece that it tells me that we're not in the euphoria stage, first of all. >> neil, do you think you'll be writing this piece again in a couple years time and adamantly using the bubble word? >> if this keeps up, look, over the last year, the s&p's risen 30%, the economy's grown 2%. that can last for a while, but not forever. does it mean it has two, five more years, more than that?

who knows, but this can't go on like this forever. >> neil, obviously, janet yellen has declined every opportunity to say that she's very acutely concerned about these things, or at least is looking for kind of an excuse to intervene in financial markets in some way that tries to not risk takers back on their heels a bit. do you have any road map as to when that might become part of the playbook of central bankers at this point? >> what's interesting to see from janet yellen is she's trying to have it a little bit both ways. so, last week in that speech at the imf, she did mention that certain markets seem a little bubbly, leveraged loans, junk bonds. you know, she did allude to the idea that there needs to be aggressive monitoring of risk. but at the same time, she doesn't want to do anything. she mentions volatility. the fed's hoping that some words and some kind of regulatory techniques are going to get rid of some of these risks and contain these risks. i think that's a very untested strategy, and i think, you know, we're very much at risk of these approaches of using only words

might leave us vulnerable to a correction in some of these more bubbly markets. >> kelly, i also think there's a lot of fundamental or idiosyncratic stuff going on that's inflating prices. if you think about some of the soft commodities, hogs and cattle, which i did a story on last week, coffee, those things are very expensive because of fungus, weather, illness or perhaps demand -- >> starting to show weakness, by the way, the index for agricultures. and jane pointed out that corn prices are at a four-year low. >> there's a disparity there, but that's what the fed is grappling with, because when food becomes expensive, that's a huge problem for the average consumer. >> neil, thank you, for now. it's such an interesting juxtaposition to have that on the front page of the "times" and the "wall street journal" with its first edition from 1989. talking about price inflation, do yourself a favor and read that today as well. walmart warning the pickup in job growth isn't helping sales. is that a sign that the economy is still fundamentally weak? up next, honeywell's ceo david cote will weigh in exclusively on that.

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a supporter of it, honeywell ceo david cote is here in a cnbc exclusive. good to have you back. why make such an issue about the ex-im bank here? >> when it's being threatened the way it is now, that's just not a great position to be in. when you think about every country recognizes that exports are critical for job development. exports create jobs. and it's why you find big countries like korea, japan, china, france, germany, all of them are supporting exports with financing. we do the same thing with the ex-im bank. we need to have this to be competitive as a country. and we can't unilaterally disarm and say, okay, for all of their companies, sure, go ahead and provide financing that helps companies export. in the u.s., we're not going to help our companies. it puts u.s. workers at a disadvantage. i don't think we ought to put u.s. workers in that kind of a position.

>> all the same, it's interesting that the u.s. having, as is so often quoted, the deepest, most liquid capital markets in the world, hasn't come up with a private sector solution here. is trade finance just not a profitable business? >> well, as i understand it, about 98% of exports that our finance do go through private means, but about 2% of them require, let's say special or better financing, and that's what you get through the ex-im bank, and it makes a difference when it comes to trying to compete with a french or german or chinese or korean firm that is supporting their workers. we need to have the same thing for the u.s. >> but if 2% is the case here that's vulnerable of our export pie, again, why isn't it that some of our banks, some of our financial institutions, some smaller lenders, even, wouldn't look at this space and say, you know, i'd be willing to take a 2% loss on 100 cents? >> i don't think they'd look at the returns as being adequate enough for them. this really is something that we need to be competitive with

these other countries who provide very low-cost financing for their exporters on a number of these bigger deals, and these bigger deals help to pull along a lot of smaller suppliers in the u.s., all those small firms and all the jobs they represent that everybody likes. this is very supportive of them. we need this in order to be competitive with that, say, korean company or french company that's supporting their workers with this kind of support. >> do you or have you in the past, david, used ex-im financing at honeywell? >> we've used it minimally as a company, but i would say a number of our customers in the aerospace industry and in the oil and gas industry have used it, and we would supply them. >> so, if the ex-im bank does lose its charter, your business will take a hit? >> yes, i believe so. i believe u.s. jobs will take a hit as a result of that. >> how big of a hit? >> well, that's always tough to know. as you know, predicting economics, i always say, despite

the amount of math that they put into economics, it certainly doesn't seem to be a science. it's more art. so, there would be an impact. tough to predict exactly what that number would be, but i sure know it wouldn't be positive. >> and david, lastly, just since we have you here and people are trying to figure out the direction of the economy right now, how strong is it? >> well, i would say, for the last four years i've been one of the guys who's always consistently more negative on growth prospects for the global economy and the u.s. economy than all the forecasts. and as a result of that, we've tended to play them pretty conservatively. and as a result of that, we've done well. we've seen the same thing happen this year. so, right now, i would still say the economy is okay. it's not great. i never thought it was going to be as good as the number of the forecasts at the beginning of the year, but it's another bad, either. and we're going to continue to have these ups and downs and these modulations, but i still

think it's okay. >> but no capex spending boom is what i'm hearing, i guess? because people would look to somebody like you or honeywell for the sign that we're on the cusp of a bigger surge on business spending here. sounds like even in 2014 that's not going to be the case. >> i can tell you, for us, for example, 2014, our capex spending is up about 20% from what it was last year. >> wow. >> because of some major investments that we're making primarily in the u.s. so, it's one of those where, yeah, the investments are going on, there is capex that's being spent, and i think by most companies at a higher rate than last year, but we're going to continue to see these bumps along the way. and i just don't think we can react to every negative piece of economic news or really positive piece of economic news in an unreasonable way. >> right. >> this is one where i think the economy's going to continue to be okay, not great, not bad, but okay. >> final question, because i know we have to go, david. on the front page of the "the new york times," we just spoke with the author of the piece

today. he calls it a bubble economy, says everything's in a bubble out there. do you agree? >> i think it's tough to know. and if we take a look at the last five years since we went through the great recession, these are unprecedented times. so, it's kind of tough to know at this point. and i'm one of the guys who says thank god the fed has done what they have in order to make sure that we didn't end up with another great depression and only ended up dealing with a very bad recession. i do believe over time we're going to have to wean ourselves off of this, but i sure don't think now's the time to do that. >> or wean off the ex-im bank, as you have put it. david cote, thank you for being here. it's good to see your perspective. >> nice to see you again, kelly. >> appreciate it. >> bye-bye. breaking news now on citigroup. dominic chu? >> here's breaking news, courtesy of dow jones. the u.s. and citigroup are near a multibillion dollar deal to resolve mortgage problems here. so, again, citi and the u.s.

government at least near a multibillion dollar deal to resolve their mortgage issues. this according to a report from dow jones, citing sources -- progress in the settlement talks is related to the sale of mortgage securities, comes after the u.s. threatened to file suit against citi for this. the settlement could happen as early as next week, according to sources over at dow jones, and citi's expected to pay more than $4 billion to resolve these particular issues. so, again, the u.s. and citigroup near a multibillion dollar deal, could be more than $4 billion to resolve mortgage issues, mortgage-related lawsuits between the u.s. and citigroup. we'll bring you more details, but for right now, again, an interesting development for a very, very large cap financial stock that's currently very much in focus for a lot of investors as we approach earnings season, kelly. back over to you guys. >> dom, it certainly is. just want to get some thoughts briefly from the panel here. kate, we've been waiting on the figure, $4 billion now appears to be the number they're reaching. and you can see the shares after hours up 1% on the news.

>> yeah, i'm not surprised by that, kelly, because at first glance, $4 billion would seem to be a win for citi. if you recall just a few weeks ago, the reporting was that they were at an impasse, the government looking for a $10 billion give-or-take issue, citi offering up to $4 billion. so that's a win for citi. they probably had incentive to get something done prior to monday because they're reporting earnings and, of course, they would like to be able to reassure investors they are close to a deal, they have a deal in principal, even if it's not inked yet. i would say at this first glance, it looks like good news for them. >> that's the message again from shareholders as well. mike, jason, either of you feel differently? >> i was going to say, we've been numb to these numbers, and i do think in addition to the earlier reporting about how big a settlement might be, bank of america's kind of serial settlements with bigger numbers i do think make this more digestible for the market. can money fix the immigration crisis on our borders right now? tens of thousands of children and others have illegally crossed our borders.

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welcome back. the border crisis continues to be in the headlines on a daily basis. now president obama asking congress for nearly $4 billion to help fix the issues. john harwood joins us now with the latest details. john, he's increased the size of what he's asking for, is that right? >> that's correct, kelly. you know, the president's leaving for texas tonight, but he's not going to go to the border and see the kinds of scenes you see here. tens of thousands of kids pouring across the border from countries beyond mexico, in central america. but the president did before leaving has released his request to congress, which was much

larger than we had been anticipating, $3.7 billion in total. of that, about $1.8 billion is for taking care through the department of health and human services of those children who have come across, $1.5 billion for law enforcement, border patrol, that sort of thing. congress is going to debate this. this is going to be difficult to get this through congress, but there is an appreciation in a bipartisan way that this is a big problem. so, we're going to see very quickly congress through the appropriations committees react to this request. i suspect he'll get at least a large chunk of this money, kelly, and we'll see if that's effective in doing the job and stemming this tide of children coming across the border. >> eamon, would you agree with that, he's likely to get -- let me quote the research group this morning. they're saying in the house, as we've got the backdrop of an israeli/hamas war looming, u.s. talks with china on the rocks, a hold in highway funding, a crisis at the u.s./mexico border and the ex-im bank may be allowed to die and they're

pursuing a hunter's right bill snaent. >> you've already seen criticism of the president from republicans in response to this request saying, look, there's not enough for law enforcement. this is about responding to the humanitarian crisis, which needs to be dealt with, but we're not seeing enough to secure the border. and that's going to be a theme you're going to hear from republicans throughout the course of this crisis, which clearly is a humanitarian disaster for those children who are involved in it, being sent across the border parentless. and it makes you wonder what horrific situation the parents have to be in in order to risk their children this way, in order to put them across the border by themselves. >> but the gop here is willing to spend the money, that's what you're saying? >> i think ultimately the president gets the money, but there will be a lot of criticism about border security and why that's not money. >> for sure. eamon, thank you. legal pot smokers in colorado are getting company today. the state of washington making the move to legalize marijuana. there are reports of long lines, high prices and shortages of some supplies. things are off to a rocky start. we'll have the details ahead. and luxury auto sales are

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welcome back. talk about gray skies, a warning about the vix, hearing words from dr. doom, they're vying for the top spot on the website

today. allen is running through it. >> hey, kelly. dr. doom is back for us. our friends at futures have an interview with him this afternoon. and by his own admission, he's been saying there's going to be a correction for about two years now, but now he really means it. the s&p could retreat up 30%. of course, people like dr. doom on our website. patty, our markets editor, pointed out the vix has had a 20% gain over the last two days. maybe volatility's back in the market. and then finally, the third story that's been burning it up all day is very yucky. it's about a medical procedure that helps people with c-difficile, one of the super bugs out there. i'm just going to say, fecal transplant. anyway, there's investment opportunities in that, and we took a look at it, and it's on the website and people are interested. >> wow. >> i did tweet out a great newsroom joke about that that i can't say on air, but if you follow me on twitter, you get the joke. >> i appreciate that, allen. >> take care, kelly. >> thank you, for now. unfortunate stuff for people

dealing with this, by the way. the pacific northwest legally lighting up today. washington joining the ranks of states where pot is recreational and legal to a grand total of two. is washington ready for the handling of finances at the cannabis craving, though? the answer to that is coming up next. ♪ one toke over the line, sweet jesus, one toke over the line ♪ ! it's a complete checkup of the services your vehicle needs. so prepare your car for any road trip by taking it to an expert ford technician. because no matter your destination good maintenance helps you save at the pump. get our multi-point inspection with a synthetic blend oil change, tire rotation, brake inspection and more for $29.95 or less. get a complete vehicle checkup only at your ford dealer. with all the opinions about stocks out there, how do you know which ones to follow? the equity summary score consolidates the ratings of up to 10 independent research providers

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welcome back. in washington back. if washington state today, 8:00 a.m. local time, it became legal to sell recreational marijuana. 20 shops were licensed. not all were ready. here is footage. there were happy crowds jockeying for product in short supply. the ceo of kind banking provides financing to the new legal pot industry and he joins us now. david, welcome. what kind of opportunity do you have and what barriers are there for other banks to participate in this space? >> afternoon, kelly, thank you for having me today. it's a big day for the marijuana industry. as you just mentioned, the state of washington went recreational today. banking is here to help the industry grow and flourish.

we provide, we're a full service financial solution. we provide debt. we provide equity. can you do could have been vertible debt. we are coming out shortly with a merchant service program that will help the industry go cashless. we provide vaulting services, payroll services. basically, we are providing the backbone for the legal cannabis industry. >> is there something banks can do as well, david, or are they restricted? >> well, any bank can do whatever they want to do. on february of this year, the federal government released a memo saying how the banks can work with the industry. however the reality has set in and very few banks, if any, are working with the industry. therefore, people like myself are stepping in and providing alternatives. however, banking is the full service platform offered in the industry today. >> it'see mon javers here. . eomon javers here.

if tike companies and big banks the rest of them. they know how to do the financing and shipping. are you worried about the big guys sitting on the sidelines all of a sudden coming in? >> my personal opinion is until federal law is actually changed i believe the big players will watch and learn and see how we do our business currently. i believe the reality is this, the world is a multi-trillion dollar market so why would a big bank or a tobacco company enter a market and risk their global platform for, you know, a 35 to $10 billion industry todayed? >> you think they need a couple more states to go? >> no, look, new york passed yesterday. so that became the 23rd state. alaska and oregon are going to have recreational on the ballot in the fall. there are at least eight other states going through the approval of medical marijuana and my true belief is until federal law is changed and marijuana is removed as a

schedule 1 drug the big players we know the names of will watch and learn and stay on the sideline. >> david what have we learned from colorado here, is there anything the states can do better? >> you know, this whole thing is a learning experience. i think you know washington is going to learn from colorado and i think the next guys down will learn from the rest. i think colorado is doing a tremendous job of regulation. crime is down, underaged, you know, there is not any underage issues ahave taking place right now. there is a supply shortage in washington. that's truly because colorado was a much more mature market before going recreational. so washington does have to catch up a little bit. >> yes. >> out of the 335 licenses issued, 24 were supposed to open today weekend only six are. that's leading to a lot of long lines. >> you are shaking your head, why? >> because i think this is morally wrong, personally.

i'm a capitalist. but i think this does a lot more harm than good for human beings. so i can't say i'm really in. >> yeah, a good point as well, one that's often overlooked. we'll leave it there. you had concerns over the state of the economy. by the way, how could people be so bad off when people are giving away money to a guy on kickstarter for a guy making potato salad. he's coming up next. .

welcome back. this kickstarter campaign has raised more than $50,000 so far. it's not for a tech start-up or a hollywood movie. it is for potato salad. with us now is the man behind this kickstarter campaign is zach "danger" brown. what are you going to do with the money? >> what's the question? >> what are you going to do with the money? you don't even have the recipe, right? >> i have a lot of recipes. i don't have "the" recipe yet. >> are you going to develop it or what? isn't at this time case you can't go off and buy sneakers or something you have to be trance parent? >> the kickstarter terms as far as i understand it is you aren't, the only rule i know for sure is you are not allowed to

contribute wage to charities. our goal with this money is to spend all of it on the greater good, working to make the world a better place. >> i have a stupid question, i'm sorry, where does that potato salad come in. >> oh, so only background. i'm making potato salad. the internet is going to give me some money. i will make some potato salad. i will give bites to some people and then whatever we end up having left over we're going to have to figure out how can we use this money that we're getting to do, i don't know, something good with it. potato salad, you know is not super expensive. i can't imagine it costing more than a few hundred dollars to make. >> unless you have a truck of caviar or something. >> zach, i want for the know if your middle name is legally "danger" is that a legal thing?

>> define legally. >> you answered the question. >> show us the birth certificate. no, i'm kidding. is the point of all this of your potato salad do something charitable and use potato sal aed a with a means to that end, did you start this and since developed moral trmore more altruisticic goals? >> i think it's the latter one. i think it's crazy to imagine you would have a $130 campaign for potato salad that would blow up to 50 or 66 or who knows where this is going to go. >> would you give this guy $10? >> no, i don't think i would. i'm kind of a undoer today. i apologize. >> it's for altruisticic reasons. >> it's for good purpts. i wouldn't expect it in return. >> you wouldn't exinvestigate $53.

000? >> i would like to try some at some point. >> have we on, i'll bring it. >> zach "danger" brown, "fast money" is coming up in a moment. melissa lee, what's on tap? >> we're making potato salad. we're going to eat it and not share it. so there. >> all right. melissa. >> we had a melt june in momentum names. we will give you the top three picks in each sectors that are buys on this pullback. >> over to you, guys. >> all right. thanks. "fast money" starts right now. out of new york's time's square, i'm melissa lee t. volatility index gaining 20% in two days. it wasn't the nasdaq hardest hit seeing its worst three-day drop in two months. the momentum names are behind the carnage we saw on the nasdaq and we are covering moves from all the angles. tun suntrust bob peck is going to name out which stocks you should