[ male announcer ] a bad cold hits your whole body. alka-seltzer plus liquid gels rush relief everywhere you need it. it's the most complete relief you can get in a liquid gel, so you feel better, fast. alka-seltzer plus liquid gels. just to reiterate some news here. according to terry mcgraw they will put their textbooks on the apple tablet, running on the iphone which jim goldman says is new information. now it is time for the "closing bell." the obama dilemma, a sluggish economy and $1.3 trillion of federal red ink. how can washington create job and cut spending at the same time? live from the new york stock exchange this is the final and most important hour of the trading day. >> i'm scott whopner hi, sue. >> hi, scott. i'm sue herrera filling in for maria bartiromo. the federal budget office predicting the deficit hits $1.3 trillion. peter orszag tells us what the white house is planning to do to come pat that massive deficit and fix the economy. let's look how the major indices are trading. dow jones industrial average 10,255.36, nasdaq ahead of key tech earnings up nine points 2,219.90. the s&p 500 is trading on the upside by 3.64 to 1,100.42. >> we begin with bob pisani. >> reporter: we were up earlier in the day. it is 2:00 well, a little after 3:00. we are starting to see the stocks come off their highs. the important thing last week notice stocks were down big on very heavy volume. the first two days of this week what have we seen? stocks up modestly on lighter volume. that is a change in momentum and affecting the psychology. some negatives some positives and some in the middle. china pulling back instructing their banks to pull back. it is a major story this morning. case-shiller showing some slippage. mixed news, consumer confidence is weak. earnings, impressive in apple and disappointing in a couple of others. look at stock earnings dupont sales picked up overseas that is the good news. the bad news there is a hard time earning profits because of higher costs. regions financial, bigger loss than expected. they continue to have problems with large losses on real estate loans. u.s. steel, the tough situation. pricing is improving. demand improving modestly but costs are going up. take a look at big mining stocks. weakness throughout the day as the dollar is stronger, rio tinto, weak on the day. tradertalk.cnbc.com. bertha, how are we looking at the nasdaq? >> reporter: as apple goes so goes the rest of the market. apple has accounted for much of the moves in the qqqs the nasdaq 100. we hit a high shy of 215 print. right around midday big program trades. selloff but 3% up. apple's rivals in the tablet field you heard mr. mcgraw tell erin on "street signs" the new tablet will work on the apple operating system. a lot of the things you've seen on the iphone and ipod will work on that tablet. microsoft and hp have collaborated on a tablet and amazon with the kindle. they are holding up well. also holding up the chips have been mixed. i talked to a trader, shouldn't intel do well because they are in the max. but intel is down and that is a big drag on chips and applied materials. rf micro devices expected to earn 12 cents on $250 million. tellabs did beat zions bancorp up. there is a diabetes drug that was approved for nordix. some competitors doing well. amylin getting an upgrade at citi. come back to the wall. the main event, of course more earnings, yahoo! over $16, a couple of others are trading to the down side. altera and gilead off at this hour. let's head to the nymex. >> reporter: traders are bracing for the report coming out from the american petroleum institute and the energy department. today's trade was equities and oil moved closely with equities. we saw a drop below $64, as equities picked up oil pared losses and closed at $71.74. ar baugh -- there was a oil spill in texas. that waterway is expected to be open to limited vessel traffic by thursday and the four refineries impacted say they are not that impacted by the closure. mastercard spending pulse showing gasoline demand was down .4% versus the previous week. we have that data to look at as we wait for inventory data. we will have an increase in crude and gasoline supplies according to the projegss. the real indicator is if we get a surprise draw and the market can't sustain a rally that will be bearish. look at the natural gas market. natural gas futures down 4% today. we have an expiration of futures contract tomorrow. we have on thursday withdraw that is expected to be low 100 bcf. less than expected withdraw as heated demand was below average by about 10% or so last week. weather forecasts over the next 11 to 15 days that are milder than originally forecast earlier in the week. in terms of gold prices we are in a rollover period. futures moving from april contract to may contract. we have a little bit of a lift today. we had a big drag in the silver market and, of course, as always we keep our eye on the greenback. rick santelli, i know you are doing the same. >> reporter: absolutely. today's stronger market pushed gold down to the mid 1080s, that is a second pass at a good support level. the third one doesn't usually hold. keep an eye on the low on gold futures. it is all about the dollar. year to date we have a new 2010 high close today. if you look at a six-month chart these are the highest levels in close to five months going back to the first few trading days of september. as far as interest rates, hey, they crept higher today. you can clearly see on the intraday ten. a successful albeit not blowout two-year note auction. the only reason it wasn't blowout other than pricing demand, the complexion of the buyers, many would like to see a bit of a different composite. sue, back to you. >> thank you so much, rick. home prices inching up .2% in november on a seasonally adjusted basis. it is the sixth consecutive month over month increase. prices down 5.3% compared to november 2008. that is the smallest year over year drop in two years. consumer confidence rising two points to 55.9 better than expected and the highest level in more than a year because consumers are feeling better about the job market. general motors striking a deal to sell saab to dutch company spyker. gm's restructuring plan called for that maker to sell or shut down. matt nesto joins us with real-time flash on walmart. >> probably more so, google. the business insider is reporting that an erroneous posting on walmart.com's website that showed the new google nexus phone and coming soon underneath has been taken down. walmart says they have made no plans and have no plans to actually sell the google phone. so google and people who have been looking to buy that on walmart or walmart.com got ahead of themselves. but the intraday on google shows some giveback if you will when those headlines cross. how it got on that website remains a mystery. it has since been taken down and the coming soon language curious but walmart says we have no plans as of yet to carry the new google nexus phone. back to you. >> matt thank you very much. evidence of the markets holding up well. the dow is looking at a 53-point gain. another story in asia overnight. marketing selling off over there on fears of tightening credit in china. there is evidence of just that today with reuters reporting several chinese lenders are facing reserve ratio increase six chinese lenders stopped extending credit last week. what does this mean for china? joe muse and david reedle. david, let me begin with you. the last thing we need to see in terms of a global recovery is china tightening credit, right? >> right. china has a delicate balancing act. they have three things to worry about, inflation, inflation, inflation. they need to make sure that doesn't their nascent economy. they will do a whack a mole approach to inflation. they will do anything they can to avoid inflation. this is the first of many steps to slow down their growth. >> it is a tight balancing act. we don't want to choke off any part of the recovery or china's growth. >> keep in mind fourth quarter growth was over 10%. the rural areas dropped that down so tier one and tier two cities are growing 12% 13%, 14%. they need to do something to slow it down make it nice and smooth, make sure inflation is under control. bear in mind if they go too tight the chinese government is there at every board meeting for every bank. if it gets too tight they can loosen it up like that. they have the control over the levers in the banking system are phenomenal. >> is china a bubble? >> i couldn't disagree more. >> why so? >> first of all take a look at asset levels. a recent tie-in to the japanese economy in the '80s, the asset bubbles. the stock market in japan was trading at 70, shapgnghai at 28. in '09 the housing market was 8% year over year. in china they are still building infrastructure. keep in mind the chinese railroad system for example isn't a quarter of the size of the u.s. railroad system in 1916. so they are deploying dollars for infrastructure that is truly needed as opposed to what japan was doing. if you go to china, spend six months or a year, see how they are deploying capital, it is extraordinarily efficient. i couldn't disagree more with china in a bubble. >> david, when is china likely to see a rate increase? there is speculation it could come the second quarter. what would an impact be of something like that? >> you could see rate increases any moment from china. they are concerned about inflation. they are not in a bubble. they have low hanging fruit for productive enhancements but they will be vigilant to fight inflation. it is their number one fear. >> understandable. thank you for your time. we have 45 minutes to go on wall street. the dow jones industrial average is good for about 48 points positive earnings from dow names today, dupont one, travelers another. the nasdaq is higher as well today. >> scott, this gentleman is famous for predicting the stock market crash of 1987. bob prechter says the next phase of the bear market is beginning. plus the congressional budget office predicting the federal deficit will hit $1.35 trillion this year. how will president obama manage to cut this massive deficit? office of management and budget peter orszag. we will break down the fourth quarter results from yahoo! as soon as the numbers hit the wire. >> first the most active stocks led by citigroup and bank of america. the parent company of this network, general electric having a good day regions financial and ford to the downside. you are watching cnbc, first in business worldwide. thought investment firms were there tdd# 1-800-345-2550 to help with my investments. tdd# 1-800-345-2550 so where's that help when i need it? tdd# 1-800-345-2550 if i could change one thing... tdd# 1-800-345-2550 we'd all get a ton of great advice tdd# 1-800-345-2550 just for being a client. tdd# 1-800-345-2550 i mean, 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cocrfome goto the iopris the d l t when g gmm i le eeerntes wehak rk ata afts. a norynicet.ayt'e heokinshi b we'll i trsullas r, we.wn a t the first quarter in 2009 and can get bullish again. >> thank you, bob. good to see you again. good luck with the new edition of the book. appreciate it. >> good seeing you. >> let's go to matt nesto with the real-time flash. >> check out the intraday charts. this stock is very, very hot of 15 stocks that will report after the bell including yahoo! none is higher than sanmina. look ability the 15 cent giveback in the last couple of minutes. people are taking profits in this stock ahead of earnings. up 5.5%. a 15-month high double the average daily volume and 25% short interest. look at that move back in november the stock dmam with much better than expected earnings after their last quarterly results. fourth quarter stock up 30% the next day and never looked back. 90% behind it. keep an eye on sanmina. >> matt, thanks so much. i'm looking at my machine. the s&p 500 has now turned negative. it is basically flat on the day. the best move of this market has pulled back. i don't know if it is on bob prechter's bearish comments you just heard right here on cnbc but the move to the upside has lost steam. the dow jones industrial average is only up about 37 points or so. so half of its best levels of the day. nasdaq is higher as well. that is just a couple of points as well, sue. perhaps it is maybe some of the comments bob prechter gave you took steam out of the move. >> he is very influential. that could be the case. i got e-mails from viewers, what kind of a pullback in the gold market. he said significant pullback. in terms of gold a drop of at least 40% from its peak value. >> i'm looking over here to see if gold is down. it is up a touch today but a small move up three bucks or so. >> we'll watch the market going into the close. president obama planning to propose a three-year spending freeze on nonessential spending. will 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[ male announcer ] introducing the all-new lexus gx. it has the agility and the power to take on any mission and the space to accommodate precious cargo because every great action hero needs a vehicle. see your lexus dealer. ♪ ♪ and this afternoon the senate voted against president obama's proposal to create a bipartisan panel that would have devised a plan to cut taxes and spending. the congressional budget office reported the deficit dropped to $1.3 trillion the president is set to announce a three-year spending freeze tomorrow during his state of the union address. we get more details with the director of the office of management and budget peter orszag. thanks for joining us on cnbc. >> thanks for having me scott. >> the congressional budget oufs predicts a $1.3 trillion deficit for the year 2010. your savings will amount to $250 billion over ten years and that's why critics are saying this is a mere blip on a huge number and meant nothing more as a symbolic move to silence the critics who are saying the obama administration are spending out of control. >> that is not true. this is one component of what we will be doing. the few details of the budget will be out monday. $250 billion is nothing to sneeze out. >> it is peanuts compared to $1.3 trillion and how big the deficit could grow to. >> remember where those deficits come from. they reflect two basic things, the failure to pay for policies in the past two tax cuts and medicare prescription drug benefit that were not paid for and the effects of the economic downturn. that is where a deficit comes from. that is why we are making sure we pay for new proposals and working to jump start the economy and get it back on its feet. >> how do you grow jobs at the same time you are cutting spend something. >> again there is a timing issue. in 2010 the primary focus is job growth. 2013 2014, 2015 it is getting the deficit down to make sure we don't imperil job growth and leave enough room for private investment. we have to promote job growth now and look for more efficiencies in the federal government and bring deficits down. >> $150 billion in stimulus working its way through congress. there are critics saying that is throwing good money after bad. because money from the original stimulus hasn't created jobs. >> all credible analysis suggests that the recovery act has spurred economic growth during the second quarter, during the third quarter and into the fourth quarter. created or saved 1.5 million to 2 million jobs. those are credible outside economist numbers. those who say it hasn't done anything are wrong. >> peter, what is the president's state of the union message going to be? >> you'll have to tune in. >> let me finish. excuse me. the message of the president has royaled the markets, a more populist tone a war on wall street. are we going to see more of that in tomorrow's state of the union? >> again, i don't want to step on the president's message and speech. i ask you to tune in tomorrow night like the rest of america i hope will. >> what is with this new if you will, or return to a populist message the president has embarked on. he rehired david plouf. if this president were trying to go back to a more populist message? >> if that is what he was doing this spending freeze would not have been released. he is trying to stick to the underlying policies and principles he has long held. what we are focused on freezing spending in non-security agencies is an important step. >> what about those who will say the president may be freezing spending and it is a good first start. it is hardly evidence of making the tough decisions. there is no defense cuts in all of this. social security, medicare and some of the other entitlements are not being addressed here. >> again this is one component of what we are going to be doing. you will see full details on monday for the rest of the budget. given the opposition that is being expressed about the spending freeze he announced it is hard to argue there aren't tough choices involved. >> peter give me your take on tim geithner as we sit here today and as a matter of fact as you stland on the white house lawn, is tim geithner three to six months going to be the treasury secretary? >> the president has expressed full confidence in geithner. >> there are speaking volumes of where mr. geithner is perceived in the administration. better yet is there a fracture in the administration at the top levels of the finance department? >> everyone in washington or i guess everyone in the country likes to play these games of looking for factions within the white house or within the administration. the president has been clear he has full confidence in secretary geithner and again, that speaks for itself. >> i'm only raising the issues people raise when mr. volcker who hasn't taken a public role being front and center and prap mrs. summers and geithner didn't agree with the new regulations coming out of the white house. i think they are valid questions to raise. >> again i would say everyone looks for diggses that may not be there. the president expressed his full confidence in secretary geithner and others. again, i think that speaks for itself. >> is ben bernanke going to be reconfirmed. >> i believe so. yes. >> peter orszag, thanks for joining us first on cnbc. >> thank you forring having me. >> you can watch president obama's state of the union on cnbc 7:00 p.m. eastern. >> thank you very much, scott. we are about 15 20 minutes away from the closing bell. the dow jones industrial average is hanging on to a modest advance, the s&p and nasdaq have turned negative since we ver viewed bob prechter. >> i'm sure overly bearish comments had something to do with that. where is the market heading next and which sectors are leading the way? after the bell instant reaction to yahoo!'s fourth quarter earnings report. "closing bell" is back in a minute. this is not pay the hospital insurance. this is not pay the doctor insurance. this is not major medical insurance. this is affordable-we-pay-cash -directly-to-you- fast-when-you're-sick -or-hurt-insurance. if all you know about us is... aflac! ...then you don't know quack. to find out all the ways aflac's got you covered, visit knowquack.com [ male announcer ] welcome to the now network population 49 million. right now 1.2 million people are on sprint mobile broadband. 31 are streaming a sales conference from the road. 154 are tracking shipments on a train. 33 are iming on a ferry. and 1300 are secretly checking email on vacation. that's happening now. america's most dependable 3g network. bringing you the first and only wireless 4g network. right now get a free 3g/4g device for your laptop. sprint. the now network. deaf, hard-of-hearing and people with speech disabilities access www.sprintrelay.com. a whole basket of diabetes drug related stocks. we are talking about the markets before we get to that. i do want to update you the dow jones industrial average, i apologize, the dow has turned negative. down ten points. bob prechter was interviewed by sue herrera. he had fairly bearish comments about 20 minutes ago. from the moment bock prechter was on cnbc the market started to selloff. the dow jones industrial average down eight points. technology is taking it on the dmin the last ten minutes down seven for the nasdaq the s&p 500 down 4.5 point as well. now the die beet drug related stocks that are rallying after the fda approved a first of its kind shot. mike huckman tells us about the excitement. >> reporter: these stocks are not selling off despite what is going on. norvo nordi won the drug. a competitor is trading at a new high? the fda okayed a up with-a-day shot for diabetes that lowers blood sugar and weight. the drug will be on the american market within just a few weeks. time is of the essence because partners are more than a month away from possibly winning fda approval of a similar once-a-week shot a reworked version of byeta. in a cnbc exclusive interview on "squawk on the street" novo ceo said that ain't necessarily so. >> of course you would expect me to tell you we think our product is better than that of the competition. there are conditions about our product in terms of convenience in terms of efficacy and side effects we believe will be competitive with a long acting drug announced in the future. >> they will be comparable from the twice a day byeta. there was a risk of thyroid tumors in lab rats, investors don't think that will scare people. the stock is up 3%. they are buying stock in lily amylin and alkermes. shares of mankind are getting a boost. they are waiting for a less than palm sized inhabl diabetes device. ceo richard pops said the fda's decision is good news for everybody. he called it an important decision that considered risk benefits. follow him on twitter and me on twitter. for more check ott the blog pharmasmarket.cnbc.com. he is the only ceo i know actively on twitter. >> thank you, mike very much. speaking of health, let's check the health of the markets right now. we have turned negative. after a scare last week we are in negative territory. some people think it is because of the comment es we got from bob prechter from elliott wave international. let's talk about that right now and see whether or not this is a sign of more to come. joining us is rich peterson at s&p and kevin caron a market strategist. bob prechter made strong comments for the gold market and stock market. do you think that perhaps that pulled the market negative and if not, what did? >> the market has been more volatile last week particularly following obama's comments about the bangs. i think what mr. prechter is looking at is an ongoing process of debt deflation in the united states to a lesser extent in europe. he may not be taking into account what is happening in china, a massive amount of credit expansion. the concern about a more intensified debt deflation, the jury is still out on that. we are aware of that, we are following trends in credit. we don't see anything in the data that would cause us to follow his lead. we are mindful of what he is saying and watching that data carefully as it comes across. >> rich weigh in on what has happened in the market. what triggered the selloff? >> in part a continuation of last week where the s&p 500 market calculation lost $400 billion. the fact is after last year trajectory the s&p went from under 700 to over 1,100 from last march. we are in a chopping period. folks seem very much on the economy, looking at higher unemployment, washington not giving a full endorsement to ben bernanke's reconfirmation. a lot of uncertainty going forward. >> at this point then kevin, how would you play this? i mean prechter recommended safety but we are not getting much in the t-bill market what is an investor to do worried about the downdraft we are seeing late in the day? >> you have to take a longer perspective on financial markets. the trends he is talking about play out longer than a trader's time frame. you have to continue to watch credit and the formation of credit. la chinese talking about tightening credit there. uncertainty about the banks here. we have lightened up on our position on the banks. $20 of $30 of improvement comes from the financials. >> thank you, gentlemen. appreciate it. we're just a few minutes before the closing bell. the dow is negative the s&p is negative and the nasdaq is negative. yahoo! shares were higher ahead of fourth quarter earnings report. should you buy or sell ahead of the results. yahoo! good for .75%. we have more on that when the "closing bell" comes right back. would you like a pony ? yeah. would you like a pony ? yeah ! 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