the same as the other. >> the question is can tim cook figure out how to either bend indian regulators to his will or get cheaper phones in some other way. >> john fortt, we appreciate it. we thank you. thank you for watching "power lunch." >> closing bell starts right now. welcome to the closing bell, everybody. i'm not paula abdul, although we may be hearing from her, in fact, in just a little while. i'm kelly evans of the new york stock exchange. >> i'm bill griffeth. that would be paula abdul's "cold hearted snake" that you're listening to. the pop star will join us live on set. very exciting. in fact, kelly and i plan to audition for the new season of "so you think you can dance." we do a mean tango. >> it feels like that. >> yes, it does. >> apple is getting a bump. apple getting a bump up 1.5%.

suppliers are preparing for big orders of the iphone 7. plus, tim cook is finishing up that big trip to india. we'll have details. >> catchy tune. meanwhile, bowing inking an $11 billion deal. with the arms embargo lifted we'll tell you what other defense stocks could be affected by this as the president continues his affect through vietnam. >> a big win for bank of america and the justice department. they'll no longer have to pay $1.3 million for a countrywide mortgage stamp. let's start with the gains for apple and its suppliers today. bertha coombs monitoring it. >> apple accounts for all of the gains that we've seen on the nasdaq 100 right now. tim cook continues his charm offensive in india, the rest of asia. analysts are getting a little less bullish. the iphone 7. that has chip stocks up. among them is universal display.

they make oled and goldman today is upgrading that stock from a buy to neutral sending those shares near a one-year high today. goldman thinks with some of its proprietary research that apple is going to be using more ole displays in its new phones and devices starting in 2017 and that is going to be a big boost in demand. they think that's going to be pretty good for universal display which happens to have the ticker oled. meantime, that technology upgrade for the iphone and the bullishness over that is carrying over into the chip space today. the sector is the best performing sending shares of a number of these suppliers like skyworks, kxp semiconductor moving higher on the nasdaq. >> i'm confused. maybe we can ask dom about this. wasn't it last week or two weeks

ago the suppliers were wringing their hands because they weren't getting the orders they thought they would get. now suddenly they have a full order here. >> perhaps it is because of that next consideration. it seems to be two different signals. >> bertha, thank you very much. apple ceo tim cook is wrapping up his visit to india speaking to nd tv over the weekend where he talked about the high prices on apple products in that country. listen. >> the challenge is the duties, the taxes and the compounding of those takes a price and it makes it very high. our profitability is less than india, markedly less. i recognize that the prices are high. we want to do things that lower that over time to the degree that we can. we're looking at a number of different things. what we wouldn't do is lower our

quality bar. >> donawn chimiluski joins us. dawn, where do you think the prices might be headed? >> in order for apple to be competitive in this market which for a moment is dominated by less expensive android phones, tim cook is right. he needs to drop the point. the iphone se which is the least expensive apple device sells for something like $500 in india. in india the per capita income is $1500. that price is far too expensive. what we understand is that apple has been looking -- has been trying to get the government to approve its plan to begin to sell refurbished devices in market perhaps with new components which would allow indian consumers to have an apple product that is of the high caliber that consumers expect of apple products but at a lower price point. >> clearly india given its population is a huge potential market for them, but we've already heard from tim cook, the

headwinds they face in all of that, the duties, the taxes, all of those things that make the phones more expensive over there. so it's not exactly low hanging fruit to go after india, but are they doing it, do you think, because of the slowdown in china right now? >> well, it seems to make sense, right? you look at the most recent quarterly report from apple and you see that china, which is the second largest market for apple, actually saw sales decline a little bit with this new generation of iphone, the iphone 6s plus. so apple is looking for a way to spark growth with its devices, so india, you know, a country with 1.2 billion people is the next logical place for them to look. >> right. >> india -- for apple, india had a 56% boost in sales year over year. that's significant. you can see why the market would be appealing to apple. >> can we ask you about the suppliers, dawn, and these projections for how much the iphone 7 might sell? is it just us or are we getting

dramatically different indications week to week here? >> you know, the market is -- the investors have been waiting for the maker bump that's going to happen with the 7. you know, how much can apple improve the device to really spur demand? we've seen over the last year what's happened. so apple had the major introduction of the iphone 6 and 6 plus and that caused sales to hit record levels. and then there was a lull as apple introduced its next year sort of the incremental upgrade. the sales have not been as remarkable. so the market is looking for some good news to react to. some sort of innovation. this is clearly one thing they're reacting to today, the component supplier news. >> at least for today. dawn, good to see you. thanks for joining us. >> thank you. >> that's dawn chimelewski. joining closing bell exchange, mark is back from us fromening, montgomery scott, john brady from r.j. ryan is

playing rick santelli and kenny paulcari. kenny, i'll start with you. we have just like the apple suppliers, one day there's tremendous volatility, then there's nothing going on. today you got a decided lack of volatility. what's the market waiting for, do you think? >> listen, it's all about the fed speak. yeah, you have pockets of individual names that are reacting to, you know, the good news, apple's one, mcdonald's another one. the broader market is happy sitting and waiting. there's been a lot of lot of fed speak between last week and this week, janet yellen and other commentary inbetween mixed with macro data. the market is happy to wait. are they moving in june, not moving in june. what's that going to mean. big asset managers are happy to sit and wait until they get a clearer picture. volume is down. that tells you people are sitting it out. there's nothing really that's creating any individual, broader market volatility so, therefore,

you have kind of a quiet day. >> mark, we don't usually highlight the richmond fed survey. it will come out tomorrow. already the new york and empire readings have been soft. is there a risk that the overall manufacturing index when it comes out at the beginning of next month slips below 50 into contraction? what does that mean for growth here? >> well, getting eastererily clo that, kelly. it showed a report of 50.1 which is nearly above the boom/bust line. the ism survey could be threatening a break below 50 again. that would be indicative of where we were earlier this year. strength of the dollar, export related tds manufacturing activity altogether means that the fed is going to have to ultimately back off once again its hawkish rhetoric if, in fact, it's leaning towards a

rate hike. >> what are you expecting mark? >> i would take the under. they're doing a good job of setting the market up for the probability to suggest that those months are live in terms of fed action. it seems to be that september is a higher activity. we haven't had evidence from the economic standpoint to suggest that it warrants them being that aggressive in moving so quickly when the market can anticipate it up until the release of the fed minutes a week ago and a couple of fed governors talking about forward rate hikes. >> john, after all of that, the fed minutes, we know the treasury yields are riding. people like mohamed olarian are feeling like it's the possibility of a june rate hike. do you agree? what are your expectations? >> 30%, bill. i think what the fed wanted to accomplish was keen alive the possibility of potential for

rate hikes. they don't like the market dictating what forward policy will be 3, 6 months forward. there are a lot of important geopolitical events, breks it, u.s. political election. the fed their first main goal was to put some term premia or risk premia into the bond market. now it's just about the data moving forward. >> john, what do you think on this news that bayer wants to take over monsanto? >> i think there are a couple of things in play there. i still think there's foreign interests in earning commodity and the pipeline. i think bayer is there and there's a foreign exchange component. perhaps there's an fx pickup. it's a global commodity trade and probably a demographic trade, kelly, with the idea that as global trade expands, the food pipeline doesn't expand in

line with population growth and the best way to play that is probably to own a company like monsanto. >> i'm just wondering, it is a politically loaded time for a german company, mark, maybe you can comment on this, to want to take over an american one to be known for genetically modified organisms, whether they're safe or not. do you think this deal is going to get done here? >> bearing in mind the stock is nowhere near the offer price right now. >> i think that's what's being reflected, absolutely, in the arbitrage. the delta between the offer price and where it's priced at suggest there's a gap in terms of market expectations relative to the ability to get this deal done, particularly at the price that bayer is currently offering. unless it becomes so egregiously valued that monsanto can't help but suggest they have to run into the arms of bayer, i would think the problems they mentioned with regard to anti-trust or concerns of gmos particularly as it plays across the euro will be enough to keep the deal thwarted.

>> we're talking about megatie-ups, what might be next here? you've seen a number of industries go through here. who might be next? >> this industry is notorious for being a copy cat industry. a deal gets struck in one particular industry, you have others swooping around looking for other opportunities. in this kind of ag chemicals space there's yarra, sagenta. deals in the potash business whether you're talking potash, mosa mosaic. some of these global giants might be looking at them if valuations look particularly attractive and the cost of capitol given low financing costs stays as attractive as right now. >> sitting at 2050 on the s&p or 2051. what numbers do you think the kpurters, the algorithms look at? >> it's got to look at 2041 which is what we saw created

last week, right? pierced 2041 which it had to do. now they'll see if they force it back down towards 2040. if they do, you have to be prepared for further down side. >> have to have volume to get the conviction. >> thank you very much. appreciate your thoughts on today's market action. >> thank you. little more than 45 minutes to go today. dow's holding on to a gain fluctuating between positive and negative territory today. the s&p is down a point. nasdaq is up four points. the battle for control of viacom. what a story. heating up now. ceo philipp dowman is in one corner, redstone finds themselves in the other. we have details on the latest court action next. up ahead, which defense stocks could get the biggest rise? a leading defense analyst weighs in, you're watching cnbc, first in business worldwide.

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media empire, cbs and viacom. redstone shocking his long-time friend friday removing him and george abe brams from redstone's trust which controls cbs and viacom's shares. then today doman and abrams sued to challenge their unexpected removal challenging redstone's mental capacity. they said he has dementia, impaired cognition and slowness of processing. redstone responded filing a petition asking the court to confirm the validity of his actions removing them as trustees. redstone's attorney noting that this is the first time dauman is raising questions about redstone's mental capacity after calling him engaged and attentive months ago. with viacom shares down about 40% over the past 12 months,

dauman's ceo job is at stake. if he wins this lawsuit, he can hold onto the ceo role. if he loses it, then sherry redstone's daughter could push him out. >> this goes back to the previous trial going on brought by manuel heurza calling into question redstone's mental capacity. the judge ended it after seeing the video. it didn't answer the question what mental state sumner redstone is in, did is it? >> that's right. the judge dismissed the suit. sumner redstone making it very clear with nasty names and expletives that he did not want him in his life anymore. the judge said he doesn't want her in his life and handling his medical affairs which is what heurzer wanted. we have seen the transcript of

the testimony. it did raise a lot of questions about redstone's ability to communicate. he had a hard time expressing himself even with the help of someone who's effectively a translator. i think that's what really precipitated all of this. >> cbs in the cross hairs here, too. >> absolutely. >> it's interesting. julia, thank you. >> but it's interesting -- >> go ahead. >> kelly, i would just say it's interesting that cbs has not been in as much of the crosshairs because it has performed so much better than viacom. viacom of all the media companies is the one that's really suffering. because its shares are down 40%, that's why we're talking about the questions about what's going to happen with the ceo role. >> exactly. >> thank you, julia. 40 minutes left in the trading session here. the dow up just eight points right now. coming up, bank of america scoring a major reversal on a $1.3 million financial crisis penalty. we'll have the details. up next, paula abdul is in

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welcome back. take a look at shares of staples today. they're up about 2.5% in this otherwise dull market. bank of america, merrill lynch upgrading the stock racing the price from $10 to $10.50. staples downsizes its footprint including in europe. staples has contacted a number of buyout firms. it follows the end of its planned buyout that was scuttled by regulators of office depot. let's check some other movers for this monday. monsanto rising. now here we call it bayer but over in germany they refer to the drug company as bayer. it wants to be a buyer. $122 a share. the deal is worth about $62 billion including assumed debt but monsanto stock, as you can see, nowhere near that price.

it's up 5% at 106 and change. tribune publishing is tumbling big time. it's rejecting a revised $15 a share takeover birth from gannett. l.a. billionaire patrick shunchong has invested $75 billion in tribune. that happened over the weekend and will join the company's bored as vice chair. gannett which owns "usa today" now says it's reviewing its options. she is a tv and inter net choreographer, dancer, grammy, emmy award winner. she has worked with janet jackson, tracy ullman. >> now mike pistello. >> she earned her first empy choreographing a piece about the stock exchange. >> paula abdul joins us. she's back with the new season of "so you think you can dance next generation."

>> 8 to 13. >> welcome to the new york stock exchan exchange. >> so happy to be here. >> you started your career in the stock pit. >> i started my career in the pit and i've come full circle and i'm back in the pit. >> how did that original routine come about? >> well, it was a sketch for the tracy ullman show and they wanted to do it about the stock market so i just would watch the news and that's how i created the number. >> wow. >> it was my first. >> all of the hand signals down. >> yeah. >> all of the movement there. >> yeah. >> doesn't look like that a lot anymore. >> kind of different now. >> the next generation, these are young kids that you're going to be judging, right? >> yes. quite different. >> pretty good. >> extraordinary. exceptional. you would think that they would have trouble with maybe a little bit of rejection, but they are more poised than most of the adults we've had in the past seasons. and phenomenal dancers. they do it all. >> do you have investments, market investments? do you trade stocks? do you have guys or people who

do that? >> i do. i do. >> do you talk to them a lot about it or just kind of -- >> no, i do talk to them. i do meet with them, with my brother-in-law. >> really? you tell him -- if someone comes on the show and he says, geez, these kids have iphones, we have to buy apple or is it far more -- >> it's amazing, the technology in the kids. it's a full-time deal and they study for their school and they take about 12 hours of dance a day and it's shocking how much brain power they use. >> we like to ask people when they come on the show what their biggest money mistake has been. the more successful, the more fun of a question. >> and we've all made them. >> i've had some major -- i should have invested -- i had the chance to become a major investor in starbucks. >> oh, really? >> would have, should have, could have? >> you didn't because? >> at the time it was brand spanking new. i met howard. >> who's going to buy coffee that much, right? >> especially when it stunts your growth, i hear.

but that and also i -- i -- i had -- was on tour and i introduced my tour promoter in singapore to the ice blended coffee drink in l.a. and i said, it's fantastic, and it was the coffee bean and tea leaf. they're not franchising. let me call the owner and see if we can get a meeting. they got a meeting. they ended up worldwide buying them and they forgot about paula abdul. >> they forgot about paula? >> yeah. >> next time you've got to get in on it. >> i like making the introductions. i don't think about that. my mother says -- >> all agents get 10% or 15 these days. variety television is still very hot. even with the demise of "american idol", you've still got other programs like what you're going to be doing here. >> "so you think you can dance". >> people love this, don't they? >> so much passion towards this little gem of a show because it really does reveal how hard it is and that these -- these

dancers are true athletes. >> you know, some of them become celebrities of their own just because they're on youtube. what do you make of that phenomenon? >> well, it's very exciting that youtube has been launching amazing careers that take flight. these kids are no exception to the rule. some of them have millions and millions of followers, but what i love about "so you think you can dance" is it's very difficult to make it as a professional dancer. these kids leave the show and they go on to be dancers for beyonce, jennifer lopez, you name it. >> right. >> a lot of them go on to become famous choreographers so it's awesome. >> sounds familiar. like a real career arc there? >> absolutely. >> paula, great to see you. good luck with the new season. >> thank you so much. >> monday night -- monday, memorial day on fox. i've heard of that network. >> yeah, fox. >> we can say that here. all right. time now for a cnbc news update

with sue herera. >> here's what's happening at this hour. iraqi forces bombarded if a luce yeah. iraqi troops turned to the city's center. south korea dismissing an offer by north korea to hold military talks citing the lack of commitment to denuclearization. a letter had been sent to the north in response to saturday's offer of talks. a crime ring has stolen almost $13 million in a lightning strike of atms across japan. the perpetrators used counterfeit credit cards to withdraw about $900 in more than 14,000 transactions. it all took place in a three-hour span on may 15th. and chewbacca electronic masks are now fetching up to

$500 on ebay after being sold out at several major toy chains after that happened, being featured last week in a viral video that has now garnered more than 136 million views. the mask retails for about 30 bucks. >> wait a minute. we've got to note this moment here. i knew something before kelly evans did. >> excellent. >> was this the one that everyone was passing around over the weekend? >> yes. this is the one. >> the most shared. the most shared over the weekend. >> huh? >> this is why i love the news update. >> got her attention. >> it actually scared daniel. it scared my 11-year-old son. he was like, turn it off, mom. turn it off. >> now the masks are going for 500 bucks. >> there you go. >> the power of -- thank you, sue. 30 minutes left in the trading session. we actually got hugs from paula abdul. >> that was amazing. >> we got hugs. the dow is up 11.5% right now. a leading trader will tell us

what he's watching into the close. coming up we'll see if we get a hug from him as well. plus, a $1.3 billion penalty against bank of america thrown out. we'll get you those details coming right up.

welcome back. shares of fiat chrysler under pressure. they used illegal software to cheat on emissions tests. the company says its vehicles are compliant with existing emissions rules. the shares are down 5%. 25 minutes left in the trading session with the dow up 17 points. we have steve grasso from stewart franklin. i don't know if i'm telling tales. steve auditioned for paula abdul. >> i did. it was for a different show. >> it was. >> fairly enough. it wasn't on this show. >> we can't mention that. >> that's right. >> so what are we waiting for? what's the market -- it is just kind of holding here. >> we all know the headlines. >> what's the next catalyst? >> everyone wants to read into it's about the fed, which it is, of course. it's about the oil, which it is.

it's about the dollar. and it's about brexit. i think the fed has a pretty inside track about the polling of brexit. >> right. >> i think they know whether brexit is going to happen. odds are it's not going to happen so it makes their job a little bit easier to deal with. saudis have been basically the fed of the crude market trying to thread that needle between production and supply and everything else. i think going into peak driving season you'd rather see oil if you're a bull above the $50 mark and we're into the seeing that. we're not really getting that overall bullishness behind oil for global growth. >> right. u.s. futures would love that. >> right. there is none. we've seen efficiencies come down. guys can make money at 25, $30. they don't necessarily need oil 65 or 85 so i think you're really looking at that $50 mark in oil. i know we're getting really specific and granular. as far as the market is concerned, look at the materials outperforming. you have bayer/monsanto.

>> right. >> there are places to make money even though we feel we're in a sideways based market. >> keep an eye on the flat year. that becomes the bullish/bearish sentiment indicator. recent low, 20/25 in the s&p cash. trade it. that's what you're here for, that's what i'm here, for, right? >> that's what you're here for. i'm here to throw back to kelly. bank of america scoring a 1.2 billion dollars court victory. diane no olick has more. diana? >> new york is throwing out a three-year ruling and its big fine saying there was not enough proof under federal fraud statutes to hold countrywide financial liable for mail and wire fraud. countrywide, of course, was taken over by bank of america in 2008. now this case dates back to mortgages made in 2007 and 2008, thousands of defective mortgages issued by countrywide financial.

the justice department had claimed fraud in the department's so-called hustle mortgage program which stood for high speed swim lane. they claim countrywide lied about the loans which had been sold to fannie mae and freddie mac. it won in 2013 and a $1.27 billion fine. the appeals court says while the loans were faulty, there was no proof that countrywide intended to defraud the government. it could, therefore, not be held liable -- it could be held liable for breach of contract but not for fraud. no comment from the u.s. attorney's office in manhattan today. bank of america though said in a statement that it was, quote, pleased with the appellate court's decision. this is just one case of many against countrywide and all the big banks for mortgage fraud during the financial crisis. those involved billions more dollars in settlements. kelly? >> diana, that's what makes this so potentially interesting. the language won't be the same. if they're saying they couldn't prove fraud, doesn't that get to the heart of what a lot of these

post crisis fines and charges were all about? >> right. >> well, perhaps fraud to the government is what it's saying but, remember, a lot of these settlements and a lot of the money really had to do with the mortgages themselves and those mortgages being fraudulent and misrepresented to investors. that has been proven over and over in other cases. so i don't think this speaks to all of the other cases but it wasn't one specific case and overturning of a very big ruling and a very big fine. >> i don't know, maybe it's symptomatic of today but i thought maybe b of a stock would move but it hasn't. down a fraction. >> not even conjecturing that it might be a broader sentiment turn. thanks, diana. >> see you later. 20 minutes to go here. dow is up 15. maybe add light to the dance, the choreography that lifted the animal spirits. >> aim higher. >> the divisions caused by the war in vietnam continue to recede. president obama lifted a ban on

the military. what it means to the industry and global affairs. meanwhile, donald trump is surging in the polls compared to democratic counterpart hillary clinton. and goldman sachs has published a note warning that increase being political uncertainty will lift equity market uncertainty itself. we'll get into what it all means coming up on closing bell.

boeing stocks slightly higher today after the aerospace giant closed that $11.3 billion deal with vietnam for 100 commercial jets. this comes on the same day that the 40-year embargo on arms sales was lifted by president obama in vietnam's capitol of hanoi. >> joining us now and what it means to the defense space is chris higgins. defense analyst at morningstar. chris, is this going to be a sudden boom to sales for the u.s. defense industry? >> yes. so the lifting of the embargo, look at it a lot of chatter beforehand. not a surprise they lifted the embargo. if you look at the defense industry, vietnam, it's not that big of a market. they account for about 3% of international arms sales. so a pretty small number. 93% of the sararms sales come f

russia. a shift. you saw that from india. they would order from russia. you see a shift over time. maybe vietnam would order u.s. equipment. we don't see a huge up side. >> you do see this as a big political maneuver for the u.s. as we try to garner more favor with the vietnamese advice a have i the chinese, right? >> geo politically, this is a big deal. vietnam is key in the south china sea for our security strategy in that area and they're really key in terms of other agreements. for example, the trans-pacific partnership. on the tpp they're one of the parties in southeast asia. only one of four countries that will potentially sign on so geopolitically it's a big deal. >> who in the space, chris, is specifically best positioned here? >> if you look at what vietnam is potentially going to order going forward, it's going to be a lot of maritime equipment we

think. so this goes right back to the south china sea, some of the security concerns there, territorial disputes. things like maritime surveillance aircraft. boeing produces those. drones potentially. so you have companies like no h northrup grummond. >> some manufacturers have viewed vietnam as a lower cost entity again compared to china. does the lifting of the embargo here, does that make that a bigger deal for the vietnamese economy right now, do you think? >> yeah. i don't really see that, mainly because this is -- lifting the embargo is only for lethal defense equipment. typically that's going to be manufactured domestically in the u.s. and a lot of the global supply chain around that is very controlled and regulated. so i don't see a whole lot of shift in terms of the manufacturing base moving into vietnam. >> i get, you know, as it

pertains to the military, but this is still just symptomatic of the continued thaw that has been going on for over a decade between the u.s. and vietnam, right? >> yeah. like i said, it wasn't a surprise. the embargo was lifted. everyone was talking about it before hand. could that extend to other areas? sure. the boeing order on commercial aircraft, they've been ordering commercial aircraft since the 1990s from the u.s. so that's not a huge surprise. the size of the deal is a pretty big deal. $11 billion. that's a big deal. the biggest ever in vietnam's history. that's indicative of commercial opportunities will flow out of this, i think. >> is there a sense of this spurring an arms race across the region, chris? >> we're looking at asian defense spending here at morningstar. we have a forecast of 4% in defense spending across the region. japan, south korea is concerned with china in the region, vietnam is concerned, india to

an extent, they're combined with pakistan. we see the defense budgets increasing in asia and continued flow of arms into the area. a lot of it having to do with the rise of china. this adds to it, yes, but only at the margins. it's something that's been going on for a while in the region. >> chris, thanks for joining us. >> thank you. >> chris higgins from morningstar. 13 minutes in the session. dow trying to hang on to a gain of 8 points. s&p flat lined. it's above the level up 2 points. the nasdaq is barely higher. >> up next, jpmorgan funds global market strategist. she'll tell us why she thinks the u.k.'s exit from the union may turn out to be a non-event for the markets coming up. ♪jake reese, "day to feel alive"♪

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tep minutes left in the trading session. the dow is up six points. art cashen told us before the break that the market on close orders show a bias to the sell side. it's $400 million to sell going into the close. we'll see if that has an impact. joining us on the floor of the new york stock exchange, jpmorgan funds. the impact the brexit could have, that vote is on june 23rd. >> yes. >> there is a feeling that the

fed's going to hold off until after they see that, but does anybody really believe -- i mean, the polls seem to suggest it's not going to happen. >> i think it's too close to call, right? because the reality is that who you're polling is actually going to turn out to vote, they could turn out to be two different things. for example, a lot of the people who are going to turn up to vote may be the conviction to actually leave the europe zone. that is not necessarily being captured in the polls right now. i think we shouldn't under estimate the brexit outcome. if you ask the fund managers, they certainly are not. as far as the fed goes, i think it will be a significant part of their consideration, but as you know, what they've been doing for the last couple of weeks is they've been at least prepping the market for the possibility that brexit notwithstanding we may still see a rate hike. >> i wonder how we're taking that, you know, idea. it seems that it's moving up rates on the shorter end of things. the 10, the 30 year moving up a little bit. >> right. >> are we confident that the growth and the inflation are

going to be there? >> you know where we are confident, that foreign investors will be there. what's happening is exactly what should be hatching in this environment. the short end is going up as a function of data and inflation. if you look at the long term, look no further than last week's treasury that showed that foreign investors are increasingly stepping up their purchases of the long duration treasuries because look at europe, look at japan. you cannot get yield there. not just in the government sector, you can't get yield in the corporate sector. >> for the u.s. financials, people came into the year making the case to buy the banks. now it seems like it's starting to turn. do you think now is a more opportune time to have exposure to the financials? >> yes. we're not just asking you because you work at one. >> right. exactly, no bias over here. i'm saying this is probably the time to look at financials, i would say banks specifically because it's been a year of big rotation. it's been a year of a first no fed rate hike, no dollar

strength, but we've started to see that unwind. there's one sector that that benefits more so than others, that is the banking sector. i would hone in especially on the banks within financials because financials, let's be honest, they have many other catalysts, right? >> what does that do to the beloved dividend play? everybody's been thwarting the dividend stocks for obvious reasons, whether it's defensive or just looking for some income somewhere. >> yeah. >> but if you like the financials expecting the fed to start raising rates, what happens to these guys? >> you have to differentiate. you might like the cyclical players versus the staples, the utilities and telecomes. they did exceedingly well because it's been a play on high quality and safety. as you move into the probability of the fed raising the rate, june, july, september. >> not a lot either, by the way. >> what's that? >> not expected to be too much

of a rate increase anyway, right? >> exactly. nevertheless, i think you want to start looking at things that give you some cyclicality to affect the rate increase. plus credit. one place to get yield is not just stocks but credit as well. >> anastasia, good to see you. >> thank you. we'll come back with the closing countdown, he said, in just a moment. >> yes. then after the bell we're going to talk about how it's not all coming up green in the pot business. some of the backlash and pitfalls. more on that after the closing bell. businesses need the agility to do one thing & another. only at&t has the network, people, and partners to help companies be... local & global. open & secure. because no one knows & like at&t.

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the party lingers on. paula abdul, i'll tell you what, she is like a rolling party making her way through the new york stock exchange today. had everybody dancing for a time there. the sell program that we saw that we talked about the market on close orders to the sell side has taken a toll here. the dow has dipped back into negative territory but, again, not a very volatile day. top to bottom roughly 70 points for the industrial average. what traders are watching very carefully is the s&p for the year which is still hovering just above the unchanged level for the year, which is at 2043. i have mary thompson here with me on the floor of the new york stock exchange. that's a number they're going to

keep an eye on very carefully. >> they will be watching that for the next couple of weeks. you know, i think what you want to see today, as you mentioned, it was a fairly narrow trading margin. >> yes, it was. >> this week is back end loaded i think. we have yellen speaking on friday. jobless claims later in the week. people will be focusing on that. today was a bit of a quiet session, but what we saw actually is some of the defensive stocks, those, of course, would be negatively impacted by the higher rates that we continue to anticipate possibly for june or july. >> like the utilities, for example? >> and the telecoms but the weaker sectors. >> the utilities especially at the close there -- >> yeah, they took a dip lower. >> that was a lot. the s&p telecom sector, suh he what it did if brian will move out of the way then i can see it. thank you very much. there you are. so down about 2/3 of a percent on the close today. >> that's right. so what we're looking at for tomorrow, we have a couple of earnings, autozone, best buy

report. also intuit and then hewlett-packard enterprises after the bell. those are some things that traders are watching. we'll also continue to watch oil. $48 level for contracts. traders said that was important. prevented any further loss. >> material stocks did well on this bayer offer for monsanto. but monsanto itself, we've been highlighting this all day, is nowhere near the offering price of $122. it's been hovering around $106 per share. somebody is skeptical that they can get this deal off. >> there are some anti-trust concerns and other concerns as to whether or not this will actually be allowed to go through so we'll see. but there was one other company in the space we should note which was also a winner, cf industry which called off a deal it had made in europe to acquire called osi. they said it was no longer worth it. >> thanks, mary. see you later. down 14, 15 points on the

dow and that puts us near the low on what was not a very volatile day. closing the bell at the new york stock exchange, we have members of the killer team and at the nasdaq team it's the teenage mutant ninja stuturtle stars. stay tuned for hour two of the "closing bell." kelly? >> thank you, bill. welcome to the "closing bell", everybody. i'm kelly evans. couldn't quite do it on the bell with the indexes. the dow looks like it's down about 3 -- man, look at this. dow giving up 3.8 points. s&p giving up 3.9. obviously a bigger impact on the broader impact. down at 2048. the stocks closing near the session low. as you can see there. a couple of interesting movers there, oil and some other commodities we'll get to in just a moment. also coming up, a new

development in the sea sweet fight in viacom. what it could mean for the stock which was up in 2%. first on today's paneling, mike s santoli with steve leaseman who played an alex trebek type role earlier today. >> i don't compare myself to alex trebek. >> for more of today's markets we're joined by david seaburg. welcome, everybody. mike, the volume was pretty light. what did we learn today? >> not an awful lot. i have a feeling that art cashen will say it is a waste of cab fair and clean shirt which is his line for ultra flat market. i think a lot of people were trying to metabolize all of this fed speak without getting to a conclusion. the treasury market didn't say there was much new and fresh that we had to seize on today. to me it's more about holding

above the low end of this range. we've been going sideways for a couple of months now. >> the people are talking more and more about the sideways markets, the side winders, steve, but what's interesting, too, is we'll get the gdp division. i saw deutsch this morning. profits will drop a third quarter in a row. that goes back to the underpinning here what everyone is trying to figure out, how strong are they. >> we've had a profit recession. it hasn't shown up in the macro gdp numbers. they have been weakened. i don't know, mike, if there's actual degrees of side waysness. the optimistic viewpoint is we're metabolizing this talk of a fed rate hike and not seeing it go down. i think i would feel better of that when the odds of june get up towards 50%. then we'll feel like it's digested. >> do you agree, david?

>> the reason is it feels like a lot of hedge funds are taking exposure down. the most shorted stocks outperformed. in the energy names, the most shorted energy are ill-related names that outperformed. it looks to me like a lot of exposure being taken down. you can look at the apple supply chain and say there was a tremendous amount of short coming there. where is the money gravitating to on the long side? i don't see a lot of long only stepping in to buy this level on the market. really across all sectors. so that does concern me quite a bit. >> right. another trader pointed out, what does it say about sent imt when the assets of the ultra short spx epx are up. since the lows, that's why we get these reversals. does that mean we have more to go or what? >> there's no doubt that people have been laying bets that the market is going to get a little bit scarier. it doesn't mean that that's automatically a contrary indicator. if you look at people buying futures on the vix and all of

these other instruments, you can say i think it's going to be a volatile summer. let me play that as opposed to playing the underlying instruments. there's a sense that we're bracing for something. maybe as david said, this very tantalizing, not much net movement in the market maybe has some bears saying this thing doesn't want to go down, we've lost an opportunity. >> my question for you is there a degree of normalcy out there in the sense that this market seems to be trading on economic data and earnings and that's a lot less scary in the sense that it's not chinese economic data anymore, it's not unknown financial systemic risk out of europe and when it comes to those two factors, u.s. economic data and u.s. corporate earnings, investors are out there willing to give both of those the benefit of the doubt. >> i do think there's something to be said for that, that, in fact, we should think that's a welcome change. i do think in terms of the trough in corporate earnings which everyone is hoping we've now reached, that's going to

take a while before that can materialize before we get real confidence that, in fact, you can place bets in that direction. look, the markets have gone nowhere since late 2014. corporate profits have gone nowhere. >> exactly. talk about -- >> makes sense to me. >> it reminds me of the jpmorgan line when the original asked him what he thought the markets were going to do. he said, they'll fluctuate. >> exactly. >> there's always a degree of that going on, david. the question clients are asking you, all right, so where are you making me some money? >> that's the problem. if you look at the options market, it's very cheap right now, kelly, to buy any up side calls. nobody expects this market to go higher. you look at the last expiration. we were talking about this in the morning meeting. people were rolling protection but weren't going out to rush it. no one is concerned that the market will fall out of bed. we're in this no man's zone right now. people are really apathetic in general about the market. i don't think there's any pockets of strength that you can point to that really are areas

where money has been gravitating except for some of the old really growthy names that people have a little sense of comfort around that are going to be there for a while, like the facebooks of the world, goiogle of the world. >> he talks about ted lock, super casting why he's going to a numbers driven forecasting instead of a month driven forecasting level. he continues to say, mike, he doesn't think investors or the market are pricing in how high the feds fund rate is going to go. >> he's gotten more cause to stick to that view. everyone is talking about the tightness of the labor market which i think we take as a premise but maybe a little bit less although the current fed speak has mentioned that inflation is moving in the direction of giving the fed cover for this. i sat there with byron wean -- >> who was also on barrons. >> he's going on tour at age 83

it seems. i had this long talk with him. we have a quote for what he thinks about the trajectory of inflation right now. >> i've studied inflation back to baba lonian times. it is a function of wages and house prices. and i don't think wages -- wages are going up but not alarmingly so. house prices are going up. again, not severely. so i think inflation is going to rise but stay tame and by that i mean 3% or less over the intermediate term. >> you can argue with a guy that's going back to babylonian times to study inflation? i think that's true. inflation going from very low to not as low is of relatively constructive backdrop. >> yes. his life lessons if you haven't checked it out over the weekend were fantastic. it was like travel as much as you can, what was it, sleep as much as you can. >> get plenty of sleen. >> can i make the joke that wien himself goes back to babylonian

times. >> somebody was supposed to make that joke, not me. >> no, you cannot. >> john williams today in a council of foreign relations panel discussion said two to three this year. we've heard him say that. he said three to four next year. >> right. >> now i asked mohamed alarian about that, he said that's too aggressive. if you do the math on the outside, use the 3, use the 4, that's 7 rate hikes. close to a 2% handle on the fed funds which is not crazy if byron's youthful forecast is right. >> cnbc.com/protalks. the impact that something like this would have on the banks. joining the conversation to talk more about the fed and financials, fred cannon. seven rate hikes between now and next year according to one of the fed members whampt would that do to the banks? >> that would be great on the short end but the long end, unless the bond yield goes up, you would have an inverted yield curve which is not a good thing for the banks. the move up in the short end is

a good thing for banks and bank stock. >> what about the issue of whether this actually comes to pass? you know, we've heard this time and again coming into the area, people were positioned for it. it didn't bear fruit at that point anyway. >> yeah, it sure is -- it's been a long way for higher rates. we did get one move and it came through in the banks. we saw net interest margins up two basis points. there was a bit of a relief on that. it shows that there's a positive impact from the short end rate moves. >> tom brown joins us as well from second curve -- sorry, never mind. tom brown is not joining us. in any case, david seaburg, what would you do with the banks and the financials here? >> i think we've seen a move here obviously with the change in perception of when they're going to raise or move, if it's going to be june or july. i think right now you take profits here. i think it's a sell. you look at the bkx. >> we a >>, we're hitting around a 200

day. unless the comments from janet yellen come through and indicate a move, i think they're a sell. you can play it from the long side into a potential moving june or july if you feel like you're starting to get your arms around that as we get closer. >> mike? >> you know, i'm going to ask fred, actually. obviously we can look at the direct impact of higher rates if we get them on various banks, one by one, but would this rate hike be coming, would this little bit of relief on the net interest line be coming at a time when other things are starting to turn the other way? in other words, credit maybe has already gotten as good as it's going to get and all the rest of it. what does that mean for the other reasons that you might want to own the banks or not? >> for a long time we've said there's no big profitability improvement in the banks from somewhat higher rates. that's because, as you said, the credit pressure is there. that said, right now we're seeing something else line up nicely for the banks, that is loan growth. loan growth started to re-accelerate after a pretty

dismal first quarter. if you get a rate height for select banks, that can be a positive. >> what do you think? >> one thing you can do if you're trying to think of where the economy is going, productivity is follow loan growth. some of it commercial industrial, some of it on the personal. some people hate debt. i dislike bad debt but i think the idea that people are out there borrowing, companies are out there borrowing, banks are out there giving those loans is a potentially good sign. look, i think this idea of a second quarter rebound, there is some evidence of it. there's scant evidence of it. any evidence is something when we talk about earlier this idea of confidence and where the market is growing confidence and earnings that tends to bolster confidence. >> fred, i see here you like wells fargo. svb, silicon valley bank? >> absolutely. the stocks trading 100 bucks or so today. for the last fed hike they were

at 130 bucks so you got a real bargain. >> yeah, although that would be one area. it's interesting. silicon valley, counter cyclical to the rest of the economy. if the fed is starting to raise rates, is that the time you would not want to be exposed to them? >> oh, no. it's all up side with rate hikes. the thing about silicon valley that people are worried about is tech cycle. . >> fred, can i ask you, if i'm a long-term investor and i look back on the bank stocks, am i going to hit myself for not investing in them because they were cheap? >> yeah, i think you'll look back on select banks, the survivors. there are a lot of banks still struggling. they might not be here in ten years. if you get the strong banks at this point in time, it's a good time to buy. >> fred, thanks for joining us. >> great to be on. >> dave, thank you. we'll let you go, sir. david seaburg. he's getting ready for "fast money." they're talking about

commodities with dennis gartman of the gartman letter. now the battle over sumner redstone's health at viacom rages on. bring you the latest details next. donald trump closing in on hillary clinton's lead on the latest nbc poll. what this means for the 2016 race and for the market. you're watching cnbc, first in business worldwide. introducing the 241 horsepower lexus is 200 turbo. with almost twenty percent more base horsepower. once driven, there's no going back.

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>> they're set to block. fbr capitol market who does cover viacom, man, i'm going to imagine trying to follow the twists and turns reading the redstone transcript. what does it mean for the direction of viacom? >> well, i think it puts the control of this company very much in a question mark situation, and i think that for viacom, a stock that trades at a 7 or 8 pe, like 50% below the peers, is a value kind of focused investor, you have to think is there some potential in this uncertainty around control

that could potentially end up unlocking the real asset value here, which i think is meaningful and not much recognized by the market. >> so the idea is really that basically the control is going to be taken away from redstone and the company possibly sold? >> yeah. >> is he aware of this possibility? do you think he would try to block that from happening? >> i think it's impossible to talk about an acquisition of viacom with sumner. i'm not sure you can have the discussion. more generally he seems clear that he doesn't want to sell. you know, maybe they shouldn't sell if they don't get the right bid, but you can't have that discussion. i think if he is no longer in control, which is essentially philipp's filing which is he is no longer capable of exercising control. if that's the case, you have different management. i think the possibility of the discussion about the control of viacom over time. >> what's the market for these assets in their current condition right now? you have viacom looking to sell

a minority stake in the paramount studio. >> right. >> what's the value of owning a minority stake in a big studio versus owning zero% of a studio? i can't get my head around that. >> it's interesting. you look at the dreamworks acquisition by viacom. i think there's real value put on iconic intellectual property. viacom has tons of that. their movie studio, "star trek", transformers. tv you have dora, nickelodeon. you have assets that i think people would like to have and i don't think that you really get a full sense of the value of them without this company, you know, having the potential. we're getting to a place where you have that potential. the question will be better answered near term. about the studio kind of question, that is very interesting right now because viacom said that they wanted to sell a minority stake by the end

of june. with this filing, you know, you've got to ask some questions, is that still on track. i think right now the foremost question is that sale price is still on track. i think if they do sell it, they're not going to accept anything that certainly looks cheaper than what dream works got. i think there's real market asset value that could come soon. >> hey, i don't know if i'm like other people looking at this saying how the heck did this happen? >> right. >> you could telegraph this from i don't know how many years away. this is america. this is the greatest capital market in the world. this is one of the biggest media companies in one of the -- in the greatest capital market in the world. >> right. >> my question is this. was this succession problem or this issue in the stock for a number of years such that viacom was less valued than it should have been because of this possibility or is this a surprise? and the corollary question to

that is, is there any effect on earnings and the ability of this company to make money from this such that perhaps there's a discount in the stock because of this craziness that's going on? >> look, i think, you know, in general when you have a control situation in an equity, that's, you know, something that weighs on valuation. you know, here you clearly had a -- >> and no one expected it, right? no one expected it. >> sumner redstone was not going to sell. >> right. >> so i think the markets had a hard time discounting when could that change, how could that change in the context of a lot of secular changes in tv. what investors have done is tloep the baby out with the bath water. they've forgotten about the asset value which is not reflected in the earnings. >> quick last question for you. sell to who? who buys it? >> in my view, if this is to be sold, it should be a breakup. i think there's pieces of viacom that could fit very well within a whole bunch of different parties. maybe kids with disney, time warner, maybe young adults with

time warner or fox, international with any number of properties. the studio could fit well within alliance, somebody else. i think there's a lot of players that could own parts of it and there could be a lot of value created for investors in viacom and the redstone family if they can't turn the business around themselves which is what i think they'd like to do. >> thank you for joining us. walking us through what's happening in viacom from fbr capitol markets. the latest polls show donald trump gaining on hillary clinton. what that means to the election and markets next. fitbit is under fire. they're claiming it's highly inaccurate. how it could impact the company's bottom line later. so your horoscope said buy the new iphone? oh yeah. it said, "this day will be fairly eventful." yeah, i mean there's no other way to interpret that. totally, right? at&t has a better reason to get a new iphone. switch to at&t and get up to

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democratic front-runner hillary clinton still beating donald trump in the latest nbc wall street journal poll. john harwood joins us with the latest numbers. hi, john. >> donald trump spent part of his day talking with his party's leading expert on international affairs, bob corker. corker said later this was not about the potential vice presidential selection in the trump campaign but a get to know you session. hillary clinton, meanwhile, was talking to a union audience in detroit. she went hard after trump on the economy. said he could turn america bankrupt. >> trump economics is a recipe for lower wages, fewer jobs, more debt. he could bankrupt america like

he's bankrupted his companies. i mean, ask yourself, how can anybody lose money running a casino? really. >> now here's why hillary clinton needs to be aggressive. you look at our nbc wall street journal poll, lead down to 46/43 from a lead of 11 in april. why did that happen? it happened because of these because donald trump has consolidated support among republicans drawing 86% support from republicans, it was 72% in may. that's better than hillary clinton's 83%. she is bogged down right now, kelly, by the fight with bernie sanders and it's getting more and more bitter. bernie sanders is going after the democratic chairman saying she favors hillary clinton and supporting her primary opponent. >> did you see peggy noonan's column, john, where she talks about combining the two on a ticket? that's hard to imagine. >> combining which two, clinton

and sanders? >> clinton and sanders. >> no, i don't see that happening. hillary clinton needs a younger running mate and i think as she looks to command the center in the fall campaign, bernie sanders is not going to be the prescription for her. >> want to mention this note, too, from goldman. today the politics is entering into every client discussion. they recommend stocks, john, with high u.s. sales, low volatility, and high dividends. you know, it's an interesting thing trying to assess out who's going to be safest in this environment where hillary or donald, one or the other, who's going to be sort of in the quiet middle to spur all of this. >> well, i don't know, kelly, how business is going to sort out that question, but i think if you simply look objectively and the fact that hillary clinton was married to a guy who was already president for eight years, she's been in public life for a long time, she's got a record as senator, as secretary of state, if uncertainty is the

thing that troubles you in business, you've got to think that hillary clinton is a safer bet than donald trump who people don't know what kind of a politician, don't know what kind of a leader he's going to be. he's also talked about things like potentially having a trade war with china. now some people discount what donald trump has said and said, well, he won't really do the things that he's saying in the campaign. >> yes. >> but if you want sure thing versus unknown, hillary clinton seems definitely to be more of the sure thing. >> the goldman note is a point in an environment of increasing certainty but protectionism, high tax rates. again, that's why, mike, they're talking about high u.s. sales, low volatility, high dividends. >> to me i think wall street strategists, they practice the art of the plausible. sometimes they say politics is the art of the possible. tip o'neill line. the reason i say that is because, yes, it makes all kinds of sense on paper. is the market going to in any precise way going to handicap the particular policy implications of one president or

the other before we get there? i have my doubts. if you expect summer volatility, go towards the stable stocks, sure. >> in part what people are doing already. >> before there's a big realignment something has to come along to tryout different things. i think donald trump is part of a realignment in american politics that has to happen. i'm not sure he's it, but my guess is business better get ready because the polls in the political sphere are re-orienting themselves in ways that are not easy to figure out. the coalitions are changing in ways that are different. and it's going to be different, but how, i'm not sure donald trump has figured out exactly how to crystallize it all but it's changing. >> john, we have to go. i've even heard people voting that jeb bush could run on the democratic ticket. >> yeah, well, that was the wrap against jeb bush, that he had drifted too far from the conservative movement, but of course donald trump is not an historic conservative. some people think he's not even

a conservative now. the one thing i'll say on the flip sides of what i said about hillary clinton and safety and certainty. donald trump is the change agent. if you want change, donald trump will bring it. >> john harwood there from washington. time for a cnbc news update. let's get to sue herera. >> hi, kelly. here's what's happening. new mexico becoming the first state to sue the federal government and the owners of two mines over the release of 3 million gallons of wastewater. its lawsuit says the environmental effects from that spill in august of 2015 were far worse than the epa complained. the veterans administration secretary said the wait time is not important but veteran satisfaction is. disney firing back saying it takes wait times very seriously. tom brady's lawyer asking a federal appeals court for a new hearing before an expanded panel

of judges. its a' not just a silly dispute over under inflated footballs but the basic right to a fair process that is shared by all union workers. finally, president obama had dinner in hanoi with celebrity chef anthony bourdain. bourdain tweeted out the meal costs 6 bucks and he picked up the check. that is the cnbc news update. this hour. back down to you. >> so generous of him. how much time does tom brady have left, sue. >> i don't know. >> the season is coming up. >> i don't know. i know they had promised that they would appeal. this morning his lawyer came out and said they were going to appeal it. now they have formally filed but in terms of how long it will take to be heard or what the steps are after that, i don't know. >> yeah. something certainly to follow. interesting stuff, sue. thank you so much. >> sure. >> shares of fitbit slightly lower on a new study showing the heart rate tracker is

inaccurate. stocks are falling 50%. could this do more permanent damage? that's when "closing bell" comes right back. man 1: you're new.

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they closed roughly flat. the dow was down 8. the s&p was down 4 points or .2 of a percent, 2048. the nasdaq was fractionally lower, too. a new study suggests some fitbit devices may be miscalculating heart rates. susan li has the story. >> yeah, 20 beats per minute. their tests involved fitbit's surge watches and their charge hr bands that have the pure pulse heart rate monitors. the participants were run through exercises and rest periods. what was found is that fitbit devices misrepresented heart rates by 20 beats per minute during intense workouts. this california study was commissioned by the lawsuit involved in suing fitbit in a class action lawsuit. fitbit was quick to point out. fitbit called the study biased,

baseless, and an attempt to extract a payout. the tests were fundamentally flawed because they were using a nonclinical device to compare the accuracy of the fitbit devices. this isn't the first time. vol state conducted an independent test in february that also showed fitbit's charge bands were off 14% when monitoring heart rates. how would a misreading of 14% a minute affect one's health? we spoke to a director at mount sin sinai's cardiology department, dr. stewart. he said athletes may be at a minimum improperly training. at worse elevating their heart rates to a level where a heart attack is possible. that's predicated on whether or not the studies are actually accurate. that's something fitbit is challenging. kelly, back to you. >> do we have any anecdotal

evidence of heartbeats -- do you wear device, steve? >> i'm not a fitbit device but i have the thing that tells me how much i walked. >> that's the thing people are more fixed on. >> you like this walking thing? >> personally, no. but i can see the value of it. >> what am i going to do with my heart rate thing? i'm not hip to that. >> i'm not sure it's unique to fitbit. when john fortt got his apple watch it routinely under counted his heart rate. if you would want that, you're exercising, trying to get a certain heart rate to train. >> i think john's ironman. he was lifting weights at 59 beats per minute. >> his heart couldn't be bothered. >> exactly. >> what about the stock? the interesting thing here is these aren't new devices, kick start, they're a cool thing. they're shareholder litigation. >> without a doubt it's an issue. what's interesting, too, was the patent side of things that fitbit was worried about.

they had the challenges on the basic technology. now they're saying maybe the product doesn't work. this stock has been left behind and has not been valued terribly as much. >> the larger one as you mentioned is anybody who's involved with tracking a heart rate, including an apple, including a host of other types of products, garmin. if there is something to this one, you wonder if that would open the door. >> what about the discovery where they ask them when they knew this, if they knew this, if they ever tested the product and what that discovery shows? that's where it could get messy. >> exactly. >> this is obviously not -- it's obviously not something where they're making claims that need to go through the fda, right? >> right. this is a truth in advertising type of thing? >> you'd think they tested it. >> they did test it. the question is what was the integrity of the test? >> somebody successfully sued red bull because it doesn't give you wings. so anything could han, steve, anything. the fed making it clear a

june rate hike is still on the table. >> this seems normal in that context. >> up next, why one leading economist thinks we won't see one until september. and legal marijuana in colorado may mean more tax dollars rolling in, but not everyone in the capitol city of denver is on board. that story is coming up. you're watching cnbc, first in business worldwide. and with her, a flood of potential patients. a deluge of digital records. x-rays, mris. all on account...of penelope. but with the help of at&t, and a network that scales up and down on-demand, this hospital can be ready. giving them the agility to be flexible & reliable. because no one knows & like at&t.

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raising rates is uncertain, he's sticking with the call for september 1. bill lee of north american economics at citigroup, head of that. welcome back, sir. >> thank you. >> why are you not concerned about the recent fed speak that june is when they'll go? >> the smoking gun that convinced them, the steps that said most participants think if growth were to pick up and labor markets continue to improve and we have inflation picking up, it would be appropriate to move in june. now that's a mouthful because that's no different than what they've been saying all along. if conditions are right, they'll move. they only put in june to say they're ready if things are okay. in october members believe it's appropriate to move at the next meeting and they put into the statement the way they did in october, we would have moved markets immediately and we would have priced it. right now markets are not convinced. they're only pricing at 30% probability. that's what's lacking. >> that brings up john williams' price.

he sees the potential for a whole trajectory of moving. >> what bill said, there's a debate among some of the fed observers out there if the fed made a mistake here. should that have been in the statement in that it was policy? >> thank you. exactly. >> bill, i think they made a mistake. i think you're underestimating, if i might, the chance of a rate hike because i think they did make policy. i will grant you it did not make the statement and, therefore, was a degree below, but they did say june. they discussed june. some guys wanted to do it in april. i think it's more -- here's the thing. i think the market made the mistake by basically canceling out any probability of a june rate hike. i don't think it's 100%. i think it's more like 50. perhaps we're on the other side of 50 where it's more likely than not if the data improves. you shouldn't cross it out but the fed might have made a mistake on that. >> that's exactly what the fed

was objecting to, that the markets crossed it out. dudley said the markets have priced things. where the market priced things is at 30 and 50% for june and july, 60%, over 50 when you get to september. that's why i'm sticking to september right now. the key is, what's chair yellen going to say? the people we haven't heard of are the doves that have been behind stalling. turrillos and the yellens. >> let's do the data dependence game. tell me what probability you put on a june rate hike if we print a 200 k number on jobs and the data comes in and really suggests a gdp number north of 2%? to me that's going to get you up above that 50% if this economy really does turn around. >> those numbers say we're on track and the things that would pull us off track would be what uncertainty is going to rouse the markets? because this fed is much more market dependent than they are data dependent. they are so concerned that markets get riled up that they

will not move if the volatilities in the markets are anywhere near where they were in september and january. now granted we're nowhere near that now, but what happens in the summer when geopolitical events occur? will the markets react? if nothing happens, you're right, we're on track. those are the risks and contingencies that i worry about to keep me in september. >> mike? >> bill, let's go to the next level there. if the fed floats this in the minutes as they have here and the markets are not perturbed because they don't believe it, the feds say, the markets are okay, we can go. that would be like a double switch. >> the blind leading the dumb or something. >> what you're going to have to see is chair yellen coming out and saying, at the next meeting we're pretty clear. when that happens you'll see the pricing pop up immediately. you'll see me changing immediately. >> what mike raises is a credibility issue actually, bill. do you think in some sense -- remember, there was a lot of fed speak before. all of a sudden last week with the minutes the markets decided to believe it or buy in. there are people including

yourself who still aren't sure they're going to do it because they might not be able to. so in a way is this sort of everybody calling the fed's bluff saying we're not so sure that you actually mean this. >> in fact, what i'm calling the fed on is are you really going to change your mind and go on one retail sales number? one preliminary sales number? that's why they made it so data dependent. they want to see the employment number, they want to see the next retail sales number. they want to make sure the consumers are not crapping out on them. >> bill, you suggested something very important, which is to follow the chair in an issue like this. yellen speaks on friday and i believe there's at least one more speech before the next meeting. those are the things where exclamation points, commas are o ellip ellip ellipses. >> the next one is not enough. she won't speak until the june meeting. why spoil it. >> she's going to speak. she's going to speak on friday. >> no, but she won't say anything about policy.

>> oh, yes she will. >> huh. >> i think she'll wait until the june speech where it's after the employment numbers. that's the smart time to say, okay, we're ready. we've got enough information, we're ready to go. >> bill, thanks for joining us. >> you're welcome. >> great stuff. bill li from citigroup. >> the grass is not always greener, at least in the pot business. how the now legal industry is dividing the rich neighborhoods and the poor ones with our jay wells when we come back.

denver's newest one, they're reaping the benefits that's creating a social proof.

jane joins us with more. >> colorado pot sales. >> many of the 200 plus growing facilities are there are in poorer neighborhoods. they complain about the smell from growing all of the cannabis. they call it the marijuana industry's war on the poor. they're limiting new rules about facilities with the highest concentrations on them. new facilities will have to be 1,000 feet away from residential areas, so a quarter mile. >> the odor control plans by next year. one more story to watch also, kelly. the broncos play at mile high.

permission. imagine going to watch football at the stadium where you would not be able to smoke cannabis. >> what's happening -- >> mile high high stadium. come on. >> you don't even need to add the high. >> somebody must be joking about this. >> the socioeconomic divide you're talking about, you referred to the smell and some of those issues. what's happening as this industry sort of deepens? >> the stores are usually, not always, but in the nicest parts of town, if you go to aspen, there is a recreational pot store there, which will, you know, blow your mind, so to speak, and is really, really, really high end. but the stuff is being grown

generally in other facilities, in poorer neighborhoods, more warehouse districts. it's turned out you can drive on i-70 and smell it if you're in that area. imagine living there 24/7. they're not going to get rid of the existing facilities, but they're limiting the growth and placement of new ones. there was a huge debate in the city council whether the new rules were too strict or not strict enough. >> it's fascinating. >> the whole state is a laboratory for the rest of the country. if they're even considering this state by state. >> in california, they're voting on this in november. we've seen it in colorado, washington, which rolled it out much more slowly, and then probably california next. this is the 800-pound pot gorilla coming here in november. >> i want to see how high the bids are for the naming rights. jane, thanks for joining us. >> you bet. >> our jane wells. the best and the brightest among teenage econ geeks. this year's economics challenge

was held today. and our own econ geek steve liesman moderated the competition. we'll see if he found the next janet yellen or ben bernanke, when we come back. no. it's all about understanding patterns. like the mail guy at 3:12pm every day or jerry getting dumped every third tuesday. jerry: every third tuesday. we have pattern recognition technology on any chart plus over 300 customizable studies to help you anticipate potential price movement. there's no way to predict that. td ameritrade.

welcome back.

kate? >> we've been talking a lot about hedge fund underperformance and that it may have an effect on the charges to investors. tuder investments cutting their fees in a couple of ways. they're lowering their expense fee, we're told by a source, to 2.25%, of their assets under management that they put toward expenses from what originally was 2.75%. also, their performance fee, their cut of any upside they make on their investments, goes to 25% from an original 27%. now, this comes at a time when tuder is down about 2.6% in terms of its performance through may 13th of this year. their flagship fund, they've also had redemptions so far this year. started at $13 billion for the entire company. now they're at about $11.6 billion. that's, again, according to someone familiar with the matter. now, it's interesting evidence, kelly, because we've been talking about this in recent weeks, the potential washout in

hedge funds according to manager dan lowe, and the pressure investors will put on funds that aren't generating returns. >> kate, thank you. our own steve liesman moderated the national economic challenge earlier today. >> it's extraordinary how smart these kids are and how much they know about economics. they blow me away. and it's a huge contest. 10,000 kids compete from all around the country. we winnow it down to four teams. i want to see how good you guys are. let's go to one of the questions here that i got a chance to ask today at the contest. in the short run the phillips curve shows the short-run tradeoff between two economic variables, and what is the shape of the long run phillips curve? >> kelly? >> inflation and unemployment.

>> what about the shape of the long-run phillips card? >> mike? >> important for monetary policy. or the debate over monetary policy. >> it's a curve. >> no, it's vertical. there's no relationship between inflation and unemployment. that's one of the things that you can adjust on the short end, but the theory, the thinking is over the long run, the relationship breaks down. let's go to the next question. pretty good. you get a point on that. let's go to the next question here. this is a good one. >> an author receives a flat 10% royalty on the total revenue from her book. if the book distributor is a monopolyist, what would they sell the book at -- >> i don't understand the question. >> you don't have to. because the kids did. i want to roll the kids. sometimes i would be doing it, asking the question, and they would buzz it in the middle. and they would even know what the -- >> wait, wait.

does mike have any thoughts here? >> no. >> an author gets a flat 10% royalty on the total revenue from her book. if the book distributor is a monopolyist, what would they offer to sell the book if marginal revenue equals the marginal cost of $4. marginal revenue is the extra dollar that you get for another unit. if you're a mono pliist, what is the revenue of another book. let's hear the kids. i'll explain it in a second. i kind of get this. i think the kids get it better than i do. >> marginal revenue equals year end. >> correct. >> you see who that was, by the way. they came out, they volunteered their time. we got all these people who are sponsoring this event. the reason i think it's if you're a mono pliist, you can't get revenue from the other sales. zero.

>> zero? >> zero. >> if i watched that a couple of times in slow motion -- >> it's been 25 years since i took an economics class. >> apparently it's a huge -- what's great is these kids get this early education in thinking about things like opportunity costs. if they don't go into economics, which a lot of them won't, they'll be able to think about, do i buy this car or this car, take this vacation or that, this job or that. they start to think about things in an economic way. >> andy kessler had an op-ed in the journal today, pushing people to understand their own life economics a little better. do you want to leave us with any econ tidbits as we look at the rest of the week? we talked about the debate. >> what i want to say is, follow our rapid update. we're updating gdp constantly, and this data comes in, 2.5% now. i think we drop below the 2% figure, doubts will rise about a rate hike in june. if we're above it, potentially with a strong jobs report, i

think we're data dependent here. >> who's counting? >> that does it for "closing bell." thank you guys so much. that does it for "closing bell." i just think i said that twice. "fast money" begins right now. "fast money" does start right now. i'm melissa lee, our traders are pete, david, karen, and guy. tonight on fast, worried about the fed in june? don't be. a top technician says even if the fed does raise in june, that's not the month to be worried about. he'll be here to explain. plus, oil hit 60 bucks a barrel. commodities, laying out two scenarios that could send crude skyrocketing. and hulu is worth $25 billion. where does that value netflix and hbo? we've got a back of the envelope calculation that you will not want to miss. we start off with a rise