One stock soaring is Vertex Pharmaceuticals after trials for the Cystic Fibrosis drug. Coming up, well talk to the ceo about the Study Results and what it can mean for vertexs bottom line and people suffering from Cystic Fibrosis. About 70,000 people worldwide are afflicted with that. A lot of hope with that drug. Yahoo Ceo Marissa Mayer reportedly caught sleeping on the job, sort of. She missed a key ad executive meeting because she overslept. Could that mean big trouble for yahoo a firm that relies so heavily on ad spending . We have that rather crazy story, coming up here. Now, heres where we stand in markets. Pretty broadbased selloff with the Dow Jones Industrial average off 80 points this hour, retreating from that 17,000 mark. Its currently at 16,856. The s p giving up about six points and the nasdaq the outperformer today. Its just slightly positive, up about four. All right, lets talk about all of this in our Closing Bell Exchange today. With us, joe bell from shavers investment research, brian persist restie from wells fargo investors, sam and Diane Garnick from Clear Alternatives and our own Rick Santelli in chicago. Rick, im going to start with you. What have you heard about the situation in iraq and could that be the reason why were seeing this selloff today . Well, you know, it didnt necessarily correlate with the wrist watch, but it definitely has been a big talking point today. So, i would think it may figure in more prominently, but its always difficult to tell, bill. And i will tell you this, there is a accumulative effect to whats going on in iraq as it weighs on the psyche of traders. But maybe a more specific, recognizable trait of what happened today, at least from the treasury side, was the spongy twoyear note option, bill. As you look at the chart, we can see rates drop down a bit. But yeah, with regard to equities, im also hearing many traders on the floor talking about taking profits in front of a big psychological area in the form of 17,000. Also, oil fell today. Gold did not respond, so theres a couple of other counterintuitive moves as well, kelly. Well, the drop in oils one of the reasons traders gave me earlier today that maybe whats going on in iraq and maybe syria to some extent, as important as it is, might not really have been the abcs of what the markets looking at. Right. Thats exactly it, not to mention that the selloff has been deepening since the news hit midday. The dows off almost 100 points. Sam stovall, we were just talking about this. You said maybe it has to do with the looming end of the quarter. What do you mean by that . I think theres the possibility that because we had the window dressing period, that usually if you have good momentum coming into the end of a quarter, momentum tends to feed on itself, but just listening to the lack of noise behind me, looking at the weak volume, looking at the number of days without movements of 1 or more, the longest since 1995, and my feeling is that people are saying, i dont expect much on to happen between now and the end of the month, lets take profits while we can. Having said that, though, you still think theres a lot of juice left in this lemon, dont you . Yes. Try to squeeze me for information, i can tell. Yes. We recorded our 67th alltime high last week, which has 5 of the trading days of this bull market historically since world war ii. Weve seen 7 of all trading days. And if you agree were in a secular bull market, the average is 9 . So, we have more ways it go before the bull market peters out. To that point, listen quickly to a sound bite from Robert Shiller, who was on squawk on the street this morning, asked, of course, about market valuation, and heres what he had to say. I have a ratio on my website thats up to 26 now, its over 26. Historically, you know, it hasnt been that high very many times in history. Its been at 26 before. Thats roughly where it was in 1996 when i testified. And unfortunately, i said i thought the market was high. It went up another, i dont know, 50 until 2000. So, i dont you know, its really hard to forecast the market. It might continue this boom. On the other hand, it is looking a little high. This is a guy who won the nobel prize for measuring valuations. Hes got a nobel prize and we dont. Yeah, and i was just going to say that sams right, sams point as well, that you can b n at a high level of valuation or hitting alltime highs, and that doesnt preclude you from doing more and more of it. Brian, you sum up the attitude of a lot these days when you say this is the most depressing bull market ive ever seen. Could you just explain that . Well, look, everybodys been waiting for the next shoe to drop, and looking at sams stats, i buy him there. I look at the fact weve been over 900 days without a 20 correction in the market, which is abnormal historically. From our perspective at wells fargo, we believe there is still potential up side, but were willing to concede that the gains are harder to get. This is not a 666 2009 s p were dealing with, but if you look at the favorite market, we still think the growth is here and its decent. Were willing to concede that the growth has broadened out, given the recovery in europe and a soft landing out of china. Bigger picture looking forward as a strategy right now, we want to look at this market and say, hey, listen, if ive been overallocated to equities, i probably dont have to add to it now. If ive been underallocated, given the geopolitical unrest, youll have your spots summer into the fall, so youll wait for a pullback on that perspective, but broadbased, we believe the Global Growth story is intact. Diane, youre very bullish here, but ive got to say, and with all due respect, dont take this the wrong way, i know one of your favorites is the utility stocks. To me, thats a fraidy cat play, even while youre bullish on the market. Yes, its a great time to buy the market. Its not necessarily a great time to buy the broad market. Were seeing tremendous divergence with sectors like utilities, Even Health Care as of late doing very well. And the riskier sectors not doing nearly as well. And if you notice, what we see is that the Utilities Sector is doing very well. Every time yields sell off. So, i think were seeing somewhat of a secular change during this bull market and that people are chasing yield. And why . Because 2008 was the very first year that baby boomers could start to retire. And at this point in the game, people are ready, willing and able to tie in returns, to tie in yield and not need to worry as much. So, while it may be a scodgy sector, i think lots of people are turning to yields there. Jill bell, all the same, its interesting to look at the price action, speaking of different parts of this market, in the homebuilders today, because theyre managing to outperform on the back of a couple home sales reports lately that have come in stronger than expected. Thats absolutely right. The homebuilders had a nice existing home sales report today. Were seeing some nice buyin there. Thats sort of one part of this recovery picture. Obviously, a lot of focus on the labor market in general, but to touch on a lot of the guests poins, weve had a strong runup especially over the last six weeks, so perhaps a little breather before the dull summer months. Bigger picture, i think theres a strong uptrend in place and i think it often lasts longer than a lot of people would expect. And i am not seeing that overwhelming amount of euphoria and optimism. Theres still i think a healthy bit of skepticism from Market Participants that ultimately tells me perhaps we are not near that major market top. Brian, a depressing bull market, but yet, Consumer Confidence report came out today, looked very good. What are they so confident about, i wonder, right now . Bill, i think when you look at this one, remember, weve seen a massive amount of the american Balance Sheet since 0809, so thats clearly supportive. I think also that youre seeing job creation. Thats proving supportive for the plight of the consumer. Remember, over 77 of our economy, so thats a big, big deal here. As we look forward here and looking at this depression, i think you need to look at the fact that the market has climbed a wall of worry here in 2014. We should note that. But more importantly as well, you know, you dont have that froth that you felt in the late 90s, and looking at even in the mid2000s. So, we think you still have room. Were 20, 25 to the top end of our target range here for 2014. We think there is still up side, but we also want to make sure that we have a balanced portfolio, that we have those international allocations, we have emerging market volatility allocations, thats been decent year to date, all slices of pie to improve performance moving forward. Another important thing. Go ahead. Not to let the data really speak for what were seeing in the market. And one of the things thats really key right now, not only are we seeing housing prices rise and were seeing Consumer Confidence up, if you speak to individual Companies Like mastercard, for example, theyre saying that they saw tremendous growth in sales over the last month, over the last two months. So, theyre releasing data on a much more regular basis, and its certainly forward looking relative to the market. It might even be a great time for Consumer Discretionary, which did so poorly during the First Quarter when we had horrific snowstorms and weather issues. This quarter i wouldnt be very surprised at all if they, you know, all these retail names, Consumer Discretionary in particular, really picked up. Consumers are ready, willing and able to lend. And finally, the banks are getting the loans out there. Yeah. Okay. And thats been an unloved space, as you mention. Well see if there is a rotation as we start towards the second quarter. Thank you all for now. Thank, gang. Appreciate it. Weve got 50 minutes to go and the dows off 100 points, down 107, in fact. 16,830 as it retreats from the 17,000 mark, bill. And the nasdaq has also now turned negative, off by almost seven. And you know, as this selloff continues, im not convinced its all about the situation in iraq, either. I mean, not all of the markets are responding the way you would expect them to. So, maybe it is just some profit hrvesi profittaking as sam is saying as we head to the end of the quarter. Coming up, chief economist of Goldman Sachs jan hatzlus, if hes bullish on the economy and his thoughts on inflation and what could trigger worries for feds and consumer wallets. Thats coming up. Also, check out Vertex Pharmaceuticals, surging on news that two of the drugs tested successful in treating Cystic Fibrosis. On a rally. The ceo will be here to talk about how much the treatment could boost the companys bottom line. And forget about argentinas world cup game against nigeria tomorrow. Argentina itself is taking its battle against u. S. Hedge funds to the public by running fullpage ads like this one over the weekend here in the u. S. Meanwhile, negotiators for the financially struggling country are meeting with those hedge funds to stave off some kind of debt default. Well tell you why it matters to your for the folio when kelly and i come back on closing bell. So what im saying is, people like options. When you take geico, you can call them anytime you feel like saving money. It dont matter, day or night. Use your computer, your smartphone, your tablet, whatever. The point is, you have options. Oh, how convenient. Hey. Crab cakes, what are you looking at . Geico. Fifteen minutes could save you fifteen percent or more on car insurance. Welcome back. Welcome back. Argentina sorry, bill, go ahead. Let me tell them about the market, first. Yes, please. I dont know, yeah. If youre just joining us, we are seeing selling. This is the first appreciable volatility weve seen in a while, kelly. Were down 123 points on the industrial average, and this started around midday. Whether it has to do with iraq is debatable and the situation there, but be that as it may, we are seeing this appreciable selloff. The dow and blue chips are hardest hit, down 7. 4 , while the s p and nasdaq are down a little less than that percentagewise here. Now, argentina waging war with wall street, the country battling with u. S. Hedge funds, now asking a judge to issue a stay of his ruling against the country in order to avoid a new credit default. This comes on the heels of argentina launching that marketing blitz over the weekend looking for support against the hedge funds in the form of fullpage ads. Three of the usas most influential newspapers ran those ads over the weekend. More now on argentinas Marketing Strategy and whether it could pay off, were joined by theresa barber. Thanks for joining us today. Thank you for having me. Quick history lesson. 2002, argentina reached an agreement with their bondholders at that time to avoid default . All but what, 7 of the bondholders opted in. Its the 7 holdouts that theyre now faced with negotiating with right now. What are they after . Where do you see this going here . Well, i think the crux of the matter is that there is no Bankruptcy Law for companies sorry, for countries. Companies can declare bankruptcy. The city of detroit can declare bankruptcy. Right. But countries cant. So, they have had this other offered mechanism where they negotiate with their bondholders. And obviously, argentina did not have a clause in there that said that the holdouts would be dragged along with 93 of the people who agreed to restructure. So, thats really at the crux of this matter is that we dont have a good mechanism for countries to go bust. And teresa, there are implications here that the u. S. Ruling the way it has mean effectively that argentina cant even keep paying the people who will hold its restructured or previously defaulted on debt without paying some of these holdout funds first, because then those funds will be held in contempt. So, a lot of people are wondering, as this june 30th deadline looms, what argentina does with a series of ultimately bad choices here. Yes. Argentina actually has three problems. First of all is the ability to pay. If all the holdouts were to get 100 cents on the dollar, then that would be 15 billion theyd have to pay out, which is more than half of their reserves. So, theres the ability to pay issue. Secondly, they have this Coupon Payment of 1 billion thats due on june 30th. If they also have to pay another 1. 3 billion to the holdouts, there is a real issue of whether they can actually come up with the money. And then the third issue is theres a law, speaking of rule of law, in argentina that says the government may not give a better deal to any other creditor than they gave in the 2005 restructuring. So, many people think what they might do is put 300 million 400 million in escrow right now, and then after this law is no longer in effect at the end of 2014, negotiate with the holdouts january 1, 2015, but its complicated. If the holdouts are willing to wait that long, thats for sure. And if a u. S. Judge is willing to go along with that. Yes, exactly. Just more of the complications there. So, weve teased what this should mean to peoples portfolio here in the United States. Why should investors in the u. S. Care about argentinas ability to pay off its debts right now . I think the reason they should care is that its important for all developing countries. Because for example, we went through the example of greece. Greece was bust. It needed to have some sort of bankruptcy protection. But since that doesnt exist for countries, they had to have another mechanism. Now, if everybody thinks, oh, i can be a holdout and ultimately get 100 cents on the dollar, why should anyone go to the negotiating table when there is a default situation . And that, teresa, brings up the central problem here, which is that for a lot of people, theyd say, well, fine, if you want to offer some way internationally of providing a route to bankruptcy, doesnt that then lead to moral hazard . In other words, wont that encourage countries to be more propagate, to not be fist capitally responsible, et cetera . Do you see another option, instead some kind of international overriding, maybe the imf does something to standardize the process now that argentina has made this much more difficult by bending how it was traditionally handled . Yeah, possibly those interested in the International Financial architecture, like the imf, might do something at that level, but more practically, i think what will happen is that contracts that are written between bondholders and bond issuers will include a dragalong clause that says if a supermajority of people agreed to restructuring, then you will be dragged along. To date, a lot of these dragalong clauses havent been very good, but i think well see them get better. On the other hand, of course, the purchasers of bonds might want to have exactly what argentina had so that hedge funds can take advantage of it. Yeah. Lesson learned. Have that dragalong clause, thats for sure. Have the dragalong clause, yeah. Teresa, thank you for joining us. Its been a pleasure. Thank you. All right, heading toward the close, see how were doing with 40 minutes left in the trading session. We continue lower. This is the low of the session, i think right here, down 128 points on the dow industrial average. It could be a long 40 minutes still as people look to see how much deeper this selloff today could go. Whats the best state for business this year . Our scott cohn has been giving his all day and hell join us live from the mystery winner in just a few minutes. We dont know who it is. My guess, colorado. I think im on to something with that, i dont know, based on the hints he gave earlier. Well see. Ive been wrong before, many, many times. Next, Goldman Sachs chief economist jan hatzlus with his view of the economic recovery, fed policy and how soon Interest Rates could rise, liftoff economically. Well talk about it coming up. [ both ] when we arrived at our hotel in new york, the porter was so incredibly. Careful. Careless. With our bags. And the room they gave us it was. Beautiful. A broom closet. But the best part but the worst part was the shower. My wife drying herself with the. Egyptian cotton towels. Shower curtain. Defined that whole vacation for her. Dont just visit new york. Visit tripadvisor new york. [ male announcer ] with millions of reviews, a visit to tripadvisor makes any destination better. Welcome back. The Dow Jones Industrial average off 125 points, having its worse day in over a month. In fact, the s p off by twothirds of 1 , down 1,950 right now. We began with the nasdaq slightly negative. We began the hour with it slightly positive. It has since turned around, joining the other two. Now, Philadelphia Fed president charles plauser spoke earlier today and suggested the economy is recovering so quickly, the fed may raise rates sooner than people expect. I believe we are closing in on our objectives, perhaps faster than many might think. So, while i supported the recent policy statement, i have growing concerns that we may have to adjust our communications in the nottoodistant future. Specifically, i believe that Forward Guidance in the statement may be a bit too passive, given the underlying economic conditions. Joining us in an exclusive interview, were always pleased to welcome back jan hazlus, chief economist at Goldman Sachs. Jan, welcome back. Good to be here. Do you agree with mr. Plosser . Are we going to be seeing liftoff sooner rather than later . I agree with the idea that were closing in on the objectives. I think in general, the news has been pretty constructive. They continue to pick up, despite the weakness in gdp in the First Quarter, so i agree with that part, but my view is i think there is more room to go before that calls for Monetary Policy tightening. I think thats still a long way away. We had Robert Shiller on this morning, talking about stocks being at the high end of historical valuation, saying again, in doesnt preclude them from going high, but they are. Do think the combination of that, plus the economic improvement youve mentioned would lead the fed to be more reactive, this fed, anyway. I mean, i think asset prices do matter, of course, because asset prices transmit the impulse of easing Monetary Policy to the economy, so the more easing of stock prisices, e more credit spreads you get will lead them to lifting the rate and moving. But while were clearing closer to the levels of financial conditions that would call for that than we have been really throughout this entire recovery, were still not there. Its still not yet time, and we think its still going to be, you know, some time early 2016, maybe late 2015, but thats still quite a ways off before you need to tighten. Are there weak spots in the economy youre looking at that tell you that, or is it just you dont feel this growth is sustainable without further easing by the fed . I would say neither. I think while there are clearly some weak spots, i mean, theres housing, but i do think that were starting to pull out of that weak spot on the housing side. I do think that the growth pace is sustainable. I just think that were still climbing out of the hole that we fell into in 20072009, and when i look at where the labor market is, and in particular, when i look at where wage growth is, which is still really only 2 if you average through all of the different indicators, that still tells me that theres a reasonably long ways to go before you really want to take steam out via tighter Monetary Policy. I mean, do you think inflation will stay roughly in this 2 yearonyear range that its in right now, especially against the backdrop and were going to talk about this in a little bit, but pwc today saying it thinks medical costs, which have been an important part of disinflation, are going to rise in the years ahead . I think for cpi around 2 seems about right. I think thats probably what were going to stay. By 2015 i think we might be a little bit higher than 2 , but bce is the index that defines the target and the feds primary index, and that is still well below that percent and will be a while. My expectation would be until after the end of 2015 before we get to 2 . Well, im curious, if you feel the growth rate is sustainable at this point, why prolong the quantitative easing process and delay the raising of Interest Rates . What would happen if we started doing that sooner rather than later, do you think . Well, i think i dont think anything dramatic would happen if there was some Monetary Policy tightening, but if youre still missing your mandate on the employment side, on the weak side, and inflation is still below your target, unless you have a strong view that youre going to get there really, really quickly, then i think you still want to err on the side of more monetary accommodation rather than less monetary accommodation. I think thats sort of the rationale. I mean, of course you know what fed critics say, just, you know, stop it now cold the way they stopped qe1, the way they stopped qe2, and let the Market Mechanisms of the economy do their thing to try and keep this economy going at some point. You know, why slowly take us off the morphine drip the way you are . Just stop it right now. So, i mean, i think on the qe side, of course, we are in the process of winding that down and everybodys expecting that it will be wound down either by the october or by the december meeting. So, its really more about the question of whether you want to lift Interest Rates in an environment where youre still missing your mandate, both sides of your mandate on the weak side. And you really have to decide whether you would rather see more growth or less growth in the short term, and there are definitely environments in which the fed will want to see less growth, because theyre worried about overheating and excessive inflation. But when youre missing on the other side, i just dont think its the right time. All right, then we heard that from janet yellen, her rhetoric certainly wasnt along the lines of trying to spook markets this time around, bill. Perhaps having learned or seen the reaction of her more hawkish, as some might view her comments last time. Jan, good to see you. Appreciate it. Speaking of which, former minneapolis fed president gary stern is going to sit down with me next hour of the show. Wait until you hear the grade he gives fed chair janet yellen, straight ahead. Meantime, we have 30 minutes left in the trading session with the dow down 112 points. Weve come off the lows of the session, but still, biggest decline weve seen here, the worst day for the markets since about may 20th, so about a month. Coming up, how in the world did lois lerners emails vanish . The former irs executive is at the center of the targeting scandal. A Congressional Panel is Digging Deeper into the email disappearances today and well have the latest developments. And up next, its been the stock of the day, Vertex Pharmaceuticals ceo on the successful Clinical Trial of two of its drugs in treating Cystic Fibrosis. Wall street sent that stock soaring by 40 today. Meg terrell talking to that ceo after we come back after this. Welcome back. A selloff on wall street today, especially the second half of the day. We had pretty good minor gains on the open this morning, but now down 118 points on the dow, backing away from that 17,000 level. Nasdaqs down 17 points. The s p down 12. Kelly . Dominic chu is tracking some of the big movers. Starting with energy, the sectors, the worst performing one in the s p 500 today, but its still the second best performer so far in 2014. So, to keep things in perspective there, energy a nice run, taking a pause today. Now, a rough day for web. Com shares, falling more than 20 as google announces its begun testing a competing service that registers internet domain names, so a big competitor possibly coming to web. Com. Also, a strong day of trading for some of americas biggest homebuilders. Betterthanexpected data on the new home sales front jolted shares of big names like d. R. Horton, lennar and pulte, all bucking the trend, up on the session. And groupon popping 6 at one point as analysts at Piper Jaffray say the deals on their website are expected to rise by 30 this year. But remember, the stock groupon has dropped about 40 in 2014. Theres still a long way to go for that stock. Lastly, finishing off with Vertex Pharmaceuticals exploding this stock is up 40 on the day. Investors are sharing the positive news that its drug combo is an effective fighter against Cystic Fibrosis, so those shares rocketing higher on that piece of news. Back to you. Thats been the stock of the day, dom. Thank you. More now on why this new therapy is such a Major Development for vertex, bring in our biotech and pharma reporter meg terrell. Meg . Reporter hey, there. Were here with vertex right now, and this has been a huge day for the company, reporting phase three data on their Cystic Fibrosis drugs. This is a combination of two medicines. We look at how they work. Cystic fibrosis is caused by mutations to a gene known as cftr. When the genes dinefective, it hampers the movement of fluid across the cell wall and leads to thick mucus in the airways. The first medication to address the disease was kalydeco. Only about 2,000 patients with cf have mou tasions that that can help alone. More have a bigger problem. The protein cant get to the membrane at all, so vertex is testing lumacaftor, which aims to help the protein get to the cell wall, where then kalydeco enables it to open a passage for chloride. The combination of the drugs could help more than 14 times as many people. Joining me now is vertex ceo dr. Jeffrey leiden in a cnbc exclusive. Dr. Leiden, thank you so much for joining us. Thank you for having me, meg. This is a wonderful day for cf patients and their families. Absolutely. Maybe you can put into context how big of a deal this is. The stock obviously reacted well, but for patients with such a hard disease. I think you showed it nicely on your video. This was a tough problem and one that vertex scientists have been working on for 15 years. The idea was to design a set of medicines that can actually treat the underlying cause of Cystic Fibrosis in the most common form of the disease that affects 22,000 people around the world. And the clinical impact, lets talk about that, because some people might look and say 2. 64 percentage points. How significant is that pore people . Maybe you can put that in context. Let me start for the viewers by putting the disease into context, which is, this is a disease, as you know, that affects children and young adults, and its a disease that affects many different organs in the body, but the main one is the lung. Over time, these kids lose about 2 of their lung function every single year, so it gets harder and harder to breathe, until finally, they get infections, and unfortunately, they still die in their mid to late 20s of their lung disease. So, you can understand the urgency of this kind of medicine. Until today, we really didnt have treatments that treated the underlying cause of the disease and prevented that decline among them. When you look at our data, what it said is treatment for six months with this new set of medicines caused an increase, we actually gave patients lung function back, of about 3 to 4 . We increased their pulmonary exacerbations, so the flareups and infections that cause them to go into the hospital and require iv, antibiotics and et cetera, and they gained weight, because these kids usually have a problem with losing weight from mall absorption. When we talk to families and kids with this disease, they say that every percent improvement in lung function, every pound of weight gain they get and every day they dont have to spend in the hospital is really meaningful to them. Lets talk a little bit about price. We have to address this. Its been a huge issue. Orphan drugs often cost hundreds of thousands of dollars, kalydeco above 2 hoappened,000. Thats the first drug. How are you thinking of pricing this and are you taking pricing into consideration when youre doing that . Its way too early to talk about the price of this new regimen. Weve only seen the data for, you know, the results for a few days, really. What i can tell you is everybody at vertex right now is focused on two things, getting this medicine submitted to regulators and approved and out to patients, and then bringing our next set of medicines behind this that offer potentially even more benefit forward in our pipeline and out to patients. Right now for the next year, thats where were going to be focusing. Absolutely. And to help people understand, you have an orphan drug price around 200,000. Can you help people understand what goes into that pricing . That might seem high to a lot of people. Well, we think about a lot of things when we set the price of a medicine, right . First one is how much value does it bring to patients . And as weve just discussed, we believe this new medicine brings a lot of value to patients in all those different ways. Also, the size of the population. Our first medicine was approved for over 2,000 patients worldwide. This medicine has the potential to help more than 22,000 patients worldwide, and that will certainly go into our considerations as well. First we have to get the drug approved and out there to patients. Of course. And you mentioned, of course, theres a lot of kids with this disease. This study was done in patients 12 and up. How are you looking at when to get into younger patients . Theres probably a lot of people clamoring for use before you can get it approved. How are you thinking about that . I think the right thing to do and what we did was first try it in kids 12 and older, because obviously, until we know more about the safety of the drug, we dont want to try it in young children. But one of the reassuring things about these results is the drug was well tolerated and safe in these older patients. And so, our plan is now very quickly to move it into that younger population of patients, and the reason is, we think if we can start treating kids early, before they lose that 2 a year lung function, we actually might be able to modify the course of this disease, and thats what im most excited about. Absolutely. Dr. Leiden, thank you so much for joining us. Meg, great to be with you. Back to you guys. Aon a day where their shares are rallying. Bill, providing hope at potentially a cost for families and people suffering with Cystic Fibrosis. Sure hope that works out. 20 minutes to the close. The dow is off 121 points, just off the session low, still one of its steepest selloffs in more than a month. The s p is negative by what, 13 at the moment . Wow. And the nasdaq off 20. Weve got the top state for business revealed next hour. Whats your guess . Do you have one . Mines washington. Okay. So, weve got the two pot states. Im guessing colorado, youre saying washington. The pot states, yes. Thats right. Right . Yes, thats right. Anyway, scott has been giving hints since yesterday, revealing the top five all day. Number one will be revealed next hour here on closing bell. I cant wait for that. Also ahead, former minneapolis fed president gary stern gives us his take on inflation, fed policy and when he sees the central bank hiking Interest Rates. Welcome back. So, a bit of a bid for treasuries today as the yield sinks below 2. 6 and red arrows across the board for markets. The dow off 110 points. Cnbc, meanwhile, highlighting the top states for business, but its still a big mystery which state is at the top. Senior correspondent scott cohn is in that state. Where are you again . Reporter ill tell you in about an hour. I like your idea of pot states for business. Were always looking for spinoffs, and that could be interesting. We have been counting down all day americas top states for business. Were going to reveal the full study, including where your state stacks up in about an hour on the closing bell. For now, though, a reminder of where weve been. State number five is north carolina, with an improving economy and abundant workforce. Four is nebraska, a businessfriendly state with an economy thats chugging along. Number three is utah, a perennial favorite that is attracting lots of business capital. Number two again this year, texas. Solid economy, great infrastructure. But costs are rising and health care remains an issue. So, who is number one . Weve been giving you hints, starting yesterday. Lets recap those as well. The hints are dont cry for me, famous brownies, a long way to learn, i feel the earth move and cant get it out of my head. So you know, you can keep on guessing for the next hour or so. Follow us on twitte twitter scottcoencnbc, use topstates. When we reveal the number one state in about an hour, you will then be able to go to topstates. Cnbc. Com, see where every state ranks. Weve ranked all 50 states in our ten categories of competitiveness. Its coming up, guys. So, i guessed colorado. Kelly, you guessed washington. One of my tweet buddies just sent Something Else, and i think he may be on to something here. I dont know. I wont say what he guessed, but i have been enjoying following it along via twitter, scott, so keep it going. Everybodys been putting their guess out there and its fun that theres no real consensus on who it is yet, and we still cant tell based on your background there, too. And a lot of the frontrunners were just ruled out. No south dakota what was that . Dont know. Okay, thanks, scott. See you next hour. Good stuff. Heading towards the close, about 13 minutes left in the trading session here. Coming off the lows, the dow down 103. I think we were down almost 130 points at the low here. If youve seen fatter Health Care Bills lately, youre not alone. A new study may make you feel ill over where health care spend is heading. Weve got the details for you in the next hour of the show. [ male announcer ] the mercedesbenz summer event is here. Now get the unmistakable thrill. And the incredible rush. Of the mercedesbenz youve always wanted. But you better get here fast. [ daughter ] yay, daddys here here you go, honey. Thank you. [ male announcer ]. Because a good thing like this. Phew [ male announcer ]. Wont last forever. See your authorized dealer for an incredible offer on the exhilarating c250 sport sedan. But hurry, offers end soon. Share your summer moments in your mercedesbenz with us. 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 oneonone review. Call or come in today for a free oneonone review. The numbers are impressive. Y to new york state. Over 400,000 new private sector jobs. Making new york state number two in the nation in new private sector job creation. With 10 Regional Development strategies to fit your business needs. And now its even better because theyve introduced startup new york. With the state creating dozens of taxfree zones where businesses pay no taxes for ten years. Become the next business to discover the new new york. [ male announcer ] see if your business qualifies. Ten minutes left in the trading session with the dow down 100 points. We were down about 128, 130 at the low within this last hour. Joining me, our buddy from oneil securities, kenneth bacarri what is this . We have the report that syria had flown into iraq and bombed and killed 50 people and thats when the market fell, but it didnt feel like it. Thats just when the market fell, but all that really tells you is the simmering nervousness underneath, right . The markets a little bit overbought, looking for traders and investors are kind of looking for reason to take some off the table. Youve got a report like that, which was kind of out of the blue, even though we understand theres unsettling in the mideast at the moment. You get a report like that, it causes people to say, you know what, let me take some money off the table. Its exactly what you saw. Heading toward the end of the quarter, any of that . Maybe a little bit, but theres a big rebalancing on friday, and actually, the end of the quarters on monday. I think the markets going to be held tight in here through the end of the quarter. I dont think theyre going to challenge 17,000 before the end, but nor does it feel like it really wants to collapse. I think it just feels like its much more of a traders market. Meantime, some of the Economic Data have been fret go pretty good. The Consumer Confidence, even though that can be volatile, was pretty good, the home sales number also. The housing data has been pretty good lately. It has been good, and the market is a little bit ahead of itself, a lot of people saying its a little bit in overbought territory. So, even though its getting better, the markets been churning. Its not been collapsing nor taking off, just churning and trying to let the fundamentals catch up to where it is, so it makes perfect sense. So, what are you doing right now . What am i doing . I asked you first. Im actually no, right now im just hanging out. Ive got customers that im trying to clean up a couple things on either end, buy and sell, so im not weighted one way or the other. Ive got people tweaking the position. This is not a dip you would buy here necessarily . Not yet. Also, its late in the day, right, so nobodys going to really take it. Theyll wait and see what the news looks like overnight and then tomorrow will be a new day. Do you watch gold at all . Do you watch oil . Yes. Oil has really perked up here. That in some ways could actually be good for the stock market, and especially the Energy Stocks certainly for the energy names, but listen, gold and silver, look at those Precious Metals, theyve rallied. That tells you theyre a little bit concerned about inflation. Right. When stocks like that are rally after the janet yellen commentary, they tell you its a little bit concerned about what its really saying about inflati inflation, so keep your eyes on Precious Metals for sure on how they react over the next few trading days. And art cashins always telling us to watch the tenyear yield, especially if it goes above 2. 6 . Were below it today, but its been hovering around that 2. 6 level here for a while. Right and youve seen what the markets done, its been struggling, the market, not really sure which way to go. Thanks, kenny. Yep. See you later. Well take a break, come back with the closing countdown for this turnaround tuesday. By the way, shark tank tuesday, too. Wait until you see the panel coming up next hour. After the bell, this story getting a lot of traction on cnbc. Com. Yahoo Ceo Marissa Mayer showing up two hours late for a dinner with big ad executives. Two hours. Reportedly because she overslept. Really . Kelly and the gang will throw that up for discussion in the next hour of the closing bell. Youre watching cnbc, first in business worldwide. [ girl ] my mom, she makes underwater fans that are powered by the moon. [ birds squawking ] my mom makes airplane engines that can talk. [ birds squawking ] my mom makes hospitals you can hold in your hand. My mom can print Amazing Things right from her computer. [ whirring ] [ train whistle blows ] my mom makes trains that are friends with trees. [ train whistle blows ] my mom works at ge. But were not in the business of naming names. 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Here is a chart of the dow for the day, and it was around midday when it started to fall and we got those reports that syrian jets had flown into iraqi territory, bombed and killed 50 people. Was that the reason we saw the selloff . Anybodys guess at this point. Hard to say. The yield on the tenyear fell as bonds were purchased, and that pushed it below what art cashin has identified as a key level of 2. 6 . There it is at 2. 57 . At the same time, interestingly, the vix, the fear indicator, perked up. This is the best day it has had since april 7th, up about 10 today, bob pisani. What are you hearing . What was this selloff about . Dont drive yourself crazy looking for a reason sometimes. Thats my job, though. Thats my job. I know. Just watch the tape. What i saw here was the number one Momentum Group is energy, has been all month. Its the best performer on the s p. We saw Energy Stocks, which were weaker late in the morning, sell off notably after about 1 00, 12 30, 1 00 eastern time. Then we saw other momentum names, airline stocks, for example, weaken. We saw Semiconductor Stocks weaken. What does that mean . Well, you had all sorts of ideas and rumors out there, but the bottom line is with momentum names in a market like this thats fairly thin, you dont need a lot of reasons to sell off. You need a rumor of a reason to possibly sell off. So, rather than exhaust yourself trying to figure out, was it iraq, was it syria, or was it a sloppy bond auction . I heard people mention the bond auction at 15. Maybe that was a factor. Whatever, we dont need a lot of excuses. We are slightly overbought for some of these momentum names, and particularly in Energy Stocks, so a name like an eog, for example, dropped about 4 , on what . On virtually nothing that was out there, but those have been names that are now heavily bought and traded, and an eog, there you see. There was no news out on eog today. Right. But you see that drop. Around noon it started to move to the down side. Thats what it is to be a momentum name. And you should have seen oil perk up on this word out of iraq. That didnt happen as well. That maybe is even more telling about what is going on today. Oil dropped thank you. There it is, see . Oil dropped at 1 00. If there were serious concerns about whether sunni militants had taken control over refineries completely or lost some control, you know, these pieces of rumors we heard didnt correspond with the way were watching the market move. So, rather than exhaust yourself, we dont have clear information on whats going on there. We just watch the tape. The tape saw the momentum names drop. Those are overbought on a shortterm level. So, for whatever reason there was some profittaking in some of the momentum names. And what i thought the most important thing today was those excellent new home sales numbers, confirming the existing home sales numbers. And the s p rose at 10 00 on that. There is a clear piece of news that you could trade on. There is a clear piece of news that the market reacted to. Until midday. Thank you, robert. See you later. Have a good one. Were heading toward the close here, down more than 100 points. So, the biggest decline weve seen on the dow pointwise since may the 20th. Stay tuned. Coming up, second hour of the closing bell. And yes, scott cohn reveals the best state for doing business, coming up now with kelly evans and company. Ill see you tomorrow. Thank you, bill. Youre watching the closing bell, everybody. Im kelly evans and heres how were finishing off a tough day on wall street with all three major indexes turning negative. In the last hour of trade, the nasdaq joining the other two, losing momentum already, and it looks like the dow is going out with its worst day in a month, down 113 points, the nasdaq giving up 18, the s p giving up 12 and the vix moving up a little bit today. Lets get right to it with todays panel. Ayman jeffeeamon javers up from. And eli from the Washington Post and mike san tilly from yahoo finance. And fast money trader guy adam adami. Did dubai help . Thats a ridiculous number. Thats clearly not a great thing. I was talking to b. K. And brian kelly at the same time. He said those housing numbers in a bull market, the bull should have grabbed on to this and run, and they did early, but then we failed. So, its sort of interesting. I mean, again, i am not going to make a big deal out of one day, but im still, and i said it to you a couple weeks ago, so ive got to be true. Ive been wrong, but i think the s p would trade down to 1,860 by the end of the month. Ive got four trading days left and well see. I think theres a shot of that happening. Thats actually what sam suggested last hour, maybe this has something to do with the looming end of the quarter. Mike santilli, id like to know what year this is. I was thinking 2005. Weve already had bigger gains than 2005, which was a rangebound market, not much digesting last years gains. It seems like there was a real nervous equilibrium, near alltime highs, and the market seems to be saying what else you got . Good Economic Data, as guy just mentioned, didnt really tack on too much there. And everyone was saying we were overbought, everyone was saying the ranges were too narrow and i think this was the path of least resistance, where they could just come in a little bit and lets all acknowledge that when volatility has been almost nil, 60 basis points seems like a lot, and thats what were talking about. And lance it was also referenced from comments from Robert Shiller earlier on the network, where he said markets had been this highly valued based on how he looks at things in 1996. He warned about excessive valuations then. Of course, things continued to take off. Do you see parallels between the period were in today and the late 90s . The bubble . Yeah, i actually feel like theres a lot of opportunity. When i see the market going up, when i see companies investing, companies acquiring, you know, google just bought dropcam. This is about excitement that theres all these new technology markets, new spaces that they can expand into, and thats what theyre doing. So, i dont have that same feeling. I covered that dotcom bubble back in 1990, and its a totally different feeling, because you could sit down with Financial Experts who could walk you through the Balance Sheet of a company and explain, this is why this company is going to lose money every time it sells in the broad market and you dont see that kind of thing now, where its a totally Fictional Company that cant possibly make money. That feeling is not in this market. Elan, this is something that the fed is thinking about as well. The journal was writing about how complacency may spur more response from the meeting last time, but that didnt seem to be the case. You saw janet yellen mention the word uncertainty in her press conference eight times, so there is a shift in messaging from the fed to say if the data turned out better than we said or by the forecast, which it has been for the past four or five years, we might have to be a little different. You cant ignore the fact that the economy is moving closer to the feds goals. I was at Charlie Costas speech this morning where he brought up the point that hawks have been wrong about inflation for many years, but one thing they might be right on is how quickly the Unemployment Rate comes down. Its all going to depend on whether or not discouraged workers come back into the workforce. Its been predicted since 2010 and we havent seen them come back yet. Thats whats different from the 1990s. So much of this depends on what the fed says. Policymakers in washington major make a huge deal over the market. While we are seeing a huge number of ipos out there that people are worried about, so much matters what they decide in washington. Think about small companies, Small Businesses. We just had two developer conference conferences with myspace. Apple and google kicks off tomorrow. Thats a lot of entrepreneurs, Small Businesses, making apps and making money and that goes into the economy. So, i think that is part of it that i dont feel is always properly measured, but its a very important and exciting part. In terms of trying to draw analogies to the late 90s, basically right now, any of these trends that are usually what feeds bull markets, you can talk about m a, you can talk about really generous credit markets or low volatility. Weve now been conditioned to lead to saying those are excessive, theyre negative, theyre going to be the downfall, whereas theyre really good trends until they get too far. And 1996 is a great marker right there, because thats when we did an overshoot phase to the upside in the 90. The whole psychological part of the irrational exuberance in 1996, right now might be irrational skittishness because people have stepped away from the market. Theyve been badly burned from the 2008 financial crash. Theyre not coming back in, theyre not as enthusiastic. You dont have the kind of guy on the street saying im whole hog, im going in. That dynamic is missing and thats what makes it different. By the way, to go back to the pain that is out there right now connected to the market being at alltime highs, its the fact that a lot of the macro funds, a lot of these credit funds, hedge funds were betting on more volatility. They were effectively short macro developments. And you know, the phrase this year you hear over and over is kind of long and wrong with regard to the market keeps moving to the long side of a lot of these positions, and theyre the ones who are left wrong. By the way, losing money, getting fired by clients. So, this, i guess, sets up the pattern or the question for the back half of this year is it more of the same or do we feel like were at some sort of point, reversal point here . Inflection point. Thats what everybodys looking for. You know, mark haines, may he rest in peace, he was a genius. I think that when mark basically called the bottom, i think what he effectively did is, there had been a rash of people that now want to be the guy or gal that calls the top, which is why we have these conversations about inflection points. But nobody rings the bell at the top, as weve said a gazillion times. Youre just looking for some of the signs, some of the warning signs. And i keep coming back to it, but this is as stubborn a bond market as theres ever been. And for a rising rate environment, rates sure have a way of staying stubbornly low. And im still in the camp that its not just the u. S. I mean, you talk about it all the time, kell. Just look at yields around the world. I mean, youre talking about crazy levels. And if growth is where the market suggests that it is, then rates should be higher. Its just, to me, its just, at some point, somethings got to give. It hasnt yet. Maybe it will in the back half. And the markets, i guess, mike, have their own version of the usa germany match, which is to say, how does that yield spread wait, do you know how thats going to turn out already . I guess on the markets. The soccer game football game, sorry, i wouldnt try. Football. Is it that that spread is an historic wise and that has caught a lot of people wrongfooted as well. Exactly. So, essentially, a scares to the income is the reason for low equity volatility. I mean, the idea that youre kind of stretching for this extra yield and looking for the incremental spreads wherever you can find them and selling volatility into it is where we got today. To me, the key is going to be, assuming we get a little more selloff, a little more pullback, kind of how the mood reacts to that, because the pattern has been we go down a couple percent in equities and its panic time and you want to see that again. By the way, the homebuilders looking okay today. As we mentioned, talked about that a little bit last hour. Guy, before we let you go, this move in groupon and a couple of these momentum names, for lack of a better term on a day, again, where youre seeing a little bit of a bid to safety in this market, theyre popping. What do you make of the move . Its momentum back, maybe. I think you see the google deal, i think its a land grab in a lot of this space. I think a lot of it is these stocks have been beaten up. I think people are getting back into them because theyve become a binary play. Groupon effectively is that. But theres a chance that maybe somebody steps in and grabs these guys, not unlike a lot of other names out there. So, i think theyve sold off enough where it gets interesting for folks again, and i think thats whats going on. Groupon being one of them, but youre seeing a bounce back in a lot of these names, 3d printing names as well. So, does the market have it right . Were going to find out. I was just going to say, i think groupons attractive because its so much in the mobile space, so much about local and giving people deals, but its still kind of a joke for some people. If you watch the recent orange is the new black, there was a groupon joke within there. Its one of the best jokes ever. I cant repeat it, but it is the problem for this company, you know, that it needs to really capture the imagination of the public in a way as a truly useful tool. Well put. Guy, thank for now. I think a lot of people are googling that right now. Guy, good to see you. Appreciate it. See you later, kell. Catch guy adami and the fast money crew at 5 00. Well be talking with the ceo of sunpower about their plans for solar storage. Dont miss that. Straight ahead here, obamacare and higher industry plants have slowed down medical Cost Increases, but a new study finding prices may be about to start rising steadily again. Up next, well tell you whats behind that and how kk be fixed. Also, yahoo s Ceo Marissa Mayer reportedly fell asleep and missed a meeting with top media and advertising executives. Coming up, whether thats excusable behavior for a company that needs ad dollars to survive. Were also minutes away from finding out the top state for business in 2014, and you may be surprised by the result. I know we will. Plus, well hear from the governor of that winning state just after the big reveal with scott cohn. Keep it right here. Youre watching cnbc, first in business worldwide. Welcome back. Health care inflation has slowed significantly over the past five years. That may be about to change, though, and Bertha Coombs joins us now to explain why. Hi, bertha. Hi, kelly. After five straight years of declining Health Care Spending growth, pwc is forecasting an uptick in 2014. Researchers see costs rising 6. 8 for large employers next year. Thats a slight increase from the 6. 5 growth projected for this year, driven by some troublesome trends with the improving economy, workers are no longer delaying costly procedures. And now, fewer big drugs are going generic, so new highpriced drugs perhaps driving speciality pharma costs up dramatically, while the consolidation of the Health Systems is driving up prices for care. Employers are battling price increases by making workers dig deeper into their own pockets. 18 of large employers offer only high deductible plans and 41 are considering highdeductible only plans in the next five years and 85 are considering costsharing measures like flatrate reimbursements and using preferred costeffective providers and prodding workers to be overall Better Health consumers. It basically means, kelly, that we all have to be more responsible about how we spend our health care dollars. Yeah, well, having more of the impact on consumers is certainly one way of doing that, bertha. Thank you. Now for more analysis, the man behind the study, rick judy, a principal at Price Waterhouse coopers industries. Rick, welcome. Thank for having me. Look, this is a trend that not just consumers as were discussing, but also economists are watching, because frankly, the drop in medical inflation has been part of the drop in overall inflation, so do you think were at a turning point here for it to move back up . Yeah. I think you summarized it well. Weve seen five years of decline in the medical cost trend growth trend, and now were at that point where its starting to tick back up. So, its a warning sign for all those in the industry, but its also very encouraging, because the history has shown us that when we have come out of these recessions and the economies have improved overall in the u. S. , weve typically spiked much more dramatically than where were at now, so it has moderated. Well, before i bring in the panel, why do you say its a warning sign to the industry . If anything, and im reminded by reading the economist about some of the pressure the Health Care Industry was feeling about lower Cost Increases over the last couple years. If anything, this is relief on that front, right . Consumers are bearing more of the brunt of this. Yeah, theres definitely a growing trend around consumers and their having to take more responsibility for their health care, and thats quite concerning as the trend continues to grow. However, we feel that that costsharing puts more of the onus and responsibility and accountability on the consumer. And what thats driving is Greater Transparency in the industry, and ultimately, we feel that that will drive cost down and quality up because of that transparency. I see. I see. Rick, its eamon javers here. Im based in washington full time, so weve spent a lot of time covering obamacare, and i know your study might not have gotten into some of the effects were starting to see, but the purpose of the Obamacare National experiment was to bend the cost curve of health care, and im wondering what youre seeing on the cutting edge. Are you seeing that cost curve starting to get bent as a result of what this country has done or is that not happening in the real world . Were very optimistic about some of the foundational things that are happening in the industry. Some of the things around riskbased payments and those types of experiments, as you call them, that are going on in the industry, are really starting to bear fruit. When we talk to hospital executives, theyre embracing this and preparing for a world thats going to be shifted away from fee for service and more towards these riskbased types of schemes. So, were encouraged by that. I think were also encouraged by the focus within the industry around cutting costs, and thats with hospitals, Insurance Companies and the like. Theyre very focused on the administrative costcutting initiatives, whether its the supply chain, whether its creating shared service functions, but also on the clinical side in trying to drive some standardization across their Hospital Systems in a way that they havent seen before. So, were encouraged by that. And when you talk about cutting costs, are you talking about cutting out waste and fat in the system or are you talking about cutting costs that are going to matter to those of us who are consumers of health care . When i go in to see my doctor, im not necessarily worried about how much it costs, im worried about whether im going to get well again, right . Well, i think theres a lot of dynamics that are driving this. I think fundamentally, theres inefficiencies in the system. And so, whether theyre administrative or clinical inefficiencies, weve got to embrace those costcutting opportunities. I think wiring up the Health Care System the way that were doing now, while its adding costs in the short term with all of that i. T. Investment, its going to be a system thats going to expose, i think, a lot of other inefficiencies and expose the data to the consumers, to the clinicians and everyone, the like. Mike, do you think this time will be different, that this recovery, despite the increase theyre forecasting, because more of the brunt is put on the consumer, it will keep prices in check or no . I think yes, although i think it gets very muddy, because overall spending is going up because overall consumption is going up, right . I mean, its hard to tease out exactly whats a price increase versus an improved technology or treatment or just more people using more because they have access to it. So, i do wonder if when we talk about health care, inflations going to fall into the category of those non discretionary things like food and energy if we try to strip away from the core when were actually figuring out whats going on in the economy. Starting to see the boomers come into the market more and more, so talking about increased consumption in health care, youll start to see those folks ratchet up. And we asked the ceo how much the treatment for Cystic Fibrosis might cost, he said we dont have an answer yet, but the drugs are incredibly expensive. When you talk about the cost of Health Care Inflation as it relates to the Economic Data, one thing thats important to remember is that Health Care Costs are weighted differently in the feds measure of inflation, pce, than cpi. And pce, medical care costs are about 20 of the total calculation for inflation. Theyre only 6 in cpi. Wow. So, if you see medical care costs start to rise, that could have a real impact on how the fed views inflation going forward. Absolutely. Its why this is such an important study. Rick, thanks for being here to explain it to us. Good to see you this afternoon. Thanks for having me. Some people on wall street are worried that janet yellen isnt taking Inflation Fears serious enough. Gary stern will tell us whether hes worried about inflation now. And apparently, americans are more focused on planning their next vacation than planning their retirement. The shocking results of a brand new study, later on the closing bell. Thank you daddy for defending our country. Thank you for your 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 youre 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. The porter was so incredibly. Careful. Careless. With our bags. And the room they gave us it was. Beautiful. A broom closet. But the best part but the worst part was the shower. My wife drying herself with the. Egyptian cotton towels. Shower curtain. Defined that whole vacation for her. Dont just visit new york. Visit tripadvisor new york. [ male announcer ] with millions of reviews, a visit to tripadvisor makes any destination better. [ male announcer ] with millions of reviews, the numbers are impressive. Y to new york state. Over 400,000 new private sector jobs. Making new york state number two in the nation in new private sector job creation. With 10 Regional Development strategies to fit your business needs. And now its even better because theyve introduced startup new york. With the state creating dozens of taxfree zones where businesses pay no taxes for ten years. Become the next business to discover the new new york. [ male announcer ] see if your business qualifies. Welcome back. Fed chair janet yellen dismissed enflasion concerns last week, but some people, including cnbc. Coms jeff cox are wondering if the fed is missing inflation threats like it missed the meltdown in 2007. Thanks, kelly. You might not be able to tell from big market moves, but wall streets not really happy with janet yellen. Its not something the fed chair did, but didnt do, which is give inflation any serious due following last weeks meeting. Ive been inundated with notes from economists, strategists, you name it. They believe the fed is not taking inflation seriously enough. Capital economics for one flat out said yellen was wrong for her comment that inflation is just noise, and tom pore khellie at rbc wondered if maybe this wasnt yellens subprime moment, a reference to Ben Bernankes dismissal in 2007 of the threat that subprime mortgages pose to the economy. One more point, the day after the fed meeting, the markets black swan index, which measures extreme fear, spiked to its 2014 high and is actually up 12 this year. So, taken all together, kelly, yellen will have to be very careful about how she approaches inflation in the future or face the markets wrath at some point. Jeff, thank you. Lets get more thoughts on inflationary concerns. We turn to a fed veteran. Gary stern is a former bank of minneapolis president , and he joins me now. Welcome. Good afternoon. Good to be here. So, what do you think about those concerns that this could be a subprime moment . I think theyre probably exaggerated at this point. I think chairman yellen is right that fundamental underlying inflation doesnt look like its getting ready to accelerate by any appreciable amount right now. Inflation theres a lot of inertia in the inflation process, so when inflation is low, it tends to stay low and so forth. If i had any quibble with the feds rhetoric, its really about their willingness to tolerate 2 inflation or maybe something higher for a time. Because if youre a central banker, you should be careful what you wish for. If it goes to 2. 5 , or perhaps more, it might be very hard to rein in or bring back down to the target. So, i would be kind of careful along those fronts, but i think shes right on the underlying situation. And here are some of the components, in particular tom porchelli referenced, looking for signs of inflation moving back up rents, medical care, we were just discussing, you heard pwcs forecast there, even clothing. Yes. You know, you can always find components of the Consumer Price index or whatever measure youre looking at that are rising significantly. They tend to be accompanied by components that are stable or declining as well, and i would point over time, at least, to things Like Technology and electronic items, where especially when you think of all their attributes today and all the things they can do on a qualityadjusted basis, the prices of those goods and services have come down a lot. So you know, i think the environment is more balanced. Well, the environment also depends, of course, on whether consumers can accept these price increases. So, if it is happening that rents are moving higher, that theres upward pressure on medical care, for example, and people dont have incomes rising along with that, doesnt that mean that the Consumer Price index is almost more of a gauge on consumers than upward pressure of inflation . Well, thats right, and consumers will adjust. You know, weve seen over and over again, if the price of beef rises relative to the price of chicken, people will consume more chicken. If medical expenses are going up a lot and you cant offset them with, say, insurance, youre going to reduce your use of medical expenses and defer things that dont have to be taken care of right away. So, what about the wage piece, then, the allimportant one we heard jan hazlus reference this past hour as well. We have seen job growth above 200,000 for a couple months now, the Unemployment Rate is moving down more quickly than anticipated. Still, theres a lot of socalled slack out there. Right. So, at what point do you think wages move to that 2 , 3 , 4 plus range that would allow consumers to pay these higher prices . Well, i think that time is still off in the distance, because global excess capacity is probably greater than domestic excess capacity, but after all, we are in a global economy. So, even if the labor market continues to tighten, and i expect it will, and i think thats all to the good, i dont think were going to see a lot of upward wage pressure. And some of that may be offset by productivity gains in any event. And thats what makes it so interesting. Should the fed respond to global excess capacity, i guess it doesnt really have a choice. Well, it doesnt have a choice to the extent that the Global Situation feeds into domestic prices and so on and so forth, which it clearly does. And you know, i think the fed one of the feds strengths is they are very good at gathering and analyzing data from a wide, wide variety of sources. So, they may not always make the right decision, but it usually isnt for lack of paying attention to the information thats available. But now im going to have to go back to 2006 and say there was plenty of information. I mean, look, its not as if the subprime meltdown occurred in a period before there was measurement and analysis of prices across the economy and of trends across the economy. If anything, the more information that we have had, the less well informed the fed often appears to be. Well, sometimes you dont ask the right questions, thats true. Sometimes you ask the question, but you dont get a definitive answer. And in terms of housing prices, i was in the fed at that time. We had studies that said there was no bubble in housing prices, you could relate them to economic fundamentals and explain them with fundamentals. We also had studies that said, no, you couldnt. It was clearly a bubble. And both sets of studies were credible. In that environment, it makes decisionmaking pretty tough. And what would you like in the main concern today to be, something parallel to subprime . Is it the subprime situation in the auto space right now, is it developments in credit markets generally or Something Else entirely . Yeah, you know, if you could really identify the next source of the problem, that would be very fortunate for all of us. I dont see any great imbalances in the economy today, but i do think if i had to point to one thing, i would guess that there is less slack in the Domestic Labor market than perhaps the majority of Federal Reserve officials think, mainly because of demographics. We know the baby boomers are retiring, we know thats a significant development. Id be careful not to underestimate that. Last question, then. As we know, Monetary Policy takes 6 to 12 months, maybe longer to really be felt in the economy, and if we think the Unemployment Rate will keep dropping, should the time be now for the fed to get ahead of this, as Charlie Plosser today seemed to suggest . Yeah, thats always the critical question, when do you start to tighten and by how much . My own judgment is that time is not right now. Its still several months off. My best guess would be by early next year. Hopefully, that will be seriously on the agenda. I would add, i dont think the fed wants to surprise Market Participants at all, so i think we will get plenty of signals, plenty of communication before they actually act. That seems clear already from this fed. Gary, thank you. Good to see you this afternoon. There were more fireworks last night in the investigation into those lost irs emails. So, you told us that all emails would be provided. When you discovered that all emails would not be provided, you did not come back and inform us, is that correct . All the emails we have will be provided. I did not say i would provide you emails that disappeared. If you have a magical way for me to do that, id be happy to know about it. Much more on that testy hearing is coming up. Also, yahoo Ceo Marissa Mayer reportedly falling asleep on the job, missing a key meeting with ad executives, and this isnt the first time shes missed an essential meeting with them. Were going to look at whether her job could be in jeopardy because of these missed opportunities. White chocolate lovers dont like dark chocolate. Milk chocolate lovers dont necessarily like dark or white. Before we couldnt really allow customers to customize their preferred 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. You are gonna need a wingman. And with my cash back, you are money. Forget him. My Airline Miles will take your game worldwide. What im really looking for is i got two words for you rewards. Theres got to be better cards than this. [ male announcer ] theres a better way with creditcards. Com. Compare hundreds of cards from all the major banks to find the one thats right for you. Its simple. Search, compare, and apply at creditcards. Com. First rounds on me. I research. I dig. And dig some trader more. Search. Because, for me, the challenge of the search. Is almost as exciting as the thrill of the find. announcer at scottrade, we share your passion for trading. Thats why we rebuilt scottrade elite from the ground up including a proprietary momentum indicator that makes researching sectors and Industries Even easier. Because at scottrade, our passion is to power yours. Yeah, citi mobile. Pay the dog sitter . And deposit that check . Citi mobile. Pack your bathing suit . Wearing it. Niiice bank from almost anywhere with the citi mobile app. Welcome back. It has been a wrestling match for the top spot on todays hot list. For the big winner, lets check in with cnbc. Com managing editor adam wastler. The top material from scott has been kicking it for us all day long, and once he tells you what the top state is, we will have the full 5 50state database on the website ready to go, but still, the champ today has to be Marissa Mayer falling asleep, being late to an important advertising meeting by about two hours. People have been loving that all day long. Thats my hot one, but its going to get a lot hotter on the website in a few minutes, kelly. Thats for sure, allen. Thank you for now. Speaking of Marissa Mayer, theres more on the controversy. Apparently, this isnt the first time shes been fashionably late for a meeting with important executives. Nick carlson is writing a book called Marissa Mayer and the fight to save yahoo due out next year, and jerry della famina from della famina advertising. We have a Business Alliance to share and coproduce editorial content. Mike santoli took off because of that. Hell come back next hour. Nicholas carlson, are we making a mountain out of a mole hill or is there a pattern that can be gleaned of Marissa Mayer not paying enough attention to these important executives . No, its strange. It actually is a weird habit of hers to be late to important meetings, and its actually caused problems in the past. She had a potential coo candidate early on in her tenure and she just sort of blew off the meeting, was very late to it and then he bolted the company after that because of it, and she once blew off the unilever ceo. Its a problem. Jerry, do you think the ad execs, how do you expect them to respond . How would you respond in this situation . Well, ad execs are used to being treated like dogs, but not in front of our clients. Two hours is insane i mean, she should not have been two minutes late. So, thats a real problem, and theres no excuse for it. Whats weird about it is that shes such a detailoriented executive in all other capacities. Shes just very prepared all the time. Its just a strange habit of hers. Shes got executive coaching, and its hard to see why she cant just sort of fix this problem. Lance, with apologies for stereotyping, is there a sense of kind of not having inner personal skills that a ceo needs because youre so good or on the tech side of things or Something Like that . Well, if youve read stuff about her, shes socially awkward, scheyhshyer than she realizes. She treats meetings in an odd way, like schedules meetings but doesnt show up or shows up late, kind of on her own schedule. But i want to be clear about something. This is, to me, this is a blip. I visited yahoo probably eight or nine months after she had taken over, and to a person, people could not stop talking about how she transformed a sleepy place into a place full of energy and dynamism. So, yeah, shes got a sleeping problem, but no one is sleeping on her watch. I mean, ive got to tell you and what is she doing . Shes crazy shes buying everything in sight. Go ahead, ylan. I just have to bring up the woman issue here. As the woman on the panel. And i have to wonder if her real issue was admitting that she slept through the meeting as opposed to pretending like she had more important things to do and was meeting people who had even more money. In washington, they say its a gaffe when you accidentally admit the truth, right . Exactly. So, maybe that was her truth, accidentally admitting she slept through it. Jerry, i wonder from your perspective if people would be more sympathetic if they knew the context of her story. Had she just gotten off an international flight, worked 14 hours the previous day . Why was she sleeping and would the ad execs give her a pass if maybe they had more detail about what was happening there . I dont think so. I think first of all, theres a famous joke about the husband knows that hes four hours late. He calls his wife and he says, dont pay the ransom, i just got free. See, it would have been better if she lied, frankly. You know, i think she actually antagonized a number of people. Wpp was really angry at her at the next meeting because she doesnt answer his emails. Yeah, i think so, without she could have picked on omni com, she would have had a trifecta. Three of the top advertising agencies in the country mad at her. I think its an important point to make that, you know, she may have been sleeping, that may have been just what she said. Theres a pattern here of disrespect for peoples time, and its, you know, and ive been reporting on this book for, you know, a couple years now, and ive gotten lots of calls from sources inside the company, outside the company being like, i dont feel like a human when she doesnt show up for two hours, when we keep getting the meetings postponed and delayed, and its just very strange for such a detailoriented executive that she hasnt narrowed in on this problem and just fixed it. But i think whats actually going on is shes overbooking herself. This is a person who only sleeps four hours a night and shes trying to do too much. Yahoo says we value our partnership with ipg and all of our advertisers. Lance, your last point. Youre saying look, give her credit for what shes doing to the business, but the point is, this is one of the most important parts of the business she has to get right and is she not getting it right . 2 percent growth year over year, so its low and the amount shes making on ads is going down. So, this is literally the group of people she cannot make angry. I dont agree with the idea that you lie to people. Tell them the truth, but then make it up to them fast. Do something smart, and you know, dont go hiding. Marissa mayer has been an unusual ceo. She has not done the things the way everyone else does. So, take advantage of that, step forward, do something smart. Dont just buy another company because that does seem to be the kneejerk reaction, but do something. I live in fear of sleeping through something. Ive got a 7 00 a. M. Hit on squawk box tomorrow morning, im going to set four alarms now, particularly after this conversation. I think everyone can relate to that, right . Knowing i was going to be on this show. Exactly. Jerry, thank you for being here. Nicholas, great to see you as well this afternoon. Now, its hard to drum up sympathy for the Internal Revenue service, but the head of the irs had a punishing appearance before the House OversightCommittee Last night. More hearings were held today. Well get you those details, coming up. And up next, scott cohn revealing this years top state for business. Have you guessed it right . Reporter dont you want to just keep on guessing . Do we really want to reveal it . I guess we do, and we will do it after the break. We will tell you, finally, who is americas top state for business, when the closing bell continues. [ girl ] my mom, she makes underwater fans that are powered by the moon. [ birds squawking ] my mom makes airplane engines that can talk. [ birds squawking ] my mom makes hospitals you can hold in your hand. My mom can print Amazing Things right from her computer. [ whirring ] [ train whistle blows ] my mom makes trains that are friends with trees. [ train whistle blows ] my mom works at ge. [ tires screech ] chewleys finds itself in a sticky situation today after recalling its new gum. [ male announcer ] stick it to the market before you get stuck. Get the most extensive charting wherever you are with the mobile trader app from td ameritrade. Wherever you are with the mobile trader app in a we believe outshining the competition tomorrow requires challenging your Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. Welcome back. Yes, it is time. All day on cnbc, our scott cohn has been tossing out hints for you to guess the winner of this years top state for business. No more hints. Here to end the guessing, the secrecy, the mystery is scott cohn and a special guest. Scott . Reporter well, we have a few of those, kelly. You know, weve been crunching numbers for months looking for a state whose Business Climate is solid as a rock. 50 states, 56 metrics, 10 categories of competitiveness. Who is americas top state for business . Dekalb school of the arts choir, tell us, please. Georgia, georgia the whole day through just an old sweet song keeps georgia on my mind reporter from stone mountain, lets take a look at georgias climb to the top. For eight years in a row our top state among americas top states for business is reporter weve crisscrossed the country. Ive been standing outside all day long. Reporter putting every state to the test. Americas top state for business 2012 americas top state for business 2013 reporter and this year, a new champion georgia. The peach state, the cream of the crop. With 1,659 out of 2,500 points. Its a big jump from georgias eighthplace finish last year. Georgias best category, its workforce, tops in the nation for the third year in a row. Georgia ties for first in infrastructure with americas Busiest Airport and one of its busiest ports. And georgias economy finishes a solid third. Unemployment is still high at 7. 2 , but georgia is adding jobs at a steady clip, a priority for firstterm governor nathan deal. My focus on job creations paying off. Deals in a tough fight for reelection. His opponent says the recovery is uneven. You cant have a Strong Economy if you leave the middle class and Small Business behind. Reporter georgia does finish 32nd for quality of life, mainly because of poor health, also 32nd for education, which the state is trying to address by adding 500 million to this years k12 budget. The top individual income tax rate is 6 . The corporate rate 6 . Plus, a Net Worth Tax that tops out at 5,000. The state sales tax 4 . Georgias largest private employer is delta air lines, the largest industry is agriculture. Yesterday we were at calloway gardens in pine mountain, georgia. Its a beautiful facility that connects man and nature in a way that benefits both. Now, as for the hints that weve been giving you. Dont cry for me refers to the have i dahlia onion which creates less tears because its sweeter. Brownies, this is the birthplace of the girl scouts and headquarters of u. P. S. A long way to learn. Berry college slt longest continuous campus in the world. I feel the earth move . Oakie if i gnocchi swamp. And you heard cant get it out of my head, georgia on my mind. Nathan deal is joining us from tel aviv, appropriately enough, where he is on a trade mission. Governor deal, i guess we have handed you a little bit of a talking point while youre over there. What is your message as you Court Business around the world . Well, my message is what you have confirmed with this rating, and that is that georgia is the best place in the United States in which to do business. And we are very pleased with the results of our visit here in israel and we are picking up a couple of new companies that are coming to georgia, and we are spreading the word. And hopefully, with this announcement tonight, this will make it even easier for us to attract more business for our citizens. Reporter we talked about the weakness in education and your general election opponent, senator jason carter, has been talking about the 500 million as sort of a lastditch Election Year ploy. What is your response to that . Well, in previous years, when our economy had not rebounded as much, senator carter voted for my budgets in the three previous years. Its only when we had the largest increase in k12 spending for education that he chose to vote against it. I think that has a lot to do with the fact that he decided he wanted to be governor. We are consistently adding new revenue to our k12 education budget, and we are making reforms to try to make sure that we continue that first place as a workforce in motion. And it requires that we build it from the bottom up, and thats exactly what were doing. Reporter governor, i have to ask you at the risk of raining on your parade, when you ran for governor in 2010, you Left Congress amid an ethics investigation. There had been ethics investigations since by the state. We know that businesses want a stable State Government. Can you assure businesses now that if youre reelected that there will be no more investigations, scandals of the like that have plagued you before . Absolutely. You know, when we have ethics complaints, the ethics complaints against me were heard by our state ethics commission, and they abolished and decided that there was no merit in any of them and they were dismissed. I think we know that if you want to play politics and use that as a weapon, it is always available to someone. I think that is one of the lowest forms of politics, but we have run a very proper State Government. It is a State Government where people have trust and confidence, and thats the reason that businesses choose to grow in the state of georgia. Governor deal, thank you very much. Congratulations. Safe travels on your trade mission. Thank you. We want to let everybody know, you can see where your state stacks up, the full study now at topstates. Cnbc. Com. Dekalb school of the arts choir, take us on out georgia, georgia, the whole day through i could listen to that all afternoon. The Dekalb School choir. I love it. People are lighting up the cnbc. Com already, im sure to check out more on georgia taking the prize. Vacation and retirement have several things in common, but planning may not be welcome back. The irs commissioner continuing to get grilled on the hill and the latest hearing on the House Oversight committee. Representative darryl isa of california has had enough. My time is expired and ive lost my patience with you. We now go to the ranking member. Eamon, it seems like its more. Absolutely, look, there is a lot of questions of what happened with the lois lerner emails and where that is going. What we see with John Koskinen is a tough series on capitol hill hear for him as the head of the irs. He has not been shy at all. He has been pushing back aggressively. He was asked whether or not he owed people an apology. He said, no, i dont feel like i owe you an apology. He has not given an inch. Thats why you see frustration from darryl isa there. We will have to wait to the end to find out. But as of now, some real questions about what happened here and who was responsible. In todays third hooerg hearing in five day, where they brought the white house lawyer briefly a lawyer for the irs. That person is well acclaimed, does not have any idea what was going on with these emails, why there was not a backup copy, do you buy all of these, let me put it this way, in a market we know, there is no coincidence, it seems like a string of coincidences. As a reporter who covers this, its not my job to buy it or figure out what happened. Who know what happened. There is a bureaucratic process here for handleing these emails, there are processes for backup tames. We have to physical out were they stored somewhere . Why havent they been produced and why isnt there coming from the irs we cant get these stories back and all this happened before loiser became a controversial figure in the first place, so their argument is se could never have plotted to destroy these emails because she did not know at the time it would be a controversy. So you got to wade through a lot of this here. We will do so in the days ahead. That Summer Vacation is right around the corner, do you put as much planning into your permanent vacation, though . That is Retirement Planning or vacation planning verse retirement is just ahead, tomorrow make sure to tune in the closing bell, white house bucket director jeff zients will join us. Well be right back. They would allow homeowners to store power. We have the exclusive. All right. Over to you guys. Fast money starts right now, new york citys times square, im melissa lee, your traders are dan nathan, brian kelly, guy adame. Selloff hits the street a. Late day selloff with the dow seeing its worst slide in over a month. Energy clocking in as the worst performing sector, fighting 2 as worries over violence if iraq outweighs volatility numbers. The vix begin i finishs better than in months. Should with be concerned . Put in context, its 13 handts