The tapering should start sooner rather than later. Thats as long as the economy can withstand it. So really, it was no new information. Exactly. And yet the market was all over the map. We want to get reaction about the market, the fed, the state of the economy, from our special cohost, ken langone will join me, and now attorney general eric holder promising significant reaction related to the financial crisis. Well get his take on eliot spitzer, his once nemesis, leading the polls in new york, the comptroller race. Theres a lot of talk about that with the outspoken ken langone. Ken is such a quiet man. Such a quiet man. The market will look for a lifeline from hewlettpackard. Yeah, were not finished yet. We have earnings tonight after the bell from hpq. The stock has been under pressure today but it is still the top dow stock for the year by a mile. Its up about 80 year to date. Well have the important numbers for you when they hit the tape at 4 00 eastern. All right. First, lets check where we stand now as we approach the final hour. The dow is lower by about 17 points. You heard the scoop, down 122 points at its worst after the fed minutes came out. 14,985. Now, that is below 15,000. If we close below 15,000, that would be the First Time Since july 3rd, i believe. Yes. Nasdaq is higher here, bouncing off of the lows, as you can see, 9. 66, at 3,623. The Standard Poors has a similar chart pattern, up a fraction here. Bob, the markets seemed to push the panic button right away when the minutes came out and then they rethought that. As art said to me, they realized these were conversations that took place three weeks ago. Reporter yeah, theres a way to look at this somewhat bullishly, though they seem split on things. Put up the full screen. Ill summarize whats going on. Theyre trying to keep the options open. The fed said they were split over the taper timing. Read that carefully. Not that they were split over tapering. But split over the timing of the tapering. And now, what a lot of guys are saying on the trading floors is they expect this to mean some taper light is coming likely in september. Whats that . Instead of going from 85 billion in bond purchases to 60 billion, the way some people thought, you go from 85 billion to 75 billion, a sort of taper light. You can get a consensus for that kind of modest tapering. That is not necessarily bearish in this environment. And i think some people, its part of the reason why we saw the markets move up right here. One of the things that helped the markets, Interest Ratesensitive groups here, the banks had a nice move to the upside. Theres bank of america, helped the overall averages. The Dow Jones Industrials in particular moving up here. Guys, i think it would be a bullish signal if we could end in anywhere near positive territory. Its a signal the market is getting more comfortable with tapering, and whether the timing is dramatic in september or december, im not sure it makes an awful lot of difference. I go with the taperinglight idea. That makes sense to me. Back to you. All right, bob, thank you so much. Joining us now in our Closing Bell Exchange is mark, david, doug from ing, and ben willis from albert freed company. Good to see everybody. Thank you for joining us. Lets talk the markets. First off, what a wild what a wild reaction, ben. Talk to us about what went on down here when the minutes first came out, about an hour ago. I think you saw a reaction with the algorithms that might have been left on during the fed minutes, just the term the few may have been an indication there was a collegial consensus from Ben Bernankes fed. Its old news. Its three weeks old. We know tapering is coming. And what bob pisani said, its the timing of the tapering and tightening, or tapering light. But, you know, the 10year is holding at the higher levels, ben. It held there. We took our queue from that. We didnt have an overreaction on the 10year, as well. The 10year has been trending higher. Once again, just a reminder of, i guess, economics 101, is that Rising Interest Rates are an indication of something good going on. Its a symptom of a healthy economy. We may not think its as healthy as wed like it to be, but the fed is telling us, in fact, were going to take the training wheels off here, ready to go. Steven, you agree. The markets are trying to make sense of a higher Interest Rate world right now. Thats right. Were in a transitionary period now. Were trying to adjust to higher Interest Rates. Looking at better growth ahead. One of the interesting things weve seen is that even as stocks have sold off, rates have gone up, its the cyclical sectors, industrials, technology, energy, materials that have outperformed. And what that tells us is that investors are getting more comfortable with the Growth Outlook for the year ahead, and thats a positive thing. So how do you invest in a risingrate environment . David, what are the strategies as rates move higher . Well, i think i would add to the last statement, industrials, cyclicals, technology. We like the banks, because of the steepening yield curve. You know, all those sectors that have held up pretty well that we think will continue to do well for the remainder of the year. And the market has to digest the onset of tapering. Thats the process were going through. Were only down a little over 3 from our level earlier this month. Right. And, you know, we move to that period and those sectors will do quite well. Doug, what are you doing . Are you ready to buy the dips . We are down about 3 3 in the last six trading sessions here. Would you buy this . Certainly. I would be fully allocated at this point. But what the minutes couldnt have seen, or missed, was the action in the foreign kourcurre markets. Im concerned whats going on in indonesia, india, asia, and there are signs that quantitative easing is actually creating a credit bubble, and i think thats i think the markets are going to really have to watch that closely. If you look at the indonesian bond yield, thats skyrocketed over the past month. A little concerned about that, though. Bill, if i could add if i bill, if i could add to that. Go ahead. Yeah, weve heard a lot of people talking about the valuations in emerging markets being so compelling, and, you know, for this year, 2013, thats essentially been a value trap. The valuations could continue to be low, because of the concern over capital inflows into those countries. Qe 1, qe 2, qe 3, sent a lot of money to the emerging Market Countries and tapering will take it out. Is it is it the fact, also, that those areas have slowed down quite a bit . I mean, i remember when brazil was churning out 7 growth levels, and then, you know, a couple quarters ago, it was. 5 . How much of it is just the story of slowdown . There is yeah, theres a slowdown. The recession in europe. Those developed countries that they export to. But i think that theres an underestimation of the impact of tapering or i think people said theres been an overreaction, someone said theres been an overreaction. I think its been an appropriate reaction. Those people that have allocated to emerging markets this year, thats been a misallocation. The sectors done very poorly this year. And we dont think that turns yet. Steven parker, the other asset class we havent talked about would be commodities. You know, plenty of people feel the dollar is destined to go higher if Interest Rates go higher. Does that mean you avoid materials and commodities, even though material stocks have been very well performing here. I think commodities is another market thats been closely tied to whats going on in emerging markets. So the slowdown in growth, particularly in places like china, have weighed on the performance of metals and ene y energy. You know, were being very cautious and thoughtful in terms of where were taking our exposure in the commodity market. We think theres better opportunities in places like energy, not as much like metal, because we think china is slowing. That being said, there are other places in the world where growth is getting better. Europe being one of those. In fact, im told materials are one of the worst performers today. Right. The dollar has rebounded to some degree. The dollar index is higher, unusual lately. Thats right. The growth will be better, but a gradual reacceleration. Without china returning to levels wed seen previously, it will weigh on prices. What about oil . Its sitting here for sometime. Is there a way to make money, or is it overvalued . No, we think that we like energy. We like Energy Stocks, in fact. Even more so than the commodity. When you look at Energy Stocks, valuations sentiment around them, you know, were at a place right now where fund managers, assets have moved away from Energy Stocks and we actually added to that tactically when oil dipped below 100. Ben willis, what are you watching . I was buying protection, looking for more downside move. As you just mentioned, we saw about a 3 drop in the broad markets over the last few days. And i would love to see us break below that. The last time the biggest correction we had was 3. 5 . Right. However, if im going to be investing, i like the energy sector, i like the partnerships as an area of interest. Now, theyve been sold off as a group, because of their Interest Rate sensitivity, but thats not why im looking at them. Im looking at them, the toll takers, regardless of the cost of the product going through their pipeline. Technology. If you believe, again, the economies around the world are improving, the trade is already happening in some of the earliers, and now looking at the industrials as a place. And particularly, i should i put the technology industrials, some of the bigger names in that group, so to speak. The whole thing, you remember the Central Banks were taking Interest Rates and their currencies to the bottom, a and we call it the race to the bottom. Were now seeing a reversal of that, and it will be how well managed reversal of the currency move is managed by the Central Banks, starting with ben bernanke and the dollar. And that impact on the commodity. Got it. Thanks, everybody. Thanks, guys. Abreerkt it. In the final stretch of trading. About 50 minutes before the closing bell is down. When we come back, fast and furious reaction to the feds latest hints on when it may start easing up on stimulus. Well have live reactions, Steve Liesman out in jackson hole, wyoming, getting ready for the big meetings there. Rick santelli in chicago. Do not miss that conversation coming up. And after the bell, home depot cofounder, kenneth langone, hosting the 4 00, as we know from the last time he was here, anything can happen. Wait until you hear what he says about Elliott Spitzer leading the comptroller race. announcer scottrade knows our clients trade and invest their own way. With scottrades smart text, i can quickly understand my charts, and spend more time trading. Their quick trade bar lets my account follow me online so i can react in realtime. Plus, my local scottrade office is there to help. Because they know i dont trade like everybody. I trade like me. Im with scottrade. announcer scottrade. Voted best Investment Services company. So you want to drive more safely . Of smart. Stop eating. Take deep breaths. Avoid bad weather. [ 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 bubum bum its been a volatile day in terms of stocks trading. The dow down about 6 points. As soon as the fed minutes were released about 2 10 eastern, the market tanked, down 1 2 points. Came all the way back, and now has now been back and forth. Lots of volatility. Were not finished yet. Joining us to talk about all of this is our own Steve Liesman, out in jackson hole, getting ready for the fed meetings there. Rick santelli in chicago, hoping to get a word in edgewise with these two is lindsay from stearns. Lindsey, ill start with you, before the whole thing starts here. What did you make of what the fed hold on a second bill, bill bill, hold on a second [ laughter ] go ahead. She can go. Dont be shy. Youre so bad. This will happen a lot. Its very much what weve been hearing from fed officials over the past several weeks. They are comfortable with the idea of tapering sooner than later. But they also want to make sure the data supports that change in policy that were seeing the increase momentum in the second half of the year. Now, what was different in the july minutes, compared to june, is that there seems to be an increased Downside Risk assessment for the second half of the year, particularly in the labor markets. We see a pointing out of the decline in the participation rate, underutilization of labor. So the fed is keeping their options open. We have four more weeks of data and another employment report. Steve, did you learn anything new . You know i from the fed. I thought the split was a little more than i had thought. It was a very symmetrical in the language, maria, when they said the members shouldnt do something now, and a few members think we should. It tells me there are questions about what to do in september, and it makes me think september is less likely than i had thought and maybe less than 50 possibility, unless the data improves. One of the things i learned is the fed is more concerned about low inflation than i thought they had quite an interesting and robust discussion about it. No particular conclusion. But a substantial part of the committee is concerned about low inflation here. Yes. Gee, they may be backing away from september, maria. Yeah, weve been saying that. Yes, we have. Rick, weve been watching the 10year, as i am sure you are, it popped, and its holding unlike the stock market which came back from its lows. Absolutely. And not only that. You know, lets just put some real tight numbers on it. The current high yield closes for 10s and 30s are all within the last week. And its 2. 88 in 10s, at 2. 86. Its 3. 90 for 30s, at 2. 89. But were at 1. 61 in 5s. Thats the highyield close. But not from last week. Thats from july 5th. And the yield curve movements made that in many regards, according to traders, the true canary in the coal mine. If rates are going to go higher, maybe the green light for that will be how we close today with regard to that 1. 61 benchmark highyield close for 5s, and the treasuries havent backed down. So im not sure that the minutes are changing the notion that a managed Interest Rate may overshoot the old metrics of 2 above nominal gdp. Lindsey, go ahead. I think the overall tone from the minutes was patience. A waitandsee. We have four weeks of data and an unemployment report that will be the key, deciding factor in whether or not they of taper in september. As steve pointed out, theres that increased risk now that were not going to see any change in purchases in september. Well, what about this eye de lindsey, i wonder if you could make go ahead. I was just saying, i wonder, lindsey, even if you have the data in hand, is it enough to provide the kind of confidence and Comfort Level that the fed would want to begin the tapering process, and before you answer that, i think its interesting to think about how the fed views the first taper movement. Does it move view it as an isolated movement or something thats part of a process . If its part of a process, i think the fed is going to be really sure about the outlook for the economy before it does it. If its a oneoff, then it can adjust as it goes forward. I think it would provide more volatility to the market if it was a oneoff. I think theyre going to want to keep this concurrent, smooth process. I agree. I dont suspect theyll do a oneoff. If theyre ready to go, theyll start to go. What about the idea thats being floated on the floor here that maybe they start with what theyre calling here affectionately tapering light, maybe they start with a reduction of 10 billion per month to begin with, just to kind of get everybody accustomed to the idea here, steve. Look, heres the problem with that, is if the fed is well aware of it watches cnbc, it sees how the market reacts, it understands that the market will not take a single incident as an isolated incident. It will begin the price in what they call the terminal point, where does the thin end up . As Dennis Lockhart from atlanta said a week or so ago, they better be ready for the market to put the pricing in if its going to do something now at the beginning, even a taper light, without the right language on the backside, would cause the market to bring forward future tightening. You really have to wonder the motivation for a 5 billion, 10 billion cutback. Either the economy is strong enough, or its not. 2 20. And the earnings have decelerated. Profit growth lower. So add that to the Overall Economic story of an anemic pace thats stuck in neutral. Before we go, rick, we just had an analyst on, maybe you heard him, talking about his concerns about yields, you know, in asia and elsewhere, and how theyve been going in a direction that he feels theres a bubble building over there that could be bufr burst by the fed beginning to taper. What do you think . I think that bubbles already in the process of bursting. I think those comments are about three weeks late. Ha. So. Much like the minutes, as they were released today. Much like the minutes. Thank you, guys. Thank you. Thanks, everybody. Well done, lindsey. Oh, its mine. Here we go. Its 40 minutes left in the trading session here. What were watching, also, is whether the fed the dow closes below 15,000 for the First Time Since july 3rd, and whether that has any meaning or not. I know the traders watched the s p more than they watch the fed. But it could mean something here. Round numbers. It creates upset in sentiment sometimes. Meanwhile, u. P. S. Delivering bad news, informing worker it is will not provide Health Insurance to working spouses that can get insurance on their own. And Marcus Lemonis is back with us, and he thinks u s u. P. S making a mistake. More after the break. Stay