>> that's just a headline that hits the stock. there are professional short sellers that are very good, blasting things and run. they take the money and run. that's all they are doing. every time cron research hits one of my stocks, i buy it. >> great to have you here. make sure you join us tomorrow. right now, it is time for "squawk on the street." good thursday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer at the new york stock exchange. david faber is off today. are we breaking out of the range? >> that is the question this morning as the s&p will open the farthest below its 200-day moving average since the ebola outbreak last october. down grades of disney, not going to help. europe, solidly in the red. the ten-year, 211.

coke ceo pens an op ed on obesity research funding. egg mcmuffins all day. how much could that mean to the bottom line the amcdonald's? global growth fierce, china, slumping oil prices all playing a role in the sharp declines in futures. jim, we have been in this range for it seems like our entire lives. we haven't lost a 17 handle on the dow since october. where are we? >> well, look. there are things that are -- have single positives, which is when the dollar is down. that tends to be a good day. we have that one. oil stabilizes. we've got that. that's good. china down but not down below the 3500, the shanghai comp. 17,000 in the dow. the dow is not supporting. that does help support. the most amazing thing, we have

37 volt. you mentioned the october lows, we will be testing those. disney is a stock to watch. i read through that down grade multiple times. it reads horribly except for the fact he is not negative on the earnings. this is what's really wrong with the market. we want to pay less for even the highest quality companies. disney is a high quality company. just be aware we can bounce. it is all about bouncing. staying in the range where the stairstep is going down this time, no the up. i urge people not to press their shorts. i was listening to louie where he was talking about apple shorting, people shorting the stock and getting negative research out there. in the end, china told me, totally on track. they have some of the really big intellectual property. the stock mustered a dollar gain after being down. at target, the reversal. the conference call was very good except for one line. it was not unlike when bob iger

said, listen, we are having some losses. i think brian cornell is trying to lower expectations, not a bad setup today. it is a bad setup for a while. >> yesterday, you said ever since disney broke, a malaise has set in. >> that takes us back from iger was on this program. >> the bundle is not going away. it is still relatively strong when you look at it given all the competition in the marketplace and you look at what percentage the bundle represents, not just in terms of revenue but how people watch television. it is still the dominant form of television viewing in the home. espn is fortunate that we believe it is a brand that ports well to any new platform, whether it is small or bundle or over the top package or whether it is direct to consumer business. >> so here is bernstein today. they down grade disney and time

warner. target on disney goes to 114. we believe it is similar to satellite tv, publishing and aol. they all seem to trade around seven times ebitda. >> you are talking about disney's multiple got very high on a $6 number. i thought that was interesting. i read this because you tweeted it. i said, i have to get ahold offer this. >> on a recent sleepless night, we had this epiphany. perhaps you had a bad night sleep a couple of weeks ago. this is really not a pile-on. that is not fair to say. it is recognition that's what happens is we are not going to pay as much money for that. the rate of subscriber loss they are seeing is higher than what they saw in 2014. this is a derivatives play on

last year. >> people don't understand how can a secular change be discovered in two weeks. how can that happen? why does that happen? >> like when the clorox ceo cabled me, we decided to shift some of our advertising out of tv and social media. >> how much? >> 30%. clorox. clorox? >> it is tipping point. that's what's lacking in this. i would have liked if these people would have been a little more cross reference to ruth poratz/alphabet. little reference to facebook. the advertising is growing so quickly to google. the subscriber side, people are still signed up. they want to have cable and get netflix. comcast is the parent company of this network, has not been bad. we want content delivery. a nice piece that came out

today. we want to watch netflix. i was honest with my 24-year-old daughter yesterday. i said, let's watch tv. she says, okay, sure. she put on netflix. that's not tv. we, dad, you are still using the type writer. i have a type writer i keep at my house when i used to cover homicide. dad, you are still like reaching for what, cbs. we want to watch anything on cbs, we go to cbs on demand, and we can watch "criminal minds," which i call criminal porn. >> viewers were writing, their kids wanted to see something on cbs but they didn't know what channel it was. >> they put all these channels. there is channel 22 to 480 i don't watch but i pay for. everyone is fed up with that. i was watching a show called banshi, which is the most super

charged outrageous, crazy show i have ever seen. i don't know what channel it is on. i just type in banchi. we just type in something. whatever comes up, is where we read it whether it is yelp or price line or care.com. the distribution by younger people is so different. i grew up in a house whe there was channel 3, channel 6, and channel 10. my kids don't think of channels. they think of key word. >> search terms. >> back to the broader market here, jim. what would be a tell today? is it exxon reclaiming? >> i don't like to recommend shorts. airline/fares as capacity grows. that's that double nightmare. that can override the gasoline,

the jet fuel thing. this says that the supposition is that they cut the rates because the department of justice got involved. they have added a lot of capacity. watch the airlines. they should be going higher off of jet fuel but they are not. people say that about the transport. >> people are talking about the russell. why is that frustrating if you want to go home and go domestic. we are down to kroger. watch lilly. they had fabulous news on a diabetes drug. that segment can hold up. the drugs can hold up. do you remember the terms i'm using can hold up. the best thing this market has going for it is the negativity. it's when you don't get up in the morning and hit up china

before us. i get up. first, i go to china and then i look at our futures. >> yesterday, your your point was, what the bulls need more than anything is the sign of a dovish fed. we got that for like 10 minutes yesterday. >> literally, it was 158 to 213, the embargo, which is there for another network. so we went up 180 points from 158 to 213. we gave those up very quickly when we realized they weren't dovish enough. people came on and said, they weren't dovish. if the fed were to come out and say, listen, we are doing this tomorrow. there was some great discussion on squawk, which was, they missed their opportunity. now, china, there are vast countries, kazakhstan, i don't know the name of their currency. i don't want to hold on to it. i remember i thought the ring didn't matter in '97.

i thought, how about the tie back. the opening music, chase. we lost chase, we lost the bat. this is fot my first currency rodeo. when you hear about these currencies that you don't know and suddenly, they are important. we are in a position where the companies like a netflix should be buying cbs and apple. they should be taking advantage of their incredible. am is not incredible. they shouldake advantage of this incredible market cap and upending the paradigm and getting great content. cbs is going down and netflix is going up. a lot of great stock is happening. >> now, if investment grade and high yield junk bond goes up, debt gets more expensive. dub do buy backs disappear? >> my charitable trust owns the

stock dow. they are suspended from the buyback. look at how that acts. they are never there. you need to be there. disney should be there. maybe they are there later today. there is a lot of flux here. we could bounce today, because the setup is not that bad, particularly with the dollar. it is just not fun. >> coke ceo defending his company. it appears mcdonald's could be on track. ahead, mohammed el-erian and what he thinks it will take for the fed to raise rates in september.

coca-cola harshly criticized with how it deals with science and obesity. they say, coke vows to be more transparent. the characterization of our company does not reflect our intent or values. i'm disappointed some actions we have taken to fund scientific research and health and well-being have served only to

create more confusion and mistrust. our company could do a better job in gauging the public health and scientific communities and we will. comes on the hills of "the new york times" piece. >> i shot an e-mail to him saying, much needed. i know the man. you get to know people after a while. i said, this is great. is it an apology? it is kind of a recognition. he is a man of the world. my daughter came back from cambodia. why do i refer to my kids? they are smarter than i am. my daughter did something with my iphone yesterday that made it so i think i can control the world from it. cambodia, coca-cola is water there. every picture but the temples, there is coke. outside of this country, it is still very important. there are a lot of brands. i think pepsi cola is ahead of

them. this is what happened. what general mills did when he said, you have to take the artificial colors out of cereal. tricks are not for kids. remember, lucky charms. wow, let's have some cereal with your candy. everyone is getting on board. in the meantime, people think whole foods is doing badly, because the trend is not your friend anymore. it is the opposite. it is because kroger is simple truth. everyone is getting this point. the transparency of what you can see on the web is extraordinary in terms of gmo, in terms of gluten, artificial ingredients. chipotle is saying 8 ingredients in a burrito there and 80 in a burrito away from them. we know what monsanto is involved in, monsanto being, by

the way, away from what we talk about, public enemy number one. >> your point about these big players, for a long time, the question was, how can kroger ever do what whole foods is doing, right? >> now, they have demonstrated that they can. >> i think kroger will do 4%, 5% comp store growth. >> in a supermarket, that's unbelievable. >> it sells as 20 times earnings and whole foods sells at 19 times earnings. fresh market is going to have zero growth. you have the total switch. whole foods used to have 30 times earnings and have better growth than kroger and now kroger has much better growth. they could go to 23 times earnings and whole foods could go to 18 before you get an activist involved. $1,000 a square foot. i'm taking a stake and making something happen. >> will the egg mcmuffin play a

bigger role in boosting mcdonald's? the ceo said, selling the breakfast sandwiches all day could help boost mcdonald's annual sales by 2.5%. >> i told you, easter brooke is willing to try everything. my discussions with sources at mcdonald's indicate we are doing everything we can to make this work. the yield is very, very good, very safe. when you look at these big retailers, howard schultz is doing beer and wine, because he has a day part not generating enough money. this is a recognition that the day in the afternoon could do much better. this isn't where we used to go, on the 3:00 a.m. shift after a hard night of covering crime. you needed that all-day breakfast. this is a recognition that the

day parts have to change. watch easter brook. he he is not traditional mcdonald's. he says, we want the franchisees know we heard you. i have to have food like sonic brought to my car. i am not getting if that line. >> we have always preached that mcdonald's is an engineering company. >> they better get back into technology. have you ever heard a through put? >> a lot of discussion about subway and jared fogle. i just read that sales were down 3.3 at subway because starbucks stole the number two position. >> i saw that. obviously, this is a tragedy. i have a friend that owns a couple of subways. they generate a lot of income if you own a subway. i thought they were a juggernaut. this is a bad moment for subway.

it is no the a bad moment to own a franchise. that's a way a lot of people have been able to create wealth. that's what i call the middle-skilled people. sorry, howard, i just called it myself like i created it. people like popeye's, a $3 million short fall. it is still a good company. their franchises are people that work their way up. the vast majority of people that own dominos are people that work their way up. >> if you are willing to work your butt off. >> the jared story, what can i say? it is a story created for the t tabloids. >> we'll get cramer's mad dash and count down to the opening bell and buckle up. more "squawk on the street" from the nyse straight ahead.

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the s&p has broken its 200-day average. we will break that with futures down almost 18 points. >> one of these stalwarts in the health care business has been eli lilly. an incredible number and piece out by them. according to vascular risk reduction, people with type 2 diabetes for one of the drugs. that's a very sad and tough disease. this is a very big deal. the safety profile is very good. remember, this is how people, approximately 50% of the deaths are caused by cardiovascular

disease. this is a major breakthrough for lilly. >> answer concerns about pipeline that they had to defend time and again. >> i think they have alzheimer's in and alzheimer's long-term. this is a class act company. a lot of people i know have been saying, why is the stock elevating? you may not know that. what they did with the depression drugs is good. think open-minded. it is a horrible disease and this is good news. >> is there good news in lumbar lick qui day tore? >> if you look at laminant in flooring at lowe's, that's a huge area. when we salute a company for having a lawyer join the organization, hey, let's give the ref some power.

i think underlying, flooring is great. if you like flooring and you don't want to worry about compliance, and you like carpet, go mohawk. you go through the beautiful home depots and it is stanley work and fortune brand and the new stanley works, the wall products coming out this quarter that are going to move the needle. be aware home depot, lowe's and kroger are my three plus lilly. i love more netflix. i am starting to stack them up. sears, it looks like the kmart is still in business. we have got some things cooking here. when you get that negative, something tends to happen positively. >> we are going to get existing homes at the top of the hour. before that, the opening bell in just 4 1/2 minutes. tech stocks on track for the worst month in a year and a

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you are watching "squawk on the street." 17,000 on the dow. we will be within a couple hundred points. >> we get winners and losers. is it a competitive drug? this may or may not be the case. when he see netflix go up, we figure, how much do we sell time warner off of it? i saw a down grade of union pacific. this is, again, the transports are not good. the only thing that could turn this market around is everybody sells and then we say, wait a second. i did some work on g.e., yielding 3.5. 87% of their business is not in

oil or things that people wouldn't like like financing. it doesn't matter. one day it will matter. is it from the 22 level. i don't know. >> we may find out. there is the opening bell. the s&p at the bottom of your screen. we will be looking for a little bit more red than green once again today. the battery dance company based in lower manhattan celebrating the 40th anniversary. over at the nasdaq, grand banks, a seasonal oyster bar aboard a historic schooner docked in tribeca. >> why not? they have pearls of wisdom in those things. >> did we mention the disney down grade? we also have a down grade of my kron. >> there was a stock at the lowest quadrant of the s&p and made a major acquisition to get into flash. they made a big ram-up position.

for a while, it kind of cornered the market with a couple other korean companies. then, people stopped using pcs. hewlett-packard will find out. as soon as you say, stop using p.c.s. anyone in that business says, jim, that's great. you are typing on a p.c. generationally, i still see apples being bought. there is a pc saying cell phones slow us. these are all the reasons there is so much sluggishness to tech. tech so big, finance so big. yield curve going the wrong way. if the dollar stays weak. i saw some really bad caterpillar numbers that weren't bad enough to drive caterpillar down. you won't to be in the situation where you have bad news but not so bad it makes you want to sell. >> break even for the year on

the s&ps. 2058. we have clearly broken that. >> it is not a good market. a lot of people are negative on it. that's going to make it so that we turn around. i do think that maybe you wait a couple days to sell. it is not every day that you need to sell. i heard that you do feel like stepping out of the way for a little while. >> then, people say, well, jim, you are staying short, which i'm not. there is this inevitable nature of selling that gets people down. you have to recognize it has its own momentum. you get what we have like yesterday at 158. i am speaking out at 1:00. that's a bad kind of thing. that says the machines are totally in control. you could have them move that

quickly. you are down so badly. we don't want to see it as someone that likes the asset class. it's under attack in so many different places. it is hard to step in front of a moving freight train that is doing so well, like a google or facebook. like an apple. i am watching popeye's louisiana kitchen. she put up these incompetent credible comp numbers. they are really beautiful. someone finds the revenue and they don't like it. they are finding things not to like wechlt a like. we are so used to being on the top line, which is revenue. people are exhausted. wake me when this stock yields 4.5. it is a malaise that i have seen before. it has a mind of its own as

opposed to the october "v" bottom. this malaise has a lot to do with the fact that sandridge down. it is a little oil company. the ratings for the agency is downgraded. you say, how are the bonds doing? i'm checking brazilian bonds. >> not a good sign. >> checking things i don't want to check. i'm worried about what's going on with the foreign. i was over there, they let you buy a lot of wine. >> things on a relative basecy should be good news. margins were higher. they raise their guidance for the full year as least and match estimates at 68 cents. not happening. >> that's interesting. they came out in the aftermarket hours, dropped $2. my life is a pathetic parody of the human mind. gee, this was a huge quarter.

it must be up. it was down, so i must be reading it wrong. yesterday, target, brian cornell did not mean to send his stock from 84 to 80. come on, don't get ahead of it. t the gist of it was, you idiot, you paid 83. that's not what he was doing. watch this lilly, that's beacon. >> j&j, the best performing dow component. >> we are oversold. that's a trading reason to own stock. bob iger is looking at his stocks. i bet what he is saying, okay, okay, why don't you bid for $500,000? if he is not doing that, he should be doing that. >> i remember last week, we asked millanovich when would an

apple kick back? >> he said, 100, 110. >> you want to say, this stock is dramatically oversold. you want to take our numbers down. we are going to continue to buy back stock. the airlines have union issues. we haven't had union issues in a long time. >> speaking of which, lockheed. likely sale of some service portfolios. jack warren and i, research director of my charitable trust, we have been wanting to buy lockheed. let me add lockheed to the list of kroger. all these countries that thought we were the world's policemen. general dynamics, a lot of people felt the private jet

division would do badly. they are doing very well. it is all about the u.s. pulling back and other countries saying, we have to arm ourselves. yemen has to arm itself. >> are you talking about an increase in the number of marginal buyers of goods. turkey thought, listen, we are going to go into war against the bad guys. they are different bad guys. i am simplifying. if you were turkey or poland, you would call them and call marilyn u sechsen. she won't come on my show. listen, lockheed, we have bad guys all over the place. what do you have for us? general dynamics, give us some tanks. it is that bad. when i look the at people's republic of china, do they need all these aircraft carriers? are they building them because

they fill all the buildings they have. does japan need to rearm? does germany need to rearm? that's why lockheed martin is doing so well. the shorts are dying. >> one last name here. we are 99 days from black friday, jim. oppenheimer initiates coverage on mattel with an outperform. i haven't taken your temperature on back to school or the holidays? >> i think back to school is going well. i saw pvh act very well. i think target is underplaying how good to season is. will they keep them to april, june 4th. how could $100,000 keep until i got out, june 14th. they cheat. they send them back the week before labor day.

they come home at spring break and don't go back. how much do they need to keep these kids for a couple of weeks? >> the amount of fees versus the amount of money, very tough times in terms of the endowment chief. >> if you didn't go to col lem, you would only have to pay 50,000. i love college. it is really important. some places where it is a bargain and return on investment. it is not a bargain. it goes up every year. >> it hasn't been in a while. >> right now, disney, the worst performing component. >> i can't figure out if the

markets are down because a lot are angry they didn't get off this week. >> there is pervasive gloom and doom. all ten sectors of the s&p 500 are on the down side, financials, discretionary technology. everything is down almost 1%. global markets not any better. the morning session was up, the afternoon fell apart. a trading range between 3500 and 4100 to shanghai. at the 3500 level, that's where we widely believe the government starts buying. germany is down. spain is down as well. you get the picture. look what's happening in brazil. the emerging market are tipping

to be weak. the dollar is strong. they say, hey, bob, it is the tren. we're not happy. the biggest issue, this general wi winyness to the collateral stocks. the big leadership stocks are starting to fall apart. i said, look at google and amazon and facebook for the quarter. nobody seems to be selling the daylights out of these stocks. when they start doing that, you will know the whole thing is going to fall apart. now, it hasn't happened yesterday. they are worried about biotech. the bloom is off the rose in biotech. down 20% almost. that's a notable little down there. that may be very good news. a little more reality going in

there. they are chock full of lockheed martin and kimberly-clark. it has a 3.2% dividend yield. these gains are on the quarter and do not include the dividend. dividend payers are doing very well. some have chevron in them. if you buy them, you get the yields. that's the argument for buying stuff when it is low. i don't endorse any of that, necessarily. it certainly is an attractive yield on these big names. they have told you, the big guys are not cutting the dividend. the dividend save story, remember, that came out of conoco a short time ago. more down beat news.

something more positive to say from receipt tail company. second half earnings were within guidance. generally, kind of downbeat commentary. bon ton, big loss. store sales down 13.33%. cato corp, sales continue to be challenging in the current environment with the ceo, john cato, the founder. now, only 145, down on the dow. back to you. >> thank you so much, bob pisani. 10-year, around 210. let's get to the bond pits, rick santelli at the cme. >> absolutely. the issue is, yesterday with the fed minutes, we saw the curve steepen in a very definite fashion. not from the long end, rates

moof moving harder. short-term yields moving higher. the rest of the curve is catching up. you are down about 4 basis points on the 30. if anything, their yields popped up. we are in the 2s, 3s, and 5s, virtually steady with their moves after the fed minutes. here is the issue? does the long end pay more attention to weak stocks? all these fed issues moving down the curve. >> let's start at july 1st. we have been there, done that with these yields. we are there as late as the third week in july on a closing basis. >> if you open the chart up, the middle of the chart is july 8th. that's currently your comp. a bit below 150. as you look to the left, a lot

around 150. that's the last time yields close at these levels. let's look at 30-year bonds. this is significant. we are confident in the same period. now, move the chart to year to date on 30s. right in the middle, april 30th. imagine drawing a line there. the left side has basically towed with 275 from last year. once they went through it, the right side of the chart hasn't gone back down below. that makes the 30 unique and makes 275 a major pivot. switch gears, let's go to foreign exchange. is zero centric. look at that year to date. look at a better way to assess the dollar. heavily included. the trade to dollar index. look at this year to date. looks much better. it is above highs.

carl, back to you. thank you very much, rick santelli. >> good morning to you, carl. we are positive right now. october, wti, up about 15 cents. not really convincing us at the moment that it is going to be necessarily a strong day. still watching the september price. the low for that price, 4021. it will go off the board trading around $41 at the moment. tomorrow, we are going to get numbers. the dollar, after the fed, a little bit of a weaker dollar that could be supportive. we are keeping our eye on tropical storm danny in the atlantic. we have gas inventories coming out at 10:30. we'll bring you those numbers. prices are flat ahead of it. another stealth move in gold, about a $20 pop.

trading over 1140. more short covering than new buyers. >> thank you very much, jackie deangelis. >> when we come back, 80% of energy stocks in the s&p are time to go bargain hunting in that sector. the dow is down 149. we'll ask jim if we are set to pop in any course of the day when we are back in a minute. [ male announcer ] whether it takes 200,000 parts,

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the dow in the red for the seventh consecutive day. 161 points from a 16 handle on the dow. we are going to watch all of that. jackie just mentioned this point about hurricane danny and a short-term disruption along the gulf coast. >> the saudis are flooding. no place. don't send it anymore. we have no place to put saudi oils. the saudis, wherever you can get

them, a port, a saudi port. we need to see the existing sales of homes be better than 5.4. we need to see the philly fed do better. we are oversold. the world is not over. >> the world is not over. >> the world is not fun. >> it only ends once as cashin likes to say. the dollar can stay weak and oil can hang in here. we get a situation where some of these indicators aren't so bad. for a trade, i'll pick some up. yesterday, that 158 to 213 yield, that was it. you want the machines to be entirely in charge. let us humans be there.

at a certain point, she would say, stop looking at your screen and tell me what's going to happen. >> we'll get stock trading with jim in a moment. don't go away.

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time for cramer in stock trading. >> watch caterpillar. caterpillar, they do a rolling moving average for their machines. it was april down 11, may, down 12, june, down 14. we got a little bit, starting to look a little better. we had some improvement today in july. a little better than the last month. i know that's not that much to hang your hat on. caterpillar can mean something if caterpillar has a little bit better numbers. you have 11% decline, which means you are back to where we were in april. in some ways, we need to see the wheels come off the economy in order to make it so the fed is on hold. on the other hand, i like to see that caterpillar is a little bit

better. watch cat. if the stock can hold 77, that would be a sign that maybe people feel like that. don't be too binary or too negative and understand the malaise. people want to pay far less for stocks. disney changed the world. >> isn't that interesting? it all came down to ratings at a sports network. >> star wars, disney, new theme parks, no, some losses. >> what's on "mad" tonight? >> you want to talk about what's going to move the market. it is going to be mark benoit at salesmarket.com. the big data is still alive and well. mark has dream force coming up.

>> i keep think about disney and merc. >> merc, the worst performing. >> listen, bob iger, there is someone doing worse than you. i thought the piece itself was sop -- >> we'll get philly fed and existing homes after the break and mohammed el-erian in a moment. at ally bank no branches equals great rates. it's a fact. kind of like mute buttons equal danger. ...that sound good? not being on this phone call sounds good. it's not muted.

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welcome back to "squawk on the street." i'm carl quintanilla with sarah eisen and simon hobbs. david faber is off today. another tough day for the markets. the dow down 200 points. hanging on now to a 17 handle. we haven't had a 16 handle on the dow since last october. oil is managing to put a couple green arrows on the board. let's get to rick santelli with breaking economic news. rick? >> if we look at the most contemporary, the august read for the philly fed index and that is 8.3. how does 8.3 fit in? the high of the year was 15.2 in

june. the lower the year was 5 exactly in march. you could see it kind of fits right in between those levels. if we look at some of the internals, we have philly fed new orders. actually moved down a bit from i believe it was 7.1 to a bit under 6. 5.8. if you look at employment, i know it is after employment. it is still important. 5.3. a much-improved from a slightly negative number. minus 4. let's go to leading economic indicators. here is the surprise. that's only the second negative number of the year. minus .02 which equalled this, was in the second month of february. you have to dpgo back quite ways to find a bigger negative number. that would be march of 2013 when you head down .03. now, another july number. existing home sales. for that, let's head east and go to diana olick.

rick, existing home sales up 2% even to a seasonally adjusted annual rate of 5.59 million units. that's the beat. the street was looking for a slight decline to 5.45. this is the third straight monthly gain and the highest since february of 2007. last month's sales were also the highest since 2007. sales up, 10.3% year over year. for five years, we have been in the 4 million range. now, we have clearly broken into that 5 million range pretty strongly. the gains are not widespread. in the northeast, sales were down 2.8%. in the midwest, sales were flat. sales were up strongest in the south. 4.1% and in the west, 3.2%. all regions were up from a year ago. the headline, again, people, it is inventory. it is shrinking. 2.24 million homes for sale. down 0.4 for the month. down 4.7 for the year. usually, from june to july, we

see a 3% gain. we did not see it. it is pushing prices higher. carl? >> thank you very much, diana olick and rick santelli, a lot of data. not helping the markets falling across the globe. oil falling to some levels not seen since the credit crisis. the dollar slipping on diminishing expectations of the rate hike in september. joining us live, mohamed el-erian. in your words, you said the classic market overshoot is developing. what do we mean by that? >> it happens in emerging markets. we see currency pegs fall and emerging markets weaken. that sends shock waves to other markets. it starts first in the emerging

market world. then, it starts spreading and what that causes is heightened risk aversion. now, what happens next is more of the same. it would create interesting investment opportunities in future. in the emerging market world, everything is being treated the same as if it is exactly the same country in the same place. that's not the case. so good names are being hit as well as bad names. there are going to be opportunities there. to begin with, in a few trading sessions and weeks, it will be an absolute trade. similarly, as it spreads around the world, corporate bonds versus equities. another interesting opportunity. you are going to see lots of opportunities as this location spreads. how bad is it going to get, mohammed, the pain in emerging markets, the shocks in emergent

markets? they always overshoot. the dedicated investor base is always small. they have a lot of tourist dollars. like any tourist, immediately after the airport. you are seeing a lot of outflows. it is going to get worse. for investors, that means opportunities down the road. >> what does it mean for the federal reserve? how can it raise rates in this kind of global environment? >> that's what's really tough. the fed has four issues to deal with, all uncertain. domestic data, relatively okay, versus pretty awful internationale data. secondly, the tranfragility of markets. it doesn't want to fuel these dislocations further. third, it doesn't have much confidence in its models. it is not as if it has complete clarity on what's happening in the u.s. and finally, worried about the dollar. doesn't want to be too divergent

from other central banks that are going to stay really loose. when you look at that, it makes it a very wishy-washy fed. understandably, this is a very uncertain period for policies. >> let me pick up precisely that point, mohammed, isn't the danger here, this is the beginning of the nightmare scenario. we are beginning to reprice the confidence in central banks, particularly abroad to accelerate economic growth. tons of cheap liquidity has done all it can. if that sets that believe. arguably as you have argued, inflatable asset prices and the stock market. prices are up here for risk assets. fundamentals are down here. the difference is this enormous trust in central banks. markets view central banks as their best friends. if that paradigm is shaken, if

it turns out the central banks do not have as much ammunition, yes, we are going to see valuations come down to fundamentals. >> to come back to the point that you made, there will be interesting opportunities for investors. when does that appear? if what we have just discussed comes to pass, those interesting opportunities may be much further out. >> for now, a barbell strategy was better. lots of cash to retain optionality and some high risk exposures, in markets that haven't been impacted by central markets as much. for now, relative. if this continues, there will be some absolute opportunities in the belly of the curb.

are you the view that they are letting the perfect be the enemy of the good? >> you know, it's tough. i sympathize with them. this is a really unusual period. i would have hiked earlier. i would have gotten off zero earlier. it is easy to say with hindsight. why is it easy to say? with hindsight, there was a moment where domestic data was ready to be strong and international data is okay. now, the international data is pretty scary. therefore, the fed has lost the opportunity when it had some alignment. if the minutes are correct from yesterday, july 28th, 29th, almost all members needed more evidence on higher inflal mags. i paraphrase. why on earth would they lock out within four business days. it seems as far as he was concerned, they were very high to not raising rates. they went out and put a message to the markets that would not

have reflected where they were at the center. >> it is hard. there are so many different views and so many different nuances. this whole community element becomes really difficult. you end up having difficulty conveying it clear. the fed wants national optionality. the market wants clarity. that contrast is what's going to play out for a while. >> it is interesting, most economists on wall street expect a september rate hike when the market does not. on the 10 year note yield, 2.1. do you think we are going to break down below 2%? >> it's interesting, what's happening now is that the curve flattened from the front end, mink that two-year yields came down. that, in this global environment, is going to pull the long-term yields downward. the curve steepens from the

front end and then it will flatten from the long end. that's what you should expect going forward for now. >> st. louis fed, i'm sure you have seen the q.e. theory not well developed. the effect of asset purchases was mixed at best. i don't want to look too much in the rear-view mirror. are you seeing any buyers remorse from various elements of the fed. >> i have just finished the book. it speaks to the fact that the fed had no choice at that stage about you to experiment. it experimented in real time with untested policy instruments. they were untested. there were reasons to believe that all they could do is buy a bridge for other policy makers to get their act together it doesn't surprise me that now the analytics are catching up and question marks as to effectively. they had no choice at that stage but to experiment and it did. >> finally, mohammed, this is

all really interesting. the most important question is scree know smith and whether or not your admiration for the jets remains in tack. >> the fact that they started self-disstrucking before the season started should not come at a surprise. at least we have the mets this year. >> if not the jets, then the mets. >> mohammed, we look forward to talking to you again. mohamed el-erian. >> thanks to a steep drop in oil, 85% of the energy stocks are now in bear market territory. they are down 20% from recent highs. so is this here now a buying opportunity. "squawk on the street" will be right back. [ piercing sound ] daddy! lets play! sorry kids.

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the dow was down 200 points. commodities in focus. 85% of energy stocks are in bear market territory, down 20% from recent highs. crude oil still hovering near a 6.5 year low. crude oil just above $41 a barrel, still under pressure. joining us no eric lee. back to the crisis years. march, 2009, you think weill brk furtherntohat territory in the 30s for wti. >> it i quite possible in our outlook, we do see wti

hitting maybehe tee hdle someme soon or if not, certainly, the fourth qrter looklike a good candidate for when that might happen. >>hat iit pressuring oil this time around? is it the supylut tha everody focused on? is the bigger push coming from th demand sector? >> clearly, it isit ofboth. it really seems like supply is e big driverere. we a rlly i the first rebalancing of at y mig ca thehell era. from $100 to $50. th rebancing isn't done yet. they musclednroun t $30, $40, $70tlel. s not settled yet. it is still mg dow deflatnsrey also theroductiv tes. >> are the prices actually real. the ability of this market to

move is astounding. the same way $110 a barrel might be unrealistic. $30 a barrel, also unreal. what role are the hedge funds playing here? the guy that became billionaire through glen core, one of the biggest mining operations in europe, has suggested that commodity prices are not making any sense at all. he is talking about copper and he says they will continue to fall. are these distorted prices by the position of these funds? financial flows have been a factor buffeting thiyear. ultimately, the financials should have to come back to the physicals. right now, the issues going into

the fourth quarter are you need to store it. in which case, the contango, upward sleep curve needs to get steeper. >> how low do you see u.s. gas prices going here, prices at the pump in this country? >> that's a tricky one for sure, depending on where you go and where you stay. you could see a return back to the $2 level in the more bearish scenario. >> some folks are wondering why the price of gas really hasn't been falling as much because of some of the refinery problems out there. the other factor i wanted to bring up is that mexico has hedged their crude oil out $49 a barrel or something suggesting that the price is going to stay very low. what does this tell you about the pain sol of these countries are feeling as a result of the

drop in crude oil? how are they hedging and dealing with it? a lot of country producers haven't edged much oil. mexico is one of the fewer exceptions out there. the price of oil that they would like to see in order to balance their physic their fiscal budgets, and in some countries, well over $100. >> i would think that would take a few years. what's the time frame for your forecast? you are going to have to adjust that down. >> the time frame is a tricky one. even until 2012, we have been calling for oil prices to get back down to a $70, $90 range.

it looks like it is targeting the lower end of that range. getting back is a tricky issue. in the second quarter, markets got excited about the fact that rebalancing was happening. demand was picking up. supply was going to pull back in three buckets. opec, maybe, shale for sure. nonopec and supply might see faster declines. it seems like this rebalancing process might be longer and more painful. >> i think it is going to be the fact that you can hit very

specific smaller local markets. hurricanes at least in the u.s. have tended to hit refineries more than actual fuel production of crude oil. that could mean for expensive. a spike in gasoline prices, in places. product places. >> eric lee, thanks for joining us on the declining crude oil. now, 41.14. eric lee is the commodities analyst with citigroup. >> stocks near the lows of the day, so far, down 213 points. we are tracking the selloff. we'll have a lot more after this break. ♪ no student's ever been the king of the campus on day one. but you're armed with a roomy new jansport backpack, a powerful new dell 2-in-1 laptop,

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a market check. the dow down 225 points at this hour. the s&p 500 is down $1.25. the losses are picking up.

the nasdaq getting hit the hardest. down almost 2 percent. 85 points. momentum picking up on the down side here selling pretty much across the board. we're going to continue to follow the market action. how the company is dealing with health and obesity. what it means for coke futures after the break? ♪ no student's ever been the king of the campus on day one. but you're armed with a roomy new jansport backpack, a powerful new dell 2-in-1 laptop, and durable new stellar notebooks, so you're walking the halls with varsity level swagger. that's what we call that new gear feeling. you left this on the bus... get it at the place with the experts

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in you stocks near highs. are they now in for oi dip. we have dominic chu. >> we talked about the idea of buy the dip. new 52-week lows that could be values. we wanted to ask viewers, tweeters and readers of cnbc.com, which stocks might have great momentum, setting record highs in 2015 but maybe are a little overexpended. with he put up facebook, jpmorgan, nike, home depot and netflix. we asked you to vote and tweet about which ones you think could be due for a bigger pullback if the market starts to take a turn. we have the winners based on your vote. jpmorgan out of this brackett. some a little more bearish on the jpmorgan shares. nike wins out over starbucks. maybe a high but nike some people say could be due for more

of a fall. chipotle wins out over underarmor and netflix comes out of the matchup with home depot. here are your final four. with he would love if you viewers would tweet in or go to cnbc.com and vote an tell us why you think some of these stocks are due for a deeper pullback than others. this is wa a photo finish neck and neck in terms of polling and voting. jpmorgan emerges as the resulting winner of that brackett. a very, very tight vote. on the other side, the most lopsided matchup so far was chipotle and underarmor by a landslide. you say that chipotle moves on. please tweet in. our next round of voting will happen and our final will be announced in power lunch and the winner announced in closing

bell. let's get across the room and go to sue herera for a news update. good morning. here is what's happening at this hour. former president, jimmy carter, making his first public comments since announcing he had cancer. speaking in atlanta, he says the cancer has spread to his brain and he will undergo his first radiation treatment today. president carter announcing he will dram matt techly cut back on his work at the carter center. a night of unrest after the police shot and killed an alleged drug suspect. dozens of people took to the street to protest the killing of an 18-year-old african-american who was shot when police say he pointed a gun at them. rocks and bricks were thrown. fires in the street. nine people were arrested. >> three forest service providers died after their vehicle crashed as they battled the blaze in northern central washington where raging wildfires were advancing on area towns. they fought a blaze near the

town of twisp. a blast in cairo tore the facade off the government building. glass and debris strewn in the street from the explosion site. that is your cnbc news update. let's get back to "squawk on the street." simon? >> thank you very much. let's send to the new york merc. >> an injection of 53 billion cubic feet. plats was looking at a range of 58 to 62. prices a little higher. we were about 271 before the report came out. we are now trading at 2.76. the things you need to watch, total stocks, as of last week, they were almost 3 trillion cubic feet, up 20% from last year. traders still feel we are in good shape.

the power demand is climbing. when i talk about demands, i'm talking about it across the country. averages, i do know it is particularly hot in certain places like texas and down south. other areas are a little less hot than they would be. if not, it is going to be considered normal that gas is down 6%. it tested at the $3 mark. really, couldn't break it. now, we are down to these lows of 278. >> thank you very much. watching wti crude under pressure. let's take a check of where we are on stocks. heavy selling with the dow down almost 250 points. s&p 500 down 1.3 points. the best among the hardest hit technology. >> global strategist at

jpmorgan. so many worries out there. gloom and doom when it comes to the markets. what do you think it is that has investors most scared today? it really has picked up, specially after the fed minutes yesterday. >> one of the main facilitating factors. specifically within that, weakness in china. i think what you've seen is a recognition on the part of markets that chinese policy is pushing against a door already closed. a 5% valuation of the yuan is leaving it at 35% more. this is the heyday of export expansion. second, recent credit statistics in china austenablely doing

well. a lot have been going to support the stock market. the extent to which policy has been able to be successful in stimulating the economy has been a little bit disappointing. >> big takeout this morning in the ft about how trade wars don't work as much as they used to in the good old days. why is that? >> well, i think what you've seen is that the dynamics that defined global trade in the 2000s were a bit of an exception. i had a massive proliferation of global supply chains. that linked up developing and emerging markets in a much tighter way than in the early '90s. that data has kind of fallen off. we are increasingly aware have o the fact that the trade dynamics in the 2000s were slightly exceptional. that said, within emerging

markets, those trade dynamics are still very much alive. most emerging markets manage their currencies with an eye towards what's going on in china. there you do see a cycle fairly well synchronized. ipso facto. >> as far as investors are concerned, it is what it is. now, i look to buy. the beginning of something new. for emerging markets, it is what it is. you are fairly substantially underweight. it is one you could see lasting at least through the end of the year. >> what's going overweight? what are you liking here? another question, are you fully

invested. development market equity there. there, the story is not as much as about emerging markets, it is about recession risk as we see somewhat of a low probability at this point. i think our main overweights are spread across developed markets. in japan, the u.s. and the euro area. >> how much longer does this pullback have to run given what's happening in china? if you think about the bull market, we haven't seen a correction since 2011. we have with stood a number of great crises up to the wire. what causes the correction in the equities.

it is the u.s. economy entering the recession. that business dynamic has been a consistent feature of the u.s. equity market. where we look is what is the probability of that happening. we view that as relatively low. another related idea is the factor the multi-asset perspective. where would you like to be? you can be in equities or bonds, the fundamental question we address. i think you would rather be in equities. >> we are not that optimistic on the prospects of taking a negative in cash when we view their probability of a recession is relatively low. >> people are buying bonds pretty heavily right now. the ten-year note yield is at 208. while it may not be attractive, it continues to get big. >> that's true. those dynamics are not driven as

much by what's going on in the u.s. economy. you have a lot of global factors. they are weighing on the long end of the yield curves, weak emerging markets and low commodity prices, the stronger doll are dollar. the 10-year and the 30-year will bounce back. what is the fair value of a long bond in the u.s.? it is not 2%. it is closer to 4%. >> stick with the u.s. stick with u.s. stocks. that's the message. brain mandel, thanks very much. >> the dow is down 2.3. >> the s&p trading about he low its 200 day average. we broke yesterday morning. now, negative for the year. much more on today's market when we come straight back. (vo) me? i don't just wait for a moment.

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crude still hovering around 6 1/2 year low. is the bearish energy market a buying opportunity for stocks? joining us on the phone, dug terreson. are the opportunities delicious enough yet? >> we think they are getting close. you are right. it is all about crude oil and with the global economy, the down side risk seems to outweigh the upside potential at this time. that's not great for any

commodity. these stocks are doing poorly. a lot of bad news reflected in these stocks. they start to become interesting when that happens. >> the question is whether or not this is just a normalle fluctuation in markets or it becomes a serious dissertation. we the him on and he was suggesting you could see oil with a three handle. presumably, the landscape changes as you bite further and further into the prices. change is what becomes a buy or not. >> well, first of all, you are right. let's not forget that this is not the first time that this industry has had a deep cyclical down turn and this deep sense of despair. at the same time, the care for lower prices is lower prices. i'm not sure it matters so much if it does go to 40 or 30. the reason why is that we are already sewing the seeowing the

recovery. we are starting to improve the market. i believe if brent stays close to these levels, it raises the likelihood that we have a "v," shaped recovery in 2016. it will occur much quicker and be more extreme. >> they say we are going to have a wave of consolidation as the companies become cheaper and cheaper. you have any takeover target, names you can draw? >> that's a natural outcome when the oil price declines. we had a major consolidation between 1992 and 2002, one of the last times this happened in earnest. we think the super majors with their sound balance sheets, 5%-7% yields will be on the hunt. this would be a great opportunity for them to pick up some attractive assets.

>> what do you mean by attractive assets if you can't give us names for say? >> what are they looking for in the smaller companies. >> the recipe for success is that companies make acquisitions that are large enough to matter. they are strategically significant, point one. point two, they have returns on capital. this group is for the last several years gotten a lot larger but they haven't created a lot of value. investors look for these companies to increase value and distribution. that typically comes with higher return on capital. >> disconnected from the discussion that you just had, what are your top picks. >> at this time, we prefer co i conocophillips. this is trading at a 6% dividend yield, which we think is safe and well-managed. we also like gas, which we think is one of the premier players in the market.

conocophillips and hess are the top ideas at this time. we also said the super majors with their 5%-7% dividend yields are becoming attractive. they mentioned they are at 30-year line support, our technical analyst. i think that will probably revise some interest in those names too. >> in a sense, it is automatic. as the price false, the percentage on the dividend rising. an automatic stabilizer for people to move in. >> like i said earlier, this is not the first time this industry has had a cyclical down turn. we are seeing dividend yields that we haven't seen in past down turns. the super majors are becoming more attractive. we are not recommending any of them just yet. >> thanks for spending the time. dug terreson joining us from evercore isi. they are defending their company, muhtar kent says, i am

disappointed that some actions we have taken to serve health and well-being programs have served only to create more confusion and ust. i know our company can do a better job engaging both the sub lick health and scientific communities and we will. he is referring to a recent article in "the new york times" funding self-searching research. the scientist at the heart of the report has pushed back, told me the article vastly oversimplifies the complex issue of obesity. promising to be more transparent in the research it funds around obesity. the company does have a lot more to lose around a pepsi. the business is much more concentrated in soft drinks. they have less revenues coming from chollas because of frito-lay and other juice and water brands. watch what they do instead of

what they say. coke is diversifying away from carbonated drinks. this he announced a new investment in a juice company in san diego and investment in monster beverage drinks and keurig green mountain. soda consumption has been declining in the u.s. for a deck okay. that's where the consumer is going, guys and also where both coke and pepsi is going regardless of this debate of obesity. >> my question is whether muhtar kent is saying, don't do this, because he can't control everything that goes on or whether they are concerned about class action lawsuits. this is written as something the defense attorney can bring up in a class action. >> i don't know about that. that's a stretch. i think reputationally he felt insulted by the criticism. >> he is not denying the accusation. >> he is not denying it. he is putting together a whole

task force to try to be more transparent about the scientific research. i know you love oreos, carl. remember this ad. >> gentlemen, oreo has rejected my bid to buy the dsrl. we liquid raise with double stuffed gold. >> that was back in 2009. it looks like now trump is no longer a fan of the oreo. the gop presidential candidate and leader of the party told reporters, i'm not eating oreos, anymore because of the report that oreomaker mondalez was moving production to mexico and urged his supporters to boycott the snack. >> i talked to mondelez. he said, we are committed to american manufacturing. to clarify, the chicago bakery is not closing. we will continue to have it as an important part of our manufacturing network, making a

variety of our nabisco biscuits and crackers. we continue to make investments in our business in the u.s. they also remind everyone that mondelez makes global snacks. oreo's america cookie is the world's cookie. trump asked if he even eight oreos in the first place, he said, quote, more than i should. he is a fan. mondelez didn't deny they have moved some of the factory jobs tho mexico but are still investing in the u.s. >> for oreos? >> $2.5 billion. the number one cookie in america. it has been a tremendous consumer packaged brand and continues to grow in the face of what has been declines of packaged goods. >> deeply in the reds and

slide slightly off the lows. more on the selloff when we come back. [ male announcer ] whether it takes 200,000 parts, ♪ 800,000 hours of supercomputing time, 3 million lines of code, 40,000 sets of eyes, or a million sleepless nights. whether it's building the world's most advanced satellite, the space station, or the next leap in unmanned systems. at boeing, one thing never changes. our passion to make it real. ♪

let's get over to the cme group in chicago. rick santelli with the santelli exchange. good morning. >> good morning sara and good

morning my guest chip dixon. before we get into issues of fed and the normalization. why don't you give me your take on what's been going on regarding china. not only the most recent news about the foreign exchange, maybe because they're trying to liberalize, timing is questionable. but the entire package of china. >> i think what's going on in china is they're having trouble making the transition they want to make. from an economy that benefitted from all the fixed investment that helped the global economy in the past decade to one that's more consumption-driven. they're not getting the same bang for the buck from the fixed investment. not getting the right kind of return. there's a lot of leverage that they're applying to it they need demand from somewhere else, i think that starts with lowering their currency, unfortunately. a lot of countries are trying that recipe. now when it comes to normalization of the fed. it's not a topic that has not gotten due amount of coverage on

cn cnbc, you've got a take that i like. you said normalization of monetary policy is going to require a shift in fiscal and regulatory policy in the united states. to get better economic growth. elaborate and you backed into my notion that the fed should have a nickname, the enablers, maybe congress didn't do what they were supposed to. but by the fed picking up the slack, think they put them in a situation where they could continue to do nothing. elaborate. >> i think what we have is an economy i call a low velocity economy. we're not growing that fast. there's not a lot of real demand. even if you look at nominal growth. it's not much more than 4%, that's weak historically. we're not, our participation rates are low. we're not creating enough opportunity. i think the politicians have to focus more on creating opportunities, think that's not a high priority for most. we're not creating opportunity. our regulatory environment is really an as you tear one and so is our fiscal policy. that's as much on the tax side

as it is on the expense side. we need to do things that focus on creating economic growth so we can create more jobs, more demand and get people a lot more opportunity. >> what you say makes sense, let's look at everything objectively. and take a step back. after a crisis, crazy things happen in over-compensation mode. after the crisis, boatloads of regulatory issues, i understand why. maybe a good idea would be to keep it simple. keep a threshold where many more mid-sized, mid-cap to smaller businesses right down to the family business can kind of circumvent some of these more onerous regulations. especially some of the regional banks, your thoughts? >> absolutely. this regulatory environment favors the large, not the smaller and mid-sized guys, and the smaller and mid sized guys is where you create most of your jobs. there needs to be a shift there. and the complexity and breadth of the regulations, it's another

source of darkness that makes it harder to operate. we need to do things that makes it easier to create more businesses to innovate and have smaller companies succeed. >> w are out of time. i hate to interrupt, but there's a lot of low-hanging fruit here whether anybody in congress admits it or not. thanks for taking the time this thursday. >> cutting our losses here at the new york stock exchange, let's send it turnover jon fortt for look at what's coming up on "squawk alley." >> we're going to continue to cover these markets. the nasdaq down about 1.5%. growth tech getting the worst of it. netflix down 5% among others. also down 5%, disney, on a downgrade. we'll tell you what's behind it. and a facebook co-founder speaking out about the controversy around amazon's culture, tech culture in general. you might be surprised what he had to say.

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♪ ♪ ♪ welcome to "squawk alley," joining us, henry blodgett, the founder, editor and ceo at "business insider," what a treat to have you. jon fortt, kayla tausche on another busy day for the markets, down 247 at the dow, currently down 192. for a minute we had the worst s&p since july 8th. it has essentially gone flat for the year. we were negative a few moments ago. selling across the board, all the major averages down 1%. bob pisani is at the desk. >> we're near the lows for the trading range we've been in for a while, the s&p. 2050 is what you