The dow is now negative for the year. Its accelerated throughout the day and the major averages closed at the lows of the session. All 40 dow stocks finished in the red yesterday. 97 of the s p 500 and 96 of the nasdaq closed lower. All ten of the sectors were down at least 6 . Heavy volume throughout this. We saw 4. 3 billion sharls that were traded on the nyse. More than a billion more than the average. And as for volatility, take a look at the vision. Youre going to see right now that the vision is up about 27 . 16, almost to 17 at this point after these incredibly low volatility rates. We knew that when things changed, they would change in a hurry. Yesterdays selloff means that the dow and the s p had their first monthly decline since january. The dow and the s p dropped nearly 2 in month of july and it doesnt end there, folks. If you take a look at the futures this morning, youll see there are more red arrows. The dow is now indicated to open down by triple digits. A decline of 113 points below fair value. S p futures off by about 14 points. And take a look at the tenyear. This is what weve been watching so closely. At this point, the tenyear is yielding 2. 752 . Picked up steadily. We have a lot of people were going to be talking to today, including mark grant, who is betting for a yield of 2 or lower for the end of the year. Steve, over to you. Overseas, stocks in europe are in the red in early trading. Do we have a boy, yes, we do. Down 1. 4 . Traders are taking cues from yesterdays selloff on wall street. The eurozone factory growth down to accelerate as expected. Growing tensions in ukraine on sentiment. In asia, stocks are mostly lower. The nikkei down 0. 6 . The hang seng down about a percentage point. Shanghai down 0. 75 . But there was some bullish Economic News out of china. Pmi there showing manufacturing rose to the highest level in more than two years. Lets check on the Broader Market this morning. The dollar, up against the pound, down against the euro. But its been stronger against the euro the last several weeks. And the yen, its up against the yen, 102. 93. Looking at oil, the selloff continuing there. Wti crude down about a puck, 97. And brent down 40 cents, 105. Natural gas down across the energy spectrum. Gold, up 2. 50 after a selloff to 1,285. 40. Lets talk about an explanation for the market in just a moment. Corporate news first, i dont think there is an explanation for this, but thats a different story. A number of stock toes watch this morning, earnings reports that came in last night, lets run through a couple of the big movers. Teslas earnings beat the street. Revenue nearly doubles. Shares rose on the news before falling. Were going to talk more about the veteran Auto Industry watcher named paul engracias. 6 50 a. M. Eastern time. You dont want to miss that. The nations automakers will be reporting Monthly Sales today. Sales hit an eightyear high in june, rather, and analysts are looking for another positive set of reports. Chrysler out with its numbers. Its sales were up 19. 7 in july. Thats its best july numbers in nine years. However, that was slightly below forecasts. Shares of gopro, we talked about this right at the top, punished big time after the Company ReportedQuarterly Results for the first time as a public company. The action cameramaker beating the street, but that was not enough to appease investors. Were going to talk to an analyst about in about 20 minutes. Youll see that stock off about 12 now. And then one more stock to watch, expedia, better than expected Quarterly Results. Among the reasons, higher hotel and flight bookings and i think i might have helped contribute to that a little bit. Are you expedia . Occasionally expedia, occasionally i used to use it. No more. No more . When you have problems, the airlines wont help you at all. Because they say you didnt buy through youre a third party and youre on your own. Youre a third party and you dont matter if you have anything that goes wrong along the way. There you have it. The countdown is on to the july unemployment report. The markets expect another big jump in job creation. Joining us now, Michelle Gerard and managing director and jim osullivan, High Frequency economics chief economist. Were looking for 230, michelle . Yeah. Were very close. Yeah . Yeah. We have a stronger number. Im at 235 and 225, pretty much the same thing. Were close to the trend. Were hovering around the yeartodate trend. A little a little on the higher side. But my model is not complete. Where are you . 270. 270 . Yeah. I got a crazy idea that there may be an increase in government by the private sector, 264. One of the reasons im softer is this idea that perhaps some of that june strength came from the influx of workers, you know, a lot of kids finished with school. The ability for firms to actually find some people to hire. Because what we keep hearing from companies anecdotally is that it isnt easy to find workers and that may explain why we had an outside gain in june. But a lot of that supply was taken up and in july they were kind of back in that same spot where it was hard to fill some of those positions when they settled that trend. Jim, whats the risk here . I mean, if we get our are you concerned that your if your number is wrong, its too low . No. I could go either way, frankly. I think either way, whether its above 225 or a little below, anything up in that territory is more than enough to keep the Unemployment Rate coming down. So i think for the markets perspective, the focus has to be more and more on the slack and labor cost parts, you know, the payrolls are up 200,000, 250,000, even 150,000, its more than enough to bring demographics down. Unemployment rate is down more in the last 12 months than anytime in the last 30 years. I think the question now becomes do we start to see pressure in the wage numbers . Can i ask a totally different question. If we get a great jobs number today, does the market rally on that somebody . Can i ask why you guys think the market is down . Were looking at markets down triple digits. I have to say, i mean, yesterday even i wondered to the extent that that eci number, theres a lot of things going on, obviously, geopolitical and things along those lines. But i also think the market is to some extent becoming unnerved about the potential if, you know, we had better gdp numbers than expect. We had a higher eci number. The employment context. I think theres some thought that maybe the fed isnt going to be able to stick with this guidance of lower for longer. Thats key. And if we see a good jobs number does that in turn is it it feels like given yesterdays route, which to me made no sense, but i dont want to cast aspersions. It just seems to me that you could get a great number. And then if you get a bad number, does that number go up . Clearly, the fed has been willing to take 200,000 plus a month in payroll, unemployment keeps falling. At what point does that push the fed to move quicker . And the key has to be the wage numbers. If you got a 250 on payrolls, a zero on average Hourly Earnings, it would probably be a good tafrg Hourly Earnings is going to be the key. That is what the fed is watching the closest. Its also month to month yesterday, the more reliability quarterly indicator. But nonetheless, its the best we have on a monthly basis and over time we get that. The Unemployment Rate, as well. Its already at 6. 1. But lets talk about if the market is wrong on the fed, how long could it be . The average expected fed funds rate at the end of 2015 is 1 . If we get stronger growth right now, what could be the upper limit of where youll be on the funds rate end of 2015. Well, you could easily get 1. 5 for sure. But i would go beyond that. Look at 2016, look at 2017. Youre talking about a tenyear treasury yield, expect the funds rate over the next ten plus years. The end of 2016 when the markets have basically got a 180 price stand, fed officials themselves in their projections at 250, thats a pretty big difference. I would argue that 250 is too low. I would say the same thing. The fed has a neutral rate up around 3. 75 . But, you know, the other thing that we keep bringing forward actually is that even the level that the fed will ultimately be able to stop at, i mean, people interchange the long run, thats going to be the highest that well get this cycle. But we sat at zero for an awful long time. And the idea that inflation, for example, that may not even be able to stop at that level. None of this is in the market but thats why so this is not just a reset of next year, its the whole trajectory. So this month and i think increasingly over the next several months, the focus is not going to be on how much water were taking out of the bucket, but in how much water is left in the bucket. And by that i mean the amount of slack in the economy. We were talking about slack for the economy. Glad you confirmed that and its going to look at things like people working parttime for economic reasons, the unemployment. The last number i calculated yesterday was nearly 20 million americans. Maybe 3 Percentage Points extra in terms of the labor force of slack out there. Which means that if the fed is too low, it doesnt have to move very quickly, does it . Well, first of all, i actually think theres probably less slack than the fed or but i think getting back to what jim said, ultimately, well know when theres slack or not or how much slack when we see wage pressures. And i think this is what even the fed has acknowledged. I can say all i want i dont think this is much slack. But unless wages start to pick up, its hard to make that let me try and make this come back. Are you no, i want to get back to the urgency of the markets. We are talking about a major market selloff here. And i want to figure out what you guys think is really happening, what the market wants to hear, how big of a down turn this is, if you think this is the beginning of a pul big pullback that everybody has been looking for. Weve been waiting forever for a 10 market pullback. Is this the beginning of Something Big or do you think this is a one off, michelle . The one thing ill say, even i dont think the fed is going to slip as quickly as perhaps the markets are worried about. I think this fed is going to continue with their message, even if things look better, were going to move slowly. Theres no urgency. I think we will continue to hear reassuring messages from the fed. And i dont actually think the data are going to be as challenging theyre not going to be so strong that they are going to force the fed and i know youre all economists, but when you look at what happened yesterday, do you have a lima reason for yesterday . Do you have a line of reason for this morning . Part of the reason is is the fed outlook changing . And the other way, the fact that the bond market didnt rally, i think it tells you something about the rethinking of the fed outlook. What does that mean . Well, no, i mean, the markets are starting to think more about the possibility that the fed will be tightening a bit sooner and a bit faster than has been expected. Clearly, there are some geopolitical issues and markets are volatility areas. Steve, you pointed this out this weeks talking about the fed futures jumping up. There was a big jump in gdp moving things forward, just expect but i dont get what jim is saying because in that world that you described, yields should be rising. And then the stock market pulling off pulls them back again. They were up yesterday in the first couple of hours after claims in ecb reported and as the equity market that puts you back to flat. But youre still up 10 basis points or whatever in the last couple of days, despite the equity markets being down. So i think once the equity market stabilizes, then theres room for the bond yields. We saw 2. 6 at one point during the trading day. So you would expect to see bonds pushing higher . I would think ultimately if the economy keeps improving and we start to get some wage pressure, then yes. That drives me nuts because the metaphor here is you get out of the way of the oncoming truck into the way of an oncoming train, right . Thats essentially if you sell stocks because youre afraid of the fed and you go into bonds, then you get right in the way of the oncoming is that not a the equity markets shouldnt be tumbling. If the economy is growing, the fed is in no rush to tighten, when they do tighten, the policy is going to be easy for several years. Earnings region price earnings ratios are extreme. Theres not an equity market for the standpoint to tumble. Should it flatten out relative to what weve been seeing . Sure, in a world where bond yields are rising. But the back drop is not for the equity market right now. I do to some extent blame the fed a little bit for this nervousness. One of the things that theyve done is in trying to justify their reason for saying so easy is to suggest that we have to be, we have to be this easy because the economy needs this kind of support. And theyve kind of sent this message over and over to the markets that we need to be there, we need to be there. So theres nervousness about what happens when theyre not there. And i think theres going to be i think to get past this first tightening, actually, its to show that we can you know, we can handle these moves, we can get off zero and the economy can still keep growing. And i think well ultimately be very positive for the economy. But its going to be a very nerveracking time here as we make this transition. If joe were here, i want to guarantee he would be talking about this concept of weak hands and strong hands and i think he will be talking about this idea that stocks would pass from the weak hands that dont want to hold stocks in an environment of rates to other hands that may want to hold the environment of a better economy and the holders may be different rye now, people who are going to make an idea to buy stocks for one reason and and the question becomes to what alternative and thats where your metaphor comes in very well. What alternative do you have to equities . Right. And i have a different question, which is how much does the trading yesterday is generated by human beings, make good stigzs and how much were made by model . Thats why i would expect to see a bounceback on a morning like today. When you see triple digits down again, that makes you stop and pause. Usually the humans would be stepping in in the meantime. Well win do think if we get numbers like jim and i are looking for, i think that that will be somewhat common. Because i think that does not suggest that this urgency for the fed to have to move a lot quicker and sooner, i think if you get a number up close to 300 again or even in the high 2s that will feel or high earnings, Hourly Earnings number, that would weigh on the markets. But i think the kind of numbers that were looking at might be somewhat calming that suggest the fed can stay the course a little bit longer. And not necessarily that they have to keep rates at zero forever, but that they dont have to move away from this gradual normalization of policy. Thank you. Thank you. Thank you. When we come back, more on the markets and the economy is front and center all morning ahead of that jobs report thats coming up later this morning. And the futures right now are still looking like they have some heavy losses. Dow futures down by about 98 points below fair value. S p 500 futures down by 12 and the nasdaq off by 27. When we come back the honeymoon is over for a hot ipo. Gopro shares, is now the time for investors to jump on the stock . Squawk box will be right back. Gopro earning 18 cents for the quarter, two cents higher than expected. The stock plummeted in extended hours trading. It was down by about 10 . You can see right now, 43 a share is the last trade, thats a decline of almost 5. Joining us right now to break things down is charlie anderson, Senior Research analyst at dourdty and company. Thanks for joining us. Thanks for having me. Were you caught by surprise, as well . Yeah. You mentioned expenses. That wasnt the surprise to me. Its their debut quarter, its a hot product. Im surprised frankly they didnt beat by more on the sales. I think as we looked through it the culprit was europe. America was up 50 . Europe was up only 7 . That was surprising. So it looked to us like there was too much inventory in the channel in europe and that was the result of not a larger beat. Do we think thats a problem with the company in terms of getting the same excitement in europe . Do you think thats a fixable problem . I think it is. I think these are mostly selfinflicted wounds. We have to remember this Company Started getting large three years ago. Theyve been staging their distribution. They sell mostly through distributors in europe, versus direct in the u. S. , so you dont see these large best buy implementations in europe. So i think thats something that will bloom over time. Its just early in the maturation cycle. What did you think of this company and this stock before the earnings yesterday . What do you think now . Still, were downgrade to go neutral today for valuations reasons. We had a buy going in. We thought there was a potential for a great upside in the quart he. It was good, but not good enough to make us need to take our estimates up significantly higher. At that point, the valuations didnt make that so were going to neutral now. This stock ran up very quickly since its ipo earlier this year. Was that surprising to you . Yeah. I mean, looking from the ipo price, we thought in some ways, it was justified by the fact that this thing was doing really well going into the quarter. But at the same time, youve got to step back and look at, you know, just historically, its trading at much higher multiples than apple ever has, than garmin has. It was a small float, right . So some of it was supply and demand. Okay. Charlie, i want to thank you for joining us today. Thank you. Why dont we take another look at whats been happening with the futures this morning. If you are just waking up, you saw yesterday the dow was down by 317 points. You may have thought you would see a rebound this morning. That is not the case. If you take a look, there are more red arrows and some significant declines in the futures. Dow futures down by about 114 points below fair value. S p futures are off by 14. Nasdaq at this point is looking like its down by 31 points. We have a big jobs report coming up this morning and that is going to be a key focus. Weve been talking this morning, trying to figure out what exactly the market wants to see. A good number or a bad number . Because the concern from a lot of people are saying that, look, the reason youre seeing the market at this point is becau