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Transcripts For CNBC Closing Bell 20141217

policy is with the entire path of interest rates will look like. and i really don't have much for you other than to say that they will be data dependent. that over time the stance of policy will be adjusted to try to keep the economy on a track where we see continuing progress toward achieving our goals of maximum employment and price stability. there's, you know, the federal funds rate has been sitting in this zero to a .25% range now for 6 years. this is -- and we have a large balance sheet. we're providing a very highly accommodative monetary policy. and even as we begin to normalize the stance of monetary policy when that becomes appropriate, it's important to remember that monetary policy will still be very accommodative for a long time. and as we begin to normalize policy we'll be looking at unfolding economic developments and as the economy strengthens and we come closer to achieving our objectives i think it's very likely that we will, you know, progress on the path of normalizing policy. but i can't tell you specifically other than saying it will depend on progress and moves will be data dependent. i can't say much more than that. >> chair yellen, the committee's projections show unemployment below your own views on where full employment should be. does that reflect a desire on the part of the committee the economy runs above potential for a while and if so can you elaborate on why it want that is and the purpose achieved and the question of john asked earlier, you called market based measures is pronounced in the five year forward range and talking about expectations that inflation many years from now will be below target and some market participants see that as evidence of declining credibility in the committee's long-term objective. why do you still view that as transitory? >> so you -- your first question is why is it that the committee sees unemployment as declining slightly below its estimate of the longer run natural rate. and i think in part the reason for that is that inflation is running below our objective and the committee wants to see inflation move back toward our objective over time. and a short period of a very slight under shoot of unemployment below the natural rate will facilitate slightly faster return of inflation to our objective. it is i should say very small under shoot in a situation where there is great uncertainty about exactly what constitutes maximum employment or a longer run normal rate of unemployment. we also do see the different measures of slack in the labor market point to different assessments of just what maximum employment is. the standard unemployment rate for quite sometime now has been signaling a little bit less slack in the labor market than measures that are somewhat broader that, for example, include the unusually large number of people who are part time employed but would prefer full-time jobs. and the portion of the decline we have seen in labor force participation that looks like it would disappear or be eroded in stronger economy and so it may be that with a very small under shoot of this longer run normal level of the unemployment rate is measured by the standard unemployment rate will be seeing further progress on those other margins of slack. but it's important to point out that the committee is not anticipating an overshoot of its 2% inflation objective. [ inaudible ] >> longer dated expectations, what i would say and we refer to this in the statement as inflation compensation. rather than inflation expectations. the gap between the nominal yields on 10-year treasuries, for example, and tips have declined. that's inflation compensation. and five-year, five-year forwards as you said have also declined. that could reflect a change in inflation expectations but it could also reflect changes in assessment of inflation risks, the risk premium that's necessary to compensate for inflati inflation. that might especially have fallen if the probabilities attached very high inflation have come down and it can also reflect liquidity effects in markets and, for example, it's sometimes the case that when there is a flight to safety that flight tends to be concentrated in nominal treasuries and could also serve to compress that spread so i think the jury is out about exactly how to interpret that downward move in inflation compensation. and we indicated that we are monitoring inflation developments carefully. >> madame chair, peter coke with bloomberg television. want to follow up on firming of normalization once liftoff takes place. you said data dependent. does that suggest to markets, to those watching the measured pace in tightening cycle and the increments that that's not something markets should expect? what is your own takeaway of how effective that measured pace was back in the previous tightening cycle? and separately on the dissents at this meeting, there were three. notal number, certainly. what does that suggest about the debate and the table and the ability to forge consensus. are you disappointed with the number of dissents? >> so let me start with the number of dissents. there is a wide range of opinion in the committee. i think it's appropriate for people to be able to express their views. and in the sense you see dissents on both sides. i think the statement does a good job of reflecting what the majority of the committee thinks is appropriate policy. so, you know, at a time like this where we are making consequential decisions i think it's very reasonable to seedier have divergents of opinion. there's no dissension of the part of the committee to use a language like that. i think quite a few people looking back on the use of that language in the -- i can't remember if it was 12 or 16 meetings, where there were 25 basis point moves, would probably not like to repeat a sequence in which there's a measured pace and 25 basis point moves at every meeting and i don't want to encourage you to think that there will be a repeat of that. many members of the committee participants have said that they think policy should be based on the actual evolution of economic activity and inflation which tends to be variable over time. and that's why i say i anticipate it will be data dependent. we have continued to provide guidance. the same guidance that we have for sometime that says the committee anticipates that even after employment and inflation are near mandate consistent levels that economic conditions may for some time warrant keeping the target federal funds rate below the levels the committee views normal in the longer run. that's a mouthful but it says in effect that the committee believes that the economic conditions that have made recovery difficult we're getting beyond them. they're optimistic that those conditions will lift. they see the longer run normal lift of interest rates as around 3.75%. so there's no view in the committee that there is secular stagnation in the sense we won't eventually get back to pretty historically normal levels of interest rates but they have said it will, you know, the economy is required to get where it is a good deal of monetary policy accommodation. we expect to be able to normalize policy. but until those conditions have lifted that have held back economic activity monetary policy will need to stay accommodative. so in that sense,valent to sayi path of normalization anticipated to be relatively gradual but, again, the path of rates will depend on how economic conditions actually evolve. and that's nothing more than an expectation on the part of the committee. >> pedro with dow jones news wires. enough about rates. i want to ask you about the new york fed. new york fed's been in the news a lot lately. president dudley was invited to congress to testify about conflicts of interest there. you had things like the cigar tapes. the byrum report and the revelation that a former new york fed official was exchanging information with someone at goldman sachs and also had new york fed connections. i just wonder, and also scandals in the crisis regarding the new fed and purchase of goldman sachs stocks. do you see the new york fed as a black mark on the system? have you talked to bill dudley about reforming the image of that particular regional fed? and do you think a person that's spent 21 years of his career at goldman sachs is in a position to regain public confidence of conflicts of interest? >> let me say that i -- i think it's very important for the federal reserve system to have confidence in the quality of its supervision. and i do have -- i have a good deal of confidence in the quality of our supervision program. for the banking organizations, we super vise in general and that also also applies the largest banking organizations. we rely on examiners who are in the field and at the reserve banks to be providing information about what's happening in those organizations. but that information feeds into a process in which it is not individuals at any single reserve bank but at the board, it's a board-led process. and it involves senior officials at a number of different reserve banks. it's also a multi-disciplinary process that involves not only people from supervision but those from markets, from economic research, experts who focus on financial stability all come together to evaluate the information that they have and to assign supervisory ratings and decide on the appropriate program for all of those large institutions. we have strengthened the process of supervision enormously since the crisis. and i feel -- i feel a very good sense of confidence in how we're carrying that out. now, it is important to make sure that we have fed into the this process all the information that's relevant to making the right decisions. and when there are individuals who are examiners, who may disagree with others in their team about how to interpret when's going on at a particular institution, it's important that there be channels by which they can make sure that disagreements are fed up to the highest levels. this is true throughout the work we do. we do economic forecasting and the fmoc receives information to help us make decisions. but obviously, there are disagreements about among economists about how to interpret developments. it's also important for us there to make sure we understand alternative views. so this is important and supervision we have announced that the board is undertaken a review of whether or not there are appropriate mechanisms in place in all of the reserve banks that individuals who disagree with decisions can make those -- make their own views known and feed into the process and we have also asked our inspector general to look into that. >> thank you. jeff kearns of bloomberg news. i would like to get off monetary policy and ask you about the relationship with congress. specifically, how worried are you about legislation that has been proposed and may be proposed again in the next congress that would reduce fed independence? would you see yourself trying to fight back or would you see yourself trying to go to congress to work with them to do more with transparency or something else to reduce their concerns? without making them law. and if there were bills sent to the white house would you talk to the president about vetoing them or do you have any confidence that he would veto bills that would reduce the fed's independence? thanks. >> so, let me simply say that congress assigned us important tasks in monetary policy and other roles that we perform, and the federal reserve is highly focused on attempting to carry out the mandates that congress has given us in the area of monetary policy. it's our dual mandate to promote maximum employment and price stability and that's what we're working on. you know, i would say that the ability of a central bank to make the decisions about monetary policy that it regards as in the best longer run interests of the economy free of short-run political interference is very important to the effective conduct of monetary policy and i think history shows not only in the united states but around the world that central bank independence promotes better economic performance. so, i do think central bank independence is very important. and that it's important to make sure that we can make the decisions we think are best free of short-run political interference. with respect to monetary policy. we should be accountable and we are accountable to congress in explaining what we do, i believe strongly in transparency and i believe strongly that we should communicate as clearly what we're doing in the rational for doing it and am very open to looking for ways ourselves to improve our communications and transparency. and working with congress to do that. but i would be very concerned about actions. back in 1978, congress explicitly passed legislation to ensure that there would be no gao audits of monetary policy decisionmaking, namely policy audits. i certainly hope that will continue and i'll try to forcefully make the case for why that's important. >> with a veto? >> i cannot speak for the white house. >> peter barnes, fox business, ma'am. i'll stay off of interest rates and first want to wish you happy holidays. >> thank you. >> second, want to ask you about the russian economy. did that come up in the meeting in your discussion about global economic developments? as you know, there's a lot of concern with the drop in oil prices the russian economy could be in some trouble. russia owes a lot of money to u.s. and foreign banks. and russian companies. is there any concern about default? any concern about possible contagion? and if so, is the fed taken any steps to prepare for that? thank you. >> well, we certainly did review global economic developments. including developments in the russian economy. clearly, russia has been hit very hard by the decline in oil prices. and the ruble has depreciated enormously in value. and this is posing a series of very difficult economic conditions in the russian economy. of course, we discussed what the potential spillovers are to the united states. which could occur through both financial and trade linkages but these linkages are actually relatively small. russia accounts for less than 1% of u.s. trade volume and u.s. banks exposure to russian residents is really quite small in terms of relative to their capital. in terms of the portfolios of u.s. residents, there are russian securities but they account for a very small share. so, i expect that the linkages back to the spillovers to the united states, both through trade and financial channels, would be small. europe, of course, is somewhat more exposed to russia. both because russia's an important supplier of oil and natural gas to europe and the financial linkages are somewhat greater but in the case of the united states, i see the spillovers is pretty small but we're obviously watching that closely. >> greg rob of market watch. also happy holidays. >> thank you. same to you. >> there's a contagion risk from low oil prices that people are talking about in the markets. what does it mean to the banks that have lent, you know, into the oil patch with the low oil prices? and i guess, you know, your warnings about leveraged loans, you have made warnings over the past year of leveraged lending. are you worried they haven't been heeded? thank you. >> so, i mean -- you are talking about the united states exposure? i mean, we have seen some impacts of lower oil prices on the spreads for high yield bonds. where there's exposure to oil companies that may see distress or decline in their earnings. and we have seen some increase in spreads on high yield bonds more generally. i think for the banking system as a whole the exposure to oil i'm not aware of significant issues there. this is the kind of thing that's part of risk management for banking organizations and the kind of thing they look at. stress tests. but the movements in oil prices have been very large. and undoubtedly unexpected. we in terms of leverage and whether or not levered entities could be badly affected by movements in oil prices, leverage in the financial system in general is way down from the levels before the crisis so it's not a major concern that there are levered entities that would be badly affected by this, but we'll have to watch carefully. there have been large and unexpected movements in oil prices. >> good afternoon, chair yellen. steve beckner. i will go back to interest rates if you don't mind. actually, it's a question about balance sheet affects on the overall appropriate level of monetary policy in reaffirming the reinvestment policy, the fmoc says once again that this will help maintain accommodative financial conditions. in the past it said that the large portfolio securities will exert a downward effect on long-term interest rates. as you look forward to raising short-term rates, to what extent does the fmoc need to take into account residual accommodative effect of a large balance sneet. >> so i agree and that's why we stated it that we typically think of the monetary policy impact of our asset purchases as depending on the stock of assets we hold on our balance sheet rather than the flow of purchases and so we're reminding the public that we continue to hold a large stock of assets and that is tending to push down term premiums and longer term yields. we make clear when or tried to make clear when we issued our normalization principles in september that we intend to use changes in our target for the federal funds rate as the main tool that we will actively use to adjust financial conditions. rather than actively planning to sell the assets that we've put on to our balance sheet. sometime after we begin raising our targets for short-term interest rates, depending on economic and financial conditions, we're likely to reduce or cease reinvestment and gradually run down the stock of our assets. but our active tool for adjusting the stance of monetary policy that it's appropriate for the economic needs of the country, that will be done through adjusting our short-term target range for the federal funds rate. >> sorry. kevin, i can't believe nobody asked you the most important question of your san francisco 49ers. since everybody wished you a happy holiday. can you talk about housing? few things are more important to americans than their wealth creation than housing. you have in your statement noted that it continues to be a drag. mr. dudley has -- relatively upbeat in his forecast. i don't know if that's a view shared on the committee. what do you think is holding housing back? what can congress do and what will you tell congress in the coming year and you didn't mention mr. dudley individually. are you pleased with his handling of the events? >> so let me start with that. i have great confidence in president dudley. he's done a fine job in running the new york fed and i want to be very clear that i have great confidence in him. he's a distinguished public servant and he's worked very hard in the aftermath of the crisis to make sure that the new york fed is doing all that it needs to do to contribute to the work that we do both in financial stability and in supervision. and let's see. the other question that you asked was about -- >> housing. >> about housing. so, you know, i've been surprised that housing hasn't recovered more robustly than it has. in part i think it reflects very tight credit -- continuing tight credit conditions for any borrower that doesn't have really pristine credit, you know, credit ratings. and my hope is that that situation will ease over time. in addition, household formation has been very depressed. in my expectations is that as the labor market continues to improve and households feel better about their financial condition that we will see household formation pick up and somewhat stronger recovery than we have seen thus far in housing. >> okay. thank you. >> all right. fed chair janet yellen completing her last news conference for 2014. more confusion here and there in terms of language. i'm bill griffeth with kelly evans on "the closing bell." >> we are looking at a dow up 272 points and basically a moment during her press conference where the market had given up all of its gains after that statement hit where they kept the considerable language. that was the big surprise initially sent stocks higher and started to talk about a couple of meetings, bill, might mean two. >> two meetings ian posturing, okay, an april rate hike and you saw the market walk back and then again as it wraps up here look where we are. pretty much the highs of the session. >> just joining us, really the headline is that they are slightly altering the language in their statement to say that the fed will have patience in waiting to normalize, to begin the normalization of interest rates and raise them and that is not -- does not alter the considerable period of time language they have before and referring to previous considerable time language. they are not changing it but they took it out and added patience. >> yeah. >> and, you know, the fed chair speaks in broad terms and we journalists are trying to pin her down to specifics. and she's not going to do this. >> also a couple of interesting moments there. she was asked a couple of times about the confidence in the new york fed as the fed has been dealing with scandals there. her confidence, she said i have great confidence in bill dudley, the president of the new york fed and, again, questioned at times because of the background of goldman sachs and that was certain think focus and additional questions which didn't come up in the statement, specifically about oil, about russia. she tried to be reassuring on both notes noting that the exposure of russia to europe and greater than the u.s. >> it's transitory, too. they expect to get to normalized inflation expectations down the road. let's ask the expert what is they thought of all of this. diane swong from chicago. jack bouroujisian in chicago and rick santelli in chicago. steve liesman will join us momentarily. rick, let's talk about the market, response. yields gone up a little bit. wild gyrations for the stock market. what did you guys think of what she -- i know you said -- i heard you say it earlier. you thought the fed statement like a rumba and how did the market treat this? >> well, really, i mean, if you blur your eyes a little bit, rates aren't much different. 2s, 5s, 10s and 30s than before the statement. what is dramatically different, the equity markets. dollar index, isn't all that different either. in the end it's about equities. in my opinion about the risk-on trade but i don't know. just this is my own opinion. i thought that janet yellen in the press conference just seems so unsure about the gps of where the economy is and where they need to go. and i consistently go back to the original 1977 legislation about stability and pricing. stability and prices. doesn't say 2% inflation. could be 2% disinflation or deflation. it seems to be talking more about a variance issue than level issue and all created by the fed. i personally think it's very hard to defend looking at the data of late for the u.s. economy but there's no argument as to whether it's commiserate with crisis style zero interest rate policy. end of story. >> steve liesman joining us from the meeting there. what jumps out to you from her answers? any surprises? >> you know what's funny, kelly. i couldn't disagree with rick more. i thought the statement -- >> not surprising. >> -- a real muddle and confident and actually much more explicit about the outlook for rates than i thought she would be. she said no rate hike for two metings and agree a rate hike next year. >> that's not what she said, steve. she said it was possible. it was possible. she didn't say -- >> rick, you bet on possible. >> a couple of meetings. right. but possible isn't raising rates. >> what you should be doing, best bet and the best bet remains exactly what it was a mid-2015 rate hike. and i thought -- >> anybody else here disagree? jack, what do you think the takeaway was? >> you know what? i think janet yellen said everything that every other fed govern for a has been saying, data dependent. not date dependent. they changed the wording to reflect that. one thing that i'll say is that she's talking about an economy that's starting to do better. look. you know, and the bottom line is this. if they are going to raise rates, it is going to be because the economy is expanding to the point of liftoff. i love that term. and the other term by the way i love and, steve, she refuses to deflation. she calls it inflation compensation. >> that's part of the confidence. she is not letting when's happening with oil prices alter her belief that you have have a stronger u.s. economy. she's not -- looking through this oil price the way she looked through and i would argue correctly the october volatility and markets and that so many people thought was the harbinger of the end of u.s. growth. >> spot on. >> i think spot on. >> diane? >> you know, i take away similar to steve. i think she was much more clear than the statement. the statement sort of a muddle of, is the next statement patient and gradual? just really silly. >> okay. so what is it she's saying now? >> she is saying what she has said. >> expecting to raise rates and, you know, what are they waiting for at this point? >> they're waiting for wages to accelerate and inflation to firm. they do not need to see inflation go back to the 2% target before they raise rates because as she pointed out they do look at the long legs and monetary policy and there is still even though they're going to be slow, gradual, walking as if they're walking on thin ice even as the economic ground firms they also are going to be preemptive and inflation could be lower. lowered the inflation outlook with the transitory nature of oil prices and global economic risk and acknowledge that and not important enough to highlight and she was more confident by saying she addressed the issues, talked about what russia meant, she talked about the exposure of lower oil prices in our banking system, in europe. all of that and they still said we're on course. the best we can be. we can't tell you exactly when it will happen but they said nothing new to the shape of it and that's why the market is rallying now. >> a quick question. as we turn towards 2015, first on the 3 dissenters in the statement. >> yes. >> a whhabitual thing and how ds that change the outcome? >> it is interesting because we are getting more doves rotating into the voting position and people that dissent don't vote in a void. we have two hawks retiring soon and this was their last stand. they used the voting position to amplify their positions which have been very clear all along. on the flip side of it, the dove, the dissenting dove does reflect incoming votes like evans from chicago. there's another chicago reference there. i think that's important to understand is this the people coming on are caution and patience, gradualism, slow, low rates for longer and the idea of having room showing traction to catch up on what we lost to the great recession. >> you asked her about oil and immaterial pact of inflation and monetary policy down the road and repeating that this decline is transitory and fully expect the inflation rate to get back to, you know, where they expect it to be and projections down the road. do you buy that? plenty of people expect the next year to be the year of low oil prices and going to have a huge impact on the economy here in the united states. she seems to be down playing that. what do you think? >> so, bill, though the question, the sub text of that question is, probing that very issue i was arguing about with rick, how aft in her forecast? saying -- answering the question, you know, there's some possibility that there's a signal from oil that we have a deflationary problem down the pike, that changes the calculus. i think that, you know what? the policy right now until proven oerz is to look through this and make it and believe it's a transitory factor and that they're on target. i think the fed of two kids. employment and inflation. employment kid is doing great. the inflation guy, the inflation kid, he comes along soon enough. >> i love she reiterated the fact that the fed doesn't want to overshoot the inflation target an just this morning, rick -- >> that was important, too. >> the cpi number declined. i mean, overshooting is clearly not the issue here. if anything, it's a question about how much they might let, for example, the unemployment rate keep dropping. more so than they might otherwise feel comfortable with to perhaps try to get the cpi rate to be at -- i know back up to 1.5% or 2%. >> kelly, that's in the forecast, as well. i think that's really important is now starting to see that forecast of unemployment lower and in fact the fed i think is starting to move that sort of threshold on what it thinks is full employment because, let's face it. we have seen unemployment come down quite a bit and yet to see the wage acceleration. >> all right. brian jacobson joins us, as well. what do you think the takeaway is today? >> well, i think the big takeaway is it's a dovish fed and trying to set us up for 2015 being like 2004. in 2003, they said that rates would stay low for a considerable time. four months they dropped it cold turkey and january 2004 meeting replaced and now melding them together. patient and considerable time and we have had considerable time for 27 months and thinking about rate rises, they're very poirnt and very gradual and setting us up for when they hike rates in june, maybe they wait a meeting, let it pause. >> brian, that's not consistent with the year-end forecast to imply they have to raise rates three different times and get the funds rate or whatever rate you want to get it over 1% by the end of the year and imply to kind of get on it. >> well, actually, those aren't really forecast. remember. they're projections and tried to clarify forecasts or projections on the basis of other assumptions so it's not taking into consideration sort of what might happen. it's what they wish would happen. so it's more like wishful thinking opposed to an actual forecast. >> more than -- yeah. sorry. >> did the basis of good public speaking is we know three points. tell they will what you're going to tell them. tell them and then tell them what you told them and clear that the fed is still in the first camp. tell them what you're going to tell them. then the next meeting, tell them what you're going to tell them. are they overdoing this preparation, playing the groundwork for the day-to-day start raising interest rates? >> i don't think they can possibly overdo it. go back to the tamper tantrum and shaken by that. they want a smooth transition. i don't think the statement i think was muddled. i agree with steve on that. yellen has come through time and time again and sort of shown this is what i know. this is what i think. this is where the risks are and been very clear on that. the bottom line is they can't overprepare the markets far transition that is the first time in a very, very long time. i think it was important she also said we're not going to put that measured pace in there and just raise rates like every quarter point, every meeting, either. i think it is very important to refact a variable fashion to data as it comes in and i think that's setting the fed up to be. i wish the statement was a little more clear but i think yellen carried it to the next level with the baton put in her hand. the statement may not have reflected all of her views alone. >> bill? >> i think it was pretty clear. >> hang on a second. the dow up 300. back to the highs of the day here. steve, go ahead. >> they didn't need that. the market was ready to simply drop considerable period and then the way she explained it after the meeting. kelly, a little bit of math, next year, the median forecast of the fmoc, two meetings and said not raising rates, six meetings to get there. go about 20 basis points per meeting or 40 or 50 in 1 and get there over time and even though -- >> brian just said -- >> steve, she also said -- >> as an idea that they would like to be -- should we be taking that 1.13% as a game plan or not? >> no. >> yeah. it's the -- >> it would be a mistake. >> not to do it. you don't have a choice. >> brian? >> i think it's a bad idea as a game plan because things will change, change their opinions and dots move around and -- >> hopefully higher and the economy is stronger. >> hopefully but -- >> keep in mind. >> now it's all about inflation. >> go ahead, jack. >> until they see evidence of inflation they won't change it' she also said that she could do something or the fed can do something between meetings. remember that. you don't have to have a meeting for there to be an action by the fed. >> she talked about calling a press conference and letting us know. >> just to be clear, she wasn't, jack. look. they can always move in between meetings. we have seen that. i think what she was trying to clarify is a lot of people think the fed makes a major policy move at a -- >> that's right. >> like today. >> reiterated that they can make the move at any one of those meetings. >> that was important. >> quite clearly one of the first points in the press conference. >> that's why i think the fed isn't overdoing it. i agree with steve. i don't like the statement this time. i think it was muddled and didn't prepare the markets and silly. that said, her press conference did clarify it. but i think it was really important to say that the press conference isn't only time to be clear. hopefully they can get the transition on that whole theory into reality when they have a statement and more clear than today. >> to the point of the clarity of the statement, i think it was actually pretty clear and dovish. and they didn't want to create any conditions that would suggest to tighten things earlier and create a transition period now to then remove the considerable time language. >> bill? >> i thought it was pretty clear and wise what they did. >> steve? >> bill, i want to ask the market mavens out there. stock movements have befuddled me for decades. this 300 points, do you think the market is there because it believes the fed is going to be less hawkish than before because my takeaway is i don't change my best bet scenario of a mid-2015 rate hike from this. i don't know why the market would rally on this unless there's a sense that the fed to emerge more hawkish from this meeting than sooef sli. >> what do you think, brian? >> a lot of people expecting perhaps a march rate hike so i think this just shifted expectations. >> yeah. but that was sort of side lined in recent days. i think there's been -- you know, it's been amazing to see where we have been over the last two weeks with the employment report and things surging and people moving up their expectations. i didn't but certainly there were people who did that and then moving back out. the market's been all over the board. bottom line is, you know, steve, i think you said it. the survey showed that the market expected them to perhaps drop the considerable time and language and clearly worried in the context of what's happened in recent weeks if they dropped it outright and needed to bridge it. i don't know that they need to worry about that. they were. i don't know. maybe the market going up is validation to be worried because the market's happy. >> jack? >> rick? >> if wages continue on the flat line, we are not going to see my house on a different aggreddres the fed moving. that's what the market's pricinging. >> jack, what do you think? >> i think the market should have never gone down and one of the reasons it snapped right back. >> jack! >> seeing the v-shaped recovery, it tells you that something was happening. whether it's a fund getting blown out. i have'm a fundamentalists. i don't look at the technicals. that's voodoo. we can argue about that. when i see the movement of october, like seeing now, that tells me that the market should not have been pricing there. it was an ash ration. whatever it was. whether it was a hedge fund tied to oil blowing out but the reality is that this fed is going to move because of growth. they're going to move because they see expansion in the economy. because the data requires them to move. and if that's the case, you've got to be long equities. >> so, jack, rate the economy 1 to 10 for 2014. 1 to 10. >> 1 to 10? the economy is a 3. the stock smarkt 59. >> there's been a disconnect. we have been talking about this. >> yeah. certainly has. i can tell by all the testimony of the defendants in this case. >> one at a time! somebody parse that out there a little bit. dow up 320 a moment ago and moving higher. steve? >> i was going to wager with rick $100 to a favorite charity if the fed doesn't raise next year. they're going. >> you're on! you're on! you're on! >> i think veterans. wounded warriors, isn't that right, rick? >> or the taxpayer depending on the fed does. >> is she underestimating the impact that russia could have on the global economy? i mean, everything you guys threw at her that was tangental to the u.s. economy, nothing is worrying her right now. russia of a question and oil being the other one. >> i don't think russia's underestimated but the issue is, bill, whether or not there's a broader pressure on emerging markets. the outflow of currency from those emerging markets and also not clear to me that she has a handle on the issue of leverage related in the financial system. >> right. >> relative to the oil business and not very confident answer i thought in that regard and we have looked at it. we have quantified it. it's not a big deal. she wasn't very firm in terms of seemed to grasp of the extent of potential and risk -- >> agree with steve on that one. >> yeah and reiterating -- >> not a good answer for the exposure to energy -- >> and european banks, as well. >> a response there. >> diane? >> she talked about europe with greater exposure and not the effects for us that they're more exposed to russia than we are and more exposed to the -- >> diane? >> she also did mention the strong dollar backwards saying that falling import prices could hold inflation down, as well. that's something we worry about a bit. >> that's actually -- >> it was in there. >> to back out a little bit and talk about 2015, in a way you have two means of tightening were already happening. u.s. dollar rallying and inflation expectations down and means that rates are higher. we shouldn't overlook -- that's pretty significant stuff going on out there. >> well, i think that gets -- >> that's why me said -- >> and the second -- >> hang on, bliian. >> the issue on the dissent and the voting members coming on, the role of charlie evans in the vote and where they stress on how the statement is actually formed. i think that's important and inflation at the end of the day, inflation played higher role in the statement this year moving into the year and employment a lesser role. you will see that go very much into the inflation direction. the single most important mandate although they have a dual one is inflation and very important for them and it being too low will become an issue if it continues to decelerate even as oil prices stabilize and if it continues to decelerate is a more broad based nature and something have to be acknowledging much more. >> i have a minute left. let's go around the horn now. steve and rick already have a bet about when they think the fed will begin liftoff, starting to raise interest rates. steve, you think it will be in 2015. yes? >> certainly in 2015. i think the fed is going to normalize policy. >> rick, you don't think they will? >> no. >> jack, when do you think the fed raises rates? >> third quarter of 2015 unless there's 4 and 5% gdp numbers and then it's faster. >> brian? >> june 2015 but in 12.5 basis increments instead of 25. >> very, very gradual at that point. >> very gradual. >> diane, when do you think? >> late in the third quarter. i think the fed will have to deal with the inflation issue and ultimately i think they'll raise rates if inflation is flow last year and set it up as a preemptive strike. >> by the way, brian, who win it is bet doing it that way? >> they do it that way, maybe 25 basis points and skip every meeting and affects to the same thing. >> i don't want to win the bet. i don't want to win the bet at -- >> i want to lose the bet! i want normalization. i hope i lose! >> we should -- >> that's the way to -- >> the economy is strong. >> there they go. like the closing bell holiday party sounds like just there. thank you all for your insights. >> appreciate it. >> thank you. we have just under 7 minutes to go here into the close. the dow jones industrial average having one of the best days of the year up almost 300 points. the nasdaq is up almost 100 so we're talking about 2% rallies both the s&p and for the nasdaq. extraordinary, bill. makes you wonder if the point is that the fed left in considerable time and you're looking at the result across the market here. >> look at the s&p 500 heat map. all 500 stocks there, it would take us less than 30 seconds to name all the stocks negative right now in the s&p 500. that's crazy. when we come back, much more market reaction to the fed today when the special coverage continues and wait until you see the panel coming up next hour, as well. steve forbes is right there ready to go. he can't wait to talk about fed policy. my name's louis, and i quit smoking with chantix. i had tried to do it in the past. i hadn't been successful. quitting smoking this time was different because i got a prescription for chantix. along with support, chantix (varenicline) is proven to help people quit smoking. the fact that it reduced the urge to smoke helped me get that confidence that i could do it. some people had changes in behavior, thinking or mood, hostility, agitation, depressed mood and suicidal thoughts or actions while taking or after stopping chantix. some people had seizures while taking chantix. if you notice any of these, stop chantix and call your doctor right away. tell your doctor about any history of mental health problems, which could get worse while taking chantix or history of seizures. don' take chantix if you've had a serious allergic or skin reaction to it. if you develop these, stop chantix and see your doctor right away as some can be life-threatening. tell your doctor if you have a history of heart or blood vessel problems, or develop new or worse symptoms. get medical help right away if you have symptoms of a heart attack or stroke. decrease alcohol use while taking chantix. use caution when driving or operating machinery. common side effects include nausea, trouble sleeping and unusual dreams. i love myself as a non-smoker. ask your doctor if chantix is right for you. female announcer: sleep train's ends sunday.e for 3 event! it's your last chance to get three years interest-free financing on beautyrest black, stearns & foster, serta icomfort, even tempur-pedic. plus, get free delivery, and sleep train's 100-day low price guarantee. but hurry! sleep train's interest free for 3 event ends sunday. ...guaranteed! ♪ sleep train ♪ your ticket to a better night's sleep ♪ inside the three-minute mark, crazy day. we knew it was going to be light because of the fed meeting waiting for a language change which we sort of got and sort of didn't get. this is the dow today. pretty good rally going into the meeting when the statement came out, instantly 150-point gain became a 270-point gain and gave it back and back up again. 289 points there or 1.7% gain for the dow at the moment. very quickly, what oil stocks today, xop etf, up 8% today. oil prices moved higher for a time but oil stocks have definitely benefited from this with that gain there as you can see. finally, the credit markets and the treasuries, five-year note shows you the tremendous volatility that was going on after the fed statement came out and they're trying to figure out what it means and raising rates and what patience equals, considerable period of time and peter costa, you famously got out of this market. >> yes. still -- >> still out of this market? >> still out of the market. even though we had opportunities to buy it over the last week, i'm not stepping back in. >> why not? >> i think that even where we were, we came from, you know, bordering on 17,000. i still felt that a lot of stocks were fairly priced and i don't see for me to go back to get 2% is not worth it. you know, the risk i find and i know that i'm on the very small part of the spectrum, very few people feel this way, i don't think the risk is worth the reward. >> okay. >> two things, why is the stock market rallying? patience, the fed says, equals dovishness to traders. number one. they made the clear the economy is improving and didn't mention the foreign risks at all. this concern about oil. they called it transitory. how many times in that conference, transitory? put it together. the stock market is up. may or may not agree and obvious why the market is up. >> the message is that the longer the fed waits to raise ratds is bullish for the stock market. >> i think once you start seeing an uptick an i'm hoping and i think without it the expansion in the economy will stall and once you start seeing an uptick in wages and see it in some sectors, i think that's where the problems will lie. you will start seeing more inflationary pressure and wait a little bit. >> huge short covering. trying to find a bottom. somebody sees bargains. >> all right. and when we're bargaining hunting today and make some money. the dow up 285 on the close. very smart people standing by now for hour number two of "the closing bell" with kelly evans. see you later. thank you, bill. welcome to "the closing bell," everybody. i'm kelly evans. looks like the market will have one of its best days of the year. a big day on wall street, a big meeting from the federal reserve with the surprising decision to keep the considerable time language in the statement and the markets moved around a little bit as the press conference continued and things shake out here the dow going without a gain of 287 points and should be good enough for the best gain of the year. the s&p 500 certainly is going to take that trophy. 40 points higher today and the nasdaq up almost 100. gains of 2% in the s&p and across the nasdaq today. get right into it with today's panel. joining me now is forbes media chairman steve forbes. michael santoli and sharon epperson and with us for more to the conference is "fast money" trader guy adami and welcome one and all. steve forbes, kick us off here. i have to know what you're making of all of this. i have a guess. >> it just shows central banks around the world and the federal reserve really don't know what they're doing. they think suppressing interest rates help the economies and it's hurt credit flows to small and new businesses which is where you get the job creation from. >> we just had one of the best u.s. jobs report in years. 321,000 jobs last month. everything's coming up roses. >> 1960s with a population less than half of what it is today you got many months in the early 6s with those kind of job creation number. participation in the tank. median incomes still in the tank. we are in the sixth year of a recovery and not above in terms of incomes where we are six years ago? my goodness. men in the private sector are fired for that kind of performance. >> what do you think about the decision today, mike? >> the way the market played it is context, s&p 500 down 100 in 11 days. rally back to friday's levels. very oversold market and looking for a reason to celebrate something and i think the message of the statement that it was -- that the fed will ease gently along in the process of raising interest rates next year is well received and i also think there's some good news to be taken out of the fact that janet yellen did not rely on the lower oil price to say we don't have to worry about inflation. that gains credibility saying you don't ignore oil on the upside and the downside. so to me it was a reflex move, oversold market and basically nothing really much changed from a week ago. >> what's the take away, sharon, for the average investor here? >> looking at the trader perspective with the volatility of the press conference, i think retail investors should be aware that we're going to see a lot more volatility in 2015 regardless of when the rate hike occ occurs. of course, watching very carefully what happens in april and june and consumers need to be ready to happen eventually. this is the time to refinance that mortgage at lows we have seen, lowest rates since may of 2013. this is the time to pay off that credit card debt and the rates are going to start to go up and the average consumer needs to be aware of that. >> let's dip out of this for a second and waiting for quarterly results of oracle. josh lipton has the details for us. hi, josh. >> kelly, yeah, oracle just reporting here. 69 cents on 9.6 billion. wall street looking for 68 cents on 9.5 billion and a beat there on the bottom and the top. just quickly, kelly, looking through here, software and cloud revenue, 7.3 billion. new cloud bookings up 140%. new software licenses 2 billion and hardware at 1.3 billion. conference call kicks off at 5:00 p.m. eastern and expecting calls of analysts about oracle's move to the cloud as well as just a general state of i.t. spending. on that call for head lines as they cross. back to you. >> all right. josh, thank you. want to get some quick reaction to the oracle shares up 3% after hours here, as well. then back things out from that for a second and daniel ives in here. what is it that has oracle shares popping higher do you think? >> this is a step in the right direction given the disappointing numbers we have seen over the last few quarters and comes down to cloud. that's putting fuel in the engine. now you start to see investors going glass half full on oracle here and the key question is can they continue this to see the type of growth and go gins what we have seen a large cap tech? softness in the hps, emcs. this is definitely good news we haven't seen in a while from oracle. >> up better than 4%, dan. read through for the other companies you cover here? >> positive. in terms of -- if oracle can have a good quarter, almost anyone can. they're the one that struggled the most. it's a good indicator of i.t. spend in q4 and focus on cloud and if oracle with ellie son not as ceo to continue this sort of momentum going into next few quarters and a positive read for the environment. >> dan, thank you. good point there from dan ives and that's a look into what's happening in that piece of the market today but the view overall was decidedly positive. we had an s&p 500 heat map up earlier and s&p up 40 points today. best gain in point terms in three years and pivot and bring in greg ipp in the meeting with janet yellen addressing the media taking questions and answers. if you had to guess why the market had a strong performance, what would you say is the reason? >> i think there's everybody thought the fed was going to make the move, open the door to high interest rates. and they did. but they did it in such a reluctant way and replacing it with patience and in the statement saying that it meant the same thing as considerable time. and then janet yellen in the press conference going further and saying, patient means no rate increase for a couple of meetings. they basically bent over backwards to make it as painless process as possible. they gave the market the spoonful of medicine and lots and lots of sugar to help it go down and appropriately so, you know. she really played down the affect of inflation on oil prices and look at the forecasting. they have inflation coming down and unemployment dropping a lot and run with unemployment very low which is and allow that to happen and great for the economy and the markets and largely because they're still so low on inflation. >> i want to get back to that in a second. guy, someone was saying seeing a bounce in energy names, maybe a bid in oil s. that why we had a good -- >> shout out, man! i'll shout out to him! >> yeah? >> huge shoutout. steve forbes brought up a lot of good things. two things today. look at fed-ex today on what was a remarkable day in the broader market. stocks down. janet yellen said the move in oil was transitory. right? that was the word she used i think. so the biggest commodity of the face of the earth is cut in half in four months and that is somehow transitory? that to me is emblematic of the problem with them in the first place. that's so preposterous to me an it's scary. if nobody is scared but me maybe i'm the problem. >> what do you think? >> clarify what she meant by that. referring the drop in oil she didn't mean the drop in oil is transitory ie oil to rally back but the affect on inflation is transitory and downplay the notion that this decline -- >> doesn't that imply that -- well, i mean, all right. play semantics but that implies she -- there's some bounce coming. the bottom line is, again, the largest commodity and mankind is cut in half. there's something structurally going on so to downplay that to me is either not that inte intelligent -- >> she didn't down play it at all. she said that this does have implications for the united states and they are on net positive. that is not down playing it but it does put a positive rather than negative spin on the implications. >> my question is whether or not the inflation targets is hit the fed is trying to achieve based on the fall in oil prices and the belief by many that we have not seen near a bottom yet. if this continues to fall, how will we get to what some of the inflation targets or spots may be there? >> well, look. if you look at the forecast, they do not expect to hit the 2% inflation target for three years. and it's clearly something that continues the bother some people on the committee. that's one reason of one dovish dissent. yellen went back to the point over and over again. she thinks that if you have an economy that's steadily better, unemployment falling below the normal natural rate and the public's expectations of inflation stable, those things together will drag inflation back to 2% and personally skeptical that it will happen but she and the colleagues seem pretty confident. >> mike? >> perhaps some kind of a floor on core inflation and i do think we have to keep in mind that ben bernanke pill ried trying to sort to speak ignore food and energy prices pushing cpi up. >> 3%. >> exactly. he said -- >> european bank raised rates. >> focused on the core and pilliried for maybe saying -- >> could you concede that point or no? >> no. the fed's policies have slowed the economy down. we should have a much more growth than we have had. >> aren't we -- the base accelerated each year. >> come on. if you are batting .200 in baseball an you get it up after 6 seasons to point 250, that's not a satisfactory performance and the fed does not realize the policies were hurtful, not helpful. and then one of the reasons why they're so waffling about raising rates is looking around the world and thinking if it continues we may have to go back to what they think is easing which is actually tightening. central banks thinkease ing but they're tightening around the world and like doctors in the days of old bleeding patients and wondering why the patient doesn't get better. >> we have a quick earnings alert with dominic chu. dom? >> here, watching what's happening with jabil circuit. moving higher. did beat on the earningse es estimates and the shares up by about 8% in the after market trades. keeping an eye on it. back over to you. >> quite a move. thank you very much. all right. coming up here, the fed fueling the big rally. how should you be investing in the volatile market? blackrock bond guru and others join us straight ahead. president obama taking a major step to noshlallize relations with cuba. potentially opening up trade and investment in the communist nation and could have an impact on many american businesses from airlines to baseball. steve forbes herishing to weigh in. you may be surprised by what he has to say. you're watching cnbc. welcome back. what a day it is today in the markets. looks like actually a recordbreaking day not in terms of closing levels and last couple of weeks taken us below that but the dow adding about 288 points. s&p adding about 40 which is the best point gain in 3 years and granted the higher we move the les those points matter in percentage terms but still for the nasdaq which had been really beaten down of late. more reaction to this market day in light of the fed's meeting with rick reiter and ron kashevski. rick, the central question for you here is where does the 10-year go from here, for example? we were shocked yesterday flirting with the 2% level. what happens now? >> so we think rates will drift higher. the hard thing of rates significantly higher particularly in the long end of the yield curve is such tremendous demand internationally and when you look at where german bunds or japanese jgbs it's hard. we think the fed signals some change in guidance, the yield curve will flatten like this afternoon and but we think the 10-year will drift higher and hard to move significantly higher. >> great point. ron, we had criticism of janet yellen for not talking about the financial sector's exposure to the drop in oil prices, for example, and maybe to some of the global concerns ala russia. what would you say are those risks in the system from the declines? overlooking them? are there areas of concern to highlight? >> look, i think the biggest concern and the one the fed is doing a good job of combatting is deflation. it is a deflationary concern. plunging oil prices, great for the consumer and gail force wind with respect to deflationary concerns. equities are undervalued in any growth scenario and deflation would cause serious problems. >> how likely do you think that is, ron? sounds like rick here doesn't see deflation on the table. correct me if i'm wrong. >> that's correct. no doubt a lower inflation range and the goal of 2% is darn hard to hit and so much growth momentum and lagged effect of wage pressure. europe is a concern. and asia's a concern. >> ron? >> look, look. look at the market. the 10-year tips, inflation expectation is 1.6, down from 220 this summer. that's a huge move and wages, really no increase in real wages. we have had wage income and hours are up. we don't have deflation around the corner but the major risk is deflation today just like it was inflation back in the '80s. >> ron, steve forbes here. let's get away from that loaded word deflation. use contractionary policies or trends around the world. do you think what you see in terms of contraction around the world almost everywhere any relation to central banks are doing or not doing? >> well, look. i think central banks are dealing with a slack in demand. what is oil? plunging oil prices really is a -- you can argue is a lack of worldwide demand. so, you know, i understand the deflation is a bad word today and i think that's what we're combatting just like volcker to keep real interest rates above the rate of inflation today fed funds needs to stay below core inflation rate longer than we think. >> rick? >> so, you know, i would argue that there's no doubt, i think what people confuse a bit is why are prices decelerating as they have been and global growth no doubt continues to be moderate. that being said, if you lock at the demand function relative to supply of energy talking about a very, very different pair dime and look at demand and how much it's come off from a global perspective it's come off and moderately. big difference is a supply glut. you have clearly one that is going to be -- it's a different energy price range for a long time. there's a different production capacity than historically. >> we went from 2013 the treasury market really panicked proactively about just the prospect of short rates higher. now we are a point where the 10-year today didn't react radically. is there a chance that the market today is not really conditioned for that mid-year rate hike potentially? >> it is an incredible dynamic. if you go back to october and think about when the fed, the statement was hawkish, equity market did well for a period after that and when the minutes, prior minutes more dovish and equity market after october 8th trading down and 1% funds rate is extraordinarily low. in fact, we tracked it at this sort of payroll growth, a 6 6-month average, the average funds rate over 6%. zero. the markets can handle a 1% funds rate and seeing it in front of our eyes. >> the markets handle 475 basis points. equities are undervalued with earnings. again, if you reduce the equity risk premium reducing earnings per share that's where we have a problem. otherwise buy equities. >> so, ron, is that you would tell a retiree listening to this, low interest rates for a very long time and even if there's a hike sometime in the middle of 2015, what do they do? >> well, look. i'm not saying it's deflationary. the concern is deflation. i think you will have an interest rate increase next year and not the liftoff. it's the pace of rate increases. so look. if i'm a retiree, i'm not pan panicking here but saying what the fed did today, i think the statement deals with deflationary concerns. >> understood. ron, thank you so much. rick, as well, rick, we might have to bring you back for the greenspan conundrum if the long end doesn't move amid all of this. now a quick market flash. hi, dom. >> kelly, we have kirby corporation, provides marine transportation and diesel engine here in the united states and moving lower to 6% after hours after cutting the fourth quarter and full-year guidance due to a sharp drop rather in oil prices. again, those shares down again by 6%. light trade, 8,000 shares traded so far in the after hours back over to you. >> damage from that decline, thank you. a ton of other news today outside of the fed and wall street and historical day here in the u.s. is president obama's move to open relations with cuba a good move? we'll talk about that next. plus, it's being pulled by more movie chains after threats of violence and more may follow suit. will sony release "the interview" on christmas day? and are theaters making the right decision not to show the movie? your chance to weigh in. once there was a girl who always mixed and matched. even in her laundry room. with downy unstopables for long-lasting scent. and infusions for softness. she created her own mix, match, magic. downy, wash in the wow. president obama shocking the world today by announcing plans to normalize u.s. relations with cuba after more than half a century. john harwood is at the white house with details. john, maybe more surprising than the news the news that it wasn't leaked first. >> reporter: exactly, kelly. you know, he may be a lame duck president, the party may have just been walloped in the 2014 midterm elections but president obama today was able to announce three things. the release of a u.s. contractor alan gross held for five years in cuba. a swap of spies who were imprisoned in both the u.s. and in cuba. and his decision to fully normalize diplomatic relations overturning a 50-year policy that began with president john f. kennedy. >> though this policy has been rooted in the best of intentions, no other nation joins us in imposing these sanctions and it's had little effect. beyond providing the cuban government with a rational for restrictions on its people. today, cuba is still governed by the castros and the communist party that came to power half a century ago. neither the american nor cuban people are well served by 0 rigid policy rooted in events that took place before most of us were born. >> reporter: but the image of raul castro, the cuban president in military garb hailing the same decision on cuban television riled opponents of the decision like senator marco rubio of florida. >> the cuban government in exchange for all of these concessions that the who is has now made has said nothing or done nothing to advance democracy. no freedom of the press or organization. there will be no elections, no democratic opening, nothing. zero. all they have done here is make it easier for the castro regime and their system of government to be permanent forever on the island of cuba. this president has to be the worst negotiator we have ever had. >> reporter: now, senator rubio who's of cuban dissent vowed the try to block funds for the establishment of an embassy, u.s. embassy in cuba. josh earnest, the white house press secretary later said he did not think it was necessarily the case that the administration needed additional funding to open the embassy. but the one thing we know the administration does need from congress is a law to be passed in order to end the embargo that president obama wants to end which also began in the kennedy administration. one thing's clear, though. politics of this are changing not just nationally but in florida where the anti-castro sentiment is so intense. president obama carried florida in two presidential elections, kelly. >> and john, thank you very much. that's exactly what we want to do now is check in on just how exactly this news is going over down in florida. but also, asking our panelists here, steve forbes, your response? it sounds as if the republican party for the most part upset or am i reading too much into what we heard from a couple of senators there? >> well, senator rubio. >> i think has a right. not changing the regime one wit. as the president said, the rest of the world is trading with cuba. had the opportunity to invest in cuba and time they start to exercise freedom, get a little bit of an exchange market with the $and the euro, the government clamps down. so this regime is going to no more change than the north korean regime. senator rubio is right and try to prop up the regime and again the president is looking like he's weak. he gives it all away so worry less about cuba. worry if he gives it away with the negotiations on iran on the nuclear program. >> you're a free market guy. what about the argument and people make which is that you open up cuba and trade more with the u.s. and that becomes the incentive -- >> they have had a thriving tourist industry because of investment of canada and europe for years. that money doesn't go to the workers but the government. they get worthless currency in return. >> it's a good point, mike. >> it is. look. i don't think there's a big swing factor here in play in terms of the policies there or really economically for us or the world or businesses here but i think it was an opportunistic move and russia is compromised and so let's do something here that does seem like a -- >> sharon? >> the timing struck me why it was done today and perhaps some to do with elsewhere around the world and what happened with the falling oil prices and just the timing was very interesting. and the fact that it was kept quiet and not leaked as you said earli earlier. >> right, steve, there are people making a trade on an etf cuba, tons of volume. speculation, of course, is that you start to open up cuba, talk about the ability to get in at 1950 prices in the u.s. and ride that whole wave of innovation and growth. is everybody making the trade betting in the wrong direction here? >> well, the key words you said were critical. opening up. the government controls this rigidly. any time, again, they'll sacrifice economic growth if they think it's going to imperil their regime. they won't ease up at all. they have plenty of opportunity to do it in the past. everyone else is open. didn't change that regime one lick. >> we have though in the last couple of years is raul castro that talked more of privatization of parts of the economy. does that show any softening, any indication that this is the beginning of a process of opening up? >> the only thing that's going to change a regime like that is going broke and no source of funds at all. after the berlin wall fell in 1989 russia cut off their subsidies in '91. that regime put the island through a horrific downturn recession and not easing up even if it was misery for their people. >> the reaction and we were hoping to get an on the ground perspective as well and read already online how people for example in the heavily cuban miami feel about this. news reports indicated those that those that left cuba in protest and feel as though to some extent the life question is called into question and going to quote/unquote normalize relations with cuba. >> that's right. they know the regime better than most people because they have lived through the horrors of it or parents have and grandparents have. and again, this regime made no change at all. maybe allowing us for major league baseball players from cuba. very nice for the mlb. but for the cuban people as a whole, no real change. that's the sad part. >> typical american. embargo in the threat of cuba and soviet union and we happily deal with china without asking for very many concessions. seems like an outdated policy. >> is it, though? we have to jump but have we gotten too soft? in other words, because we now depend so heavily on china, have we missed an opportunity to be more aggressive, to stand for the values and to the rest of the countries including cuba? >> it's soft or pragmatic. i don't know how you come down on that but yeah. it's obviously inconsistent, though. for one thing. >> that's for sure. thank you. oil gaining back some ground today. coming up, my next guest says anybody who claims to know where prices are going is a liar or delusional. david rosenberg will explain why in a moment. tomorrow, russian president vladimir putin making a speech on the state of the country's collapsing economy. a preview of this potentially market-moving event coming up. (vo) rush hour around here starts at 6:30 a.m. - on the nose. but for me, it starts with the opening bell. and the rush i get, lasts way more than an hour. (announcer) at scottrade, we share your passion for trading. that's why we've built powerful technology to alert you to your next opportunity. because at scottrade, our passion is to power yours. russian president vladimir putin will hold an important press conference. in the wake of plunging oil prices. we have the details and what to hear tomorrow. >> he gave the annual speech to parliament and spoke about how important this was, how important the context was. now, it's unprecedented because of the economic situation that russia finds itself in. take a look at this. this video is from russia's channel 1, biggest state-owned channel in russia basically running a hollywood-like preview of the speech complete with a sound bite of one of the putin's interviews, quote, the bear never asks for permission. well, not asking for permission, especially coming to crimea. that is, of course, one of the ripple effects of a situation right now. sources and experts i spoke with say tomorrow expect putin to announce or at least get more specific about financial reforms and measures to stabilize the currency and the economy. perhaps even announce or hint at a change within his cabinet. prime minister medvedev's name is thrown by and the head of the central bank and they say it's a way to pin the blame on the economic situation on these folks even though we all know he's the one making the decisions. where, of course, expecting him to place some blame on the united states and europe, but the tone might be a little bit different this time considering that he's really backed himself into a corner and we could hear him sort of extending a hand to the west reiterating that russia doesn't want isolated economically. now, i spoke with an oligarch saying the crisis is deep and will last for a listening time and hoping that whatever he says will not make the markets worse and they say that the bottom is yet to come and one of many reasons why this press conference is so important and why we're watching it so closely. >> thank you. my next guest says no one knows where oil is going next and anyone that claims to know is either a liar or delusional. his words. david rosenberg joins me now. good see you again. and i guess just begin here if we could since we heard about russia with the impact that crisis is having on financial markets here. >> right. well, i should just say that there's a lesson to be learned about what i wrote that you quoted which you don't publish anything after three glasses of pinot noir. that aside, i think that, you know, this oil price situation is interesting because nobody questions what the driving forces were that brought us over $100 a barrel to begin with last summer. and those forces were never sustainable to begin with. this transcends, you know, the market being in a physical surplus globally. the fact that opec isn't meeting until june is something else that we know since ultimately they could be the swing producer like they were when they cut by over 4 million barrels and helped put in the low back in the spring of 2009. but what nobody talks about is financial demand for oil. >> right, right. what is the financial demand for oil, david? how much did that continue to the run-up now and getting out no wonder we're seeing the other side of it. >> well, you know, what's interesting is that, you know, we had the first 25% decline and before this opec meeting oil at $75 and then everything that happened since then so i think a lot of speculators expecting saudi -- options. >> yep. >> they peaked at 500,000 contracts and now down to 280,000 and demand destruction on the financial side and principle cause for the latest, you know, swoon in the price of oil. but, you know, the reality is that we're not going to get a fundamental bottom. whatever that price is until the net spec long contracts eliminated altogether or 100,000 contracts of flat. i did try to estimate the price of oil would happen in that environment and try to answer the question, you know, without being disingenuous and you could talk about $40 to $45 by the time those contracts are out of the system. >> take a quick listen today ceo jeff immelt of ge had this to say about the ill-timed shift being an oil-based business. take a listen. >> we have modeled the business at $60 a barrel. i like the business a lot. we're going to go through a cycle in the short term. but look. this was a business before thanksgiving that needed better execution around the big projects. all the ceos in the industry looking at the supply chain saying the costs have to come down and do a better job of lowering the break-even cost and been on this path more than a year and i look at it as an opportunity. we think we have hedged the upside and downside appropriately. >> so david, sum it all up for us. what's at stake for u.s. companies and economy if the price settles where you mentioned. >> you know what? kelly, this's the thing. i'm not saying necessarily settle there for long period of time. i think that that would be a real what we would call a capitulation low. not like we had back in 2009. we got, you know, below $40 temporarily and didn't exactly stay there. i think that longer term probably settle somewhere in that $65 to $70 range and not saying that $40 to $45 is anymore permanent than 100-plus was. and so, in answer to your question, look. like any other shock, kelly, there's winners and losers and we know the winners and the losers. losers are producers and the services and the manufacturing that cater to the energy industry and the winners are practically everybody from consumers with a pick-up in the purchasing power and in the manufacturing sector and cost base goes down. remember that oil fundamentally is something we consume. it is a cost. >> right. >> actually a classic table of the u.s. economy and you do a real dynamic analysis and you look at who the losers are, winners are, you can counter the multiplier impacts, the u.s. gdp comes in plus point five to the better out of this and not saying monumental but a net positive and not negative. >> on the same page as janet yellen on that one. thanks for being here. sony hack offering gossip and now a threat against moviegoers and now more than more theaters are choosing not to release the nil m on christmas day. do you think they're making the right decision? weigh in right now cnbc.com/vote and tomorrow "closing bell" live from the yale ceo summit. exclusively here. don't miss the show. we have bob diamond. all coming up. welcome back. a quick market flash from dominic chu. >> kelly, we are watching shares of ak steel high tore the tune of 6% after the company gave guidance above wall street expectations. this due to lower materials costs so they cite things like falling oil prices, also lower iron ore, carbon scrap and energy costs in the fourth quarter compared. those shares as a result ak steel up 6% after hours. >> and there you have it. just after hearing from dave rosenberg. national release of comedy "the interview" in serious jeopardy as the play jor theater chains say they won't be showing it on christmas day. julia boorstin joins us from los angeles. how can they release it at all now? >> reporter: sources said that sony will move forward and without the five biggest that's in smaller theaters or offering it through video on demand. with the theaters pulling, sony could be freed of restrictions and could stream it much sooner than originally planned. selling the movie via vod is primary way to earn back the $42 million spent to make it and tens of millions of dollars more to market it. it's too soon to quantify just how much sony will lose on the entire hack attack. take a look at sony's stock decline since the hack was first reported at the end of november. of course, a cost to rebuilding the network, dealing with lost employee data and facing two class-action lawsuits. some estimates say those costs could be as much as $100 million. "the new york times" premier of -- the new york premier of "the interview" is canceled and tonight's screening in detroit, baltimore, cincinnati and austin. the national association of theater owners says the members are working closely with security and law enforcement agencies and are, quote, encouraged that the authorities have made progress in their nchings. kelly? >> all right. thank you very much. we want everybody to tell us what you think. did the chains make the right decision? you can vote right now. for more we bring in entertainment consultant katherine arnold and worked as a film producer and executive. i want to point out it's early minutes and more than 90% of people say it's a wrong decision. what do you say? >> well, it is a really tough call, kelly. there's financial implications and also censorship implications. we are denying the creative freed freedom. is the next step to pull jon stewart back or tell seth rogan not to make a movie like this? it's a tough question. >> would the chains, katherine, be liable and cover terrorism like -- i mean, to what extent are they making a decision they have to make and to what extent is this more an issue of free peach? >> well, the legal and the security implications are not really my area but i would assume that the lawyers looking very closely at the liability they could have if anyone did get injured. i think the real question is to make sure that the theaters are safe and people enjoy the christmas viewing habits as they always would every year. >> yeah. >> this is a very tough call for sony as to what to do but what do you about a serious movie of north korea or political movie and not a satirical film? pull that, as well? that sets a precedent and the reason you're seeing the poll aenl 90% of the view earls saying, no, i don't think it was the right idea but the question then becomes now sony in a better position of off the hook now they don't have to have tv advertising. they can pull that. they can not have those dollars to spend. >> i wonder if the 90% of people who think it's wrong decision and would show up to watch this film. >> i think they want the opportunity and they're not looking at the forgone revenue and the estimates $50 million or $60 million over 4 weeks and pl. but you have to consider all the other movies shown during christmas. if you're afraid of something happening, i do think you have understandably skittish theater owners given that there have been random attacks in theaters before. and it's a function of what small risk we're willing to bear versus others for the exchange of watching a comedy. >> what is the right call here? >> it was a cowardly decision. they can make all the rationales they want, but a barbaric small regime like north korea can bring down a major entertainment conglomerate and have millions of moviegoers not go to the theater because theater owners are afraid, i mean everyone now knows. this underscores the narrative. this country is perceived as weak. >> than have a giant showing in bryant park, for example. you can say it right here that you're going to screen this movie in new york city for anyone and everyone who wants to say this. >> i'll say this. if it's at any theater, i'll go to it. i wasn't originally going to go to it. but i will now as a protest. and buy extra popcorn as well. >> there you go. we'll leave it right there. 88% as we close this poll of people say it was the wrong decision. 87% there for theaters not to show the chain. that's coming up on christmas day. new diplomatic relations with cuba. that was today's big international story on cnbc com. marco rubio's comments that congress will not support an embassy in cuba caught the attention of our digital audience. if it attracted enough visitors after the dow was up nearly 300 points after that fed meeting. we'll be right back. here's a question for you: as nations develop over the next 25 years, the world will have almost twice as many cars. how much fuel will be needed to power them? about the same as today? 50% more? 100% more? the answer is... about the same as today. by 2040, advances in fuels and vehicles could enable about 75% better fuel economy than today. take the energy quiz -- round 2. energy lives here. a huge rally after the fed's statement today that had cnbc.com on fire this afternoon. allen joins us with the hot list. quite a reversal from the hot stories driving us for the last couple of days here. >> yeah, it was. still kind of the same effect. i kind of had a trifecta of fire today. the market coverage with the same people piling in, this time to find out why are we rallying. from that into the fed coverage too. people piling into the live blog of janet yellen. some thought she got a little snippy with the meetings thing. and cuba, a big cuba lift that got a lot of fire too. so it was a three-way burnout today on the website, kelly. >> plenty more for people to check after hours. thank you. we have more on this day. final thoughts with our panel when we come right back. new cadillac.... ♪ ♪ my baby drove up in a brand new cadillac.... ♪ ♪ look here, daddy, i'm never coming back..... ♪ discover the new spirit of cadillac and the best offers of the season. lease this 2015 standard collection srx for around $359 a month. welcome back. some breaking news on the interview now. julia boorstin with the latest. hi, julia. >> that's right. big news here. sony announcing in a statement to nbc news that they are no longer planning to release the movie "the interview" on december 25th, saying in light of the decision, the majority of our inhibitors not to show the film "the interview." we decided not to move forward with the planned release. we understand our partners decision and share the interest in the safety of employees and theaters goers. they're deeply saddened that this brade brazen effort to suppress the distribution of a movie do damage to our company, our employees and the american public. we stand by the right to free expression and are extremely disappointed by this outcome. really unprecedented in the film industry. >> julia, stay right there. i want to bring in the panel on this as well. julia, can you give us any indication as to the language they used. they say they won't release it on december 25th. that doesn't mean they're not going to release it altogether, does it? >> it seems like they're certainly leaving that door open and they could do some video on demand release, as i mentioned earlier in the hour. and the theater owners themselves while they say they're cancelling the planned december 25th release have not ruled it out entirely. it seems like the focus is allowing law enforcement officials, the fbi, the department of homeland security to investigate exactly the nature of the threats and whether or not they're credible. >> we heard from nato on this. >> yes. we don't know what this means in terms of streaming this movie, right? they may still be able to do that, while they won't recoup all of the losses for putting this movie out. that's something with two stars who are very, very present on social media. it will be very interesting to see how they now remarket this film. >> but where -- go ahead, julia? >> they haven't made any announcements yet about streaming premium video on demand. but that's certainly an area to watch. >> i think the theater chains are willing to have this be -- i think the lesson is that the self-interests of a corporation often does not go according to any principle. >> shocking news there. thank you for joining me this afternoon. straight over to "fast money" with melissa lee and the gang. live from the nasdaq market site in new york city's times square, this is "fast money." i'm melissa lee. these interest traders tonight. steve grasso, dan nathan, karen finerman, and guy adami. and yes, you're listening to the song "patience" right now. it is that word that led the dow and the s&p to the best days of the year today. the federal reserve saying it will be patient when it comes to raising rates. and oil showing signs of life again today, though it's down 40% over the last three months. our own steve liesman asked fed chief janet yellen for her take on the oil drop.

Transcripts For CNBC Closing Bell 20130918

unlikely to raise federal funds rate if inflation remains below target. your own proceyour own projecti below target through 2016. is that consistent with a lift-off in thorough fund rates in that period? related, is there a case to be made your threshold should be supplemented with lower balance for inflation, i.e., you won't tighter if inflation is lower bound? >> so, in the latter part, you know, of course you're seeing interest rate projections and inflation projections separately. you're not seeing them combined by individuals. each individual is making their own projection. i think you're right. we should be very reluctant to raise rates if inflation remains persistly below target. that's one of the reasons that i think we can be very patient in raising the federal funds rate since we have not seen any inflation pressure. on having an inflation floor, that would be in addition to the guidance. we are discussing how we might clarify the guidance on the federal funds rate. that is certainly one possibility. i guess an interesting question there is whether we need additional guidance on that, given we do have a target. of course, implicit in our policy strategy is trying to reach that target for inflation. but inflation floor is certainly something that, you know, could be a sensible modification or addition to the guidance. >> reporter: victoria, dow jones news wire. many investors were expecting the fed to move at least a little bit in pulling back the bond-buying program today. given that you all decided not to do that, do you have any concerns that once again the fed is confusing investors and sending mixed signals? >> well, i don't recall stating we would do any particular thing in this meeting. what we are going to do is the right thing for the economy. and our assessment of the data since june is that taken collectively that it didn't quite meet the standard of satisfying our -- or of ratifying or confirming our basic outlook for, again, increasing growth, improving labor markets and inflation moving back towards target. we tried our best to communicate to markets. we'll continue to do that. but we can't let market expectations dictate our policy actions. our policy actions have to be determined by our best assessment of what's needed for the economy. >> reporter: peter barnes, fox business. you mentioned fiscal business in the statement today. are you concerned about a government shutdown? we're hearing more about that possibility. did that come up in your discussions at this meeting? what do you think will be the impact of a government shutdown on the economy? and what could the feds -- or would the fed be prepared to respond to that and help the economy with additional accommodation? for example, additional asset purchases. thank you. >> a factor that did concern us, as in our discussion, was some upcoming fiscal policy decisions. i would include both the possibility of a government shutdown but also the debt limit issue. these are obviously, you know, part of a very complicated set of legislative decisions, strategies, battles, et cetera, which i won't get into. but it is the case, i think, that a government shutdown and perhaps even more so a failure to raise the debt limit could have very serious consequences for the financial markets and for the economy. and the federal reserve's policy is to do whatever we can to keep the economy on course. and so if these actions led the economy to slow, then we would have to take that into account surely. this is one of the risks we are looking at as we think about policy. that being said, you know, again, our ability to offset these shocks is very limited. particularly debt limit shock. and i think it's extraordinarily important that congress and the administration work together to find a way to make sure that the government is funded, public services are provided, that the government pays its bills, and that we avoid any kind of event like 2011, which had at least for a time a noticeable adverse effect on confidence and on the economy. >> reporter: this week marks five years since the financial crisis began. and hank paulson, who you've worked closely with, said his biggest regret is that he wasn't able to convince the american people that what was done, bank bailouts weren't from wall street, they were from main street. what is your biggest regret as you reflect on the five-year anniversa anniversary? and do you believe the fed, congress and the president, have put the necessary measures in place to prevent another deep financial crisis? >> well, on regrets, i have many. i think my -- you know, reasonably, the biggest regret i have is that we didn't forestall the crisis. i think once the crisis got going, it was extremely hard to prevent. you know, i think we did what we could, given the powers that we had. i would agree with hank that we were motivated entirely by the interest of the broader public that our goal was to stabilize the financial system so that it would not bring the economy down, so that it would not create massive unemployment and economic hardship that was even more -- that would have been even more severe by many times than what we actually saw. so, i agree with him on that. and i guess since you gave me the opportunity, i would mention that, of course, all the money that was used in those operations has been paid back with interest. so, it hasn't been costly even from a fiscal point of view. now, in terms of progress, that's a good question. i think we made a lot of progress. we had, of course, the dodd/frank law passed in 2010. we recently have, you know, come to agreement internationally on a number of measures including basel iii and a number of agreements relating to shadow banking and other aspects of the financial system. i think today our large financial firms, for example, are better capitalized, by far, than they were certainly during the crisis and even before the crisis. supervision is tougher. we do stress testing to make sure that firms can withstand not only normal shocks but very, very large shocks, similar to those they experienced in 2008. and very importantly, of course, we now have a cool we didn't have in 20 08 which would have made, i think, a significant difference if we had had it which is the orderly liquidation bill dodd/frank gave to the fed. under the authority liquidation, the fdic, with other agencies, has the ability to wind down a failing financial firm in a way that minimizes the direct impact on the financial markets and on the economy. now, i should say, i don't want to overstate the case. i think there's a lot more work to be done. in the case of resolution regimes, for example, the united states has set the course internationally. other countries and international bodies like the fsb are setting up standards for resolution regimes similar to those in the united states, which is going to make for better cooperation across borders. we're still some distance from being fully geared up to work with foreign counterparts to successfully wind down an international, multinational firm. we made progress in that direction but we need to do more. so, i think there's more to be done. there's more to be done on derivatives although a lot has been done to make them more transparent and trading of derivatives safer. but it will be some time before all of this stuff that has been undertaken, all of these measures are fully implemented and we can assess, you know, the ultimate impact on the financial system. >> reporter: steve beckner. a number of economists and, indeed, some of your fed colleagues, have argued the effectiveness of quantitative easing has greatly diminished, if not disappeared. and they point to the recent performance of the economy as proof of that. and there have been a number of people who have argued there are regulatory and other impediments to growth beyond the reach of monetary policy. to what extent are these valid arguments? and if the economy does not speed up, if it does not reach your objectives, how will you ever get out of quantitative easing? >> well, on the effectiveness of our asset purchases, it's -- it's difficult to get a precise measure. there's a large academic literature on the subject and they have a range of results. some suggesting this is a quite powerful tool, some less powerful. my own assessment is that it has been effective. if you look at the recovery, you see that some of the strongest sectors, leading sectors it, like housing and autos, have been interest-sensitive sectors. these policy have been successful in strengthening financial conditions, lowering interest rates and, thereby, promoting recovery. i do think they have been effective. you mentioned that there hasn't been any progress. there has been a lot of progress, as i said at the beginning. labor market indicators, while still not where we would like them to be, are much better today than they were when we began this latest program a year ago. and importantly, as actually referenced in our fmoc statement, that happened notwithstanding a set of fiscal policies, cbo said would happen and hundreds of thousands of jobs. the fact we have maintained improvements in the labor market that are as good or better than the previous year, notwithstanding this fiscal drag, is some indication that there is at least a pasrtial offset from monetary policy. as you say, there are a lot of things in the economy that monetary policy can't address. they include the effectiveness of regulation, they include fiscal policy, they include developments in the private sector. we do what we can do. if we can get help, we're delighted to have help from other policymakers and the private sector. we hope that will happen. the criterion from ending asset purchases is not, you know, some very high rate of growth. what it is, is criterion -- the criterion is substantial improvement in outlook for labor market. we have made significant improvement. ultimately we will reach that level of substantial improvement. at that point, we will be able to wind down the asset purchases. again, you know, and i think people don't fully appreciate that we have two tools. we have asset purchases and we have rate policy and guidance about rates. it's our view that the latter, the rate policy, is actually the stronger, more reliable tool. when we get to the point where we can -- you know, where we are close enough to full employment, that rate policy will be sufficient. i think that we will still be able to provide -- even if asset purchases are reduced, we'll still be able to provide a highly accommodative monetary background that will allow the economy to continue to grow and move towards full employment. >> reporter: chairman, donna with american banker. the financial stability oversight council has designated two non-bank firms and presumably a third and others to follow. however little has been said in how specifically these firms will be regulated by the fed, which has been a chief criticism of the entire process. given that, can you provide us any guidance at this point in term of how far along the fed is in terms of letting the banks know how they will be regulated besides, you know, tailoring the plans. >> well, the two firms that have been designated, aig and ge capital, actually are -- have been regulated by the fed because both of them are savings and loan, thrift holding companies. we have already a lot of experience with those firms and and a lot of contact with those firms. we will -- i mean, i want to use the word tailor because we want to design a regime that is appropriate for the business model of the particular firm. but our other objective, and what makes designation by the fsoc, particularly noteworthy is that the primary goal of the consolidated supervision by the fed is to make sure that the firms -- the firm doesn't in any way endanger the stability of the broad financial system. so, we'll be looking at not just the usual safety and soundness type matters or supervision, which both can be again tailored to the types of assets and liabilities that the firm has, but also we're going to want to focus on things like resolution authority, practices relating to derivatives and other exposures, interconnectedness, et cetera, to make sure the firm in its structure and in its operations doesn't pose a threat to the wider system. that's what is going to be distinctive about our oversight. not only of these designated firms but also of the large bank holding companies we already oversee and which we're already subjecting to tougher supervision, higher capital, stress tests and all the rest. >> reporter: peter coke with bloomberg television, mr. chairman. one of my colleagues was remarking as we came in here, we don't often get surprises from the federal reserve. this was a surprise. you talked about you hadn't telegraphed anything specifically but you've seen the market reaction, i'm sure. my question for you is, were you intending a surprise today? and did you get the intended result, judging from the market reaction, and related to that, by taking this action today, continuing the bond purchases going forward, at what point do you believe you're starting to complicate the exit strategy simply by continuing to keep the fed's foot on the gas pedal? do you make life more complicated for the federal reserve down the road? >> well, it's our intention to try to set policy as appropriate for the economy. as i said earlier, we are somewhat concerned. i don't want to overstate it, but we do want to see the effects of higher interest rates on the economy. particularly mortgage rates on housing. so, to the extent that our policy makes conditions -- our policy decision makes conditions a little bit easier, that's -- that's desirable. we want to mike sure that the economy has adequate support and we, in particular, it's less surprising the market or easing policy as it is avoiding a tightening until we can be comfortable that the economy is, in fact, growing, you know, the way we want it to be growing. so, this was a step -- it was a step -- precautionary step, if you will. it was an -- the intention is to wait a bit longer and to try to get confirming evidence to whether or not the economy is, in fact, conforming to this general outlook that we have. i don't think that we are complicating anything for future fmocs. it's true that the assets that we've been buying add to the size of our balance sheet. but we have developed a variety of tools. and we think we have numerous tools that can be used to both manage interest rates and to ultimately unwind the balance sheet when the time comes. so, i -- you know, i'm -- i feel quite comfortable that we can -- in particular, we can raise interest rates at the appropriate time, even if the balance sheet remains large for an extended period. and that will be true, of course, for, you know, future fmocs as well. >> mr. chairman, kate davidson from politico. do you think the recent attention paid to who will be your replacement has had any immediate effect on the fed? could it have any lingering effect on your successor? do you think the process has become too politicized or is this part of a healthy debate? >> i think the federal reserve has strong institutional credibility. and it is a strong institution, highly competent institution. and it's independent. it's nonpartisan. i'm not particularly concerned about the political environment for the federal reserve. i think the fed will be -- continue to be an important institution in the united states and that it will maintain its independence going forward. >> reporter: thank you, mr. chairman. greg rob, market watch. was there a discussion among the committee today about changing the forward guidance to 6 .5% jobless rate? could you say why the committee decided to hold that steady in light of the weaker economy? >> well, as i mentioned earlier, the committee has regularly reviewed the forward guidance. and there are a number of ways in which the forward guidance could be strengthened. for example, they mentioned inflation for. there are other steps we could take. there is other information we could take after we get to 6.5%. if we could provide precise guidance, that would be desirable. now, it's very important we not take any of these steps lightly. we make sure we understand all the implications and that we are comfortable that it will be -- that the -- any modifications to the guidance will be credible to markets and to the public. so, we continue to think about options. there are a number of options we have talked about, but today we -- as of today we didn't -- we didn't choose to make any changing to the guidance. >> reporter: l.a. times. as you may know, the census bureau reported yesterday the poverty on medium household income saw no improvement last year. i wonder when you see median incomes turning up significantly for most people? and in light of the fact that people in the middle and the bottom have seen very little of the gains relative to higher income households, how would you assess the post-quantitative easing and fed policies? >> sure. so, that's certainly the case, there are too many people in poverty. there are a lot of complex issues involved. there are complex measurement measures. i would just have to mention that. there are a lot of issues that are really long-term issues as well. for example, it might seem a puzzle that the u.s. economy gets richer and richer and yet there are more poor people. and the explanation, of course, is that our economy's becoming more unequal. the more -- more very rich people and more people in the lower half who are not doing well. there's a lot of reasons behind this, this trend, which has been going on for decades. and economists disagree about the relative importance of things like technology and international trade and unionization and other factors that have contributed to that. i guess my first point is that these long-run trends, it's important to address these trends. the federal reserve doesn't really have the tools to address these long-run distributional runs. they can only be addressed by congress and administration. it's up to them to take those steps. the federal reserve is -- we are doing our part to help the median family, the median america, because our -- one of our principle goals -- we have two principle goals. one is maximum employment, jobs. the best way to help families is to create employment opportunities. we're still not satisfied, obviously, with where the labor market, the job market is. we'll continue to try to provide support for that. and then the other goal is price stability, low inflation, which also helps make the economy work better for people in the middle and lower parts of the distribution. so, we use the tools that we have. it would be better to have a mix of tools at work and not just monetary policy, but fiscal policy and other policies as well. but the federal reserve, you know, we only have a certain set of tools and those are the ones we use. again, our objective -- our objectives of creating jobs and maintaining price stability are quite consistent with helping the average american. but there are limits to what we can do with regard to long-run trends. i think those are very important issues congress and the administration, you know, need to look at and decide, you know, what needs to be done there. >> reporter: hi. jeremy with afp. some emerging countries are blaming the fed for distress they're experiencing. i want your take on that. and also how did you judge the way markets reacted to your announcement back in june. thank you very much. >> let's talk a little about communication in june. let me talk just about the emerging markets, which is an important issue. let me first say we have a lot of economists who spend all of their time looking at international aspects of monetary policy. we spend a lot of time looking at emerging markets. i spend a lot of time talking to my colleagues in emerging markets. we're watching that very carefully. the united states is part of a globally integrated economic and financial system. and problems in emerging markets, in any country for that matter, can affect the united states as well. and so, again, we're watching those developments very carefully. it is true that changes in longer term interest rates in the united states but also in other advanced economies does have some effect on emerging markets, particularly those who are trying to peg their exchange rate. and can lead to some capital inflows or outflows. but there are also other factors that affect inflows and outflow. those include changes in risk preference by investors, changes in growth expectations, different perceptions of institutional strength within emerging markets across different countries. so, there are a lot of factors that are there playing a role. that's one reason why different emerging markets have had different experiences. they've had different institutional structures and different policies. but just to come to the bottom line here, we think it's very important that emerging markets grow and are prosperous. we pay close attention to what's happening in those countries. it affects the united states. the -- we -- the main point, i guess i would end with, though, is that what we're trying to do with our monetary policy here is, i think my colleagues in the emerging markets realize s trying to create a stronger u.s. economy. and a stronger u.s. economy is one of the most important thins that could happen to help the economies of emerging markets. and, again, i think my colleagues in many of the emerging markets appreciate that notwithstanding some of the effects they may have felt, that efforts to strengthen the u.s. economy and other advanced economies, in europe and elsewhere, ultimately redounce to the economies of emerging markets and economies elsewhere. >> thank you very much. >> thank you. >> welcome to the "closing bell." i'll bill griffeth along with maria bartiromo. i'm at new york stock exchange. where are you? >> i'm coming to you from blackrock headquarters in new york. we're at the trading desk looking at the news. the fed elected not to taper, as we thought here on the "closing bell." does not warrant reducing asset purchases. we'll keep with $80 million a month of bond buying and with that the markets took off. >> what you and i were looking at were the benchmarks the fed set for themselves in terms have inflation expectations, employment gains, growth in the economy. we aren't anywhere near any of those benchmarks right now. i mean, while i left here yesterday maybe convinced they were going to cut some of the tapering because that's what sh was talking about, i was still scratching my head as to why when we hadn't reached those benchmarks. they answered it today. chairman bernanke said inflation is not where they want it and job growth is not where they wanted it. >> that's right, bill. that's why i never expected a tapering because the fed was clear on those benchmarks. every time we speak with ceos they say a similar tune. that is, this is an anemic growth pace in the economy. having the fed pull away at this point brings up a debate on whether or not the economy in terms of the growth pace you would expect at this point in a recovery in this cycle is just not there yet. so, again, it's about the data. bernanke just said that. he reiterated that a number of times in the press conference. it is about the data. that's what we're looking at for the next meeting. i would say the data has to improve in the next two months. i would probably expect tapering to begin in december. as we have discussed, that means it is somebody else's problem come 20 14, unless of course bernanke chooses to stay, which is unlikely. >> he was very coy about that. meantime, major averages in the stock market, all-time highs in this big rally we're seeing. dow up 142 points. about 30 points above its old all-time high. the s&p is up 19, about 15 points above its all-time high. gold has skyrocketed by $30 today. and the yield on the ten-year note is at a five-week low down to about 2.67%. let's bring in the experts and bring in this surprising decision not to taper. bringing in ken fisher, brian jacobson from wells fargo advantage funds, mike, and our own team of rick santelli and steve liesman. >> ken fisher, this has to be your worst nightmare today. you are not a fan of ben bernanke. you're not a fan of quantitative easing at all and now it continues at the same pace for the foreseeable future. >> let me say i'm a bull. the market's rising, i'm happy. but i'd much rather see the wicked witch of the east go away. i think we'd be way better off if we ended quantitative easing real fast so this scapegoat can get behind us. quantitative easing is bad, not good. bernanke is bad, not good. >> you think the economy would be better off without quantitative easing? >> absolutely. we have done well without quantitative easing, not in spite of it. it's an evil. look at britain when we thut kwan ta -- when they put quantitative easing in, things went to the tank. leading curve has been a leading economic indicator. steeper yield curves, auger in more bank future lending because it's a reflection of the marginal proceed pmargin al propensity for banks to lend. you could get a marginal bank curve of zero to zero and nobody would lend to anybody. >> perhaps, perhaps. and yet as this period moving into this meeting has created real volatility and interest rates moved up about a week ago, touching almost 3 %, the market for housing has slowed down. so, i mean, you can't have it both ways. brian jacobson, let me ask you your take in terms of the move in the ten-year today, five-week low, back down to 2.6%. is that going to spur the momentum? housing? >> well-being i thi, i think it help a little bit. i think more significant is the pass-through on the mortgage interest rate side. a lot of banks have announced they'll be cutting back on staffing due to the decline in mortgage refinancing applications. so, perhaps some of the effect of the decline in ten-year treasury is not going to percolate into the housing market much like the fed would like. maybe they've painted themselves into a corner with a lot of the taper talk. i wasn't convinced they were going to do the tapering but the markets certainly appeared to be. now there's going to be the problem that given there was no taper, that this might not actually be stimulative anymore. >> ken, what rn ywere you going say backup in rates and potential impact on the housing market? that can't be good for housing. >> let me go back to the british example. when they ended quantitative easing, the same thing happened and housing took off. >> i think we have to draw a distinction with the british example, though. >> moreover in terms of having it both ways, when everybody thought tapering would end, every day the market rose right into it. they found out it wouldn't, the market keeps rising. why? it's a bull market. it's in spite of this nonsense, not because of it. >> michael, what do you make of what's going on today? where does the stock market go from here? we're at all-time highs. is this about the economy or the continued drip of morphine coming from the fed? >> morphine. i think it's all about morphine, bill. i think we really should not be surprised. i was calling for at most a $10 billion cut. yesterday we were talking about how you would not be surprised to see no cut. bill, something that's inte having, on milton friedman's 90th birthday, commenting on -- excuse me, my glasses, commenting on tightening during the great depression and he said, i quote ben bernanke, regarding great depression, you're right, we did it. we're very sorry but thanks to you, the friedmans, we won't do it again. bernanke says he'll be very, very cautious unwining any stimulus efforts. whether it's right or wrong, it's here to stay. i think the markets go higher. i think it's a sentiment issue more than a data issue. i think people are way too wound up about how much tightening was going to occur. i think this is really positive for the markets. >> it certainly has been already. we're seeing this market take off once again record territory. steve liesman, let's go through some of the things ben bernanke said. he said the downside risks have, in fact, diminished. that's a positive for the core fundamental story here, although not ready yet to actually begin to pull away the punch bowl given the fact that the growth numbers that we're talking about are still considered anemic. >> yeah, maria, having covered this for the last five years, this financial crisis and the innovative and creative response of the fed to, it i find policy right now and the outlook about it inskrutable as i ever have. i think things are confusing and i think the outlook is confusing. i heard bernanke say three things. one, they don't have confidence in the outlook. the second is financial conditions have tightened and they're concerned about that. and the third is concerns about fiscal restraint. when i puzzle this through about when the fed will ever actually be able to tighten, you think about better growth. the fed talks about tapering. rates rise. and then ultimately you have this concern about growth and then the fed talks about not tapering. it's like a hamster on a treadmill. it's hard to understand how the federal reserve gets to a place where it's happy enough with financial conditions. i mean, if you can't take 285 on the ten-year, what can the economy take? >> what about the marker? bernanke was clear to point out 6.5%. remember a long time ago we were saying -- >> but that's interest rates. moo ma rhea -- >> hold on. he was very specific. he said 6.5%. >> you have it wrong, marie dwra. >> when was the last time -- >> but that's -- >> i know it's higher interest rates. however, de -- he did put that out there, unemployment rate at 6.5%. once that's out there -- >> it's been out there. >> i know. but before bernanke was so specific, you very rarely had any chairman be so specific in terms of what they're looking at in term of an actual rate. and he was. >> that's right. but you had the unemployment rate come down, which everybody thought was the precursor for tapering. now that unemployment rate is not really the metric to follow. the 6.5% is not so much a metric. it's a metric for interest rates, not necessarily tapering. i wonder if we get to this place where we have to do it all over again. you have better economic numbers. is it a month from now? two months from now? and what the fed actually buys here by not tapering this time around when the market was already primed for it. >> steve's right. we're in a ham centster cage. if it gets withdrawn, it will be slow. we're in a vicious cycle where it's very difficult to get out from under this. regardless if we like it or not, more money will be pumped into the system for longer than perhaps it should be. >> rick santelli -- >> but the economy is not doing so great. >> rick santelli -- we've gone how many minutes and we haven't gone to rick yet. ken fisher doesn't like qe as much as you don't like qe but it's still in place in full force. what are you talking about on the floor today? >> i ado agree with ken. put it curve is steepening. five to tens steepened five basis points. so even though we're -- well, you know, listen, they don't call him helicopter ben for nothing. i found it the most factual aspect of the statement is when he quoted "my way" when asked about regrets. i think the fact the song is called "my way" today it's so appropriate. as you look at interest rates hovering as lowest levels since the second week of august, only maria's words are ringing in my ears. so many ceos have been on talking about anemic growth. i don't know where eye been. there are been a few. but the story is, interest rate is going up because the economy is better. candidates flip-flop, ben flip-flops but eventually interest rates will level. >> thank you, mr. sinatra. you like the rise in the stock market but are you investing because of the fundamentals or investing because of the morphine drip from the fed? >> there is no morphine drip from the fed. if there was, it would be rising at a rapid rate. it's not. >> it's rising -- >> you don't think the stock market is going up because of the fed's -- >> no, it's going up to spite it. i like a bull market. there is no morphine drip. that's ridiculous. >> maria? >> i don't know why people are questioning -- >> if it was morphine drip, the quantity of money would be going up. >> i don't know why people are questioning ben bernanke's news today. the bottom line is, we hear it every day, that people, companies are sitting on cash. the corporate sector today is probably the strongest we've seen in a long time. three-plus trillion on balance sheets. because of the uncertainty, skyrocketing costs for regulation, health care, uncertainty of tax policy, companies are sitting on that cash. as a result, we have a persistent unemployment problem. that's what bernanke and company are looking for and looking at. that's why there is no tapering today. that's the bottom line. i mean, i don't know what you guys are seeing. look at the corporate earnings. >> i think that's a good -- >> the third quarter is over in eight-days. revenue has been squat. we're not seeing the growth that is warranted in order to -- >> maria, you're saying 15,685, the current level of the dow, is all fabricated completely? are you on record saying that now? >> no, i don't i think it's fabricated at all. >> then how can you have it both ways? >> i think there are very few alternatives. i think this market is on fire -- >> exactly. >> so, it's rigged -- >> it's three-part monty? >> is that why the stock market is going up if it's not the morphine drip, because it's the least best looking house on the street? >> the market is going up because globally the economy is doing better than people think it is, and that's the surprise. it's the power of capitalism despite terrible policies. >> gentlemen, we thank you all. >> where is the economy doing best? housing. and people are worried it's vulnerable because interest rates have been so vuler? able. is it doing so great in spending? probably not. >> very, very sluggish growth. very sluggish growth. >> maria, they have given themselves an out to actually start the tapering in october. if you think about, they want to make every single meeting important. so one way to do that -- >> that makes no sense. >> they're trying to get through the fiscal year. every single reference as far as in the statement f you read through it, it takes about the fiscal drag. perhaps when we get through the fiscal end of the year, the fed wants to wait to see whether or not there's actually a budget, is there going to be a shutdown of the government. that would give them cover if they want to to actually begin tapering at that point. >> we got to go. >> one more thing. i want to say who the smartest guy of the week is now. it's larry summers. larry summers gets my vote because he doesn't want any part of this. >> there you go. >> no water left in the water cooler. we exhausted it. thank you for your insights. ken, great to see you. maria, we expected fireworks and we're getting them. 20 minutes left in the trading session. all the major averages in record territory with the dow up 153 points right now. >> we want to look at repercussions. how will today's move or not move impact blackrock's strategy? they manage for money than the federal reserve, $3.8 trillion. coming up, an exclusive interview with larry fink. rick receipt ereither is with m. 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[ whispers ] get eight hours. ♪ [ shouts over music ] turn it down! and, of course, talk to farmers. hi. hi. ♪ we are farmers bum - pa - dum, bum - bum - bum - bum ♪ . we have bob pisani, maria at blackrock. there is so much chatter on the floor today. nobody can believe what the fed did today. >> never have so many been so wrong about something. kudos to you, my old friend. you two got it right. kudos to both of you. >> we were just looking at the numbers. >> take a nod. you were right. there are a lot of mad people out on the street. they're mad because they're losing money. they were flat or short the market and they're not happy with these developments. they're convinced the fed has misled them. they're not convinced they misread the fed, which is the logical thing to anticipate. it's the fed who misled them. whatever you call it, there was a mass psychosis. we all convinced ourselves that even though the data was weak, it was strong enough to warrant a taper. that's the bottom line for all of this. there was a lot of people who felt mr. bernanke was making a political decision but for his legacy he needed to begin tapering right now on his watch. a number of other people said, however, he was more concerned, perhaps, about making it even a bigger mistake. it would turn into japan. japan raised interest rates suddenly, about ten years ago, a little more than ten -- less than ten years ago. >> prematurely. >> that's what he was worried about. john mentioned that to me. kudos to him. >> maria, i'd be interested to hear what your guest will say about that because his thing is interest rates and fixed income investing. what do you do now? what are interest rates going to do now if they keep this? the dollar has tanked today. rates have gone down to a five-week low again. you wonder -- >> one thing that blackrock has been noting, is that it hasn't been necessarily money coming out of one area and going into another but a reallocation within bonds. we'll talk to rick reiter about that. they're seeing a reallocation within bonds. we want to get to dominic. we have a $1,000 price on one former high flier. looks like it's flying high again. >> records are being set all over the market. one of those stocks hitting a record high is priceline.com. that's the online travel booking website. it went over $1,000 per share for the first time ever just in the past 10 or 15 minutes. that eclipses old record high of $995 on august 9th. the move makes priceline worth $52 billion and makes it worth just about as much as gm. get this, bill griffeth, making it worth more than shipping giant fedex. back to you. >> that's the world -- we're not in the 20th century anymore, dominic, that's for sure. we'll head toward the close here. we have about 12 minutes left in the trading session here. what a wild day it's been. up 145 points in record territory for the dow, maria. >> unbelievable, rock 'n' roll. we'll take a quick break. when we come back, we'll talk fixed income with rick rieder and howard fink. how are bond managers raeking to the fed's decision? i'm sure pretty happy. larry fink on the docket. what does this mean about the overall economy? could the fed think it's worse than we thought? we'll come to you live from blackrock headquarters in new york. rch. rch. my doctor and i went with axiron, the only underarm low t treatment. axiron can restore t levels to normal in about 2 weeks in most men. axiron is not for use in women or anyone younger than 18 or men with prostate or breast cancer. women, especially those who are or who may become pregnant and children should avoid contact where axiron is applied as unexpected signs of puberty in children or changes in body hair or increased acne in women may occur. report these symptoms to your doctor. tell your doctor about all medical conditions and medications. serious side effects could include increased risk of prostate cancer; worsening prostate symptoms; decreased sperm count; ankle, feet or body swelling; enlarged or painful breasts; problems breathing while sleeping; and blood clots in the legs. common side effects include skin redness or irritation where applied, increased red blood cell count, headache, diarrhea, vomiting, and increase in psa. ask your doctor about the only underarm low t treatment, axiron. the yield on the ten-year note is at a five-week low, 6.27%. now back to 270. all of it means a higher stock market. the major averages, dow and s&p are in record territory at this hour. the dow was up 179 points. the nasdaq, that's far from its all-time highs but that's a high we haven't seen. s&p is up 20 point. we've got our fireworks, as expected, maria. >> we sure did. thanks very much, bill. we are looking at the ten-year 2.07%. want to talk about yields and the implications of the no tapering news today out of the federal reserve. rick reiter is with me, chief fund manager at blackrock. thanks for being with me. your thoughts on the lack of tapering. 2.7% on the ten-year. how does that change your strategy? >> you heard we wouldn't taper interest rates. it was actually pretty surprising. you had a window. you think about back in may, he opened the door to actually start the tapering. i thought they would do it in treasuries, not mortgages. i thought they would be easy in terms of guidance, in terms of forward guidance bs which they were. at 270 you ratcheted down the range of the ten-year. you have to ratchet down 25 basis points. >> this is something -- we got the evidence and the bow tie from the federal reserve knowing -- saying that the economy is just not where they would like to see it and not growing at the pace one would expect, gwynn where iven where the recovery. this is something we've been hearing a lot from ceos, sitting on catch, unwilling to put money to work. what does this tell you, the fact they are downgrading the assessment of the economy going forward, holding back from taking back the stimulus. are things worse than we thought? >> i don't think -- i think the fed has been aggressive in terms of their economic forecast. i think they're bringing more in line to where the economy will grow going forward. i think they're suggesting we're in a decent economic period but, boy, we need to ratchet down where we've had an aggressive growth paradigm. i think they're reflecting that. i think forward guidance has been pushed out to a very long period of time to where rates were going to be. i think they're trying to adjust to that. you've said at blackrock investors need a new core bond portfolio. you're seeing a reallocation within the bond market. not money going out of bonds into equities. what are the opportunities you see now in the bond market? >> there's been the great story out of debt into equity. what's happening is great rotation within fixed income. >> not out and into equity. >> people are looking, how do i get income in my portfolio? you have an aging population. people still need the income. how do i get it without the interest rate hit. the drawdown in terms of interest rate and losses. people want income. they're buying high-yield loans, inconstrained funds. i think that continues for a while. people being flexible without taking fixed income. >> are you looking at ash local debt, european local debt. there are yields to look at there. >> we think european high yield will be a good opportunity. we think given the nature of the change in the banking system you'll see more debt issued to european markets. same thing with asia. part of being flexible is finding areas in the world where you with find opportunity. >> larry summers is out. you think it's janet yellen. does she become even more accommodative? she's basically been drinking the kool-aid with bernanke, right? >> let's say it's don kohn or janet yellen, whoever it is, we'll continue down the road with the fed laid out. both are pretty pragmatic people and see where the committee laid out the forecast and i think they'll continue down that road. do i think it takes the committee a bit more dovish with janet yellen? i don't think so. >> thank you so much. >> we're heading to the close here. we're waiting to see if the dow can remain in record territory. we're losing steam as we go. the bias is to the downside by a little bit. in fact, we're just below that record high. we'll come down with the countdown. plus, yes, there's more. oracle earnings are due out at the top of the hour. we'll have full team coverage of that coming up in a bit. >> also take a look at china's credit bubble, jim chanos has been warning us about, telling us how he's allocating capital. i put in the hours and built a strong reputation in the industry. i set goals and worked hard to meet them. i've made my success happen. so when it comes to my investments, i'm supposed to just hand it over to a broker and back away? that's not gonna happen. avo: when you work with a schwab financial consultant, you'll get the guidance you need with the control you want. talk to us today. ♪ unh ♪ [ male announcer ] you can choose to blend in. ♪ or you can choose to blend out. the all-new 2014 lexus is. it's your move. but it doesn't usually work that way with health care. with unitedhealthcare, i get information on quality rated doctors, treatment options and cost estimates, so we can make better health decisions. that's health in numbers. unitedhealthcare. closing up a crazy day on wall street. fed announces no change in tapering. growth is not strong enough to sustain job growth or bring inflation rate back where they wanted. the dow and s&p are in record territory. in fact, the dow is strengthening as we go into the night with a gain of 140 point. gold skyrocketing by $57 as dollar tanks. the yield on the ten-year goes to all-time low. oracle earnings coming out at the top. maria bartiromo is at blackrock to talk with larry fink himself. stay tuned for hour number two of the "closing bell." i'll see you tomorrow. >> 4:00 on wall street. do you know where your money is? hi, welcome back to the "closing bell." i'm maria bartiromo coming to you from the headquarters of blackrock in new york. historic day on wall street, dow and s&p 500 close at all-time new record highs. after the federal reserve said they would keep their foot on the gas pedal and did not slow down the bond buying at all. take a look at where we stand as question close out another day. the dow jones industrial average up 145 points. we had been up better than 170.

Transcripts For CNBC Closing Bell 20140730

we continue to move to the down side. we should add as we enter this hour, we're off about 41 points. the nasdaq, though, bucking that trend. >> we should show you the ten-year yield as well. that's been up ten basis points today. that gdp number had a big impact on that. it's up nine basis points to 2.55%, and the 30-year's 3.2% right now, so moving quite higher. but i'm stealing -- oh, now it's at 3.30%, as a matter of fact, $ 3.31, do i hear 3.32? i'm stealing rick santelli's. >> troubling reports out of russia and ecrane, things that may be escalating. stocks may have lost early gains on those worries. we'll talk about all that coming up. also, forget tax inversions. now outversions are the new corporate tax trick. >> oh, that's right, yeah. you've got to look up on cnbc.com. >> you wrote about that on cnbc.com in a story that's getting a lot of interest right now. it involves companies spinning off their real estate holdings into real estate investment trusts, all, of course, blessed by the irs. some stocks already getting a big boost from this move, and you're going to be following that a little bit later. >> and relatedly, it's master limited partnerships, another one of these tax-free structures in the news today. you can look at shares of hess, which is pursuing this kind of thing. so, there's inversions, there's outversions. >> when we talk to a lot of money managers about where they're finding good income these days, mlps, master limited partnerships come up quite often, so plays into that very much. >> absolutely. it all ties together. let's look at where we stand here. as we kick off the final hour of trading, the dow's off 46 points at this hour, 16,865 is the level there. earlier at the lows, we had gone negative for the month of july, so we'll keep a close eye on that. the nasdaq still adding about 14 points. strength in twitter certainly helping today. and the s&p 500 off about two, 1,967 is the level there. >> all right, a lot to talk about today. let's get to hank smith from haverford investments, abigail doolittle from peak theories. two of the strongest bulls we know, jack bouroudjian from index financial partners and anthony chan from chase. and of course, our own rick santelli joining us with the market response to all this. anthony chan, go ahead. you said it'd be like this. you can gloat. you can tell us you told us so. were you as pleased by the fine print as you were by that number that we got this morning on gdp. >> i really was, because you basically saw that nice upward revision to the prior quarter making the first quarter not as bad, and certainly, the second quarter a lot stronger. but keep in mind that from 2011 to 2013, the government did revise down the numbers about 0.2%. so, we still have an output gap of about 4%, if you used the congressional budget office numbers. and i love the congressional budget office because they've got democrats and republicans, so there's no political ax to grind. that tells me that there's still more room for the economy to expand before we really have to worry about serious inflation in this environment. >> jack bouroudjian, you say we should all say thank you to the federal reserve here? >> absolutely, kelly. look, you know, not only are we getting growth, we've got a low interest rate environment, we have got inflation under control, and anthony's absolutely right. i mean, this is turning into the best of all possible markets. you know, if we didn't have putin, maybe the market would be even higher. so, i think what we need to do is accept it for what it is. this is the proof in the pudding. what the fed has been doing is working, and that is absolutely good news. >> so, rick, i'm sure you want to jump in on those two comments. >> no, not really. not really. we've had 4% gdp before. the average is 0.95%. yes, we're pleased as punch we're only down 2.1% in the first quarter. i would rather concentrate more on this statement. once again, i think that the notion of, you know, how much of the labor force can work that is working has been a big theme on this trading floor. it hasn't been a very big theme at the federal reserve. they've really pretty much gloated about a lot of improvement and the dropping unemployment rate. but of course, as it gets to the point where we definitely do have solid growth compared to a crisis economy, i agree with jack, but we still have crisis economy type zero interest rate policy, and the fed is probably going to acknowledge things like labor force participation rate a lot heavier in the future. as for the market, all the volatility was really on the extremes, the two-year and the 30-year. ten-year is up ten basis points, looks to be the highest close since july 8th, and the curve actually steepened a couple basis points today, either though every metric is still pretty much at rather historic flattening, anywhere from 1.5 to 4.5 years, depending what part of the curve you look at. >> hank, do you think the fed's doing the right thing here? >> oh, absolutely. i think they have been doing the right thing. they have not gotten enough credit. i think everyone is worried because we're in this new environment where the fed has used so many tools that haven't been used before, and we're worried about how do we get from extraordinarily accommodative to neutral? can they do that successfully? but you know, the fact is, fed policy has been spot on, and it continues to be spot on. but let's not confuse this bull market. this bull market has been born on fundamentals. the fed has been helpful, but it's been earnings growth that's driven the bull market. >> so, what do you tell your middle class neighbor whose wages haven't gone up, who still can't get credit to get a mortgage, who has to take out a subprime loan to buy a car, which is his new house? you know, a car is like the big investment now because you can't get a house. so, as long as you're long in stocks, federal reserve gets an a-plus, right? >> that's not the federal reserve's fault, rick! that is congress's fault. >> jack, i was talking to the other guy. we know you're a bull and long stocks, too. >> but that's the problem. that's the problem in this congress -- >> i have no problem with anybody being long stocks. >> not the federal reserve -- that's not the fed's problem. you know what you tell those people? you tell them not to vote for those people they're voting for. >> $4.4 trillion. they're pretty much an authoritarian boureaucracy with no bridle, no rules base. sounds like putin! >> i have to jump in here. i absolutely agree with rick. i don't agree with jack today, surprise, surprise. and when we look at the jobs report, the last jobs report, the quality is really pretty weak. it was a big surge in part-time jobs, not full-time jobs, so that was one of the bright spots talked about by the fed today, but i don't see it. and if we return to gdp, today is 4% print. yes, it's impressive, but put in context of the first-quarter contraction, we're back to equal at the end of 2013. bill, you often talk about these near-term markets being herky jerky. i think we're looking at a long-term herky jerky economy. it's up, it's down, it's up, it's down. we had lousy housing data come out this week in addition to the positive gdp print. there's so much uncertainty. it puts a lot of pressure on, you know, the second-half recovery. i don't think that's going to happen this year and i think that stocks are going to connect that reality. the fed is running out of tricks. >> here's one point -- >> anthony. >> i agree with kelly that last month most of the jobs were part-time, but you really have to look at the base when the economic expansion began. it began in june of 2009. we've created 7.8 million jobs. if you look at all the part-time jobs from june of 2009, i hate to disappoint people, but they're down 397,000. and by the way, if you break them down, what you'll find is the number of part-time workers for economic reasons down 1.48 million. the only ones that were up were the part-time jobs for noneconomic reasons, people that want to work part-time, but the net number is minus 397,000. >> you're referring i think to what abigail was just saying -- >> in june, it was 800,000 part-time jobs added, 533,000 full-time lost, so you have all these part-time people who don't have benefits -- >> can you answer rick's question a while ago as well, when he was saying what do you tell your neighbor who may not be doing that great here in this economy? >> well, the answer to that -- >> yes, i'd tell them we have elections coming up this fall -- >> that's right. >> and we'll have a presidential election in 2 1/2 years. >> bingo! >> and elections make a difference, because the key to monetary policy, the success of monetary policy moving to neutral would be pro-growth fiscal policy. in terms of tax reform and regulatory reform. that is what we need to help monetary policy. >> hear hear. that's exactly right. >> you know, that is one piece of it, but one thing we're all looking for is for an interest rate rise. the federal reserve is excellent at communication. they have all of us looking at when will rates go up. it's positive in the fact that it steers us toward thinking that the economy's improving, and yet, they keep pushing it out. you would think it's positive for stocks. but the fact of the matter is, we still haven't had a true economic cycle. so, to put an interest rate cycle would be like putting out a fire that never started. and more importantly, it's easier said than done. jack and rick would know more about this than me, but because of the liquidity, the fed can't use its typical market operations to sell bonds to raise the federal funds rate. they're experimenting with a reverse repurchase facility, but it's very risky -- >> right. but let me ask the broader question to everybody here. would you have any objection to saying to americans out there, middle-class americans, however you want to classify it, they should get involved with the stock market here? because i see everybody from hank saying we're in a secular bull market to pretty much every guest we've had on here lately thinking this thing could still have years of room, of space to run. >> if it's an advice question, i think it's a financial question. probably half of america cannot afford to invest in stocks. >> all right. i just remember jim cramer living out of his car when he was investing in stocks back in the early days. >> jim will tell you about that, exactly. >> thank you, folks. we've got to go at this point. thank you, though, for a lively discussion, as always, as anticipated. see you later. heading toward the close here with 50 minutes left in this trading session. the dow is down 42 points. it's been a wide-swinging day. at the low it was down 94, at the high it was up 72 on the open this morning. so, volatility's still around. we're wondering whether this strong gdp number will force janet yellen to boost interest rates sooner than anticipated. that may be what the bond market was signaling today. we have steve liesman and former fed governor randy kroszner joining us with their takes coming up in a moment. also ahead, the financial fallout from vladimir putin's aggression in ukraine. new european and u.s. sanctions on russia. fitch downgrading more than a dozen foreign banks. we'll have the latest developments and how it's impacting your money. and a new batch of earnings due out after the close tonight. kraft, metlife, whole foods and yelp on the plate. we'll tell you what numbers to watch out for and how they could move the markets, coming up. stay tuned. more "closing bell" right after this. over 20 million kids everyday in our country lack access to healthy food. for the first time american kids are slated to live a shorter life span than their parents. it's a problem that we can turn around and change. revolution foods is a company we started to provide access to healthy, affordable, kid-inspired, chef-crafted food. we looked at what are the aspects of food that will help set up kids for success? 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which is more important? >> i think it rolls into one. the fed tapers by 10 billion, bringing the monthly purchase down to 25 billion and it had been 80 billion, so there's a ways to go, probably ending in october. looks like in my opinion a slightly hawkish tilt to today's fed starmt, certainly brought about by the better economic numbers. i just got a report in the new york fed, who says this is neutral, but here's my reasons. the plosser dissent saying the current language doesn't reflect the economic progress. the fed saying the likelihood of 2% -- below 2% inflation has diminished somewhat. they made better comments about the labor market. the one dovish comment is the introduction of this new concept that there remains significant slack in the labor market. "the most significant shift in the fomc statement, which went further than we expected was the recognition that inflation has moved closer to the fed's target and the fomc has more confidence and will likely remain close to the 2% target." 4% gdp growth, expecting 3%. first quarter originally expected down and now down 2.1% and the jobs report estimate is 230. the friday number and their-quarter data now very significant. a repeat of a strong quarter like we had in the second could prompt the fed to accelerate its pace of tightening, either when it begins or how far and fast it goes when it starts, kelly. >> i don't know, steve. steve, stay with us, because i want to get perspective from randy kroszner from the university of chicago booth school of business. randy, steve just said to what extent could the better spate of data lately pursue the fed to adopt a faster exit policy tuned what extent would that sort of being burned by the first quarter and some of the other headwinds out there, including the labor market slack, keep them from being so hasty? >> i think that change in the language is quite significant, because really, the main change in that statement is the significant underutilization of the labor resources in the economy. and so, i think what they're trying to do is pivot from the strong gdp number to focus on the labor market. now, of course, the unemployment rate has come down, but it's janet yellen said in her first press conference, she was focusing on a broader measure of labor market utilization, the so-called u-6, which looks at people who are marginally taxed to the labor force and people who are part-time who would prefer to be full-time. so, i think that still gives them a fair amount of leeway to wait. >> steve, why do you think they're focusing, or at least publicly acknowledging the slack in the labor force now? this is not a new phenomenon. we've talked about this before. the guys on the trading floor have been buzzing about it, so why the acknowledgement now, do you think? >> let me pivot off that question a little bit and tell you, there are a couple ways for a boss to come in. he can fire everybody at the beginning or hang around for a few months and then fire a few people. this is sort of yellen hanging around. she had introduced this concept of labor slack for a while, talked about it in her nomination hearings, and now she's made it part of policy. so, over time, she's talked about it. the significance, as randy suggests, is that now it's part of the statement, which makes it part of policy. but randy, i just want to push back a little bit, respectfully -- >> sure. >> -- to the former governor here. if the economy goes the way it's going, 6% nominal, we're doing 200,000-plus jobs that's double what's needed to bring down the unemployment rate, it seems inexorable to me that we would begin soaking up slack at a reasonably fast rate. my point is not that there isn't slack now. my point would be, if the pace continues, which is the way i put it, then we'll see a fed that's going to have to accelerate because the slack is going to be less. >> and that's the key thing, i think, to focus on. if you look at this broader measure that janet yellen and others focus on, it's at 12.1%. the unemployment rate is at 6.1%. that's a 6% gap. there's always a gap between these two. >> right. >> but we've been collecting this data for about 20 years or so. until mid-2009, the average gap was 4%. so, i think the people focusing on the labor mark slack, they say we have another 2% to go before getting back to nianythi close to normal conditions. >> does it require in order to get there, i mean, do we have enough lift-off to get us there already, or does that require more? and is fed policy the right prescription here? >> a lot of questions there. so, i'll try a little bit on those. so, i think the con sencensus o the fomc is that the policy they're pursuing now will allow us to get there, to a reduction of the gap between the broader underutilization number and the broader unemployment number, but that's going to take a while, probably by some time next year. we still haven't seen pressure in wages, and actually, if you look at the gdp rescissiovision reduce the wages and salary growth over the last three years, so we haven't seen a lot of pressure there. >> randy, i'm just wondering, though, acknowledging that 2% gap that's in there. the fed can't wait until that gap is entirely closed to bring -- >> for sure. >> -- to begin bringing policy back to normal. some time between now and the closing of that 2% gap, rates have to move. >> so, i think -- and in some sense, they're gradually doing that through the stepdowns in the asset purchase program, which i agree, as you had mentioned before, are likely to end in october, and it will be in a little bit of wait-and-see mode. then obviously, we have to see which way the inflation pressures are going. if they heat up, the fed will have to move a little bit sooner. but i think the consensus is that there is a fair amount of slack. and one metric to look at would be this gap between the u-6, that broader measure, and the normal unemployment rate. it's only one measure. also, very low labor force participation rates. those still haven't bounced up. they're back at levels of 1978. >> before we let you go, today notwithstanding, the yields are moving up and the 10-year, the 30-year especially, but for the most part, long yields have remained stubbornly low, even as the fed continues to taper. why do you think that is? >> well, i think broadly there's a concern that we're not going to have a strong takeoff. maybe we will see more of that, and certainly, the 10-year rate moved up nine, ten basis points when the gdp report came out. it really hasn't changed since the fed statement came out. so, i think they don't see a lot of inflation down the line. they don't see a lot of really robust growth. so, that's why i think the 10-year rate hasn't moved up as much as it would if we had stronger growth expectations. >> all right, governor kroszner, good to see you. steve, thank you, as always. thank you both for your thoughts on the economy today. apparently, the traders enjoyed what they heard on the economy as well. just kidding. heading toward the close, we have got 40 minutes left in the trading session here. the dow is down 31 points in what has been a pretty volatile day for the markets. pitney bowls es is trying t reinvent itself into an e-commerce company. it was a metered supplier and its cfo tells us exclusively how the business is going when we come right back. how long have i had my car insurance? 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call the number on your screen to switch to the aarp auto insurance program from the hartford and be rewarded for your experience behind the wheel. recovercare, auto insurance that helps take care of me. now i've seen it all. you won't drop me, you take care of me as well as my car, and you offer savings to switch. it's unbelievable! if you're 50 or over call now to request your free quote. i'm gonna call. i'm calling. i'm calling. i'm calling. call the hartford at the number on you screen to request your free quote. we'll even send you this free calculator. call: now. why wait? and here's where we stand with markets, 35 minutes to go on the session, and we're seeing red arrows for at least the two major indexes, the dow and the s&p 500. now, just a little while ago, we heard from the group of seven leaders that they're warning russia of more sanctions. recall they rearranged earlier this year to exclude russia, and this comes a day after the u.s. and european union announced new sanctions on russia. so, some geopolitical pressure certainly getting attention here this afternoon. all right, let's go to bertha coombs following the big movers today. >> a lot of earnings movers in particular. start with twitter, soaring after posting better-than-expected quarterly profits, up 2 cents a share, that on strong user growth. despite all the haters, twitter today up nearly 22%. hum humana falling after second-quarter profit declined 18% as it saw a surge in benefit costs offsetting a bigger than expected increase in revenue. humana is down over 4.5%, sending down a number of other insurers as well in sympathy, although we heard different results from wellpoint. we'll end with pitney bowes, higher after posting second-quarter revenue that beat street forecasts and it raised its outlook for fiscal 2014. pitney bowes trading up nearly 5% on the day. let's get more on the second-quarter results now from pitney bowes. >> with us now is their executive vice president and cfo, michael monahan. good to see you again. welcome back. >> well, thank you. good to see you again, kelly and bill. >> where was the strength? was it the old technology or the new technology that you guys are talking about? >> well, what we're really happy about is this is a combination of a strategy we laid out. it's pretty simple -- stabilize our core mailing businesses, take cost out of our business, but really grow our digital commerce business. and we're very excited about 27% growth in our digital commerce business this quarter, 25% growth in that business for the first half of the year, and it has become almost a quarter of our total revenue base now. >> michael, how much of your business is cross-border? and this seems to be the place of so much upheaval lately. i mean, whether it's the u.s. trying to figure out what to do with the ex-im bank, whether it's the international tensions we were just describing. does that help your business? does that drive solutions, or is this a hurdle for you potentially? >> if you think about the e-commerce marketplace, there's a huge potential for domestic sellers to sell globally. so, what we're really looking to do is open that global market up to a lot of domestic providers today. and we've seen tremendous growth in that. it's really the key driver behind our digital commerce growth. >> i was looking at a chart of pitney bowes today and it went back ten years even. i mean, a lot of volatility. 2007 you were at $50 a share. just before the financial crisis hit. you hit a low in the beginning of 2013 of $10, a huge decline there. but in the last 18 months, you've gone from $10 to $28, and i'll bet you're going to lay that to your new ceo who's been there exactly 18 months now, mr. lautenback, yes? >> yes, absolutely. mark came in with a clear strategy and we've been implementing on that strategy and its balance. >> what's different? you talk about a new culture he implemented. what is different now? >> yeah in terms of the culture, mark believes in people that are fit for purpose in the jobs. he's brought in a number of new business leaders, really focused them on a few key initiatives. and we've really been able to drive growth, drive costs out of our business, really manage our core mailing businesses effectively for cash and profit. >> well, that will do it. michael, thank you. it's good to see you this afternoon. >> thank you. good seeing you. >> you bet. >> and we've got 30 minutes to go until the close here. >> yes, we do. >> the dow jones industrial average off about 32 points, the s&p is now positive, albeit slightly. the nasdaq up 17. >> so, we had gdp, we had fed and we had russia. when we come back, is the financial fallout from the new sanctions on russia hurting your portfolio? it sure didn't help the stock market today. the pros weigh in on that when we come back. if energy could come from anything?. or if power could go anywhere? or if light could seek out the dark? what would happen if that happens? anything. in a we believe outshining the competition tomorrow requires challenging your business inside and out today. at cognizant, we help forward-looking companies run better and run different - to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work. because the future belongs to those who challenge the present. yyyup. with xfinity internet soyour family can use all their devices at once. works anywhere in the house. even in the garage. max what's going on? we're doing a tech startup. we're going public! [cheering] the fastest in-home wifi for your entire family. the dow is still negative, but the s&p's now turned positive. the nasdaq has been on the heels of twitter's better-than-expected earnings last night. the industrial average, you know what? we've got 30 minutes. anything's possible. >> and we were down almost triple digits at the session lows. >> yep. so, we will see as we head toward the close. >> the fed helping bring stocks back this afternoon, but before that, jitters about russia and ukraine saw some good gains erased this morning. >> this coming as russian stocks maybe ironically steadied after widespread investor dumping of russian stocks late in anticipation of broader economic sanctions to hit the russian economy. let's get more on what it means and whether these guys would invest in russian stocks right now. dennis gartman, founder, editor and publisher of "the gartman letter" and cnbc contributor lash larry mcdonald, both joining us. you both sent us notes ahead of time on your thoughts on russia, and both of you, interestingly, gave us a history lesson about russia. dennis, why is that significant to know about, you know, russia going back 150 years to understand what they're going through today? >> bill, you have to understand who the russians are. these are a patient people who have survived unbelievable problems. let's think about what they did in st. petersburg during world war ii. let's think about that they lost 20 million people in world war ii. let's think about the fact that they have survived communism. they have overcome almost everything. they are a very patient people. >> so, these sanctions will mean nothing to them in the aggregate, is that what you're getting at? >> i think by the time it's all done, they will survive the advantageo sanctions very well. and even though they can't move crude oil perhaps to their old clientele, they will be moving crude oil to somebody. >> larry, is it possible this becomes a buy russia, sell europe kind of event? >> well, we were on in march and were very bullish on russia on cnbc. but i would say, you know, if you think about putin, he's a 21st-century czar. >> bingo. >> and his oligarchs are his princes, essentially, his lesser lords. and we're hearing, if you listen closely in the global news flow, the head of the german cia said that his inner circle is crumbling right now. not all of it, but some members are putting pressure on him. so, we think there's a rising probability of a putin deeper invasion action into the ukraine. >> larry, unfortunately, because we're in the business of investing in markets here, let's boil this down to whether or not russia, you liked it last time. would you buy russia today? or are there other ways that people should think about the consequences of everything that you're discussing? >> well, i think this will set up for a phenomenal buying opportunity. i think you want to buy fear. right now there's not as much fear. i think dennis is right, it's the cheapest market in the world. you want to buy in on fear, but right now i'm moving to the sidelines on russia. >> and what about those commodities that are so tied to russia in many cases that you might follow, too, dennis? >> well, i think one of the things we have to understand, the russians are huge suppliers to the world of wheat and corn, predominantly wheat. they're going to be sellers of wheat, they're going to be sellers of crude oil any way that they can, even though they won't be able to move much of it to europe. and i think that's going to put downward pressure on commodity prices. but i have to tell you, bill, i would be looking at russian stocks. the old rule is, you want to buy when the trumpets are sounding, when the war is being fought, as they used to say, when the streets in paris run with blood, that's when you want to buy stocks. i don't think you want to be short the russian market, and if you have to do anything, you probably want to be a buyer of it instead. >> that's what james grant told us the other day. i regret that this is so macabre, but this is the reality of the situation, i guess, larry. are you surprised that crude oil and gold haven't been popping more to the up side, given all of this? >> especially gold. >> yeah. >> well, that's the thing. i mean, i think if you look at crude, you look at gold, then you look at the s&p, the market is numb to this. this market has grown so numb. everybody's focused on the fed. the market is blind to these risks. and that i think is very disturbing. so, i think the risk-reward in, say, equities here is poor because the market's not focusing on these possible substantial downside risks. >> and dennis, what do you do, just buy a russian etf? jim rogers told me for years, you've got to watch out for russian accounting practices, you know. when they report earnings and things, you've got to be careful for individual corporations. so, do you just buy the overall market instead? >> i think that's the only way to do it, bill. you could look at vimplecom, but i think the best way to do it is exactly that concern. you don't know when a russian corporation is going to cook its books something fierce, so look at the etf. that's the best way to do it. and i suspect i'm going to start thinking about buying the russian etf. i haven't done it yet, but i may start thinking about buying the russian etf and selling our own stock market against it to hedge it. >> just in a word, dennis, for gold, for oil, same question, does this show you more about how weak they are? >> i think, kelly, it absolutely shows you how weak they are. look at what the term structure in the crude oil market is doing. front-month presents has gone to contan contan contango. look what's happening to crude oil today. i think it's telling you that there's an abundance of crude oil out there and it's telling you that the russians will be great sellers of it. they have no choice. >> wow. thanks, guys. >> i hear a contango. thanks for your thoughts today. >> thanks for having me on. >> you bet. big day for argentina, as we all know, trying avoid default on billions of dollars on bonds. kate kelly has the latest. what's going on? >> bill, argentine bonds are trading at multiyear highs this hour as the country's officials try to hash out a deal to settle their differences with some powerful hedge funds. argentina's economy minister is meeting with representatives from elliott management in midtown manhattan as we speak. in a last-ditch attempt to avoid entering a state of default first thing tomorrow. argentina owes elliott and other hedge funds nearly $2 million most immediately in debt payments, in this case by midnight, and the country spent recent weeks name-calling and avoiding negotiations in violation of u.s. court orders to pay up. at issue, the ability to access international capital markets really for the first time in 13 years. and on the other hand, the risk of a raft of demands from creditors for additional payments if argentina does settle. we'll be watching the clock tonight, bill and kelly, to see where it all shakes out. >> yeah, kate, for sure. by the way, why isn't argentina paying creditors? is it posturing or because they truly don't have the money here? >> it is posturing, kelly, albeit with perhaps some legitimate legal concerns. they have roughly $30 billion in reserves now, so they technically do have the money. the problem is, if they pay today these hold-out creditors, that could trigger additional payments that they hadn't owed up until now under a sort of obscure clause in their creditor agreement. so, some folks think they're trying to avoid that, some folks think they're just posturing. there could be issues of national pride here, they don't want to cave into the, their words, vultures and extortionists. >> taking out the full-page ads. >> absolutely, ongoing within the last few days, even. >> set that precedent there. thanks, kate. keep us updated if you hear anything. heading to the close with 20 minutes left. the dow's down 20 points. the nasdaq's still up 22 and the s&p has turned positive here in just the last few minutes. shifting from macro to micro. up next, a top wall street pro names three stocks with potential for big gains. you'll want to write these down, just named one of barons' top stock-pickers. >> then later, eamon javers' next installment on his reports on a growing safety problem in the trucking industry, and this problem is costing more and more lives on american highways. stay tuned for that. chocolate is very individual. white chocolate lovers don't like dark chocolate. milk chocolate lovers don't necessarily like dark or white. before we couldn't really allow the consumer to customize their chocolate. we needed a scalable cloud solution allowing them to select what they are looking for. now there is endless opportunity to indulge. customization is made with the ibm cloud. the ibm cloud is the cloud for business. okay, there are some who think they are expert stock-pickers, right? they're everywhere. you meet them all the time. but at "barron's" and zacks investment research, they have put together rankings of the top stock-picking firms on wall street based on their performance for the first half of this year. >> and snagging the number one spot on that list for 2014, rbc capital markets. they've get a 10.2% return, which out-performs the s&p 500 and most others in the race. >> with us to talk about his top stock picks and investment strategy, the guy with the hot hand, marc harris, co-head of global research at rbc. what'd you see that nobody else did? >> look, you know, obviously, it's just inside our brilliance, all these great analysts we have across the platform. it goes without saying, right? so, we did have some themes. first of all, we started out looking at the year and saying, all right, we need to pick names that haven't run as much. find the relative underperformers, but keep a cyclical bias. our market strategist who you've had on the show, jonathan's view is that this market continues to run. we've got a lot more to go, cyclicals amongst those early in the recovery, with a steady eddie performance ahead and more to go. >> so, of the top-performing sectors this year it's been utilities and energy, but it was really the energy sector where you guys saw some winners. and i'm just curious, you don't change the list for the back half of the year, so what do you think happens from here and what are your top picks? >> that's actually an important point because that is tough to do, set your list and not do anything. >> and you're good. >> right. that worked for us. it's something we're trying to take a long-term investing view with this list. it's intended for our big investors. in the back hat, there are a number of names. >> let's name names. cbs. >> cbs. one of the great ones, right? here's a company that honestly is spinning off a reit business, so we've got catalysts ahead. they're continuing to turn capital. they've got opportunities to take some of the shows they have, "csi" and others, generate more money from them by putting them into other avenues. >> price target's $60 and it's at $57. >> a lot more room to go and les moonves, brilliant at doing what he does. >> okay. johnson controls. >> johnson controls, jci. here's an opportunity to basically see a company that's going to dramatically change its portfolio over the next couple years. you have a got that in three years will look a lot different. they've took their electronics business and sold it, there's more to come, possible return to shareholders, other elements we liked along these themes. >> and finally? >> and finally, our other favorite, aap, advanced auto parts. here's a company that, again, has great opportunities, i think, to just continue to operate their business. they bought another large retailer that actually has a big commercial business. that commercial business we think is higher margin. we think that shows the way for their existing business. higher margins equals higher earnings and a better stock than we had. >> you're not worried about tapering by the fed, you're not worried about russia, you're not worried about the bricks in the wall of worry right now keeping people out of the markets? >> you look pretty comfortable. >> i do, very, very comfortable. the reality is, let's think about it. you would have expected ten years ago oil prices to spike on what's happening in the middle east. oil prices, yes, up, but certainly not the way you'd expect. i think it's a similar effect across the global markets, where in essence, you have a great performing u.s. economy, a safe place to be, and the u.s. stock market is still a terrific place to be as a part of that. that's why this list is heavy, although we have picks from around the world. >> underpinning that is a view that the stocks will continue to rally. a final word on that subject of much debate, how much further do stocks, generally speaking, rally? >> i think we still have a significant amount more to go. another 20% run? look, that might be overdone. but in any one year, i think we all know, 7%, 8% is great. if we saw that this year, which is not out of the realm of possibility, i think everyone would walk away pretty happy in their portfolios watching on tv. >> we've called it the most unloved rally in market history, right? >> best ever, absolutely. it is. it is. nobody wants to believe it and it keeps going. >> but you believe it. >> i'm a believer. call me a believer. >> so important, so good. >> isn't there a song about that? >> i believe so, yes. >> or a belieber. in any case, we have 13 minutes to go. thank you, marc harris, rbc. the dow struggling to turn positive, but the s&p and nasdaq have already to the tune of about 1 and 21 points respectively. and another full plate of after-the-bell earnings at the top of the hour. we'll tell you what numbers to look out for, so get your pencil and paper ready again, coming up. and when you hear mcdonald's and grimace, you might think of this loveable purple thing. >> of course i do. >> but now, mcdonald's executives might have a grimace of their own, due it a new ruling from the national labor relations board, and it could change the fast-food industry forever. >> isn't he cute? 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>> yeah, i've got my earnings caffeine already, that jolt all ready for this afternoon. we have a lot of consumer-facing earnings this afternoon, beginning with yelp. investors will focus on its ability to try to monetize all that advertising for small businesses and improve its mobile traffic. the street is looking for a loss of 3 cents on revenue of about $86 million. and for kraft foods, the issue is going to be the top line. it's been soft since the split from mond lees back in october of 2012. rising commodities are also a major headwind for the company. most likely, the three key ingredients that are going to be a problem for them, cheese, meat and grains. and before you watch "sharknado" tonight, get the popcorn out, because we are going to be watching for amc entertainment looking for a gain of 29 cents on revenue of $737 million. and we're going to end on whole foods. this was once the darling. this company could not miss. this year it's lost 35% of its value, making it the second worst performer in the s&p 500. recently lowered its outlook for a third straight time. investors want to know whether they can deliver on expectations and at least maintain. and they're looking to earn 39 cents on revenue of $3.39 billion. we'll have all the numbers for you as soon as they come in in the next hour of the "closing bell" with kelly. >> yep. standing by. thank you, bertha. and when we come back, we'll get you to the closing countdown, see how we do here with the dow down 28. after the bell, we'll talk about a new tactic used in corporate america to cut taxes owed to uncle sam. kelly has an article on cnbc.com. it's called "outversions," and you'll hear more about it later in the show and why the irs says it's a-okay to do right now. you're watching cnbc, first in business worldwide. collection. ♪ ♪ during the cadillac summer's best event, lease this 2014 ats for around $299 a month and make this the summer of style. thank ythank you for defendiyour sacrifice. and thank you for your bravery. thank you colonel. thank you daddy. military families are uniquely thankful for many things, the legacy of usaa auto insurance can be one of them. if you're a current or former military member or their family, get an auto insurance quote and see why 92% of our members plan to stay for life. in a we believe outshining the competition tomorrow requires challenging your business inside and out today. at cognizant, we help forward-looking companies run better and run different - to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work. because the future belongs to those who challenge the present. who found a magic seashell. it told him what was happening on the trading floor in real time. ♪ the shell brought him great fame. ♪ but then, one day, he noticed that everybody could have a magic seashell. [ indistinct talking ] [ male announcer ] right there in their trading platform. ♪ so the magic shell went back to being a...shell. get live squawks right in your trading platform with thinkorswim from td ameritrade. welcome back. coming up on the three-minute mark here before the closing bell, here's what happened today. we did get volatility as anticipated. the dow opened higher on that stronger-than-expected gdp report for the second quarter, 4%, up 73 points. down, another issue involving russia and the sanctions being imposed there. that for a second day brought the market lower. we were down 94 points at the low of the day. here's where the fed made its announcement at 2:00, that they were continuing the tapering. as usual, we get this stutter-step move. the dow turned positive briefly, and now we have moved lower since that time, down 27 points. so, the volatility continued today. twitter, the stock of the day after that blowout earnings report last night, up 20% today. best day in a while, holding on to most of those gains. it was up more than that earlier, but now at $46.40. now we watch for the earnings coming out in a few minutes. bertha just highlighted them. here they are. kraft foods and amc entertainment, both of them fractionally lower today. whole foods, yelp and metlife are up. look at yelp, especially up 9%, helped, you could imagine, by twitter's numbers. joining me, bob kaiser from s&p capital iq and bob pisani as well. and the earnings really have performed well, haven't they? >> earnings are outstanding, you know. we started the season with expectations for about 6%. now we're up to about 8.5%. excluding the financials sector, we're 10%. originally, s&p earnings weren't supposed to hit double digits until the end of the year, so we're dancing the timetable now in terms of earnings growth. >> gdp today, good numbers, but it didn't change the narrative, modest growth. the fomc comments came out today, the most important thing in that sentence there, labor slack. >> slack in the labor force, yep. >> that's the signal from the fomc. they're going to continue to keep rates low. that's why we saw that pop there. so, the whole trend today has been modest economic growth, and that's why i like it. choppy, yes, but modest economic growth, that keeps the market slowly moving forward. now, if we get 300,000 jobs on friday, we're expecting 230,000? is that the number, the consensus number? if we get 300,000, now you're going to get the bulls come out and say, wait a minute here, now we're getting strings way above expectation economic numbers, now we're a little more concerned about the higher interest rates. >> the adp number this morning for the private payrolls less than expected, looking for 281,000, they got 218,000, but we quibble. we get herky jerky numbers every month, right on a lot of this data? >> bill, we're looking at the market as being a completely different place today as it was a year ago. you had the fiscal cliff, sequestration. all the economy had to do was avoid recession and produce a decent earnings number and the market would go higher. today's a very different situation. 2015 expected earnings are actually moving higher. and you're not going to get that with a 2% gdp growth environment, which is where we've been since the beginning of this recovery in 2009. >> that's exactly what we're going to get today. >> the gdp number today is very encouraging because the market needs stronger growth. 2.5% would be better if we see $130 a share in the s&p 500. >> we had marc harris from rbc on. he has the hot hand for stock picking, the best performance of all the houses. and he said, they're just investing in growth and holding steady at this point. >> if you look today -- >> that's their theme here. >> stocks, energy stocks, industrial stocks, those were the ones up the most. and we had declines in interest rate sensitive stocks on some concerns about higher rates, which i don't think are going to materialize any time soon. >> all right. good to see you both. thank you. see you later. we're going out with the dow not telling the whole story. transports came back today to some degree, so the russell 2000, those had been weaklings earlier in the week. stand by. we've got a lot of earnings coming your way here as we pointed out. that's all coming your way on the second hour of the "closing bell" with kelly evans and company. i'll see you tomorrow. thank you, bill. welcome to the "closing bell," everybody. i'm kelly evans and here's how we're finishing up the day on wall street. take a look across the major indexes. looks like the dow's still down about 31 points here at the close or about 0.2%. the nasdaq up 20 points. even the s&p 500 turning slightly positive there, hugging that 1,970 level. we'll talk about what that all means as we await big earnings, as bill just mentioned. let's get to today's panel. joining me on set, kevin roost from "new york" magazine, cnbc contributor stephanie link, our own sara eisen, and from the nasdaq to talk markets is "fast money" trader tim seymour. welcome to everybody. stephanie, how significant is this 1,970 level for the s&p, do you think? >> well, i mean, today was a really active day, and i actually was expecting that friday was going to be the more active day, right? because we've got the big nonfarm payroll numbers. it still is going to be a big day, but i thought the fed's statements were really very, very encouraging in that they're starting to tell us what the reality is, that jobs are getting a little bit better, that inflation is ticking up a little bit, wage growth, though, still nowhere to be found, so that's going to be a very key number for me on friday. earnings continue to come in pretty okay. so, i kind of think it's steady as she goes. we've got to get through friday, though. that's a big, big milestone to get through. >> yeah, there's a lot of data to digest. what do you think stands out? >> gdp numbers were more interesting than the federal reserve statement. the fed made it pretty clear it's in no rush to change policy. saying yes, we're seeing labor market improvement, but there's still plenty of slack, indicating they're pretty much on their set course. gdp was interesting to debate. the headline number, 4%, much better than economists were looking for, indicating that, yes, first quarter was an anomaly because of the weather. we saw it across the board with consumer spending. the one thing economists are looking at is can that kind of growth sustain itself into the following quarters, especially with the build in inventories, which could be sort of a temporary phenomenon, but look at what happened in the treasury market today. higher yields. you saw the ten-year jump the most since march, a sign that the economy is on a better trajectory, no matter what the federal reserve is going to do or change policy about. >> and as you said, a lot of that was in reaction to the news this morning as opposed to in the afternoon, but kevin, maybe the big news of the day is still twitter. i don't know. it's a 21% move. >> it could be. it's an amazing move and i think the narrative about twitter is changing. investors were nervous they were going to be able to monetize in the same way that facebook does. now we have a little bit more, you know, clear guidance on the fact that they have a plan, they have a strategy. who knows if it will work in the long run, but at least it's there and seems to be working now. >> after seeing the improvement in facebook, in twitter, there's a little halo effect across the social media space to help the nasdaq out-perform today. we'll get earnings this hour from yelp. those shares were up better than 9% i think today when all is said and done. and you can see linkedin, groupon, facebook, groupon and facebook only up 1%, but it's a difficult tape. and if you want to talk about relative strength in this market, we can also talk about relative weakness. i raised that question with dennis gartman last hour about oil and gold. they weren't well bid today on a day of plenty of news that could otherwise be supportive of it. >> but you bring it back to the fed and people are concerned. the bond market, the three-year highs on yields. i think you have to believe that the fed -- i mean, let's wait until jackson hole to hear what underutilization means by janet yellen. i think people really don't know how quickly the fed's going to run back into the table, but there's a little more descension on the fed board. i would not be scared with the bhps and the alcoas and integrated miners and the industrial metals. i think if we have the kind of growth and the inventory build we saw out of today's gdp, those are trades that still have a valuation argument and i think they've got the global economy behind them. >> are we making too much of this dissent at the fed? just to remind viewers, we've had two dissents this year. the one back in i think march, was to the dovish side of things and now one with plosser more hawkish. >> which is more surprising. people thought it would be richard fisher, especially in light of his recent speeches. >> it kind of was, yeah. >> when it comes to the "wall street journal," they transcribed his speech, sort of going against what's happening right now and talking about the inside for higher interest rate policy. you have to see more people dissenting to really see a split and sort of the change in balance, clearly. and i think peter summed it up nicely, the doves are still in charge at the federal reserve. >> but i think it's very important to recognize that the economy, there are underlying pac pockets of the economy that are getting better and if they do start to tighten, which i don't think they will, not this year, maybe in the beginning of 2015. we'll have to see what the data looks like, but i think the economy is in better condition, better shape to handle them taking away the american emergency -- >> they are. this is goldilocks. >> -- the emergency fed. i think that's a good thing. >> tim? >> i agree. i think you have the best of all worlds here. >> right. >> i think the economy was totally misjudged in the first quarter and i think the fact that the fed has to err on the side of caution means you've got an opportunity where this market's going to grind higher. the bond market will try to lead the way, but in the meantime, you'd be a seller of utilities, you'd be a buyer of big-cap valued tech on a day like today, and that's the trade that i think you have to look at. >> you know, the interesting thing, though, is that it's precisely the opposite of that that's worked year to date. i wonder about the dollar today and that linking some of the weakness we saw in the commodities space. if the dollar's rallying because maybe people are seeing a world beyond the fed and a stronger u.s. economy relative to other parts of the world. stephanie, do we need to start thinking about companies that will be a headwind for, or is that too small a factor or too marginal one? >> i think you have to watch what the dollar's going to do. it wasn't just the commodities that got hit it was kind of the industrials and multinationals that would be impacted from a stronger dollar, but i think you've got to look for your opportunities. if demand, in fact, is getting better, you do want to be in some industrials, and they can be global or they can be domestic, but you want to be a part of that leverage to a better economy. >> yeah. >> the dollar's been in an upwards trajectory since the last payrolls number, so much stronger than everyone was expecting, so obviously, it will be good to see what happens on friday, but it's also following yields. we've got a higher yield story. >> i'm excited for friday. i think we're going to get -- i mean, we know which metrics the fed is watching. they're watching wage growth, the participation rate. they don't care so much about headline numbers, but the market's reaction is another thing entirely. so, i'm excited. i think it's going to be one to watch. >> and i know the wage growth is going to take a while until it's there. i have a feeling the debate, as it's already starting to shift, will be about how convinced are you that it's coming, that it's out there and that the fed needs to wait until it's absolutely sure that it's there to kind of fully back off here. kevin, i mean, i think a lot of what's happening across the tech space is places where wages are being bid up and we could see a knock-on effect from all that. >> it's true. what's funny about the market's reaction to yellen's call about social media stocks a couple weeks ago has just been dead wrong. since she made that announcement, facebook's up 10%, twitter's up 20%. i mean, the market -- whether or not you think these stocks are overvalued, the joke going around in silicon valley circles is that yellen capital management is doing pretty badly on its tech investments. >> oh, for the love -- >> i don't think she was giving stock tips. >> that's great. we're going to send it out to bertha coombs here, who's going to start off the slate of earnings alerts that we should expect this hour. go ahead. >> yeah, another mixed quarter from whole foods. it's $3.38 billion revenue on the top line more or less in line with expectations. it did beat on the bottom line, 41 cents versus 39 cents. its comp-store sales up 3.9% for the second quarter. that's well below what the street was looking for, about 4.6%. in the commentary, though, they do say they are seeing signs of stabilities in sales trends and they say for the current quarter to date, at least through the first 27 days of july, comp-store sales are up 3.1%. back to you. >> bertha, thank you. stephanie, this company already one of the worst performers this year. we remember when it was down 29% on its last earnings report. what is going on? >> competition. everybody. everybody is getting into this space, and it's on the margin, hurting them, obviously, because that's what they do, right? but if you go to not just a king's or a stop n shop or a kroger, i mean, it's everywhere. it's even at costco's. this is a problem. they had to do 4.5% comp for the stock to do well and they just did 3.9%. i don't know what gross margins are, so we have to see how aggressive they were on pricing. if they held, that's encourage 'but i'll be looking for that number. >> you have to look at that number because they've been taking hits on pricing, right? that was their whole strategy is reduce to try to deal with the competition, and this is going to be a kind of long turnaround. the stock, as you mentioned, is down 35%. >> but they've missed the last six out of seven quarters and the stock is still trading at 23 times forward estimates, so it's not really cheap just yet, unfortunately, because the estimates are coming down pretty rapidly at the same time. >> what do you think this means for the rest of the consumer space? anything? i mean, is this a whole food-specific story? do we have to start to look at -- just talk us through the implicatio implications. >> i think that the consumer's very choosey. go back to wages. wages are only running around 2%, 2.5% annualized, so we need that to get better, we need the job market to get better for them to have incremental spend. for now, they're either going to go buy the car or go to home depot for the housing goods, or they're going to go get that sweater. it depends, but they're not going to be buying all three at the same time. this group has been beaten up, though, and it's underperformed, and i think there are some laggards that you can look at on the declines. >> kevin, do you think on the margin it makes the difference, all these services like fresh direct that are out there now, kind of reinventing the way people shop and cook and consume? >> i don't. i think we're seeing a glut of delivery services, same-day delivery is one of the biggest trends in tech, but no one's cracked the code yet. no one's figured out how to make it profitable in the long-run. i tried out some shopping services and they're great for the consumer, but on the investor side, i don't think it's something companies are ready to release widely yet. >> tim, thoughts? >> getting back to whole foods, i think it's a company-specific problem. so, it's competition, as has been said. it's valuation, though, that is starting to get interesting. some time around 12 times ebitda, they're not trading at a premium anymore, but i think there are so many other people who can get into the space that already have the infrastructure. all the price investments these people have made and the efficacy of them, i don't think anybody cares. the stock, technically, if it breaks $36, it's in a lot more difficulty. i think it holds, but it's not a good day for these guys. >> i'm thinking about we had yesterday a discussion about panera relative to chipotle. when panera first hit the scene, it was the hottest thing around. it kind of started to reinvent the fast, casual space and it's struggled lately. stephanie, would you put whole foods in the same category or is that too strong? >> i think -- well, panera has certainly their own issues, right? they have to invest aggressively, so as a result, their earnings are depressed in the near term, but i think they are fixing it the right way and adding technology into their stores. and the expectations are extremely low for that stock. it's been a massive underperformer. whole foods, they're getting their lunch eat, really, at this point. so, it's a company-specific -- >> got to go. hang on one second because we have yelp earnings hitting the tape now and bertha's going to rejoin us. yelp was up 9% today, so high expectations. >> and extending here after hours. yelp posting its first profit of 4 cents a share on $165.2 million in revenue. its unique monthly visitors were up. it is raising its outlook for the third quarter and for the full year as well as it's launching a number of new things on their platform, including the ability to post videos, which we've all talked about. so, really a surprise profit there from yelp, sending shares up better than 6.25%. back to you. >> thank you, bertha. kevin, this just feels like a moment for these social media names. >> you know, they're having a good month. and i think part of that is because investors are realizing that these companies are actually thinking seriously about growth, and you know, not just sort of user growth but really bottom line growth as well. >> perhaps still a legacy, tim, of the last time around. >> sorry. yeah, i think if you're talking about where these guys can grow and also where they can make a difference now, the international footprint to me is the other part of this story. if you look at the stock also technically on the charts, $80 it's running up to right here in the after-hours. let's watch that. i don't think you have to jump and grab this one, but i think it's a week where people are seeing top-line growth, reaffirmation of why people are buying these names. >> and so, after beats by facebook, twitter notably yesterday, yelp today coming out posting its profit. we'll leave it there for now, guys. thank you. catch tim seymour coming up with the "fast money" crew at the top of the hour at 5:00 p.m. they'll be talking to the ceo of the company that helps track movement in smart devices, invensence, she said. that's next, don't miss it. the economy growing 4% in the quarter. will that force jantet yellen t raise interest rates sooner than expected? 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[cheering] the fastest in-home wifi for your entire family. the x-1 entertainment operating system. only from xfinity. welcome back. philadelphia fed president charles plosser, the lone no-vote from the federal reserve today. he says the committee isn't taking into account economic progress that's been made when considering when to raise rates. will janet yellen have to move up her timetable for raising interest rates? rick reiter's fixed income cio at blackrock. also joining the conversation, ellen zeddner from morgan stanley with thoughts on the fed. welcome to you both. rick, first of all, you guys changing your projections for a rate rise? >> it's interesting. you had two conflicting pieces of data today. you had the gdp piece of data that clearly showed the first quarter was aberrational, then you have a fed that many interpreted as hawkish that we thought is more dovish when you include the comment on labor. so, we're not changing. we think the fed will be moving and the data will support moving early in '15. >> first part of next year. ellen, are you in the same camp? does anything today, whether gdp or from the fed, change your view? >> no. i would agree with rick, nothing has changed our view in terms of the timing of the first rate hike, but we are beyond his expectation, early 2016 is when we expect the fed to raise rates, and nothing i saw out of the gdp revisions or fomc statement would have changed our view today. >> wow, that's a big difference between where the two of you see the fed moving, rick. why do you think they could raise rates in the first part of next year? we're talking about just over six months' time from now. >> so when you think about where we are today, and when you think about this discussion of why are we at a 0% funds rate? we're at a 0% funds rate because we were in unusual times if you go back two, three years ago. today you look at what is happening in terms of the payroll numbers, we're going to run at 230,000 average payroll. we're talking about we could have a 5-handle on the unemployment rate. the job openings are surging higher. these are not unusual times. the lending market is open. but i think that the data is going to influence the fed starting to move, and they recognize the inflation data is actually starting to get to their target level. >> and we saw a little bit of a reaction in treasury yields moving higher because of that, but why hasn't there been a bigger move? if we're this close to the rate hikes you've been talking about and the better economic conditions, shouldn't we be higher than we are now? >> i think there are two parts. first, the front end that will start to move up as the fed moves, but then the back end of the curve is also reflecting the fact that you have great uncertainty in the world today. what's happening in the mideast, what's happening in the ukraine. so, there's a flight to quality and there's a premium. and you look at where europe is, where bunds are and you look at where jgbs are. u.s. at 2.55 ten-year is not bad compared to the rest of the world. >> ellen, what's interesting is this means the fed is perhaps getting lower interest rates than the economy might otherwise merit. shouldn't that actually mean that their policy today is much more stimulative than models alone would suggest? do they have to react to that here at all, do you think? >> well, i think what we have to remind ourselves is that this is a fed operating post financial crisis, where the potential gdp has been damaged and policy accommodation remains in place much longer than anyone suspects. the fed did acknowledge they're getting closer to their dual mandates, but they did so grudgingly and in a way that would insure little market reaction. they're going to find that when they go to raise rates, financial conditions tighten, and it's going to end up delaying that mid-2015 rate hike they've been promising. that's what our base line is, that's what happened going into 1993's tightening cycle, and we think something similar will play out. >> ellen, do you share the view of blackrock about the fundamental strength of the u.s. economy or are you more wary? >> we're definitely more optimistic about the economy. we're expecting stronger second-half growth. so is consensus, so is the fed. where we differ is how strong that growth is. we think we're more realistic in our growth expectations for the high 2s in the second half of this year and beyond because we don't have a consumer that's releveraging, that's leveraging back up. so, there's only so much growth in the economy you can expect without debt accumulation. the fed's got a pretty lofty forecast. and remember, them expecting to raise rates in mid-2015 is predicated on hitting growth forecasts that are beyond 3%. and so, they've got to hit those pretty lofty growth forecasts in order to do what they've promised, raise rates in mid-2015. we just don't think they're going to get there. >> rick, do you think investors should be short or long bonds? >> so, we think rates are going to drift higher from today's levels and you'll have a significant flattening of the curve. we think the belly of the curve will head up and the back end will hang long. you're getting paid for taking long in interest rate rios. if you said where will we be in six months? we think rates are going to drift higher. >> drift higher, but are you won over perhaps to the view that they're lower generally speaking for much, much longer than anybody would have thought? >> oh, there's no question in my mind, we're going to be in a low-rate environment for some time, even though i think the fed is going to move. when they move, they're going to be i think quite clear about how long they're going to be still at lower interest rate levels. and the big problem in the system today is we live in a delevering world. there's not enough fixed income assets relative to the demand, and so you keep this headwind on interest rates. so, i think it's going to be a low interest rate environment for a long time. >> yeah. broad implications about that as well. >> completely agree. >> we'll leave it there for now, then, point where you agree. thank you this afternoon. we'll send it right out to bertha coombs for another earnings alert. >> hi, kelly. weight watchers posting a significant beat on the bottom line, posting 90 pents ex-items. that is 20 cents better than what the street was looking for. on the top line, revenues came in at $397.5 million. now, this is down significantly from last year, which the company does acknowledge their membership is down, their paid memberships are down. however, they do say they do feel that a restructuring is in place. as a result, they are raising their outlook for the next quarter and for the full year, and the street is rewarding them for that. this afternoon, the stock after hours up 14.25%. back to you. >> a big move, bertha. thank you, for now. now, companies have been doing tax inversions and they've been called unpatriotic and corporate deserters by the white house and other lawmakers. there's another tax trick that could yield profits as well. and it's approved by the irs. stocks soaring on the news that they can do it. that story is next. and the federal government ruling mcdonald's can be held liable for labor violations by its franchise operators. some say it will put the franchise model in jeopardy. coming up, larry kudlow weighing in on if the ruling will stand. just take a closer look. it works how you want to work. with a fidelity investment professional... or managing your investments on your own. helping you find new ways to plan for retirement. and save on taxes where you can. so you can invest in the life that you want today. tap into the full power of your fidelity greenline. call or come in today for a free one-on-one review. 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[ whirring ] [ train whistle blows ] she makes trains that are friends with trees. ♪ my mom works at ge. ♪ welcome back. let's start here with an earnings alert and our bertha coombs. >> yep, vistaprint printing a pretty good quarter, earning 75 cents on the bottom line versus an expectation of 53 cents. also, its revenues came in ahead of expectations at $338.2 million versus $323 million. the company says part of the results and the revenues in particular driven on new pricing and stronger pricing in the u.s., the uk and germany, and they think that's going to help them moving forward here. taking a look at akamai, coming in on the top line for revenues mrks $476 million even, 58 cents on the bottom line versus 55 cents. no guidance for the third quarter, but the street will be looking for at least $484 million on the top line. despite the fact that the company says they seem to execute well in every geography, not getting a very good reception here at this hour. the stock now down 8% after hours. back to you. >> okay, bertha. thank you for now. windstream's stock shooting up earlier this week after announcing it's going to spin out some real estate assets into a real estate investment trust, particularly known as a reit. reits have tax structures that can save companies millions a year. the move is dubbed as a tax outversion. oppenheimer managing director timothy horan, welcome. >> thank you, kelly. >> you wrote this was a game-changer for the industry. why? >> the industry we think can reduce their taxes substantially as a result of this, possibly 30% to 50% on average. and about a third of their free cash flow goes to taxes, so it's a very important move. >> are you surprised that the irs more or less approved this, at least with a private letter indicating that that's the case, at a time when washington has been trying to crack down on some of these tax practices? >> well, the irs has to go by the letter of the law, and this is the first time that we've seen transmission lines like this in the communications space, so it definitely was a surprise to the street. >> and you said it could boost the value of a lot of the companies in this space. we saw the rally in windstream and some. others as well. this is outside your coverage area, but why couldn't some of the other major retailers in this country pursue the same thing, then, spin off the real estate assets to lower their tax bills? >> absolutely. that seems to be the case. but i think it is complicated. at&t and verizon could also do it, but they would rather see the overall corporate tax rate lowered to something more reasonable, like 25% from the 35% we're at. >> i wonder if that's just fear of headline risk, stephanie, from some of the blue chip names. >> when we saw the timber industry go through this, weyerhaeuser, potlatch and those kinds of companies. one, it was just like one announced it, and right away, another one and another one and another one. do you think it's going to be pretty quickly that we hear about another company doing the same thing, or is the interest rate going to kind of step back and say, let's see how this progresses. >> we've seen this a couple times. the wireless tower companies have done it already and it took a couple years. data center companies, it took a couple years. our industry's going through a huge amount of consolidation right now, so companies like frontier is very busy, they're buying an asset from at&t, at&t's buying directv, and everyone i think wants to see what happens to windstream. they have to go through regulatory approvals at the state and federal level. how smooth does that process go? then what happens to the stock valuation when they are separately traded? >> we should note, kelly, you wrote this up for cnbc.com today. you took on this issue. what did you learn? >> i think the interesting point is that it's just a matter, i guess, of taste, or the way this all eventually plays, but from a shareholder point of view, if there's something in the existing tax code that allows you to significantly lower your tax rate, and the only thing holding companies back is kind of fear of looking like they're dodging their taxes, well, frankly, we're going to start to see the dominos fall one after the other, aren't we? what's to stop them? >> we absolutely are, and companies won't have a choice from a fiduciary perspective and from a free cash flow perspective. windstream really needed the cash to invest in the network, beef up the broadband speed, so they didn't have a choice. >> some of the companies, when buying an overseas company to lower their taxes, they'll argue that we have to stay globally competitive, and we see that in the tech space a lot. but with a lot of these u.s. players, this is frankly just a u.s. story about a way to use a reit structure to lower their tax in this case. >> it's at no timely craz lly - kraid crazy. what is the fiduciary duty? because this was possible a year ago, this was possible two years ago, as long as we've had our corporate current tax structure, inversions were possible. were they neglecting their fiduciary duties then by not inverting? is there anything in the corporate structure that makes it necessary if my competitor inverts or spins off for tax purposes? why do i have to do the same thing? >> well, you'll be at a cost disadvantage, but inversion's different. that's companies going overseas. this is a reit inversion, where we've been kind of pushing the envelope over the last few years. towers, billboard companies, timber companies and on and on. and i think there's going to be a lot more of it. >> but those who didn't in the timber industry traded at a discount for a long time, and people really did bid up these reit structures because they viewed it as very shareholder-friendly. and oh, by the way, a nice dividend yield. >> and you also have some talk that companies that wouldn't ordinarily go to the mlp could now do that as well for tax incentives. doesn't it all speak to how messed up the tax system is? >> yes, and that's the fund maintainal point that comes out of all of this. tim, thank you for being here. important issue. we have breaking news on yum! brands. bertha coombs, what can you tell us? >> yum! brands raising the red flag here, saying that as a result of their problems with osi group, that chinese chicken and meat handler, that they have seen some significant negative impact when it comes to same-store sales in china for both their kfc and pizza hut brands, despite the fact that osi is not a big supplier for them, and they have seen minimal disruption to their menu. nonetheless, the blowback on this from the public has been tough. the company says it's too early to note how quickly sales will rebound, but if it continues, it's going to have a significant sales impact and material effect on full-year earnings. they say they're outraged and reserve the right to take full legal action for this, kelly. back to you. >> here we go again, bertha. they're trading down on the news. should a company like mcdonald's be held responsible for labor violations of its franchises? the national labor relations board says yes. up next, larry kudlow says they've got it dead wrong and that decision could have negative implications for the fast-food industry and for the economy. and nearly 4,000 people were killed in long-haul truck crashes last year. critics say the trucking industry's underregulated and they point to this as proof. some companies simply have to change their names after deadly accidents to stay in business and avoid costly crash litigation. our eamon javers has this outrageous story of these so-called chameleon carriers later on the "closing bell." in a world that's changing faster than ever, we believe outshining the competition tomorrow requires challenging your business inside and out today. at cognizant, we help forward-looking companies run better and run different - to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work. because the future belongs to those who challenge the present. bulldog: oooh! bulldog: mattress discounters' $197 mattress sale! television announcer: get a serta mattress, any size, for just $197 each piece when you buy the complete set. the $197 mattress sale... bulldog: oh boy! television announcer: ...ends sunday. ♪ mattress discounters when it comes to the national labor relations board, it is likely safe to say mcdonald's not lovin it. yesterday, they ruled the fast-food giant can be held jointly liable for labor violations made by franchise operators. if upheld, it could bring major disruptions to the business, as people can bring their complaints up to the mcdonald's corporation, not just the franchise operator. among the consequences could be a corporation like mcdonald's not offering as many franchises for sale. let's discuss this with cnbc senior contributor larry kudlow and labor notes director mark brenner. welcome to you both. larry, why is it that people are calling this ruling, if upheld, a game-changer? >> well, this is going to be a very important ruling. let me just say, the parts you've got to focus on is 14,000 versus 1. the seiu labor union has been trying to organize the fast-food industry for years. they can't do 14,000 franchises. it's too expensive, too many resources. they can do one, though, walmart. if it's only walmart -- only mcdonald's in the head office, they can go after that. so, that's really at the bottom of this. the national labor relations board is a very pro-union board under this administration, and essentially, i think they're trying to break 30 years of franchise law and custom. they may get away with it or it may go to the supreme court. >> mark, what are the implications? >> well, the question we have to ask ourselves is who's the boss here? when mcdonald's corporate headquarters is setting the price ease, they're dictating how many buttons are on your shirt, they dictate how you take your order. they're clearly in the driver's seat. so, of course they should be liab liable. that's what this is about, inserting a modicum of sanity into our labor law. i think it's a really good deal, hopefully for workers on the front lines, but it remains to be seen. >> well, look, that's the argument. i appreciate the argument -- >> it's the facts, larry. this is not an argument. >> i don't think it's a fact. i think mcdonald's -- >> ask the franchise owners, they'll tell you, they cannot control anything about their business except the wages that they pay and the pricing structure that mcdonald's set for them -- >> they can control their food prices, they can control the -- >> that's not true. mcdonald's sets the prices on their menu and they also are in a box. they can't do anything -- >> they're not in a box. >> they have fees to pay back to mcdonald's. they are in a business model that is built to -- >> let me get a word in. that's your point of view. i respect your point of view. i do, however, want to make a different point of view. >> all right. >> if you're talking about a walmart, all right, they control everything that the walmart stores do. if you're talking about a mcdonald's with 90% of them franchisees -- >> that's right. >> -- they do not have -- this central office does not have that control. they've never had that control. it's the franchisee who puts up the money. the margins are very, very thin, the profit margins, and they have to make lots of decisions about labor and pricing and menus and so forth and so on. the central office at mcdonald's -- >> everything that matters about running the business is in their hand. >> the central point about mcdonald's, mcdonald's central headquarters can make suggestions, but whether it's equipment technology or labor prices, wages, they can't make the final decision because they don't own. the store is owned by the local group. >> let's, if we can, put up a chart to see how mcdonald's has been trading on this news. and i'm curious, stephanie, implications for investors as they're digesting it. shares up about 0.1% today. >> well, one of the advantages of when a company has a lot of franchisees is that the cost structure is a lot lower. and so, if this all of a sudden is going to change, this is a real big change for the company, but also for the industry, as larry is pointing out. it's a very, very big deal and something that we're watching very closely as well. >> see, they're legal decisions. i mean, the reason this troubles me is, well, first of all, the nlrb is so totally pro-union. >> right. >> the last we heard from them -- >> yeah, that's exactly what it looks like. >> -- opening up a plant in a right-to-work state in south carolina, all right? we know they're biased. going back to 1982, "the new york times" story had it right. there was a legal decision, very important, by i think a federal circuit court, that had a narrow and a broad definition of the issue of control. for 30 years, we've used a narrow definition of control, giving it to the franchisees. what the current nlrb wants to do is use the broad definition of control, that if two people run a bunch of employees, then it is a matter of control and they run the operation. now, this probably is going to have to go all the way to the supreme court. the national retail federation said today they are not going to give in to this. >> mark, even if it does, and i want to give you the last word on this, even if this happens, is it possible it just depends on how the company runs its franchises? >> well, i mean, i think the question larry started with about what are workers going to be doing here in response to this is really where we need to end, and i think this is good news for folks. 90% of the workers in this industry suffer from wage theft. they're, you know, routinely being forced to clock out before they clean up at the end of the shift. these violations are endemic, they're baked right into the model, and i think this is going to give them some new tools to try and fix these problems. and so, i think this is good news for working folks. >> the seiu wants a $15-an-hour wage. >> i do, too. >> even obama is at $10. right now, the fast-food industry is about $9. >> because you can't live on $10 an hour, larry. >> let me tell you -- >> i know, even ted strickland said that. he just had a piece in politico saying you can't live on the minimum wage. >> if you go to $15 an hour, you will decimate that industry, as stephanie link suggested. >> we have to leave it there. >> that business model cannot accommodate that and the labor market supply-and-demand -- >> they have $5.5 billion in profits. of course they can afford it. >> i'm going to keep listening during the commercial break because they're going to keep going at it. mark, larry, we appreciate it. keep an eye on mcdonald's. if you drive on the hoidz, and that's most of us, a story you can't miss. a special investigation into the dramatic rise of the fatalities involving long-haul trucks. eamon javers with an eye-opening, investigative report is next. ♪ when the world moves, futures move first. learn futures from experienced pros with dedicated chats and daily live webinars. and trade with paper money to test-drive the market. all on thinkorswim from td ameritrade. welcome back. the government accountability office has looked into what happened at the obamacare launch last year and the results aren't pretty for the folks at healthcare.g healthcare.gov. dan mangan has details. >> the gao came out with a report that will be talked about tomorrow at the house energy and commerce committee that's looking into the debacle of the launch of healthcare.gov. the gao found lax oversight of contractors, a rushed schedule and change in requirements led to both significant overruns in the launch of healthcare.gov and also the flawed rollout where effectively nobody could sign up. specifically, the gao said the site was launched "without effective planning or oversight practices, despite facing a number of challenges that increased both the level of risk and the need for effective oversight." >> all right. important moves. thank you very much. our dan mangan from cnbc.com. there's more on the website. and a cnbc investigation "collision course" has followed the growing problem of truck accidents on u.s. highways. they're responsible for nearly 4,000 deaths in 2012, which is the last year statistics are available. our cnbc investigation has found there is one type of trucking company experts say is three times more likely to cause severe crashes, and eamon javers joins us now with more. >> thanks, kelly. critics call them chameleon carriers, trucking companies that change their names and reregister with the government to clear dirty safety records. listen to this. kelly linhard, a truck driver who had over 15 years of experience and was the father of four, was doing a routine truck inspection in september 2008 when he was hit and killed by an oncoming truck veering out of its lane. >> fell asleep on a mission, ran off the road and ran over kelly linhart, dragging him to a terrible death. >> michael is a attorney who represented the family and deposed daniel clary, the driver of the out-of-control truck. >> you admit you were driving under the influence of methamphetamine at the time of this crash, right? >> in my system, yeah. >> reporter: he pled guilty to criminally negligent homicide and driving under the influence of intox accountants. he was sentenced to 40 months. in his deposition, clary admitted to prior convictions for meth and marijuana. who would let a driver with that record behind the wheel of an 80,000-pound truck? this man, forrest rangelof. >> range transportation did have some safety concerns? >> yes. could never pass. >> reporter: he says the company was nothing more than a chameleon carrier, a trucking company that shuts down and refiles with the department of transportation under a new name to avoid liability or government fines. forrest's company, range transportation, had a conditional safety rating from the government. that's a warning to companies that they need to improve. even after the linhart crash, though, he was able to file for a new company that he called range it express. >> i see too often in this case and other cases that i handle where the owner of the company simply closes down, refuses to pay the fines and starts another company. >> reporter: forrest rangelof did not return cnbc's requests for comment. >> there are legitimate reasons to have separate companies, absolutely, but when we're talking about a chameleon carrier, we're talking about a truck company that is so unsafe, the government fines it. instead of paying the fine, the owners close it down and start another company. >> reporter: forrest rangelof isn't alone. in one year in 2010, the government accountability office found over 1,100 new trucking company applications that appeared to be changing their name to clear their troubled records. and gao found 18% of suspected chameleons were involved in severe crashes, triple the rate for nonchameleon carriers. an farrow is the outgoing head of the fmcsa. gao found in 2010 her agency only checked 2% of new applicants for being potential chameleons. now the gao and farrow say more is being done. >> but what we have done is created a system we call vetting. are there patterns in this company's operation that show that they actually are sharing the address with a company we've shut down before? >> reporter: so, what's the penalty for a chameleon company? >> well, there are a series of different penalties. the highest penalty is we shut them down. we say very clearly, you are not authorized to operate. >> reporter: as for the linhart family, they were able to arrange a confidential settlement with the company that hired forrest rangelof in the first place. forrest was dropped from the lawsuit. kelly linhart was one of the nearly 4,000 fatalities that happen on our roads every year, and you can see more from our special report "collision course" on investigationsinc.cnbc.com. >> eamon, it's great work. and the fact that this is a known industry practice but there hasn't been a national outcry about it suggests that's where we have to start, tamping down on some of these practices he's drawing our attention to. i wonder if this reminds us of what judge rakoff said about the financial crisis. he said, if you're going to as prosecutors go after companies instead of people, you're not ever going to be able to totally get to the heart of some of the wrongdoing here. and i wonder if this -- >> this is just absolutely devastating to hear. great reporting by eamon. i would just say that the truck industry in itself has been -- we've seen shortages of drivers. we've seen very old -- the age of the fleet is at 20-year highs. that's one of the reasons why you want to be bullish on the truck companies themselves, because you're seeing that better demand in the replacement cycle, but this from a personal point of view is just horrible. >> kelly, part of the problem is that there is such economic pressure on the trucking companies and truckers themselves. the economy's been improving. that's why they say we've seen the spike in truck fatalities since 2009, because as the economy improves, more stuff is on the roads getting more accid happening. and the trucking companies tell us they're under huge pressure to hire. there is about 30,000 empty jobs right now in the trucking industry. they'd like to find that 'new drivers. they can't find them. so there is some pressure here to maybe take somebody who has something on their record and give it a blind eye. >> when we spoke to the ceo of ryder, he said part of the reason they were having trouble finding drivers is because of some of the tougher regulations that have come down the pike. emon, thank you for that report. we appreciate i. much more on our website. let send it over to bertha coombs for another earnings report. >> reporter: hi, that crash, the top and bottom line posting earnings of 80 cents a share, and light on the top line as well at 4.75 billion. the expectation was 4.84 billion. the company dealing with rising info costs, meantime, yelp posting its first profit ever. the company coming in with a 4 cent profit on a $165.2 million revenues. it is boosting its outlook. whole foods, meantime, a small beat on the top line. 375 million. 98 cents x items also beat, a huge beat on the bottom line, but it's outlook is weak. so kind of a mixed reaction there on whole foods. it's down about 5.5%. back to you. >> bertha, up next, are things heating up? stocks are like cards, you have to foe when to hold and when to fold. coming up, a poker player who should not turn his head at hot lists. what does the future retail look like? tomorrow we'll tell you on "closing bell" in a special report." we'll be right back. . you do a lot of things great. but parallel parking isn't one of them. you're either too far from the curb. or too close to other cars... it's just a matter of time until you rip some guy's bumper off. so, here are your choices: take the bus. or get liberty mutual insurance. for drivers with accident forgiveness, liberty mutual won't raise your rates due to your first accident. see car insurance in a whole new light. call liberty mutual insurance. welcome back. time to check in with the hot list, editing manager alan wasler is joining me now. >> hey, if you add up, 50,000 people have trampled through it. right now we are looking at how people might start looking at data more than listening to the fed. that will be a change. number two on the list, you heard from eamon javers. he has the truck concerns, people have been eat tack one up. finally, number three, this has been hot all day long there was a major poker championship last night. these guys had to put up a million dollars to buy if. one guy, a 2% chance of losing. guess what, he nailed that. it's the most heart breaking video you will ever watch. there you go, kelly. >> alan, thank you, i'm glad to hear his story is getting the attention it deserves. we will squeeze in final thoughts with the panel, look ahead to the rest of the week, coming up on friday, we will talk to john tapper. he joins our all star panel here on "closing bell." we'll be right back. . ♪ ♪ over 1.2 billion eyeballs are on us during the two weeks at wimbledon. true tennis fans want to know what's happening. they don't want to just see what's happening, they want to know and understand why it's happening. anybody can just put data up, but we want to get a reaction, make it far more interactive. we rely on the cloud to provide that immersive digital capability. give fans more then just the game with the ibm cloud. the ibm cloud is the cloud for business. with all the opinions about stocks out there, how do you know which ones to follow? the equity summary score consolidates the ratings of up to 10 independent research providers into a single score that's weighted based on how accurate they've been in the past. i'm howard spielberg of fidelity investments. the equity summary score is one more innovative reason serious investors are choosing fidelity. call or click to open your fidelity account today. . welcome back. let's get final thoughts on a busy afternoon and a busy day, guys. >> there is some fuse to talk about today. it feels like a summer of for the volume, no motion, for the news. we are finally getting maybe an indicator that things are about to get a little more interesting. >> yeah, everyone that has been long vol has been hoping so, sarah. >> a few things you need to watch, tomorrow morning, you will continue to get consumer news, kraft with a disappointment. in a statement, they talked about top line growth challenges because of the consumer and economic environment. are you seeing on the low income the packaged food guides. whole foods a disappointment when it comes to lowering guidance there. so continuing struggles with these big companies. on the economic side, we're looking ahead to jobs day friday. international front, we're watching argumenty fa. >> absolutely. it looks like they are ruled in a selective default. all still entirely to be determined, stephanie. we could be hearing from argentina, what are you keeping an eye on? >> i want to look at energy reports, that has been one of the best performing sectors in this quarter, right? so we get marathon, oxy and we get a slew of different kind of companies in energy. i want to hear what they say about global demand. >> we want to see if they can keep it going this year. >> keep it there. thank you. "fast money" is coming up in just a few moments with pell lisa lee. what's on tap? >> tech following that enables motion sensors and swiping. we got the company that has the technology for half tech technology, it's supposedly in the iphone 6 and the iwatch. we have the ceo and we are pressing him if he is one apple as a customer. >> thank you. >> "fast money" starts right now. new york city's time's square, straighters are tim seymour, guy adami, whole foods share sink as guidance comes in below expectations. a conference call is just beginning. we'll bring you the latest throughout the hour. a social turn yarnd, yelp taking a turn to the downside as an official pop in after hours for a 9% of stock for the day

Front Range liquor stores at a crossroads

Chris Fine, executive director of the Colorado Licensed Beverage Association, said his group estimates that one in every four — or maybe even one in every three — of Colorado’s approximately 1,600 independent liquor stores could close as a result of the legislation and ballot issue. That would mean 400 to 600 shuttered retailers.

Liquor stores at a crossroads in Colorado

Few shots are ever heard at the busy northwest Longmont intersection of Hover Street and 17th Avenue. And yet it's a battlefield in a larger statewide war.

Liquor stores at a crossroads – BizWest

LIVE! Music: Old Crow Medicine Show packs the Aud in Eureka Springs during OzMoMu weekend | The Arkansas Democrat-Gazette

Old Crow Medicine Show performs at the Aud in Eureka Springs this weekend. The concert coincides with the 10th annual Ozark Mountain Music Festival at Eureka's Basin Park Hotel. Early ticket sales that included access to both events have sold out already.

LIVE! Music: Old Crow Medicine Show packs the Aud in Eureka Springs during OzMoMu weekend

Old Crow Medicine Show performs at the Aud in Eureka Springs this weekend. The concert coincides with the 10th annual Ozark Mountain Music Festival at Eureka's Basin Park Hotel. Early ticket sales that included access to both events have sold out already.

Wine is coming to Colorado's grocery and convenience stores beginning March 1

Coloradans will be able to begin buying wine at their local grocery and convenience stores early next year. The bitter battle over the future of wine sales stayed too close to call long after Election...

Coloradans will be able to buy wine in grocery stores beginning in March

After counting up the remaining votes from Denver, Proposition 125 changed direction and narrowly passed, letting Coloradans buy a bottle of wine at the grocery store. Grocery and convenience stores w...