Major comeback over the last four weeks. But heres the thing, guys, its not just those momentum stocks. Largecap tech stocks also moving to the down side. Steve malone vich at ubs has a buy rating on apple, but he did put out a cautious note today, saying apple could face pricing pressures in china. On that note, intel and ibm will be in focus, kicking off tech earnings next week. Thats when investors will get an initial preview of what to expect in the Second Quarter. Bill and kelly . Seema, thank you very much. Lets talk about whats going on today and what it means. Joining our closing bell exchange, winnie sun from Sun Group Wealth partners, rob morgan, mark matsen from matsen money. Anthony chen, maybe one of the most bullish economists on wall street. Hes with chase. And our own Rick Santelli. Anthony, im going to start with you. The tone of the market lately, weve seen very defensive issues moving higher. Utilities are actually up today, while the secondaries, the small cap stocks are getting clobbered here, which would suggest that this markets anticipating some economic weakness. What do you thinks going on . Well, i think that if you look at the bond market and you see bond yields coming down to 256, that is a little bit of nervousness. We know that earnings season is coming upon us, you know alcoas going to report. Youll see a Major Financial Institution reporting on friday. So, i think this market, they really need to see real evidence that the economy is getting better. I think the employment report provided a nearby preview to an improvement in the economy. Now they need to see if theres proof that this improvement in labor Market Conditions going to translate into better Economic Activity in the second half of the year. All right. Id like to know, winnie, rob, mark, to all of you here, are you do you have the Shopping List out . Do you look at a name like twitter up 7 and see an opportunity to get in here or cross some of these other sectors . Winnie, first to you. Do you recommend right now that people look at these names, or do you have a sense that there are deeper selloffs coming . Well, were here on the west coast, so tech is something that were very comfortable. And yes, absolutely. Weve had a lot of cash on the sidelines. And so, thats something that weve been looking forward to. We knew that some pullbacks were necessary for this moderate Economic Growth economy. Are you waiting for more or is this the time to start to shop . Well, you know, were going to start to add now. We do have weve had a lot of cash waiting and we have cash coming in. Theres been a lot of changes. And so, for us, this is a Good Opportunity to start adding. What about you, rob . Yeah, bill, i like tech, too, just like winnie. I dont think id necessarily go so much for the momentum names, though. Id go for some of the bigger cap names, maybe microsoft or an apple, Something Like that. I think that the high fliers, were going to continue as the year goes on to see risk on, risk off. Today was a risk off type day. And of course, some of the twitters of the world got hammered. What do you think has flipped the switch, mark . Why are we now in a riskoff period, and are you seeing value now as a result of the selloff . Yeah, one of the toughest things for investors to do is to smash the illusion that they can predict the next 20 . Nobody can. So, investors need to focus on the next 200 . If there is a selloff, then what investors have to realize is the people that panic transfer their wealth to the people that are smart enough to buy on the dip and then rebalance their portfolio. So, own equities long term. Dont try to time it. Own it and then buy on dips. Rick santelli, welcome back. Whats the market telling you . What do you thinks going on here . I think the market is telling me that the economy is improving, and some of the parts are improving rather well, but the total economy isnt the sum of the parts. Its less. Whether its productivity, which by the way is well below its tenyear average. Its currently, if i start pegging it from the Fourth Quarter of 08 to current, its 1. 4 . Definitely on the light side. It should be basically double that. So, i think to summarize, as we improve and we look at stocks that, you know, pretty much are built for perfection, were going to see probably periods of low volatility, lots of interest in the puts side or the vix on the options side. On the Interest Rates, here we sit at 2. 56 . This is exactly where we were on february 3rd, six weeks into 2014 when Interest Rates did their plunge from over 3 , and i continue to say [ everyone talking at once ] pardon . Rick, its as if the june jobs report never happened. Well, the reason we say jobs, jobs, jobs is its the lowest common denominator to put the money into consumers pockets, but what do we see . We see that Consumer Credit, which just hit the wires, came in a whisker under 20 billion. It was supposed to be closer to 24 billion. Last look was 26 billion. You could look at it two ways Consumer Credit goes up, we continue to have the synonymous interpretation of taking on more debt as the same as income, but this way its better, but its not part of the feds plan and i think thats key. Anthony, what i cant figure out, maybe you can shed light on this, are we witnessing a speedup or a slowdown scare in the economy here . Why are markets selling off . Is it because some of the jobs market data has been better and the fed response may be quicker, or is it because theres some sense of additional weakness out ahead of us in the economy . Anthony . Kelly, when you have an equity market that goes up over 6 on a yeartodate basis and our expectation is that the s p will go up 8 to 10 , you are going to see corrections along the way. If you look at since 1945, weve had over 20 corrections, and the average correction is about 13. 8 . Corrections are the part of the process. Rick, by the way, is correct on the productivity. If you look at the hours worked in the Second Quarter, they were up almost twice as fast as in the First Quarter, a little over 3 , almost 4 , hours worked compared to 1. 5 . If you get growth in the Second Quarter in the neighborhood of 3 and you have hours growing faster than that, youre not going to have productivity accelerating. Thats the story for the Second Quarter. The hope and expectation is that as the year progresses, that dynamic changes, but it is not going to be a big one for the Second Quarter. So, winnie, you say youre looking at technology. Thats where you want to put some of that cash to work. What in technology . Wheres the Growth Opportunity for you right now . Well, if you think about it, i mean, onethird of the global population is on the internet. So, we view that there is so much activity in terms of smart homes, smart wireless, and theres so much innovation all around us here in the state of california, so we see this. But theres a lot of risks, a lot of things that we need to take care of. For example, a lot of these Tech Companies need to be able to hire more talent, and we need to get through a lot of the regulatory and tax issues, too, for more of the Tech Companies to evolve over time. You know, winnie, we had three profit warnings that perhaps point to whats happening in the market today. Samsung, philips, walmart. In other words, the nexus of the consumer and their mobile device to some extent. So, the argument that youre making doesnt seem to stand up to the developments in the market today. At least not right now, right. Right. But i think over time, i think thats the consensus. We do feel that these levels that we can add, and we think that, the story hasnt unfolded yet. Theres a lot of legs to this tech rally. Rob morgan, do you hedge to some degree . I pointed out utilities are doing well, actually, today, relatively speaking. Theyre actually positive here. Do you put some money to work there just as kind of a hedge against a correction in this market . Well, you know, as anthony said, were going to eventually have some kind of pullback here. But i think that at this point in time, youve got to stick with the cyclical sector. I think the danger here is being out on days like today where you could be buying on the dips. And so, not only do i like technology, which i mentioned before, but i like industrials and financials as well. And rob, why is that . For viewers out there who are watching, who are saying, oh, forget it, the economys terrible, its not as good as you think, make the case for investing in cyclicals here. You know, from the standpoint of a lot of todays action i think was brought about by the New York Times article by neil irwin about bubbles, bubbles everywhere. Id make the case that if there is a bubble, its probably in the bond market, and that moneys going to continue to flow into the stock market through time. The Retail Investor really hasnt gotten back into the stock market in a big way, started to get back in. But weve got a reasonably priced stock market with a healing economy, as anthony pointed out, Retail Investors that will ultimately be getting back in at some point in time. And i just think that those cross currents just say good things for stocks. Yep. You want to mention or shall i . Neil irwins going to be with us next hour here on the program. I was just going to ask Rick Santelli too bad i cant ask him a question. More people talking about how it is going to be the bond bubble here it was a great article it was a great article, but i think he needs to go to the next level, and the next level is the real bubble is in unaintended consequences of bad policy and monetary policy. You have a new question for neil irwin now. Thank you, guys. Thats coming up next hour. Thank you, folks. We will be speaking to neil about that piece next hour, as it continues to make the rounds here on wall street, and so, too, does the head scratching as we look at these markets selling off again here under pressure. Weve got about 50 minutes into the close. The dows off 114. It is off its session lows. While the s ps giving up 14 this hour. Alcoas earnings, they will hit after the bell today, and it could set the tone for the trading session tomorrow. Well tell you what to expect. Plus, we have ceo Klaus Kleinfeld here exclusively, even before he talks to analysts to break down those numbers and walk us through what alcoas seeing across the economy. Did you know shares of alcoa, by the way, are up 78 since being kicked out of the dow 30 . Well get his reaction to all that. Thats not the only company thats left the dow and then taken off after that. Isnt that interesting . By the way, middle pause. Hopefully, after six years, were starting to gain a little traction in the u. S. And that tractions coming at the top end. I think the middle and down is still pretty challenging. Thats what we were just talking about, middle and down still pretty challenged. Do the concerns of walmarts ceo, bill simon, raise a red flag about the entire economy . A couple of top consumer watchers will be weighing in when we come back here on closing bell. Stay tuned. [ girl ] my mom, she makes underwater fans that are powered by the moon. She can print amazing things, right from her computer. [ whirring ] [ train whistle blows ] she makes trains that are friends with trees. My mom works at ge. And our luggage was immediately. Taken to. Stolen from. Our room. The Hotel Manager was clearly behind it. He was such a. Kind man. Con man. My husband wanted to. Hug him. Strangle him. And to this day were still in contact with. The manager. The police. I wish we could do that vacation all over again. Dont just visit paris. Visit tripadvisor paris. [ male announcer ] with millions of reviews, a visit to tripadvisor makes any destination better. [ male announcer ] with millions of reviews, oh i knew i forgot something. Ill just do it now. Well, were boarding. No, ill use citi mobile. Takes two seconds, better safe than sorry right . Yeah who knows if well even get service on the islands . What no service . Seriously . No electricity, were going to make our own candles, were going to churn our own butter. Oh, we lost one. Cant leave a bag unattended. Bank from almost anywhere with the citi mobile app. To learn more visit citi. Com easierbanking welcome back. The dow back below 17,000, were down 115 points. We were down 149, coming off the lows. Nasdaq is hit hardest today, so is the russell 2000, almost down 1. 2 . I pointed out earlier today that it was on this day in 1932 that the dow hit its 20thcentury low of 41. 22. 41. 22. 41. 22, exactly. And i tweeted out with a little joke that at the same time, the vix hit 17,000. And somebody wrote back and said, come on, guys, the vix wasnt invented until 1986. It was a joke. Yes. Sarcasm. He knows. Anyway. Meantime, walmarts ceo is worried about the Financial Health of walmart shoppers and sat down earlier with courtney reagan. Courtney joins us now. Courtney, as we try to appraise exactly whats going on with the u. S. Economy and these markets here. Thats right, kelly. Here today at walmarts headquarters, more than 900 meetings are going on between Small Businesses and walmart executives, as walmart looks for new vendors to add to the roster of companies that produce products made in the usa. Now, while getting a Distribution Deal is a very big opportunity for any business, walmart continues to struggle to gain those positive samestore sales and positive traffic as competition continues to increase across retail. Now, walmarts u. S. Ceo says while unemployment may be at the lowest level in six years, the reta retailers for consumer may not be a part of that job growth. The unemployment numbers particularly have been difficult to read with the number of people dropping out of the work force. And i think its going to take a while, six months or a year for those numbers to balance out. Youll see a drop in the rate, and then as more people come back into the work force, that might change again. Hopefully, after six years, well see that. That tractions coming at the top end. I think middle and down is still pretty challenged. Simon says that walmart is working to better serve customers for builtin trips, to better compete with Dollar Stores and drugstores. In fact, the company adding more of the Small Format Stores this year for the first time than those bigbox locations. Kelly and bill, back to you. Courtney, thank you. Such an interesting perspective on the consumer. As goes walmart, so goes the economy. That is the question. Yeah, so lets talk about the state of the American Consumer right now, bring in seven capital managing principal monica meyda and jonathan murray, managing director at ubs. Monica, you agree with bill simon, it depends which consumer youre talking about, the upper 10 . You feel theyre doing fine, right . Exactly. Weve mostly seen an Asset Recovery because of fed policy. The top 10 of americans who own real estate, stocks, theyre doing fine, theyre feeling fine. But if you look at everybody else, the middle class in particular are suffering. I think i saw a statistic, 59 of americans feel that the American Dream is impossible to achieve . 52 cant afford the house that they live in. One out of six primeage working men is not working. Labor force participation is down by 8 million, and 4 million of thats not coming back. Its 2 million that are living on disability and another 2 million who are idle and of prime working age. Jonathan, she have you convinced or do you think the outlook out there is actually pretty good . You know, i just think its better than what a lot of folks think. And what i do is i look at the nfib numbers, National Federation of independent businesses, and if one does that in fact, some data just came out today youll see that these optimistic levels are at levels that they havent been in for seven years. Small Business Owners for the first time in seven years are finally feeling good about things. Theyre hiring. Theyre the ones that said today that they see an increase in wages. They were also the ones, the nfib, that said that theyre having a difficult time filling their job openings. And to me, that gives me reasons for optimism. How do you reconcile that, though, with what bill simon, the top retailer in the whole country, what hes saying about their business . Its just stalled out. Its growing, but its just stalled out compared to what its done in the past. Well, bill, maybe thats a companyspecific anecdote. I mean, i wonder if the ceo of amazon or google or twitter would say the same thing. Great point. Monica, what do you say to that, and to walmart, who says they were seeing more of the impact of the snap benefits going away in the fall than they expected . Shouldnt they have realized that and positioned more aggressively for the loss of benefits to their bottom line . One point, were at a 30year low in terms of startup activity, and while Small Businesses actually do generate most of the jobs, we dont have enough on them and were relying more and more on large corporations that are really focusing on efficiency measures and are more likely to utilize technology and outsource jobs. I think thats a big part of the problem, too, and its not talked about. Walmart has their work cut out for them. You know, again, the consumer that they deal with, that everyday low shopper is the one thats getting hit the hardest. And inflation actually hits that consumer the hardest, too. Theyre spending more and more on the very basics, like college tuition, housing, electricity. So, you know, walmarts best positioned than even the Dollar Stores. Like, in the dollar store space, youre actually seeing mergers and acquisitions, companies trying to combine to lower their cost bases. Its tricky for everyone. Jonathan, you could also argue to some extent that the Companies Like amazon, which are growing share so rapidly, are actually not as sensitive to the General Health of the consumer because theyre Building Business and stealing shares from their rivals. Yeah. Look, kelly, i give walmart credit. Our analyst just had a meeting with the new ceo and she said that she applauds his strategic vision. They want to get much more into ecommerce, they want to improve their samestore sales, so she thinks they are on the right mission, but right now, we have a market perform rating on the stock. Jonathan, this is the way its supposed to be, i guess, given fed policy at the moment, but when they start to nudge Interest Rates higher, isnt it that small businessperson that starts to feel the hurt before the large corporations do . I think less than Interest Rates, bill, its a question of regulation. All of my clients, who are small Business Owners, tell me they want clarity. They want less regulation, but they want clarity. Whats their tax picture going to be . Are they going to be penalized for health care . Theyre ready to hire. Theyre seeing interest out there are to people that want to work for them. We cant guarantee the clarity, but we can guarantee that rates are going to go up at some point, and thats going to smart, wont it . For some companies, perhaps, but i think it will be a good thing for consumers. Look, were talking today about consumers and the health of the consumer and the wage disparity. A lot of baby boomers right now are desperate for Interest Rates to go up because thats what theyre living on. I mean, they were used to getting cds at 6 and 7 retirees also. Retirees, yeah. So, i think a rise in raises could actually be a good thing for the economy and for the consumer. Theyre almost one and the same these days. Are they . The baby boomers. Oh, boy. The stories we could tell behind the scenes. Thank you both for joining us today. Appreciate it very much. Thank you. Down 110 points as we head towards the close. About 40 minutes left in this trading session today. Much more ahead on todays selloff. Alcoas ceo will give us his exclusive take on the companys earnings, due out just after the close today. Plus, honeywells ceo makes the case for preserving the exportimport bank. Its a Government Agency that backstops losses if foreign importers dont pay their bills exporters, we should say. And wait until you hear what both of them think about the state of the economy right now. Thats a very big issue in washington right now. Meanti meantime, the u. S. Attorney for the Southern District of new york is no longer undefeated. A little while ago, Preet Bharara lost a jury verdict on the Insider Trading case. We have the news and the aftermath coming up after this. [ female announcer ] theres a gap out there. Thats keeping you from the healthcare you deserve. At humana, we believe if healthcare changes, if it becomes simpler. If frustration and paperwork decrease. If grandparents get to live at home instead of in a home. The gap begins to close. So lets simplify things. Lets close the gap between people and care. Welcome back. Heading towards the close, and heres a look at markets which are under pressure across the board. Actually, the dow and s p are holding up better as the nasdaq sells off to the tune of 1. 4 . The russell about the same. And in fact, these twoday losses, which we started the week off, pretty much give back some of the gains for these indexes that we had in all of last week. And bill, as we mentioned, the retreat in the tenyear Interest Rate as well almost seems to have ignored the fact that we got that strongerthanexpected june jobs report on thursday. Exactly. Weve got the dow utilities we can show as well. Thats been a positive today, interestingly. So, as we mentioned earlier, the secondaries, the defensive stocks are doing well. So, there it is, up a fraction in todays trade. Don chu, whos moving this market . Bill, kelly, lets drill down more with big momentum names. Theyre taking it on the chin. Were talking about priceline, amazon, netflix, tesla. Theyre all losing ground in the trade today. Off 2 , 3 , 4 in todays trade. Social media stocks also taking a hit. Twitter, facebook, yelp, zynga, you name it, all moving lower on the board today. Also, shire after increasing its offer for the british drugmaker off 4 . They told shareholders to sit tight while it reviewed a sweetened bid. One company in the green is engine maker cummins. It increased the Quarterly Dividend by 25 to 78 cents a share and added 1 billion to its stock buyback program. And well finish off with the airlines, all falling except for united continental, although off their lows. Air france kln issued a profit warning for the year. This followed lufthansas profit warning last month, and airlines have been one of the high flyers, one of the best performing Industry Groups in the s p so far, now losing steam in todays trade. Back to you. They certainly have. And the implications for the Broader Market make it something to watch. Meanwhile, the federal governments top again against wall street insider trader Preet Bharara defeated today. But scott cohn, tell us about it. Every streak has to come to an end, bill. In this case, it would have been kind of an afterthought, if not for the fact that it is the first defeat in u. S. Attorney Preet Bhararas fiveyear crackdown on Insider Trading. Its led to, as you heard, 85 convictions or guilty pleas, not a single acquittal until now. This is the younger brother of raj raj rod nam, currently serving an 11year president term. Rangam was initially charged with his brother, but by the time the jury got the case this morning, all of the underlying Insider Trading charges had been dropped or dismissed, and only the conspiracy charge remained, the verdict not guilty. In a statement, the u. S. Attorney says he is disappointed but we will continue to seek justice in the investigation and prosecution of those who violate u. S. Security laws. So, Preet Bharara is now 851. Perhaps more important, though, this investigation has changed the flow of information on wall street, but rengan rajaratnam, unlike his older brother, is now a free man. Guys . Thanks, scott. Stay with us there. What is the significance of this loss . What does it mean for Preet Bharara and for future prosecution . Joining us is mitch evepner, former u. S. Prosecutor. Whatd you think of this defeat . I think it was a reach too far for Preet Bharara and the u. S. Attorneys office. They went forward with a case where, frankly, the proof was not as strong as its been perhaps in some of the prosecution against the older brother. Maybe you could have seen this coming, because some of the charges had been dropped, a couple of fraud charges. The judge dropped those a few months ago, right . Yeah. Everything that sort of underlaid the case, the substantive charges were thrown out. So, all that was left was conspiracy. We did hear rengan on tape at his brothers trial. So, the case was that he was involved in the conspiracy, even if he didnt do Insider Trading himself. But as you heard, maybe it was a bridge too far for the u. S. Attorney. I do wonder what this means for additional prosecutions now, mitch . Well, the big question thats out there is whether in order to be found guilty of Insider Trading, you need to not only know that somebodys giving inside information, but if youre not the person getting it directly, you need to know that the tipper is actually receiving something of that value. And thats an open question right now. Judge buckwalt, who presided over this case, held the government to that higher standard. Thats why she dismissed the substantive charges. And if that is the rule Going Forward, it will be harder to bring Insider Trading cases against people down the daisy chain. Does this also tip the hand to future Defense Attorneys . They can see maybe a little ray of light in arguments that they can make based on either this case or some of the other cases that may be pending right now . Absolutely. Its both a question of what you can argue to a jury. Its also a question of what sort of leverage do you have in negotiations. Obviously, when youre negotiating against somebody who has all the poker chips in front of him and has never lost a hand, its hard to get them to back off of their big demands. Scott, how many more are in the pipeline . Well, i mean, this is an ongoing investigation, but as youve heard, i mean, a lot has played out here with 85 convictions and some pretty highprofile ones at that. So, the question is, how much further are they going to go . And this whole question of the standard of Insider Trading, pending before the 2nd Circuit Court of appeals is also likely to be an issue. The other thing thats kind of interesting is what this says, if anything, about the anger that the public has towards wall street. It was for the longest time difficult for any hedge fund figure to get necessarily what they might have thought was a fair shake against the jury in manhattan. This is an acquittal, and maybe it signals that the tide is turning just a little bit. Mitch, you agree . I absolutely agree, but it takes away some of the fear that you cant get a fair trial. Im not certain whether it shows that the tide has turned, but i think it will give some more courage to people who would be otherwise afraid that they couldnt get a fair shake. Oh, okay. Thanks, guys. Mitch, thank you for perspective there. Thanks for having me on. See you later, scott. Heading towards the close, back to the markets now, 30 minutes left. The dow kind of plateauing here. Were down 111 points. We were down 149 at the low in the morning session, but weve since come back at this time. And as we asked why maybe this market is worried about earnings season, which is getting under way here on wall street. Well be hearing from alcoas ceo, Klaus Kleinfeld after the bell. Before that, well speak to some pros about what to expect and if samsung and philips earnings are a harbinger of more to come. I make a lot of purchases for my business. And i get a lot in return with ink plus from chase. Like 50,000 bonus points when i spent 5,000 in the first 3 months after i opened my account. And i earn 5 times the rewards on internet, phone services and at Office Supply stores. With ink plus i can choose how to redeem my points. Travel, gift cards, even cash back. And my rewards points wont expire. So you can make owning a business even more rewarding. Ink from chase. So you can. Dad hes our broker. He helps . Look after all our money. Kid do you pay him . Dad of course. Kid how much . Dad i dont know exactly. Kid what if youre not happy . Does he have to pay you back . Dad nope. Kid why not . Dad it doesnt work that way. Kid why not . Vo are you asking enough questions about the way your wealth is managed . Wealth management at charles schwab. Welcome back. Selling on wall street today. The heaviest selling has been among the small cap stocks. Look at the bottom of the screen. The russell 2000 down 1. 25 . Look at the nasdaq, down 1. 33 . Theyve been the highest. Fliers recently are the biggest decliners today. The dows down 117, was down 150, and the s p down about 14 points right now. All this as alcoas getting ready to post Quarterly Results after the closing bell today. Morgan brennan joins us now with a preview. Morgan . Thank, kelly. Consensus estimates for the aluminum giant, 12 Cents Per Share on 5. 66 billion in revenue, that would represent a 3 decline in sales, but a 78 increase in profits. The ongoing story for alcoa, its transformation into a products manufacturer. So, investors keeping an eye on revenue in the flat rolled and engineered products divisions. Also looking at how primary metals, basically the mining and smelting operations are doing as Aluminum Prices seem to be stabilizing. Watch for alcoas Aerospace Industry outlook, considered a big growth area for the company, especially now that its acquiring firth rickson for about 2. 8 billion. Kelly, back to you. A big deal for them, and ceo Klaus Kleinfeld will speak to me exclusively after the earnings come out after the show. Morgan, thank you. Well see you with more numbers in about a half hour. First, earnings warnings from samsung and philips, issued for this current quarter. Samsung citing weak smartphone demand for q2, philips saying its Health Care Unit will miss forecast earnings. Is this all a sign earnings season could be weaker this time around and is the stock market forecasting that, too . Joining us is nick raich from earnings scout and max wolfe from citizen vc. Good to see you both. Max, lets start with samsung. What do you make of this profit warning, and do you think its responsible, by the way, for the broader pressure the group seems to be under today . Thanks for having me. Its always a pleasure to be joining you. We think samsungs a little bit of a bellwether, talking about the allimportant smartphone space, and we still expect 1. 2 to 1. 3 billion smartphone units around the world, also the tablet space. I think what we are seeing is that these markets are maturing, so growth is slowing in tablets and smartphones. And in china, lenovo, shalamy and callway are taking away part of the market, so samsung has a chance of being hit from above probably by the new iphone, hit by below by the chinese competitors putting smartphones in peoples pockets for the first time below 200 bucks. So, we think it shows a maturation in shift in the mobile market and its something the market should be paying attention to. Nick, the question we should ask is will there be others warning in that area . You say maybe not. One company does not a trend make, obviously. Thats exactly right. No, it is a global bellwether and the largest component in the emerging market index, so it does raise some eyebrows, but it also is a graeme of expectations. And two years ago, apple had very high expectations, too, with regards to its smartphones and tablets as well. For samsung, those expectations have steadily crept up, and sometimes its just a game of that. Also two years ago, apples loss was samsungs game, and that might be reversing out, because apple has gotten steadily better. The Overall Technology sector earnings are actually acceler e accelerating, particularly in the semiconductor and Semiconductor Equipment industries that does not give us a cause for concern just because two of these companies have come out and warned. By the way, ill point out, blackberrys been up 50 in the last month here. Not too shabby, right . Okay. Just pointing in out. It is a specific story in some cases, nick. Im looking at the estimates from capital iq. Theyre looking at increases of 8. 5 , roughly . Does 8. 5 , in light of what weve just heard from samsung and philips sound still achievable to you . Absolutely. That definitely could happen. And in certain areas of the Semiconductor Industry within the technology sector, expect to see 30 earnings growth. But what were looking at, kelly, is this. A year ago at this time, the Technology Earnings estimates in aggregate were going down by about 7 . Now theyre actually being maintained or actually raised. So, there has been a steady improvement in the underlying earnings trend, the rate of change of the earnings expectations, and thats whats moving the market and thats why Technology Stocks are outperforming in 2014. Max, nick describes it almost as a zero sum game between apple and samsung. Are we seeing the tide go back to apple at this point . I think a little bit on the high end. But samsung is the biggest producer of feature phones and the smartphones, and theyre giving us a little bit of a check of temperature on some of the things that are very important. We have a slow economy in europe that looks like it might be slowing. We have some deceleration in china. And we have ferocious hardware battling on the low end for tablets and smartphones. Part of what i think nick is referencing we acknowledge, too, but we dont see it as a repeatable offense or a repeaceable situation, and that is, there is a replacement cycle having a little to do with microsoft phasing out the xp, and we think that the notebook desktop world will be strong and the semiconductors, but we dont expect that to last more than probably two to three quarters. Got to go, max, but then what do you think could be the real surprise from this earnings season, then . Well, i think were going to see a bunch of big names come in weaker than expected because the bottom line is the macro Global Economy isnt good enough to produce doubledigit growth in all but the guys who are taking someone elses market share. We expect that, its a stock pickers market, there will be strong names out there, but rising tides wont lift all boats in this quarter. Good to see you both. Yes, thank you. Thank you for your thoughts today as we get ready for more earnings coming out in a critical area. Heading toward the close with 20 minutes left. The dow still down 111. Somebody hit that machine and see if its still working. The s p down 13 or thereabouts and the nasdaq and russell off sharply. Well have more on the selloff coming up. Plus, welcome to the everything boom or maybe the everything bubble, its the New York Times article generating buzz on the internet and on the floor today. Very much so. Some say this is playing lower in the market. The author of the article will join us live in just a bit. vo watching. Waiting. For that moment, where right place meets right time. And when i find it i go for it. announcer at scottrade, we share your passion for trading. Thats why we give you the edge, with innovative charting and trading features, plus powerful mobile apps so youre always connected, wherever you are. Because at scottrade, our passion is to power yours. If yand youre talking toevere rheuyour rheumatologistike me, about a biologic. This is humira. This is humira helping to relieve my pain. This is humira helping me lay the groundwork. This is humira helping to protect my joints from further damage. Doctors have been prescribing humira for ten years. Humira works by targeting and helping to block a specific source of inflammation that contributes to ra symptoms. Humira is proven to help relieve pain and stop further joint damage in many adults. 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Bob, you wonder if theyre anticipating a lousy earnings season or were just kind of taking a rest after a pretty good rally last week. We saw in march and april all of the momentum names weaken, and for good reason. People started questioning valuations in biotech and some of the other names and some of the pharma names and some of the internet names. And look at the valuations of some of these names. I just did a trader talk on this. 150 times forward earnings for a company like pandora . Really . Think about it. Thats a lot. Those are huge numbers. 70 times for yelp. Groupon is 66 times. Its right for people to say, fellas, are we doing the right thing by paying this much money for these stocks . And i think its a healthy thing for the market. The overall market is not doing that much. Its fine right now. Seema, what about you . I mean, its really, you know, eyebrow raising to look at some of the social media names in particular hit hard today. Yeah, weve seen a lot of volatility in the socalled momentum stocks, social media, internet and Cloud Computing names have staged a major comeback over the last one month. Thats one of the reasons the nasdaq was a big winner in the month of june. Now youre starting to see some of these stocks move lower, sign of weakness, if you will, ahead of the earnings season. So, definitely a concern. Of course, Growth Prospects and valuation will be two things investors will be talking about when it comes to these momentum stocks. By the way, everybody keeps screaming at me whenever i bring up this guys, is it worth it paying how much, facebook, 43 times earnings . They say, were not buying on forward earnings for 2014, were buying on 2017. I say, you know what the earnings are going to be in 2017 for facebook . Oh, yes, we have excel spreadsheets that explain this. Im sorry. Bob, quickly, kelly and i have heard the talk about the neil irwin article in the times today. How much buzz have you heard about the bubble article . It was the lead article on the front page of the the New York Times today . Look, everybody mentioned it. I thought it was a good article, a timely article. I dont think it revealed anything much more than anybody was saying. Was it responsible for some of the sort of riskoff that weve seen today . It may have been, but notice it was in the big momentum names where the stocks would have been hit. That happened yesterday as well. Good point. Thanks, guys. Just a reminder once again, neil will be with kelly next hour. Closing bell. Looking forward to that very much. Heading toward the close, 13 minutes left in the trading session with the dow still down 111 points. Well have more on these markets next. And from the you cannot make this stuff up department, if the economy is so bad, how did somebody raise more than 40,000 on kickstarter to make potato salad . To make potato salad. This is for real. There is a look at it. He will also be joining us in the next hour. That had better be really good potato salad. Get your recipe cards ready. Here at fidelity, we give you the most Free Research reports, customizable charts, powerful screening tools, and guaranteed 1second trades. And at the center of it all is a surprisingly low price just 7. 95. In fact, fidelity gives you lower trade commissions than schwab, td ameritrade, and etrade. Im monica santiago of fidelity investments, and low fees and commissions are another reason serious investors are choosing fidelity. Call or click to open your fidelity account today. Welcome back. About ten minutes left in the trading session. Its been a selloff day. The dow was off 150 points in the selloff in the morning, has since come back. Whats not come back is the small cap stocks, the nasdaq, down 1. 4 and the russell down 1. 3 . Joining me to talk it through, Jeff Kleintop and Tony Benjamin from benjamin and jerrell. What do you make of, the markets been cranky since the jobs report last thursday. Because the eyes are on yellen and what they are perception of expectations are Going Forward. But lets not forget the backdrop. We clearly had a nice runup, the dow 17,000 and came up above that. Typically when we hit those milestones, you do see a lot of volatility, see the market come back and correct. It would be healthy in my view to see the market in down to 16,750 before it came back up. I think theres more to the down side, but you think its constructive, though . I think its constructive. All eyes are on yellen. Shes got a credibility issue with the inflationary issues, and i think that i would like to see her turn around and do something with the rates right now, kind of a token rate sooner rather than later. Yes. That would get the markets attention, wouldnt it, jeff . It certainly would jerk them back awake after the sleepy summer weve been in. But i chock this up to early earnings season every jitters. Theres nothing going on this earnings season, no crazy weather, no crazy moves in the dollar. Companies have to deliver. And with the dow above 17,000, that raises expectations that much higher, doesnt it . It raises the bar, but i think it will deliver this quarter. We just had the 25th anniversary of seinfeld. This will be a show about nothing this earnings season, no real surprises. After a few Earnings Reports, no surprises, stocks will rally back. What about the idea, you would like the fed to raise rates now. Youre not alone in that, but the fact that we have had better jobs reports, you know, there have been calls on wall street that maybe the fed will raise rates sooner rather than later here. I was thinking more like a token gesture. Let the markets know that were watching closely. And remember, bill from my vantage point, its not the Inflation Numbers that count, its inflationary expectations that begin to mount that will begin to bring pressure and you see it in the tenure. Which the fed agrees with you on, by the way. I would think they do. Yeah. Inflation, is that a worry for you . Not yet. Remember, that becomes a problem when the yield curve inverts. Talking about the midyear outlook, numbewere a long way that. Think about how much inflation it takes and how much the fed would have to inflate rates. The yield curve has predicted the session with no false positives. Its a great indicator. Need to keep an eye on it. It. How much would you like to see us move down before you start to buy again . Again, about another 150, 16,750 on the dow, you know 1,963 on the s p right now. Yeah, i would say were going down around 1,950, somewhere around there on the s p. Not so much on the s p. A little further on the dow and not as much on the nasdaq as well. Okay. Stay there. Well come back and get to the closing countdown, look ahead to that Earnings Report after the bell. Well bring you the alcoa numbers that are due right after the close. And per tradition, alcoas ceo, Klaus Kleinfeld, will break them down exclusively even before he speaks with analysts. So, stay tuned for that. Its the beginning of the earnings parade for the Second Quarter coming up. Youre watching cnbc, first in business worldwide. Ld thats chg faster than ever, we believe outshining the competition tomorrow requires challenging your Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. Having a perfectly nice day, when out of nowhere a pickup truck slams into your brand new car. 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Its so close to the options floor, youll bust your brainbox. All on thinkorswim, from td ameritrade. Welcome back. About three minutes left in the trading session here. Selling by degrees. What do i mean by that . Selloff certainly for the blue chips. The dow on the open this morning at the low, down about 149, 150 points. Sideways since that time. Were down 114 here on the close. What got hit today were the small cap stocks. Nasdaq down even more, down 1. 3 here, a 60point decline, slow roll south to 4,391 and the russell 2000, which had been the high flyer this year, setting all kinds of alltime highs, even before the dow earlier this year, down and off its low, a little better than the nasdaq has. What has been positive today . The utilities. This is interesting. The defensive stocks for the most part have done pretty well, Even Health Care has done relatively well, but this has been the standout today, as people go to those areas where they feel a little more secure, if we are going to get a correction of some kind today. Now we wait for the earnings to begin. Alcoa kicks it off. Its not in the dow anymore, not considered a bellwether, but it is still the number one, and it has turned positive here, as you can see, as we get ready to report those earnings. The expectation is for a profit of 12 cents. Whispernumber. Com says that theyre expecting 13 cents, and the revenue expectation is 5. 66 billion. Alc alcoa, does it matter . Doesnt really matter. Its not much of a bellwether for anything. Later this week well get wells fargo, next week well get general electric, far more bellwethers for whats going on in the u. S. Economy. But what do you think theyll tell us . What i want to hear interestingly is whats going on in europe. Weve seen europe bring down Interest Rates here in the u. S. , weve seen europe weigh somewhat on the stock market here of late. I want to hear better results. Nike had Better Things to say about europe, Carnival Cruise lines as well. I want to hear that from a broader selection of companies. I know two days does not a trend make, but we have seen the blue chips go down, but small caps have gone down more than that at this point. Does that say anything to you . I think for a while, the small caps have been overbought. We tried to or the market tried to correct them a while ago to some extent or another, but the nasdaq kept coming back and kept getting stronger and stronger. So, after the correction we saw recently in the nasdaq, i think were going to wind up finding ourselves a little less down side now there as the markets start to catch up to that move down. What about my point about the utilities . Theyre positive today i think thats another indicative example of what i was talking about with inflationary expectations. People who move to flight to safety, as you mentioned, looking to say how do i hedge myself for the future Going Forward with rates going higher, possibly. Would you hedge in utilities right now . I would not hedge in utilities right now. Why not . I mean, come back here. Theyve come back here. They had a wonderful first half of the year, tremendous utili utilization of utility output, it was a cold winter and rates came down. I wouldnt count on that for the second half, but industrials could be the leader in the second half. Thats the difference between a trader and a fundamental strategist. You see it right there. Thanks for joining us today. So, were going out off the lows of the session but still pretty meaningful selloff today as we get ready for those earnings. Alcoa kicks it off. Weve got Klaus Kleinfeld, the ceo, here in the second hour of the closing bell with kelly evans and company. Ill see you tomorrow. Thank you, bill. Welcome to the closing bell, everybody. Im kelly evans, and heres how were finishing. A pretty dismal session across wall street. Indexes under pressure. The Dow Jones Industrial average off about 113 points at the close here. It was off as much as about 150 points earlier in the session. The s p also giving up about 0. 66 , 13 points from its high last week. And the russell 2000 and the nasdaq, we should say, both the underperformers. Certainly both down more than 1 today and well talk about whats weighing on these markets in particular now with our panel. Joining me today, mike santoli from yahoo finance, cnbcs eamon javers and jason from Strategic Partners and more with the markets, fast money trade yr trader. Mike san toloie, is this the start of the selloff everybodys been waiting for . This may not be the one. I cant pin this much on anything except were up 7 almost in a Straight Line without a rest in three months. And the market seems to have gotten to a point where as it has in this rally in general, the froth, they dont just let the froth evaporate, they wipe it away in a couple of swipes. And i think thats what were seeing right now, the markets fed on good news and bad news to go higher, and i just think its kind of tired. What id be watching for is whether the anxiety really wells up, just as weve seen in the past, 2 or 3 down. All of a sudden, we get a little panic, so thats what im watching for. Jason, what are you watching for signs of how much further this could go . Listen, obviously, were right on the verge of earnings season. And i think one of the things weve noticed is that theres been four negative preannouncements to every one positive preannouncement. That tends to make me believe that a lot of bad news is already priced in. So, frankly, i would be nervous being short going into earnings season, just given the likely bounce well see in gdp in the Second Quarter. And recent history, by the way. A couple sectors exhibiting stress today, obviously, we discussed some of the social media momentum names under pressure. The airlines have performed really poorly recently, kate. And also today, the financials and goldman as we head into hearing from some of the major banks getting a downgrade today. I think mike he did a good point about the market being a little too bullion or overbought. Ive talked a lot on this show about how the Hedge Fund Managers ive talked to are sort of buying stocks but holding their noses at the same time and waiting for the bottom to fall out. We had stockspecific news today as well, well, general and specific. One is i would point to the costcutting theme, the fact that the efforts the banks are engaging in arent enough to make up for pay expenses that continue to be high as well as new regulatory expenses and theres no sign of the regulatory expense set slowing down. I mean, if you think about even today hearing about higher frequency trading and perhaps new changes to the structure on wall street. And goldman, interestingly, we have that story about Lloyd Blankfein thinking about succession, introducing some of the new generation of leadership to the board and also in very casual and in the course of business, but a story like that doesnt end up in the newspaper lightly. That tells you blankfein, who whatever his flaws, has carried the company through a difficult period and into a new era. I want to talk about those numbers in just a second, but it does look as though were getting results now from alcoa. Lets go to Morgan Brennan right now with the numbers. Morgan . Thanks, kelly. Well, weve got strong numbers for alcoa today. 18 cents exitems. Thats earnings per share. Significant bottom line beat versus the 12 cents expected by the street. Thats on revenues of 5. 84 billion. Again, a beat versus the 5. 66 billion that the street was looking for. A few items of note. All of alcoas Business Segments were profitable during the quarter. And the one that we really want to highlight here, and this goes back to the fact that alcoas been shifting away from being just a pure aluminum producer to more of a products manufacturer is its downstream business, engineered products and solutions. That delivered the highest aftertax operating income in the history of the company, 204 million. We will keep going through this report and bring you more as we get it. Morgan, thank you so much for that. Looking at alcoas shares, which do appear to be moving higher after hours. With us now to break down the quarter in an exclusive interview is alcoa chairman and ceo Klaus Kleinfeld. Klaus, welcome to the program. You guys have managed to deliver results pretty handily, beating what the consensus was on wall street. What particular component of the business in the quarter do you think led to this outperformance . Well, look, its a strong quarter. Transformation is in high gear. You see our value add business makes up 59 of the revenues but almost 70 of the profits. And our downstream business, the highest quarter ever in the history, our midstream business up 34 in profits, and you also see that on the commodities side, we continue to improve our cost position and also to perform better. So, thats fantastic. We can see that necessary as well as the price of aluminum remains under pressure. But as you say, this is a company thats focused on putting the bulk of its performance into the downstream valueadded kind of segments where youre making important components for everything from aircraft to ford f150s to bud light bottles. So, if we could just go through some of those Business Segments with you and talk about the outlook, lets start with aerospace, where youve just made a major acquisition. Is the outlook for aerospace in light of this sector being under some pressure lately, still as rosy as you saw it last quarter . Actually, we continue to be very, very positive about it. I mean, we raised in the last quarter our projection for growth for this year to 8 to 9 . Over the longer term, we see a 7 growth rate here. Thats a nineyear order backlog in the large commercial aircraft. This is a great business, and thats why we have invested in it organically. We have invested here with two expansions, one in virginia and one in la porte, indiana, growing our business organically, and as you just mentioned, we have announced that we are in the process of acquiring forth rixon, so this is a good growth business, but this is not the only one. The next great one also in this quarter is automotive, and in particular in north america. Its growing in general. Its growing even more because of those likely for us. So, you see the announcement earlier this year of ford going for the f150 as an allaluminum intense vehicle. This is fantastic. This is giving us additional tailwind. And you can go further. I mean, a great story also this quarter continues at a good indicator for where the u. S. Economy stands is commercial transportation. Commercial transportation up, orders up 20 . The backlog is also growing. This is a great business. We Just Launched a new wheel that is the lightest wheel on this planet, basically going into this segment. You can go to building and construction, where we also are very strong and Building Components and curtain walls and that business also showing signs of recovery here in the u. S. All of the early indicators show this business is coming back. You know, klaus, and yet theres this juxtaposition with what youre seeing across your business and what markets seem to be nervous about here lately, where the tenyear Interest Rate is moving lower, people are out there talking about whether the quality of jobs in this economy and growth in this economy is really that strong. You sound confident in spite of all of this. What gives you that confidence . Well, first of all, i think when we are looking at jobs, this is always a latent indicator. So, nithis is not the best way take a look at the economy. And obviously, there are technological changes also on the job site. So, in regards to the economy in general, i would say there is a lot of innovation going on. If you go to aerospace, what is driving the Aerospace Demand . There are really two factors that are driving Aerospace Demand. One is the growth of the middle class in all of asia and the emerging countries. And the second is the efficiency of the new types of engines and the new types of planes, and thats exactly where we are investing. Right. I mean, we are marrying firth rixon and us, two of the largest innovators of engine makers together, they are at the sweet spot and we are delivering in that. Same holds true on the automatic front. They directly give money into the pockets of each consumer because it goes for higher fuel efficiency, right . This has now become one of the largest decision criteria for consumers in the u. S. When this go into the dealerships and look for a new car. Right. Yeah, its not just cup holders anymore. There are a couple of bigpicture issues out there as well i just want to ask you about, and one of them is capex. So, how much are you guys investing this year to continue the production of some of these components that youve discussed . And to what extent is any proceeds you have from being in the credit markets or your cash flow generally going to what some would more derisively call Financial Engineering . Well, look, i mean, i didnt talk about our proactivity. Proactivity is strong and it comes from all across the company, and it has been like this basically since the crisis. This needs to again, we show that the Balance Sheet is stronger. We are generating nice, free cash flow. Our net debt has come down. So, this is a very positive thing. This allows us to invest. And as i said, i mean, if you look at the investments just here in the u. S. , indiana, 100 million, virginia 25 million, the firth rixon acquisition 2. 85 billion. Then you look at automotive. Automotive is two big expansions here. One is in tennessee thats just deramping, coming online. And thats 300 million. This is going into the ground as we speak. Aluminum lithium, the new material that we invented, very strong in aerospace but also in other applications that we see, another 100 million were investing there. So, we are well positioned to capture the growth of the investments that weve made. Okay, final related question then. Are you looking for more deals, especially in a sector like aerospace, oil and gas, for example, on the heels of this firth rickson deal, and are you under any pressure to lower your effective tax rate, which i think at last check is in the range of the mid20 . Well, we are very committed to generally to value for our customers as well as for our shareholders, you know . And we look at every opportunity that we can find there. So, as you saw, i mean, we do a lot through organic growth, through innovation, and we also look at inorganic ones, and we have a lot of markets, not just the Aerospace Market that are attractive. I mentioned automotive, commercial transportation. So, the good thing is, we are building a lightweight, multimaterials, Innovation Energy thats firing very, very heavily, and at the same time, were building a competitive commodities business and these two things are a very, very nice fit. How long before youre back in the dow . Or do you want to go back in the dow, given the performance since youve left . Look, kelly, i mean, the moment we were booted from the dow, we said this is not going to influence our strategy. And everybody seeing it is not going to influence our strategy. We are continuing on that path. Were building a lightweight, mult materials innovation powerhouse at the same time we are increasing the competitiveness of our commodities business. This is what counts, and the strategy works. You see that we are creating value all fronts. Klaus, thank you for being here this afternoon. Thank you. Good to see you. Klaus kleinfeld, ceo of alcoa, whose shares are moving higher after market on the back of their earnings beat. Before we go, want to get quick thoughts from the panel. Brian kelly, our trader with us for this segment, what do you think about the numbers and the activity tomorrow on the back of this . So, great numbers, obviously. The real question you have to ask yourself is how much of this is priced in . The stocks have doubled since last october. Weve known about ford pickup trucks going all aluminum. Mr. Kleinfelds very excited about the Aerospace Industry. Im actually short boeing. I would be a little afraid that hes late on this. Youre starting to see a lot of overcapacity in that. So, if i had a double on my hands, im not in alcoa, but if i had a double on my hands, i would absolutely be taking profits. Just zooming out to the macro picture, i was fascinated by what he had to say about the economy generally. He kind of said jobs shouldnt be taken overly seriously. I think he called them a latent indicator. Maybe he meant lagging, said there was a lot of innovation going on. It sounds like his tone, mentioning automotive, aerospace, commercial transportation, what you call Financial Engineering he calls pro activity and says theyre in position to take advantage of it. Regardless, it sounds like his tone bespeaks the confidence other companies are airing right now, so perhaps the economic picture is better than the data indicates, even with relatively low unemployment. Well talk to someone else who was booted out of the dow coming up and ask them about the relevance there. Alcoa rallied significantly since that happened. Thank you for coming up. Brian kelly will be up on fast money later today. Three internet stocks you should buy on todays momentum meltdown. Get out the Shopping List. Thats all coming up. Meantime, well send it over to dominic chu for a earnings alert. Container store cts shares, down about 11 in the after hours, the stock is moving lower after the Company Reported a loss in the First Quarter of 7 cents a share. Thats a penny worse than estimates on wall street. Revenue also coming in light at 173 million. The company also giving 2014 guidance, fullyear guidance thats below wall street expectations. I want to note something that the company said in its release. The chairman and ceo said that they think that while consumers are buying homes and automobiles and even highticket furniture, most segments of retail are, like us, seeing more challenging sales than we had hoped in early 2014, but we are very much looking forward to the Fourth Quarter. They see slight improvements in the second and third quarters. So, that might be one reason why youre seeing the stock react the way it is, down 14 now in the afterhours trade, kelly. Back over to you guys. And remember, they went public just a short time ago, dom. Fascinating that in some ways it seems easier for companies if they need financing to sell bigticket items to the consumer today than kind of just the day in, day out purchases. Maybe theyve been saving for a while. Again, this may speak to a broader theme developing among the consumers out there. Thank you, dom, for that in addition as well. Stocks have been under pressure generally today. My next guest isnt too surprised, though. He says stocks, bonds, emerging market, farmland, pretty much every investment in between is expensive. And now, are we in the everything bubble . This was the front page of the the New York Times today. The articles author, neil irwin, is here next. Then, well take the pulse of markets and the economy when i speak with honeywell ceo david cote. Youre watching cnbc, first in business worldwide. During the cadillac summers best event, lease this all new 2014 cts for around 459 a month or purchase with 0 apr and make this the summer of style. Im spending too much time hiring and not enough time in my kitchen. [ female announcer ] need to hire fast . Go to ziprecruiter. Com and post your job to over 30 of the webs leading job boards with a single click; then simply select the best candidates from one easy to review list. You put up one post and the next day you have all these candidates. Makes my job a lot easier. [ female announcer ] over 100,000 businesses have already used zip recruiter and now you can use zip recruiter for free at a special site for tv viewers; go to ziprecruiter. Com offer2. Welcome back. Heres a look at the session today. Stocks under pressure with the nasdaq in particular taking it heavy. Seema mody, what was driving indexes lower today . A broadbased selloff here at the nasdaq, kelly. 90 of the stocks on the nasdaq 100 trading lower. The biggest laggards were a mix of internet, biotech and social media, but it wasnt just the momentum stocks that weighed on the nasdaq today. Largecap tech playing a role, also consumerrelated stocks, best buy, chi popotle and other. There is a reason that the Consumer Discretionary sector is the worst performing sector so far this year. But lets also put the nasdaqs move into perspective. Yes, a big twoday drop for the nasdaq, but this has been the key outperformer over the past two months. In fact, investors did not sell in may and go away. The nasdaq up about 8. 5 , outperforming the s p 500. Of course, now attention turns to earnings. Tech earnings begin next week. Inte intel, ibm and ebay in focus. Thank you, seema, for now. So, red arrows across the board on the street today. We wondered if the New York Times article welcome to the everything boom or maybe the everything bubble is something behind it. Thats certainly some of the speculation down here today. Joining me to discuss is author neil irwin. Neil, great to have you here. Whats interesting about the point youre making is that its not necessarily that its one particular part of the economy where valuations are sky high so much as its so many different types of Asset Classes are at just higherthanaverage levels right now. Yeah, this is the dotcom boom in 2000, stocks are much more reasonably valued than they were then. This isnt housing in 2006, different measures of real estate are more reasonably valued than they were then. Whats different this time is that everything across the board around the world, virtually every financial asset class seems at the high end, at least, of historical valuations. There arent the bargains out there, emerging market debt, bonds, stocks, hard to find a deal. Across the board, around the world. Neil, its eamon javers here in new york. I wonder, if everythings so expensive right now, whats this going to mean for wages, and in particular, i put on my washington hat and whats it going to mean for jobs and politicians, ultimately . Thats what everyones focused on is when are people going to start to see an increase in their pay once theyve seen all of the other assets skyrocket . Yeah, in many ways, what global asset prices are telling us that the central bankers around the world have succeeded in one aspect of their job, which is trying to reflate the Financial System and get prices back on track. The question is, when or does that translate into wage gains, into employment gains, not just in the u. S. But around the world . And the evidence is spotty, you know. We had a good jobs report on friday and weve had a few of them over the last few months, but theres a big difference between a few good months and a kind of systemic, broadbased recovery and i think the jurys still out on whether the Financial System, the Financial Markets have become disconnected from the world economy. Neil, this seems to tailor nicely with the sort of issue that weve been grappling with really for years, but certainly in recent months with the Thomas Pickety book about the wealth Class Divisions were seeing and the economic underpinning of it. I think certainly for the middle or working class, its hard to save and gain any yield, and its certainly probably unaffordable for many people to buy a home or other assets, whereas theyre being bit up dramatically by the wealthier classes. Was that sort of a current you saw in doing this reporting . Yeah, its a risk. The question is, if youre ben bernanke or now janet yellen, you know, is this a case where youve succeeded on one dimension of your job and succeeded in trying to reflate a Financial System that was already, you know, was in deep disrepair five years ago . Maybe thats succeeded, but thats not having the translation into middle class gains that one might want to see. And the question is now what do you do . Well, fiscal policy is really on the bench, not doing much of anything. The fed is looking to taper and get out of extraordinary accommodation. And now we might be stuck. And its great to have a large stock portfolio, not great if youre trying to get a job and trying to get a raise. I tend to agree with mr. Irwin quite a bit. I mean, i dont think would you use the bubble word . I wouldnt, because i think you almost come to an existential question, which is what is the net present value, then youre discounting by a negative real Interest Rate. When Interest Rates are this low, its difficult to come up with a right valuation but this is exactly what happened during the last expansion, where the fed said you know what, we can never really know, so wed rather try to clean up afterwards than try to predict it beforehand and clean up the economy. I think mr. Irwin is pointing out one of the myths of monetary policy. The fed is quintuple the size of its Balance Sheet. It was 800 billion, now its 4 trillion. So, youre essentially trying to hammer and nail with a snow shovel. Youre using the wrong tools. You should be using fiscal policy, i would argue, or easing up on regulatory policy, but there is very few there are very few alternatives in a low Interest Rate world. Wearing your investor hat, what do you see when you see an article like this . How do you react . What opportunity does this create . Kelly, personally, i think people are still calling this a rally. This is a bull market. Its been going on for five years. So, i view this as a piece that it tells me that were not in the euphoria stage, first of all. Neil, do you think youll be writing this piece again in a couple years time and adamantly using the bubble word . If this keeps up, look, over the last year, the s ps risen 30 , the economys grown 2 . That can last for a while, but not forever. Does it mean it has two, five more years, more than that . Who knows, but this cant go on like this forever. Neil, obviously, janet yellen has declined every opportunity to say that shes very acutely concerned about these things, or at least is looking for kind of an excuse to intervene in Financial Markets in some way that tries to not risk takers back on their heels a bit. Do you have any road map as to when that might become part of the playbook of central bankers at this point . Whats interesting to see from janet yellen is shes trying to have it a little bit both ways. So, last week in that speech at the imf, she did mention that certain markets seem a little bubbly, leveraged loans, junk bonds. You know, she did allude to the idea that there needs to be aggressive monitoring of risk. But at the same time, she doesnt want to do anything. She mentions volatility. The feds hoping that some words and some kind of regulatory techniques are going to get rid of some of these risks and contain these risks. I think thats a very untested strategy, and i think, you know, were very much at risk of these approaches of using only words might leave us vulnerable to a correction in some of these more bubbly markets. Kelly, i also think theres a lot of fundamental or idiosyncratic stuff going on thats inflating prices. If you think about some of the soft commodities, hogs and cattle, which i did a story on last week, coffee, those things are very expensive because of fungus, weather, illness or perhaps demand starting to show weakness, by the way, the index for agricultures. And jane pointed out that corn prices are at a fouryear low. Theres a disparity there, but thats what the fed is grappling with, because when food becomes expensive, thats a huge problem for the average consumer. Neil, thank you, for now. Its such an interesting juxtaposition to have that on the front page of the times and the wall street journal with its First Edition from 1989. Talking about price inflation, do yourself a favor and read that today as well. Walmart warning the pickup in job growth isnt helping sales. Is that a sign that the economy is still fundamentally weak . Up next, honeywells ceo david cote will weigh in exclusively on that. And marijuana are now legal in Washington State. Well talk to one entrepreneur who wants to become the ge capital of the growing cannabis industry. [ girl ] my mom, she makes underwater fans that are powered by the moon. She can print amazing things, right from her computer. [ whirring ] [ train whistle blows ] she makes trains that are friends with trees. My mom works at ge. If yand youre talking toevere rheuyour rheumatologistike me, about a biologic. This is humira. This is humira helping to relieve my pain. This is humira helping me lay the groundwork. This is humira helping to protect my joints from further damage. Doctors have been prescribing humira for ten years. Humira works by targeting and helping to block a specific source of inflammation that contributes to ra symptoms. Humira is proven to help relieve pain and stop further joint damage in many adults. Humira can lower your ability to fight infections, including tuberculosis. Serious, sometimes fatal events, such as infections, lymphoma, or other types of cancer, have happened. Blood, liver and nervous system problems, serious allergic reactions, and new or worsening Heart Failure have occurred. Before starting humira, your doctor should test you for tb. Ask your doctor if you live in or have been to a region where certain fungal infections are common. Tell your doctor if you have had tb, hepatitis b, are prone to infections, or have symptoms such as fever, fatigue, cough, or sores. You should not start humira if you have any kind of infection. Take the next step. Talk to your doctor. This is humira at work. Welcome back. The debate over the face of the exportimport bank. The government is a governmentrun entity that ensures losses for exporters. A supporter of it, honeywell ceo david cote is here in a cnbc exclusive. Good to have you back. Why make such an issue about the exim bank here . When its being threatened the way it is now, thats just not a great position to be in. When you think about every country recognizes that exports are critical for job development. Exports create jobs. And its why you find big countries like korea, japan, china, france, germany, all of them are supporting exports with financing. We do the same thing with the exim bank. We need to have this to be competitive as a country. And we cant unilaterally disarm and say, okay, for all of their companies, sure, go ahead and provide financing that helps companies export. In the u. S. , were not going to help our companies. It puts u. S. Workers at a disadvantage. I dont think we ought to put u. S. Workers in that kind of a position. All the same, its interesting that the u. S. Having, as is so often quoted, the deepest, most liquid Capital Markets in the world, hasnt come up with a private sector solution here. Is trade finance just not a profitable business . Well, as i understand it, about 98 of exports that our finance do go through private means, but about 2 of them require, lets say special or better financing, and thats what you get through the exim bank, and it makes a difference when it comes to trying to compete with a french or german or chinese or korean firm that is supporting their workers. We need to have the same thing for the u. S. But if 2 is the case here thats vulnerable of our export pie, again, why isnt it that some of our banks, some of our financial institutions, some smaller lenders, even, wouldnt look at this space and say, you know, id be willing to take a 2 loss on 100 cents . I dont think theyd look at the returns as being adequate enough for them. This really is something that we need to be competitive with these other countries who provide very lowcost financing for their exporters on a number of these bigger deals, and these bigger deals help to pull along a lot of smaller suppliers in the u. S. , all those small firms and all the jobs they represent that everybody likes. This is very supportive of them. We need this in order to be competitive with that, say, Korean Company or French Company thats supporting their workers with this kind of support. Do you or have you in the past, david, used exim financing at honeywell . Weve used it minimally as a company, but i would say a number of our customers in the Aerospace Industry and in the oil and gas industry have used it, and we would supply them. So, if the exim bank does lose its charter, your business will take a hit . Yes, i believe so. I believe u. S. Jobs will take a hit as a result of that. How big of a hit . Well, thats always tough to know. As you know, predicting economics, i always say, despite the amount of math that they put into economics, it certainly doesnt seem to be a science. Its more art. So, there would be an impact. Tough to predict exactly what that number would be, but i sure know it wouldnt be positive. And david, lastly, just since we have you here and people are trying to figure out the direction of the economy right now, how strong is it . Well, i would say, for the last four years ive been one of the guys whos always consistently more negative on Growth Prospects for the Global Economy and the u. S. Economy than all the forecasts. And as a result of that, weve tended to play them pretty conservatively. And as a result of that, weve done well. Weve seen the same thing happen this year. So, right now, i would still say the economy is okay. Its not great. I never thought it was going to be as good as the number of the forecasts at the beginning of the year, but its another bad, either. And were going to continue to have these ups and downs and these modulations, but i still think its okay. But no capex spending boom is what im hearing, i guess . Because people would look to somebody like you or honeywell for the sign that were on the cusp of a bigger surge on business spending here. Sounds like even in 2014 thats not going to be the case. I can tell you, for us, for example, 2014, our capex spending is up about 20 from what it was last year. Wow. Because of some Major Investments that were making primarily in the u. S. So, its one of those where, yeah, the investments are going on, there is capex thats being spent, and i think by most companies at a higher rate than last year, but were going to continue to see these bumps along the way. And i just dont think we can react to every negative piece of Economic News or really positive piece of Economic News in an unreasonable way. Right. This is one where i think the economys going to continue to be okay, not great, not bad, but okay. Final question, because i know we have to go, david. On the front page of the the New York Times, we just spoke with the author of the piece today. He calls it a bubble economy, says everythings in a bubble out there. Do you agree . I think its tough to know. And if we take a look at the last five years since we went through the great recession, these are unprecedented times. So, its kind of tough to know at this point. And im one of the guys who says thank god the fed has done what they have in order to make sure that we didnt end up with another Great Depression and only ended up dealing with a very bad recession. I do believe over time were going to have to wean ourselves off of this, but i sure dont think nows the time to do that. Or wean off the exim bank, as you have put it. David cote, thank you for being here. Its good to see your perspective. Nice to see you again, kelly. Appreciate it. Byebye. Breaking news now on citigroup. Dominic chu . Heres breaking news, courtesy of dow jones. The u. S. And citigroup are near a multibillion dollar deal to resolve mortgage problems here. So, again, citi and the u. S. Government at least near a multibillion dollar deal to resolve their mortgage issues. This according to a report from dow jones, citing sources progress in the settlement talks is related to the sale of mortgage securities, comes after the u. S. Threatened to file suit against citi for this. The settlement could happen as early as next week, according to sources over at dow jones, and citis expected to pay more than 4 billion to resolve these particular issues. So, again, the u. S. And citigroup near a multibillion dollar deal, could be more than 4 billion to resolve mortgage issues, mortgagerelated lawsuits between the u. S. And citigroup. Well bring you more details, but for right now, again, an Interesting Development for a very, very large cap financial stock thats currently very much in focus for a lot of investors as we approach earnings season, kelly. Back over to you guys. Dom, it certainly is. Just want to get some thoughts briefly from the panel here. Kate, weve been waiting on the figure, 4 billion now appears to be the number theyre reaching. And you can see the shares after hours up 1 on the news. Yeah, im not surprised by that, kelly, because at first glance, 4 billion would seem to be a win for citi. If you recall just a few weeks ago, the reporting was that they were at an impasse, the government looking for a 10 billion giveortake issue, citi offering up to 4 billion. So thats a win for citi. They probably had incentive to get something done prior to monday because theyre reporting earnings and, of course, they would like to be able to reassure investors they are close to a deal, they have a deal in principal, even if its not inked yet. I would say at this first glance, it looks like good news for them. Thats the message again from shareholders as well. Mike, jason, either of you feel differently . I was going to say, weve been numb to these numbers, and i do think in addition to the earlier reporting about how big a settlement might be, bank of americas kind of serial settlements with bigger numbers i do think make this more digestible for the market. Can money fix the Immigration Crisis on our borders right now . Tens of thousands of children and others have illegally crossed our borders. Theyre being kept in Holding Cells while awaiting deportation. Now president obamas asking congress for nearly 4 billion to combat this issue. Well get you the details on that next. Also ahead, a 10 Kickstarter Campaign to make potato salad has gone viral. Ive been hard at work in the kitchen learning how to boil potatoes. And now hes raised more than 60,000 for this project. Has he even decided on a recipe . And why are people giving their own money for this kind of, what some would say is frankly nonsense . Well ask the man behind this potato salad, later on the closing bell. 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Tens of thousands of kids pouring across the border from countries beyond mexico, in central america. But the president did before leaving has released his request to congress, which was much larger than we had been anticipating, 3. 7 billion in total. Of that, about 1. 8 billion is for taking care through the department of health and Human Services of those children who have come across, 1. 5 billion for law enforcement, border patrol, that sort of thing. Congress is going to debate this. This is going to be difficult to get this through congress, but there is an appreciation in a bipartisan way that this is a big problem. So, were going to see very quickly congress through the appropriations committees react to this request. I suspect hell get at least a large chunk of this money, kelly, and well see if thats effective in doing the job and stemming this tide of children coming across the border. Eamon, would you agree with that, hes likely to get let me quote the Research Group this morning. Theyre saying in the house, as weve got the backdrop of an israeli hamas war looming, u. S. Talks with china on the rocks, a hold in highway funding, a crisis at the u. S. mexico border and the exim bank may be allowed to die and theyre pursuing a hunters right bill snaent. Youve already seen criticism of the president from republicans in response to this request saying, look, theres not enough for law enforcement. This is about responding to the humanitarian crisis, which needs to be dealt with, but were not seeing enough to secure the border. And thats going to be a theme youre going to hear from republicans throughout the course of this crisis, which clearly is a humanitarian disaster for those children who are involved in it, being sent across the border parentless. And it makes you wonder what horrific situation the parents have to be in in order to risk their children this way, in order to put them across the border by themselves. But the gop here is willing to spend the money, thats what youre saying . I think ultimately the president gets the money, but there will be a lot of criticism about Border Security and why thats not money. For sure. Eamon, thank you. Legal pot smokers in colorado are Getting Company today. The state of washington making the move to legalize marijuana. There are reports of long lines, high prices and shortages of some supplies. Things are off to a rocky start. Well have the details ahead. And luxury auto sales are firing on all cylinders, but one brand is stalled and its cadillac. It was once one of the most popular makers out there and also one of the most popular stories in cnbc. Com today. Well get you the hot list, next. I make a lot of purchases for my business. And i get a lot in return with ink plus from chase. Like 50,000 bonus points when i spent 5,000 in the first 3 months after i opened my account. And i earn 5 times the rewards on internet, phone services and at Office Supply stores. With ink plus i can choose how to redeem my points. Travel, gift cards, even cash back. And my rewards points wont expire. So you can make owning a business even more rewarding. Ink from chase. So you can. Welcome back. Talk about gray skies, a warning about the vix, hearing words from dr. Doom, theyre vying for the top spot on the website today. Allen is running through it. Hey, kelly. Dr. Doom is back for us. Our friends at futures have an interview with him this afternoon. And by his own admission, hes been saying theres going to be a correction for about two years now, but now he really means it. The s p could retreat up 30 . Of course, people like dr. Doom on our website. Patty, our markets editor, pointed out the vix has had a 20 gain over the last two days. Maybe volatilitys back in the market. And then finally, the third story thats been burning it up all day is very yucky. Its about a medical procedure that helps people with cdifficile, one of the super bugs out there. Im just going to say, fecal transplant. Anyway, theres Investment Opportunities in that, and we took a look at it, and its on the website and people are interested. Wow. I did tweet out a great newsroom joke about that that i cant say on air, but if you follow me on twitter, you get the joke. I appreciate that, allen. Take care, kelly. Thank you, for now. Unfortunate stuff for people dealing with this, by the way. The Pacific Northwest legally lighting up today. Washington joining the ranks of states where pot is recreational and legal to a grand total of two. Is washington ready for the handling of finances at the cannabis craving, though . The answer to that is coming up next. One toke over the line, sweet jesus, one toke over the line its a complete checkup of the services your vehicle needs. 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You get 10 gigabytes of data to share. What about expansion potential . Add a line anytime for 15 bucks a month. Low dues. Great terms. Lets close. Introducing at t mobile share value plans. With our bestever pricing for business. [ female announcer ] f provokes lust. It elicits pride. Incites envy. And unleashes wrath. Temptation comes in many heartpounding forms. But only one letter. F. The performance marque from lexus. Welcome back. In washington back. If Washington State today, 8 00 a. M. Local time, it became legal to sell recreational marijuana. 20 shops were licensed. Not all were ready. Here is footage. There were happy crowds jockeying for product in short supply. The ceo of kind banking provides financing to the new legal pot industry and he joins us now. David, welcome. What kind of opportunity do you have and what barriers are there for other banks to participate in this space . Afternoon, kelly, thank you for having me today. Its a big day for the marijuana industry. As you just mentioned, the state of washington went recreational today. Banking is here to help the industry grow and flourish. We provide, were a full Service Financial solution. We provide debt. We provide equity. Can you do could have been vertible debt. We are coming out shortly with a Merchant Service program that will help the industry go cashless. We provide vaulting services, payroll services. Basically, we are providing the backbone for the Legal Cannabis industry. Is there something banks can do as well, david, or are they restricted . Well, any bank can do whatever they want to do. On february of this year, the federal government released a memo saying how the banks can work with the industry. However the reality has set in and very few banks, if any, are working with the industry. Therefore, people like myself are stepping in and providing alternatives. However, banking is the full Service Platform offered in the industry today. Itsee mon javers here. Eomon javers here. If tike companies and big banks the rest of them. They know how to do the financing and shipping. Are you worried about the big guys sitting on the sidelines all of a sudden coming in . My personal opinion is until federal law is actually changed i believe the big players will watch and learn and see how we do our business currently. I believe the reality is this, the world is a multitrillion dollar market so why would a big bank or a Tobacco Company enter a market and risk their Global Platform for, you know, a 35 to 10 billion industry todayed . You think they need a couple more states to go . No, look, new york passed yesterday. So that became the 23rd state. Alaska and oregon are going to have recreational on the ballot in the fall. There are at least eight other states going through the approval of medical marijuana and my true belief is until federal law is changed and marijuana is removed as a schedule 1 drug the big players we know the names of will watch and learn and stay on the sideline. David what have we learned from colorado here, is there anything the states can do better . You know, this whole thing is a learning experience. I think you know washington is going to learn from colorado and i think the next guys down will learn from the rest. I think colorado is doing a tremendous job of regulation. Crime is down, underaged, you know, there is not any underage issues ahave taking place right now. There is a supply shortage in washington. Thats truly because colorado was a much more mature market before going recreational. So washington does have to catch up a little bit. Yes. Out of the 335 licenses issued, 24 were supposed to open today weekend only six are. Thats leading to a lot of long lines. You are shaking your head, why . Because i think this is morally wrong, personally. Im a capitalist. But i think this does a lot more harm than good for human beings. So i cant say im really in. Yeah, a good point as well, one thats often overlooked. Well leave it there. You had concerns over the state of the economy. By the way, how could people be so bad off when people are giving away money to a guy on kickstarter for a guy making potato salad. Hes coming up next. Welcome back. This Kickstarter Campaign has raised more than 50,000 so far. Its not for a tech startup or a hollywood movie. It is for potato salad. With us now is the man behind this Kickstarter Campaign is zach danger brown. What are you going to do with the money . Whats the question . What are you going to do with the money . You dont even have the recipe, right . I have a lot of recipes. I dont have the recipe yet. Are you going to develop it or what . Isnt at this time case you cant go off and buy sneakers or something you have to be trance parent . The kickstarter terms as far as i understand it is you arent, the only rule i know for sure is you are not allowed to contribute wage to charities. Our goal with this money is to spend all of it on the greater good, working to make the world a better place. I have a stupid question, im sorry, where does that potato salad come in. Oh, so only background. Im making potato salad. The internet is going to give me some money. I will make some potato salad. I will give bites to some people and then whatever we end up having left over were going to have to figure out how can we use this money that were getting to do, i dont know, something good with it. Potato salad, you know is not super expensive. I cant imagine it costing more than a few hundred dollars to make. Unless you have a truck of caviar or something. Zach, i want for the know if your middle name is legally danger is that a legal thing . Define legally. You answered the question. Show us the birth certificate. No, im kidding. Is the point of all this of your potato salad do something charitable and use potato sal aed a with a means to that end, did you start this and since developed moral trmore more altruisticic goals . I think its the latter one. I think its crazy to imagine you would have a 130 campaign for potato salad that would blow up to 50 or 66 or who knows where this is going to go. Would you give this guy 10 . No, i dont think i would. Im kind of a undoer today. I apologize. Its for altruisticic reasons. Its for good purpts. I wouldnt expect it in return. You wouldnt exinvestigate 53. 000 . I would like to try some at some point. Have we on, ill bring it. Zach danger brown, fast money is coming up in a moment. Melissa lee, whats on tap . Were making potato salad. Were going to eat it and not share it. So there. All right. Melissa. We had a melt june in momentum names. We will give you the top three picks in each sectors that are buys on this pullback. Over to you, guys. All right. Thanks. Fast money starts right now. Out of new yorks times square, im melissa lee t. Volatility index gaining 20 in two days. It wasnt the nasdaq hardest hit seeing its worst threeday drop in two months. The momentum names are behind the carnage we saw on the nasdaq and we are covering moves from all the angles. Tun Suntrust Bob Peck is going to name out which stocks you should