has been has been widely negative recently so i think the fed that the timing of what the fed is doing is a little bit strange if you look at some of the variables that they're supposed to be watching like economic growth but i think it's long overdue i think they waited far too long to do what they're doing but i certainly agree with stopping q.e. at this point i think the fed's recognizing by what they're saying that the. potential for further q.e. is is zero essentially that they've run out of benefits but they're worried about the risks so they're unwinding the policy. jim yellen i did say that quote i read another quote you given the economic situation that i just described we judge that a high degree of monetary policy accommodations remains appropriate so despite ending q we low rates will remain in place for some time to come so are you concerned that this will have negative unintended consequences well yeah i mean i think that's the fed's trying to walk a fine line there is trying to say ok we're done with q.e. but what they're worried about is the market overreacting to that

the fed cannot do that. -- the fed did not do that.arninge pretty dovish, people about not getting too confident in the economy and taking risks. >> but they are not doing anything about it. >> they were a little bit positioned for weakness in the equity market, which would've resulted in a more hawkish statement. >> also if you look at the context of the past few -- 2 days specifically. pretty negative, the most negative we have seen in quite some time. >> middle of the new correction, the bull market might be over -- ity just goes to show that might offend people positioning ahead of the fed and they would come in with an adjustment to the rate hike trajectory. now we are back up and it is as if nothing ever happened. i heard from one strategist that it might be suggestive of a deeper bull market -- >> just because we are up today doesn't mean it is off the table. the correction doesn't necessarily go straight down the way a bull market doesn't go straight up. >> very true, but they are willing to dump equities and see the sorts of l

inflation and the fed, and it's not the fed's focus right now.ve low inflation, but when these things turn, they turn like stampeding horses. thanks to all of you, michael cox, former dallas fed chief economist, all our traders and peter barnes down in washington d.c. thank you so much. >>> well, the dow is still not positive, the s&p trying to make a go of it, can't quite do it right now. but the closing bell is about 45 minutes away. we've got much more on today's federal reserve announcement including when we can expect an interest rate hike. we're going to get the guesses from the money men and the man who is described as really having that direct line to the central reserve because he understands them the most. the "wall street journal"'s jon hilsenrath. >>> and if you thought twitter was going the way of the dodo bird, look again. the little bluebird flying high today but still not reaching anywhere near the high that its stock had hit since its ipo. robert peck is the expert analyst who was the very first to put a price target on twitter e

the fed is behind the curve.he labor share in the economy is still way below where it should be in order for us to generate gdp growth of greater than 2%. the reason they are still in the business of buying bonds -- they are not tapering them. the economy really has not 2.25% out of the doldrums. u.s. economy must be on solid footing, she said. how would you define solid footing? footing is broad based across the range of categories we usually see -- verbal goods, nondurable goods and this is. toht now, from one quarter the next, you see some strengths and nondurable's, some strengths and services. that durables are still dead in the water. you can see that in the pce. imports.ee it in another key aspect of the economy that continues to be extremely weak is capital spending, non-structure capital spending. business continues to sit on the sideline. you see that in terms of not too much wage inflation. you see that in more robust hiring, but not across the board. and fundamentally very little in terms of cap x. un

fed damned if they do or don't. fed criticized for missing the signs of previous buns. now damning them for calling out potentially bubbles. is that fair to say, gemma? >> who's right and wrong? actually about how long they are. heard about the rick of conviction and con sen is, but the one thing we're not hearing about, alluded to on the debt side, about the level of correlation in portfolios now. janet yellen is worried about specifically high yield debt and actually how there's a risk whether you're looking at equities, bonds, commodities, there is this risk of a rate rise and, therefore, portfolios aren't as diversified as you think. putting on the same bets, and the concern there is if something kicks often, where do you find protection? we think equities are in a sweet spot. how do you protect that? >> josh, you're right, steve, when you say, josh, she didn't explicitly say sell stocks but in a fed-speak sort of way, maybe she did? >> wall street guys get -- >> somebody from outside of our small little bubble happens to mention the stock market or think they have

and the staff of the new york fed described the fed's role there as treasury's agent and described the treasury department as the fed's client. is this characterization just a yes or no, is that a good characterization of your relationship? >> the federal reserve is the fiscal agent of the government? and in that sense, that's correct. >> time of the gentleman has expired. the chair recognizes the gentleman from georgia, mr. scott. >> thank you, mr. chairman. i'm over here in the yellen. i would like to just take us briefly in another direction because we don't operate in a vacuum in the united states. and to what extent are the developments in various parts of the world taking place now in ukraine, you got the situation in iraq, possible caliphate there, the israeli-palestinian situation, syria. i mean, the world is aflame. and i'm wondering what extent this would have on our global economic growth and especially united states economic outlook. but something that's going a little bit unnoticed is another situation, and that situation is iran. and by sunday is the deadline, and the dec

will the fed start changing the interest rate on excess reserves held at the fed during this time? >> when we decide to raise our target for short-term interest rates, a key tool will be to raise the interest rate we pay on excess reserves. so we would only raise the interest rate on excess reserves when we have determined that the time has come to begin raising short-term interest rates more generally that will be a key tool that we will use. >> last week, a federal reserve vice chairman stanley fisher gave a speech in which he suggested that adding a financial stability mandate to the overall mandates of all the u.s. financial regulators could help improve financial stability. can you comment on the effect that adding an explicit financial -- i guess i'll get that in writing, my response. my time has expired. thank you. >> time of the gentlelady has expires. we recognize mr. backus, the chairman emeritus of our committee. >> cherry allen, let me begin by saying this will be my final federal monetary policy hearing that i'll participate in as a member of congress since i'm retirin

a repeat like the second koucou prompt the fed. otherwise, look for the fed to not raise rates until mid 2015 if we stay on the current course. for "nightly business report", i'm steve liesman. >> here with perspective on what the fed said and what it may do and when is alan blinder. he's former vice chair of the federal reserve. before we get to the fed, i would like to get your reaction to the gdp report, a 4% growth rate in the second quarter. do you think that is sustainable, one, and was it, two, really boosted by a sort of snap back factor from the very weak first quarter? >> i don't think it is sustainable. i don't want to sound and you just mentioned tyler and the you look into the details and accounting for most of the forecasters errors, by the way, was inventory accumulation and firms don't just keep on piling in and piling in. >> so what type of growth are you looking for in the near term, professor? the 4% is not sustainable, what would be sustainable and what would indicate to you that the economy is on a steady growt

peter a lot of people look at fed ex u.p.s. and wal-mart is almost proxies for economic activity in the u.s. so which companies in the u.s. stock market do you look at as proxies for overall economic activity especially in terms of forward guidance well i don't look at any one company but the ones that you mentioned in particular had disappointing earnings and a number of other companies that have reported in the last couple of weeks that cater to the middle class consumers they're reporting weaker than expected numbers we also have had weaker numbers in the homebuilders and in fact if you look at a lot of the housing data that's been coming out over the past several weeks and several months it has generally been disappointing numbers and so i think the housing recovery is already over and the market is already reversing and remember the fed is basically is optimistic forecasts on the housing market continuing to grow because the the only recovery is built on a foundation of asset bubbles and stocks that allstate and the result

but neither does the fed.he time, resources and effort policymaker have put forth to make sure we don't experience another financial crisis from dodd-frank, to recapitaling the banks, to other measures, does it make any sense to double down on a monetary policy, which many of us believe was the pry marry imp 'tis leading up to the financial crisis. yes, we strongly agree there were bad actors and regulators that failed in their job to rein them in, but given the complexity of our financial system, if policy strongly encourages investors to move out the risk curve, as it did then, and even more so does now, market participants invariably find a way around existing regulations, and stay one step ahead of regulators. failing to take into account the lessons of history leads to a bad risk return. i played a living analyzing the future, not the present or the past. and while i don't have a criystl ball, it's high in my mind the fed's monetary experiment will be more disruptive down the road than the fed currently a

an objective data-driven rule, the fed would be required to disclose the rule, and the fed would be allowed to deviate from the rule, but it would have to come to congress and explain when and why it was doing so? what are your thoughts on an arrangement of that nature? >> well, no central bank in the world follows mechanical mathematical rule. i think it would be a terrible mistake to ask the federal reserve to specify a mathematical rule. >> we've got central banks that peg their currency. that is a well-defined rule. >> well a currency board. >> or having a gold standard is a well defined rule. >> okay. if that's what you mean by a rule of gold standard, currency board, yes, that has happened. but given the goals that congress has assigned to us with respect to inflation and employment, i'm not aware of any, for example, inflation targeting country of which there are many that has a mathematical rule. nevertheless, it makes perfect sense to behave in a relatively systemic way. in looking, when you have objectives, asking the question, how far are you from achieving those objectives, and

your reaction to the fed minutes

ahead of the fed minutes.g attention. >> people are paying attention for sure. i find it very difficult to know what the surprise would be. fully -- to a full extent what the other fed numbers are. it is likely we will not see much of a surprise. people are actively watching this. russellave play on the 2000, the ishares russell 2000 etf. iwm is your take her. >> -- ticker. >> one thing that is reasonably high is the skew. lower denominated strikes, 80%, 90% strike options are actually quite high. >> with a strike price being lower than it is now. >> moving down. if you want to buy protection down five percent you by 95% strike. further,nt to buy even volatility is higher. the premium you will pay is lower. what is that i have is called a foot three. you are buying a closer. [indiscernible] i want to catch two fomc meetings. at least there will be some bid to those options. 2014 options the and sell two options against them. i want to sell the 107 strike put. i am buying one option and selling two options. it

members to feel this way about the fed quest mark -- fed?e a good reason for them to want more predictability? >> i think it is a bit of grandstanding. >> this is not the first time. >> the fed is not really understood the general public, how they operate. it is just some big behemoth. people think that the way things were before was better than the way they are now are the way they are going to be. a bigdea that having balance sheet makes the fed too important. >> to the not remember what it was like under alan greenspan >> no, they don't. have aairness, we do not smaller balance sheet. >> interest rates have been zero for almost seven years. no interest rate has ever been at the same level for that long. before that, they were raising rates 25 basis points a meeting. has been aity hallmark of the fed throughout the last couple of years. >> stay with us. we need to pay the bills and go to a commercial break. stay with us. ♪ >> this is "market makers." of janetyou day two yellen's testimony before congress. as an input -- during the time per

marc is blaming the fed. we'll join us ahead. >>> also new york senator chuck schumer defending the u.s. import/export bank. it's scheduled to expire at the end of september. provides financing and credit insurance to u.s. and foreign firms in an effort to stimulate american exports. find out why schumer is teaming up with big business in battling republicans in this unlikely fight. >>> and check out the new ferraris parked just outside the new york stock exchange today. which one do you want? >> that's how you got here. >> that's how i got here quickly today. >>> and uncertainty over the economic recovery hangs over wall street. ferrari's interim ceo will tell us how his business is doing. stay tuned. you'll watch kelly drive one of those babies down wall street coming up. about speeds and feeds. it's all about latency. it's all about how fast does it run. i often sit with enterprises who ask me about how mission critical and how's the performance of the cloud. and i tell them, if you can make gamers happy,

they have to get from the fed.the fed is tightening they are taking money out of the banking system. so the banks fail and when the banks fail not only are the shareholders going to lose their money, not only are the bondholders going to lose their money but depositors will lose their money. so if we had an increase in interest rates, the banks would fail, the government would default on its debt. the whole economy would implode. that's why it isn't going to happen. that's why the federal reserve can talk all they want about raising interest rates in some unknown point in the future but they are never going to do it. i said this from the beginning. when the fed first did he read the first time they did and they said it was temporary. i said no it's not. they will do it again a sentence that ends. i said they will do it again and they did do it again. they had qe2. there are going to be more cute he's and rocky movies. it's never going to end. it just can't work. whenever the federal reserve does quantitative easing

housing has been perplexing to the fed. last year's taper tantrum in the rise in rates and the rise in moreng was him much important and shows the fragility in the economy. >> in the bond market, i think there's a lot of distressed about the economic data, frankly. people say the less marquee data points, the more anecdotal data points, more growth than maybe some of the benchmark measures people are looking at, so they are saying the fed is getting perhaps behind the curve, and they are getting concerned about it, especially because if the bears are getting squeezed out , any unexpectedly positive data could really cause a shock or any premature kind of hiking could cause a shock to the bond market right now. numbers surprised a lot of people today. what will that do in terms of the debate on when to raise interest rates? >> you've got to imagine it certainly brought the debate to the four over the last couple of days. there already was discussion about win is the appropriate time. when -- when is the appropriate time. the

the quadrupling of the size of the fed's balance sheet that has occurred as a result of the fed's qe purchases of treasury and mortgage-backed securities is worrysome. these qe assets will remain on the fed's balance sheet for a very long time and the reserves used to purchase them will remain in the financial system. the process of normalizing monetary policy will be difficult, particularly in light of the fact that our economy has failed to strengthen in the way that was promised by the supporters of this unconventional monetary stimulus. recent federal open market committee minutes indicate that in the coming years, any miscommunication about monetary policy during this normalization period could create risks to the economic outlook. continued clear communication will be important, particularly as the fed is seeking to rely on new tools that are unfamiliar to the market. for example, fed officials have indicated that overnight reverse purchase agreements, also known as repos, will likely play a large part in setting monetary policy during normalization. while the federal funds rat

the fed's got a pretty lofty forecast.hem expecting to raise rates in mid-2015 is predicated on hitting growth forecasts that are beyond 3%. and so, they've got to hit those pretty lofty growth forecasts in order to do what they've promised, raise rates in mid-2015. we just don't think they're going to get there. >> rick, do you think investors should be short or long bonds? >> so, we think rates are going to drift higher from today's levels and you'll have a significant flattening of the curve. we think the belly of the curve will head up and the back end will hang long. you're getting paid for taking long in interest rate rios. if you said where will we be in six months? we think rates are going to drift higher. >> drift higher, but are you won over perhaps to the view that they're lower generally speaking for much, much longer than anybody would have thought? >> oh, there's no question in my mind, we're going to be in a low-rate environment for some time, even though i think the fed is going to move. when they move, the

the fed has the following trade off, willing the fed says to underwrite future financial instability as long as we get economic lift off. if that economic lift off doesn't happen, then not only do we have a sggish economy, we have a high risk of financial instability. instead of the fundamentals validating prices, the price would have to come down and that's one of the big risks. the other risk is they over do it and we get inflation in the system, rate inflation in the system. that's why it's a delicate balance. >> mohammed, one thing that popped out is this quote that the fed said investors are not factoring in sufficient uncertainty about the path of the economy. what is your interpretation of what that means and what's the problem with that? >> so they are worried the markets are too complacent. they look how low volatility is and look at certain bubblish markets and are worried they are too complacent. they know why. mrs. yellen told us last week, which is very low interest rates encourages excessive risk taking. they are worried that hoping they can signal the market, nudge the

inflation was up and if you put that into context inflation is moving up the fed today holding rates steady doesn't that mean that real interest rates interest rates often flayed dropping so we have this hawkish federal reserve because everything is looking so great yet interest rates actually formally and so to me that suggest maybe not everything is so great and when we finally going to raise rates i think we're still going to be in negative territory meaning after inflation that means financial repression in the u.s. is going to continue if a long time the key difference is that here we have made to believe that we have a strong recovery but i think that's not exactly the case now absolute both core and headline inflation have ticked up a bit lately and they were both up two point one percent in june which is above the fed's inflation target so what's going on here. what's going on is that inflation creeping into the system we have this very bifurcated recovery i think is everybody knows that one thing that the fed and janet yellen to take a look at is wage inflation and as a wage

but now in just a second, let's go to peter barnes at the fed. >> the fed continues to taper as expected. the fed continues to taper, cutting its bond purchases by another $10 billion a month. its policy statement is almost identical to its last statement in june, though its language on inflation acknowledges that the fed is getting closer to its 2% inflation target. here's the economic analysis. quote, information received since the federal open market committee met in june indicates that growth in economic activity rebounded in the second quarter. labor market conditions improved with the unemployment rate declining further, however, a range of labor market indicators suggests that there remains significant underutilization of labor resources. household spending appears to be rising moderately and business fixed investment is advancing. while the recovery in the housing sector remains slow, fiscal policy is restraining economic growth although the extent of restraint is diminishing. inflation has moved somewhat closer to the committee's longer-run objective. longer term inflation expec

which is fed.t the fomc minutes on wednesday and get a couple of jobs numbers in order and maybe we're truly in a recovery. cheryl: large checkbook to your point. >> very large. cheryl: thank you. adam: major stock indices hitting record highs this month, is it possible the all the action come and gone we're in for a long and sleepy summer? our next guest says we may not see much action in equities this season but he will tell you how you can still make some money. >> joining us mkm partner executive director and chief market technician. let's talk about the theory of long, sleepily summer. we hit dow 17,000 and we're hitting new highs for the dow and s&p. >> one of the interesting things lately we've seen three of 10 narrowest trading ranges in s&p 500. contrarians might say that is sell signal. againly when you see the low trading ranges. that doesn't precede a major market top. preceding major market top, volatility increase and trading range expands. maybe this is the first time but up until to

the fed funds target -- continue and reinvestment along with or after the first fed rate hike and reduce investments gradually. here's technical stuff they're talking about. what they're going to talk about is interest on excess reserves will play a central role in the new policy that because they have this large balance sheet out there, reverse repos will play a supporting role, and then for you, fixed income folks out there, a 20 basis point spread would be appropriate, and reverse repos. they will communicate a policy later this year once they agreed to it. on the economy, the fed was surprised by the size of the q1 gdp decline, but they did see the economy rebounding in the second quarter. among the things they saw, future pickup? capital spending, and also consumer spending. several participants were concerned about soft retail spending along with soft housing recovery and soft residential construction. several we are concerned about lower inflation in europe and japan. iraq and ukraine noted as possible downside risk. this has been ongoing for a long time, critical to policy, and t

unused and the fed's been paying the banks to leave them there so so the feds create a lot of money it hasn't gone into the system it's going into the stock market in different areas but it hasn't gone into the economic system as a whole so we haven't seen prices rising and in a broad way really much at all over the last five years somewhat but but but not much. so so i think to some degree because the policy hasn't really worked you know if the fed was trying to boost spending in a broad way they should be writing checks the average household or something like that they should do something besides pouring money into banks which are lending it out to households so so we haven't seen inflation because their policy hasn't really been effective. i think the fed is a little bit worried about rising inflation here because some of the metrics they're looking at have gotten to the point you know inflation is getting a little bit of traction lately i think that's another reason besides financial asset prices that the fed is beginning to talk about easing easing up on q.e. for example and ev

the data will flow fast and furious, will it change anything for janet yellin and the feds. a new prognosis for two of the nation's biggest entitlement programs. medicare and social security. merger monday, $12 billion in deals helping to lift spirits on wall street. we'll tell you who is in a buying mood and why. all that and more tonight on nightly business report for monday july 28th. >>> good night, everyone. the week started with a hint of optimism, thanks to a dual of deals. there was greater caution as investors paused ahead of a number of high profile earnings this week. the white house says it expects the european union to impose new sanctions this week against russia, and that the u.s. will impose additional measures as well. and deal news which saw dollar tree and family dollar get together offset discouraging pending home sales for june. more on that in a moment. at the close, the dow industrials were up 22 points to 16,982 and change. the nasdaq, though inched lower, falling four and the s&p 500 rose fractionally to 1978. attention now turns to some very importa

another big story this hour ahead of the fed meeting results, the cnbc fed surveys, steve liesman focusing on growth and your first graph is very interesting. >> scary? >> a little bit, yeah. >> let me show you why it may not be or is overly optimistic. what's happens is the growth framt for 2014 and '15 have both come down. this is percent change year over year. now we're down to 189. if you can zoom in on that, that was the number for last year as well. this won't be the year of growth. however, we think we hit about zero? the first half. to get to 189, do the math at home, folks, you knee about a 3.8 in the second half, almost 4% growth. this may be too optimistic. the story for next year remains impact. what you see here is we did come down as 275 from a high of 3 for this series, so we'll see and monitor whether that remains intact. but the big drop right northeasterly is the story for 2014 because of that big negative number. we're getting gdp tomorrow for the second quarter to see how much ground we have to make up. meanwhile, the probability of recession, it did tick up just a litt

i think what fed chair was trying to say, we're aware of this. we're aware there are certain parts of the market that are extremely stretched. what is important is what she didn't say. the fact that she really highlighted a couple sectors is the notion that the fed does not believe that the broader market whether we're talking about equity or credit is in a bubble. >> that's a fascinating point. what i think you're saying is that in those parts of the market that are stretched, whether you find the pandora and gr groupon, they can snap back and hurt you. >> in the u.s. generally larger is cheaper. we had a huge run in small caps. those valuations are twice than large cap companies on a basis. large looks cheaper. the reason is again, people have been stretching for yield in sectors like utilities the more cyclic l parts of the market and the u.s. has been out performing for a long time. that's arguably justified because u.s. growth is stronger, but it's left u.s. stocks relatively expensive, compared to the rest of the world and for the most part

is sort of affecting behavior i think that a lot of that is directly correlated that the fed is you know they have reduced the supply of some financial assets and sort of forced people unwillingly into other financial assets and that's had a very real impact on prices and you know as a result it has the potential to create this environment where you know potentially the market prices become sort of disconnected from their underlying fundamentals and that has you know in a sort of weird way chewy can be destabilizing in a way that the fed doesn't really you know expect or you know can be destabilizing in a way that you know they would would be actually counterproductive to what should be a stabilizing policy in their views so yeah i think that all of those indicators are sort of signs that we're moving into sort of a later stage in the market cycle than really the behavioral cycle now the government budget deficit is declining pretty quickly so why do you think that is. well you know a lot of people have confused this with us austerity and that's really not what's going on here what

auditul's old bill to the fed has been reintroduced into the house with the provision that the fed must adopt a rule or tell the gao why not. if they do not follow the rule, they are supposed to write a letter explaining why. there is some talk that there will be enough strength among congressional republicans that it might pass. so an interesting line of questioning tomorrow. >> i know one group that is very focused on janet yellen's testimony -- bankers. while we are waiting for more, we have to talk about banks. sachs andgoldman j.p. morgan are up today which is perverse after better-than-expected earnings reports. banks beat on top and bottom lines, even -- this is why it think it is perverse -- as trading revenues continue to slow and head count is down. the big story we are watching is jamie dimon's health. the company is prepared for "all scenarios," as he continues his fight against her cancer. erik? >> stephanie. >> while jamie donegan say the success and plan is not changing. we are staying the course. does anyone believe that is the case? was anyone talking about secession pl